Obama Seeks New System For Rating Colleges

PolygamousRanchKid writes "Targeting the soaring cost of higher education, President Barack Obama on Thursday unveiled a broad new government rating system for colleges that would judge schools on their affordability and perhaps be used to allocate federal financial aid. But the proposed overhaul faced immediate skepticism from college leaders who worry the rankings could cost their institutions millions of dollars, as well as from congressional Republicans wary of deepening the government's role in higher education. The new rating system does not require congressional approval, and the White House is aiming to have it set up before the 2015 school year. But Obama does need support from Congress in order to use the ratings as a basis for parceling out federal financial aid. In addition to tuition, schools will also be rated on average student loan debt, graduation rates and the average earnings of graduates. Under Obama's proposal, students attending highly rated schools could receive larger grants and more affordable loans."

Comments

Forget ratings, measure ROI.

[robbo]

What is the median salary, divided by total cost of education, one year and five years after graduation? That is really the main thing a prospective student needs to know. Everything else is window dressing.

Re:Forget ratings, measure ROI.

[Anne_Nonymous]

The value of an education does not reside solely in earnings potential.

Re:Forget ratings, measure ROI.

[robbo]

You are correct but at some point you must wonder whether it's worth it to go into debt, and by how much, to free your mind via Art History.

Re:Forget ratings, measure ROI.

[icebike]

The cost of college will expand to consume the available student loans, grants and financial aid. This has been true since the invention of student loans.

I suspect your ROI calculation would serve only to raise the price of an economical college quickly up to the price of the most expensive schools, because the ROI would prove them to be a much better deal, and as they draw all the students they can handle the price will rise.

Re:Forget ratings, measure ROI.

[Fluffeh]

What I simply don't understand is why US universities are so expensive. It's gotten to the point where it seems that any sort of education can only be gotten my pretty much taking on so much debt that you will be lucky to pay it back - which then forces the government to start putting in copious amounts of scholarships/funding to keep students there.

Degree Costs in Australia

Over here, a degree (not counting the really expensive ones like medicine) costs $15-30k and a masters $20-37k.

The average cost (excluding the notoriously expensive universities) in the US is $28k per year.

Seriously, why?

Re:Forget ratings, measure ROI.

[ColdWetDog]

It's the free market, son. That's what makes America great.

Seriously, it's the insane near religious stance that everything has to be a) profit making b) run like a widget company and c) expand financially forever. Coupled with fair degree of rent seeking, a terrible method of allocating money to people who cannot afford it on their own (Pell grants, the student loan system), massive expansion of physical plants for sports and near complete collapse of the vocational / technical college.

The Perfect Storm, if you will.

Same problem in medicine to some degree. Add a for profit stance to something that should not be run for a profit, stir in a generous heaping of incompetent government bungling, sprinkle with freebies to insulate the end user from economic consequences of their decision and bake slowly in a hellish furnace composed of hot air from insurance companies and Wall Street (the old profit thing) and you have a sticky, toxic mess that's impossible to clean up.

I think I'll go cook dinner now.

Re:Forget ratings, measure ROI.

[GodfatherofSoul]

There was an article about this a few years back. Basically, the costs of college are so high that families are disassociated from the costs of repaying them if they're taking out government-subsidized loans. So, there's no difference between a $5K/semester school or a $7.5K/semester school when you have to borrow and won't pay off for 4 years anyway. People think, "damn this is expensive" which includes a wide range of prices. Schools have figured this out and know that whatever they charge for tuition they'll get from the government to some extent. It's not like profit-motivated banks are going to stop giving out loans. It's in the interest of the government to educate the workforce in a technical age. Add to that a crappy market where even secretary positions ask for college educations. Schools know how valuable their diplomas are, so they dangle them over our heads on a platinum barb.

Re:Forget ratings, measure ROI.

[MightyYar]

What I simply don't understand is why US universities are so expensive.

