President Obama’s new higher education plan

Here is one summary:

“Early Thursday, he released a plan that would:

  • Create a new rating system for colleges in which they would be evaluated based on various outcomes (such as graduation rates and graduate earnings), on affordability and on access (measures such as the percentage of students receiving Pell Grants).
  • Link student aid to these ratings, such that students who enroll at high performing colleges would receive larger Pell Grants and more favorable rates on student loans.
  • Create a new program that would give colleges a “bonus” if they enroll large numbers of students eligible for Pell Grants.
  • Toughen requirements on students receiving aid. For example, the president said that these rules might require completion of a certain percentage of classes to continue receiving aid.”

There is another summary here.

So far I don’t get it.  There seems to be plenty of information about colleges, and I doubt if a federal rating system would improve on those ratings already privately available.  To the extent that federal system became focal, the incentives to game and scheme it would become massive, and how or whether to punish the gamers, if and when they are caught, would be a political decision.  I don’t see that as healthy.

Given that previous educational subsidies mostly are converted into higher rates of tuition and thus captured by the school, the second plank would simply boost the subsidy to high performing colleges.  There are plenty of ways to do that and in any case it doesn’t seem to help today’s marginal students, who probably cannot do well in those environments in any case.  Furthermore colleges with high graduate earnings are very often those located in or near high-paying cities.  Should we be subsidizing on that basis?  Should we be giving colleges an incentive to identify and deny admission to potential lower earners?  Do we really want the federal government helping to crush humanities majors?  And I don’t see that the kind of rating system under discussion here is measuring actual value added, ceteris paribus of course.

I am not opposed to tougher requirements for aid recipients, but again there is a danger of gaming.  For instance the aid recipients might simply choose easier classes and majors and aid-hungry colleges might very well accommodate them and make things as easy as they need to.

On the third plank, I don’t think the problem is that Pell Grant recipients cannot get into a good enough college.  The problem, insofar as there is one, relates to how well they do once they show up, given what is often inadequate preparation.  Encouraging now-rejecting colleges to accept them will if anything lure them into environments they are not capable of handling.

I would find it helpful if this proposal would outline the core, underlying theory of market failure in higher education, and then how these ideas would fix it.  It is difficult for me to put that argument together in my mind.  I do get the intuitive reason why “aid should be tied to outcomes.”  But presumably students, who already have by far the most at stake in choosing a college, already allocate their own dollars and aid dollars on the basis of outcomes.  If that process isn’t broken, this plan seems to address a pseudo-problem.  If that process is broken (misguided students?), we need to know whether this plan really will fix the kink in the system.  For instance if students cannot right now choose the schools offering the best expected outcomes for them, this plan seems to work mighty hard to get the schools to do the choosing for them, but in reality only ends up putting the students into tougher and less appropriate institutions.  Can you spell “remedial”?  In any case, under these assumptions, it would seem to be the students who need the fixing, not the schools.  And so on.

I do like this part:

Further, the administration is promising to issue “regulatory waivers” for “high-quality, low-cost innovations in higher education, such as making it possible for students to get financial aid based on how much they learn, rather than the amount of time they spend in class.”

Overall the ideas here strike me as underdeveloped in terms of logic.  Perhaps the plan will have positive effects simply through the “bully pulpit” medium.


'So far I don’t get it.'

What, other universities would be able to figure out what GMU did decades ago?

'To the extent that federal system became focal, the incentives to game and scheme it would become massive, and how or whether to punish the gamers, if and when they are caught, would be a political decision.'

Ah - since there is no question that GMU has not been anything but rewarded for decades, while somewhat flying under the radar due to being a second rank (as an alumni, I'm being charitable) institution.

First Troll!

In my experience, GMU is largely rewarded by an entirely different thing mentioned in Tyler's post-- by being located close to a high-paying area, and benefiting from lots of people that already have well paying jobs taking degrees while working in order to get paid even more.

GMU would be hurt by a continuing of sequestration of funds, or by outsourcing the federal government more to other cities.

"Overall the ideas here strike me as underdeveloped in terms of logic."

How often have I said the same thing when reviewing proposals by this administration...

Nooooo! The logic is immaculate. The marketing is inaccurate.

Could it be that logic and marketing are inversely related. The less logical, the more marketing required. The more logical, the less marketing required.

So schools get more grants and aid funding if they lower tuition, expand admissions, and reduce academic standards (to improve graduation rates), but meanwhile the student recipients of that funding are subject to more rigorous requirements.

Clear losers appear to be: (1) Academically rigorous institutions, and (2) Lower-income/lower-performance students who probably need financial aid the most.

One metric that's hard to game is graduate earnings. What's wrong with using that one?

