Aug. 23 (Bloomberg) -- President Barack Obama’s proposal to tie federal student aid to college tuition and outcomes, intended to control costs and support low-income students, may have the opposite effect, some education leaders said.
Colleges may be discouraged from accepting and giving aid to students from low-income families because of the risk that they might hurt the school’s rankings, which would include graduation rates, debt levels and future earnings, the officials said.
Obama’s proposal, which is subject to congressional approval, is likely to encounter strong opposition from colleges whose students rely on federal financial aid to help cover their costs, educators said.
“It’s a very hard job to decide on how to rate colleges,” Derek Bok, former president of Harvard University in Cambridge, Massachusetts, said in a telephone interview. “I have to be somewhat apprehensive when any force as powerful as the federal government undertakes the task.”
Small, private colleges offer many different paths to a bachelor’s degree and its benefits, said William Fox, president of St. Lawrence University. The ratings proposal doesn’t take those different approaches into account, he said.
St. Lawrence, in Canton, New York, near the Canadian border, has about 2,450 undergraduates and 100 graduate students. The school accepted 48 percent of applicants for its incoming class and tuition is $45,705.
“There are different models of cars we can all drive. Who’s to say whether the Ford F-150 is a better way to get to New York City than the Toyota Camry,” Fox said in a telephone interview. “You still get there.”
Administration officials said they would seek advice from colleges, students and experts in determining how to put together the ratings and carry out Obama’s proposals, yet they acknowledged the potential for controversy. An effort to crack down on for-profit colleges by cutting off aid to those whose students take on heavy debts ran into heavy opposition.
“They’re not going to be popular with everyone, especially those who benefit from the status quo,” Cecilia Munoz, the White House domestic policy director, said on a call with reporters.
The plan’s push to collect data showing which schools are most successful in graduating students and keeping their debt levels down would be invaluable, said Amy Laitinen, deputy director of higher education for the New America Foundation, a nonprofit public policy institute in Washington.
“Education is a black box,” she said. “Students assume that when they go to college things are going to be just fine, and that’s not always the case.”
Public universities tend to have lower tuition, yet some also have lower graduation rates than private schools. Community colleges -- hailed by Obama for giving Americans valuable skills -- also tend to have low graduation rates, while for-profit colleges report low degree completion and high student-loan defaults.
Under the plan, whose details are still to come, the Education Department would develop a rating system to be in place before the 2015 school year. Obama said in remarks yesterday at the University of Buffalo that he would ask Congress for legislation that would dole out financial aid based on those ratings by 2018.
“It will be possible to identify winners and losers -- and which states win and lose,” said Terry Hartle, senior vice president of the Washington-based American Council on Education, which represents 1,800 college presidents. “Those sorts of discussions tend to become very political.”
The plan would rank similar colleges against their peers, and students who go to highly rated schools would get more aid than those at lower-rated institutions. The ratings would be based on such measures as access, affordability and outcomes, including the percentage of students who get Pell grants reserved for those from lower-income families, average tuition, loan debt, graduation rates and graduates’ earnings.
Some college presidents said they worry that rather than reducing costs, the regulations might lead schools to avoid enrolling students who are least likely to graduate.
“We would use our financial aid to attract a population that’s better prepared, financially and academically, to finish college and graduate,” said James T. Harris, president of Widener University in Chester, Pennsylvania. “It would deter colleges from graduating more students, particularly in the middle-income and lower-income populations” that Obama is interested in, he said.
Tying federal aid to student progress and graduation rates would benefit students because their worst outcome is to leave school with no degree, said Peter McPherson, president of the Association of Public and Land-grant Universities.
Still, he cautioned against a ranking system “based on incomplete and potentially misleading metrics.” A ranking partly based on graduates’ income could penalize institutions whose students pursue lower-paying fields, such as teaching and social work, he said.
Under Obama’s plan, colleges would also have a financial incentive to enroll students eligible for Pell Grants. To prevent waste, the money would require colleges with high dropout rates to dole out aid over the course of the semester, rather than in a lump sum.
The Obama administration tried to crack down on for-profit colleges by cutting off aid from those whose students take on heavy debts that don’t pay off with higher incomes. The industry lobbied heavily against that plan and successfully fought against the rules in court, saying they were arbitrary and would hurt low-income students.
Under pressure from the government, for-profit colleges have become more selective in recruiting students, and at least 70 percent now use some kind of entrance requirement or assessment, said Steve Gunderson, president of the Association of Private Sector Colleges and Universities, a Washington trade group that represents the for-profit industry.
The question of how to make sure that U.S. financial aid is going to the most effective schools is bound to be contentious, and formulating legislation to do that is a process that may outlive the Obama administration, said Jarrel Price, an analyst at Height Analytics in Washington, who follows education regulation.
“Agreement that institutions need to be held accountable seems to be universal,” Price said. “There’s no agreement on how to apply that. That conversation hasn’t started, and it will take several years to complete.”
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