Key Takeaways from the House Higher Education Act Reauthorization Bill

Majority Republicans on the U.S. House Committee on Education and the Workforce unveiled their draft legislation today to reauthorize the Higher Education Act—the most important piece of legislation affecting American higher education. The Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act checks in at a hefty 542 pages and touches many important aspects of higher education. I live-tweeted my first read through the bill (read the thread here), and in this blog post I am sharing some thoughts on the key themes of the legislation.

Takeaway 1: This bill would undo many Obama-era regulations and salt the earth on future regulations. It’s no secret that Republicans didn’t care for regulations such as gainful employment, borrower defense to repayment, or providing a federal definition of the credit hour. The PROSPER Act would not only undo the regulations, but prohibit the Secretary of Education from promulgating any future regulations (meaning that Congress would have to pass legislation to create any new rules). The Secretary of Education would also be prohibited from creating a federal college ratings system, even though the Obama-era effort to do so was unsuccessful.

Takeaway 2: The federal student loan system would be radically overhauled. Instead of the array of loans that are now available, there would be three flavors of a federal ONE Loan—for undergraduates, parents, and graduate students. The key details are below.

 

  Undergrad (dependent) Undergrad (independent) Parent Grad student
Annual limit (current) $5,500-$7,500 $9,500-$12,500 Cost of attendance Cost of attendance
Annual limit (PROSPER) $7,500-$11,500 $11,500-$14,500 $12,500 $28,500
Lifetime limit (current) $31,000 $57,500 Cost of attendance Cost of attendance
Lifetime limit (PROSPER) $39,000 $60,250 $56,250 $150,000

Note: Medical students have higher loan limits than what is listed above.

Undergraduate students actually have higher loan limits, but the PROSPER Act would also allow colleges to limit borrowing by student major if they feel students are unlikely to repay their obligations. Financial aid administrators have sought this authority for years, which means that students could actually see lower loan limits. Graduate students, on the other hand, would be limited to $28,500 per year and $150,000 overall in federal loans. Given that tuition alone often exceeds this number, expect students to turn to the private market (when possible) to finance their education.

The PROSPER Act also drastically changes income-driven repayment programs. Instead of the range of programs available now, future borrowers could choose between the standard ten-year payment plan or an income-driven plan that would allow them to pay 15% of their discretionary income (over 150% of the federal poverty line) for as long as necessary to repay the loan. There would be no ending date to payments, and payments for married couples would be based on both spouses’ incomes even if they file their taxes separately. (Both of these provisions differ from current law.) The Public Service Loan Forgiveness program, which was only mentioned once in passing in the entire bill, would also end. However, people in the program now would be grandfathered in.

Takeaway 3: Colleges would be held accountable for their outcomes in new ways. The cohort default rate metric (which I’m no fan of) would be replaced by a repayment rate metric. If a program (not a college) had more than 45% of its borrowers at least 90 days delinquent or in certain types of deferment for three consecutive years, it would lose access to all federal financial aid. This is a more generous definition of repayment for colleges than the College Scorecard’s definition (repaying at least $1 in principal), so I can’t say how many colleges would actually be affected.

Another interesting piece is that colleges would have to repay at least a portion of federal financial aid dollars given to students who left college during a semester. Right now, colleges can try to claw back those funds, but this proposal would limit colleges to trying to collect 10% of the amount owed back from students. This is similar to what Matt Chingos and Kristin Blagg have proposed in a policy brief.

There are so many other interesting points in this legislation, but I think these are the three most important ones that I can speak to based on my experience and research. Keep in mind that the Senate will also introduce a Higher Education Act reauthorization bill sometime in 2018, and that the two bills may differ significantly from each other.

A Poor Way to Tie the Pell Grant to Performance

“Groan” is a word that is typically used to describe something that is unpleasant or bad. But in the language of student financial aid, “groan” has a second meaning—a grant that converts to a loan if students fail to meet certain criteria. The federal TEACH Grant to prospective teachers and New York’s Excelsior Scholarship program both have these clawback requirements, and a 2015 GAO report estimated that one-third of TEACH Grants had already converted into loans for students who did not teach in high-need subjects in low-income schools for four years.

Republican Reps. Francis Rooney (FL) and Ralph Norman (SC) propose turning the Pell Grant into a groan program through their Pell for Performance Act, which would turn Pell Grants into unsubsidized loans if students fail to graduate within six years. While I understand the representatives’ concerns about students not graduating (and thus reducing—but not eliminating—the return on investment to taxpayers), I see this bill as a negative for students and taxpayers alike.