The problem with any federal ranking system is that whatever metric they choose, it will not accurately reflect consumer preference. In that sense, it really amounts to the politicians playing favorites. This is nothing new, of course, it happens wherever federal mandates are in place. But the idea that market-distorting federal policies are a banality is unsettling to me.

Like the man said "Should we be giving colleges an incentive to identify and deny admission to potential lower earners? Do we really want the federal government helping to crush humanities majors?"

Other possible unintended consequences include punishing schools that accept more women and schools with more education graduates. Although female labor supply has increased, it's still about 10-15 points below male participation rates for the entire US population. I don't know what that figure is for college graduates, and presumably it's a more narrow gap, but it still would pose a problem for the graduation earnings calculations.

Also, clearly schools that produce a lot of teachers will have low graduate earnings. On the margin, reducing the size of the education programs could produce larger gains for the college through improving that metric.

It wouldn't make any sense to rate colleges by the average earnings of their graduates. What matters is the % of students who entered as freshman who ultimately made enough to pay off their student loans within the planned period. So an employed teacher should count as much as an investment banker. What we should seek to eliminate (obviously) are programs with negative expected returns. I don't see why requiring universities to co-sign all federal student loans wouldn't go a long ways toward that goal.

It would go 100% of the way towards establishing that goal.

Very good idea. how about just making the college responsible for 20% of any student loan defaults. That should give the colleges enough skin in the game to weed out the worst cases of marginal students, poor returning programs, and overly expensive colleges.

A reduction in the size of education programs may be a net gain to society too. Education majors seem to make sub-par teachers. There's a reason for education's reputation as a fluffy, easy major.

Ideally, nobody should be able to major in education; it's far better to major in one's intended teaching subject, with education as a minor. That way, the majority of coursework would go toward the student's mastery of his/her specific discipline, with only a dash of the pop psychology and short-lived trends that tend to go into "regular" education classes.

Shocked that arbitrary use of waivers is part of the plan.

In the plan, not in the plan--eventually it comes to whatever the President feels like doing.

My hypothesis is that 18 year olds are terrible at making life choices (e.g., where to go to school, what to major in) - they are irrationally optimistic about their own talents, their ability to beat the odds in a low EV major, etc. Further, they are egged on by a civil society that tells them they should major in whatever they want and "do what they love" and by a government that will finance any education decison they make.

From this hypothesis, the easiest fix I can advocate for is doing something to drive down the cost of tuition. This is easier than making 18 year olds rational, and improves their lives by making their stupid decisions less costly for them - they'll have to deal only with low employability, not low employability on top of a crushing debt load. To the extent that this proposal creates any incentive at all for lowering tuition (or at least the amount that has to be borrowed), I like it.

The easiest fix is having high school guidance counselors reviewing with juniors (and their parents) some potential future scenarios based on known data.

For example:

Guidance Counselor: "What are you thinking about studying if you go on to college?"
Student: "Psychology."
Guidance Counselor: "This chart tells me that if you would have graduated 10 years ago from a top 50 school with a Psychology degree, were you to land a job in local market right out of school paying in the top quartile for that job, it would have taken you ~12 years to pay off your student debts. Future numbers are difficult to predict, but trend data suggests that number will be ~14.5 years by the time you graduate. You need to adjust your expectations accordingly - these numbers could end up being wildly different if you're not matriculating in a top 50 school, if you end up working in a different location where salaries are higher or lower, and what your interest rates will be on the loans you secure."

Or whatever.

The federal government should sponsor the collection of that data and make it available everywhere. It should be required that you sign off that you have read and understand this and wish to continue with your pursuit of a higher education degree before you enroll in any school, and before the beginning of every year of college. If you change your major, you get a different set of numbers.

This won't work, because the high school student, being a 16-18 year old who believes he is special and can conquer the world, will assume that he or she will end up in the upper percentiles of psych majors in terms of outcome. It's not like this kind of data isn't already readily available, at least in the form of anecdote, to anyone who cares to google or read the news.

If you can't make high school students rational, you must make their irrational decisions less destructive, and we can do that by driving down tuition.

The student's parents, now sobered of the actual costs, might be the voices of reason. Might.

Even if not, it's better than nothing, and it costs relatively little.

But good luck with your solution of driving down the cost of tuition. When you're done with that, please get started on driving down the cost of health care.

I've never bought into the whole obsession with majors. The problem isn't that kids major in the wrong thing. The problem is that lots of kids either have no real plan for how to be employable or their plan is ill thought out. This is something that happens often with kids who are among the first in their families to go to college.

