Clinton and Trump Proposals on Student Debt Explained

This article was originally published on The Conversation. Read the original article.

The high price of attending college has been among the key issues concerning voters in the 2016 presidential election. Both Democratic nominee Hillary Clinton and Republican nominee Donald Trump have called the nearly US$1.3 trillion in student debt a “crisis.” During the third presidential debate on Oct. 19, Democratic nominee Hillary Clinton raised the issue all over again when she said,

“I want to make college debt-free. For families making less than $125,000, you will not get a tuition bill from a public college or a university if the plan that I worked on with Bernie Sanders is enacted.”

Republican nominee Donald Trump has also expressed concerns about college affordability. In a recent campaign speech in Columbus, Ohio, Trump provided a broad framework of his plan for higher education should he be elected president.

In a six-minute segment devoted solely to higher education, Trump proceeded to call student debt a “crisis” – matching Clinton’s language. He also called for colleges to curb rising administrative costs, spend their endowments on making college more affordable and protect students’ academic freedom.

The highlight of Trump’s speech was his proposal to create an income-based repayment system for federal student loans. Under his proposal, students would pay back 12.5 percent of their income for 15 years after leaving college. This is more generous than the typical income-based plan available today (which requires paying 10 percent of income for 20 to 25 years). The remaining balance of the loan is forgiven after that period, although this amount is subject to income taxes.

As a researcher of higher education finance, I question whether these proposals on student debt will benefit a significant number of the over 10 million college-going voters struggling to repay loans.

How student loan interest rates work

Typically, students pay interest rates set by Congress and the president on their federal student loans.

Over the last decade, interest rates for undergraduate students have fluctuated between 3.4 percent and 6.8 percent. Rates for federal PLUS loans have ranged from 6.3 percent to 8.5 percent. Federal PLUS loans require a credit check and are often cosigned by a parent or spouse. Federal student loans do not have those requirements.

While students pay this high a rate of interest, rates on 15-year mortgages are currently below three percent.

It is also important to note the role of private loan companies that have recently entered this market. In the last several years, private companies such as CommonBond, Earnest and SoFi as well as traditional banks have offered to refinance select students’ loans at interest rates that range from two percent to eight percent based on a student’s earnings and their credit history.

However, unlike federal loans (which are available to nearly everyone attending colleges participating in the federal financial aid programs), private companies limit refinancing to students who have already graduated from college, have a job and earn a high income relative to the monthly loan payments.

Analysts have estimated that $150 billion of the federal government’s $1.25 trillion student loan portfolio – or more than 10 percent of all loan dollars – is likely eligible for refinancing through the private market.

Many Democrats, such as Senator Elizabeth Warren of Massachusetts, have pushed for years, for all students to receive lower interest rates on their federal loans. In the past Republican nominee Donald Trump too has questioned why the federal government profits on student loans – although whether the government actually profits is less clear.

Issues with refinancing of loans

The truth is that students with the most debt are typically college graduates and are the least likely to struggle to repay their loans. In addition, they can often refinance through the private market at rates comparable to what the federal government would offer.

Struggling borrowers, on the other hand, already have a range of income-driven repayment options through the federal government that can help them manage their loans. Some of their loans could also be forgiven after 10 to 25 years of payments.

Furthermore, the majority of the growth in federal student loans is now in income-driven plans, making refinancing far less beneficial than it would have been 10 years ago. Under income-driven plans, monthly payments are not tied to interest rates.

So, on the face of it, as Clinton has proposed, allowing students to refinance federal loans would appear to be beneficial. But, in reality, because of the growth of private refinancing for higher-income students and the availability of income-driven plans for lower-income students, relatively few students would likely benefit.

Focus needed on most in need students

In my view, Clinton’s idea of allowing students to refinance their loans at lower rates through the federal government is unlikely to benefit that many students. However, streamlining income-based repayment programs (supported by both candidates) has the potential to help struggling students get help in managing their loans.

Nearly 60 percent of students who were enrolled in income-driven repayment plans fail to file the annual paperwork. That paperwork is necessary if students are to stay in those programs. And failure to do so results in many students facing higher monthly payments.

At this stage, we know many details of Clinton’s college plan. Her debt-free public college proposal (if enacted) would benefit families in financial need, but her loan refinancing proposal would primarily benefit more affluent individuals with higher levels of student debt.

