A New Year, A New Way of Funding Higher Education?

In the flurry of holiday and end-of-year activities, the Department of Labor’s new $98.5M Workforce Innovation Fund (WIF) application slipped under the radar. Now that the fog of turkey, eggnog, and champagne has lifted, let’s take a minute to think about how this application could and should foreshadow the Administration’s thinking about future higher education funding.

The WIF joins other Administration efforts, including the Department of Education’s Investing in Innovation (i3) fund, to use different tiers of evidence to determine funding levels:

1. New—untested (eligible for smaller grants)
2. Promising—previously implemented and tested (eligible for mid-size grants)
3. Adapting—ready to scale  (eligible for largest grants)

Paying for programs that have evidence of success on the front end is good policy and I expect the President’s budget will contain more variations on this theme across agencies. On the higher education front, I imagine we’ll see another request for First in the World, an evidence-based competitive grant program focused on increasing completion and productivity. While the proposal was lost last year amidst debt ceiling brinkmanship, Pell talks, and the Super Committee, perhaps there is hope for it this year, given that the President and Members of Congress from both sides are expressing significant interest in containing college costs.

But the WIF goes one step further than paying for evidence on the front end—with an additional $20M to pay for outcomes on the backend.  Under this “Pay for Success” model:

…the government pays for services only after clearly defined outcomes are achieved. This allows effective and evidence-based solutions to be identified and implemented while maximizing taxpayer dollars by paying only for demonstrated results.

With the confluence of stagnating completion rates, growing student debt and default rates, decreasing state investment in higher education, escalating tuition rates, historic pressure on the Pell grant program, and increasing questions as to individual and taxpayer returns-on-higher-education-investment, a “pay for success” approach to institutional and student financial aid is worth exploring.

While safeguards would need to be established, imagine if the Department of Education “paid for success” based on completion rates? Or what if it stopped paying for seat time and started paying for actual learning (based on demonstrated, validated, competencies)?  The possibilities are endless—we just need the imagination and will. The WIF application makes me think we might have a little bit of both.