If you go to a good enough school, a liberal arts major won't preclude you from a career in consulting or financing. Even if you don't go to an Ivy, there are plenty of careers for a liberal arts major. You can major in English and get a job in advertising. You can be an art student and get a job as a graphic designer or commercial artist. There's a long tradition of people with artistic ambitions falling back on those types of careers. Plenty of those jobs still exist, but it's just much harder to fall into them. It helps to be roughly headed in that direction in the first place.

There is certainly a lot of crossover in the group of people who major in soft majors and the group of people who don't have a well thought out idea of what they want to do after college, but they are not perfect proxies for each other.

Absolutely agree with what you're saying. I'm a composer working on Wall Street. While my background and situation are not unique, I'm closer to the exception than the rule. The average liberal arts major won't land a job in Finance, or IT, or Pharma right out of school. I certainly didn't.

For those who can't land a job in one of these higher-paying fields - or who don't want to in the first place - students should be made to understand what a typical graduate from their typical school of choice would earn in a typical job market and, most importantly, the typical amount of time it would take to pay off typical student loans from said school of choice.

Of course a single change in variable changes the calc, but then you at least have a baseline to form a mental picture of what you're getting yourself into.

The key when it comes to employment is not to be average. The average job applicant, by definition, doesn't get the job.

A liberal arts major from a top school can get a job in finance. A liberal arts major with demonstrable programming skills can get a job in IT. Skills, experience and connections are what get people hired. All of those things trump majors.

My advice to any kid going to college right now would be major in what you want, but make sure you're developing demanded skills (financial, computer, languages, etc.) either in class or out; learn how to network; and find a way to get work experience in the thing that you want to do.

If student loan were being provided by the private sector, thne the student would find all of that condensed into two pieces of information:
1. Will anyone lend me money to study X.
2. What interest rate are they charging.

The problem is that the government run student loan program is providing students with perverse incentives, and obscuring the market signals that would normally direct people towards higher-paying careers.

Require double majors, one in a science and one in an art.

Adds an extra year or two, but they student is able to get better employment or at least go back to school to fix their mistake without too much lost time later.

I do like this part:

Further, the administration is promising to issue “regulatory waivers” for “hig-quality, low-cost innovations in higher education, such as making it possible for students to get financial aid based on how much they learn, rather than the amount of time they spend in class.”

I don't like this part at all. This seems like it will be used to bypass the rules and favor schools based upon political connections. Why do you need a “regulatory waiver” to help high quality, low cost schools? Shouldn't the rules be designed to favor such institutions explicitly? In which case you don't need a waiver. If you do need a waiver, then the rules are poorly designed.

I do like the idea of linking aid based upon graduate earnings and progress towards completion. But perhaps we need to consider providing little aid the first two years of college and providing a lot more the next two to three years.

Taken as a whole, our post-secondary education system is probably the single most evil, destructive, and dangerous forces in the country today. It also happens to be a major source of political money laundering (Democrat politicians shoveling government money into it, which then gets donated back to their political coffers) and Democrat propaganda indoctrination, so I'm not at all surprised that "reform" in this context means "more, more, more."

"It also happens to be a major source of political money laundering..."
Do you have some evidence for this?

You can quite easily google political donations by faculty of various Universities. They lean heavily Democratic.

99 percent of donors from Princeton give to Obama --- The majority of University faculty and staff members who have donated to the 2012 presidential candidates have donated to President Barack Obama’s campaign, according to numbers tracked by the Center for Responsive Politics in Washington, D.C.

A total of 157 University faculty and staff members donated directly to the presidential candidates, with only two of those donations going to Gov. Mitt Romney, the records show. Total donations directly to Obama exceeded $169,000, while donations to Romney summed to exactly $1,901.

Without getting into mike's specific claim, it is certainly the case that higher education- as an industry- spreads massive amounts of money around DC.

If you poke around that link you can find information on direct donations, and it would appear that the Democratic party does a lot better than their opponents.

All of the ratings I recall from my college search (now over a decade ago) were based on numbers like retention, alumni donation percentage, and student satisfaction. From what I understand, the "new" rating system would be focused instead on outcomes such as how much graduates were making after they'd graduated. I don't recall this ever being mentioned in the ratings I looked at.

Of course, what they should really look at is the effect the school had on earnings. For example, given certain entrance criteria (SAT scores, parent's income/wealth, high school grades, height, etc.), you should be able to estimate an individual's income at, say, age 30 when they are 18 and haven't enrolled in college yet. You compare this number to the observed income of these individuals and then look at the deltas, comparing across colleges.