In order to access Trump’s plan we need more details. For example, the current income-based repayment system exempts income below 150 percent of the poverty line (about $18,000 for a single borrower) and allows students working in public service fields to get complete forgiveness after ten years of payments. The extent to which Trump’s plan helps struggling borrowers depends on these important details.

The Conversation

Do Presidential Debates Increase Student Applications?

Tonight is the first presidential debate of the 2016 general election season, and this clash between Democrat Hillary Clinton and Republican Donald Trump could top 100 million viewers. (I won’t be one of them, as I’m teaching tonight.) The host site, Hofstra University, is actually the second choice—as Wright State University pulled out over the high price tag this summer. Hofstra is paying about $5 million to host the debate, with the costs generally covered through three donors.

Hosting a presidential debate is undoubtedly a great public relations opportunity for a university, similar to making a big run in the NCAA basketball tournament or making a big football bowl game. Some research has shown that big-time athletics success is associated with increased student applications in the following year, so the media circus following a presidential debate (Hofstra is trending on Twitter as I write this post) could have similar results.

Hofstra also hosted a presidential debate in 2012, so I looked at what happened to the number of applications they received before and after the debate compared to their defined group of peer institutions. The data are below:

Name 2011-12 2012-13 2013-14 Pct increase, 2012-13 to 2013-14
Adelphi University 8278 9184 8654 -5.8%
American University 18706 17039 17545 3.0%
Boston University 38275 41802 44006 5.3%
Drexel University 48450 40586 43945 8.3%
Fordham University 31792 34070 36189 6.2%
George Washington University 21433 21591 21756 0.8%
Hofstra University 18909 21376 22733 6.3%
Ithaca College 13436 13813 15658 13.4%
LIU Post 7369 7209 6001 -16.8%
Marist College 11399 11466 10351 -9.7%
New York University 41243 42807 45779 6.9%
Northeastern University 43255 44208 47364 7.1%
Pace University-New York 10623 11778 12885 9.4%
Quinnipiac University 18651 18825 20699 10.0%
Seton Hall University 6436 10180 10735 5.5%
St John’s University-New York 54871 52972 51634 -2.5%
Syracuse University 25884 25790 28269 9.6%

 

Hofstra did see a 6.3% increase in applications between 2012-13 and 2013-14, compared to a 4.6% increase across its peer institutions. But other peers, such as Ithaca, Quinnipiac, Syracuse, and Pace saw even larger increases. So it appears that the debate brought plenty of pride to Hofstra, but there was not an unusual jump in applications after the debate aired.

Clinton’s New College Compact Plan Explained

This article was originally published on The Conversation.

Ahead of the Democratic National Convention – on July 5 – Hillary Clinton announced a set of new proposals on higher education. Key measures included eliminating college tuition for families with annual incomes under US$125,000 and a three-month moratorium on federal student loan payments.

Clinton’s original plan had called for the federal government and states to fund public colleges so students wouldn’t have to borrow to cover tuition if they worked at least 10 hours per week.

The revised higher education plan represents a clear leftward shift and is likely an effort to solidify her support among still-skeptical young supporters of Bernie Sanders.

As a researcher of higher education finance, my question is whether these proposals, estimated to cost $450 billion over the next 10 years, will benefit enough of the over 10 million college-going voters struggling to repay loans.

How student loan interest rates work

Typically, students pay interest rates set by Congress and the president on their federal student loans.

Over the last decade, interest rates for undergraduate students have fluctuated between 3.4 percent and 6.8 percent. Rates for federal PLUS loans have ranged from 6.3 percent to 8.5 percent. Federal PLUS loans require a credit check and are often cosigned by a parent or spouse. Federal student loans do not have those requirements.

While students pay this high a rate of interest, rates on 15-year mortgages are currently below three percent.

Several private companies have entered the student loan market.
Application form image via www.shutterstock.com

It is also important to note the role of private loan companies that have recently entered this market. In the last several years, private companies such as CommonBond, Earnest and SoFi as well as traditional banks have offered to refinance select students’ loans at interest rates that range from two percent to eight percent based on a student’s earnings and their credit history.

However, unlike federal loans (which are available to nearly everyone attending colleges participating in the federal financial aid programs), private companies limit refinancing to students who have already graduated from college, have a job and earn a high income relative to the monthly loan payments.

Analysts have estimated that $150 billion of the federal government’s $1.25 trillion student loan portfolio – or more than 10 percent of all loan dollars – is likely eligible for refinancing through the private market – much of it likely for graduate school.

