Society and Culture, Education

Obama’s college rating plan: Who gets the carrot, and who gets the stick?

degree factory

By Mando vzl (Own work) [CC-BY-SA-3.0], via Wikimedia Commons

In the world of higher education, rankings reign. Best party schools? Got you covered. Best faculty? Done and done. Best college value? That one’s an industry in and of itself (here, here, here, here, and here). Not to mention the granddaddy of them all, the U.S. News rankings for undergraduate, graduate, and professional degree programs. Back in August, the Obama administration threw its hat in the ring, announcing a plan to evaluate colleges on performance metrics such as average student debt, graduation rates, and post-graduation success. And while the current, lucrative rankings industry is arguably powerless as a policy tool, Obama’s plan seeks to eventually tie a school’s performance to federal financial aid eligibility. Good schools receive more dollars, bad schools fewer.

Earlier this week, the Obama administration held the first of four public forums to solicit feedback from concerned citizens nationwide. After multiple hours of testimony from students, professors, college administrators, and advocacy groups, we’re no closer to understanding what the system will look like. And a lot more certain of the challenges.

The basic logic is as follows: by tying student aid eligibility to institutional characteristics, schools will improve student performance in order to protect and maximize their access to precious federal aid dollars. Moreover, well-performing schools have an incentive to increase enrollment, because that would translate to more dollars. But this assumption is not entirely bulletproof. In practice, many existing institutions actively choose to keep enrollment stable over time, despite sizeable student demand. This could be a space issue—classrooms, dormitories, etc.—or a conscious choice to constrict enrollment and maximize selectivity. (Harvard could enroll ten times more students, but why?)

On the student side, the plan’s logic assumes that students will shun low-performing schools in favor of schools with higher ratings—both for quality reasons and in order to maximize their access to federal student aid. For many students, that’s just not the case. As one forum participant articulated, “students usually select a community college based on location and convenience.” The same is true for hundreds of thousands of students considering public four-year colleges. What matters most is a loose analysis of location, cost, and familiarity; too few students rigorously review a school’s outcomes or performance.

If Congress votes to tie these ratings to federal student aid, it’s not clear how this will translate to changes in funding levels. Will low-rated schools receive less aid per student than they receive now? Or, will they continue to receive the same amount, while higher-rated schools enjoy relative increases? If it’s the latter, we have an inertia problem. As my colleague Andrew P. Kelly rightly points out, “If there is surplus demand and students attending lower rated programs receive the ‘usual’ amount of financial aid per student—sans reward—where is the incentive to go to great lengths to improve on the ratings?”

But, if it’s the former, we have a punishment problem. Students who enroll at these lower-rated institutions will suffer cuts to their financial aid. The Pell Grant already doesn’t keep pace with tuition increases—even at public institutions. Decrease the amount they can receive, and students—not necessarily institutions—will suffer the consequences. (For instance, do they fill this gap in funding with more student loans?) While it’s nice to envision a system where students take this as the nudge they need to enroll elsewhere, it’s just not clear how many students will have that option.

Which brings us to Policy 101: Carrots and Sticks. If Obama’s rating system is implemented poorly, high-quality institutions that perform well in the ratings stand to benefit from further increases in financial aid without increasing student enrollment—a rather enticing carrot. Meanwhile, students who make their enrollment decision based on factors other than quality and aid might be unable—or unwilling—to respond by enrolling elsewhere. They risk losing access to financial aid, or college more broadly. Unless enough students choose to avoid these lower-ranked institutions, forcing them to improve quality, it’s not the schools that get the stick. It’s students.

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