Tag: politics

Unit Record Data Won’t Doom Students

The idea of a national unit record database in higher education, in which the U.S. Department of Education gathers data on individual students’ demographic information, college performance, and later outcomes, has been controversial for years—and not without good reason. Unit record data would represent a big shift in policy from the current institutional-level data collection through the Integrated Postsecondary Education Data System (IPEDS), which excludes part-time, transfer, and most nontraditional students from graduation rate metrics. The Higher Education Act reauthorization in 2008 banned the collection of unit record data, although bipartisan legislation has been introduced (but not advanced) to repeal that law.

Opposition to unit record data tends to fall into three categories: student privacy, the cost to the federal government and colleges, and more philosophical arguments about institutional freedom. The first two points are quite reasonable in my view; even as a general supporter of unit record data, it is still the burden of supporters to show that the benefits outweigh the costs. The federal government doesn’t have a great track record in keeping personally identifiable data private, although I have never heard of data breaches involving the Department of Education’s small student-level datasets collected for research purposes. The cost of collecting unit record data for the federal government is unknown, but colleges state the compliance burden would increase substantially.

I have less sympathy for philosophical arguments that colleges make against unit record data. The National Association of Independent Colleges and Universities (NAICU—the association for private nonprofit institutions) is vehemently opposed to unit record data, stating that “we do not believe that the price for enrolling in college should be permanent entry into a massive data registry.” Amy Laitinen and Clare McCann of the New America Foundation documented NAICU’s role in blocking unit record data, even though the private nonprofit sector is a relatively small segment of higher education and these colleges benefit from federal Title IV student financial aid dollars.

An Inside Higher Ed opinion piece by Bernard Fryshman, professor of physics at the New York Institute of Technology and recent NAICU award winner, opposes unit record data for the typical (and very reasonable) privacy concerns before taking a rather odd turn toward unit record data potentially dooming students later in life. He writes the following:

“The sense of freedom and independence which characterizes youth will be compromised by the albatross of a written record of one’s younger years in the hands of government. Nobody should be sentenced to a lifetime of looking over his/her shoulder as a result of a wrong turn or a difficult term during college. Nobody should be threatened by a loss of personal privacy, and we as a nation should not experience a loss of liberty because our government has decreed that a student unit record is the price to pay for a postsecondary education.”

He also writes that employers will request prospective employees to provide a copy of their student unit record, even if they are not allowed to mandate a copy be provided. This sounds suspiciously like a type of student record that already exists (and employers can ask for)—a college transcript. Graduate faculty responsible for admissions decisions already use transcripts in that process, and applications are typically not considered unless that type of unit record data is provided.

While there are plenty of valid reasons to oppose student unit record data (particularly privacy safeguards and potential costs), Professor Fryshman’s argument doesn’t advance that cause. The information from unit record data is already available for employers to request, making that point moot.

The Political Attractiveness of “Last-Dollar” Scholarships

The old adage about there being no such thing as a free lunch may hold true regarding a turkey sandwich on rye bread, but free lunches can happen in the world of higher education. An example of this is the growing number of “last-dollar” scholarships, in which private entities or state/local governments agree to cover students’ remaining tuition and fees after all federal grants have been provided. (Note that it does not cover room and board or living expenses—an important component of the total cost of attendance.)

Consider this hypothetical example of a last-dollar scholarship. A student with a zero expected family contribution (EFC) qualifies for a maximum Pell Grant ($5,730 for the 2014-15 academic year) and a Supplemental Educational Opportunity Grant of $1,500. If she enrolls at a public university with tuition and fees of $9,000 per year, the last-dollar scholarship would then cover the remaining $1,270. But if she goes to a community college with tuition and fees of $5,000 per year, the last-dollar scholarship does not pay a dime.

