As a rule, speechwriters put the most dramatic parts of a president’s agenda front and center in televised speeches, leaving the boring policy details to the supplemental notes. Last night, the Obama administration did the opposite: the higher education section of the State of the Union address was much the same as last year’s, focusing intensely on college affordability and putting institutions on notice that the gravy train of public support for rising prices would have to end. But the truly earth-shaking policy initiatives were left for the supplemental policy document released directly after the speech, in which the Obama administration proposed the biggest change to federal higher education policy since at least the Higher Education Amendments of 1972.
Those laws created what would become the Pell Grant program for low-income students, which has grown to a $40 billion pillar of government support for higher learning. The Pell grant is a voucher system–any eligible student can use their grant to pay tuition at any accredited college of their choice.
The key words in that sentence are “accredited” and “college.” There are lots of ways to learn, but Pell grants can only be used to purchase learning from organizations that fit the model of colleges as we know them today. And who decides, legally, what a “college” is? Accreditors, a group of independent non-profit organizations run by…colleges as we know them today. By controlling access to Pell grants, student loans, and other forms of financial aid, existing colleges determine the price, structure, and character of higher learning. This regulatory monopoly has had severe and sadly predictable negative effects on price and innovation in higher learning. To compete on a level financial playing field, you have to teach, spend, and ultimately charge like established institutions.
The Obama administration wants to change all of that:
The President will call on Congress to consider value, affordability, and student outcomes in making determinations about which colleges and universities receive access to federal student aid, either by incorporating measures of value and affordability into the existing accreditation system; or by establishing a new, alternative system of accreditation that would provide pathways for higher education models and colleges to receive federal student aid based on performance and results.
Last year, similar language tying federal aid to “value” was explicitly limited to a group of relatively minor aid programs. The Pell grant and loan programs that make up $140 billion in annual aid were excluded. No such restrictions appear here (although the President did refer to only “certain types” of aid in the speech itself.) But the real kicker is at the end: a new, alternative system of accreditation that would provide pathways for higher education models and colleges to receive federal student aid based on performance and results.
The existing accreditation club has been around since the end of the 19th century. It has had an exclusive franchise on determining federal financial aid eligibility since the middle of the 20th century. Opening a new doorway to the Title IV financial aid system would be an enormous change, particularly when coupled with the phrase “higher education models and colleges.” The clear implication is that the higher education models that would eligible for federal financial aid through the alternate accreditation system wouldn’t have to be colleges at all. They could be any providers of higher education that meet standards of “performance and results.”
Shortly after the speech, American Federation of Teachers president Randi Weingarten tweeted a response to this proposal, warning that it was a “huge opening for profiteers.” This is exactly wrong. The financial aid profiteering that occurred over the last decade happened because the old accreditation system was left in place. Whatever college that one might think plundered the treasury was a college, duly accredited by a non-profit organization that lacked the wisdom or capacity to prevent plundering. Obama is proposing creating new standards of quality and accountability that don’t exist today. It is an anti-plundering plan.
There is a clearly a great deal of innovation happening in higher education right now. Much of it is happening online, although it would be a mistake to assume that all innovation is technological and vice versa. The upward spiral of college costs isn’t going to be arrested by government price controls. Only intense new competition from high-quality, low-cost providers will create the kind of market pressure needed to change the way colleges spend, teach, and price their services. But that competition will never thrive if innovators are forced by incumbents to adopt expensive, centuries-old organizational models in order to have equal access to financial aid.
It will fall to the administration to flesh out the details of this proposal in coming weeks. Here are some of the components I’d like to see:
More to come.