Linking federal financial aid to college outcomes, like graduation rates, is a popular reform plan advocated by many education groups. This will encourage colleges to do a better job educating students. If there are consequences for low performance, outcomes will improve.

Not so fast, says a new report by the Advisory Committee on Student Financial Assistance. Focusing on graduation rates would harm colleges. More importantly, however, it would harm the very students the reform is ostensively designed to help.

As the report explains, the percent of students receiving Pell grants, federal money provided to low income students for them to attend college, and student test scores explain 75 percent of the disparity in college graduation rates. “Failing to account for inputs when measuring and evaluating college performance unfairly penalizes colleges that are efficiently serving large numbers of low-income students, particularly colleges doing so with limited resources,” the report says. So giving less federal money to schools that have low graduation rates would really just mean giving less money to poor and academically struggling students.

None of this has much to do with college quality. Certainly one problem with the analysis is that students from poor backgrounds who come into college with low test scores often attend pretty dysfunctional colleges. It’s possible that more oversight will encourage colleges with lots of poor students to do a better job serving such students.

But not necessarily. Witness what happened at Winston-Salem State University last year. North Carolina evaluated the school based on student outcomes, and so it appeared the college may have just faked student outcomes to avoid losing funding.

A good strategy, the report recommends, is to evaluate institutions such that “output measures [are] …adjusted to adequately reflect differences in inputs, in particular, college mission, student characteristics, resources, and factors beyond colleges’ control.”

Instead of just using raw performance measures to reward and punish colleges, the Advisory Committee on Student Financial Assistance solution would distribute more money to colleges that do a better job serving students than should be expected given student demographics, and punish schools that don’t do as well as they should given the students they educate.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer