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By Eric Reich

On Thursday President Obama outlined a rating system for higher education that included sharing consumer data with students and parents, encouraging colleges and universities to drive down the cost of attendance through innovation and linking future federal financial aid to an institution’s performance. The president’s proposal is a necessary step, but for true reform to be realized, many more steps are needed, including increased clarity on the ratings themselves and greater stakeholder participation.

Students and parents would benefit from transparency in the cost of education, number of low-income students each institution enrolls, graduation rates and average student debt loads.

In order to maximize the impact of proposed programs and systems, students shouldn’t be the only people closely evaluating the data. Institutions will be expected to continually examine information that addresses affordability and illustrates that students graduate with the skills employers demand.

The administration’s data-driven mandate should neither start nor stop with the measures that achieve institutional compliance. Campuses must use the directive to continually refactor students’ educational experience and maximize student success. Rewards should be bestowed upon the most innovative institutions that share best practices and those institutions that adopt them.

Even with more data, institutions will need to become more efficient. The most difficult choices will be the elimination of practices and programs that don’t yield tangible results. Unfortunately, too many legacy programs still exist because these tough decisions weren’t made previously.

In order for students and parents to rely on the new rating information, the integrity of the process and the results will need verification. Certainly, some institutions will attempt to better understand, deconstruct and potentially manipulate the rankings for their benefit. Others will play at the fringes of policy, promoting the admission and advancement (or failure) of students who make the greatest gains within the new criteria. Any system will be imperfect and many unknowns remain.

Details aside, the necessity of new criteria is obvious, with education serving as a key national economic driver. Graduates who can devote less time and money repaying loans will more quickly buy homes and cars, with increased levels of disposable income to support other industries. Employers would receive a workforce prepared to add value, or even better, to become employers.

It is a new day for higher education. Immune from scrutiny and sheltered from change for nearly 150 years, it isn’t business as usual for colleges and universities – and that is good news for students, businesses and education.

Eric Reich is the co-founder of Buffalo-based Campus Labs.