So, did these graduating Princetonians get their money's worth -- and did the government? Photographer: Michael Nagle/Bloomberg.
So, did these graduating Princetonians get their money's worth -- and did the government? Photographer: Michael Nagle/Bloomberg.

If you run a college or university, you had to know this was coming. The federal government now has $560 billion in student loans outstanding. At some point it was going to ask where the money is going and whether it's getting value in return.

President Barack Obama is working on an overhaul of higher education -- building on the nationalization of student lending in 2009. That was a landmark. Previously the federal government had guaranteed private loans; since 2010 it has loaned the money directly. The Congressional Budget Office estimated at the time that the switch would save the government $86 billion through 2019, by cutting 10 to 20 percent from administration costs (including the private intermediaries' profits).

The government didn’t take on any new risk, as it had guaranteed the loans before. But the change mattered because it affirmed that higher education is more of a public priority than before, and it gave the government new leverage.

One idea is to tie loans to metrics that track the performance of colleges and students. For instance, colleges that place more of their graduates in good jobs could be given preference in student loans. Students who aren’t finishing classes quickly enough could lose their access to new loans. Colleges can be encouraged in other ways too. For example, the government could pay them a bonus if they improved their graduation rates for students from poor families.

But all such measures of quality are questionable -- and many can be gamed. (Lowering standards would allow colleges to graduate their students faster.) Measuring quality isn't easy, as college applicants and their parents can tell you.

Rankings by the likes of U.S. News and World Report, Forbes, Princeton Review and Washington Monthly arrive at wildly different conclusions. Two interesting alternatives, as Dylan Matthews and Kevin Carey have pointed out, are the Collegiate Learning Assessment and the National Survey of Student Engagement. The first tests students on their general ability to think critically and communicate in writing. The second surveys student and teacher effort, asking how long students spend preparing for class, and how much time they spend in the classroom or working with faculty. The problem with both is that the results are secret.

The U.S. doesn’t have a single public and widely trusted measure of quality in higher education. Whether the government should strive to create one is debatable, though. Education isn’t manufacturing: You can’t check students on an assembly line to see whether their parts fit within tolerance. No single measure of performance will work for all students. Obama's desire to get better value for money is laudable -- but making money follow metrics in higher education will be more of a gamble than he thinks.

(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)

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