Setting aside the merits of the idea for a minute, I’m deeply skeptical that the Department of Education and student loan servicers can accurately manage such a program. With a fair amount of difficulty managing TEACH Grants and income-driven repayment plans, I would expect a sizable number of students to incorrectly have Pell Grants convert to loans (and vice versa). I appreciate these two representatives’ faith in Federal Student Aid and servicers to get everything right, but that is a difficult ask.

Moving on to the merits of the idea, I am concerned about the implications of converting Pell Grants to a loan for students who left college because they got a job. Think about this for a minute—a community college student who has completed nearly all of her coursework gets a job offer with family-sustaining wages. She now faces a tough choice: forgo a good, solid job until she completes (and hope she can get another one) or take the job and owe an additional $10,000 to the federal government? If one of the purposes of higher education is to help students move up the economic ladder, this is a bad idea.

This could also have additional negative ramifications for students who stop out of college due to family issues, the need to support a family, or simply realizing that they weren’t college ready at the time. Asking a 30-year-old adult to repay additional student loans (when he may have left in good standing) under this groan program would probably reduce the number of working adults who go back and finish their education.

If the representatives’ concern is that students make very slow progress through college and waste taxpayer funds, a better option would be to gradually ramp up the current performance requirements for satisfactory academic progress. These requirements, which are typically defined as a 2.0 GPA and completing two-thirds of attempted credits, already trip up a significant share of students. But on the other hand, research by Doug Webber of Temple University and his colleagues finds significant economic benefits to students who barely keep a 2.0 GPA and are thus able to stay in college.

Finally, although I think this proposal is shortsighted, I have to chuckle at a take going around on social media noting that one of the representatives owns a construction company that helped build residence halls. Wouldn’t that induce a member of Congress to support policies that get more students into college (and create demand for his company’s services)? It seems like he is going against his best interest if this legislation scares students away from attending college.

Comments on the Trump Higher Education Budget Proposal

The Trump administration released its first full budget proposal for Fiscal Year 2018 today, and it is safe to say that it represents a sharp break from the Obama administration’s budget proposals. The proposed discretionary budget for the Department of Education is about $69 billion, $10 billion less than the Fiscal Year 2017 budget. Below, I offer brief comments on three of the key higher education proposals within the budget, as well as my take on whether the proposals are likely to be enacted in some form by a Republican-controlled Congress that seems fairly skeptical of the Trump administration’s higher education policy ideas.

Public Service Loan Forgiveness would no longer be available for new borrowers. Public Service Loan Forgiveness (PSLF) was first made available in 2007 in an effort to encourage individuals to work in lower-paying nonprofit or government jobs. This plan allows students enrolled in income-driven repayment plans who annually certified their income and employment status to have any remaining balances forgiven after ten years of payments of 10% of discretionary income. However, the plan has been criticized due to its likely high price tag to taxpayers and because it provides far larger subsidies to graduate students than undergraduate students.

The Trump administration’s budget proposal would end PSLF for new borrowers as of July 1, 2018—and require all people currently on PSLF to maintain continuous enrollment in the program to remain eligible. This is likely to be a difficult hurdle for many people to clear, as a large number of students have been tripped up by annual recertification in the past. I’m glad to see that the Trump administration didn’t completely end PSLF for current students (as people reasonably relied on the program to make important life choices), but otherwise saving PSLF in the current form isn’t at the top of my priority list because of how most of the subsidy goes to reasonably well-off people with graduate degrees instead of low-paid individuals with a bachelor’s degree in early childhood education.

Prognosis of happening: Low to medium. This will generate howls of outrage in The New York Times and The Washington Post from groups such as the American Bar Association and the National Education Association, but there is a reasonable argument for at least curtailing the amount of money that can be forgiven under PSLF. A full-fledged ending of the program may not happen, but some changes are quite possible as quite a few members of Congress are upset with rising costs of loan forgiveness programs.

Subsidized loans for undergraduates would be eliminated, and income-driven loan repayment periods would change. Undergraduate students can qualify for between $3,500 and $5,500 per year in subsidized student loans (meaning interest is not charged while they are in school), with the remainder of their federal loans being unsubsidized (with interest accumulating immediately). The Trump administration would end subsidized loans, with the likely rationale that the interest subsidy is not an efficient use of resources (something that is hard to empirically confirm or deny, but is quite plausible).

