Before I begin, I warn readers that this post is going to make some people see red. I ask before you vent you spleen that you only do so if you are proposing an alternative that ensures that education is delivered with those grades and diplomas.
The Higher Education Commission of Indiana has recommended cutting funding to state colleges and universities at least partially based on what is euphemistically call "performance based funding." By "performance" they mean retention and completion rates, not skill mastery, employability, etc. Yes, you assume that retention and completion are welded to skill mastery and employability, but they are not in a academic community where student evaluations carry more weight than performance on standardized examinations.
The message of these types of actions, however well meaning, is that faculty challenge students at their own peril. Students who face no real challenge to their intellect will be retained, give excellent course evaluations, and complete degrees. Faculty will get tenure, schools will get money. Well, at least until the realization hits that degree holders incapable of delivering goods or services that support the economy also don't fill state tax coffers.
I think the point of public education is to ensure that there is an educated populace capable of maintaining, and building an viable commonwealth by investing in the population of the state. To succeed, education at all levels must challenge and measure. Some will disappointed. Some will fall behind and even fail. If institutions of education can't be free to challenge and measure worthless diplomas will be awarded. An unskilled populace incapable of meeting challenge will be reduced to the dole to live.
Surely, we must find ways to balance our state budgets, but printing diplomas on the back of birth certificates instead of funding education that educates only gets you a population with a high percentage of degree holders.
T.S. Hall
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This kind of policy will do exactly as you stated. It would be easy for professors to pass students under the pressure of less funding. If the state just spent more time collecting data on employment of recent graduates and income, that would put more fire under them to produce students of real value. So far, not many colleges/universities do this sort of thing
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Universities need to change the way they use money and should compete more on a free-market, that will drive quality up and costs down.