President Obama's Secret $150 Billion Plan To Remake College

In the fine print of a policy proposal is a revolution in educational choice.

President Obama only spoke for a minute about college during Tuesday's State of the Union address. But in the White House policy blueprint released with the speech there's a little proposal that could bring massive changes in the flow of students and money toward innovative higher education programs that are actually affordable and connect students with good jobs: massively open online course platforms like Coursera; ultra-low-cost providers like Straighterline; experiential, skills-focused education programs in high-need industries like Hacker School, General Assembly, and Enstitute; even experiments like Skillshare and Khan Academy.

Federal higher education aid—student loans and grants like the Pell Grant—is a $150 billion funding stream. Right now students can only spend this money at accredited colleges. Accredited colleges are accredited according to a set of bureaucratic standards by groups of other accredited colleges, a cozy arrangement. Accreditation has little or nothing to do with the amount of debt your graduates have, or whether your students are able to get jobs, or are using anything they learned five years out. The for-profit University of Phoenix is accredited; so is Harvard.

Obama's Department of Education has already taken the first tentative steps toward a more meaningful kind of accountability for colleges. The "gainful employment rule," released in 2011, says that in order for a college to be eligible for federal aid a minimum number of your graduates must be able to pay back their loans. But this rule applies only to for-profit colleges, and it was weakened significantly by their lobbyists before it was passed.

The blueprint released yesterday goes much further. It reads:

"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."

Considering value and affordability means holding colleges accountable for year after year of double-digit tuition increases, by ranking them, naming and shaming them with a new college scorecard, and yanking federal money if they can't prove their worth to the students they serve.

A new, alternative system of accreditation—and to my knowledge, the Department of Education is very interested in taking this path—is something else entirely. It has watchers of innovation in the education space very excited.

Kevin Carey of moderate Democratic-leaning DC think tank New America Foundation writes:

"The clear implication is that the higher education models that would be 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.'"

This opens the door for more experimentation and for all of the innovative education startups Fast Company covers to compete on a level playing field with traditional colleges and universities on the metrics that count: value and quality. Learners are the winners in this equation.

[Images: Flickr user Steve Rhodes]

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  • Mgreenfield

    The administration has been fairly hostile to for-profit higher education and has used traditional accreditors as weapons, which will make it hard to encourage innovation.

  • David Blake

    Heard the President of the Western Association of Schools and Colleges speak at Stanford last week and said that they won't exist as they do now in 10 years, either because they fail to adapt and become irrelevant or because they do adapt and morph into something different from what we have known accreditation to be.

    There were also interesting comments on how there is no longer even a common sense of what it is to have a degree. With AP credits, CLEP exams, prior learning assessments, MOOCs for credit, all cobbled together, the degree is no longer the most helpful standard of education. scores and verifies your lifelong education from any source, both formal and informal allowing you to reflect everything you have learned.

  • BrokeBustedDisgusted

    Great article on this brushed-by topic. I think it's great that the administration is taking an active role. But a hugely important aspect of this - in my eyes - isn't just changing what "institutions" students are allowed to borrow massive sums of money for. Instead, it's making students more financially literate and aware of the true potential ROI of their accredited education. This seems like it still remove the responsibility from the would-be-students, many of whom could be considered "sub-prime" borrowers.