The President's Reforms on the Accreditation Process in Higher Education

      This has been an issue that the President has identified as of major concern since his campaign in 2008 at least. He knows first hand how the spiraling costs of college loans-and tuition-exponentially has skyrocketed over the last 30 years leaving a young college student out of college often jobless or struggling in low paying jobs beneath their degree and changing while crushed under a debt load often in the six figures. A commentator, Irene White, has an excellent piece that summarizes and looks at his recent proposals in his 2013 State of the Union  Speech and how they can specifically reform the accreditation process and make accredited colleges more accountable in terms of keeping tuition costs in line

    "In his 2013 State of the Union address, President Obama outlined several proposals to reform and improve higher education, including putting the brakes on the spiraling costs of college tuition. One method for achieving this, an initiative that has resonated with students and parents alike, is to make a school’s participation in certain federal aid programs dependent on it being affordable and effective. This new form of accreditation, linked hand-in-glove with the Department of Education’s College Scorecard has received broad public support."

   http://www.accreditedonlinecolleges.com/blog/2013/obamas-accreditation-reforms-on-higher-education/

   I know first hand about how crushing the current status quo in student loans is as I'm just a couple of classes from getting my Master's in accounting. Obama's focus on this is welcome. As Ms. White explains, the rules and criteria for a college gaining accreditation in the U.S. is actually set by various private associations and that while the Department of Education is involved it doesn't have ultimate authority overall. She goes through the qualities a school needs to gain accreditation. There are many standards like 

   "High-quality education, guided by well-articulated goals" and 

   "Sufficient faculty, staff and resources to ensure a high-quality education"

   Most of it are the kind of rules you'd expect. However, one criteria not so widely known is that a school has to have tuition costs that are reasonable and not wholly out of whack. 

    "You may have noticed that financial responsibility and helping students reach their goals are both typically included in criteria for accreditation. In fact, institutions that wish to participate in federal financial aid programs must meet certain financial benchmarks. Schools that fail to meet and maintain these standards cannot offer their students federal aid."

     In his speech the President outlined some new measures that would push accredited schools to improve on such financial benchmarks.  He starts by rewarding efficient schools:

    "Building on the requirements for financial responsibility, the President’s new accreditation plan takes the process a step further. The initiative would tie a school’s access to federal aid programs to its capability to provide an affordable and complete education. Criteria the administration has already identified as relevant to this determination may be found on the College Scorecard; the scorecard ranks schools and programs on graduation rates, costs, average amount borrowed, employment and student loan default rates."

    "This plan to hold institutions of higher education more accountable is part of the President’s plan to strengthen the middle class."

     He also  calls for a much needed improved immigration policies-of course, what we need for this is for Boehner to allow the Senate immigration bill already passed to come up for a vote...

    "Another piece of the President’s plan involves common sense immigration reform. Today’s system of uneven enforcement effectively allows companies to hire undocumented workers at low wages. This pulls down wages for everybody and hurts the employment opportunities of legal residents."

    Finally he calls for prioritizing reintegration of veterans into American society:

    "Finally, the President has again called for strong action to help our veterans reintegrate into American society. Wounded veterans need to have better access to physical and mental health care and military families need stronger support. In particular, programs which help veterans obtain sustainable, fulfilling employment need to be bolstered, perhaps with tax credits and public-private partnerships. Shamefully, the unemployment rate among veterans who served since 2001 was 9.9% in 2012 – 46% higher than the average unemployment rate for all Americans, which was only 6.8%."

     "The President’s proposals are relatively new and little if any headway has been made on implementing these initiatives. However, if enacted, these programs could bring about major changes not only in the way colleges and universities are accredited, but to U.S. higher education as a whole. Prospective students researching colleges and universities should look into President Obama’s initiatives, which will make choosing a college and starting a career just that much easier."

    What I wonder is if Obama can implement the new accreditation guidelines without an act of Congress-I'm assuming he can. In any case, there no issue that is more urgent than bringing down the costs of tuition and reforming the student loan system which is now such a burden on America's college graduates. In the early 80s it was complained that graduates could too easily walk away from their student loans with no penalty. The lenders complained that they simply couldn't stay in business. However, we have now come full circle as now student loans have a special subsidy on them from the government as now students can't gain bankruptcy from student loans for any reason. Effectively this is a government guarantee to student lenders with its own kind of moral hazard. Do we really want to burden the future earners of America to this extent?

     P.S. For anyone planning on attending an accredited school I recommend reading the entire Ms. White's entire article, it's a real resource for information as is the blog more generally. 

     P.S.S. The other day we talked about the fact that while the market is efficient in many industries and often produces the best outcome, in certain markets this is clearly not the case. One is clearly healthcare as Kenneth Arrow-kind of the father of market efficiency or at least the first to give a working model of it-himself says. There are others like the financial industry and also the important economic need we have of adequate R&D-the free rider problem mitigates this. Clearly the area of college loans and tuition is another where there's no chance of hanving anything like a pure free market. 

   http://diaryofarepublicanhater.blogspot.com/2013/08/kenneth-arrows-on-market-efficiency-in.html