During his college affordability bus tour kickoff at the University of Buffalo, President Barack Obama outlined what he described as three “new” approaches the federal government could take to make college more financially feasible for young people.
1. Create a rating system for colleges
“What we want to do is rate them on who’s offering the best value so students and taxpayers get a bigger bang for their buck” – President Barack Obama
President Barack Obama said he would like to see the federal government creating a U.S. News and World Report-like rating system for colleges based on a number of factors, including metrics on how many graduates are working in the field of their degree, how much debt the average student leaves, how easy that debt is to pay off and what the rate of graduation is.
“Taxpayers shouldn’t be subsidizing students to go to schools where kids aren’t graduating,” Obama said to cheers from the audience.
Obama expects to implement this new rating system in the next two years. The goal, he said, is to have it in place by the beginning of the 2015 school year.
But there’s a catch: Only Congress has the power to create an official rating system. Previously, Obama directed the Department of Education to create a scorecard that allows students and parents to compare college costs of various universities. In order to create a rating system that has consequences for universities, however, legislation must be passed and created.
“We need Congress to create a rating system,” Secretary of Education Arne Duncan admitted to reporters on Air Force One on Thursday morning.
“Again, this is something we’re going to do in a very public, transparent way, and want to work with Congress to do this. This should be absolutely non-political. We should be able to work together,” he continued.
Duncan also suggested that Obama currently has no idea what such legislation will even look like.
“On the rating system, we’re going to take some time and be really thoughtful on this. It’s not something we’re going to do overnight,” he said. “I’m going to travel the country; the President is going to be out talking to folks. You worry about perverse incentives or doing the wrong thing, so we’re going to take our time on it.”
In all likelihood the rating system will be similar to the White House’s College Scorecard, except it will list universities in rank order.
2. Jumpstart competition between colleges (and not in sports)
Obama’s second proposal was less fleshed out than his first one. What Obama did say was that colleges with better outcomes – which will be determined by the rating system – will receive more money in federal subsides that universities with poor outcomes. He said his administration would be encouraging states to follow the federal government’s lead and reduce funding for colleges that don’t meet federal guidelines.
“For example, universities that are doing a great job of accepting Pell Grant recipients but then actually graduating Pell Grant recipients, that’s really hard work. First-generation college goers — we like to see those institutions get more money to do those kinds of things,” Duncan told reporters.
3. Pay-As-You-Earn program
This is in no way a new proposal. Obama directed the Consumer Financial Protection Bureau to implement the Pay-As-You-Earn system during his first term.
The Pay-As-You-Earn (PAYE) program allows qualifying graduates who are able to demonstrate “financial hardship” to spend a maximum of 1o percent of their salaries on paying back their federal student loans. After 20 years the government will forgive the rest of PAYE enrollees’ loans regardless of how much money the student still owes.
A similar program called Income Based Repayment (IBR) caps monthly student loan payments at 15 percent of graduates’ income and puts the enrollee on track to have loans forgiven in 20 – 25 years, depending on the circumstances.
Obama confessed during his speech that the program itself was not new. He said the program really just needed to be reworked in order to solve two “obstacles.”
“One is that too many current and former students aren’t eligible, which means we have to get Congress to open up the program for more students. And we’re going to be pushing them to do that,” he said.
“The other obstacle is that a lot of students don’t know they’re eligible for the program. So starting this year, we’ll launch a campaign to help more borrowers learn about their repayment options and we’ll help more student borrowers enroll in Pay-As-You-Earn.”
But as Red Alert’s Kelsey Osterman previously pointed out, Pay-As-You-Earn and IBR (aka income based taxpayer ripoff program) reward students who attend schools out of their price range and obtain degrees that have little practical application. Likewise, it punishes students who borrowed responsibly by forcing them to pay off the student loans of their peers through taxes.
Because these two programs are already in place, it’s not fair to consider them ‘new’ proposals. Furthermore, the President’s ratings system will practically be very similar to the College Scorecard the Department of Education already put in place. The only truly “new” idea proposed by the President today is to tie universities’ federal funding to the rating the system. How the White House decides to weight individual categories and how drastically it will affect schools’ federal funding will be the key issues to watch in this debate moving forward – that is, if Congress even decides to follow the President’s lead and take up this issue.
