Tag: politics

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.

Comments on the Bush Higher Education Proposal

The three Democratic candidates for president all released their plans for higher education fairly early in the campaign cycle, with Sen. Clinton, Gov. O’Malley, and Sen. Sanders’s plans all including some variation of tuition-free or debt-free public college. These plans are all likely dead on arrival in Congress due to their price tags ($350 billion for the Clinton plan) and the high probability that Republicans hold the House of Representatives through 2020, but the candidates deserve credit for making higher education a key part of their domestic policy platforms.

On the Republican side, higher education has been much less important during the campaign, with only Sen. Rubio having a framework (with a good number of components that may enjoy bipartisan support) in place for higher education before now. But Gov. Bush’s newly released proposal for education reform (as summarized in this piece written by Jason Delisle and Andrew Kelly, two informal advisors to the Bush campaign and people I greatly respect) reflects the most detailed proposal from any of the Republican candidates. (Gov. Bush’s summary on Medium is available here.) And like Rubio’s plan, there are components that will likely get bipartisan support in Congress—while other parts are likely to face opposition from within his own party. Below are the key planks of Bush’s higher education platform, along with my comments on whether they are likely to be effective and feasible.

Proposal 1: Replace the current financial aid system with education savings accounts and a line of credit. If one thing unites all presidential candidates, it’s that the Free Application for Federal Student Aid needs to be either incredibly simple or eliminated. The Bush proposal would replace the FAFSA for most students with an education savings account based on the tax code. All students would get a $50,000 line of credit (roughly the same as what independent students can borrow for a bachelor’s degree today), and low-income students would get an additional account with need-based aid based on their family’s income in high school. Adults would also qualify for grant aid, likely by filling out some new version of the FAFSA. Tax credits would also disappear in the Bush proposal, which will probably upset some people although they have not been proven to induce students to enroll in or graduate from college.

This proposal represents a modest—but likely helpful—improvement over the current system for undergraduate students. This would give students at least some additional flexibility in using their financial aid, with the potential for students to accelerate their progress by taking summer courses that would not be aid-eligible under current rules. Getting students information about their likely aid eligibility in eighth grade is a plus, as shown in my research. But I’d like to see students get money deposited in their account at a slightly earlier age to make the commitment seem more tangible.

It appears that the $50,000 line of credit will be the new lifetime limit for federal student loans. For undergraduate students, this makes a lot of sense. The typical student with debt has between $30,000 and $35,000 in debt for a bachelor’s degree, so $50,000 seems like a reasonable upper bound for most students. However, it doesn’t look like graduate students would qualify for additional credit—which could curtail enrollment in master’s degree programs or doctoral programs in less-lucrative fields. This could create an opportunity for the expanded use of income share agreements with the private sector.

Proposal 2: Impose “risk sharing” on federal student loan dollars by holding colleges responsible for a portion of loans that are not repaid. The general principal of risk sharing makes sense—if a college’s former students can’t pay the bills, then the college should be responsible for partially reimbursing taxpayers. And the idea has at least some bipartisan support, as evidenced by 2015 legislation introduced by Senators Hatch (R) and Shaheen (D). But putting together a risk sharing proposal that doesn’t punish colleges for serving at-risk students while protecting taxpayer funds is far more difficult than it would first appear. I’ve tangled with some of these issues in my prior work (see my proposed framework for a risk sharing system), and the Bush team will have to do the same if their candidate pulls off an improbable comeback.

Proposal 3: Allow new providers to receive federal financial aid dollars. Right now, students can take their federal financial aid dollars to any of the approximately 7,500 colleges and universities nationwide that are eligible for and participate in programs under Title IV of the Higher Education Act. Conservatives have frequently called for other non-college providers (such as boot camps, apprenticeship programs, and single-course providers) to be eligible for federal financial aid to promote competition and potentially place downward pressure on the price tag of traditional programs. However, making this sort of change would likely require a significant overhaul of the current accreditation system, which has been deemed a cartel by some Republicans.

Bush’s proposal echoes these calls, but also proposes that prior learning assessments qualify for federal financial aid. This would allow students to use Pell Grant or student loan dollars to pay for taking tests such as the College Level Examination Program (CLEP) that can result in college credit if a student can demonstrate subject mastery. It could also potentially be used to help pay for portfolio assessments of previous academic or work experience, which can cost hundreds of dollars at some colleges. Even if the entire accreditation system isn’t blown to smithereens, a relatively modest change of allowing vetted prior learning assessment providers to accept federal aid would benefit students.