Bryce McKibben of the Association of Community College Trustees (ACCT) analyzed the implications of the new Tennessee Promise scholarship, which promises students free community college tuition and fees if they meet a relatively restrictive set of eligibility criteria. The program is estimated to cost about $34 million per year, suggesting that not many students will benefit. McKibben’s piece mentioned that 35% of Tennessee community college students have a zero EFC, meaning these students will get no additional funds from the program as the maximum Pell Grant of $5,730 far exceeds full-time tuition and fees of under $4,000 per year. Indeed, an analysis by the Tennessee Higher Education Commission showed that the median student with an EFC of under $2,100 would not see a dime from the Tennessee Promise:

aid_by_efc

This doesn’t mean that last-dollar scholarships don’t have value. They do benefit community college students who barely miss qualifying for the federal Pell Grant, as well as students attending four-year institutions (such as under Indiana’s 21st Century Scholarship program). Another important benefit of last-dollar scholarship programs is informational. Students may be induced to attend college simply by having better knowledge of what college costs, even if they do not receive any additional money. The literature on college promise programs, as I summarized in this paper, suggests that informational campaigns can increase college enrollment rates by several percentage points.

Last-dollar scholarships are politically attractive due to their clear message about college costs (even if they’re excluding any housing or living expenses) and relatively low cost. If the goal is to help the neediest students afford college, however, states may want to consider adding stipends to students whose tuition is already covered by funds from other sources.

Do States and Colleges Affect Student Fees?

I am presenting a paper, “A Longitudinal Analysis of Student Fees: The Roles of States and Institutions,” at the Association for Education Finance and Policy’s annual conference today.  Here is the abstract:

Student fees are used to finance a growing number of services and programs at colleges and universities, including core academic functions, and make up 20% of the total cost of tuition and fees at the typical four-year public college. Yet little research has been conducted to examine state-level and institutional-level factors that may affect student fee charges. In this paper, I use state-level data on tuition and fee policy, the role of state governments and higher education systems, and partisan political balance combined with institutional-level data on athletics programs and selectivity to create a panel from the 1999-2000 to 2011-12 academic years. I find that some state-level factors that would be expected to reduce student fees, such as fee caps, do reduce fees at four-year public colleges, but giving the legislature authority to set fees results in higher fees. Additional state grant aid and higher-level athletics programs are also associated with higher fees in my primary model.

And here are the slides from my presentation, summarizing the study (which is still a work in progress). Any comments are greatly appreciated!

Should Campus-Based Financial Aid Be Reallocated?

I am presenting a paper, “Exploring Trends and Alternative Allocation Strategies for Campus-Based Financial Aid Programs,” at the Association for Education Finance and Policy’s annual conference this afternoon.  Here is the abstract:

Two federal campus-based financial aid programs, the Supplemental Educational Opportunity Grant (SEOG) and the Federal Work-Study program (FWS), combine to provide nearly $2 billion in funding to students with financial need. However, the allocation formulas have changed little since 1965, resulting in community colleges and newer institutions getting much smaller awards than longstanding private colleges with high costs of attendance. I document the trends in campus-level allocations over the past two decades and explore several different methods to reallocate funds based on current financial need while limiting the influence of high-tuition colleges. I show that allocation formulas that count a modest amount of tuition toward financial need reallocate aid away from private nonprofit colleges and toward public colleges and universities.

And here are the slides from my presentation, summarizing the study (which is still a work in progress). Any comments are greatly appreciated!

College Accountability and the Obama Budget Proposal

The Fiscal Year 2015 $3.9 trillion budget document from the Obama Administration includes a request of $68.6 billion in discretionary funds for the Department of Education, up $1.3 billion from 2014 funding. This excludes a great deal of mandatory spending on entitlements, including student loan costs/subsidies, some Pell Grant funding, and some other types of financial aid. (Mandatory spending is much harder to eliminate than discretionary funding, as illustrated by this helpful CBO summary.) The budget is also a reflection of the Administration’s priorities, even if many components are unlikely to be approved by Congress. For a nice summary of the Department of Education’s request, see this policy brief from the New America Foundation.