I have no idea how one could get this information from a bunch of schools, (I suppose a large public university system could do a system-wide analysis comparing within-system campuses to eachother, but I'm not sure what the incentive to do that particular study would be.) but I think it would be very useful for determining which schools produced the most gains. You'd almost certainly have to control for major lest you bias your study in favor of engineering-heavy schools.

It's been a while since I went to college, but I'm pretty sure that the information you can find on "college scorecard" ( is different from the information that I found in US News' college rankings.

"There seems to be plenty of information about colleges, and I doubt if a federal rating system would improve on those ratings already privately available."

As far as I can tell, the major rankings (USNews, Economist) do not currently cover "graduation earnings" - the majority of their ranking is based on subjective survey data. There really is no reliable source for this info right now. (This comes the closest:

If students can actually calculate the ROI of a college with the earnings data, I think this could really make a difference in enrollments.

If a student can actually calculate an ROI of anything I am already less worried about that student ...

You question the use of survey data, but this is almost certainly how earnings information will be gathered. What's to stop someone from inflating how much they earn on a survey? Where do you get good data, unless you start delving into tax records? And is that what we really want to be doing, delving into people's tax records?

The problem is that "graduate earnings" doesn't tell you very much. Even ignoring the geographical arguments, there's so much selection going on in who goes to which school. Even if you could get a value-added metric like "earnings added" it wouldn't be very useful due to the non-linearities in education (e.g. people who are more capable of learning, for instance due to Heckman-style noncognitive skills, go to better schools).

Don't say I didn't warn you.

We already solved this problem on a thread yesterday. Force Universities to co-sign all student loans. Sure, students "already have by far the most at stake in choosing a college, already allocate their own dollars and aid dollars on the basis of outcomes", but many students are lead astray by the false messages sent to them by universities and by our pro-college culture. Universities are packaging programs and selling them to students, so make them put their money with their mouths are and co-sign all those student loans. Then see how the market responds...

I like it.

I assume that Universities will respond by refusing to co-sign large amounts of disadvantaged and minority students who are the least likely to repay their loan. Knowing that and the backlash it would trigger, Universities will never agree to it.

It seems to me, by their very nature, loans should not be given to anybody that cannot afford to pay them back. That alone is why this is even being addressed - because people can't afford their commitments. Disadvantaged minority folks will still attend these schools. It will just be financed with charity, and not loansharking.

Schools already have to disclose a bunch of data through IPEDS, including graduation rate, and that data can give us general information (like, more competitive schools have higher graduation rates), but I wouldn't want to tie student aid to it. You can make schools report data, but it's a lot tougher to make them report accurate data. I also wonder if the earnings data is going to be just on loan recipients (for whom there's already some data collection occurring, but not by the colleges) or graduates overall. That's something most colleges don't currently collect. It'd be interesting data to have from a research perspective, but it's quite a project, particularly if it's not just for recent graduates.

I was wondering whether Tyler opposes the Feds starting yet another rating or just the mere fact that aid may be tied to some rating, any rating; even a pre-existing third-party one.

"Do we really want the federal government helping to crush humanities majors?"
If it means more resources for STEM and business, then yes. My kids can study humanities for the rest of their lives, while they earn money using skills they learn and refine in college.

There seems to be a presumption that the government is responsible to ensure that that ................. happens with higher education, without agreement of what ............ is. Have we decided that college attendance is a right? Is it going to be govenment controlled like K-12? Are we going to expect college for everyone?

What's the next step? Hiring university truancy officers? At what point do we expect children to become responsible for their actions? I'm refering to both college students and lenders. A controlled bankrupcy after X number of years (say 5) would stop out of control spending in it's tracks. If, of course, the goal was actually to prevent predatory lending rather than increasing DC control.

There is zero justification for government involvement in post-secondary education. Once a citizen is taught basic numeracy, literacy and civics, then any other education they desire should be up to them and their families. College is a purely private good.

Can a generous university administrator and MR visitor tell us, please: what penalties are assessed for post-secondary drop-outs? Do the Feds bump up student loan rates on those who secure loans only to drop out after so many years? Do universities/colleges assess their own penalties, financial or otherwise?

My favorite hobby horse remains my favorite hobby horse, though: abolish ALL post-secondary remedial programs ASAP. (Has any education researcher seen the connection between post-secondary remediation and post-secondary drop-out rates that I suspect?)

I hear you, but I'm not sure I agree with the underlying philosophy. It seems to be based on the idea that pre-college education is a thing that someone either takes advantage of or doesn't. Whenever I discuss education with anyone I find that I never, just for example, diagrammed sentences, did proofs that I'm aware of, etc.

Try "Shape Up or Ship Out: The Effects of Remediation on Students at Four-Year Colleges."

