President Obama seeks to shame colleges for rising tuition costs

President Obama unveiled a new plan Thursday designed to shame colleges and universities over rapidly escalating tuition costs, warning the nation is facing "a crisis in terms of college affordability and student debt."

At a series of events across New York state, the president touted his order to the Department of Education to create a new ranking system that grades universities on their value to students, providing applicants with a clearer idea of which schools give students the best bang for their buck.

He also proposed tying federal aid to the rating system, arguing that the federal government should not subsidize schools "who have higher default rates than graduation rates."

"It is time to stop subsidizing schools that are not producing good results," Obama said.

Obama detailed the plan during a pair of speeches in Buffalo and Syracuse, the first stops in a two-day, four-city bus tour winding through New York and Pennsylvania that has been billed as a major part of the White House's summer economic push. He also held an informal roundtable discussion about the program at a Rochester diner where he stopped for lunch.

The Department of Education will spend the next year-and-a-half creating and fine-tuning the "value"-based system, soliciting input from students and educators. White House officials said the rankings would grade universities on their ability to hold down tuition and student loan debt, and measure costs against post-graduation employment rates. 

Obama said the rankings would empower "students and families to make good choices," while also incentivizing schools to hold down costs — much as popular rating systems like the U.S. News and World Report rankings lead universities to prioritize certain programs and goals in order to gain an edge on competitors.

"Right now all these rankings systems rank you higher if you charge more and let in fewer students," Obama told a collection of high school students in Syracuse. "But you should have a sense of who is actually graduating students and giving you a better deal."

The president will also ask Congress to tie federal grants and financial aid to the rankings. The idea, Obama said, is to reward schools that keep costs down and punish those that jack up tuition rates.

"These reforms won't be popular with everyone, especially those who are making out just fine under the current system," Obama said.

But, he added, "Higher education cannot be a luxury. It's an economic imperative. Every American family should be able to get it."

Obama noted that over the past three decades, the average tuition at public four-year colleges has risen more than 250 percent, while a typical family's income only increased 15 percent.

"At some point, families are having to make up some of the difference or students are having to make up some of the difference with debt," Obama said.

Federal student debt topped $1 trillion in July, according to the Consumer Financial Protection Bureau, while private banks have issued another $200 billion in student loans. Aside from mortgages, student loans are now the most widely held debt in the country, according to the Federal Reserve.

The president said the new ratings system would take into account how schools are serving low-income students eligible for Pell grants to incentivize universities to admit and support those who could benefit the most from a college degree.

"We should rate colleges based on opportunity: Are they helping students from all kinds of backgrounds to succeed?" Obama asked.

The president also called for a new federal program — priced, according to White House officials, at $1 billion — that would be used to encourage universities to create programs that would help students graduate with less debt. Obama cited public universities that allow students to take classes at their own pace, complete introductory courses at community colleges, and offer rigorous online degrees as examples of successful experiments that could be funded under a higher education "Race to the Top."

"It's time for more colleges to step up with even better ways to do it," Obama said.

And Obama called for the expansion of a program that caps student loan payments to a borrower's income. Under the plan, those with federal student loans would not be asked to put more than 10 percent of their income toward student loan debt.

Republicans on Thursday dismissed the president's address, with Republican National Committee spokeswoman Kirsten Kukowski blasting the president for "giving another speech with no record to show for it."

"Obama’s record with youth is wrought with failures from college costs to student loan debt, and his economy has made it difficult for young Americans to prosper," she said.

House Education Committee Chairman John Kline (R-Minn.) said he was pleased by the president's call for more innovation in higher education, but was wary of the rankings.

"I remain concerned that imposing an arbitrary college ranking system could curtail the very innovation we hope to encourage — and even lead to federal price controls. As always, the devil is in the details, and I look forward to examining the president’s proposal further as part of the committee’s ongoing efforts to reauthorize the Higher Education Act and help improve college affordability and access," he said in a statement.

The president's economic push comes ahead of looming battles over the federal budget and debt ceiling upon Congress's return from summer recess.

In his remarks, Obama chastised "a certain faction of my good friends in the other party who have been talking about not paying the bills they've already run up."

"We can't afford the usual Washington circus of distractions and political posturing," he said.

And while education was the primary thrust of the first day of his bus tour, Obama also managed a detour to Seneca Falls, the New York town that has become synonymous with the women's suffrage movement.

While there, Obama visited the national park that hosts the site of the first women's rights convention, and bought his daughters copies of the Declaration of Sentiments, a pivotal suffrage document modeled on the Declaration of Independence. He also donated a signed copy of the Lilly Ledbetter Fair Pay Act to the museum there.

— This story was last updated at 7:11 p.m.