President Obama’s speech in Buffalo yesterday launched a new conversation on the role of higher education as a platform for social and economic mobility. The speech represents a major policy shift on higher education policy toward a performance-based funding approach that holds colleges accountable for how graduates do in the job market. Though it is true such a formula for assessing college performance may be imperfect, changing how colleges think about their role in workforce preparation is essential. For young Americans to succeed in today’s global economy we must smartly invest in higher education that will enhance our competitiveness.
In the speech, President Obama finally acknowledged the current structure of the federal student aid program – a structure that now doles out over $100 billion in new loans annually while asking few questions – is unsustainable. In this context he unveiled a new proposed strategy for federal student aid distribution that holds both colleges more accountable by creating a new ranking that rewards schools for low student debt levels and high job placement rates. Students will also be held more accountable by having to show good grades from the year before to get next year’s loans.
President Obama is right to propose drastic changes to the federal student aid program. Federal aid for higher education has quadrupled in size over the last decade, yet the program itself remains essentially unchanged from its establishment in 1965. And now is the right time: the Higher Education Act, the legislation that determines eligibility criteria for federal student aid programs, is set for reauthorization at the end of this year. Hopefully this new proposal sets the tone for a serious review of current programs.
The current federal student aid party cannot go on forever. Doling out essentially unlimited federal aid to colleges will only delay an industry reorganization and consolidation that is both necessary and inevitable, especially at second and third tier schools. In its current form federal student aid subsidizes ineffective schools and transfers those costs to its graduates, who likely will struggle most to repay the average $26,000 per borrower student debt. The fact that President Obama reckoned the government would end up footing the bill for these schools shows he probably agrees. It’s time for higher ed to fully embrace the cost-saving education technology revolution that is finally gaining traction.
Early dissenters of the proposed changes to federal aid distribution, including the American Council on Higher Education, a major higher ed lobbying group, are concerned the ranking will overemphasize college’s role in job preparation. But isn’t that exactly what college’s major role is, and what colleges should be held accountable for? Perhaps such dissenters should explain their view to the 50 percent of young college graduates who are currently underemployed or unemployed and try again.