On the higher education front, the Obama budget implies that accountability will be a key priority of the Department of Education. The Administration made two key requests in this area: $10 million to fund continued development of the Postsecondary Institution Ratings System (PIRS) and $647 million for a fund to reward colleges that enroll and graduate Pell recipients. There was a holdover request for $4 billion in mandatory funds for a version of Race to the Top in higher education, but few in the higher education policy community are taking this plan seriously.

The $10 million for PIRS would go toward “further development and refinement of a new college rating system” (see p. T-156). This request is a signal that the Administration is taking the development of PIRS seriously, but the $10 million in funds suggests that large-scale additional data collection is unlikely to happen in the near future. It is also unlikely that the federal government will work to audit IPEDS data for the rating, something that I called for in my recent policy brief on ratings. Even if the specific $10 million request for PIRS is not acted upon, the Department of Education will use other discretionary funds to move forward.

The $647 million request for College Opportunity and Graduation Bonuses, if approved, would provide bonuses to colleges that are successful in enrolling and graduating large numbers of Pell recipients. I view this as a first attempt to tie federal funds to college performance using metrics that are likely to be in PIRS. I would be surprised if any Pell Grant funds get reallocated through college ratings except for perhaps a handful of very low-performing colleges, but it is possible to get some additional bonus funds tied to ratings.

I had a poll on a blog post a couple weeks ago asking for readers’ thoughts of the likelihood that PIRS would be tied to student financial aid dollars by 2018. The majority of the respondents gave this less than a 50% chance of happening, and I am inclined to agree as well. The Administration’s budget priorities suggest a serious push toward tying some funds to performance, although it is worth emphasizing that a future Congress and President must agree.

What are your thoughts of the Obama Administration’s higher education budget, particularly about accountability? If you have any comments to share, please do so and continue the conversation!

New Policy Brief on College Ratings

I am pleased to announce the release of my newest policy brief, “Moving Forward with Federal College Ratings: Goals, Metrics, and Recommendations” through my friends at the Wisconsin Center for the Advancement of Postsecondary Education (WISCAPE). In the brief, I outline the likely goals of the Obama Administration’s proposed Postsecondary Institution Ratings System (PIRS), discuss some potential outcome measures, and provide recommendations for a fair and effective ratings system given available data. I welcome your comments on the brief!

Will Federal Aid Be Tied to College Ratings? (Poll)

With all of the discussion of what will be included in the proposed Postsecondary Institution Ratings System (PIRS), there has been relatively little discussion about whether federal Title IV financial aid will actually be tied to the ratings by 2018—as the President has specified. I would love to get your thoughts on the feasibility by taking the following poll, and leaving any additional comments below.

 

 

I’ll share my thoughts in a subsequent post, so stay tuned!

Senator Warren’s Interest Rate Follies

First-term Senator Elizabeth Warren (D-MA) is a darling of the progressive Left, and she has been mentioned as a possible Presidential candidate in 2016 (although she has stated she’s not running). One of the ways she has gained support with the Democratic base is through her many public statements about the federal government’s purported profit on student loans, which she cites to be $51 billion in Fiscal Year 2013. Given the huge profit, she has introduced legislation to drop interest rates to the overnight borrowing rate at the Federal Reserve: 0.75%.

Her argument suffers from one main problem: student loans carry risk for the federal government. (She made my 2013 not-top-ten list for this reason.) The Congressional Budget Office, where the $51 billion estimate came from, uses federal borrowing costs as a discount rate. This discount rate is very low, in part because the federal government is viewed as very unlikely to default (even with the possibility of debt ceiling shenanigans). As a result, numerous groups have suggested the use of fair-value accounting, in which the risk of default is considered. Indeed, the Washington Post’s fact-checking blog gave Senator Warren’s statement of a $51 billion profit “two Pinocchios” because it did not consider fair-value accounting.

