'Gainful' Comes to the Nonprofits

Excerpt from Libby A. Nelson's article.

After the applause faded from President Obama’s State of the Union address, a question lingered: Obama told colleges they were "on notice," but what does “on notice” mean, anyway?

Friday provided a few answers.

In a speech at the University of Michigan, the president laid out a plan for higher education that could be a key plank of his re-election campaign this year. Obama proposed using campus-based financial aid programs to reward colleges that keep net price low and punish those that  do not. Two new competitions, modeled on the administration’s “Race to the Top” program for elementary and secondary education, would reward states that invest in higher education and colleges and nonprofit groups that improve productivity. A host of new disclosure forms would give students more information on price and financial aid.

On one level, the plan is  an election year crowd-pleaser, an appeal to middle-class voters who feel college for their children is increasingly out of reach. But it also signals a shift in the administration’s higher education policy, which until now has focused on reining in for-profit colleges and increasing financial aid for low-income students.

The plan calls for linking federal aid not only to net price increases but to whether colleges provide “good value” to students -- a “quality education and training that prepares graduates to obtain employment and repay their loans,” the White House wrote.

If that sounds familiar, it’s for good reason. A similar philosophy guided the Education Department’s controversial and much-protested "gainful employment" rule, which judges the value of for-profit colleges and vocational programs based on on whether they prepare their students for “gainful employment” by looking at student loan repayment rates.

The real message in “on notice”: Increased scrutiny and regulation aren’t just for for-profit colleges anymore.

“They’re sending a strong signal about where the second Obama administration, if we have one, is likely to go,” said Kevin Carey, policy director at Education Sector, a think tank. “They’re not going to just keep putting millions of dollars into the Pell Grant Program and letting the chips fall where they may.”

The president’s higher education plan appears poised to become a major feature of his re-election campaign, alongside support for manufacturing, clean energy and other ideas intended to help shore up the troubled economy...