5 Potential Flaws in Obama's College Affordability Plan

Higher education policy experts weigh in on what might make Obama's plan more effective.

Higher education policy experts weigh in on what might make President Obama's college affordability plan more effective.
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While President Barack Obama is pushing a multi-faceted plan aimed at making college more affordable, many policy experts fear the proposals do not address core problems in higher education: tuition prices are soaring and many graduates are unable to repay their debt.

While the majority of college administrators and education officials agree that there is a need for innovation to make higher education more accessible and affordable, especially for low-income students, they differ on what measures should be used and how they should be implemented.

Here are five points of criticism on Obama's college affordability proposal:

1. Linking financial aid to measures like graduation rates is a bad idea.

Perhaps the most controversial aspect of Obama's plan is the ideaof tying colleges' federal financial aid eligibility to their performance in ratings. But giving too much weight to graduation rates may cause institutions to either push out a large number of unprepared graduates, or to become more selective in terms of the students they admit, so they can ensure they will have high graduation rates.

That happened in K-12 education with No Child Left Behind. In order to meet tough requirements for upping graduation rates, some states lowered the rigor of their assessments to push more volume, says Mike Cagney, co-founder and CEO of the student loan refinancing company SoFi.

[DEBATE CLUB: Should Congress Pass the No Child Left Behind Rewrite?]

And on the flip side, some colleges may feel pressure to become more selective in terms of which students they admit in order to ensure high graduation rates, and thus, federal financial aid, says John Ebersole, president of Excelsior College in Albany, N.Y.

"The Ivy League takes the cream of the crop, they don't have this problem. You can predict that 80 to 90 percent of the people who come into those programs are going to graduate, but that's not true for [all institutions]," Ebersole says. Being more selective, he says, "gives them the graduation rates they want to brag about, and it helps them on the prestige search that so many institutions are on."

2. Even if all the proposed ratings data were available, they would not be specific enough.

The majority of the data Obama wants to use in his college rating system (such as earnings after graduation, debt-to-income ratios and graduation rates for nontraditional students) are either currently very limited or are prohibited under current law.

The president has plans to have colleges report the average earnings of their graduates, but that data would not be extremely helpful unless they were reported by major, rather than as a school average, Cagney says.

"That's why we have, or a big part of why we have, the debt crisis that we're in right now on student loans," Cagney says. "There's still a pretty large dichotomy between what I'm going to get paid being a computer science major versus a psychology major ... They translate into different amounts of money that you can borrow and affordably be able to pay back."

3. A lack of specific data increases financial illiteracy and over-borrowing.

The president's proposal does include plans to address financial literacy by launching an awareness campaign to get more students to enroll in income-based repayment programs.

Although students may become more aware of their repayment options, they often don't know what they're getting into when they take out loans, and see them as "funny money" because it often times goes directly to the institutionfor tuition, without reaching the students' hands.

[READ: Student Debt Relief Companies Profit From Borrower Confusion, Report Says]

Cagney says this lack of education has lead to chronic student over-borrowing – students pay the same amount in tuition for degrees that lead to different earnings outcomes, and schools have no incentive to lower tuition rates because the fees get paid, regardless of whether students can repay their debt or not.

"If you borrow less than the value of the education, you're going to be able to pay that debt off," Cagney says. "If you're borrowing more than the value of the education, you won't."