It seems to me we should be encouraging students to be less ambitious in their school choices, with more staying at home and attending their local commuter school.

I think this is the idea. My guess would be that ROI for public schools is much better than for private, mid-tier institutions.

This lead me to a public institution for my undergrad over mid-teir private schools like Hopkins. Rather than having six figures in debt when I finished, I'd managed to make a bit of money. (Florida had/has very generous merit-based scholarships for in-state students.) Given where I ended up post-grad school, I have absolutely no regrets.

Another day another plan.

Why doesn't anyone ever talk about some good ol' fashioned price controls? Tell Harvard, etc. that there tuition is now $X, to rise at no more than the rate of inflation henceforth. If the problem is really that demand keeps pushing up against inelastic supply and so the money flows into useless administrators and amenities, then it stands to reason that this is a price control that would actually "work." The difficulty of getting a Harvard education doesn't come from the expense, it's just that most people can't get in at all even if they had the money.


Something is causing your browser to not refresh the replies. I posted a note that won't show up on chrome, but it shows up when I switched opera. But I won't see this post on either until the context of this topic is purged from both chrome and opera's caches.

Not a MR problem, but of their service provider (wordpress?) I'm sure.

Not that you will see this...

Thanks, I do see this now. For some reason there was a long delay for everything to come up.

Someone is ignoring Pragma: no-cache :(

Aren't we dancing around the real issue? Graduating more people may give us a more educated populace (hooray!), but it's not going to magically create _jobs_, and that *is* why people go - to get the magical token that lets them past the first HR filter. Many would like to believe it's just for personal enlightenment, but if that's the case, no one should be paying huge piles of cash for it - they should use free MOOCs and read books.

So the real issue is, and will continue to be lack of jobs. Isn't the number still roughly 3 people for every job? With automation improving all the time, our need for people will decrease further. Even if we made college free at the point of delivery (as some Euro countries do, and pay for it using taxes), we'd only "solve' part of the issue - access and debt, not the ultimately issue of jobs - and the sooner we face up to that issue, the better. Where does this lead? A basic income, of course. Some people will remain ZMP for the rest of their lives, and their ranks will only continue to grow. Better that they sit around and watch videos, play games, make music, and play sports than start a revolution.

What I don't get is the belief that less government funding of education is the solution to controlling education costs, when in my lifetime, the reduction in government funding of education has resulted in growth in education costs beyond the reduction in government funding.

In the 50s and 60s, millions of students attended college paying no or very little tuition because the governments, mostly State, paid a substantial portion or all of college teacher salaries. Of course, the Federal government in a law signed by Lincoln heavily subsidized the building of the State universities, not only by providing the land they are built on, but also by providing large tracts of land that generated revenue to fund the university construction.

California was well known for its extensive system of public colleges that had very low tuition because the legislature provided most of the cost of teaching.

And then we have the GI Bill for those who served before the 50s or 60s that paid the tuition in full for millions, but was cut back for those who served in the military in Vietnam - WWII draftees got the GI Bill but by the 60s it was restricted for draftees.

And FDR had established a connection to universities that heavily subsidized research at universities which became formalized post war in DARPA and other programs with specific promotion of educating students in STEM, providing funding for RAs, TAs, and other stipends to students. Plus the funding of education of students in ROTC and enlistees who were trained and then paid to attend before active service.

The private schools that did not qualify for some of this funding, or refused it on religious or other grounds, had to keep tuition, room and board down to keep the cost of student aid low in order to compete with the heavily subsidized public schools.

Note that State and Federal funding of low tuition trade schools tied to local industry was also extensive. Stingy NH had 7 community "colleges" which were primarily trade schools covering all of industries dominant in NH, printing, machining, welding, mechanics, etc. with the capital paid for by taxes and tuition heavily subsidized.

So, by the logic Tyler is advancing, tuition costs in the 50s and 60s must have been sky high with college instructors being paid far higher salaries than the private sector paid.

But in my experience, the reduction in government funding and subsidies which shifted more and more of tuition costs to students seemed to drive up tuition faster than the reduction in subsidies: for every dollar in reduced subsidy, tuition increased by two dollars. And with students paying higher tuition, students started shopping based on other factors.

In the 50s and 60s, public and private colleges offered room and board in black for the same reason Henry Ford offered his cars in black - that was the essential services for the lowest cost. But in the 70s, the mantra became free market competition, which meant giving the students choice. And that was the GM model of education - private colleges started providing loans, like GM did to out compete Ford, and offered lots of choice in colors, like GM did. And the private colleges that stuck with the barrack dorms and the beans, rice, and canned meats and veggies lost "customers" to the GMs who offered private rooms and fresh cooked food, with loans to help pay for the high costs. And to attract students, colleges competed for name brand professors, those who had Nobels, etc, something only the historic and heavily endowed Ivy's or the universities doing government research could afford.