They are fiercely competitive, so they spend gobs of money trying to outdo one another. And they get away with it because there are government-backed loans for domestic students and they draw from rich foreign student populations. When I visit my alma mater, or my wife's, the tuition has doubled over 20 years and so has the campus - there are literally twice as many buildings for roughly the same student population. I don't think the instruction has improved much - particularly at my wife's institution which has always been very prestigious - but the perks are amazing... the cafeteria looks like a fancy mall food court now. The gym is like a YMCA from heaven. There are cafés in the library. Ubiquitous WiFi. The newer dorms are not the bare painted cinderblock walls that we had. Landscaping and student areas are all immaculate. And of course, every bullet point in the US News and World Report rankings checklist has been addressed.

Re:Forget ratings, measure ROI.

[tipo159]

The cost of college will expand to consume the available student loans, grants and financial aid. This has been true since the invention of student loans.

The cost of college (at a state colleges) here has expanded because "we will cut your taxes" politicians kept getting elected, so the state cut their support of the colleges (20-odd% here from 2006-20011), so the colleges are now getting the money from the students.

Re:Forget ratings, measure ROI.

[dgatwood]

Why? I'll tell you why. Because they CAN.

As someone whose parents both retired recently from teaching at four-year universities, I don't buy that explanation. At all. It's pure and utter bulls**t. The fact is, most universities are barely holding on financially, having to cut entire programs to keep from going under. Professors' salaries barely keep up with inflation most of the time, if that, and staff salaries don't fare much better. They rely more and more on adjunct instructors to cover classes because they can't afford to hire additional professors to cover the classes.

Why are the costs going up? The main reason is that the cost of living is going up, while the states keep cutting the portion of the tuition that they pay so that they can spend that money on other programs. Most universities are getting smaller and smaller portions of their operating budget from the state, which inevitably means that they have to charge higher and higher tuition to make up the difference. There's no market magic involved here. There's no supply and demand at work. The demand is fixed; everyone wants an education. The supply is also fixed; every school can handle only a certain number of people. There's no profit margin—most schools are purely nonprofit and cannot make money except as temporary savings towards future costs—therefore, the cost is purely driven by the cost of operation. Any statements to the contrary, at least as far as public universities are concerned, are just plain wrong.

This is not to say that there isn't bloat in the system; if you dig in, you can find lots of small places where costs could easily be cut, and together they add up to big inefficiencies. The problem is that those inefficiencies are hard to rout out without a concerted effort by someone who understands how to motivate people. For example, policies along the lines of "Any money your department doesn't spend by the end of the year is returned to the general budget and may result in a reduction in your budget next year" are a big part of why we have this bloat creep problem. Fixing those sorts of policies at a systemwide level and giving bonuses for finding ways to improve efficiency are what is needed. Unfortunately, that sort of thinking seems to be very contrary to the university culture, at least in the United States. And this is another reason why the cost of education (and government in general) keeps going up.

Re:Forget ratings, measure ROI.

[saleenS281]

BECAUSE the government is giving away money. The universities will keep increasing costs because they can, and because the government will continue to fund what may very well be a bad loan. Additionally private institutions are LINING UP to give out student loan debt. You can't ESCAPE it! Who wouldn't want to loan out money at 8% interest rate that the borrower can never default on?

Re:Forget ratings, measure ROI.

[__aaltlg1547]

Well, some of them could make more in industry -- e.g. the hard sciences, math, engineering, some soft sciences like psychology, communications. Others, not so much. There's no commercial marked for history professors. English literature, not so much. Everybody thinks they can write and Amazon is shoveling out shlock in the name of literature. Your chances of making it big as a writer are about the same as your chances of making it big as a NBA basketball player. Lawyers, same thing. Law schools have been turning out too many Juris Doctors for the market for decades.

But you're right in the big picture. It's not that professors cost too much. You're talking the highest level of professional educators. They should be damn good (in my experience most are) and be paid well for what they do, commensurate with what other highly skilled professionals make. Their incomes have more or less kept pace with the professional workforce over the last few decades. They're not driving the college inflation trend. One big factor is a drastically reduced PUBLIC share of the budgets of state universities. There used to be much bigger subsidies.