Many Democrats, such as Senator Elizabeth Warren of Massachusetts, have pushed for all students to receive lower interest rates on their federal loans for years. Republican nominee Donald Trump too has questioned why the federal government profits on student loans – although whether the government actually profits is less clear.

Issues with refinancing of loans

Interest rates on student loans were far higher five to 10 years ago (ranging from 6.8 percent to 8.5 percent based on the type of loan). Allowing students to refinance at current rates ranging from 3.76 percent to 6.31 percent would mean that some students could possibly lower their monthly payments.

But the question is, how many students will benefit from the refinance?

Struggling borrowers are likely the ones with least debt.
Robert Galbraith/Reuters

Students with the most debt are typically college graduates and are the least likely to struggle to repay their loans. In addition, they can often refinance through the private market at rates comparable to what the federal government would offer.

Struggling borrowers, on the other hand, already have a range of income-driven repayment options through the federal government that can help them manage their loans. Some of their loans could also be forgiven after 10 to 25 years of payments.

Furthermore, the majority of the growth in federal student loans is now in income-driven plans, making refinancing far less beneficial than it would have been 10 years ago. Under income-driven plans, monthly payments are not tied to interest rates.

So, on the face of it, allowing students to refinance federal loans would appear to be beneficial. But, in reality, because of the growth of private refinancing for higher-income students and the availability of income-driven plans for lower-income students, relatively few students would likely benefit.

Why implementing a moratorium will be hard

On the proposed three-month moratorium, Clinton has said she could proceed on it via executive action as soon as she takes office – potentially making it the most important part of her plan.

During these three months, the Department of Education and companies servicing student loans would reach out to borrowers to help them enroll in income-driven plans that would reduce monthly payments.

So, would a moratorium on student loan payments help struggling borrowers?

The challenge is that reaching out to each and every one of the estimated 41.7 million students with federal student loans in a three-month period would be a Herculean task given the Department of Education’s available resources.

Currently, about one-fifth of the federal government’s student loan portfolio, or $260 billion is in deferment or forbearance, meaning that students are deferring payments until later.

To put this another way, about 3.5 million loans are at least 30 days behind on payments, and eight million loans are in default. This could mean that those students haven’t made a payment in at least a year.

Just trying to contact 3.5 million students in a three-month window would be a difficult proposition, let alone contacting the millions of additional students who are putting off payments until later.

Currently eight million loans are in default.
Andrew Burton/Reuters

There are also other issues that Department of Education staffers and loan servicers must deal with that may be more important than an overall repayment moratorium.

Nearly 60 percent of students who were enrolled in income-driven repayment plans fail to file the annual paperwork. That paperwork is necessary if students are to stay in those programs. And failure to do so results in many students facing higher monthly payments.

Focus needed on most in need students

In my view, Clinton’s proposals of allowing students to refinance their loans at lower rates through the federal government and a three-month moratorium on payments are unlikely to benefit that many students.

Hopefully, the Clinton campaign will focus later versions of the proposal on borrowers most in need of assistance. If not, this could present an opportunity for the Trump campaign to release a coherent higher education agenda.

The Conversation

Proposed Student Finance Regulations May Hamper Small Institutions

This post originally appeared on the Brookings Institution’s Brown Center Chalkboard blog.

In June, the U.S. Department of Education released a 530-page set of proposed regulations on the topic of ‘defense to repayment.’ Although this sounds like an obscure topic (and reading the document is no picnic!), these proposed rules, if adopted, could allow students to be able to have their student loan debt forgiven if colleges misrepresented themselves to students. The Department of Education is currently working through this process for former Corinthian Colleges students, and tens of thousands more students could be eligible under the proposed rules.

Although forgiving student loans has the potential to benefit many financially struggling students, this will likely come at a significant cost to taxpayers. The official cost estimate of the proposed rules is between $199 million and $4.23 billion, which reflects both the number of colleges expected to be subject to the regulations and the large amount of uncertainty in the final number of students affected. To guard taxpayer dollars, the Department of Education is also proposing increasing the number of reasons for which colleges will have to post letters of credit—bonds that the federal government can keep if a college closes in order to compensate former students.

