Getting What We Pay for: Using Financial Aid to Pay for Learning, Rather than Time

Our entire massive multibillion-dollar federal financial aid system runs on credit hours. Credit hours are used to determine a student’s full- or part-time status, which changes the amount of aid an individual can receive. But as we note in our report Cracking the Credit Hour, credit hours simply measure time, not learning. Despite the trillions of dollars spent by students and taxpayers on higher education, we don’t know whether students are learning or not (and there is increasing evidence to suggest that students aren’t learning much at all). As higher education becomes increasingly necessary and increasingly expensive, measuring time, rather than learning, is a luxury that students, taxpayers, and the nation can no longer afford.

The U.S. Department of Education should use the three financial aid tools it currently has at its disposal to pay for learning, rather than time. This could go a long way in helping institutions think differently about how they do or do not think about learning.

  • Innovate within an existing frame: use the flexibilities offered by the new federal credit hour definition

Surprisingly enough, the first place the Department should look if it wants to move away from the time-based credit hour is its own recent definition of the credit hour. While many have worried that the definition stifles innovation,  it actually allows for much greater flexibility than people realize.

Until recently, credit hour determination was solely in the hands of colleges and their accreditors. Institutions would assign a number of credit hours to a course, accreditors would review the process of determining credits—and if they signed off, the Department would open its coffers. This started to change in 2009 when the Department’s Inspector General (IG) found that three accreditors, which accounted for more than 70% of all federal aid awarded, were exercising inadequate oversight credit-hour assignment, resulting in credit inflation. In response to the IG report and to a growing concern over poor quality controls for federal financial aid eligibility, the Department decided there needed to be a consistent, standard definition of the credit hour. This decision brought a decidedly less-than-enthusiastic response. Many in the higher ed community saw this as government intrusion into the academic decision-making realm of experienced educators while others worried about reinforcing an antiquated time-based measure.

After much discussion and controversy the Department issued final regulations in 2010 that tried to address the concerns about innovation. It did so by offering, in addition to an easy to measure time based component of the definition, alternatives that would allow schools to receive federal financial aid for credit hours that were made up of either evidence of work or evidence of student achievement. But in the noisy aftermath of the Department’s broader program integrity regulations, many remained skeptical.

If the Department wants institutions and accreditors to move beyond seat time, it needs to be much more proactive in encouraging the use of the flexibilities offered by its credit hour definition– by, for example, highlighting models that are already receiving financial aid that do not use a seat-time approach, such as the competency-based Western Governors University. 

  • Innovate through controlled experimentation: use “experimental sites” authority

The Higher Education Act offers the Department the opportunity to create a small, controlled, voluntary virtual laboratory of ‘experimental sites’ on which it tests particular learning-based financial aid policies to see if they work, how they work, for whom they work, and under what conditions they work. The Department could experiment with using financial aid to pay for Prior Learning Assessments or for high-quality programs that don’t have traditional faculty-student interaction, like Carnegie Mellon’s Open Learning Initiative.

  • Innovate on a blank slate: use “direct assessment” authority

Created for, but never used by, Western Governors University, this little-known provision in the Higher Education Act allows credit hours to be bypassed entirely for the purposes of awarding financial aid in cases in which there is “direct assessment” of student learning. Unlike the credit hour, which is laden with time-based history and practice, the blank slate of direct assessment has the most potential to radically change how the federal government pays for -- and, therefore, how institutions measure -- student learning.

These three tools offer a tremendous amount of opportunity to experiment with education that privileges learning over time and tradition. And while the Department must do a better job in promoting these authorities, they must also set a very high bar for use of these authorities lest we recreate the grade inflation and weak academic standards in the existing time-based system or open up the floodgates to billions of dollars in federal aid to unscrupulous operators. Demonstrated learning outcomes will be key to this endeavor.

But how will the federal government determine what learning outcomes should be and how to measure them? They won’t. And they shouldn’t. But what they can and should do is establish (with input from the field) guidelines that are broad enough to support innovation yet stringent enough to prevent abuse. At a minimum these guidelines should include transparent, externally validated learning outcomes and assessments.

Institutions do and should value different things. Learning outcomes and assessments should not be the same across the board -- but everyone should know what students are expected to (and actually do) learn. Institutions should make public, at a fairly granular level, what students in specific courses are expected to learn, and what they actually learn.

Some argue that work to improve student learning can happen without federal involvement.  That’s true. And it is happening (the Degree Qualifications Profile (DQP) and Tuning USA being just two examples).  But it is happening on the margins. Federal policy can encourage experimentation with the DQP and Tuning to help institutions more systematically define learning outcomes as well as with tools to measure both broad-based skills (critical thinking, reasoning, etc) and course-specific skills. We need to do a better job about defining and making transparent what we want students to learn and how we measure that learning. If the adage “you get what you pay for” is true, then the federal government needs to start paying for learning, rather than time.


Amy Laitinen is director for higher education with the Education Policy program at New America. She previously served as a policy advisor on higher education at both the U.S. Department of Education and the White House.