politics – Page 6 – Robert Kelchen

The 2013 Higher Education Not Top Ten List

Yesterday, I put out my top-ten list of higher education policy and finance issues from 2013. And today, I’m back with a list of not-top-ten events from the year (big thanks to Justin Chase Brown for inspiring me to write this post). These are events that left me shaking my head in disbelief or wondering how someone could fail so dramatically.

(Did I miss anything? Start the discussion below!)

10. Monsters University isn’t real. The higher education community was abuzz this summer with the premiere of Pixar’s newest movie about one of the few universities outside Fear Tech specializing in scaring studies. The Monsters University website is quite good, and as Jens Larson at U of Admissions Marketing notes, it’s hard to distinguish from many Title IV-participating institutions. I’ll use this blog post to announce my willingness to give a lecture or two at Monsters University. (As an aside, since the two main characters didn’t graduate, their post-college success may not help MU’s scores in a college rating system.)

9. Brent Musburger set men back at least five decades in the course of 30 seconds. His public ogling of the girlfriend of Alabama quarterback A.J. McCarron during January’s BCS championship game instantly became a YouTube sensation. Musburger shouldn’t have listened to his partner in The Waterboy, Dan Fouts, who urged him to not hold anything back in the last game of the season. McCarron, on the other hand, is preparing to play Oklahoma in the Sugar Bowl on January 2.

8. Rankings and ratings are not the same thing. While college leaders tend not to like the Obama Administration’s proposed Postsecondary Institution Rating System, it is important to emphasize the difference between rankings and ratings. Rankings assign unique values to each institution (like the college football or basketball polls), while ratings lump colleges into broad categories (think A-F grades). Maybe since I work on college rankings, I’m particularly annoyed by the confusion. In any case, it’s enough to make my list.

7. Mooooove over: The College Board has another rough year. This follows a rough 2012 for the publishers of the SAT, as more students took the ACT than the SAT for the first time last year. But in 2013, the redesign of the SAT got pushed back from 2015 to 2016, giving the ACT more time to gain market share. The College Board followed that up with a head-scratching example of “brand-ing,” passing out millions of cow stickers to students taking the PSAT. If these weren’t enough, the College Board also runs the CSS Profile, a supplemental (and not free) application for financial aid required by many expensive institutions. Rachel Fishman at New America has written extensively about the concerns of the Profile.

6. Gordon Gee is the most interesting man in higher education. The well-traveled university president began 2013 leading Ohio State University, but left the post this summer after his 2012 comments disparaging Notre Dame, Catholic priests, and the ability of the Southeastern Conference to read came to light. Yet, he and his large bowtie collection will be heading to West Virginia University this spring as he assumes the role of interim president. There is still no word if the Little Sisters of the Poor will show up on WVU’s 2014 football schedule.

5. Rate My Professor is a lousy measure of institutional teaching quality. I’m not going to fully dismiss Rate My Professor, as I do believe it can be correlated with an individual professor’s teaching quality. But a Yahoo! Finance piece claiming to have knowledge of the 25 colleges with the worst professors cross the boundaries of absurd. I quickly wrote a response to that piece, noting that controlling for a student’s grade and the difficulty of the course are essential in order to try to isolate teaching quality. This was by far my most-viewed blog of 2013.

4. Elizabeth Warren’s interest rate follies. The Democratic Senator from Massachusetts became even more of a progressive darling this spring when she announced a plan to tie student loan interest rates to the Federal Reserve’s overnight borrowing rate—0.75%. Unfortunately, this plan made no sense on several dimensions. While overnight borrowing has nearly no risk, student loans (over a ten-year period) have considerable risk. Additionally, if interest rates were set this low, money would have to come from somewhere else. I would much rather see the subsidy go upfront to students through larger Pell Grants than through lower interest payments after leaving college. Fortunately, Congress listened to smart people like Jason Delisle at New America and her plan went nowhere.

3. The Common Application fails early applicants. The Common Application, used by a substantial number of elite colleges, did not work for some students applying in October and November. The reason was that the Common App’s new software didn’t work and they failed to leave the previous version available in case of problems. Although this didn’t affect the vast majority of students who aspire to attend less-selective institutions, it certainly got the chattering classes talking.