Currently, colleges have to post a letter of credit if they have a low financial responsibility score or if there are serious governance or fraud concerns. But these proposed rules would extend posting letters of credit to private nonprofit and for-profit colleges that have “significant fluctuations” in their Pell Grant and student loan awards, with the definition of “significant” left to the Department of Education to determine. However, on page 358 of the proposed rules, the Department of Education noted that 991 of 3,590 private nonprofit and for-profit colleges had a change in student loan volume of 25% or more between the 2013-14 and 2014-15 academic year. I use this 25% change as a guide in this analysis, as well as looking at the changes in dollar values.

I used data from the Office of Federal Student Aid’s Title IV volume reports to look at the number of colleges with large changes in their Pell Grant and student loan awards between 2013-14 and 2014-15, with my sample consisting of 3,575 colleges that received Pell Grant and/or student loan dollars in both years.1 Of these colleges, 1,088 (30%) had at least a 25% change in Pell Grant or student loan dollars during this period. Much of this rate is driven by for-profit colleges, of which 43% saw large changes; just 15% of nonprofit colleges had similar changes.

The tendency of for-profit colleges to have larger percentage changes in both Pell Grant and student loan awards can be seen in the below two charts, with the two red vertical lines representing changes of -25% and 25% between 2013-14 and 2014-15. It is also worth noting that the typical for-profit college saw a sizable decline in both types of aid, while the typical nonprofit college had little to no change in aid. This can be attributed to the rapid decline in enrollment at for-profit colleges over the past several years.

defrepay_fig1

defrepay_fig2

The drawback of using a metric based on the percent change in aid awarded is that very small institutions can have large percentage changes with relatively small dollar changes. The next two charts show that the vast majority of colleges with changes above 25% had relatively small amounts of federal aid in 2013-14. The median college with a change that could subject them to a letter of credit had about $250,000 in Pell Grant revenue or $550,000 in student loan revenue, which explains all of the dots right along the axis in the charts.

defrepay_fig3defrepay_fig4

There were a small number of colleges with both sizable amounts of federal student aid in 2013-14 and large changes between 2013-14 and 2014-15. Ten colleges had more than $10 million in Pell Grants and a 25% change the following year, of which only two (nonprofit Southern New Hampshire University and for-profit United Education Institute) had gains. The eight colleges with large losses in Pell awards were all for-profits, and seven are now closed or under new ownership. The only one that is still open is Fortis College, which saw a 39% drop in Pell awards in just one year.

Colleges with large changes in Pell Grant awards, 2013-14 to 2014-15
Name For-profit? 2013-14 Pell ($mil) 2014-15 change (pct) Now closed?
Southern New Hampshire U. No 31.5 +77.2 No
United Education Institute (UEI) Yes 10.6 50.4 No
Florida Career College Yes 22.7 -25.3 Yes
Sanford-Brown College Yes 13.1 -33.0 Yes
Heald College Yes 66.9 -34.1 Yes
Fortis College Yes 12.6 -38.9 No
Everest University Yes 169.0 -39.8 New owner
Wyotech Yes 10.3 -41.1 New owner
Drake College of Business Yes 12.3 -41.2 Yes
Anthem College Yes 11.8 -91.6 Yes

 

Six colleges with more than $100 million in student loans in 2013-14 had changes of more than 25% in 2014-15, with just one college (for-profit Ultimate Medical Academy) seeing an increase of at least 25%. Of the five colleges with large declines, for-profits Everest University (now under new ownership) and Heald College (now closed) show up again, while nonprofits Loma Linda University, Webster University, and Southern New Hampshire University had large declines. SNHU is particularly interesting, as it saw a 77.2% increase in Pell dollars at the same time it saw a 43% drop in student loan dollars.

Colleges with large changes in student loans, 2013-14 to 2014-15
Name For-profit? 2013-14 loans ($mil) 2014-15 change (pct) Now closed?
Ultimate Medical Academy Yes 100.9 28.7 No
Webster University No 159.4 -36.0 No
Loma Linda University No 143.6 -36.0 No
Southern New Hampshire University No 346.1 -42.7 No
Everest University Yes 317.1 -50.1 New owner
Heald College Yes 150.5 -59.4 Yes

 

If the Department of Education sticks to the percentage change metric for examining which colleges should post letters of credit, the smallest colleges will be disproportionately affected. Meanwhile, the University of Phoenix, which received over $2.6 billion in Pell and loan revenue with declines of between 15% and 20% in both categories, would not face additional scrutiny even though more students would be affected by any changes. And by extension, more taxpayers would be liable in the case of a bailout of these students. As being unable to obtain a letter of credit may cause some colleges to close, the federal government should potentially consider a sliding scale based on a combination of initial enrollment or federal financial aid volume for considering percentage changes in aid received.

