Obama to create college financial aid rating system
Updated at 7:06 p.m. ET
The nation is facing a crisis in terms of college affordability and student debt, President Obama said Thursday as he unveiled a set of new federal education initiatives, some of which he can launch without the help of Congress.
"We understand that in the face of greater and greater competition, in a knowledge-based economy, a higher education is more important than ever," the president said at the University at Buffalo. "A higher education is the single best investment you can make in your future," Mr. Obama said, but the high cost of education has been "a barrier and a burden for too many American families."
The speech marked his first stop on a two-day bus tour through New York and Pennsylvania, during which he'll visit schools to pitch his three new proposals: a new ratings system for colleges, encouraging innovation in education, and making it easier for students to repay their federal loans.
Mr. Obama is directing Education Secretary Arne Duncan to create the ratings system, with public input, before the start of the 2015 school year.
"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," Mr. Obama said. He criticized the college rankings put out by publications like U.S. News and World Report, remarking that they "actually reward [colleges] in some cases for raising costs."
This federal ranking system, the president said, would use metrics like the average graduation rate and the level of debt with which students leave. It will also place an emphasis on the access colleges provide to low- and moderate-income Pell Grant students.
"This is going to take a little time, but we think this can empower students and families to make good choices," Mr. Obama said. "We are going to deliver on a promise I made last year... Colleges that keep their tuition go down and provide a quality education are going to see their funding go up. It is time to stop subsidizing schools that are not providing good results."
Later on Thursday, the president traveled to Henninger High School in Syracuse, N.Y., to highlight several programs spearheaded by the school district there that prepare students for college by offering advanced courses and ensure they can afford college by offering scholarship programs.
"You have declared that no child in the city of Syracuse should miss out on a college education because they can't pay for it," he said. "We're hoping more cities follow your example because what you're doing is critical...to America's future."
To actually tie federal funding for colleges to the new rating system, Congress would have to enact new legislation. The administration wants Congress to do that when it reauthorizes of the Higher Education Act, and officials say they're optimistic about its success.
"There are states that are already tying their higher education funding to performance, and some of those states have Republican governors," Cecilia Munoz, director of the domestic policy council at the White House, told reporters Thursday. Creating incentives for a better education system, she said, "is clearly not a partisan issue."
Congress has been slow to take up Mr. Obama's proposals. Even reforming the federal student loan interest rate to ensure that rates didn't double this fall -- something that both Democrats and Republicans wanted to accomplish -- took months of negotiations. The administration, however, contends that even before Congress ties the ratings system to federal funding, it could have an impact on college costs.
"By making information available about outcomes, we believe we can have some impact even in the short term in this sector," Munoz said.
White House officials said the Department of Education is engaging with the education sector to develop the ratings system and is working carefully to ensure the system doesn't favor certain institutions or create the wrong incentives. For instance, this system -- unlike the U.S. News and World Report list -- will not rank colleges, it will merely rate them.
"I don't think we're walking into this with a pre-ordained sense of who's going to fare well and who's going to fare badly," Munoz said. "There are leaders in this sector who are eagerly addressing the issue of college cost, how are not afraid of transparency... We want to encourage more of that behavior... kind of turbo-charge that conversation."
The idea of allocating resources to schools based on performance is gaining steam at the state level, Jamie Merisotis our CEO of the Lumina Foundation, told CBSNews.com. The Lumina Foundation is an independent, private foundation focused on increasing the proportion of Americans with higher degrees.
However, Merisotis said, "This is a classic case of the devil's in the details -- figuring out what elements you want to emphasize and what outcomes you want to see... There's a lot of complexity in terms developing this kind of system."
Merisotis said the administration should focus on a metric system that rewards positive student outcomes, rather than positive institutional outcomes, given the fast-moving, tech-driven changes in the education sector.
"We're hardwired to think about institutional outcomes and rewarding institutions... the point should be you should reward institutions for doing better for students," he said.
Mr. Obama today also said he wants the federal government to encourage innovation at colleges by providing seed funding for innovative programs and documenting the programs that work. For instance, he pointed to Southern New Hampshire University, which is offering course credit based on how well students master the material, rather than the number of hours they spend in class.
"If you're learning the material faster, you finish faster, which means you pay less," Mr. Obama said. "We want to encourage more colleges to embrace innovative new ways to prepare our students for a 21st century economy and maintain a high level of quality without breaking the bank."
Merisotis said that the federal government is well-equipped to use its leverage to encourage innovation, which he said will be critical to the health of the nation's education system.
"Super-sizing the current system of education isn't possible," he said. "Families don't have the resources and governments don't have the resources, so you've got to be innovative, think about course redesign."
There's also room for innovation in the student loan repayment system, Merisotis said. The president Thursday said he wants to expand the "pay as you earn" payment plan by allowing people with student loan debt to cap their payments at 10 percent of their monthly income.
"Our national mission is not to profit off student loans," Mr. Obama said. "Having the best educated workforce in the world, that should be our focus."
Other nations like Australia have made their repayment programs completely income-based. "There's a lot we can learn from their system," Merisotis said. What the administration has proposed is a good start, he said, "but there's a lot more to do if we're going to bring down debt."