The federal government currently offers students a menu of income-driven loan repayment options, and the Trump administration proposed to simplify these into one option.  Undergraduates would pay up to 12.5% of the income over 15 years (from 10% over 20 years for the most popular current plan), while grad students would pay up to 12.5% for 30 years. Undergraduate students probably benefit from this change, while graduate students decidedly do not. This plan hits master’s degree programs hard, as any graduate debt would either trigger a 30-year repayment period for a potentially small amount of additional debt or push people back into a standard (non-income-driven) plan.

Prognosis of happening: Medium. There has been a great deal of support for streamlining income-driven repayment plans, but the much less-generous terms for graduate students (along with ending PSLF) would significantly affect graduate student enrollment. This will mobilize the higher education community against the proposal, particularly as many four-year colleges are seeking to grow graduate enrollment as a new revenue source. But potentially moving to a 20-year repayment period for graduate students or tying repayment length to loan debt are more politically feasible. The elimination of subsidized loans for undergraduates hits low-income students, but a more generous income-driven repayment program mainly offsets that and makes that change more realistic.

Federal work-study funds would be cut in half and the Supplemental Educational Opportunity Grant would be eliminated. The federal government provides funds for these two programs to individual colleges instead of directly to students, and colleges are required to provide matching funds. The SEOG is an additional grant available to needy undergraduates at participating colleges, while federal work-study funds can go to undergraduate or graduate students with financial need. Together, these programs provide about $1.7 billion of funding each year, with funds disproportionately going to students at selective and expensive colleges due to an antiquated funding formula. Rather than fixing the formula, the Trump administration proposed to get rid of SEOG (as being duplicative of Pell) and halve work-study funding.

Prognosis of happening: Slim to none. Because funds disproportionately go to wealthier colleges (and go to colleges instead of students), the lobbying backlash against cutting these programs will be intense. (There is also research evidence showing that work-study funds do benefit students, which is important to note as well.) Congressional Republicans are likely to give up on changing these two programs in an effort to focus on higher-stakes changes to student loan programs.

In summary, the Trump administration is proposing some substantial changes to how students and colleges are funded. But don’t necessarily expect these changes to be implemented as proposed, even if there are plenty of concerns among conservatives about the price tag and inefficient targeting of current federal financial aid programs. It will be crucial to see the budget bill that will go up for a vote in the House of Representatives, as that is more likely to be passed into law than the president’s proposed budget.

The Importance of Negative Expected Family Contributions

The Free Application for Federal Student Aid (FAFSA) has received a great deal of attention in the past year. From a much-needed change that allowed students to file the FAFSA in October instead of January for the following academic year to the pulling of the IRS Data Retrieval Tool that made FAFSA filing easier for millions of students, the federal financial aid system has had its ups and downs. But one criticism that has been consistent for years is that the FAFSA remains an extremely blunt—and complex—financial aid allocation instrument.

After students fill out the FAFSA, they receive an expected family contribution (EFC), which determines their eligibility for federal and other types of financial aid. EFCs are currently truncated at zero for reporting purposes, which lumps together millions of students with various levels of (high) financial need into the zero EFC category. In a previous article, I showed that more than one-third of undergraduate students have a zero EFC and how that rate has generally increased over time.

Yet the underlying FAFSA data allows for negative EFCs to be calculated, and these negative EFCs can be used for two different purposes. First, they could be used to give additional Pell Grant aid to the neediest students; there have been several proposals in the past to allow EFCs to go down to -$750 in order to boost Pell Grants by up to $750. Second, the sheer number of students classified in the zero EFC category makes identifying the very neediest students difficult when there are insufficient funds to help all students from lower-income families. Reporting negative EFCs would at least allow colleges to help target their often-scarce resources in the best possible manner.

In my newest article (just published in the Journal of Student Financial Aid, which is open-access!), I used five years of student-level FAFSA data from nine colleges to show how calculating negative EFCs can help identify students with the greatest levels of financial need. The graphics below give a rough idea of what the distributions of negative EFCs could look like under various scenarios and current FAFSA filing situations. (I show dependent students here, but the same story is generally true for independent students.)

