On his recent education bus tour, President Barack Obama pressed for a new rating system to ensure that more families are able to afford higher education. I think we can all (well, almost all of us) agree that the rising costs of a bachelor's degree need to be constrained, and we must find ways to help middle- and lower-income students enter and graduate from college. The value of the education promised to students matters and "debt without diploma" is unacceptable.
What is vastly harder to agree upon is how to address the problem, rather than just wringing our hands over it — which we have been doing for far too long.
Let's start with the president's idea of rating colleges based on graduation rates and prospective earnings, among other variables. To be sure, given the president's reference to the U.S. News rankings in his speech last month at the University of Buffalo, one wonders whether "ratings" are similar to or different from rankings — apart from using different variables.
On the surface, measuring graduation rates and prospective earning may seem easy. And advising families on how to compare and contrast college offers seems wise. But devising a quality rating system requires deep insight into how the world of higher education actually works.
Here's why.
First, we know that more-elite institutions that serve Pell-eligible students have higher graduation rates than open-access institutions that enroll Pell- eligible students. What accounts for this disparity is subject to debate, but arguably, part of the answer is that the richer institutions only take the "best" among the low-income students. This means that elite institutions, absent some adjustment, would rank higher than non-elite institutions on graduation rates without any explanation as to why that is occurring.
Second, if we only calculate graduation rates of true first-year, full-time students, we will be missing the mark in terms of who is actually enrolling in college today. Students with previous credits, transfer students, adults returning, part-time students and veterans would not be counted in the calculation — absent a change in how the government collects data.
Third, earnings are certainly occupation-based. Graduates who become teachers and nurses and police officers earn less than students who are employed by investment banks or hedge funds. Clearly, success in higher education cannot be measured based on earnings alone.
Finally, there is a built-in assumption that students and their parents will pay attention to and use the published ratings effectively. Experience suggests otherwise. Despite transparency in the realm of consumer protection, consumers still make irrational and unwise choices, as behavioral economists have noted.
Indeed, consumption decision-making is often based on non-economic determiners. And we already have early evidence that the current federal scorecard has not worked as expected — despite best efforts to share its availability. Moreover, the income-based repayment program has not had the expected uptake among students who could benefit from it. We need to make disclosure "smart." We need to focus on how to engage families in conversations about money. Educational institutions' obligation to advise students about loan repayment should extend beyond graduation, particularly since initial payments often commence six months post-degree.
As an additive or alternative to the president's suggestions, I think we would be wise to consider changes to the legal response to students and their families who default on their loans — so the fallback legal position, absent some exceptions, would benefit those families who have borrowed the funds. For example, what about enacting legislation, through an amendment to the Bankruptcy Code, that enables students and parents to discharge burdensome private and public loans through bankruptcy?
A recent study by the Center for American Progress suggested the dischargeability of select public and private loans. The Consumer Financial Protection Bureau and the Department of Education issued a report in 2012 suggesting reconsideration of the nondischargeability of private student loans.
To anticipate the suggestion that easing bankruptcy's discharge will create a moral hazard, my experience over 30 years of working with debtors and consumer finance suggests that this common concern is not supported by the evidence.
The availability of bankruptcy and the opportunity for dischargeability of specified debt has not led to a wave of abusive bankruptcy filings. As I always have said, most people do not wake up in the morning and say, "Yippee. I get to file bankruptcy today, having failed at America's rags-to-riches dream."
Surely the president has latched onto an issue that matters — a college education for the betterment of individuals and their families and society at large. This is because, at the end of the day, we need an educated citizenry to preserve our democracy. The real issue is how we make that accurate idea a reality. As with most difficult issues, the devil remains in the details.
Karen Gross is president of Southern Vermont College. A longer version of this article can be read at Inside Higher Ed, http://tinyurl.com/mjb9y4m