Re:Forget ratings, measure ROI.

[Anonymous Coward]

Only problem is its not free market. Whats the opposite of free market? Oh yea, heavily regulated, that would describe our colleges better.

Many are state run, no free market right there, getting subsidies from all levels of government in return for following their rules, again no free market, and they are accredited by the government, no free market. Lets top it off by all student loans being backed by a clause in Obamacare so it is nearly impossible to get a loan not backed by the government.

At no level anywhere is college free market. As a matter of fact that is EXACTLY why it costs so much. When everyone is guaranteed a loan then you have more people applying than can realistically go to college. When you have more demand than product, what happens? Oh yea, costs go up, just like Fannie Mae did with housing a while ago.

By the way, medicine may be the ONLY thing more regulated than college, again the opposite of free market, and amazingly enough its even more expensive.

Re:Forget ratings, measure ROI.

[Obfuscant]

but you ignore massive amounts of evidence that this pure free market capitalism has been causing strife and economic ruination since the 70's.

There is no pure free market capitalism.

Just for one example, it was the deregulation of the housing and mortgage industry that allowed "free market" to destroy the economy in 2008.

No, it was the regulation of the home loan "industry" that created the problem that anyone with any sense could have seen coming. When you force banks to make bad loans, those bad loans have to go somewhere. When people with as much access to information as Dodd and Frank keep claiming there is no problem and keep stonewalling any regulation that would have helped prevent the collapse, you have to wonder why.

Competition and free markets are also the cause of much evil in the world today.

No, abuse of power is the cause of much evil in the world today. There are no truly free markets, so that can't be the excuse. Perhaps if the markets were freer and legislation and external control wasn't being applied to turn the market into a political and social tool for power. You know, like if banking regulations didn't force banks to make home loans to people who couldn't afford them if they wanted to avoid lawsuits over potential redlining, then maybe the banks wouldn't have had so much bad paper to find some way of dealing with. You know, just a thought.

Re:Forget ratings, measure ROI.

[paulpach]

Just for one example, it was the deregulation of the housing and mortgage industry that allowed "free market" to destroy the economy in 2008. You should take a world history class, fool. Hell, just get up to date on current events! Competition and free markets are also the cause of much evil in the world today.

1997 the government decided that people should not pay capital gain taxes on houses but should pay capital gain taxes on everything else
2001 to come out of the recession, the government (via the federal reserve) artificially lowered interest rates to 1% and kept them there for 3 years. Fueling a borrowing spree
You have monsters like Fannie mae and Freddy mac, which are entities created by government with an implicit government garantee now made explicit. That bought mortgage securities from anyone capable of fogging a mirror. Creating a massive wave of creative loans such as ARMs. Banks hurried to finance anyone, so that they could turn around and sell the mortgage to government backed Fannie Mae and Freddy mac.
CRA (community reinvestment act) forced banks to give loans to lower income brackets that they would not have done otherwise
FHA provided garantees to mortages that allowed people to get a loan with 0% down. This meant that the minute houses went down even a little, a lot of people would end up underwater, which further fuels foreclosures creating a massive snowball effect.

Wake up, there is nothing free about the housing market, there is no deregulation. Please tell me what housing related law was struck down?. The bubble was made entirely courtesy of massive government distortions (which are still at full force). The minute the free marked tried to correct the misallocation in 2007 - 2008, and get rid of all these wasteful activities, the government doubled down on distortions (called them stimulus), fueling yet another bubble that will be sure to burst sooner or later.

Re:Forget ratings, measure ROI.

[LordLimecat]

What I simply don't understand is why US universities are so expensive.

Theyre not.

Over here, a degree (not counting the really expensive ones like medicine) costs $15-30k and a masters $20-37k.

Same here.

