Four (or maybe five) ideas for how President Obama really could reform college financial aid

Addendum: My ideas in this blog post are now a Major Motion Picture column over at Inside Higher Ed.

My observable corner of the blogiverse has been active and very sharp since the president’s speech at SUNY Buffalo and the White House dreams of reforming college financial aid. Various people I read have noted the administration’s targeting of federal-aid exploitersthe post-Administration time frame, the way this initiative builds on the White House’s “college scorecard” project, the absence of anti-tenure or other anti-faculty rhetoric in Obama’s plan, at least mild incoherence in the plan, the potential whack-a-mole impact of the policy (in the alternate universe where it happens), the contorted relationship between federal financial aid policy and institutional reindeer status games, the giant disconnect from community-college reality, and the Underpants Gnome theory of action for ratings/rankings.

Admirable: The desire to target financial aid (and institutional eligibility for participation in federal aid programs) at colleges and universities that make it easier for students of moderate means to attend and complete undergraduate programs.

Reasonable and very interesting policy ideas: Paying colleges for Pell graduates, using the statutory authority of Experimental Sites to give colleges waivers on Title IV (federal financial aid) rules for innovative ideas.

Good idea at heart, though the details matter: expanding pay-as-you-earn.

DOA: Changing the statutory structure of Title IV (or the Higher Education Act in general). This is not going to happen in this president’s term.

The “school uniform” idea, something that is backed by much too little research: tying Pell-grant aid to student performance (beyond staying in school).

The “didn’t you listen to Cass Sunstein at all?” idea: creating Yet Another College and University Rating System. Anyone ever meet more than five high school students who have made a college choice based on the (much more thoughtful than U.S. News) ratings produced by Washington Monthly?

The crack cocaine of reformers

One brief comment on the rating/ranking as norm-setting and policy mechanism: I understand that ratings and rankings are the crack cocaine of this generation of education reformers. The president, his White House advisors, and Secretary Duncan can’t get it out of their head that if we just have the right (magical) formula, we can get the education system to perform better. Matthew Chingos and Beth Akers have the best short walk-through from an algorithm advocate’s perspective. Cedar Reiner and Timothy Burke have explained some of the concerns I have about blind faith in bad formulae… and I am afraid that “we’ll figure out a good formula in the next two years!” is as comforting as other similar claims have been.

But at least over the next few years I’m worried a little less about a federal ratings system on higher ed than I am about how the proposal for technocratic mechanisms could license some really awful ideas that could pop out in states. Already Florida Governor Rick Scott has used Obama’s speech to say, “Yeah, we already do that,” though Florida’s higher education system is in a pitiful and politicized place right now. The state legislature created a pot of money for its two “preeminent universities” (decided a priori by their legislative friends) and continued to fund an unnecessary 13th university with no current enrollment while other public colleges and universities still are smarting from the Lesser Depression cut in state support to higher education. And Governor Scott has been retaliating against fellow Republicans by not reappointing university trustees or the system’s governors based on decisions that are supposed to be autonomous but that he didn’t approve. The specific issues shouldn’t matter so much as the general environment in a state where the governor thinks the 0.8% of Florida’s college students who major in anthropology are the major reason we don’t have enough STEM graduates.

Some alternatives that might happen in this lifetime?

I’m a fan of interesting ideas that are implausible, because it’s important to state what is best even if it’s not possible. That’s sort of what we academics should be doing. But even apart from the technocrat’s dream of The Perfect Policy Algorithm, federal politics make the most significant parts of Obama’s proposal impossible to enact in the framework he put forward. Let’s reframe his proposal in terms of the general aim of his mechanisms:

  • Reduce federal aid to institutions that exploit or fail to serve students of poor or moderate means. 
  • Increase federal aid to institutions that serve and perform well for students of poor or moderate means.

The assumption in Obama’s plan is that this all has to happen through policy changes (i.e., combination of regulations under current law and statutory changes), and all through the federal government. Suppose we give up on amending the Higher Education Act for now and think about alternatives to federal action, or alternatives to federal-only action. Is there room? Here are four ideas and a bonus speculation below, plus a caveat: I don’t know the Higher Education Act structure in detail, and my assumptions about what is doable through a combination of appropriations and regulations may be incorrect.

