Barack Obama aims to expose US colleges and universities to "competition from new, lower-cost, highly respectable entrants to the market", including online learning providers.
Observers detected a new higher education agenda in the US president's State of the Union address last week, in which he called on Congress to change the Higher Education Act so that affordability and value are considered in determining which institutions are "accredited", allowing students to access federal financial aid.
"Taxpayers can't keep on subsidising higher and higher and higher costs for higher education. Colleges must do their part to keep costs down, and it's our job to make sure that they do," Mr Obama said.
In the policy document accompanying the address, titled The President's Plan for a Strong Middle Class and a Strong America, he says that either the current accreditation system should be reformed or a "new alternative system" should be developed, providing "pathways for higher education models and colleges to receive federal student aid based on performance and results".