Fixing the Flaws in Obama’s Affordable College Plan
As CEO of a company that’s working to revolutionize the student loan industry, I have to say the past couple of weeks have been interesting to watch.
President Obama’s much-debated plan to increase college affordability has stoked the fires of an already heated national dialogue about the rising cost of higher education. I applaud the President for addressing this issue, and I’m pleased that this event is bringing the conversation to the forefront. However, I still think there are some fundamental flaws in the plan.
First, tying college ratings to graduation rates doesn’t work. It just means colleges will graduate folks who are unprepared. We’ve already seen this in secondary education at the state level.
Second, it doesn’t address the core problem, which is that colleges do not teach students about the realities of job prospects and earning potential for different majors. As a result, students are unable to make educated decisions about post-graduation career planning and how much they can afford to borrow. This kind of financial intelligence would go a long way to solving the problems we face today, but for some reason most schools fiercely resist it.
Third, there still is no “skin in the game” for these schools. As long as they get paid to push volume, they will have no accountability for the quality of that volume.
Finally, the idea of providing loan forgiveness for public service is completely backward. The President acknowledges that the US needs more engineers, so why provide subsidies to folks entering an already-bloated bureaucracy versus pursuing a career in the technology sector?
Overall, I do think the concept is a move in the right direction. In my view, the best way to fix the system is to build real school accountability. Schools should have an economic connection to student loan performance – if their students default, it should affect the school’s ability to receive aid. That would drive down tuition costs and lower debt burdens immediately.
I also believe that colleges have a fundamental responsibility to educate students about how much they can reasonably borrow and be able to repay, given their choice of major and career path. Let them know what they’re up against so that they can make smart decisions. The sooner these borrowers know the facts, the better their chances of keeping their own student debt in check.