Obama’s new plan ‘shames’ colleges, and that’s why it may work

Updated

The phrase “rising college costs” has become so characteristic to the topic of higher education that it seems virtually bound to the debate.

Recently, while on a bus tour to several colleges in Pennsylvania and New York, President Obama made attempts to decouple this phrase when he presented a new proposal to link the amount of federal financial aid to college performance, which would in turn lead to a reduction in cost of higher education across the country. It is, in essence, attempting to shame colleges into offering better aid to their students.

With his new plan, more federal aid would be granted to schools that lower their costs for students, and schools that fail to halt tuition increases would face cuts in the federal aid they receive.

A press release from the White House that referred to Census data stated that “the average tuition at a public four-year college has increased by more than 250% over the past three decades, while incomes for typical families grew by only 16%.” It went on to illustrate the growing concern of rising loan default rates, and decreasing graduation rates.

Obama’s proposed restructuring of Pell grants into an incremental disbursement system gives students money in a more structured way so that if a student drops out, they are not still receiving Pell grant money while not in school. According to the White House, President Obama also plans to give colleges a bonus based on the number of Pell grant students they actually graduate, not just the number of Pell grant students they enroll.

Low-income students are more likely to attend colleges with lower graduation rates, and often take much longer to graduate, but with the president’s new plan, student aid will be connected to student outcome, which will put pressure on schools to graduate their students, and help encourage students not to drop out.

The president also wants to cap student loan payments at 10% of an individual’s monthly income. This would help all students, but in particular low income students, to manage their debt so that fewer students default on payments, and the high cost of college becomes less of a deterrent for attending.

This plan comes at a time when Obama is trying to emphasize his commitment to helping the middle class. He made his position clear in an email that was sent out to supporters:

“Just tinkering around the edges won’t be enough: To create a better bargain for the middle class, we have to fundamentally rethink about how higher education is paid for in this country. We’ve got to shake up the current system.”

If passed, this plan would change the government’s role in higher education. Previously, it has limited itself to simply dispensing financial aid based on the number of students attending each school, but with Obama’s new proposal, it would assert itself into a more regulatory role, serving to classify institutions with a larger set of criteria. Turning the college decision process into more of an equation has its risks though; it relies on data that is at times inaccurate or incomplete, and also switches a lot of the focus to the limited perspective of job preparation.

The Department of Education already has a rating system set in place to determine the affordability of different schools, with an interactive “college scorecard” and “college navigator” that allows potential students to compare different schools’ costs, graduation rates, loan default rates, and employment after graduation. Obama’s new plan would update the system, which currently has very spotty data, and then connect it to the amount of federal financial aid each college receives for its students.

The plan is not only intended to force colleges to lower their price, but will also offer a more accessible source of information for students to compare the benefits of each college.  Much of the data already exists, but it is hard to find, particularly for students who come from under-resourced school districts and families that are unfamiliar with the college application process.  The new plan would not only update the existing criteria, but also include things on the scorecard like graduate’s earnings and number of advanced degrees, data that already exists, but is not yet a part of the scorecard and therefore often not a part of the vetting process.

After the measures used to rate schools are fully established and the system is set in place, federal student aid would then be dispensed based on the rating that each college receives. The federal government could then seemingly tempt colleges into making their tuition more affordable, dangling the carrot of increased federal aid in front of their noses.

The updated rating system is said to take effect in time for the 2015 school year, and if Congress approves the plan, the actual adjustments in funding would start in 2018, giving colleges several years to adjust.

Eliza Arnold is a recent graduate of Tulane University where she studied Political Science, International Development, and Philosophy. A native San Franciscan, she now lives in Brooklyn. 

Watch our recent coverage of the president’s education plan above.

Explore:

Obama’s new plan 'shames' colleges, and that's why it may work

Updated