• October 31, 2014

Obama Vows Action on College Costs, but Observers Say His Options Are Few

Obama Vows Action on College Costs, but Will It Work? 1

Brendan Smialowski, AFP, Getty Images

President Obama promised during a speech last month at Knox College (above), in Illinois, to "shake up higher education." During a three-stop college tour that he embarks on this week, he's expected to lay out some specific proposals.

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close Obama Vows Action on College Costs, but Will It Work? 1

Brendan Smialowski, AFP, Getty Images

President Obama promised during a speech last month at Knox College (above), in Illinois, to "shake up higher education." During a three-stop college tour that he embarks on this week, he's expected to lay out some specific proposals.

In a speech at Knox College last month, President Obama said he would "shake up" higher education with an "aggressive strategy" aimed at making college more affordable.

On Thursday the president will embark on a two-state, three-campus tour where he'll lay out what he has in mind. In a letter sent to his supporters this week, he promises "real reforms that would bring lasting change."

"Just tinkering around the edges won't be enough," he says in the letter. "To create a better bargain for the middle class, we have to fundamentally rethink about how higher education is paid for in this country."

The plan, he continues, "won't be popular with everyone—including some who've made higher education their business—but it's past time that more of our colleges work better for the students they exist to serve."

But it's hard to see how the president will tackle two of the root causes of tuition growth: labor costs and state budget cuts. Despite productivity gains and a move toward self-guided, "competency-based" learning, higher education remains highly dependent on skilled labor. At the same time, many states have slashed their spending on higher education, forcing public colleges to raise tuition to cover costs.

Taking Colleges to Task

Over the past year and a half, Mr. Obama has become a frequent critic of colleges, taking them to task over rising tuition and warning that the government won't continue to pour money into an "undisciplined system." He has threatened to withhold some federal aid from colleges that fail to hold down tuition growth, and has proposed grants for states and colleges that adopt cost-saving measures.

So far, those ideas have fallen flat, largely because of federal budget constraints. The president has had better luck increasing aid to students and making debt more manageable, through expanded income-based-repayment options and lower interest rates on student loans.

His administration has also made information about college costs and student debt more transparent, through the use of an online College Scorecard and a standardized financial-aid-award letter, or "shopping sheet."

This week's college tour is the latest in a string of campaign-style events the White House is using to promote its economic policies in the run-up to debates in Congress over the federal budget and the debt ceiling. It includes stops on Thursday and Friday at two State University of New York campuses—the University at Buffalo and Binghamton University—and at Lackawanna College, in Scranton, Pa.

Details of the president's proposals aren't yet available, but some observers expect Mr. Obama to recycle a plan that would tie some money from the campus-based aid programs to efforts to rein in tuition growth, and to repeat his call for a "Race to the Top"-style grant program for colleges and states that take steps to control costs.

He might also propose an expansion of his signature Pay-as-You-Earn student-loan-repayment plan, or declare use of the financial-aid shopping sheet mandatory for all colleges.

To deal with state budget cuts, he might propose requiring states to sustain their spending on higher education to receive certain federal funds. But past maintenance-of-effort provisions haven't proved particularly effective, and some members of Congress oppose their expansion. Tackling labor costs would be even trickier.

"When it comes down to it, there's not all that much the president can do, besides using the bully pulpit" to exhort states and colleges to do more, said Daniel T. Madzelan, a longtime Education Department official who retired last year. "It just comes down to the price of labor."

From Benefactor to Critic

During his first years in office, President Obama focused on expanding student aid, pushing for increases in the maximum Pell Grant and the creation of a more-generous tuition tax credit. Those changes helped make college more affordable for current students, but they didn't do anything to slow tuition growth, and skeptics say they may have even fueled it.

In 2010 the administration turned its attention to for-profit colleges, proposing to cut off federal student aid to institutions where borrowers struggle to repay their student-loan debts. The resulting "gainful employment" regulation was overturned by the courts, and the Education Department is opening negotiations to rewrite the rule this fall.

But it was not until 2012, in his State of the Union address, that the president began to apply pressure to all of higher education, putting colleges "on notice" that his administration would not continue to subsidize "skyrocketing tuition."

"If you can't stop tuition from going up, the funding you get from taxpayers will go down," he said.

Three days later, in a speech at the University of Michigan, he issued a "blueprint for keeping college affordable," repeating proposals to shift more money from the campus-based student-aid programs to colleges that "do their fair share to keep tuition affordable," and to create new incentive programs for colleges and states. The plan also included a call for a College Scorecard that would provide families with "essential information" for choosing a college, including data on institutions' costs, their graduation rates, and the potential earnings of their graduates.

He returned to those themes in his 2013 State of the Union address, calling on colleges to "do their part to keep costs down" and urging Congress to consider "affordability and value" when awarding federal aid. In a policy plan that accompanied the speech, he suggested incorporating measures of value and affordability into the existing accreditation system or establishing a new, alternative system of accreditation "based on performance and results."

Sidestepping Congress

Getting Congress to agree to any of those ideas will be difficult, given budget realities and competing priorities—not to mention the partisan gridlock currently gripping Washington. Recognizing that, Mr. Obama has vowed to use the powers of his office to get things done.

"Whatever executive authority I have to help the middle class, I'll use it," he said to cheers during his speech last month at Knox College, in Illinois. "Where I can't act on my own, I'll pick up the phone, I'll call CEOs, I'll call philanthropists, I'll call college presidents."

The Obama administration has already shown a willingness to sidestep Congress to achieve its goals, issuing rules in 2010 and 2011 that defined a "credit hour," expanded state oversight over distance education, and sought to end aid to colleges that failed to prepare students for "gainful employment." Last year the president issued an executive order that required colleges that receive military tuition assistance to adopt the financial-aid shopping sheet.

The administration has also released its College Scorecard, although the tool currently lacks information about job outcomes and earnings.

David A. Bergeron, another former longtime Education Department official who worked on the first version of the "gainful employment" rule, said he expected the president's campus tour to continue his focus on transparency and accountability. He said he hopes the tour will offer new ways the government could use performance metrics to "differentiate between good and bad programs."

"Now that we're in the era of big data," he said, "we ought to exploit it to provide better services to students."

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