I also looked at how much it might cost the federal Pell Grant program to fund EFCs of -$750 by increasing maximum Pell Grants by an additional $750 for the neediest students. I estimated that funding negative EFCs would have increased Pell Grant expenditures by between $5 billion and $7 billion per year, depending on the specification. This is far from a trivial change for a program that spent about $31.5 billion in 2013-14, but it would roughly return Pell spending to its high point following the Great Recession. To save money, additional Pell funds could be given just to students with an automatic zero EFC—students with low family incomes who are already receiving some kind of means-tested benefit (such as free lunches in high school). That sort of limited expansion could be funded out of the current Pell surplus (assuming it doesn’t get used for other purposes, as is currently proposed).

Regardless of whether students get more money from the federal government under a negative EFC, it is a no-brainer for Congress and the Department of Education to work together to at least release the negative EFC number alongside the current number. That way, states, colleges, and private foundations can better target their funds to students with the absolute greatest need. Until the FAFSA is simplified, it makes sense to better use all of the information that is collected on students so everyone can make better decisions on allocating scarce resources.

Examining College Endowments per Pell Recipient

One of the most-discussed higher education policy proposals from President Donald Trump has been a proposal to tax the endowments of wealthy colleges that are seen as not using enough money on financial aid. Key Trump supporter Rep. Tom Reed (R-NY) has introduced legislation requiring colleges with endowments over $1 billion to spend at least 25% of all investment returns on financial aid, much to the chagrin of wealthy colleges.

This proposal does not take into account the size of a college—which means that colleges with similar endowment levels can have vastly different levels of resources. For example, Vassar College and North Carolina State University had endowments just under $1 billion as of June 2015, but the sizes of the institutions are far different. Vassar has about 2,500 undergraduate students, while NC State has nearly ten times as many.

Another important factor is the financial need of students. Colleges can have similar sizes and similar endowment levels, but differ substantially in their number of Pell recipients (a proxy for low-income status). Washington State University and the University of Missouri-Columbia both have endowments around $900 million, but Washington State enrolled 3,000 more Pell recipients than Mizzou in spite of enrolling 4,000 fewer undergraduates. This means that Mizzou has the ability to target more aid to their Pell recipients should they choose to do so.

To explore this point in more detail (and thanks to Sara Goldrick-Rab for the idea), I dove into newly available finance data from the Integrated Postsecondary Education Data System (IPEDS) for the 2014-15 academic year and merged it with data on the number of Pell recipients for the same year from Federal Student Aid’s Title IV volume report datasets. After eliminating colleges that did not report endowment values or reported endowment or Pell recipient data in conjunction with other campuses, my sample consisted of 479 public four-year colleges and 909 private nonprofit colleges. You can download the spreadsheet here to see the ratios for each college with data. (Note: This was updated on February 20 to include colleges in the District of Columbia. Thanks to Patricia McGuire for calling that error to my attention!)

Most colleges have quite small endowments per Pell recipient, as shown in the graph below. The median public college had an endowment of $12,778 per Pell recipient in 2014-15, while the median private college had an endowment of $65,295. Given typical endowment spending rates of about 5% per year, this means that public colleges can spend about $640 per Pell recipient on financial aid and private colleges could spend about $3,200 per recipient. But this assumes that (1) colleges will only spend their endowment proceeds on need-based aid and (2) colleges can actually use their endowments on whatever they want instead of what donors say. This means that most colleges do not have much ability to significantly improve financial aid packages based on endowment proceeds alone.

endow_pell_fig1_feb17

The other thing that stands out in the graph is the number of colleges with endowments of over $1 million per Pell recipient. In 2014-15, 92 colleges were in the millionaires’ club, including 88 private nonprofit colleges and four public colleges (William and Mary, Michigan, Virginia, and Virginia Military Institute—an unusual institution). Below are the institutions with the 25 highest endowment to Pell ratios. All of these colleges have more than $4.2 million per Pell recipient—an enviable position should any of these colleges seek to increase low-income student enrollment.