Proposal 4: Get outcome data into the hands of students and families. Florida has one of the most comprehensive education data systems in the country, allowing students and their families to access detailed data on earnings by field of study. The Bush proposal calls for each state to develop a similar system in order to provide outcome data to the public. However, given the way the pendulum has swung regarding student privacy (a substantial part of both the GOP and Democratic primary bases), it will be difficult to include incentives or sanctions that would encourage states to develop these databases. But even if such a proposal were to be adopted, it’s far from clear whether 50 separate databases would make more sense from a logistical or privacy perspective than a federal College Scorecard with program-level data.

Proposal 5: Reform the student loan repayment system. Both Republicans and Democrats seem to be moving toward a consensus that income-based repayment models (where loan payments are tied to a former student’s income and debt burden) are superior to the traditional 10-year fixed payment plan. Bush’s plan would make income-based repayment the only option for new borrowers, with payments equal to 1% of income per each $10,000 borrowed for up to 25 years, with the maximum lifetime payment being $17,500 per $10,000 borrowed. His proposal would also encourage current borrowers to shift into income-based repayment, which is currently a headache for many students. Although people will likely disagree with the exact terms Bush’s proposal sets forth, the general principles match up with conservative proposals as well as President Obama’s REPAYE program.

Although Gov. Bush is badly lagging in the polls, his campaign’s higher education proposals are serious, generally well-considered (although lacking for most details), and represent an important starting point for federal higher education policy discussions. Given that large infusions of federal funds into higher education are unlikely regardless of who becomes the next President, some pieces in the Bush plan (such as increased flexibility in how students use Pell Grants) are worth considering as low-cost plans that have the potential to positively impact students. Other ideas (such as risk sharing) sound promising in principle, but have the potential to do harm if they are improperly implemented. But even if the Bush campaign doesn’t make it past the first few primary states, many of the ideas included in the plan should be strongly considered by other candidates.

Should States Offer Student Loan Refinancing Programs?

As outstanding student loan debt has roughly tripled in the past decade to reach $1.2 trillion, many people have pushed for measures that would reduce the repayment burden on former students. In the last few years, there were efforts to stop subsidized student loan interest rates from doubling (which were largely successful) and more generous income-based repayment programs on federal loans, as well as efforts for tuition-free and/or debt-free public college that have taken center stage in the Democratic presidential primary.

The latest effort to reduce debt burdens has been allowing students to refinance their student loan debt at a lower rate. Private companies such as SoFi and Earnest are expected to refinance between $10 billion and $20 billion in loans in the next few years, primarily of well-paid professionals who are extremely unlikely to default on their obligations. (By doing this, loans become private—so this isn’t a great idea for people who would qualify for Public Service Loan Forgiveness.) But for people who have lots of debt and a steady job, refinancing can save tens of thousands of dollars.

Spurred by the #InTheRed hashtag on Twitter and support from some leading Democrats, the next move is to consider allowing all students to refinance their loans through the government. Any legislation in Congress to do so is unlikely to go anywhere with Republican control and concerns about increasing the deficit. As a result, efforts have moved to the state level, with at least seven states having adopted refinancing plans for some loans and others considering plans. But is this a good policy to explore?

While states are free to do whatever they want—particularly if they issued the loans instead of the federal government—I view state refinancing efforts as an inefficient way to help struggling borrowers. Sue Dynarski at the University of Michigan sums up my concerns nicely in 140 characters:

Essentially, further subsidizing interest rates rewards borrowers with larger debt burdens (particularly those with graduate degrees who rarely default on loans) at the expense of students with debt but no degree represents a transfer of resources from lower-income to higher-income families. For a group that draws most of its support from the Left, supporting regressive taxation like this is rather surprising. Additionally, to keep the price tag down, some states are heavily restricting who can refinance and acting more like private companies. Minnesota, for example, will only allow graduates to refinance—and only in that case if they have a good credit score or a co-signer. This could potentially help keep some talented graduates in state, but the magnitude of the benefit is often outweighed by differences in income taxes, property taxes, or job offers across states.

I would encourage states to take whatever money they plan to use on refinancing loans and directing it toward grant aid for students from lower-income families who have stopped out of college and wish to return. Scarce resources should be directed toward getting students through college at a reasonable price instead of trying to make graduates’ payments slightly lower later on.

To Reduce Debt, Give Students More Information to Make Wise College Choice Decisions

This article was originally published at The Conversation.

Higher education has gotten a lot of attention during the early stages of the 2016 presidential campaign. All three major candidates for the Democratic nomination – former New York Senator Hillary Clinton, former Maryland Governor Martin O’Malley and Vermont Senator Bernie Sanders – have proposed different plans to reduce or eliminate student loan debt at public colleges.

