President Aims to Link Financial Aid to College Performance

In a speech at the State University of New York in Buffalo, President Obama pledged to link financial aid to college performance. In that address, he declared that the nation is in the midst of “a crisis in terms of college affordability and student debt.” He pointed out that the average graduate who borrows to fund his or her college education owes more than $26,000 upon graduation.

No specific proposal was introduced. Nevertheless, the President outlined a conceptual approach that will guide his reform effort. That approach entails three components:

  • A new ratings system to evaluate college performance. The ratings system would include such measures as how many students graduate on a timely basis, how well graduates do in the workforce, the average debt burden for graduates, among others. Financial aid would eventually be tied to those ratings.
  • Efforts to encourage “new competition” between colleges to promote innovation in improving affordability and student success. He pointed to the Southern New Hampshire University’s granting course credit based on how well students learn, not classroom hours, and Central Missouri University’s early college program where high school students can earn college credits as some examples of innovation.
  • Mechanisms to assure that students who borrowed to finance their college education would be able to “manage and afford” their debt service. Toward that end, he planned to expand student eligibility for the “Pay-As-You-Earn” program, which caps annual student debt service at 10% of a graduate’s earnings.

Although the current political environment in Washington probably reduces near-term prospects of financial aid’s being tied to new ratings mechanisms, demands for greater accountability regarding higher education outcomes and costs continue to increase. In response, accreditors are already placing greater scrutiny on “institutional effectiveness.”  In its 2013 review of self-study reports, the Middle States Commission on Higher Education cited Standard 7 (the relevant standard) more than any other standard in requests for follow-up reports for the first time. Prior to 2013, Standard 14, which concerns assessment of student learning, was perennially the most-cited standard.

In this evolving environment, it is likely that college performance will increasingly be measured not only by graduation rates, but also how well graduates fare upon leaving college. Unemployment rates, the kind of jobs graduates obtain, how well they perform in the workplace, the graduate studies programs to which they are admitted, among other variables, could become widely-cited metrics.

As an example of this widening focus on college performance, the New York City Department of Education issued its first report on teacher preparation programs earlier this month. That report compared outcomes for teaching hires from 13 colleges and universities whose graduates enter the New York City school system. That report features data including New York State teacher growth scores, teacher retention, tenure decisions, and unsatisfactory ratings. Currently, the data is not provided at the level of detail to allow comparisons as to how well graduates who are hired in the City’s high-need schools fare. Differences by employment context, among other factors, could provide additional important context into overall outcomes. Consequently, the level of detail in that report and other reports that could be developed will probably increase consistent with the increasing demand for college accountability.

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