Name Undergrad enrollment Pell enrollment Endowment ($bil) Endowment per Pell recipient ($mil)
Johns Hopkins University 6357 787 3.33 4.23
Grinnell College 1734 393 1.79 4.55
Claremont McKenna College 1301 152 0.73 4.83
Amherst College 1792 442 2.19 4.96
Bowdoin College 1805 278 1.39 5.01
Columbia University in the City of New York 8100 1912 9.64 5.04
Williams College 2072 403 2.27 5.62
Northwestern University 9048 1256 7.59 6.04
University of Pennsylvania 11548 1643 10.10 6.17
Pomona College 1650 326 2.10 6.44
Swarthmore College 1542 237 1.85 7.79
Dartmouth College 4289 596 4.66 7.82
Duke University 6626 925 7.30 7.89
Washington and Lee University 1890 181 1.47 8.13
Rice University 3926 620 5.57 8.99
University of Notre Dame 8448 902 8.78 9.74
Soka University of America 411 123 1.22 9.93
University of Chicago 5738 639 6.55 10.30
Washington University in St Louis 7401 571 6.89 12.10
California Institute of Technology 983 127 2.08 16.40
Massachusetts Institute of Technology 4512 806 13.50 16.70
Stanford University 7019 1106 22.20 20.10
Princeton University 5391 790 22.30 28.20
Harvard University 10338 1238 37.60 30.40
Yale University 5477 724 25.50 35.30

Should Part-Time Students Have Their Borrowing Limited?

One of the key higher education policy interests of Senate Health, Education, Labor, and Pensions chairman Lamar Alexander (R-TN) has been to limit student borrowing in an effort to help reduce rising student loan debt. I’ve written in the past about how “overborrowing” is not as big of a concern as students not borrowing enough for college, but there is one group of students that may actually benefit from not being able to take out the maximum allowed amount in student loans.

Currently, students who attend college part-time can borrow the same amount as full-time students as long as there is space in their financial aid package. This can be a concern for students, as it means that they can run out of federal loan eligibility before they complete a bachelor’s degree. Current federal loan limits are the following:

Year in college Dependent student Independent student
First $5,500 $9,500
Second $6,500 $10,500
Third $7,500 $12,500
Fourth and beyond $7,500 $12,500
Lifetime $31,000 $57,500

 

This equates to about four and a half years of borrowing at the maximum for dependent students and five years for independent students. Given that a sizable percentage of students complete a bachelor’s degree in more than five years, running out of loan eligibility before graduation can be a real concern for students. This is particularly true among students who begin at a community college, where tuition is relatively low compared to at a four-year college. If a student reasonably expects to take six years to complete a bachelor’s degree, then she and her financial aid office should have a conversation about how to best preserve her loan eligibility for when she needs it the most.

A fairly straightforward way to reduce the number of students who exhaust their loan eligibility would be to allow students to get a certain amount of money per credit hour. Students can currently receive a Pell Grant for up to 12 full-time equivalent semesters, with full-time defined as taking at least 12 credits. The current loan limit could be divided by 12 (roughly $2,600 per semester), or this could be done on a per-credit basis (perhaps $200 per credit) to recognize that students who take more classes need to work less.

A completely different proposal would allow students to use their student loan eligibility in any way they see fit. For example, dependent students could use their $31,000 in two years if desired—as long as they had space in their aid package. This idea of an education line of credit was raised by Jeb Bush in his short-lived presidential campaign, but it is unclear what Senator Alexander thinks of this proposal. At this point, it seems like the idea of limiting borrowing for part-time students at an individual college’s discretion is the most likely policy outcome.

Five Higher Education Suggestions for President-Elect Trump

It’s pretty safe to say that Donald Trump wasn’t the candidate of choice for much of American higher education. Hillary Clinton received nearly 100 times as much in donations from academics as Trump, and the list of academics supporting Trump doesn’t have a lot of well-known names. But the typical American saw the election in a far different way than your average New York Times reader (as evidenced by the big divide in support by educational attainment), and Trump is now the president-elect after a stunning victory.

Here are my recommendations for Trump in the realm of higher education policy as he prepares to move from Trump Tower to the White House in just over two months.

(1) The Department of Education won’t go away, but certain functions could be reassigned. Although the Republicans kept control of the House and Senate, the margins are razor-thin—perhaps a four-vote margin in the Senate and a tenuous grip on the House thanks to divides between establishment and activist Republicans. This makes getting rid of the Department of Education extremely unlikely. Some functions, such as handling student loans, could go to the Department of the Treasury. Others could possibly go to states in the form of block grants. Yet there will still be a need for some administration in Washington to handle basic functions.

(2) Reach out to career staff members at the Department of Education. Trump ran on the concept of “draining the swamp,” but replacing longtime Washington staffers all at once comes at a risk. Career staff members who have served in multiple administrations have knowledge about how programs work that is difficult to replace, so it is essential to keep some of those staff members to help ensure a smooth transition across administrations. Will longtime staffers want to work for Trump? It’s anyone’s guess, but Trump’s transition team should make a good-faith effort to reach out.

