President Barack Obama on Thursday detailed his new plan to control the cost of higher education. The proposal involves evaluating colleges based on their tuition, share of low-income students and effectiveness in ensuring students graduate without too much debt. Those criteria would play a role in building a rating system to help determine how the federal government distributes aid.
In addition to using the ratings system to pressure colleges on costs, Obama's plan has two other goals: encouraging schools to compete for students and helping students manage debts.
The ranking system and many other elements of the proposal would require Congressional approval and Republicans are cool to the plan.
Here are four talking points on each side of the plan:
- Tying federal aid to graduation rates would attack a big stumbling block in higher education: students who leave school with no degree. Colleges already have incentive to keep this number up because many other ranking systems use it as part of their formula, but tying it to government money would give this metric real teeth.
- Using market forces — such as financial bonuses for colleges that meet goals and fostering increased competition among schools — would drive real reform in a way that mere mandates might not. One example of an incentive: Colleges could receive bonus money for the number of Pell Grant students who graduate.
- An existing loan program – the "Pay As You Earn" model that caps loan repayments at 10% of income — is already available to some students. Expanding it as called for under the proposal would take a popular and proven idea to more students.
- A component of the reform would call for colleges with high dropout rates to spread out federal aid disbursement over the term rather than dispersing it in lump sums at the beginning. This would help ensure that students who drop out don't keep federal aid funds when they aren't in school.
- In a rankings system where schools are graded on graduation rates, debt levels and future earnings of students, colleges may shy away from students from low-income families because of the risk that they might hurt the school’s standing. The Pell Grant bonus, however, is meant to serve as an incentive to avoid such an issue.
- Public universities with lower tuition and community colleges may also have lower graduation rates, which might hurt their standing up against private schools with deeper pockets to dole out grant aid. Plus, a ranking system based in part on graduates’ income could penalize institutions where students pursue lower-paying fields, such as teaching.
- Enlarging the federal role in the college market is anathema to some people, and this proposal leaves little doubt that government would play a bigger hand in higher education. Some critics, like Republican Congressman John Kline of Minnesota, have even raised the specter of "price controls" on higher education. Critics also worry that more government intervention would mean more red tape, which would increase costs that would inevitably be passed on to students.
- Ranking systems often face criticism for their methodology and criteria, and this system would be no different. This one, however, would have not only real money, but the force of law behind it — something even U.S. News & World Report can't lay claim to.
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