However, the price tags of these plans (at least $350 billion over 10 years for Clinton’s proposal) will make free college highly unlikely. Republicans, including leading presidential candidates, have already made their opposition quite clear.

But student loan debt is unlikely to go away anytime soon. What is important for now is that students and their families get better information about tuition costs and college outcomes so they can make more informed decisions, especially as the investments are so large.

What colleges will reveal

Although colleges are required to submit data on hundreds of items to the federal government each year, only a few measures that are currently available are important to most students and their families:

First, colleges must report graduation rates for first-time, full-time students. This does a good job reflecting the outcomes at selective colleges, where most students go full-time.

But full-time students make up only a small percentage of students at some colleges, and data on the graduation rates of part-time students will not be available until 2017.

The price tag of Hillary Clinton’s college plan is too steep.
Marc Nozell, CC BY

Colleges must also report net prices (the cost of attendance less all grant aid received) by different family income brackets. The cost of attendance (defined as tuition and fees, room and board, books and supplies, and other living expenses such as transportation and laundry) and the resulting net price are important measures of affordability.

Because financial aid packages can vary across colleges with similar sticker prices, net prices are important to give students an idea of what they might expect to pay.

Colleges that offer their students federal loans must report the percentage of students who defaulted on their loans within three years of leaving college. This measure reflects whether students are able to make enough money to repay their loans. Colleges must also report average student loan debt burdens, so students can see what their future payments might look like.

In addition, vocationally oriented programs must report debt and earnings metrics under new federal “gainful employment” regulations. This provides students in technical fields a clear idea of what they might expect to make.

The Obama administration has promised that additional information on student outcomes will be made available “later this summer”, although they have not said what will be made available.

What don’t we know?

Despite the availability of information on some key outcomes, more can still be done to help students make wise decisions about which college to attend.

Below are some example of outcomes that would be helpful for students and their families to know about.

Although enormous gaps in college completion rates exist by family income, students and their families cannot currently access data on the graduation rates of low-income students receiving federal Pell Grants. (The federal government is purchasing data from the National Student Clearinghouse to fix this going forward.)

Colleges are required to report the percentage of minority students and the percentage of students receiving Pell Grants, but nothing is known about the percentage of first-generation students.

This is of particular interest given the key policy goal of improving access to American higher education; without this information, it is harder to tell which colleges are engines of social mobility.

Students need to have more information.
Lynda Kuit, CC BY-ND

Private-sector organizations such as PayScale and LinkedIn work to fill this gap, but they can only provide a limited amount of information.

How could we know more?

The data needed to answer many of the questions above are already held by the federal government, but in multiple databases that are not allowed to communicate with each other.

The greatest barrier to better information from the federal government is due to a provision included in the 2008 reauthorization of the Higher Education Act which banned the federal government from creating a “student unit record” data system that would link financial aid, enrollment and employment outcomes for students receiving federal financial aid dollars. This ban was put in place in part due to concerns over data privacy, and in part due to an intense lobbying effort from private nonprofit colleges.

States, in contrast, are allowed to have unit record data systems, and a few of them make detailed information available to anyone at the click of a mouse.

For example, Virginia makes a host of student loan debt information available in a series of convenient tables and graphics.

Senator Rubio has teamed with Democratic Senators Ron Wyden of Oregon and Mark Warner of Virginia to introduce legislation overturning the ban on unit record data, although no action has yet been taken in Congress.

A bipartisan push to make more information available to students and their families has the potential to help students make better decisions.

But getting data is only one part of the challenge. The other is getting that into the hands of students at the right time. For that, it is important for the federal government to work with college access organizations and guidance counselors.

Students should be able to access this information as they begin considering attending college. Although additional information may not allow a student to graduate debt-free, it will help him or her to make a more informed decision about where to attend college and if the price tag is worth paying.

The Conversation

Read the original article.

Comments on Senator Clinton’s Higher Education Proposal

Hillary Clinton’s presidential campaign released her framework for higher education reform at midnight on Monday morning (see details here and here). The plan, officially listed at a cost of $350 billion over ten years, would move closer to the idea of debt-free public college, require states to increase their spending on public higher education, and potentially embrace some accountability reforms with bipartisan appeal. Below are some of my first-take comments on Sen. Clinton’s proposal, as I look forward to seeing complete details. (I didn’t get an embargoed copy in advance.)

