Should U.S. Colleges Be Graded by the Government?

10 minute read


You’ll be forgiven if you’ve never heard of Lesley University. The small, private liberal-arts school exists almost literally in the shadow of Harvard, scattered across a handful of brick buildings and Victorian mansions in Cambridge, Mass. With only 1,650 undergraduates and a Division III sports program, Lesley rarely makes headlines. But lately its president, Joseph Moore, has been making some noise.

What’s got him going is President Obama’s plan to assign an official government rating to every college and university in the country, from tiny faith-based schools to giant state flagships, and then allocate federal financial aid according to those ratings. “When I first heard about the plan, I thought, Holy smokes,” Moore says, “what kind of scientific nightmare are we getting ourselves into here?”

While the Administration hasn’t announced how it’ll go about determining ratings, schools across the country are clearly worried. Once the government imposes its promised tests to evaluate things like accessibility, affordability and student performance after graduation, chances are that small, pricey colleges like Lesley might not stack up well. After all, only about a quarter of Lesley’s students are eligible for need-based federal aid, its tuition is $32,000 a year, and its graduation rate is just under 50%.

And that, says Moore, is exactly his point: none of those numbers takes into account the national awards for teaching won by Lesley’s professors, the impressive off-campus internship program for students or the fact that the Lesley Lynx are the New England sports champions in soccer and softball. What’s more, he says, even the existing data points skew the truth. The federal graduation rates, for instance, don’t take into account about a third of Lesley’s students, who take classes part time or who transferred from other institutions, and the federal aid numbers omit hundreds of middle-class families who just miss the cut. “You have to look at the whole environment in which an institution operates,” Moore says. “Three or four or five measures don’t tell the whole story.”

Moore is hardly alone in his crusade. Nearly 60% of college presidents doubt the rating plan will work, according to a December 2013 Gallup and Inside Higher Ed poll, and earlier this year, the head of every college and university in Wisconsin signed a letter expressing unified opposition to it. Public comments to the Department of Education on the issue have been overwhelmingly negative. “The fundamental question is, who should be responsible for assigning value to an education?” says Tracy Fitzsimmons, president of Shenandoah University in Virginia, another small, private college. “The answer is, students and their families. The federal government should not be in that business.”

The problem, of course, is that the federal government is already in the college business–big-time. Congress currently earmarks about $150 billion every year to federal loans, grants and work-study programs for undergraduates, about four times more than it spends on K-12 education. Far too much of that money ends up going to subpar institutions with abysmal graduation rates that leave most of their students marooned–with either no degree or a worthless degree, few job prospects and a load of student debt. In an economy where real wages are stuck in the mud, American students are taking on ever larger loans, almost $30,000 each on average, and default rates are rising at an alarming pace, doubling to 10% over the past decade. “The status quo isn’t working,” says Cecilia Muñoz, director of the White House Domestic Policy Council. “It’s not O.K. that we keep pouring in federal money to keep up with colleges’ raising prices.”

No one knows just what will happen next year when the Obama ratings go into effect. If the scheme succeeds as the President wants, it could remake the higher-education landscape, weeding out the weakest schools and forcing middling ones to improve. If it fails, as critics predict, good schools will be punished and the neediest students might find themselves with even fewer options. What no one doubts is that some change is coming. “There is a sense now that we can’t keep going like this,” says Andrew Kelly, a higher-education scholar at the American Enterprise Institute. “We either need to start demanding more of colleges or something’s going to break.”

A Presidential Priority

In the spring of 2013, President Obama’s policy wonks came to him with a modest plan that would create limited incentives for colleges to keep tuition down and help more low-income students graduate. But Obama sent them back to the drawing board, saying he wanted something bigger. A few weeks later, the team came back with another plan, and again Obama said no. He wanted, he told them again, something that would force Americans to fundamentally rethink higher education and shake up a broken system. A few weeks after that, the rating plan landed on his desk. “We needed a plan that would actually change the status quo,” Muñoz says. “And that’s what we’ve got.”

When Obama announced the idea in August, he described it as a way to identify the schools with “the best value, so students and taxpayers get a bigger bang for their buck.” The rating system would make colleges more accountable in three ways: First, it would provide students with a quick, easy-to-use cheat sheet on which schools are the most affordable and produce the most successful graduates. Second, it would encourage institutions to compete against one another to get their ratings up. And third, Obama announced that he would seek congressional authorization to reduce financial aid to the lowest-ranked schools. At least that’s the theory.

