President Obama on college costs (Part 2): Pay for institutional performance

SCRANTON, PA - AUGUST 23: U.S. President Barack Obama (L speaks at an event as U.S. Vice President Joe Biden (R), looks on at Lackawanna College on August 23, 2013 in Scranton, Pennsylvania. Obama is on his second day of a bus tour of New York and Pennsylvania to discuss his plan to make college more affordable, tackle rising costs, and improve value for students and their families. (Photo by Jessica Kourkounis/Getty Images)
Photo by Jessica Kourkounis, Getty Images

One of my favorite phrases when teaching educational policy is “the devil is in the details” (I once wrote an article that used that phrase as the title – it’s chapter 2 of this report). Politicians and policymakers will often issue grand policy proposals that address issues from an altitude of 35,000 feet, and until the details of the new policy are fleshed out it is difficult to determine what the impact will be at ground level.

This is very much the case with President Obama’s announcement last week of a new set of proposals to address the issue of the rising price of college and how Americans pay for it. As I described in my post last week, the president articulated a series of proposals that are very broad in scope and for the most part will require Congressional action in order to implement them. Thus, it is difficult at this point to determine with any degree of certainty what impact the proposals will have on colleges, universities, and students, but I will do my best to analyze them from the information the White House has provided.

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More from President Obama on college costs (Part 1)

hero_college_affordability2This week President Obama outlined a new series of proposals to help Americans deal with the rising price of college. Addressing college costs has been a priority of the president’s from early on in his first term, but this is probably the most comprehensive set of proposals that have been released at one time. He described them on a two-day, two-state bus tour of college campuses.

There is a lot packaged in the president’s proposals, and in the next couple of blog posts I will provide analysis of some of the key pieces. The proposals fall under three main topics:

  • Provide incentives for both higher education institutions and students to link financial aid to performance;
  • Encourage innovation on the part of colleges and universities to come up with new pathways toward less expensive degrees and provide better information to students and parents; and
  • Make loan debt more manageable for those who borrowed to pay for college.

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Measuring the return on investment of attending college (Part 1)

Last month I described my testimony at a U.S. House of Representatives hearing on getting better information about college. One of the topics mentioned by a few of the House committee members was the issue of the return on the investment in college as measured by what students are earning today. There has been much interest in getting better data about what graduates of different colleges earn when they enter the labor markets, so that prospective students can get an idea of what the return on their investment in postsecondary education will be.

While measuring the return on investment (ROI) of attending different colleges sounds like a good idea, in reality it is a complex and challenging task. To calculate an ROI, one has to have accurate data on both the value of the investment as well as the value of the return, or the earnings that the investor receives from her investment. While we have lots of data on the cost of attending different colleges, including some data on net prices (as I described in my testimony), we have very little accurate, reliable, and comprehensive data on what the graduates of different colleges earn.

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Happy 40th birthday, Pell Grants

Senator Claiborne Pell (D-RI, 1961 to 1997)
Senator Claiborne Pell (D-RI, 1961 to 1997)

In 1972, Congress passed and President Richard Nixon signed into law the 1972 amendments to the Higher Education Act of 1965.  A key aspect of the legislation was the creation of the Basic Educational Opportunity Grant program (BEOG), later renamed the Pell Grant program in 1980 after the late Senator Claiborne Pell.  Senator Pell was the key champion for the creation of the BEOG program.

Since the passage of this legislation, tens of millions of undergraduate college students have received a total of over $280 billion in Pell Grants from the federal government.  Pell Grants are awarded based only on the financial need of the student and/or her family, and they are designed to be the foundation grant for promoting college access.  This school year alone, almost 10 million students will receive over $35 billion in Pell Grants.

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The truth about student loans

Credit: NYT
Credit: NYT

The New York Times is currently running a series on student loans, a topic that has been at the forefront of both the media and the general public for some time now. There has been widespread publicity (here’s just one recent example from USA Today) regarding the fact that student loan balances now exceed $1 trillion, an amount in excess of the balances of either consumer credit card debt or  automobile loans.

The first installment of the Times series ran in a most visible location: above the fold in the Sunday paper (the headline and image above is from the web version of the article).

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