How To Not Waste $2.5 Billion

President Obama has proposed creating a $2.5 billion "College Access and Completion Fund." This is a terrific idea, given the huge problems we have (see here and here) with college completion. But there are good and bad ways to spend $2.5 billion over five years. As Congress considers the proposal, it should keep them in mind:

Bad Ways

1) Paying off state guarantee agencies. The $2.5 billion will come from savings realized by cutting the middlemen out of the federal student loan program. Many of those middlemen are, unsurprisingly, opposed to this idea. While lending giants like Sallie Mae and huge, world-destroying banks have gotten most of the attention, a bunch of ostensibly non-profit agencies also stand to lose out, including state guarantee agencies, which occupy an arcane and largely vestigial role in the loan process. If they're still going to get paid, it should be for something of actual value, like servicing government loans. Giving them a chunk of this money for ill-defined "counseling" purposes or whatnot would waste scarce resources. 

2) Straight formula distributions. The easiest and most politically expedient way to divvy up this money is via a simple funding formula: every college gets an amount equal to their share of all Pell grant students or something similar. Formulas are objective, consistent, easy to explain, and guarantee that nearly every Congressional district gets a taste. They're also a surefire method of ensuring that dollars do little good. The federal government has a long, ignoble history of distributing K-12 funding this way, spreading Title I allocations that amount to only a small fraction of total education spending far and wide to nearly every school district in the nation with little attention to need or whether the money actually does any good. As a result, much of it did little good. There have been improvements to the Title I formulas in recent years, but much of the money is still shot out via a method that (no lie) gives anti-poverty money to schools in Beverly Hills. Formulas are like bamboo: once they take root they're nearly impossible to eradicate. Let's not make the same mistake twice.

3) Data systems, college preparation, and other things that seem perfectly reasonable but aren't actually about directly helping college students earn degrees. Some people have proposed giving states and institutions wide latitude in spending this money, including building data systems to track completion. But there's money elsewhere in the federal budget for that, as well as for improving college preparation through programs like GEAR-UP, etc., etc. This money should be for directly helping college students complete college.

Good Ways

1) Competitive Grants.  Some states and institutions are well-positioned to use this money. They have solid programs in place, good people on the ground, and accountability systems that track success.  Other states and institutions have no idea, but will be happy to cash the check, hire a new administrator, and shuffle the rest of the money around behind the scenes to use for the things they actually care about. Per above, formulas by definition make no distinction between the institutions that are best prepared to use funding and those that are least prepared. $500 million a year isn't much compared to the $400 billion we spend on higher education annually. If this money isn't focused on those who can spend it well, it will be wasted, and students will bear the brunt of that failure. 

2) Partnerships: There's a tricky balance to strike in any grant program. On the one hand, it's madness to try and legislate the who's and how's of a specific completion initiative. Colleges have diverse missions and student bodies--the best approach at a small community college might be entirely different than the most successful strategy at a big research university. But dispersing the money to thousands of disconnected efforts, each trying to independently re-invent the wheel, isn't a good idea either. Preference should be given to coalitions of institutions, systems, or even states that are prepared to help and support one another in pursuing larger completion goals over multiple years. 

3) Accountability. The good thing about college completion is that it's relatively easy to measure. Funds should be distributed with the understanding that grantees will need to show improved results if they expect to come back for more. Completion numbers should be broken down by students' race/ethnicity, gender, and income status. Part-time and non-traditional students should be included. Students should be followed along extended time horizons as they move and transfer. If someone enrolls in a community college part-time for a couple of years, earns 30 credits, transfers to a four-year institution and ultimately earns a degree, that's a success for all concerned. Grantees should be evaluated for effectiveness and efficiency. If you walked up to a man on the street and said, "Hey, if you complete college within six years, I'll give you $500 million," that would probably work. But it wouldn't be a good use of taxpayers' dollars. 

4) Evaluation. Typically, government programs are evaluated as follows: A) Enact program. B) Worry about other things for awhile. C) Come back a few years later to consider re-authorizing program. D) Try to figure out if program worked. But by then it's far too late--to properly evaluate a program, evaluators needs to be involved up-front. Researchers should be hired from Day One to study all the different ways the funding was used and figure what worked best.