1 I was unable to perfectly match the number of colleges the Department of Education had in its analysis using publicly available data from the Office of Federal Student Aid. This likely leads me to slightly understate the number of colleges that could be affected, as the colleges not in my dataset are probably quite small or had stopped participating in federal financial aid programs during the period of analysis.

Why I Support the File Once FAFSA Act

This year will mark the biggest change to the federal financial aid process in quite a few years, with students being able to file the Free Application for Federal Student Aid (FAFSA) for the 2017-18 academic year on October 1, 2016 instead of January 1, 2017 using 2015 tax data. This change, known as prior prior year (PPY) or early FAFSA, has the potential to give more students information about their federal financial aid eligibility around when they are applying to colleges. My research on the topic (thanks to the generous support and assistance of my friends at the National Association of Student Financial Aid Administrators) found that most students will see similar Pell Grant awards under PPY than under the current system, which helped alleviate concerns about what PPY would mean for both the federal budget and financial aid offices. However, I remain concerned that colleges will not notify students of institutional aid earlier than under current rules due to concerns about their financial aid budgets.

While prior prior year is a step in the right direction for students and their families, there really isn’t a good reason why many students have to fill out the FAFSA every year. While the U.S. Department of Education claims that it takes the average student 21 minutes to file the FAFSA, this number is undoubtedly higher for students with more complex family situations or students whose parents struggle to navigate the form due to limited English proficiency or the FAFSA’s complicated instructions. As a result, an estimated 10% of Pell-eligible students who remained enrolled in college fail to refile the FAFSA.

In 2013, I wrote a piece in The Chronicle of Higher Education with Sara Goldrick-Rab (now at Temple University) titled “Change FAFSA Now.” In that piece, we argued for one-time FAFSA filing to reduce the burden on both students and the U.S. Department of Education. Today, I am happy to see a piece of legislation called the File Once FAFSA Act of 2016, introduced by Rep. Bobby Scott (D-VA), that would allow dependent Pell Grant-eligible students to file the FAFSA just once as long as they remain dependents. (Students with large changes in family income could get their expected family contribution (EFC) changed by talking with their financial aid office.)

While I am pleased to support the legislation, I would like to see two additional groups of students become eligible for a one-time FAFSA. The first group is those students who file the FAFSA just to receive a federal unsubsidized loan. All students attending participating colleges can receive these loans regardless of financial need, so making students repeatedly file the FAFSA just to get these loans makes little sense. This would be particularly beneficial for graduate students, who can no longer receive any federal subsidized loans.

The second group of students who should become eligible is independent students with dependents of their own. In the 2011-12 academic year, 61% of students in this category had an EFC of zero—reflecting a large amount of financial need. This compares to just 24% of dependent students having a zero EFC. Moreover, in a 2015 article, I showed that over 98% of independent students without dependents who had a zero EFC one year and refiled the FAFSA two years later received a Pell Grant that year. Therefore, extending the one-time FAFSA to this category of students make sense.

The idea of a one-time FAFSA should garner bipartisan support, as evidenced by a similar idea being a part of former Republican presidential candidate Jeb Bush’s higher education proposal. I welcome and support Rep. Scott’s proposal as a first step to helping more students whose family circumstances don’t change much while they are in college spend time doing something more productive than completing the FAFSA.

The Tradeoffs of Making Private Student Loan Debt Dischargeable in Bankruptcy

There is an old adage dating back to the 1700s that the two most certain things in life are death and taxes. But for families with certain types of student loans, having to make payments on their loans is another certainty. Students used to be able to discharge educational loans in bankruptcy, but that ability was first restricted in 1976 before being fully eliminated for federal loans by 1998 and private student loans in 2005. The growth of income-driven repayment programs for federal loans reduces the need to discharge these loans in bankruptcy, as payments would instead be zero if a student signs up for this plan and earns below the poverty line.1 But private loans, which are about $10 billion per year, generally do not offer income-based repayment options.

