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Assessing Value and Opportunity in Higher Education

Location: New York, NY

I will be brief today so we can get to an important discussion.

Last month, President Obama unveiled a landmark plan to address our country's "crisis of college affordability and student debt."

His plan would tackle that crisis on three fronts: By encouraging innovation and competition in higher education to improve institutional performance; by helping people responsibly manage their debt; and by empowering students and families to select schools that provide the best value for their hard-earned dollars.

Expanding innovation in higher education is critical to our nation's future. Many of the outstanding college leaders here today are driving innovation to boost institutional performance, while maintaining and even improving quality.

Yet I think we all know that innovation is too rarely taken to scale in higher education. President Obama wants to address that gap, and that's one reason he has proposed both a $1 billion Race to the Top for Higher Education and a new $260 million First in the World fund.

In addition to promoting innovation, helping people responsibly manage their debt is every bit as critical. In a knowledge-based, globally-competitive economy, higher education can't be a luxury--every hard-working family in America should be able to afford to go to college. Today, sadly, many middle-class families are starting to believe college is only for the affluent, not for people like them.

Today, I want to talk primarily about the last, and most controversial, of the three prongs of the President's plan. And that is creating better incentives for colleges to do more with less and deliver better value for students and their families.

As you know, the President has assigned our Department to develop a college ratings system for the start of the 2015 school year. Under his plan, the college ratings system would be used to transform the way federal student aid is awarded to students, starting in 2018.

When the President unveiled his plan, he proposed a new idea that marks a major break from the past. It is an idea that has been talked about in Washington for a long, long time, but no one has had the courage to act upon it.

President Obama said the federal government should "rate colleges based on opportunity: Are they helping students from all kinds of backgrounds succeed, and that [we should rate colleges] on outcomes--on their value to students and parents."

I want to speak today about some of the early reaction to the President's announcement--and give some preliminary thoughts as to how we should be thinking about the development of a college ratings system.

To be absolutely clear, we have not even begun to develop the college ratings system yet--and we are only in the beginning stages of soliciting input from a wide range of stakeholders about the metrics that should and should not be used in the ratings system.

I'm not sure how this is possible, but a few critics have already gone on the attack against a ratings system they don't like but that doesn't exist. That's obviously a little premature--and more than a little silly. In fact, over the course of the next year, we are going to solicit input on the ratings system from literally hundreds and hundreds of stakeholders.

We'll be holding hearings, Town Hall meetings, and roundtables. We will be traveling across the country to engage with everyone who can help us to design an effective ratings system--one that is useful to students, and sensitive to the varying educational missions and vast differences among schools.

In fact, just yesterday, our team had its very first outreach meeting with student groups, who expressed their huge concerns with the rising costs of college.

We will also be consulting with parents, college faculty and administrators, state education leaders, business and industry, researchers, associations, innovators, philanthropies, consumer interest groups, and other public advocates. Next month, we plan to release a Request for Information to solicit comments from technical experts about the metrics we should use in the ratings system. And later in 2014, we plan to release a draft proposal for public comment and review. No later than December of next year, we'll use the feedback we receive to finalize the college ratings system.

So, with the caveat that this is barely yet a work-in-progress, let me lay out a few guiding principles for thinking about the design of the college ratings system:

First, even though we don't know yet all the metrics that will form the ratings system, we do know that it will rely on multiple measures--not one or two crude measures of college value. President Obama has already indicated that the ratings system will be looking at three big performance buckets.

We'll be looking at access, such as the percentage of students receiving Pell grants. We'll be looking at affordability, like average tuition, scholarships, and loan debt. And we'll be looking at outcomes, such as graduation and transfer rates, alumni satisfaction surveys, graduate earnings, and the advanced degrees of college graduates.

Second, we'll be seeking to make apples-to-apples comparisons of like institutions, not apples-to-oranges comparisons. This is hugely important. The ratings, in other words, will compare colleges with similar missions, similar student populations, and identify colleges that do the most to help students from disadvantaged backgrounds and colleges that are improving their performance. We are interested in the progress schools are making.

We'll be looking, for example, at how successful colleges are at enrolling and graduating students who benefit from the Pell grant program. As President Obama stated, his "firm principle [is] that our ratings have to be carefully designed to increase, not decrease, the opportunities in higher education for students who face economic or other disadvantages." We want to reward institutions who are performing well and demonstrating their commitment to improvement.

Lastly, unlike some published college rankings, we will offer a ratings system, not a rankings system. The ratings system won't highlight trivial differences between elite institutions or heavily reward schools based the number of students an institution turns away. Our goal is inclusion, not exclusion.

