President Barack Obama recently shared his "ambitious new agenda to combat rising college costs and make college affordable for American families". The agenda is meant to make higher ed institutions more accountable for their performance and help keep the reins on soaring tuition costs. Its centerpiece is a proposed new rating system for colleges and universities to which Federal financial aid would be directly tied. The agenda touches on other matters, including several encouragements towards "innovation": blended learning approaches, three-year degree tracks, MOOCs and other learning technology, and so on.

First, the rating system

By 2015, the Department of Education will develop a ratings system for higher ed institutions that evaluates colleges based on their "value". It will look at a given school's...

• Access, defined in terms of the percentage of students receiving Pell grants
• Affordability, such as average tuition, scholarships, and loan debt
• Outcomes, such as graduation and transfer rates, graduate earnings, and advanced degrees of college graduates

...and rate them accordingly. Schools will have to publish their scores, giving applicants, students, and their families an objective, standard of competition by which to judge an institution.

Then, the money

By 2018, the President hopes to tie Federal Aid dollars to a school's score, funneling more funds towards those schools with better scores—to the end of making those schools more affordable. To-wit: students at higher-scoring schools could get higher Pell Grants and be eligible for student loans with lower interest rates than at a lower-rated school. Meanwhile, schools and students would be subject to more oversight regarding their use of Federal Aid money: students would need to make continual progress towards their degrees to remain funded, Pell disbursement cycles would change, and schools would have to keep closer tabs on their Aid-funded students.

And the value

The scores rate schools on their "value": the cost of the education as compared with what the student ends up getting from it. One half of this equation is the outcome—what does the graduate go on to earn? The other half is the cost of the education that led to that outcome. So, the waitress that spent a hundred grand on a B.A. got a bad value; the Automotive Tech graduate with a successful import car repair business got a good value.

The agenda suggests that "innovation" will help both sides of the value proposition. Education technology, for example, can lower the cost of the education while simultaneously improving the outcome. Three-year degree tracks are surely less expensive than four-year degrees. Blended learning reduces the need for expensive facilities like classrooms and campuses. And so on.

Some observations

We serve a wide variety of smaller schools that focus on easily-misunderstood facets of higher education—liberal arts, Oriental medicine, theological seminaries, performing arts (to name a few)—and this plan, we think, portends ill for our customers.

1. What does this agenda assume?

The agenda is based on particular assumptions about higher education. Here are a few:

1. Higher education is fundamentally just job training for high-end jobs
2. College graduates should step directly into those high-end jobs
3. The essence of higher education is measurable
4. Data, technology, and administration are the solutions to pedagogical, social, and economic problems

2. More money for wealthy schools

It's hard to see how funneling federal money towards highly-rated schools will do anything but subsidize schools already wealthy enough to generate those high ratings. The amount of reporting involved alone would place an untenable administrative burden on smaller schools. Big Federal efforts always favor the big, entrenched players.

3. The rating system disregards educational quality

The ratings are based on quantifiable economic factors—low-income students, earnings of graduates, affordability—and not on the other results of a college education. Also, once you have a rating system with money attached to it, those who are rated will learn to game it. For example, if graduation rates have to rise, so will statistic-juicing things like grade inflation.

4. Tracking graduate earnings is a hard nut to crack

So, your graduates need to step into well-paying jobs that their degree trained them for, and your ability to attract more Pell and Stafford funds depends in part on how well they do. Let's even assume in the first place that you can A) collect data on your graduates' earnings and B) meaningfully report on it. Assuming that, what if...

• They graduate into a denuded, depredated job market in a depressed economy?
• Your school developed in them such commendable civic character that they commit to living in a region with lower wages?
• It takes fifteen years of development and maturation for their career to net them a tony salary?
• Graduates from other schools land sweet jobs because they're well-connected?
• They get a fine job in a field their degree prepared them for in a non-quantifiable way?

Rating a school based on factors outside of their control is, in a word, nuts. Forcing schools to "compete" based on these ratings—given the wild disparity between one school's resources and another's—is pointless and unfair.

5. If this goes anywhere, it's not nearly as bad now as it will turn out to be

To enact this, the President will need some far-reaching legislation. And there's nothing like a long, drawn-out legislative process at the Federal level to make a bad idea even worse. Lobbyists for online for-profit schools (one of the likely targets of this agenda) won't go down without a fight. Faith-based schools, looking back at the HHS mandate from the Affordable Care Act, likely have additional ratings based on "religious inclusion and diversity" to look forward to. Liberal arts schools will watch as the solons on both sides completely misunderstand the liberal arts. Faculty will find targets painted on their foreheads.

Whatever the case, the strings currently attached to Federal financial aid will multiply into a wall-to-wall spiderweb. If this agenda makes progress and grows some teeth, smaller schools that rely on Federal dollars might wonder if it's really worth it.

Selected further reading on the subject and some related matters:

Here's a video of the President's speech on the whitehouse.gov site.

Time Magazine has the official talking points.

The Wonkblog at the Washington Post has a thorough write-up of the agenda.

Inside Higher Ed has a thorough and irenic article on the ratings system.

The American Association of University Professors has no love for the President's proposal.

First Things shares some thoughts on faith-based schools that take Federal financial aid.

The acerbic Timothy Burke has some very long sentences about the technocrats that come up with stuff like this.

This guy looks forward to lots of professors being laid off because they've been replaced by MOOCs. I'm not sure his predictions will come to pass, but their contours aren't unreasonable.

Matt Yglesias, called out by Mr. Burke as a technocrat, loves the agenda and hopes its modest implementation will bring good and meaningful changes to higher education.