Arne Duncan's Got it All Wrong, Again

I'm just back from Washington DC and now unhappily certain that President Obama is headed in the wrong direction with his efforts to get a handle on college costs.  The winds have shifted and Arne Duncan has taken the lead on the planning-- and well, you know what that means.  We're going to get yet another quasi-market solution that fails to grapple with the real problems and destroys any hope for a good result.

Here's the thing:

The current financial system hinges on the actions of students, prioritizing their consumer choice in the hopes that those choices will be well made.  It assumes that any problems with schools will be resolved by students turning away from them.  But this assumption is deeply flawed, not only because students do not (and cannot, and will not) make informed choices, but also because a segment of selective schools (and states) have manipulated aid policy for so long that the incentives are now distorted and they can do whatever they wish. And what they want is to maximize their own interests, which are rarely aligned with those of their students. So the problem, in other words, is really the behavior of schools and states.  Yes, students and families are an issue too, but their lack of information is just a fraction of the overall college cost problem.

Creating a ratings system for all of the nation's colleges and universities will do absolutely nothing about institutional and state behavior because:

• Student choice is often highly constrained by finances, family, and geography -- you can declare a local community college "bad" but students have no choice but to attend it anyway, and if it closes nowhere else public to go (remember, there are far fewer community colleges than k-12 schools, and for-profit institutions who'd jump at the chance to fill in for the missing community college). We already have a ranking of community colleges, thanks to Kevin Carey, and no one is making use of them.

• Schools simply won't care -- good luck making ratings the elites will take more seriously than US News, and for the others, they know their consumers and count on the fact they have no other good options

• States won't view the ratings as their problem

Frankly, it is laughable to suggest that a college ratings system will be "consumer protection" from the college cost crisis we now face.  Instead, just like Arne's war on teachers (rather than poverty and segregation) it is an enormous waste of taxpayer resources and destined for failure. Just look at the Scorecard and the Navigator-- they aren't used or demonstrably effective at all.

This kind of nonsense has to stop. President Obama had it right when he said he'd tie Title IV financial aid to institutional performance. The next step was not to turn to Arne, but rather his experts who've crafted nuanced accountability systems with anti-creaming provisions. We've tried the voucher approach to financial aid-- it's time to get serious.  

When Title IV began, there were relatively few seats in higher education in the public sector and relatively few students. Today there's enormous capacity in the public sector and tons of students.   We can't afford to make every current institution Title IV eligible, and the ones that should re-compete for their eligibility are the ones who have created the current crisis: 

(a) the selective, elite private non-profits whose admissions criteria mean they do not serve any kind of public good while they establish "standards" for college quality that are conflated with great expense, and 

(b) the for-profit institutions that set their tuition according the availability of federal aid.  

If you reign in those two players, the rest will begin to fall in line.

President Obama needs a do-over. He made a mistake.  Pull back on the wasteful ratings plan, and instead say "let's do this thing right."  Prioritize putting public resources into public institutions of higher education.  Fund them and their students well, for once.  Time to degree will go down, and quality of instruction will rise.  Next, create accountability metrics intended to lower costs and open access at the private non-profits (else cut them out of Title IV), and to lower costs and increase completion rates at the for-profits (again, or else they're out).  

Such a plan will not require massive behavioral changes on the part of millions of college students or require big informational campaigns.  It will not leave students to attend colleges designated "bad" or have no local option at all-- the community colleges will remain and do their jobs better by having a decent amount of money to spend.  What it will do is focus squarely on the problem at hand, and go straight at it.

There, now get to work.

  *****

But really, who am I kidding?  Arne and his big money men in Congress (mainly grads of private colleges and universities) will never let this happen. They'll ensure we get a ratings system that protects no one,  least of all the students. There's simply too much money to be made.

Senator Warren, Director Cordray --- are you listening?