It wasn't so much that the pay of college instructors increased, but that they needed to spend more time becoming branded, so they taught less so they could publish, which required time for research. Even in the small religious colleges, the instructors with tenure got time for increasing their status to make the college a better sell by having the better radio or more chrome or fins like GM offered over Ford.

In the 50s and 60s, legislatures basically said, we believe in higher ed for the good of out citizens and economy, but we aren't going to offer more than black, just the essentials of high quality with no frills. If you want frills, go to a private school. But the private schools had to provide the colors for a very low incremental cost,

But once the public colleges were charging higher tuition, the private schools now had more head room to offer frills. If tuition room and board at a public school was $1000 because the taxpayers paid $1000, the private schools might charge $3000 and then offer student aid to bring the price down to $2000 for most and maybe $1200 or even $500 for the marketing. But when the public school cost $1500, the private schools increased to $4500 with most paying $2500, and some paying only $1000, still $500 less than the public school, just to prove they served the rich and poor for diversity.

And the private schools more than public schools made sure students understood where their scholarships came from so by the time they started working they were contributing to the college tuition fund and the bigger the scholarship which made them well off, the more the college would work to have them pay.

But now the former students making huge contributions to cover the higher costs would think back to the colors, chrome, and fins they wanted as a student, so they put conditions on their gifts like directing it to a science building capable of research, or a football stadium. But that only increases the operating costs, and thus the tuition and room and board.

GM competing with Ford did not drive down the cost of reliable cars but instead forced Ford over time to make its cars more expensive and less reliable. The greatest reliability results from progressively refining a constant function, and by eliminating faults, costs go down. GM offered less reliable cars but they sold the concept of replacing cars every three years to update to the latest style. People paid a lot for style that constantly changed.

Education has been responding free market competition just like GM and Ford did, with those Detroit automakers focused only on high priced cars. Datsun and Toyota sold cheap rust buckets with wimpy engines and zero style, and responded to criticism of them being rust buckets by making them the most rust resistant so by the 80s they were reliable and cheap and thus able to out compete US automakers. Detroit attacked the imports as unstylish, subsidized, too spartan, too few options, no branding like associated with NASCAR and Indy, too slow, but not for them being too cheap. GM and Ford were riding high because they sold Americans on spending lots of money on gas guzzlers to prove they are Exceptional Americans.

The same has occurred in education - the more you spend on a degree, the more you prove you are an Exceptional American and you need to be more exceptional to compete. Competition does everything it can to increase the cost to the consumer.

Okay, here is the most likely elephant in the room: new entrants have no outcomes.

And grading outcomes based on access? Access defined as government assistance? Where have we heard that before?

I cannot think that this will actually be acted upon. I would imagine that it has a huge effect on non-academic preferential admission policies. This will affect a large number of special interests in a very negative way.

Here's an idea: Just make every student buy a higher education, academic or technical, with subsidies according to income. Students can pick Gold, Silver, or Bronze institutions and majors. Track compliance by entering every person's academic record into a Federal Information Hub. Let the IRS monitor income honesty and purchase compliance, Impose fines on those who refuse to pay for a post-secondary degree! -The nation has gone mad. Why not make the descent thorough?

Establish exit examinations to monitor student learning in each course having a significant knowledge-and-skill base. Let students determine whether to reach a satisfactory score by self-study or university classroom tuition. There is no reason to let universities rake off billions from students who are self-starters. There is also, today, no assurance whatever that a person with a generic BA learned anything of value. Students and faculty alike avoid such exit-testing propositions. There is a reason.

This nonsense has got to stop. The education system is a 20th century dinosaur that needs a fundamental structural change, not more tinkering around the edges with funding models and aid requirements to existing colleges.

In a world where technology is rapidly changing and new job categories are being created and destroyed regularly, people need to be flexible. Our current educational model of forcing young people to commit to a career path at age 18 then racking up a lifetime of debt to prepare for that career, is just nuts.

We need an educational system that encourages and rewards lifelong learning We need certifications and accreditation that aren't based around a specific institution or course program, but rather the sum total of a person's knowledge. We need to involve employers in helping to shape the people coming into their industry through co-op, apprenticeship and mentorship programs. We need to give value to non-traditional educational sources like corporate training.

What I'd like to see is the development of an educational 'matrix' of core skills and competencies, with 'degrees' being achieved when certain collections of knowledge are attained. I'd like to see employer feedback become part of that matrix. I'd like to see more focus on open-source textbooks for core undergraduate courses to break the expensive textbook racket that helps make schooling less affordable.

