President Sees an Obamacare Solution to Higher Ed’s Problems

Higher ed, welcome to Obamacare.

Frustrated by how his policies of the past four years haven’t stalled rising college-tuition prices or moved the needle on the number of students, particularly low-income students, graduating from college, President Obama took on the higher-ed establishment on Thursday, declaring bluntly that the federal government cannot just keep chasing college prices with federal aid but not getting better results.

It’s the same problem Obama confronted with health care in 2009: Spending more just leads to higher prices and not necessarily better outcomes. The higher-ed system’s “current trajectory is not sustainable,” the president told an audience Thursday morning at the University at Buffalo.

Unlike health care, Obama did not propose a full-scale reform of the nation’s postsecondary-education system. But with the power of the federal purse, he wants the government to do something that could have just as much of a long-lasting impact: no longer treat every college the same in doling out student aid.

Federal student aid, either direct through grants or indirect through loans, is the lifeblood of colleges and universities. Very few could survive without it, and many can’t survive even with a little bit less of it. That’s a good thing. Right now, too many colleges are not getting the job done—whether it’s not graduating enough of their students, especially those on Pell Grants, or putting too many of their students or their students’ parents deep in debt in order to finance a degree with little payoff in the job market, today or five years from now.

The central plank in Obama’s plan is to develop a new college-ratings system built on the value offered by colleges rather than the input measures that colleges now chase and overspend on with merit aid and student amenities in order to perform better in the U.S. News & World Report rankings.

Consumer information about colleges has improved greatly in recent years, with tools such as College Navigator, the president’s own College Scorecard, and The Chronicle’s College Reality Check.

And now with efforts in the states to link the earnings of college graduates to specific institutions and majors, we are on the cusp of a moment when applicants know as much about their colleges as colleges know about them and their families. It reminds me of when the Internet leveled the playing field for car buyers, allowing any of us to know what other people had paid for the same vehicle even if they were across the country. Imagine that transparency coming to college pricing.

Even colleges have jumped on the bandwagon of developing better consumer information, with sites like the Voluntary System of Accountability or U-CAN, largely under threat by the last federal incursion into higher ed, the Spellings Commission.

But the key to Obama’s new proposal is not just more consumer information or another rankings scheme. It is to use that ratings system to reward institutions that do well, by giving their students larger Pell Grants or more favorable interest rates on student loans.

Because it’s unlikely that the federal student-aid pie will grow in the next decade, such a plan will essentially punish colleges that don’t provide value for the money spent on tuition. The likely result is that those colleges will see their enrollments drop and thus be forced to improve, merge, or go out of business. After all, who wants to attend a college that charges a lot and where you have to pay more for a student loan?

Given the current gridlock in Washington, many pieces of the Obama plan are unlikely to go anywhere anytime soon. But the ideas are a start to rethinking what we want out of the vast federal investment in higher ed. And, perhaps, just like the rhetoric of the Spellings Commission last decade, colleges and universities will be spurred to act in their own best interest, even before Congress lifts a finger.

Just look at what Obamacare has meant for the nation’s health-care system.

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