(3) Make Higher Education Act reauthorization a priority. With unified (but tenuous) Republican control, Higher Education Act reauthorization suddenly looks more plausible than it did last week. A Trump administration should focus on the HEA in an effort to govern through the legislative branch rather than using executive orders and administrative rules—policies that conservatives have despised. 2017 reauthorization is probably unlikely given the administration’s other priorities, but 2018 or 2019 could work.

(4) Make more higher education data available to the public. The Obama administration made some good strides in the area of consumer information, culminating in the College Scorecard. Yet they also didn’t make data on a range of outcomes (such as PLUS loan default rates or program-level data) available to either the public or researchers. I signed onto a letter along with over 100 researchers last month calling for the Department of Education to release additional data on the federal student loan portfolio, and the Trump administration should release the data. Even if Trump wants to back down in terms of high-stakes accountability, consumer information is important.

(5) Visit a number of colleges across the higher education spectrum. Like most presidents, Trump is a product of high-prestige colleges (attending Fordham and Penn). I’d love to see him experience the great diversity of American higher education, including rural community colleges, HBCUs, technical institutes, and the workhorse regional public university sector. I hope that some colleges extend invitations to Trump—and that he accepts them.

The Rise and Fall of Federal College Ratings

President Obama’s 2013 announcement that a set of federal college ratings would be created and then tied to federal financial aid dollars caught the higher education world by surprise. Some media coverage at the time even expected what came to be known as the Postsecondary Institution Ratings System (PIRS) to challenge U.S. News & World Report’s dominance in the higher education rankings marketplace. But most researchers and people intimately involved in policy discussions saw a substantial set of hurdles (both methodologically and politically) that college ratings would have to clear before being tied to financial aid. This resulted in a number of delays in the development of PIRS, as evidenced by last fall’s delayed release of a general framework for developing ratings.

The U.S. Department of Education’s March announcement that two college ratings systems would be created, one oriented toward consumers and one for accountability purposes, further complicated the efforts to develop a ratings system. As someone who has written extensively on college ratings, I weighed in with my expectation that any ratings were becoming extremely unlikely (due to both political pressures and other pressing needs for ED to address):

This week’s announcement that the Department of Education is dropping the ratings portion of PIRS (is it PIS now?) comes as little surprise to higher education policy insiders—particularly in the face of bipartisan legislation in Congress that sought to block the development of ratings and fierce opposition from much of the higher education community. I have to chuckle at Education Undersecretary Ted Mitchell’s comments on the changes; he told The Chronicle of Higher Education that dropping ratings “is the exact opposite of a collapse” and “a sprint forward.” But politically, this is a good time for ED to focus on consumer information after its recent court victory against the for-profit sector that allows the gainful employment accountability system to go into effect next week.

It does appear that the PIRS effort will not be in vain, as ED has promised that additional data on colleges’ performance will be made available on consumer-friendly websites. Although I am skeptical that federal websites like the College Scorecard and College Navigator directly reach students and their families, I am a believer in the power of information to help students make at least decent decisions, but I think this information will be more effective when packaged by private organizations such as guidance counselors and college access organizations.

On a historical note, the 2013-2015 effort to rate colleges failed to live up to efforts a century ago, in which ratings were actually created but President Taft blocked their release. As Libby Nelson at Vox noted last summer, President Wilson created a ratings committee in 1914, which then came to the conclusion that publishing ratings was not desirable at the time. 101 years later, some things still haven’t changed. College ratings are likely dead for decades at the federal level, but performance-based funding or “risk-sharing” ideas enjoy some bipartisan support and are the next big accountability policy discussion.

I’d love to be able to write more at this time about the path forward for federal higher education accountability policy, but I’ve got to get back to putting together the annual Washington Monthly college rankings (look for them in late August). Hopefully, future versions of the rankings will be able to include some of the new information that has been promised in this new consumer information system.

It’s Time to Make Accreditation Reports Public

The higher education world is abuzz about this week’s great piece in The Wall Street Journal questioning the effectiveness of higher education accrediting agencies, whose seal of approval is required for a college to receive federal student financial aid dollars. In the front-page article, Andrea Fuller and Douglas Belkin of the WSJ note that at least 11 accredited four-year colleges had federal graduation rates (excluding part-time and transfer students, among others) below 10%, which leads one to question whether accreditors are doing their job in ensuring institutional quality. A 2014 Government Accountability Office report concluded that accreditors are more likely to yank a college’s accreditation over financial concerns than academic concerns, calling for additional oversight from the U.S. Department of Education.

