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New US rating plan: Feeding “the best”, weeding out the rest

In August 2013 President Obama introduced the US government’s plan to develop the so-called Postsecondary Institution Rating System (PIRS) in order to deal with a huge student loan debt of more than USD trillion and curb its escalation in future. According to 2012 data, average debt of a bachelor’s degree graduate is around USD 29 400.  While college tuition has almost doubled in the last 25 years, the income for typical families has seen only a meagre increase by 16%. Furthermore, graduation rates have dropped by 58% (completion of four-year programmes within six years).

So what the US Department of Education (ED) is about to do is develop a set of criteria to evaluate higher education institutions and distribute federal funds on the basis of their performance. According to ED, the aim is not to rank institutions but “to compare colleges with similar missions and identify colleges that do the most to help students from disadvantaged and underrepresented backgrounds, as well as colleges that are improving their performance”. The rating will probably be based on three broad criteria: access (percentage of students receiving Pell grants), affordability (average costs of attendance, e.g. tuition fees, student loan debt or scholarships), and outcomes (graduation rates, transfer rates or graduation earnings). 

The plan has raised a heated debate as to how colleges can be compared in all their diversity, or who decides on the performance indicators. The fear in academic circles is that socio-economic disparities among students may grow even larger than before. 

Despite the controversies, the Education Trust report published this month argues in favour of the government’s plan and calls for more federal pressure in requiring colleges to meet minimum performance criteria. According to the findings, around USD 180 million is spent annually by the federal government on student aid and tax benefits for colleges, but an institution’s performance has no bearing at all on the allocation of funds, despite huge discrepancies among high and low performers. 

Drawing on the three measures proposed by the government, the authors of the report suggest benchmarks which define the lowest performing 5% of four-year colleges in the country. The proposal for minimum performance standards is the following:

  • A minimum of 17% of full-time freshman enrolment eligible for the federal Pell grant
  • A minimum of 15% of six-year, full-time freshman graduation
  • Less than 28% student loan default
The report also blacklists 100 colleges that fail to meet one or more of the proposed benchmarks. The Ivies are not spared either: the report shows that Stanford, Yale and Princeton are below the first threshold with respectively 16%, 13% and 11% of freshmen in 2011/12 eligible for Pell grants (federal grants awarded to lowest income students). The US college graduation rates are among the lowest in the developed world, with less than 2/3 of students who start full-time studies graduating within six years of initial enrolment, the report states. Graduation rates are below 15% equally in for-profit and public colleges, which is usually justified by having prevalently part-timers or returners to college. Still, most of the student loan default takes place at for-profit colleges, and some “historically black of Hispanic-serving institutions”, it is said in the report. 

It remains to be seen whether the plan will go through in the Congress amidst strong criticism and resistance in the academia. In case it does, the first allocations based on the ratings are to take place by 2018.

The White House Factsheet