If this approach sounds familiar, that’s because it is. For more than a decade, federal funding for K-12 education has rewarded schools that meet federal benchmarks of achievement. Under President George W. Bush, the Centers for Medicare and Medicaid Services started a rating system for nursing homes in an effort to help Americans choose–and direct their federal dollars to–the higher-quality institutions. And states long ago began using metrics to track their own colleges and universities. As of this year, 25 states from New Mexico to Massachusetts require colleges to meet certain performance standards to receive extra financial aid. In Florida, the government will disburse an additional $20 million this year to four-year institutions that demonstrate that a certain percentage of their graduates are gainfully employed. In Louisiana, some schools will get extra funds for keeping students from dropping out.

But adopting such a plan at the federal level has proved much trickier. That’s partly because colleges and universities are among the most powerful and well-connected special interests in Washington. Over the past decade, the higher-education industry has spent more than a billion dollars on lobbying and has employed about 1,500 lobbyists a year, according to the Center for Responsive Politics. It’s not hard to see why. The vast majority of colleges and universities rely on the feds for about two-thirds of their revenue–even private institutions’ budgets are made up of more than 40% public funds, according to an analysis by financial-aid expert Mark Kantrowitz–and they’re willing to fight to ensure that those dollars don’t decline. Members of Congress, who count an average of 11 institutions of higher ed in their districts, don’t want to see those dollars disappear either. In the school year ending in 2012, the median congressional district received $167 million in federal higher-education aid.

That reality has long shaped how lawmakers think about these issues. In 2008, the campus lobby fought hard for the passage of a law that banned the Department of Education from using existing data, like income information from the Social Security Administration, to track schools and answer tough questions like whether graduates of a given program made enough to cover their student debt. In the past few months, the campus lobby has fought the Obama plan to rate colleges because–what else?–it says the feds don’t have the data to do it well. “It’s infuriating,” says Amy Laitinen, a scholar at the New America Foundation. “Higher ed is as well organized as industries like oil or tobacco, but people don’t think of it that way, so it goes unchecked.”

How to Value a College Degree?

It’s hard to miss the rich and unexpected irony in the fact that much of the American academic cosmos is resisting a President it almost universally supported through two elections. But Obama isn’t backing down yet. While he needs an act of Congress to tie the rating system to financial payments, he doesn’t need permission to create the system in the first place. And for now, the Department of Education is charging ahead. It has said that it will publish a draft version of the plan this fall and that the final version will go live in time for the 2015–16 school year. Terry Hartle, senior vice president of the American Council on Education, the mother ship of higher-education associations in Washington, says that while his organization is “totally opposed to the idea” of the ratings, the most he can do now is try to delay it.

The battle over the rating plan has therefore shifted in recent months from whether it will happen to how it will take shape. What metrics will the government use? How much weight will be put on each measure? Which colleges will be compared with one another? How will the rating system work as both a guide for students and a tool for accountability?

Consider, for example, the particularly slippery problem of measuring how well a school’s students do after graduation. Rewarding colleges whose graduates go on to have higher incomes, as measured by state wage records or campus surveys, could have the effect of punishing schools like Lesley, whose graduates are more likely to pursue important but lower-paid careers in teaching, therapy, the arts or social work. But Department of Education officials say omitting that data isn’t the right answer either. Research shows that many students, particularly those from low-income families for whom a college degree is the only ticket to the middle class, use available data about graduates’ income to choose schools, programs and majors.

There is also the risk of imposing perverse incentives on academia. If the new ratings reward schools for increasing their graduation rates, what’s to keep administrators from pressuring professors to lower their standards and simply shepherd more kids across the finish line? Washington’s obsession with testing in lower schools led to an outbreak of cheating, often led by teachers, around the country in the past decade. “Why are we letting data geeks determine how we value an education?” asks David Warren, president of the National Association of Independent Colleges and Universities. “It’s not a quantifiable product.”

But that view is also no solution for the next generation of students who–the statistics clearly suggest–are headed for an adulthood saddled in debt. While it may be impossible to put a number on the value of a great professor or the lessons learned in a dorm, other factors, like future income and monthly student-loan payments, are as quantifiable as can be. And no matter how good the college years, rewarding memories won’t erase the debt.

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