We need to make education more available through non-traditional sources. We need to make it easier to switch careers or pick up additional credentials in mid-life. We need to create a system where education is directed and improved through bottom-up feedback by all stakeholders instead of controlled by federal education bureaucrats and college administrators.

Regarding this earning after college caveat... where are the highest paying jobs? STEM fields, yes?

In Obama's next speech on immigration reform, he'll talk about the US not having enough qualified STEM candidates. This in in direct contrast to his education reform. By increasing H1-B visas at a rate of 120,000 - 200,000 positions PER YEAR, soon to be grads will need to look elsewhere because we've already thrown in the towel on STEM fields.

"Overall the ideas here strike me as underdeveloped in terms of logic."

There's a very specific logic here, it was developed in Athens: Knowledge of virtue leads to virtue; as a corrolary, people's badness stems from their lack of knowledge. Therefore the state should be ruled by the knowledgeable, whose wisdom makes them best equipped to lead the citizens to the good. One of the many straightforwad applications of this logic is to slap warning labels on universities.

I am not opposed to tougher requirements for aid recipients, but again there is a danger of gaming.

My impression from reading Why Does College Cost So Much? and some of your links in this post is that colleges are already in effect "gaming" student loans, and the real question is the rules of the game and who those rules will favor.

Encouraging now-rejecting colleges to accept them will if anything lure them into environments they are not capable of handling.

I wonder if colleges would do more for pre-preparation, "cultural" preparation, etc. in order to make more of these students able to handle the college environment.

I am not necessarily convinced that this set of rules will lead to massive improvements but it also seems to me that they won't, based on what I understand, make things worse for marginal students or make the cost problem overall worse.

Re: "Given that previous educational subsidies mostly are converted into higher rates of tuition and thus captured by the school, the second plank would simply boost the subsidy to high performing colleges."

You didn't state the converse: The low performing colleges would get less, and information about their performance would permit students to compare and spend wisely.

This website gives me whiplash: Yesterday, the theme was: if you give students loans, they will bid up the price of education, and many will still not graduate. Of course, you missed the intermediate point: loans aren't the issue: it is the institutions that accept poor performers, overhype or don't tell students about their prospects,...and take their money. (By the way, colleges would have a greater incentive to give scholarships to student who would improve their statistics...but that is another story.)

Now, you try to focus on the institutions and...OMG, people will misuse information and make decisons with more information.

We can't have that.

This is dead in the water. Obama knows no such system could be designed and passed through Congress in his remaining time in office. Try to say something that sound profound but is meaningless.

You want to get better returns on education. Recruit students who come from privileged backgrounds. Their connections still go a long way in life. Reward schools that have a high percentage of Pell grant students. Seek out poorer students who score high on math and science.
Create grade inflation so that people hiring your graduates have no way to sort them. Plus everybody graduates on time, as long as they show up.
etc. etc

As bad as some colleges are, they are still better run then the government controlled public elementary and high schools in this country. President Obama should spend his time looking at the schools that the government has already screwed up.

DanC, Re: Being dead in the water.

The Senate Education committee has been holding hearings on this subject for some time. I think parts of it have a chance for passage, particularly given that its sponsor, Sen. Harkin, is retiring. The Senate usually does something for a member when they retire.

Please, just Sound and Fury.

Ignore the biggest problem in education, lower grades, and make unworkable suggestions for "improving" colleges. People already have a good idea about quality education and returns on investment.

Who suffers the most? People who are unprepared for college. People who are desperate for an education and hope that some shady program will make a difference - because the school system they came out of failed them.

Obama is just making silly comments. He should say that he is sorry that so many school systems have failed their students, leaving them unprepared for a modern workplace. That colleges are hardly the place to train people in the basic skills that they should have received by the eight grade.

And colleges compete increasingly on quality of life issues instead of quality of education.

Plus borrowing $20-25,000 dollars for education is hardly a burden. It is the cost of their first car out of college.

The quality of students at state colleges has gone up dramatically over the last twenty years. Elite schools can create financial aid packages. The other schools, they have to deal with problems. The "vocational" schools and "art" schools are often a mess.

"Plus borrowing $20-25,000 dollars for education is hardly a burden. It is the cost of their first car out of college."

One foolish purchase deserves another, eh?

Obviously, they are looking to put in place a system so that the federal government can manipulate the post-secondary system the way they do the rest of the education system. As with public education everywhere, you say it's about improving quality, then you use the power of your funding to force conformity to political and cultural (sorry to use the word) agendas. Next up, Common Core for universities.