  1. Distributing some chunk of college aid based on Pell graduates, as per the Obama plan but with a twist. I think this can be accomplished through the appropriations process, and does not require amendment of the Higher Education Act. But what about the Pell-grad data and the unit-records ban! you cry? It’s all cool as long as everyone understands that requesting the Pell-graduate reward is voluntary on the part of institutions, and involves an auditable trail (i.e., data collection and availability). You don’t want the money, or don’t want to collect/provide the data on Pell-recipient diplomas? Not a problem! Just don’t apply. Here is the twist: We do not know whether it would be best to have a flat payment per graduate or weight it by the Pell award received at the institution.1 Both are going to be somewhat progressive, regardless of the funding amount, disproportionately rewarding community colleges (as a percentage of per-student cost). But there are some potential advantages of weighting the reward by the Pell received while enrolled: addressing transfer issues in a rational (if not perfect) way, giving some advantage to institutions with the poorest students, and giving institutions a significant incentive to help students keep Pell grants year-to-year. But how do you handle this empirical question? Apart from giving grants to researchers such as Sue Dynarski and Sara Goldrick-Rab, it could make sense to give states some part of the money and some flexibility on the formula to use. Again, I am not an expert on the Higher Education Act, but if it is possible to run this through appropriations, the performance-pay and state-option part of this could appeal to Republican governors. And maybe even House Republicans, if suggested by someone on the center-right. So if your name happens to be Cecilia Muñoz, please ignore this blog post, or at least stay quiet in public and give it to a friend who’s a Republican.
  2. Cap student loans by institution, tying that cap to the number of graduates who carried federal student loans at the institution in the past 2-3 years. Not graduation rate, but number of graduates. I am assuming this can be done by regulation. It can be fairly generous in terms of who it lets in the door at the beginning, but it doesn’t require a complicated rating system and the data darned well better be available at the institutional level. And if the regulation (as well as any other suggested here) has a look-back requirement, it can be tinkered with in the future.
  3. Cap both personal student loans and loan-forgiveness on income-based repayment to accomplish some of the “reduce aid to exploiters” aim. In so doing, Congress and the White House can also end the structure that has allowed Georgetown Law school to game graduate student PLUS loans so that neither Georgetown nor its students pay (in net) anything to the federal government. It’s important to set annual, per-degree, and lifetime loan caps at a level that discourages overreliance on student loans and does so on a sector-neutral basis. I think this can be done through the federal appropriations process (addendum: or possibly regulations). The trickiest part is the politics, and one way to slice that is to set the totals so that they are tied to current tuition/fees/cost of attendance data and then fixed. That’s a minimal standard, but it would undercut the complaints of privates. Addendum: See the current limits for the non-PLUS loans, especially the high amount for independent graduate students. The federal government really is in control of this and can reset/stop raising the cap any time now.
  4. Consider alternative methods of reining in parent PLUS loans, which comprise the alternative mechanism to make exploitation easy. Part of this is sensitive because of the reliance on parent PLUS loans of tuition-dependent private colleges. The latest round of debates on PLUS loans and private historically Black colleges and universities has gone to HBCUs, with a reversal of the Obama administration’s efforts to tighten creditworthiness criteria for parents. I don’t know what the solution is on the loan side (maybe smarter caps, maybe tying total institutional eligibility to numbers of graduates the prior three years), but it has to be matched by thinking clearly and carefully about the role of HBCUs … and understanding that private HBCUs are the canaries in the coal mine for tuition-dependent non-profits. See below for more.

Together, these four ideas address the general goals the president is targeting but without (I think) needing the Higher Education Act to be amended. None of them require the assumption of finely-tuned ratings, and none should require a huge amount of statistical work by institutions beyond what Title IV colleges and universities must track today.

