United States | Higher education

Universities challenged

Barack Obama wants degrees to be better value for money

|CHICAGO

THE cab driver boasted that his daughter had just graduated. But then he admitted that her journalism degree from the University of Wisconsin had cost $140,000. Since journalism is an ill-paid job that requires no formal qualification, this sounds like a waste of money.

Barack Obama worries that too few students are getting value for money from college. Graduates earn more than non-graduates, of course, but how much of this is because they were cleverer to begin with, rather than because college stretched their minds or taught them something useful? The average American graduate finishes college with $26,600 of debt; some with far more (see article). The proportion of student loans at least 90 days in arrears has risen from 8.5% in 2011 to 11.7% today. Many graduates are struggling.

On August 22nd Mr Obama vowed to put pressure on colleges to lower fees and raise graduation rates. Before the academic year 2015 begins, the Department of Education will publish a new college-ratings system, measuring such things as how much it costs to attend an institution, what proportion of students graduate and how much they earn afterwards. The aim is to help students work out which colleges offer the best leg-up for the least loot.

Federal financial aid could then be tied to these ratings, said Mr Obama, perhaps when the Higher Education Act is renewed (it expires this year). Since the federal government spends $150 billion a year on student aid (mostly in the form of loans), this would be a powerful lever. Aid is currently doled out according to the number of students that a college enrolls, prompting some institutions to cram the lecture halls with youngsters who have little hope of ever graduating, but who rack up debt just the same.

Change is overdue. The cost of attending college has shot up much faster than inflation or wages over the past three decades (see chart). Yet graduation rates are miserable: only 58% of full-time students who started at a public four-year college in 2004 earned a degree within six years. Student loans total $1.2 trillion, 6% of the national debt. A new study from the National Bureau of Economic Research finds that increasing federal aid leads only to a modest increase in the number of people who attend college. Much of the extra cash is swallowed by the colleges themselves, which raise fees, hike salaries and build glossy football stadiums.

Critics worry that universities will game the new system. If federal aid is tied to graduation rates, won’t some colleges simply lower standards? Employers are already fed up with grade inflation. Many hope that a new voluntary test, the Collegiate Learning Assessment, will provide a more objective scorecard. The CLA is set by an independent non-profit and will be open to students at traditional and online colleges from next year.

Mr Obama hopes to encourage colleges to dream up ways of cutting costs. The Education Department will issue regulatory waivers that will allow institutions to experiment with new ideas, such as financial aid for high-school students who take college courses, or rewards for students who perform well. Some colleges already give some students credit for understanding a subject rather than spending time at university. Others use technology to cut costs. But change will come too late for some. Please tip your cab-driver generously.

This article appeared in the United States section of the print edition under the headline "Universities challenged"

Hit him hard

From the August 31st 2013 edition

Discover stories from this section and more in the list of contents

Explore the edition

Discover more

Do undocumented immigrants have the right to own guns?

A federal court in Chicago decides that some do. Republicans are outraged

Chicago wants to stop Glock pistols being turned into machineguns

The city is suing the manufacturer


Georgia’s black Republicans have a battle plan for 2024

Joe Biden will have to work harder to win the state’s black voters this year