[On Twitter, the wonderful Libby Nelson notes that my explanation of fair-value accounting vs. federal regulations is unclear. Here is a nice CBO summary of the different methods.]

With the debate over student loan profits and accounting methods as a backdrop, the release of Friday’s Government Accountability Office report on federal student loans was eagerly anticipated in the higher education community. The title of the report succinctly summarizes the rest of the document: “Borrower Interest Rates Cannot Be Set in Advance to Precisely and Consistently Balance Federal Revenues and Costs.” This resulted in a few howlers from policy analysts, including this gem from Matt Chingos at Brookings:

https://twitter.com/jetpack/status/429271034546499584

Karen Weise at Bloomberg was a little more diplomatic with her summary of the report:

The report itself is fairly dry, but it does emphasize something that should be kept in mind when considering the costs of student loan programs. Due to the growing prevalence of extended payment plans, increased rates of income-based repayment plan usage, and the continued risk of defaults, the actual amount of the subsidy or cost on student loans will not be known for 40 years after disbursement.  Each of these individual variables could also have a large effect on the long-run subsidy or cost; for example, a higher-than-expected rate of income-based repayment participation could increase program costs.

The following paragraph on pages 18 and 19 sums up a key point of the report:

“As of the end of fiscal year 2013, it is estimated that the government will generate about $66 billion in subsidy income from the 2007 to 2012 loan cohorts as a group. However, current estimates for this group of loan cohorts are based predominantly on forecasted cash flow data derived from assumptions about future loan performance. As more information on actual cash flows for these loans becomes available, subsidy cost estimates will change. As a result, it is unclear whether these loan cohorts will ultimately generate subsidy income, as currently estimated, or whether they will result in subsidy costs to the government. This will not be known with certainty until all cash flows have been recorded after loans have been repaid or discharged—which may be as many as 40 years from when the loans were originally disbursed.”

I read this paragraph as providing possible evidence that interest rates may have been set relatively high compared to the federal cost of borrowing. (Recall that the interest rates for subsidized Stafford loans declined from 6.8% in 2007 to 3.4% in 2011, while Treasury rates were at historic lows.) The spread between the 10-year Treasury yield in May versus the interest rate on subsidized Stafford loans has been the following for the past seven years:

Year Stafford (pct) 10-yr T-note (pct) Spread (pct)
2007 6.8 4.75 2.05
2008 6.0 3.88 2.12
2009 5.6 3.29 2.31
2010 4.5 3.42 1.08
2011 3.4 3.17 0.23
2012 3.4 1.80 1.60
2013 3.86 1.93 1.93

This interest rate spread is statutorily set at 2.05% for subsidized Stafford loans in the future, roughly the long-run average. So while future GAO reports a few years after disbursement may find similar results, what we’ll all be waiting for is longer-term data to see if the estimates hold true. The federal government doesn’t necessarily have a great history of long-run cost projections, so I’m expecting this spread to disappear over time. (And keep in mind this report doesn’t fully account for risk.)

Yet Senator Warren and eight other Democrats released a press release on Friday afternoon with the headline of “Democratic Senators Highlight Obscene Government Profits Off Student Loan Program.” They focused entirely on the initial projection of a $66 billion profit over five years and entirely ignored the long-run uncertainty highlighted by the GAO. This press release is a great example of selecting only the most favored parts of a report, while ignoring other important details along the way. Again, the Twittersphere (myself included) expressed its thoughts:

On a more fundamental note, I think that Senator Warren and colleagues are misguided in their efforts to continue lowering student loan interest rates. Given the reality that higher education funding is a zero-sum game, I would much rather see funds used to support the Pell Grant, work-study, and other upfront sources of aid for students than slightly lower loan payments after students have already left college. (The same argument holds against tax credits.) Senator Warren may not be running for President (yet), but she’s in the running for my 2014 not-top-ten list.