Neal Hutchens of the University of Mississippi and Richard Fossey of the University of Louisiana have an interesting new piece up at The Conversation that argues that private student loan debt should once again be dischargeable in bankruptcy. They contend that more students should be able to meet the “undue hardship” test for paying off private loans, which includes both having low income and making a good-faith effort to repay loans. Senate Democrats, such as Elizabeth Warren of Massachusetts, have pushed for making private loans dischargeable in bankruptcy, and the Obama Administration has expressed interest in the idea.

But making private student loans dischargeable in bankruptcy would likely come with two main drawbacks for borrowers. The first one is that private lenders would significantly increase their standard for creditworthiness, thus rejecting students who need money for college but do not (and their co-signer does not) have outstanding credit. The second one is that interest rates would rise to take into account the increased risk that borrowers do not repay their loans. Currently, the terms on private loans are generally comparable to PLUS loans. If a student gets denied a PLUS loan (or a college doesn’t package a PLUS loan into a student’s financial aid package), the terms on private loans may become so bad that students and parents don’t wish to consider this option—even with the protection that discharging a loan in bankruptcy would offer.

The traditional market for private student loans is at a crossroads right now, with the terms on many types of federal student loans getting much better in recent years while the growing student loan refinancing market and the potential for income share agreements have the potential to threaten traditional lenders’ business models. But in the meantime, advocates for allowing students to discharge private loans in bankruptcy need to carefully consider the tradeoff between protecting some of the most vulnerable students who fall upon hard times and potentially restricting access to needed credit for other students to attend college. Which of these two factors is more important? It’s hard to tell at this time, but both need to be carefully considered by policymakers.

———————————————————————————————————-

1 Parent PLUS loans qualify for a far less generous income-driven repayment plan than all other federal loans, but payments would still be zero if the parent earned below the federal poverty line

Which Factors Affect Student Fees?

Tuition increases tend to get the most focus in discussions about college affordability, but a number of other factors also affect the total price tag of a college education. In addition to researching living allowances for off-campus students, I have looked into the often-confusing world of student fees at public colleges. These fees are used for a variety of purposes, such as supporting core instructional activities, funding athletics, paying for student activities, or even seismic safety. The University of California-Santa Cruz lists over 30 mandatory fees that all undergraduates must pay, ranging from $.75 per year to fund a marine discovery center to $1,020 per year for student services. At the typical four-year public college, student fees were nearly $1,300 in the 2012-13 academic year, roughly 20% of median tuition and nearly double their 1999-2000 rate after adjusting for inflation.

In a new article that was just published in The Review of Higher Education, I used a panel regression framework to explore potential institution-level and state-level factors affecting student fee levels between the 2001-02 and 2012-13 academic years.  For institution-level factors, I included tuition, the percent of nonresident students, measures of selectivity, and per-student athletics expenditures (a proxy for the magnitude of a college’s athletics program). For state-level factors, I considered appropriations and financial aid levels, economic conditions, whether a tuition or fee cap was in place, who had the ability to set tuition or fees (politicians, state or system boards, or the individual college), and partisan political control in the state.

Given that students subsidized athletics at public colleges to the tune of at least $10 billion over five years, I fully expected to find that higher per-student athletics expenditures would be associated with higher student fees. Yet after controlling for other factors, there was no significant relationship between athletics spending and fees. This could be explained by the small number of high-spending colleges in big-time conferences that come close to breaking even on athletics, or it could be due to my data ending in 2012-13 and larger increases in athletics fees occurring since then. The only significant institution-level factor was tuition—as tuition rose, fees fell. This implies that some colleges likely treat tuition and fees as interchangeable.

More of the state-level factors have statistically significant relationships with student fee levels. States that have capped fee levels do have fees about $128 lower than states without fee caps, but I also found evidence that colleges in states with tuition caps have fees $59 higher. This suggests that colleges will substitute fees for tuition where possible. If a state’s governor and/or legislature can set tuition, fees tend to be lower, but if policymakers can set fees, fees tend to be higher. Finally, partisan political control only has a small relationship with fees, as having a Republican governor is associated with slightly lower fee levels and control of the legislature was not significant.

Given the magnitude of student fees and the relatively small body of research in this area, I hope to see more studies (particularly qualitative in nature) digging into how student fees are set and how the money is supposed to be used compared to its actual uses.

Who Exactly is a “Hard Working” Student?

