Can President Obama's Higher Education Fix Work?
At least President Obama's thinking like a business person. His higher education plan may be a little showboat-y, but it's a start to a discussion that needs to happen.
In the spring, he released a college scorecard, Last week, he announced more proposals to hold colleges accountable by linking financial aid for students to those government ratings. Pending congressional approval, the plan would kick in by 2015.
The higher ed plan is based on the model of the Race to the Top educational plan for public schools, in which states get federal money based on the quality of test scores. Stakes-driven testing is already controversial, but it's one way to tackle education reform. Will it work for colleges? It's a political minefield. Still, it's an entrepreneurial approach to figuring out the disaster of unaffordability when it comes to getting a college education in America today.
The proposal requires colleges to submit data on, for example, debt, tuition, the percentage of low-income students, graduation rates, and graduates' earnings. Those ratings would be compared to peer institutions and would then determine how students get loans, grants, subsidies, etc. (This would kick in by 2018.)
Are government rankings a good idea?
Not a lot of people are happy with the news.
Rep. John Kline (R ) who is the chairman of the House Education and Workforce Committee, is not keen on the idea of government rankings: "I remain concerned that imposing an arbitrary college ranking system could curtail the very innovation we hope to encourage--and even lead to federal price controls."
"Naturally, the President blamed somebody else and demanded more authority over higher education," wrote editors at the Wall Street Journal. "Tying aid to whatever the bureaucrats decide is the right tuition is a back-door form of price controls. Even more disturbing is the idea that a federal political authority will decide which curricula at which institutions represent a good educational value."
"The Federal government should keep its fat fingers off curriculum choice," said Al Lord, the former head of the college lender Sallie Mae.
But something has to be done. "This spring, 9 of 10 families we surveyed said financial aid would be 'very necessary' to afford college--the highest level we've seen since 2007," said Rob Franek author of The Princeton Review’s Best Value Colleges. "In 2009," he added, "the biggest worry students and parents had was 'we won't get in to our first choice college.' Now it's 'the level of debt incurred to pay for the degree.'"
The one faction that has been, interestingly, silent on this issue--in my highly unscientific client poll--is the business community.
Most businesspeople I know, including many who aren't fans of the President, support what he's doing. Why? Because the President is taking a quantitative, accountability-based (and hence business-like) approach to the problem.
The government is higher ed's biggest customer, and it's flexing its muscles.
Most businesspeople have a huge chip on their shoulders when it comes to the university system. I live outside of Philadelphia and am surrounded by some of the best colleges and universities in the country--Penn, Villanova, Swarthmore, Haverford, and Bryn Mawr.
It's a plush life being at college, both for professors and for students. But the burden falls on the students to emerge, often heavily in debt ($26,000 is the average) unless it's their parents who are footing the fat bill, and find a job.
It's not news that the higher education industry operates on another planet. Costs at four-year public colleges have risen 257 percent since 1993. Tenure guarantees your job for life. Students get total independence to party non-stop and sleep through their classes or fail them.
Still, there's a role for the government to play in higher education. The fed spends about $150 billion annually on student aid. That shouldn't change.
I'd take the same tack as the President: I'd use my purchasing power to make things better. He's saying: I (the taxpayer) am your largest customer. I don't think you're all giving me (the taxpayer) the best bang for the buck. So I'm going to spend my (the taxpayer's) money where I get the most value.
"It's exactly what I do with my suppliers," one client told me. "We're constantly evaluating and always making sure we're getting the best value. The ones that give us the best value get more of our business."
Just as in a sustainable business model, it's about value, not costs.
This emphasis on value, not necessarily costs, resonates with business owners. Cost and value are two separate things. We struggle to educate our customers about this. The small retailer may not be as inexpensive as the Walmart down the road, but their level of service is higher. The corner grocery story may be struggling to match prices at the supermarket in the strip mall, but their cuts of beef are worth it.
It's none of our (or the feds') business what professors are paid, whether athletic programs get too much cash, whether a college's infrastructure costs are too high. This plan isn't about how colleges operate. Neither is it any concern of ours how a supplier runs his or her business.
Here's what's true: The President is the steward of taxpayer money. Just like a CEO is the steward of his or her shareholders' money. Each must choose to spend the money he or she has been entrusted with as wisely as possible.
Which is why the proposed "ranking system" emphasizes value. The wrangling starts now and is bound to be contentious. But the ambition is right on: Create a system that compares colleges against their peer groups and weighs various factors, such as job placement, and then folds them into the decision-making process.
Who should run the show?
The colleges themselves? No thank you. Media companies who create their own rankings? Nope. As a business owner, I'd rather see the government take on a role as arbiter. Sure, bureaucrats can screw anything up. But the downside is minimal.
The President has done much, over the past five years, to upset the business community. And he's far from running a pro-business administration. But I'll give him this much: his ideas to make higher education more affordable and valuable sound like something a business owner would also propose. And for that he deserves some extra credit.
GENE MARKS | Columnist | Owner, Marks Group
Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.