Higher-Education Reform: a Legacy for Obama?

Michael Morgenstern for The Chronicle

January 21, 2013

Higher education had no place in the 2012 presidential election. Mitt Romney's agenda consisted of reinstating enormous public subsidies for private-sector student lenders and praising a for-profit college in Florida that charges $20,000 a year for a bachelor's degree in video-game design. President Obama touted past efforts to increase Pell Grant funds and to make student loans affordable, but offered little in the way of bold new ideas for a second term.

Now the federal agenda is dominated by gun control, immigration reform, and manufactured debt-ceiling crises. It would be easy for Obama to set higher education aside, secure in the knowledge that his first-term victories will stand up well in the judgment of history.

It would also be a mistake. Higher-education reform is one of the things legacies are made of. Lincoln is still remembered for signing the Morrill Act, Lyndon Johnson for the Higher Education Act, Franklin Roosevelt for the GI Bill. Obama has the opportunity to make a similar lasting mark—but only if he's willing to think more expansively than anyone before him about what higher education can be.

Obama should begin by consolidating his achievements. There are still $400-billion in outstanding loans made under the old system of subsidizing private banks, which he helped repeal in 2010. By giving borrowers incentives to refinance old bank loans into new, federal direct loans, the government could save $34-billion in bank subsidies, money that could be directed to more useful purposes, like Pell Grants. In a time of rising college prices, high unemployment, and stagnant middle-class income, Pell Grants are a cornerstone of economic opportunity, but the program will have a $5.8-billion yearly budget deficit starting next year. It needs to be put on a sound financial footing for the long term.

The 2011 "gainful employment" regulations remain vulnerable. A lawsuit backed by for-profit colleges has held the measures up in court, forcing the administration back through a long, tedious process of writing rules. These are places where good ideas die quiet, unnoticed deaths. For-profit colleges have already tightened their admissions policies in anticipation of the rules, a step that has helped curb reckless expansion and predatory marketing. Vulnerable students can't be left unprotected again.

The Obama administration also instigated an important, underrecognized change in how the federal government subsidizes student loans. Traditionally, students get cheaper loans if their income is low when they start college, with the government picking up interest costs that accrue during their college years. The administration has helped promote and expand so-called income-based repayment (IBR) for loans, which helps students who are struggling financially after college, when loan payments are due. Borrowers with little or no income have little or no monthly loan payments, and remaining debt is forgiven after 20 years.

It's a great program, but only a small fraction of borrowers are enrolled, and the rules are too generous for high-income borrowers with large loans (lawyers, mostly). The administration should close that loophole while making IBR the default repayment option for all student-loan borrowers.

Then the administration should map out a second-term plan to make a good higher-education presidency into a great one.

The state of state higher-education policy is, in many parts of the country, deplorable. State lawmakers have learned all the wrong lessons from the recession: Slash funding to the bone, let colleges make up the difference with tuition hikes and service cuts, and—look!—the colleges and universities are still there, seemingly no worse for wear. The deep human cost of state disinvestment is all below the surface and in the future, in the form of depleted savings, defaulted loans, diminished scholarship, and debased academic standards.

The federal government needs to begin rendering harsh judgment on such conduct. States that pull their weight in educating the citizenry and work force of tomorrow should be rewarded. Those that don't should experience enough financial pain to make them think twice about trashing the great public colleges and universities they inherited from wiser generations.

Meanwhile, basic questions like "How much are undergraduates learning?" and "What educational practices actually work?" remain unanswered. Are tenured professors better teachers? Are massive open online courses (MOOCs) a viable alternative to traditional classes? Who knows? The U.S. Department of Education disburses $155-billion per year in grants and loans, yet the amount of money spent studying the return on that investment is minuscule by comparison, and should be greatly increased.

There are also major opportunities to collect and publish more information about what happens to college students. The "gainful employment" measures show that people who get those video-game degrees from Full Sail University—the Romney favorite—graduate with debt payments equal to a whopping 20 percent of their annual income. Why limit that examination to for-profit colleges and vocational programs? Of course, some college majors aren't preprofessional. But most are, particularly those in which most students enroll. The most popular undergraduate major, by far, is business. Presumably, most students major in business so they can work in business. Are they successful? How much do they earn? Parents and students deserve answers to those questions. The data used to calculate the gainful-employment rules should be calculated and published for all higher-education programs, for-profit and nonprofit alike.

Finally, and most important, the Obama administration should expand its vision of what publicly supported higher learning can mean. The MOOC provider Coursera recently announced that it would charge students relatively small sums, on the order of $100, for verified certificates of learning. The marginal cost of making a MOOC available on the Internet is $0, which is why those courses are free to students. By contrast, the marginal cost of assessing student learning, at a MOOC or elsewhere, is more than $0. Authentic, reliable evaluation costs money, and so someone must pay for it. Evaluation is also crucial to granting students college credits that lead to credentials.

Why can't students use their Pell Grants to pay for MOOCs, even those offered by the world's most prestigious universities? Because MOOCs are not colleges, traditionally defined. But that definition is an artifact of federal policy. Students can give their federal-aid dollars only to accredited colleges, and existing colleges control the accreditation process. So new colleges, eager for aid dollars, dress themselves up as traditional colleges, with commensurate expense to students, even if that makes no sense in the digital age.

The Obama administration should take the bold step of writing a new rule book for federal student aid to use alongside the old. Any provider of higher learning willing to meet exacting standards of transparency and quality should be eligible for student aid, regardless of traditional accreditation. Funds available per college course under this new system should be much less than those granted under the present system, to encourage the creation of high-quality, low-cost options, and to put price pressure on traditional institutions that currently experience none.

By combining its unique ability to grant a national seal of approval to nontraditional modes of learning with vast amounts of student aid, the federal government can catalyze a new market for higher learning, one that would not be confined to institutions built on a 19th-century organizational model. Obama's predecessors left higher-education legacies that still resonate, decades after those presidents' terms came to a close. This could be his.

Kevin Carey is director of education policy at the New America Foundation.