We will begin by initially looking at metrics for which data are already available that tell consumers about critical student outcomes: How many students at an institution graduate, at a reasonable cost, without a lot of debt, and get a job in a field they choose--public or private sector--and that enables them to support themselves and their families.

Now, those are some very broad parameters for our college ratings system. And believe me, we are all aware that if this is not done well, a college ratings system could create unintended consequences and allow gaming of the system.

We are beginning this work with a great sense of humility. Designing a good ratings system is a big, complex challenge, and there are a lot of tough questions we will need to answer together.

To cite just some examples, what metrics should be used to measure institutions where performance has improved--and how should this be reflected? We are much more interested in where you are going than in where you have been.

Should we especially highlight how changes in state aid increase or decrease the price paid by students at public institutions? States have a critical role to play--their disinvestment in higher education is not helpful, strategic, or in our nation's best interest.

How do we design a college ratings system that recognizes the tremendous benefits associated with studying the humanities at liberal arts colleges and universities? As a proud sociology major, this is important to me.

And how do we design a college ratings system that supports public service--even if graduates initially earn lower salaries after graduating from college in professions like teaching, the military, or public service jobs like the Peace Corps?

With a million of our country's teachers retiring soon, we literally have a once-in-a-generation challenge of strengthening the entire profession. And if any of you have observed our dysfunctional Congress lately, you can see the tremendous need to attract the next generation of talent into the public sector.

These are only a few of the difficult, nuanced questions that we'll need to look at carefully in the coming year. And frankly, that is one reason I am so eager to have this conversation today--and to continue to solicit the input and guidance of the higher education community throughout the coming year.

Now, despite these difficult questions, I want to be clear that I absolutely reject the idea that it is impossible to create a meaningful college ratings system for students and families.

I reject the idea that the value of a college education is so elusive, so inexpressible that no ratings system can ever meaningfully help consumers determine its value.

After President Obama released his plan, one higher education lobbyist warned that if the President wanted to "condition the receipt of student aid on [the ratings, he had] an obligation to have perfect data."

Of course, no college ratings system can be perfect, and no ratings system will have perfect data. But, frankly, that lobbyist was starting from the wrong premise.

The right question to ask is not whether the ratings are perfect.

Instead, we should ask whether the ratings would constitute a big step forward in making college costs and outcomes more transparent for students and families--and whether they would better ensure that institutions reaping the benefit of our taxpayer dollars through federal student aid provide good value, compared to the existing system.

Unfortunately, in education policy, we too often let the perfect become the enemy of the good. That leads to paralysis and inaction--and a perpetuation of the status quo.

And we must remember that when it comes to improving college affordability and value, we are not operating in a historical vacuum, or on a blank canvas.

Everyone here knows that the current system for dispensing federal aid is not only imperfect; it has serious shortcomings and is ultimately unsustainable. We have a moral, economic, and educational obligation to challenge that status quo.

The federal government today makes available over $150 billion in student financial aid every year in grants and loans. But our existing funding model essentially only provides incentives for enrollment growth--the more students you have, the more money you get.

It doesn't support excellence. It doesn't encourage people to stay in college and earn their degrees. And it doesn't enhance productivity or provide desperately-needed transparency. The difficulty families have trying to figure out basic things--like grants versus loans, or one-year costs versus four-year costs--is mind-boggling.

Our annual $150 billion investment is driven by inputs, not important outcomes--like what students know and can do. Students, taxpayers, and our country all deserve something better.

The truth--as we have painfully seen in the last few years--is that our funding systems for higher education provide few long-term incentives to constrain college costs, reduce student debt, and improve performance.

That has to change--as President Obama said, "We're going to have to do things differently--we can't go about business as usual." The President wants to "shake up" higher education. So instead of propping up the status quo, I am asking higher education leaders to shake it up. We can't price the middle class--and everybody working to get into it--out of a college education.

And we can't regain our global leadership and enhance our economic competitiveness when so many students never graduate and are left with steep student loan debts but no degree.

Higher education leaders cannot tackle this problem alone. None of us can.

The challenges to our higher education system can only be met through a shared partnership, with clear responsibilities, involving the federal government and each of the 50 states, local governments, institutions, and students--as well as the business, labor, and philanthropic communities.

We know there are no silver bullets or easy solutions here. But we also know we can't let the difficulty of the challenges facing higher education become a discussion-ending excuse for inaction. We are better than that, smarter than that, more committed than that.

We very much want--and need--the benefit of your collective guidance and wisdom about how to design a college ratings system that ensures America's extraordinary system of higher education continues to thrive, grow, and strengthen our entire nation.

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