Well, until someone decides that they want to go out of state, to a really expensive school, and then complain about debt, sure. For the record, I live in Va, and I can go to any of the following schools for ~$400 /credit:

• WIlliam and Mary
• Va Tech
• U.Va
• GMU
• JMU

I can also complete the first two years of undergrad for ~$100/credit at Va's community college system, and transfer into any of those. As I work it out, youre looking at ~$20k for your undergrad from fairly terrific schools ( I hear that UVA is considered "decent"....).

The "Why" is that sometimes people decide its a good idea to go to a university that they cant afford for a degree in an unmarketable field, and then complain that theyve dug themselves into a hole.

All he does is suggest "broad" change

[JackieBrown]

Where is the actually written bill?

He loves going place to place and telling that audience what they want to hear and then passing the actual work to Congress who he knows won't/can't do it.

Re:All he does is suggest "broad" change

[XxtraLarGe]

Bills are written by the legislature, the President signs them. He can push an agenda, but he's not the one writing the actual bill.

Nothing's stopping him from writing a bill and giving it to a Rep. or Senator to introduce.

His solution isn't one

[Impy the Impiuos Imp]

College costs are due to the easy borrowing as a perverse consequence of trying to make college easier for people to afford. As with a car loan, nobody wants to pay $2000 for a fancy radio, but an extra $35/month, sign me up!

8% a year? No problem...on my loan! Sign me up!

The way to reign this in is to deny government backing for cheap loans to any college that increases costs more than 2% this year. And keep that up for 10 years to drag relative costs back down vs. inflation.

All these loudmouths in charge of colleges who throw up their hands and say hey don't know why, the liars will sort things out quickly.

Perverse incentives are perverse.

Re:How about get rid of student loans?

[subanark]

Want the potential of college without the risk of massive debt due to picking the wrong major or flunking out?

Try Oregon's new College tuition bill "Pay Forward" (bill passed, but not yet implemented). The government pays for the full cost of tuition over 4 years. You pay them 3% of your salary for 24 years. Is it more expensive for the student? For good jobs, sure. But it gives a peace of mind that you aren't going to be hurt too badly financially, and reduces the penalty if college just didn't work out for you.

Graduation rates = lowered standards

[morinpatmorin]

Tying funding to graduation rates is a bad idea. It leads to one (or both) of two things:

1. 1. extremely high entrance requirements that ensure any student who gets in has what it takes to get through the program, or
2. 2. lowering standards so that every student (no matter how bad they are) makes it through the program.

Option 1 leaves out students who are plenty smart, but just goofed around in high school. Option 2 makes university degrees worthless.

Subsidies are not difficult to understand.

[dtmancom]

Before grants and guaranteed college loans, colleges could only charge what the students could afford. I myself graduated from a big 4-year state college in the 80's for a total cost of $21k, and I was an on-campus student.

Now we have grants and the ability to take out tens of thousands of dollars... per year... for tuition. All an adult student has to do is sign his or her name, and it is like free unlimited money for all the education you can eat.

How can anyone be confused by the idea that colleges will adjust their cost by the amount their customers can afford to pay? This is econ 101, here. When these stupid adult children can afford $50k to get their art history degree, why do you think a college won't increase their price to accommodate the sucker windfall?

Want to watch the price of college plummet? Remove all loans. We'll return to the days of "only the rich can afford college/not fair!", but at least the stupid will not be graduating under a mountain of debt from which they will never be free. The truly academically gifted and motivated will get scholarships no matter how poor they are.

Just stop

[gr8_phk]

Under Obama's proposal, students attending highly rated schools could receive larger grants and more affordable loans.

So students going to lesser schools will be fucked with less affordable loans? WTF?

How about the government just STOP guaranteeing student loans (which can't even be discharged in bankruptcy). Get the fuck out of the system, it's the loan program that has driven up tuition rates for 25 years. When I went there were several students who worked to pay their own way. As hard as that seems to do back then, it must be nearly impossible today, so they get loans and then get fucked for life. Same thing happened with subsidized housing, all that did is drive up home prices to the point of a bubble that crippled the economy for years. Just fucking stop meddling.