President Barack Obama on Thursday announced a plan to improve college affordability by revamping the current college rating system to tie federal financial aid to performance, promoting accelerated degrees and online education, and tweaking repayment options for federal student loan borrowers.
Obama has pushed for greater college access and affordability for months: he put colleges "on notice" to keep tuition from outpacing inflation in his 2012 State of the Union speech and hinted at a push for performance-based funding models in his 2013 address. But he would be making true on his vow to "shake up the system" of higher education if his new college funding model is implemented, marking a significant shift in how the financial aid system operates.
"There aren't many things that are more important to that idea of economic mobility, the idea that you can make it if you try, than a good education," Obama said. "In the face of greater and greater global competition, in a knowledge-based economy, a great education is more important than ever."
Currently, most institutions receive federal aid based on enrollment, but the president's plan would tie that to college performance, based on a number of factors including how many students from disadvantaged backgrounds are served, average tuition, scholarships and loan debt, and graduation and employment outcomes.
The administration plans to begin gathering data to implement the college rating system immediately, but linking federal aid to college performance would require congressional approval and is likely to upset some colleges.
"It won't be popular with everyone, especially those who benefit from the status quo," said Cecilia Munoz, director of the White House Domestic Policy Council. "But it is also true that there are leaders in the sector who are eagerly addressing the issue of college costs and are not afraid of transparency. We want to see and encourage more of that kind of behavior in the sector."
The ratings would be published before the 2015 academic year, and pending congressional approval, would determine the amount of an institution's federal financial aid by 2018.
Munoz said that simply making such data available, regardless of if financial aid becomes tied to the ratings, would have an impact on what happens in higher education because students and families would have more information about which colleges provide the most value.
Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, said in a statement he hopes the administration will work with Congress to promote accountability and transparency in all higher education institutions.
"Our institutions are the ones most able to address our nation's growing skills gap, and educate the new traditional student, so we stand ready to continue in our role as the leading innovators in skills-based, career-focused training in high-demand industries," Gunderson said.
But Rep. John Kline, R-Minn., chairman of the House Committee on Education and the Workforce, said he is concerned about the ratings system and that it could lead to the federal government controlling financial aid for colleges. "I remain concerned that imposing an arbitrary college ranking system could curtail the very innovation we hope to encourage," Kline said in a statement. "As always, the devil is in the details, and I look forward to examining the president's proposal further as part of the committee's ongoing efforts to reauthorize the Higher Education Act."
But Obama said that a new rating system is necessary, and that many colleges put their own interests ahead of students' to get a boost in their ranking.
"Right now, private rankings like U.S. News & World Report puts out each year encourage colleges to game the numbers and rewards them in some cases for costs," Obama said. "Are they helping students from all kinds of backgrounds succeed?"
Declining state funding has also been one of the main causes of soaring college costs, which have increased by more than 250 percent during the last 30 years. Several states, including Tennessee, Indiana and Ohio, already allocate state funds to colleges based on performance measures.
Obama said he would encourage states to reshape their financial aid funding models through a $1 billion Race to the Top for Higher Education that would push states to maintain funding for public higher education.
"Over the past few years, states have been cutting back on their higher education budgets ... the fact is, we've been spending more money on prisons, less money on college," Obama said. "Meanwhile, not enough colleges have been working to figure out how do we control costs, how do we cut back on costs. All this sticks it to students, sticks it to families, but also taxpayers end up paying a bigger price."
To get students through college quickly and at a low cost, Obama also said his administration would push colleges to adopt different educational frameworks, such as accelerated or competency-based degrees, massive open online courses (MOOCs) or "hybrid" classes that split class time between online and in-person instruction.
Institutions such as Western Governors University and Southern New Hampshire University, for example, have competency-based degree programs that evaluate students "based on demonstrated learning, rather than the amount of time they spend in class," said James Kvaal, deputy director of the White House Domestic Policy Council.
The last leg of Obama's proposal seeks to keep college costs low for current and future students by making all federal loan borrowers eligible for the Pay As You Earn repayment option, which caps monthly student loan payments at 10 percent of a borrower's income.
Currently, students who borrowed before 2008 or have not borrowed since 2011 are not eligible for this plan. The average student graduates with more than $27,000 in debt, according to the Institute for College Access and Success.
"At a time when a higher education has never been more important, or more expensive, too many students are facing a choice they should never have to make," between not attending college, or pursuing a degree and gathering a large amount of debt, Obama said. "They've got this crushing debt that is crippling their sense of self-reliance and their dreams."
"This country is only going to be as strong as its next generation," Obama added. "I have confidence that our nation's colleges and universities will step up ... and lead the way to do the right thing for students."