My State of the Union Wish List

My State of the Union Wish List

I don’t have tremendously high expectations for tonight’s State of the Union address regarding higher education, given the priority placed on other topics such as social mobility and potentially even foreign affairs. However, I would be thrilled if President Obama and/or the small army of Republicans responding touched on any of the three following items:

(1) Don’t make grand claims on fixing the rising burden of student loan debt. While student loan debt has crossed $1 trillion, it’s unclear whether any of the proposals out there would seriously help students after they leave college—let alone encourage students to attend college. Last year’s fight over interest rates was an example of tinkering around the edges. The push for so-called “Pay it Forward” plans might help, but these plans are a long way from enrolling students and may have adverse consequences. I encourage the President and Republicans to bring up these ideas, but don’t overpromise here.

(2) Talk about access to college for more than just high-achieving, low-income students. The recent White House summit on these students is a nice PR push, but will do little to improve college access. Most of these students are going to college somewhere, although some are attending less-selective institutions. As Matt Chingos at Brookings notes, focusing on the problem of “undermatching” won’t move the college completion margin in any substantial way. Focus on trying to increase college access for more than just the small number of very well-prepared students.

(3) Don’t overpromise on college ratings. While the push for federal ratings is moving forward this year, these ratings won’t be released for at least several more months. And once the ratings get released, there is no guarantee that students use the ratings in any meaningful way (although it’s possible). Additionally, tying aid to ratings takes an act of Congress and won’t happen during the current administration. Keep plugging forward on the ratings work, but don’t make them sound like the solution to all of our problems.

I’m looking forward to the speech tonight, and please send along your wish list through either the comments section or via Twitter!

Can Maintenance of Effort Programs Fund Public Higher Education?

The American Association of State Colleges and Universities released a policy paper this week calling for the federal government to enact (and fund) a program designed to encourage states to increase their support for public higher education. The AASCU brief rightly notes that per-student funding for public higher education has fallen over the past three decades (the magnitude of which is overstated somewhat due to their choice in inflation adjustments), and they propose a potential solution in the form of a maintenance of effort provision.

AASCU’s proposal would give colleges a partial match of their higher education appropriations, as long as per-FTE funding to institutions is higher than 50% of the value of the maximum Pell Grant and did not decline from the previous year’s value. The value of the matching funds would go up as state appropriations to institutions increased. They estimate that their hypothesized program would cost something in the neighborhood of $10-$15 billion per year, which could be paid for by cutting waste, fraud, and abuse in current financial aid systems (particularly among for-profits) and by implementing some sort of risk-sharing for student loans—which I’ve written on recently.

However, I view the plan as having a fatal flaw. By only including state appropriations to institutions in the calculation—and not requiring that the matching funds be spent on higher education—states can game the system to get additional money from the federal government. States could reduce funding to their financial aid programs and direct those funds toward institutional appropriations in order to get federal dollars, which could be used for K-12 education, healthcare, or tax cuts.

If states followed the incentive to eliminate all grant aid and fund institutions instead, tuition would likely decrease (something that AASCU institutions would appreciate). The most recent NASSGAP survey of state aid programs found that states spend $9.4 billion per year on grant aid, two-thirds of which is allocated based on financial need. Putting this money into state appropriations would cost the federal government several billion dollars, with no guarantees of any additional funding for students or institutions.

I have a hard time seeing Congress approving this maintenance of effort plan, regardless of the merits. Lobbyists for the private nonprofit and for-profit sectors are likely to strongly oppose this measure, as are lobbying groups for K-12 education, healthcare, and corrections spending (behind the scenes) since higher education is often cut at the expense of higher ed. In addition, this is likely to be a nonstarter in the House due to its placing restrictions on state priorities.

I’m glad to see this proposal from AASCU, but I don’t see it becoming law anytime soon. I would suggest that they follow up with some more details on their proposed risk-sharing program, as well as how elements of this plan could be incorporated into the Obama Administration’s proposed college ratings.