Congress has also been placing pressure on accreditors in recent weeks due to the collapse of the accredited Corinthian chain of for-profit colleges and the Department of Education’s announcement that at least some Corinthian students will qualify for loan forgiveness. The head of the main accreditation body responsible for most Corinthian campuses got grilled by Senate Democrats in a hearing this week for not pulling the campuses’ accreditation before the chain collapsed. As a part of the (hopefully) impending reauthorization of the Higher Education Act, members of Congress on both sides of the aisle are interested in a potential overhaul of the accreditation system.

Students, their families, policymakers, and the general public have a clear and compelling interest in reading the reports from accrediting agencies and knowing whether colleges are facing sanctions for some aspect of academic or fiscal performance. Yet these reports, which are produced by nonprofit accrediting agencies, are rarely available to the public. For the WSJ piece, the reporters were able to use open-records requests to get accreditation reports for 50 colleges with the lowest graduation rates. I was recently at a conference where the GAO presented on their aforementioned accreditation report and asked whether the data they compiled on accreditor sanctions was available to the public. They suggested I file an open records request, something which I’ve (unsuccessfully) done for another paper.

Basic information about a college’s accreditation status and reports –including any sanctions and key recommendations for improvement—should be readily available to the public as a requirement for federal financial aid eligibility. And this should cover all types of colleges, including private nonprofit and for-profit colleges that accept federal funds. The federal government doesn’t necessarily have to get involved in an accreditation process (a key concern of colleges and universities), but it can use its clout to make additional data available to the public. (Students probably won’t go to the college’s website and read the reports, but third-party groups like guidance counselors and college rankings providers would work to get the information out in more usable form.) A little sunshine in the accreditation process has the potential to be a wonderful disinfectant.

Is “Overborrowing” for College an Epidemic?

As the Senate Health, Education, Labor, and Pensions Committee continues to slowly move toward Higher Education Act reauthorization, the committee held a hearing this week on the possibility of institutional risk-sharing with respect to federal student financial aid programs. This idea, which has bipartisan support at least in principle, would require at least some low-performing colleges to be responsible for a portion of loans not repaid to the federal government. (I’ve written about this idea in the past.)

Sen. Lamar Alexander (R-TN), the committee chair, began his opening statement with a discussion of “overborrowing,” which he defines as students borrowing more than they need to in order to attend college. Along with Sen. Michael Bennet (D-CO) and other colleagues, he is sponsoring the FAST Act, which contains a provision that would prorate the amount of funds part-time students can borrow for living expenses. Financial aid administrators are also concerned about overborrowing, as evidenced by their professional association’s push to allow colleges to offer students less than the maximum loan amount. This is also something that Sen. Alexander discussed in his opening statement.

But there is no commonly-accepted definition of “overborrowing,” nor is there empirical research that clearly defines how much borrowing is too much. I can see why policymakers want to limit the amount of money that part-time students can borrow for living expenses while in college, as students may hit their lifetime loan caps before completing their degrees as part-time students. But, as research that I’ve conducted with Sara Goldrick-Rab at Wisconsin and Braden Hosch at Stony Brook shows, about one-third of all colleges set living expenses at least $3,000 below what it likely costs to live. This effectively limits student borrowing, as they cannot have a financial aid package exceeding the cost of attendance.

Some people have said that high student loan default rates are a clear indicator that overborrowing is a common concern. Yet students with a small amount of debt are at a higher risk of default, as many of them dropped out of college without a degree and were unable to find gainful employment. It could be the case that borrowing more money would be a better decision, as that money might help students stay in college and complete degrees. However, a substantial percentage of students from low-income families are loan-averse—either completely unwilling to take on debt or only willing to take on a bare minimum as a last resort. Underborrowing is the concern in higher education funding that few people are talking about, and it deserves additional study.

Finally, it is worth a reminder that the typical student graduating with a bachelor’s degree has about $30,000 in debt, although there are huge differences by race/ethnicity and family income. This is in spite of media reports that focus on borrowers with atypically high debt burdens. While I’m concerned about the substantial percentage of students borrowing large amounts of money for graduate school (and particularly the implications for taxpayers due to the presence of income-based repayment programs), it’s hard to convincingly argue that overborrowing for an undergraduate degree is truly an epidemic.