College & Workforce Readiness

Obama College-Cost Plan Aims to Go Beyond Access

By Alyson Klein — February 07, 2012 8 min read

President Barack Obama’s aggressive basket of proposals aimed at helping college students get maximum value in the face of soaring tuition costs signals an economy-conscious shift in the administration’s approach to higher education policy.

The Obama administration had focused mainly on access for those moving beyond the K-12 system—ensuring that students can cover the cost of college as more careers demand a postsecondary education. But the administration is now pushing a set of proposals that would steer a greater share of federal money to states—and institutions—that are able to graduate students and prepare them for the workforce.

For the administration, “quality has been assumed” up to now, said Kevin Carey, the policy director for Education Sector, a think tank in Washington. The latest proposals “mark a shift in federal policymaking,” he said. “It sends a signal about the Obama administration’s larger stance on the traditional education sector. ... They can’t just keep jacking up tuition.”

‘Economic Imperative’

At a Capitol Hill hearing on the proposal last week, Martha Kanter, the undersecretary at the U.S. Department of Education, urged members of the Senate Health, Education, Labor, and Pensions Committee to work with the administration on the package.

“Higher education has become an economic imperative,” she said. “We’re concerned that without immediate action the price of higher education will make it an unaffordable luxury for too many students.”

As part of the package first rolled out in the State of the Union address Jan. 24, President Obama is pushing to make student outcomes—including graduation and retention rates—a factor in deciding how much campus-based federal financial aid each postsecondary institution receives.

Separately, he wants to create a $1 billion version of the administration’s signature Race to the Top competitive-grant program to encourage states to keep up their spending on higher education and to make sure students graduate on time and get more bang for their bucks from their higher education systems. The president also would like to establish a separate, $55 million “First in the World” fund, to scale up promising practices, such as expanding the use of technology, at the college level.

Higher Education Proposals

The Obama administration is proposing steps intended to curb rising tuition costs and ensure that students get maximum quality for their higher education dollars. Among them:

• Allocate campus-based aid dollars, such as Perkins Loans, in part by student outcomes, such as graduation and retention rates

• Create a new “Race to the Top” competitive-grant program to reward states for maintaining funding for higher education and helping students graduate on time

• Develop a $55 million “First in the World” competitive-grant fund to scale up promising practices at the college level

• Create a College Scorecard to help students compare outcomes, including graduation rates and earning potential, at a number of institutions

• Establish a uniform financial-aid letter to help students better compare offers from different schools

• Avert a planned increase in student-loan interest rates to 6.8 percent, from 3.4 percent

SOURCE: U.S. Department of Education

In addition, Mr. Obama is working on a “college scorecards” proposal that would arm prospective students and their parents with information about how different institutions stack up when it comes to graduation rates, student-loan repayment rates, and graduates’ future earning potential. Much of that information already is collected by colleges, but the requirement that they compile some additional data, such as earning potential, would require legislation.

The president also is seeking to head off planned increases in interest rates on student loans, and double the funding for work- study, which allows students to defray their college costs by working on campus.

Debate Joined

College advocates quickly threw cold water on one aspect of the package: the proposal to tie campus-based aid to student outcomes.

Now, campus-based federal aid such as low-interest Perkins Loans and work-study is distributed through a formula that generally steers money towards older institutions. Under the proposed change, colleges with strong student outcomes such as high graduation and retention rates—particularly for low-income students eligible for Pell Grants—would get extra money. Institutions that struggle to retain students could lose their funding altogether. Campus-based aid programs make up less than 2 percent of overall federal student aid, based on data from the New York City-based College Board.

The details, including just how big a bonus schools with good outcomes would get, are still to be determined.

“If the president is thinking about taking financial aid away, the [people who] get hurt by that are the neediest students,” said Molly Corbett Broad, the president of the American Council on Education, which is based in Washington and represents 1,600 college officials at both public and private institutions.

At least one lawmaker echoed that argument.

“The threat to reduce federal spending for colleges is really a threat to cut federal aid to students,” U.S. Sen. Lamar Alexander, R-Tenn., a top lawmaker on the Senate Health, Education, Labor, and Pensions Committee said in a statement.

This isn’t the first time policymakers in Washington have sought to curb college costs. U.S. Rep. Howard P. “Buck” McKeon, R-Calif., a former chairman of the House education committee, sought to limit tuition increases in 2003, but college lobbyists fought against the proposal. (“Federal File,” Nov. 12, 2003.)

