Several days ago the President proposed that the federal government create a rating system ("scorecards”) beginning in 2015 to rank colleges by such metrics as tuition, percentage of low-income
students, graduation rates, alumni earnings, and debt of graduates. Federal financial aid to students, currently running at $150 billion a year, would be allocated on the basis of the ratings, though this part of the proposal would require legislation; the other parts the President can effectuate without congressional action. For a good summary of the program, see Dylan Matthews, “Everything You Need to Know About Obama’s Higher Ed Plan,” Wonkblog, Aug. 22, 2013, www.washingtonpost.com/blogs/wonkblog/wp/2013/08/22/everything-you-need-to-know-about-obamas-higher-ed-plan/.
There are of course college rating systems already, such as that of U.S. News & World Report. A federal rating system would probably have somewhat greater credibility; and if it became the basis for allocation of federal financial aid, the system would have far greater effect on college choice, given that more than 80 percent of college students receive federal financial aid.
Multi-factor rating systems have an obvious, and very serious, problem: weighting. It is almost certainly the case that the factors in the proposed “scorecard” don’t have the same importance to an intelligent choice of which colleges to apply to. Worse, there is unlikely to be agreement on which factors are the most important and so should be given the greatest weight—and how much more weight than the other factors. That won’t matter a great deal as long as the ratings just guide college
choice, for then parents and their kids will give whatever weight they want to the various factors. But the ratings will matter greatly—and influence that choice—if Congress allows them to be used to govern the allocation of federal financial aid to students.
To evaluate the President’s proposal, we need to step back and consider what ails our higher-education system. It is helpful to note the affinity between its rather doleful situation and that of our health care system. The top institutions in both systems provide world-class quality of service, mainly to children of the affluent and nearaffluent—the top tier of American universities and colleges is generally considered tops in the world. Both systems provide indifferent quality at the bottom, the bottom-tier universities and colleges being worse than the bottom-tier hospitals and clinics. Both systems are very expensive, with much of the tab picked up by the taxpayer—both are very expensive in part because of poor quality control by the federal government. The government is not a very competent financier, in major part because it is buffeted by interest groups wielding formidable political power.
The Administration’s Affordable Care Act (“Obamacare”) is an enormously ambitious, almost incomprehensibly complex, effort to improve medical care and at the same time reduce the rate of growth of the nation’s medical expenditures. The President’s new higher-education proposal is much less ambitious, especially if one sets to one side the part that requires congressional approval—the part about keying federal financial aid to universities and colleges to how well they perform on the “scorecard.” It is worth analysis, of course, but can be relegated to secondary concern on the pragmatic ground that congressional approval appears to lie far in the future.
The Presidente’s proposed ratings do identify characteristics of colleges and universities that parents and their high-school children should consider in deciding whether (and where) to apply to college. True, most of the information is available already, but not (so far as I know) in a compact, readily readable and comprehensible form, amd of course missing the imprimatur of the federal government. The Wall Street Journal in an editorial yesterday (August 24) scoffed at the supposition that the government can pick “winners.” But that isn’t the purpose of the ratings. The purpose is to provide accurate, readable information for the relevant consuming public, and so understood seems perfectly appropriate. The “picking winners” criticism will become more apt if and when Congress authorizes the allocation of federal financial aid on the basis of the ratings.
But I do think the scorecard even when viewed purely as an information device can be criticized. For example, while I can see why the percentage of low-income students in a college would be an appropriate factor to consider in allocating federal aid, I don’t see its relevance to the choice of a college by would-be applicants. Tuition, on the other hand, is a relevant factor, obviously, but is disclosed up front by any college or university to which one applies. Alumni earnings sound relevant, but the problem is that they necessarily are backward looking. They are the record of experiences of previous students, and may reflect characteristics of the college or of the job market that have changed since those generations of students graduated. The amount of debt of graduates is similarly an ambiguous signal to a prospective applicant. If the debt of graduates of a particular institution is above average, this may reflect career choices or excessive optimism, things for which the college may bear only limited, if any, responsibility. The factor is included in the scorecard I assume because of a belief that some colleges lure students by obfuscating the financial obligations that a student who applies for financial aid will be taking on. I think this belief is correct but I don’t know how much
of the indebtedness of graduates it is responsible for.
Most American colleges and universities are nonprofit, but that just means that are don’t have shareholders; profit residuals are dissipated in generous salaries for administrators and faculty, student amenities designed to attract rich kids and thus increase (along with high-powered sports programs) future donations, and lavish building programs. The colleges compete with each other with Darwinian ferocity. Federal financial aid has them to increase tuition at an astonishing rate, which has funded the competitive extravagances. The nonprofit colleges and universities seem just a tad less avaricious than the profit-making ones.
The competition has greatly increased the number of college graduates—to the point where many cannot find a job requiring a college education. IQ is a limiting factor in the value of a college education in the job market.
So below the very top tier of institutions, the picture of American higher education has become rather depressing. The President’s newly announced program seems unikely to work any significant improvement.