  • This proposal feels like a direct reaction to pressure that Sen. Clinton was facing from the political Left. Both of her main rivals, independent Senator Bernie Sanders of Vermont and former Maryland Governor Martin O’Malley, have supported versions of debt-free public college plans. This has zero chance of passing Congress as is, particularly as the House of Representatives is likely to stay in Republican hands through 2020 and the proposal would be paid for by additional taxes on wealthy Americans.
  • I’m highly skeptical of the $350 billion price tag, or at least when it’s phrased as just being $35 billion per year (roughly equal to federal Pell Grant spending). New federal programs take several years to phase in, meaning that most of the expenses are in later years. (President Obama’s free community college proposal is similar.) Once this plan is fully in place, I’d expect the price tag to be closer to $70 billion per year. All politicians like to massage the ten-year budget window used for cost estimates, and Sen. Clinton is no different.
  • Unlike some other “free college” proposals, Sen. Clinton’s proposal brings at least some private nonprofit colleges to the table by potentially making some of their students eligible for additional aid. This is a politically smart move, as the private nonprofit lobby is strong and many colleges in this sector do good work for students. But as noted in Inside Higher Ed this morning, the leadership of the private college lobby is concerned about any proposals that direct relatively less money to private colleges—as it could affect some institutions’ ability to survive.
  • This plan includes a federal/state partnership, which is typical for Democratic higher education proposals (and a good way to keep the price tag down somewhat). However, as suggested by Medicaid, many Republican governors may not take up the extra funds in exchange for having to assume additional responsibilities. For that reason, Sen. Clinton’s proposal to allow public colleges in those states to bypass the state governments to work directly with the federal government is politically brilliant. But states probably won’t be happy.
  • Much of the price tag will go to reduce interest rates on student loans, both for current students and to allow former students to refinance their loans. This is a big deal for the Elizabeth Warren faction of the Democratic Party—the folks who really make their voices heard in primary elections. But this money will do little to improve access and completion rates, in part because much of the money goes to students after they have left college and because income-based repayment plans make interest rates less relevant. Additionally, students who tried to avoid debt as much as possible (many from lower-income families) won’t benefit as much and may be upset by the subsidies going to higher-income borrowers. I wrote about this in my previous post.
  • There are bipartisan pieces in this plan, including accreditation reform, better consumer information, and risk-sharing for student loans. If Sen. Clinton becomes the nominee, look for her to pivot to the center and highlight some of these proposals.
  • The Clinton staff are claiming this proposal will help bring down the cost of providing a college education, in addition to the price that students pay. I just can’t help but be skeptical when suggested cost-saving areas include administration and technology. Colleges have been facing pressure to tighten their belts for years from states (and many have actually done so), so I don’t think the federal government will be any more successful. But it makes for a good soundbite.

The three main Democratic candidates have now laid out their higher education agendas. Hopefully, the Republican field (which, with the exception of Sen. Marco Rubio, have been fairly quiet on the issue) will follow suit.

Why “Debt-Free” College Will Upset Some Students

In a major higher education policy proposal, former Senator and current Democratic presidential frontrunner Hillary Clinton recently announced plans for higher education reforms that come close to debt-free college by increasing grant aid to students and reducing interest rates on current loans. She is following in the footsteps of the other two main candidates for the Democratic nomination—Vermont independent senator Bernie Sanders and former Maryland governor Martin O’Malley—both of whom have called for some sort of debt-free higher education option.

Putting aside the substantial cost to federal taxpayers ($350 billion over 10 years) and state governments (unknown at this point) for a while, any plan for student loan reforms or debt-free college should make those who know the burden of student loan debt happy. Right? Perhaps not so much. A somewhat similar example comes out of Seattle, where credit card processor Gravity Payments announced earlier this year that its employees would be paid a minimum of $70,000 per year. Again, this is an idea that sounds great—essentially double the wages received by lower-level employees and get an outpouring of good publicity. However, although Gravity signed up a number of new customers, the company has faced some unexpected opposition.

As detailed in a recent New York Times article, Gravity lost a number of existing customers over fears that increasing wages would result in higher future charges, even though the CEO cut his salary to partially pay for the wage increases. That doesn’t really have a corollary to higher education, but the other key point in the article does. Gravity lost two employees making over $70,000 per year as a result of the wage increase for everyone else, as they did not feel valued in a company that paid lower-skilled workers similar amounts to what they earned.