College advocates also contend that tuition increases can be traced in large part to an issue over which colleges have little control: the marked decline in state support for higher education. Total state fiscal support for higher education nationwide declined by 7.6 percent from fiscal year 2011 to fiscal 2012, according to the annual Grapevine survey from the Center for the Study of Education Policy at Illinois State University, a joint project with the group State Higher Education Executive Officers.

But Mr. Carey of Education Sector sought to poke holes in that argument. While state cuts to higher education are certainly a factor in rising tuition, college costs went up in boom times as well, he argued. “It’s not like, when times are good, [higher education systems] are a model of restraint,” he said.

Whatever the factors, costs have risen. Between 2006-07 and 2011-12, average tuition and fees at public four-year colleges and universities increased annually an average of 5.1 percent above inflation, according to “Trends in College Pricing 2011,” a report published by the College Board.

The Obama administration’s past efforts to address the issue included scrapping the federally subsidized loan program and using the projected savings to shore up the Pell Grant program, which helps the lowest-income students cover the cost of college. (“Health-Care Law Also Makes Over Student Lending,” March 31, 2010.)

Easy Shopping

The administration’s scorecard plan is getting mixed reviews.

College counselors like that the proposal would provide students with data on cost, graduation rates, the student-loan debt of an institution’s graduates, and graduates’ earning potential.

“Given that higher education is becoming such a major investment, the scorecard is a nice way of saying to institutions of higher education, we would like to see some outcomes before we make the investment,” said Steve Schneider, the guidance counselor at Sheboygan South High School, in Sheboygan, Wis. “It makes sense to me.”

If the report cards become available, he’s planning to mass-produce those highlighting Wisconsin state schools and hand them out to students.

They also could spur change at the postsecondary level, said Mr. Schneider, who also serves as the secondary-level vice president for the American School Counselor Association, in Arlington, Va.

“If those simple data points don’t reflect well, and colleges are forced to report it, they might possibly make some changes. They could no longer hide behind their reputations,” he said.

Much of the information to be outlined in the scorecards already is available on college websites, said Mamie Lynch, the higher education research and policy analyst at the Education Trust, a research and advocacy organization in Washington. But she said students and “have to dig through several Web pages” to find out what they need to know.

The proposed scorecard would “present [the information] in a consistent format,” she said, “so that students could really compare apples to apples across different schools.”

But Ms. Broad, of the ACE, worries the scorecard might not give students a complete picture of what a particular college has to offer.

“I think ... it simplifies some really complicated issues,” she said. “It isn’t just your first job you’re getting educated for. It’s gaining the potential to be educated over the long term.”

Other college analysts share her skepticism.

The scorecard is a laudable idea, said Christine Keller, the director of research and policy analysis at the Association of Public and Land-grant Universities. In fact, APLU and its sister organization, the American Association of State Colleges and Universities, or AASCU, both based in Washington, have created their own voluntary database to give students more information about such factors as cost and learning outcomes.

But Ms. Keller is not sure an additional federal requirement is the right solution. The voluntary database has been “pretty darn successful,” she said. “Our institutions are perfectly willing to be transparent.” But, she added, “federal mandates always make me nervous.”

The Obama administration is also calling for a uniform financial-aid letter, so that students can better compare different aid packages at different schools.

Rich Williams, the higher education advocate for U.S. PIRG, a consumer advocacy group praised that proposal.

“It would create an ability for students and families to have an apples-to-apples comparison” of their bottom-line costs, he said.

Congressional Hurdles

College advocates also are cautious about the proposal to create a version of the Race to the Top program for postsecondary education, said Robert L. Moran, the director of federal relations for AASCU.

The program would reward states for, among other actions, maintaining spending on higher education and helping students graduate on time. But big questions loom, Mr. Moran said, including how the administration plans to structure the program. States’ level of enthusiasm is another unknown, given that many state leaders felt the initial K-12 Race to the Top program was cumbersome.

College advocates had warmer feelings toward the proposed $55 million “First in the World” fund, which would help colleges test and expand such strategies as bolstering technology to help retain students, graduate them on time, and cut excess costs.

“That holds enormous potential,” said Ms. Broad, of the ACE. “My hope is that it could be funded more richly.”

A version of this article appeared in the February 08, 2012 edition of Education Week as Obama College Plan Aims Beyond Access


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