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President Obama in Buffalo, NY, discussing his proposed higher education rating system.

Bad Education Policy: Obama’s New College Rating System

The issue of combating student loan debt is one that President Obama has discussed from his time in the U.S. Senate and as a Presidential candidate in 2008, through to the start of his second term in 2013. Most recently, the President has been on a bus tour discussing his desire for a rating system that will qualify the real value of an education produced by a college or university to give students a way of measuring whether or not the schools they are applying to are worth the money.

The focus on the plan is based on the belief that rising tuition at America’s colleges and universities are partly driven by the distribution of over $150 billion in federal student loans. If your college keeps tuition costs down, then you would be rewarded with additional federal dollars for students. Whereas if your school failed to keep tuition costs down, then you would be penalized by getting less federal aid for enrolling students.

President Obama’s primary goal is to make college affordable for students with less economic means and to reduce debt. At a promotional stop Buffalo, New York, the President echoed this theme saying, “We can’t price the middle class and everybody working to get into the middle class out of college.” He also said that “it is time to stop subsidizing schools that are not producing good results.”

On the surface, this might seem like a good proposal to reducing student loan debt. Student loan debt in 2003 was $203 billion dollars. In 10 years, the total loan debt for college students now exceeds $1.2 trillion. 17% of recent college grads owed between $30,000 and $50,000. This is continuing to rise and could surpass 25% of college grads within the next 5 years.

However, the President’s idea lacks any real details on how such a rating system would actually work, what criteria and data it would use, as well as how it would collect the data and what the projected impact would really be – not just to student loan debt, but also to college admissions.

One problem such a system would create immediately is that it would disproportionately favor colleges and universities with larger endowments, assets and financial contributors. Many of these schools also have larger professional networks, which better enable students to find employment following graduation. If President Obama’s goal is to help middle class and those working to become middle class, his rating system most likely would reduce the number of federal student loan dollars to colleges and universities that accept a majority of students from middle and lower income families.

Secondly, how do you begin to quantify the value of an education at a particular college? How do find a formula that evaluates how well a college is containing costs and tuition in a way that is fair across so many different types of colleges and universities? The rating system would have to contain algorithms that are almost impossibly complex, or it would have to be so watered down to prove meaningless. Given the difficulty of passing complex legislation and the large number of political interests involved, you can guarantee that any rating system will be closer to the latter.

So, how does the President’s plan really reduce student loan debt? It does not.

I do agree with President Obama that the rise of student loan debt is creating significant challenges. Recent studies show the drain on net worth to be almost $250,000 over a person’s lifetime. The cost and growth of debt will cause significant challenges for generations if something is not done soon.

However, the solution is not a ratings system.

In the end, we need to dramatically change the curriculum and school structure we have at the secondary education level. It is in secondary education where the greatest failings are taking place, and where the greatest opportunities to drive reform in higher education and reduce student debt exist.

If we can start to get away from our factory-based model of learning, and start opening schools focused on specialized learning, apprenticeship, divergent thinking and collaboration, and assess learning through projects and simulation, we can produce more employable young people who will not need 4 years of generalist college education and the debt that accompanies it. Such as change will improve the economy by injecting more employable and skilled people into the workforce, and compel dramatic changes in higher education to improve their quality and cut costs, while simultaneously keeping financial aid available to those who choose to continue on for higher degrees.

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