This raises an important point—whenever a program such as a dramatically higher wage floor, student loan reforms that reduce borrowing costs, or debt free college is introduced, at least some similar people who do not qualify for the new program are likely to be upset. Consider the case of a student who just finished repaying $15,000 in student loans by making additional payments in order to become debt-free as soon as possible. She may have sacrificed by working additional hours while in college, attending a less-selective college, and forgoing buying a newer, more reliable car. If the terms on student loan debt change in a way that essentially reward a student who borrowed $35,000 in order to not work in college and enjoy a slightly higher standard of living, it’s reasonable to expect the student with less debt to be upset. (Let’s also not forget the group of lower-income students who are debt-averse and will do anything not to borrow for college. They wouldn’t benefit from any student loan reforms.)

A move to debt-free college works in a similar way, as students who go to college after such a program is instituted get to benefit, while students who attended a few years earlier get nothing. This is happening to some extent in states like Tennessee, where all students can go to a community college tuition-free, and there is no constitutional amendment saying that life must be fair for all. But when plans for debt-free college and reducing student loan burdens get introduced, let’s not forget that some people will get upset because they perceive themselves as getting the short end of the stick. And when presidential campaigns try to build up support, they should do everything they can to make this group happy.

Analyzing the Heightened Cash Monitoring Data Release

NOTE: This post was updated April 3 to reflect the Department of Education’s latest release of data on heightened cash monitoring.

In my previous post, I wrote about the U.S. Department of Education’s release of a list of 544 colleges subject to heightened cash monitoring standards due to various academic, financial, and administrative concerns. I constructed a dataset of the 512 U.S. colleges known to be facing heightened cash monitoring (HCM) along with two other key accountability measures: the percentage of students who default on loans within three years (cohort default rates) and an additional measure of private colleges’ financial strength (financial responsibility scores). In this post, I examine the reasons why colleges face heightened cash monitoring, as well as whether HCM correlates with the other accountability metrics.

The table below shows the number of colleges facing HCM-1 (shorter delays in ED’s disbursement of student financial aid dollars, although colleges not facing HCM have no delays) and HCM-2 (longer delays) by type of institution (public, private nonprofit, and for-profit).

Table 1: HCM status by institutional type.
Sector HCM-1 HCM-2
Public 68 6
Private nonprofit 97 18
Private for-profit 284 39
Total 449 63

 

While only six of 74 public colleges are facing HCM-2, more than one in ten private nonprofit (18 of 115) and for-profit colleges (39 of 323) are facing this higher standard of oversight. The next table shows the various reasons listed for why colleges are facing HCM.

Table 2: HCM status by reason for additional oversight.
Reason HCM-1 HCM-2
Low financial responsibility score 320 4
Financial statements late 66 9
Program review 1 21
Administrative capability 22 7
Accreditation concerns 1 12
Other 39 10

 

More than two-thirds (320) of the 449 colleges facing HCM-1 are included due to low financial responsibility scores (below a 1.5 on a scale ranging from -1 to 3), but only four colleges are facing HCM-2 for that reason. The next most common reason, affecting 75 colleges, is a delayed submission of required financial statements or audits. This affected 43 public colleges in Minnesota, which are a majority of the public colleges subject to HCM. Program review concerns were a main factor for HCM-2, with 21 colleges in this category (including many newly released institutions) facing HCM-2. Other serious concerns included administrative capability (22 in HCM-1 and 7 in HCM-2), accreditation (2 in HCM-1 and 12 in HCM-2), and a range of other factors (39 in HCM-1 and 10 in HCM-2).

The next table includes three of the most common or serious reasons for facing HCM (low financial responsibility scores, administrative capacity concerns, and accreditation issues) and examines their median financial responsibility scores and cohort default rates.

Table 3: Median outcome values on other accountability metrics.
Reason for inclusion in HCM Financial responsibility score Cohort default rate
Low financial responsibility score 1.2 12.1%
Administrative capability 1.6 20.3%
Accreditation issues 2.0 2.8%

 

Not surprisingly, the typical college subject to HCM for a low financial responsibility score had a financial responsibility score of 1.2 in Fiscal Year 2012, which would require additional federal oversight. Although the median cohort default rate was 12.1%, which is slightly lower than the national default rate of 13.7%, some of these colleges do not participate in the federal student loan program and are thus counted as zeroes. The median college with administrative capability concerns barely passed the financial responsibility test (with a score of 1.6), while 20.3% of students defaulted. Colleges with accreditation issues (either academic or financial) had higher financial responsibility scores (2.0) and lower cohort default rates (2.8%).

What does this release of heightened cash monitoring data tell us? Since most colleges are on the list for known concerns (low financial responsibility scores or accreditation issues) or rather silly errors (forgetting to submit financial statements on time), the value is fairly limited. But there is still some value, particularly in the administrative capability category. These colleges deserve additional scrutiny, and the release of this list will do just that.