Obama Can Fix Education If He Follows This Simple Plan


Congressional gridlock is usually the go-to excuse for why something can't be done in Washington, and for good reason. The partisan obstructionism that has paralyzed Washington has transformed Congress from an institution where laws are born from ideas to a legislative hospice where good ideas go to die. That's why some have written off Obama's new higher-education plan. But what's different about Obama's college affordability plan from other policy ideas is that the core of it can be achieved without Congress. In fact, Congress doesn't even need to vote on this for the remainder of Obama's presidency.

To understand why that is, it's important to understand what the plan is. The goal of Obama's higher-education plan is to apply cost-control theories in the allocation of financial aid to shift colleges from the current pay-for-enrollment model to a pay-for-performance model.

As of now, colleges get more money for enrolling more students. This gives colleges the incentive to increase operating costs by spending money on things that would attract students without actually improving the quality of education or implementing reforms that would lower tuition because doing so mean less revenue. For example, my school, George Washington University, recently spent quite a bit of money renovating the entrance to the library so it would look nice when prospective students tour the campus. The university did not improve the less visible areas of the library that students use to study. The renovated library, while it looks nice, does nothing to increase the graduation rate. It does nothing to improve the quality of my education. It does nothing to improve my prospects of getting a decently-paying job after graduation. What the renovation does is increase my tuition (or prevent it from decreasing) and potentially attract new students.

The ideal solution is a pay-for-performance model, where colleges that do the best job educating and graduating students make the most money. In theory, this is easy: tie federal loans to cost and quality metrics so students have the financial incentive to go to schools that are doing a good job educating and preparing students for the real world.

The difficultly lies in defining those metrics and "performance." Performance is generally defined in the terms of access, affordability, and outcomes. However, these factors can sometimes be opposing forces. If performance is based on graduation rates, what incentive would schools have to accept more disadvantaged students without unintentionally penalizing them? If performance is a measure of post-college salaries, how can one assess colleges where more students become teachers rather than working on Wall Street?

Obama's plan broadly defines affordability by using the metrics of things like scholarships, average tuition, and student loan debt. The percentage of students receiving Pell grants factors into in assessing access. Graduation and transfer rates, post-college earnings, and advanced degrees of college graduates contribute to a university's outcomes.

Pay-for-performance is a two-step system. The first step is figuring out how to reliably measure performance (the difficult part). The second part is linking those measurements to payments. The Obama administration can do the first part via the Department of Education. Linking those measurements to payments, however, requires congressional approval, and that step doesn't need to happen for a while.

The fact sheet the White House released on Obama's higher education plan states that the Department of Education will develop a new ratings system before the 2015 school year. It states that the president will seek legislation allocating financial aid based on these ratings by 2018. This would be after these ratings systems are well established, and at least a year after Obama's second term ends.

So Obama is promising to set up the groundwork necessary for a pay-for-performance model, all of which can be done without congressional action, by the end of his second term. That's the most difficult and time-consuming part of this higher education reform. After that's complete, he can push to get legislation that ties financial aid to those ratings before the end of his term. If that doesn't happen, it will be up to his successor to get that done.