The public good and private colleges and universities

The controversy over HBCUs and student/family loans is one form of a broader question untouched by the ideas above: how can we address the needs of tuition-dependent private colleges who admit students with weaker records — when it is difficult to separate exploitative institutions from institutions that have an historical record of serving the public good? In the last century, HBCU graduates have represented a disproportionate number of African-American professionals after college. That amazing history does not justify indefinite indirect subsidies by the federal government through student and family loans, especially given the inability to discharge educational debt in bankruptcy. But it does justify an understanding that some private institutions have low graduation rates while meeting a legitimate public purpose.

Advocates of a federal ranking/rating system argue that they can adjust measures of student success by the difficulties of serving the institution’s population. I am skeptical of that claim, in part based on the experience with K-12 accountability algorithms that repeatedly fail to demonstrate sensitivity or specificity in identifying weakly-performing schools, and in part based on the substantial disconnect between the available database (IPEDs) and even the best social-scientific attempts to quantify entering-student needs. My experience and common sense about statistics lead me to believe that a federal ranking/rating system wouldn’t be worth all the candlepower that the White House is going to put into it. Or fairy dust sprinkled into the servers used for it.

Instead of trusting a magical-algorithm approach, let’s provide some direct support to such institutions in a way that allows them to be a little more efficient business-wise, boosts capacity in supporting students, and provides a little more accountability. A combination of the following is what appeals to me at the moment, but it’s not some magical formula:

  • Use the Experimental Sites waiver provision of Title IV to let public and non-profit colleges work together on the student-services and business sides of the house, creating consortia that draw on common services for some critical supports. In May, Southern New Hampshire University President Paul LeBlanc complained that federal rules prohibited non-profits from working together on bundled services, even as many used commercial (and more expensive) corporations such as Academic Partnerships. Now, LeBlanc thinks that Experimental Sites might allow that bundling of services in the non-profit college world. While I think LeBlanc would like SNHU to provide bundled services for online, competency-based education, we can extend the concept to consortia of non-profits with common interests, such as relatively non-selective HBCUs, and addressing issues that most directly affect student persistence and completion and that can reduce costs if shared between institutions. Those relationships already exist among for-profits, in the context of holding companies that operate franchise branches of the University of Phoenix, Argosy University, and so forth. If we skip the exploitation but let non-profits take advantage of sharing services, that will reduce costs.
  • On top of some deregulation of bundled services exchanged between colleges and universities, the option of using direct federal aid to such consortia, with an obligation to share data. If the federal government provides technical-assistance grants supporting both instruction and student persistence/completion efforts to consortia of either nonselective public colleges, nonselective private colleges, or a mixture, it could make data-sharing a condition of such grants. That data-sharing would allow adjustments to the regulatory ideas I described above.

For tuition-dependent private colleges and universities that are allergic to sharing records, they could join together in consortia without getting federal assistance. Those that most desperately need direct support and technical assistance would get it, along with some accountability.

Kicking the fairy-dust-algorithm habit

It is not enough for skeptics of college ratings/rankings to point out all their flaws. We need concrete policy alternatives, ways to get to the same end without them. The above is my not-so-modest attempt to tackle that goal. It eliminates the Overarching Hopefully-Perfect Algorithm (that’s DOA anyway) in favor of simpler, more robust mechanisms. I think it does not require amendment of the Higher Education Act. And for tuition-dependent non-profits that have a claim of serving the public good by serving especially-needy students, it has the option of providing modest direct support in return for sharing of data.

But my attempt may not be the best option. What is your proposal for targeting federal aid to the most needy students in a politically-realistic manner?


  1. Anyone who really makes such a claim to omniscience needs to check their lightning bolts at the door, so the rest of us can see. []

One response to “Four (or maybe five) ideas for how President Obama really could reform college financial aid”

  1. trm

    I believe you are correct regarding a ratings systems. I don’t think one can be developed that will be both and accurate and useful. A sufficiently accurate system, in my opinion, would be based on a model too complex for most anyone to trust, particularly policymakers who are the real audience for such systems – they just want a yardstick to help allocate money. Any useful/usable system will be no better than those you mentioned.

    However, I do think there are additional tools that can be created to help some students make more informed decisions, even if they are still bad decisions. After all, bad decisions or perhaps, seemingly sub-optimal decisions, end up being the right thing in the long run for some.