Most people don’t like giving money to slackers. After all, people who work hard for their money don’t want to hand it over to people who aren’t working so hard—a very reasonable position to take. But the challenge is defining what “hard working” actually means, particularly as individuals’ definitions may differ and it is generally difficult or expensive to observe someone’s effort level. (I’m not the only academic to note this challenge.) A classic example of struggling to define hard work comes from the welfare reform debates of the 1980s and 1990s (which eventually resulted in major welfare reform in 1996) and has clear linkages to higher education debates.

Similar to the famous “welfare queen” example that Ronald Reagan first used in 1976 of a woman who defrauded the federal welfare system, there have been concerns about “Pell runners”—people who go from college to college in an effort to defraud taxpayers instead of get an education—for years. While the U.S. Department of Education estimates that 2.5% of Pell dollars are improperly spent (either due to fraud or errors by the college or the federal government), there are concerns that students are not putting in sufficient effort to get support from the federal government. In 2011, then-Representative Denny Rehberg (R-MT) called the Pell program “the welfare of the 21st century,” a concern shared by some who point to the billions of dollars each year going to students who do not graduate (although barriers to graduation may include family or financial issues in addition to academic success or work ethic).

Politicians supporting increased funding for financially needy students have taken great care to explain how their plan helps “hard working” students in an effort to gain political support. For example, President Obama and the White House communications team have repeatedly referred to “hard working” students in describing the administration’s plans for tuition-free community college and other proposals for reform. Obama’s tuition-free community college proposal defines “hard working” as having a 2.5 GPA, enrolled half-time, and making satisfactory progress toward a degree. These requirements are tighter than the Pell Grant’s rules, which require a 2.0 GPA and satisfactory academic progress with no enrollment intensity requirement. Last week, two Democrats on the House Education and the Workforce Committee referred to current Pell recipients as “hard working” in their appeal to use a $7.8 billion surplus in the Pell program to increase awards to current students.

As in most cases in life, it’s worth reading the fine print to see exactly who politicians, advocates, or others consider to be “hard working” students. The term sounds really good, but be wary of people defining the term in such a way that it aligns with their political priorities. I don’t have a perfect definition of what it means to be hard working in college, so I would love your suggestions in the comments section below.

(Still) Don’t Dismiss Performance Funding Research

I like the idea of funding public colleges and universities based in part on their former students’ outcomes—and I’m far from the only one. Something in the ballpark of three dozen states have adopted some sort of a performance-based funding (PBF) system, with more states currently discussing the program. Given that many states currently fund colleges based on a combination of enrollment levels and historical allocations that can be woefully out-of-date, tying some funding to outcomes has an intuitive appeal.

However, as a researcher of accountability policies in higher education, I am concerned that some colleges may be responding to PBF in unintended ways. At this point, as I briefly summarized in a recent piece at The Conversation, there is evidence that PBF may adversely affect access to college for moderately prepared students as well as the types of postsecondary credentials awarded. My newest contribution was a recently published article in the Journal of Education Finance that found both two-year and four-year colleges subject to PBF saw less Pell revenue than other colleges not subject to PBF.

Since that article finished the peer review and copy editing processes and was posted online two weeks ago, I’ve been expecting a response from one of the largest organizations advocating for PBF. HCM Strategists, a DC-based advocacy group that is quite effective in lobbying and policy development, has traditionally been a strong supporter of PBF. (Disclaimer: I’ve gotten funding from them for a project on a different topic in the past.) In 2013, an HCM director responded to a high-quality paper by David Tandberg and Nick Hillman (that was later published in JEF) by writing an Inside Higher Ed piece called “Don’t Dismiss Performance Funding.” In this piece, they call the research “flawed” and “simplistic,” neither of which are particularly true. I wrote a blog post called “Don’t Dismiss Performance Funding Research,” in which I wasn’t too pleased with their response.

Today, HCM director Martha Snyder has a much more nuanced IHE essay on my and Luke’s work entitled “Jumping to Conclusions,” saying that our work should not be used “to draw any meaningful conclusions” on PBF. Snyder discusses what she perceives as some of the limitations of our work. The most notable one is that multiple types of PBF policies are lumped together in the analyses. That is necessary due to data limitations—there is no comprehensive archive of the nuances of PBF plans prior to the early 2010s. However, general trends in PBF policies across states are partially captured by the year fixed effects in the regression (standard practice in panel analyses), which also help to account for these factors.

