Why Obama’s higher ed ratings are struggling

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Feb 19, 2015

A Wall Street Journal article last week reported that the Obama administration is running into major political and technical obstacles in completing and rolling out its college ratings system.

The unfortunate thing is that these political and technical challenges were predictable ahead of time, and that there exists a more viable path forward that involves developing the ratings system with some humility to see if it is even feasible and what its unintended consequences would be before running headfirst into powerful political headwinds.

Many observers of higher education might compare the administration’s proposed ratings system to the Quality-Value (QV) Index that I first proposed in 2010, but there are several important differences.

Rather than attempt to develop a ratings system to cover all of higher education, my proposal was for the QV Index to apply only to a small subset of higher education, at least initially. The QV Index would establish an opt-in mechanism to allow new low-cost, high-quality educational opportunities to bypass the current accreditation system to gain access to limited federal dollars to expand students’ choices around institutions focused on helping students improve their futures.

There was an important logic behind not rating existing institutions. Historically, both the not-for-profit and for-profit incumbents have been successful at warding off policies that seek to regulate quality, as the regulation asks them to do things for which they were not built. So long as they are dominant, they will likely continue to be successful in these efforts (see my piece here on why these attempts fail). What the analysis from framing this through the disruptive innovation lens suggests is that perhaps this is not a battle that has to be fought on either side at the moment. Instead of managing the outcomes that we do not want to see, the goal of policy should be to unleash innovation by establishing the conditions for good actors that improve access, quality, and value—be they for-profit, not-for-profit, or public—to succeed. And if those institutions deliver, then the landscape will shift over time, as it has in every other highly regulated market that was disrupted.

Designing the QV Index in this way isn’t just to avoid a political fight. Applying the QV Index just to a subset of new institutions would allow us to learn about the feasibility and unintended consequences of such a ratings system. In addition, the need for new entrants is clear. Although people express a desire for disruptive innovation in higher education to lower costs and improve accessibility, accreditors don’t have the incentive to allow new players into the market, as my colleague Michelle R. Weise has explained. Even as the ultimate disruptive innovations in higher education are likely coming from outside what we consider traditional higher education—from places like General Assembly, Dev Bootcamp, Lynda.com, Udemy, and Udacity—part of the reason costs in higher education have escalated over time is that the ability for disruptive innovators to enter the market is constrained such that costs either continue to rise from sustaining innovations or they flatline as the level of service suffers (as we explain here and here).

There are other things that preliminary glimpses of the president’s proposal misses. As the Wall Street Journal article said, “Community college officials pointed out Tuesday that schools could effectively be punished for accepting students who take one or two skills-training courses and are then hired by an employer without earning a certificate. Those students would be better off but might be counted as dropouts nonetheless under the ratings system.”

This is a big reason why the QV Index doesn’t rate colleges on graduation rates. Although persistence is importance, persistence toward an individual student goal is what is important, and the degree is not always the ultimate goal. The ultimate goal though generally lines up around improving people’s lives, which we can capture through other measures.

Similarly, according to the article, Undersecretary of Education Ted Mitchell said one big challenge is to be careful not to incentivize a system that would neglect the liberal arts—which is why we suggested including a retrospective satisfaction index so people could report if, knowing what they now know about their investment, how likely it is that they would choose to repeat the experience. In this vein, it would ask people about the softer, non-monetary sides of why they attended college. The QV Index also proposed—albeit imperfectly—a way to make sure schools would not have the incentive to ignore working with the hardest-to-serve students.

Finally, the administration’s measure continues to look at net tuition paid rather than a measure of total expenditures to incentivize students to pick truly low cost options, rather than options that might be heavily subsidized by the government—and therefore unaffordable in the long run as baby boomers continue to retire en masse and health care and pension obligations mount, thereby eating into available dollars for higher education. The difference matters, as it looks at fundamental affordability of an institution rather than simply the political circumstances one or another institution might find itself in at any given moment.

Whether using a ratings system to award scarce government dollars to institutions is a good idea is a worthwhile question to continue to debate, but in the meantime, there is a viable path forward to start to experiment to see what works without running into today’s strong forces sure to stymie any well-meaning efforts. We’ll see how nimble the administration is in the months ahead.

Michael is a co-founder and distinguished fellow at the Clayton Christensen Institute. He currently works as a principal consultant for Entangled Solutions.