The Government Will Now Start Rating Colleges -- But Why One Expert Is 'Skeptical

Speaking about a “crisis in college affordability and student debt,” President Barack Obama wants to tie federal higher education dollars to the performance of both colleges and students. But at least one expert is "skeptical."

“It is time to stop subsidizing schools that are not producing good results and reward schools that deliver for American students,” Obama said as he outlined a plan to rank colleges based on performance in order to receive federal funding, and require students getting federal aid to show results, during a speech before students starting their school year at the University of Buffalo in Buffalo, N.Y.

President Barack Obama speaks on education at the University of Buffalo, in Buffalo, N.Y., Aug. 22, 2013. (Getty Images)

Obama also talked about encouraging colleges to take innovative actions such as more online courses, and provide more flexibility to those with student loans.

He said he was directing Education Secretary Arne Duncan to establish the ratings system by 2015 and even took a swipe at rankings done by private outlets, specifically naming U.S. News and World Report.

“Right now private rankings like U.S. News and World Report puts out each year their rankings and encourages colleges each year to focus on ways to ‘how do I game the numbers,’ you know, it actually rewards them in some cases for raising the costs,” Obama said. “I think we should rank colleges based on opportunity in helping students from all kinds of backgrounds succeed and on outcomes. That means metrics like, how much debt does an average student leave with? How easy is it to pay off? How many students graduate on time? How well do those graduates do in the workforce? The answers will help parents and students figure out how much value a college truly offers.”

The federal government spends $150 billion each year on student financial aid to colleges and universities, and states spend about $70 billion, according to the White House. The money is based on the number of students who enroll in a school and not results. Obama wants the funding tied to the college’s ratings under the 2018 reauthorization of the Higher Education Act, once the ratings are established.

“Over the next few years, we’re going to work with Congress to use these ratings to figure out how we allocate aid to colleges,” he said.

A ranking system by the Department of Education wouldn’t be harmful because more consumer information is always helpful, said Richard Vedder, director of the Center for College Affordability and Productivity, which ranks colleges for Forbes magazine.

“Providing more information fosters competition, so long as they don’t say others can’t do rankings,” Vedder told TheBlaze. “Conceptually it’s OK. The devil is in the detail and there isn’t much detail. Given the history of previous announcements, I’m skeptical if the government can pull this off on time.”

Over the last 30 years, the cost of college tuition increased by 250 percent while incomes grew by 16 percent, according to the College Board and U.S. Census data. Obama said that is not sustainable. The average student borrower graduates with $26,000 in debt, while 58 percent of full-time students who started college in 2004 earned a four-year degree within six years, according to the White House.

The proposal would require students to complete a certain percentage of their classes before receiving continued federal assistance, as a means to try to encourage students to finish their program on time – which he said would reduce student debt in the long term.

“There are schools out there that are terrific values,” Obama said in Buffalo. “There are also schools out there with higher default rates than graduation rates. Taxpayers shouldn’t be subsidizing students who go to schools where the kids aren’t graduating. That doesn’t do anybody any good. Our ratings will also evaluate how good colleges are at enrolling and graduating students who are on Pell Grants.”

Graduation rates are an important element to tackle, but only if there are quality control measures in place, Vedder said.

“To say colleges will pay a penalty if X percent doesn’t graduate runs the risk of lowering standards,” Vedder told TheBlaze. “If I was a university administrator, I could drum up all kinds of ways to get more kids out.”

That said, Vedder added that Obama is correct to raise this issue.

“As colleges are pressured to graduate a higher percentage, perhaps they will accept fewer high risk students, which I would support,” Vedder said. “Many schools have a 10 percent or 15 percent graduation rate. That’s a scandal. I think the president should say schools that have a graduation rate under 20 percent will lose their accreditation.”

It’s not enough, but Vedder said most of the proposal is better than nothing. He added the federal government has been a major cause of the problem.

“Costs are rising rapidly in health care and in health care and subsidies are driving those rises,” Vedder continued. “There is currently no incentive for universities to keep costs down. Federal financial aid has been going up 11 percent per year, fueling the extensive costs rising.”

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