It's not any more complicated than that. All the ROI and etc. is just the justification for the federal government to coerce colleges into compliance in content through financial pressure. Easy peasy.

Oh, and trust me, politicians will use whatever sounds good to your group to get you on board. If you want financial soundness, they'll say this is the best way to be efficient and talk ROI. If the art history major you just met irritates you, they'll say this is to promote STEM. If you're afraid the U.S. is falling down in the world market, they'll tell you it will increase competitiveness globally.

I don't understand why we can't tie loan eligibility to the student choice of major.

Why not simply survery typical salaries in the 5 years after graduation for various professions, and then only lend money up to the point that the student is likely to be able to pay it back with his epxected salary? This is all math here. It's what banks are supposed to do. If there's more risk of a student defaulting, set the interest rates higher for those students. Calculate what rate at which lending would be profitable - and if nobody wants to borrow at that rate, good on them for making a sensible decision not to pursue a useless degree.

The likely result of this would be to introduce some market signals that would tell first-year students that they had better start studying some math and science and get into a STEM fieldm instead of letting them study basket-weaving for four years and then find out that there are no job prospects in their senior year. It doesn't even have to be STEM fields, it could be anything where the student has a high probability of earning enough to pay back the loan.

The college ranking system is completely unnecessary. We already have the statistics on salaries and we already know what program students are enrolled in via the university. Put together a point system and restrict loan eligibility based on a combination of the student's grades and the choice of major.

+1 Except for the comment on college ranking, as some data is not collected, or disclosed, today in a comparable fashion.

Giving students the message that you will not be paid well as a radio announcer, or pastry chef, after you take a course is a good message. But, the institutions should also disclose completion rates, average salaries, etc., and maybe even be on the hook for amounts in excess of what is loaned for what they loan a student who has little chance of success.

What if you gave the institutions the loan money and measured future loans based on the amount they collected, the number of graduations, and student success. Perhaps that would align incentives.

What if you just let private entities that want to turn a profit make all the lending decisions?
The novelty!

"I would find it helpful if this proposal would outline the core, underlying theory of market failure in higher education, and then how these ideas would fix it. It is difficult for me to put that argument together in my mind."

I have also been frustrated by the focus on the fringes of this and other issues. Part of the problem, in my opinion, is the classic Innovator's Dilemma ( problem that all the parties in the conversation have too much at stake to really disrupt higher ed.

I tried to articulate what that disruption would look like from an "outside" point of view, and I'd love the feedback of this group. Apologies in advance for the first and last time trying out squidoo:

"Given that previous educational subsidies mostly are converted into higher rates of tuition and thus captured by the school"

Proggers deny price elasticities of supply/demand determine who benefits from subsidies/suffers from taxation. They simple believe whoever directly receives subsidies/taxation is the one effected.

" Do we really want the federal government helping to crush humanities majors - "

Gee I really wish it would. Worthless degrees shouldn't be govt funded. If you have fund things I can think of things which are a much better investment of my (read that as taxpayer money).
Thinks like
Medical fields

Call me old fashioned but after all I am paying for it.

"So far I don’t get it. ... how or whether to punish the gamers,..., would be a political decision."

Don't be dense. The whole point is to increase the power of the political class and create more opportunities for graft and corruption and social influence. I's just like Obamacare - the point is not to get more people insurance but rather to bring health care under complete political control so the political class has more power over us.

"Do we really want the federal government helping to crush humanities majors?"

The colleges crushed the humanities when they moved away from classical literature, western philosophy, military history, etc. and towards idiotic b.s. like transvestite midget poetry and hairy lesbian feminist studies. They never needed government help. That's really sad, because it used to be that a degree in one of the humanities meant you were pretty intelligent, able to make sense out of difficult, complex information, and probably a good hire. With a few exceptions, nowadays it just means that you look at non-standard porn and can't figure change without a cash register to help you.

The best way to help higher education is to make all student loans dischargeable and allow interest rates on loans to be set according to risk of default, with no upper limit on the rate. In that situation an Accounting or Chemistry degree would cost you about 2%, whereas Black Studies would run north of 70%.

Doesn't this federal judgment of colleges scheme ultimately mean that all the profs will have to speak that which the government likes? Why would it fund colleges that have profs who speak out against it. Isn't this the end of independent thinking in colleges?

This makes plenty of sense from a socialist viewpoint with a political purpose for controlling society. It has nothing to do with academic excellence or developing human intelligence. I see no mention of developing independent minds willing to question and learn first hand.

His policy almost reads like a list of why college is so expensive.

Aside from tying interest rates to rating, I assume the rating would be some proxy for prospective incomes, this seems like just bolster existing dynmic. It almost certain to drive costs up.

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