Starting point

The federal government spends $150 billion a year on student financial aid


The federal government spends $150 billion a year on student financial aid. It has an obvious interest in making sure that American colleges and universities provide their students with valuable degrees without tying them to a lifetime of debt.

Holding schools accountable, and giving them incentives to lead more students through graduation while keeping tuition and loan costs down, is the aim of a plan President Obama announced last week. The proposal includes solid ideas and goals, but it poses potential risks.

The most obvious is the possibility of creating a bureaucracy that won’t necessarily deliver better education or better value. Under the President’s plan, the U.S. Department of Education would develop a rating system by the 2015 academic year that would provide comparative data for colleges based on their percentage of low-income students, tuition charges, student loan debt and graduation rates, and salaries and advanced degrees earned by graduates.

The more troublesome part would come later, if Congress agrees. Mr. Obama wants to use the ratings to change how federal aid is awarded by 2018. Students who attend higher-performing schools could receive large grants or cheaper loans. That feature of the plan may be the most unrealistic.

Mr. Obama’s proposal to cap student loan debt at 10 percent of a graduate’s monthly income could prove too costly. It would, however, impose stricter requirements for students to show progress toward graduation for them to keep receiving aid.

Less-onerous provisions would encourage schools to accelerate progress toward graduation, with more three-year degrees, online coursework, and the option for students to use financial aid to pay for exams that allow them to test out of coursework.

Success will require careful attention to the details, so that career preparation and the kind of broad-based learning that is an essential part of a college education go hand in hand. Mr. Obama’s plan provides a starting point.