Snyder also suggests that some states have been encouraging students to enroll in community colleges, which is definitely the case (although somewhat less so prior to 2012-13, the last year of our analysis due to the pace at which new data become available). If this were true, it would explain decreases in per-FTE Pell revenue at four-year colleges, but also increase Pell revenues at two-year colleges. Instead, we saw nearly identical negative point estimates, which raise further cause for concern. (Could this affect for-profit enrollment? I can’t really tell with federal data, but a state-level analysis here would be great.)

I appreciate HCM’s work in helping states implement more modern funding programs, but it is imperative that influential policy organizations work with the research community before drawing any meaningful conclusions about the potential unintended consequences of PBF—especially as the stakes become higher for students and colleges alike. The small, but growing, body of literature on colleges’ responses to PBF suggests that collaboration among interested parties would be far more productive than attempting to dismiss findings from peer-reviewed research that suggest caution may be in order. I’m happy to do what I can to summarize the literature on unintended consequences while working to move forward policy discussions on future versions of PBF.

What the Leading Republican Presidential Candidates Are Saying About College Affordability

With cumulative student loan debt exceeding $1.2 trillion and the average net price of college attendance continuing to rise, college affordability has become an important issue in the 2016 presidential election. Most of the attention on this topic has been in the Democratic primary, in which Vermont Senator Bernie Sanders and former Secretary of State Hillary Clinton both have ambitious plans to make public colleges either tuition-free (Sanders) or debt-free (Clinton) that have played a prominent role in their campaigns.

College affordability has played a much smaller role in the Republican primary to this point, with topics such as foreign policy and immigration getting far more attention from the candidates. Yet the rising price of college is likely to be an important issue in the general election, particularly among younger adults who tend to lean toward supporting Democratic candidates. Here, I examine the leading Republican candidates’ positions on how to make higher education more affordable for students and their families.

Donald Trump

The billionaire businessman and political novice has gained attention recently for his foray into for-profit higher education through the Trump Entrepreneur Initiative, which was previously known as Trump University before New York’s attorney general sued to stop Trump from using the term “university.” Trump is also facing lawsuits from former students who claimed that they got no value from their investment of up to $35,000 in real estate seminars.

In multiple interviews, Trump has stated his intention to either close or substantially downsize the U.S. Department of Education, although much of his rationale appears to be due to opposition to the Common Core standards at the K-12 level. In his only statement regarding higher education affordability, Trump has criticized the Department of Education for making a profit on the federal student loan program. Trump shares this view with many Democratic legislators, even though government agencies have different opinions about the profitability of student loans.

Sen. Marco Rubio

The first-term Florida senator has significant experience with higher education, having been an adjunct professor of political science at Florida International University between 2008 and 2015. In the Senate, Rubio has co-sponsored bipartisan legislation that would make income-based repayment the default option for federal student loans and would require colleges to report additional data on student outcomes. He has also co-sponsored a bipartisan bill that would open the federal financial aid program to alternative education providers that can meet certain outcome standards and gain accreditation, although he has also faced criticism for his defense of for-profit colleges whose access to federal funds has been threatened.

Rubio has also supported ideas that are likely to appeal to Republican primary voters but may not be as popular with independent-minded voters in a general election. Like Trump, Rubio has also called for the elimination of the Department of Education. Rubio has noted that some programs currently administered by the federal government should continue (such as the federal student loan program), but they could be absorbed by the Department of the Treasury or other agencies. He has sponsored legislation in the Senate to allow students to use private income share agreements, which function similarly to private loans with income-based repayment, to finance their education. This idea has been criticized as a form of indentured servitude, even though federal loans function in similar ways.

Sen. Ted Cruz

The first-term Texas senator has said relatively little about college affordability, other than noting that he just recently paid off his $100,000 in student loan debt. Like the other GOP candidates, he has called for the vast majority of the Department of Education to be eliminated. Cruz would appoint an Education Secretary whose sole goal would be to determine which programs should remain and give most funding to the states via block grants. In 2012, Cruz indicated that he would keep federal student aid funds in the federal budget, but transfer funding and authority to the states.

As Democrats will certainly keep at least 40 seats in the U.S. Senate (the minimum needed to sustain a filibuster to block legislation) and may gain a majority in this fall’s election, it doesn’t appear that the Department of Education will go away anytime soon. But if any of these three Republican candidates are elected, their actions on affordability—and the implications for both students and taxpayers—are likely to be quite different than what a Clinton or Sanders administration will be proposing.