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Obama to create college financial aid rating system

Updated at 7:06 p.m. ET

The nation is facing a crisis in terms of college affordability and student debt, President Obama said Thursday as he unveiled a set of new federal education initiatives, some of which he can launch without the help of Congress.

"We understand that in the face of greater and greater competition, in a knowledge-based economy, a higher education is more important than ever," the president said at the University at Buffalo. "A higher education is the single best investment you can make in your future," Mr. Obama said, but the high cost of education has been "a barrier and a burden for too many American families."

The speech marked his first stop on a two-day bus tour through New York and Pennsylvania, during which he'll visit schools to pitch his three new proposals: a new ratings system for colleges, encouraging innovation in education, and making it easier for students to repay their federal loans.

Mr. Obama is directing Education Secretary Arne Duncan to create the ratings system, with public input, before the start of the 2015 school year.

"What we want to do is rate them on who's offering the best value so students and taxpayers get a bigger bang for their buck," Mr. Obama said. He criticized the college rankings put out by publications like U.S. News and World Report, remarking that they "actually reward [colleges] in some cases for raising costs."

This federal ranking system, the president said, would use metrics like the average graduation rate and the level of debt with which students leave. It will also place an emphasis on the access colleges provide to low- and moderate-income Pell Grant students.

"This is going to take a little time, but we think this can empower students and families to make good choices," Mr. Obama said. "We are going to deliver on a promise I made last year... Colleges that keep their tuition go down and provide a quality education are going to see their funding go up. It is time to stop subsidizing schools that are not providing good results."

Later on Thursday, the president traveled to Henninger High School in Syracuse, N.Y., to highlight several programs spearheaded by the school district there that prepare students for college by offering advanced courses and ensure they can afford college by offering scholarship programs.

"You have declared that no child in the city of Syracuse should miss out on a college education because they can't pay for it," he said. "We're hoping more cities follow your example because what you're doing is critical...to America's future."

To actually tie federal funding for colleges to the new rating system, Congress would have to enact new legislation. The administration wants Congress to do that when it reauthorizes of the Higher Education Act, and officials say they're optimistic about its success.

"There are states that are already tying their higher education funding to performance, and some of those states have Republican governors," Cecilia Munoz, director of the domestic policy council at the White House, told reporters Thursday. Creating incentives for a better education system, she said, "is clearly not a partisan issue."

Congress has been slow to take up Mr. Obama's proposals. Even reforming the federal student loan interest rate to ensure that rates didn't double this fall -- something that both Democrats and Republicans wanted to accomplish -- took months of negotiations. The administration, however, contends that even before Congress ties the ratings system to federal funding, it could have an impact on college costs.

"By making information available about outcomes, we believe we can have some impact even in the short term in this sector," Munoz said.

White House officials said the Department of Education is engaging with the education sector to develop the ratings system and is working carefully to ensure the system doesn't favor certain institutions or create the wrong incentives. For instance, this system -- unlike the U.S. News and World Report list -- will not rank colleges, it will merely rate them.

"I don't think we're walking into this with a pre-ordained sense of who's going to fare well and who's going to fare badly," Munoz said. "There are leaders in this sector who are eagerly addressing the issue of college cost, how are not afraid of transparency... We want to encourage more of that behavior... kind of turbo-charge that conversation."