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The government is going to grade colleges. Friday we learn what it takes to get an "A."

The federal rating system is expected later this year.
The federal rating system is expected later this year.
Shutterstock

Tomorrow, we'll get the first look at a federal project that aims to be the Consumer Reports of higher education: an Education Department system that rates colleges based on their quality.

Individual colleges won't be rated yet. But the Education Department will finally say what data they plan to use when they assign letter grade, or whatever shorthand they choose to denote quality. The grades themselves will be released in 2015.

Why is the government doing this? President Obama sees college students as consumers in an expensive, confusing higher education marketplace. He hopes the government can help as they sort out their college decisions, which often come with thousands of dollars of student debt. The ultimate goal is tying the ratings to federal financial aid — so colleges with higher ratings could offer students more generous grants or loans with more favorable terms than are available at colleges with lower ratings.

But the plan presents presents two opposite risks. Either the ratings will become tremendously effective, and invite colleges to game the system as they do with college rankings. Or the ratings won't be able to create perverse incentives, because no one will pay enough attention to them to care.

Which scenario is more likely depends on whether the public thinks the federal government can really judge the value of a college degree.

How the ratings will work

rating system

(Shutterstock)

While rankings from US News and other publications try to determine whether one individual college is better than another, ratings create broad categories of quality but don't go as deeply into the details. So colleges could be rated with stars, like restaurants or hotels; or with letter grades, as some K-12 schools are.

Given what data the Education Department collects or can access, the ratings will probably be based at least in part on graduation rates, debt levels, and some information on graduates' earnings.

College presidents are particularly concerned that less selective colleges will be penalized, since low-income students are more likely to drop out and more likely to take on debt. Education Department representatives has repeatedly said they understand that concern and plan to reward colleges for serving low-income students — though colleges aren't required to report on whether those students graduate. neither party in Congress appears interested in bringing federal ratings into the financial aid equation.

Obama wants the ratings to eventually factor into the formula for distributing federal financial aid. But this doesn't seem likely in the next few years. The Higher Education Act, which sets the laws on federal financial aid, is unlikely to be rewritten during the Obama administration, though it's technically due for an overhaul.

Even if it's rewritten soon, neither party in Congress appears interested in bringing federal ratings into the financial aid equation. Republicans want to stop the Education Department from rating colleges in the first place. and Senate Democrats aren't generally enthusiastic about using federal aid to reward and punish colleges, either.

If the ratings do affect financial aid, it will be much later down the line, after the Obama administration has left office. For that to happen, the ratings have a much bigger hurdle to overcome: they have to be perceived as a valid measure of what a college is worth.

What nursing homes ratings teach us about colleges

nursing home

(Shutterstock)

The federal government has never rated colleges before. But it's not entirely new to the ratings game. The federal Centers for Medicare and Medicaid Services' five-star system for rating nursing homes is the best parallel for what the Education Department is trying to do now.

Like the proposed college rating plan, the nursing home ratings were meant to bring clarity to a confusing marketplace. According to the New York Times, Sen. Ron Wyden (D-OR) said it was easier to find information about a new washing machine than about a nursing home. (Wyden has since moved on to make similar remarks about higher education, sponsoring legislation that would require colleges to disclose more information about student earnings, debt, and graduation rates. He hasn't weighed in on the Obama administration's rating proposal.)

Like rating colleges, rating nursing homes is difficult. Some have sicker patients than others, just as some colleges serve students who are less likely to graduate; the rating system takes these factors into account.

And like colleges, nursing homes initially resisted the ratings fiercely. But even though there are no financial incentives involved — one-star nursing homes get reimbursed just as five-star nursing homes do — they've become a widely used consumer tool, and even the nursing home industry has embraced them as a valid indicator of quality.

That's the best-case scenario for college ratings in the near term: that colleges find the ratings fair and incorporate them into their own marketing. But there are also some disturbing lessons from the nursing home example.

The nursing home data, like much of the data colleges send to the Education Department, is self-reported and isn't audited. A New York Times investigation found that nursing homes were gaming the system, getting high ratings for self-reported data even if they were under investigation for treating patients poorly or earning low marks on state inspections.

Colleges have learned to game the system to climb the US News rankings, and they could learn to do the same with a rating system.

Will the Education Department get tough?

below average

(Shutterstock)

Nursing homes appear to be suffering from a sort of federal grade inflation: in its investigation, the New York Times reported that four- and five-star ratings have become more common and now make up almost half of all grades.

While the Obama administration loves to talk in tough generalizations about cracking down on colleges that are serving students poorly, it's been reluctant to do so in practice for nonprofit and public colleges. The question is whether the Education Department is willing to give colleges low ratings, even if they have tight budgets, serve students who are less likely to succeed, or are the only option for students in their geographic area.

Once the general outline for how ratings will be calculated is released, it'll be a free-for-all as colleges try to figure out how they will score. Then they have a few months to weigh in and lobby for changes. The pressure to create a rating system that hands out mostly good and great ratings will be intense.

A system like that at least wouldn't penalize colleges that don't deserve it, and it would create few incentives to game the system. So it might not be the worst outcome — but it wouldn't challenge the status quo much, either.

Does anyone care what the Education Department thinks?

harvard

Any college rating system that doesn't put Harvard near the top will have trouble getting public validity. (Shutterstock)

There is one flaw in the Medicare analogy: picking a college isn't like picking a nursing home. People might not have set ideas about which nursing homes are better than others, but they definitely have preconceived ideas about the quality of colleges.

While the federal government is convinced that students need additional information to choose what college to attend, it's not clear that students themselves feel that way — or that the Education Department ratings will count the characteristics students value most. Nearly half of all college students, for example, attend community colleges, which are more likely to be chosen for their convenience and location than for their quality.

A recent federal effort to name and shame colleges fizzled. In 2008, Congress required the Education Department to publish lists of colleges with the highest tuition and largest tuition increases. The 5 percent of colleges at the top of the list would have to explain their increases to the Education Department, explanations that would be posted to the department's website.

The lists were initially released to great fanfare. But the most expensive college on the list, Sarah Lawrence, spun its high sticker price into a badge of honor. The hoopla faded, and this year, this year, the lists were released quietly, to little media coverage.

Most of the predictions surrounding the rating system and whether it will save or ruin higher education assume that the system will debut to a great amount of attention and immediately be able to sway students' decisions. But the tuition shame lists show that just because the Education Department does something doesn't mean anyone is paying much attention.

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