2. The federal government shut down and budget games ensued all year long. The constant partisan battle culminated with a sixteen-day shutdown in October, bringing much of the Department of Education to a screeching halt. While the research community used Twitter to trade downloaded copies of IPEDS data and government reports, other disruptions were more substantial. 2013 also featured sequestration of some education spending, although it looks like the budget process might return to regular order for the next two years.

1. Georgetown Law finds a way to stick taxpayers with the entire cost of law school. It is no secret that law school is an expensive proposition, with six-figure debt burdens becoming the norm at many institutions. But some of the loans can be forgiven if students pursue public service careers for a decade, a program that was designed to help underpaid and overworked folks like public defenders or prosecuting attorneys.

Georgetown’s Loan Repayment Assistance Program advertises that “public interest borrowers might now pay a single penny on their loans—ever!” To do this, the law school increased tuition to cover the cost of 10 years’ worth of loan payments under income-based repayment for students making under $75,000 per year. Students take out Grad PLUS loans to fund this upfront, but never have to pay a dime of those loans back as Georgetown makes the payments. Jason Delisle and Alex Holt, who busted this scheme wide open this summer, estimate that students will have over $150,000 in loans forgiven—and put on the backs of taxpayers. Although Georgetown tries to defend the practice as being good for society, it is extremely hard to make that argument.

Honorable mentions: #Karma, lousy attacks on performance-based funding research, financial stability of athletics at Rutgers and Maryland, and parking at 98% of campuses.

The Year of Higher Education Policy in Review

As 2013 draws to a close, it’s time to take a look back at some of the biggest happenings (or non-happenings) of the year. Some of these items would have been on the list for several years, but others (including the top happening of the year) are brand-new for 2013. Enjoy the list!

10. There is still some hope in the academic job market. In spite of continued concerns about the working conditions of adjuncts (as exemplified in the case of former Duquesne adjunct Margaret Mary Vojtko—read both the original op-ed and a thoughtful retelling of her life story), the tenure-track job market may just be springing back to life after a few lean years. I’m thankful to be one of those success stories, as I got a great job offer from Seton Hall University before defending my dissertation at the University of Wisconsin-Madison. (Look at my faculty webpage…I’m bona fide and I love my job!) But, in other disciplines, the rough market continues.

9. We heard more noise about reauthorizing the Higher Education Act, but no action. The HEA, which dates back to 1965, is supposed to be renewed in 2014. And Congress is saying all the right things about renewing the HEA, including holding a series of hearings on reforming the Pell Grant. However, it is hard to find anyone in academia or the policy community who thinks that is likely. After all, No Child Left Behind (the Elementary and Secondary Education Act) expired in 2007. If I had to put money on a reauthorization date, I would go for 2017.

8. The higher ed policy world gets RADDical. During late 2012 and early 2013, 17 organizations and teams released white papers as a part of the Gates Foundation-funded Redesigning Aid Design and Delivery (RADD) project. The recommendations of the groups ranged widely (see this nice summary from the National Association of Student Financial Aid Administrators, one of the participating organizations), but all groups suggested substantial changes from the status quo. It’s worth noting that the recommendation shared across the largest number of reports is stabilizing or increasing Pell funding, which could be a tough political lift in the current fiscal environment. This effort was not without its skeptics, as this well-commented Chronicle piece on the influence of Gates funds details.

7. The FAFSA changes to recognize same-sex parents, but is still complicated. Despite the push among many of the RADD grantees and at least some interest in Congress, the FAFSA ends 2013 as perhaps being more complicated than it was at the beginning of the year. This is because the venerable form changed to recognize the existence of same-sex marriages after this year’s Supreme Court ruling and political pressure before the ruling took place. The net result is that some students will see less aid. I would also be remiss if I didn’t mention my work with NASFAA on the feasibility of using prior prior year financial data to determine aid eligibility. That might get tied into the next HEA authorization.

6. Congress reached a reasonable solution on student loan interest rates. Put your shocked face on, folks—Congress did accomplish something without causing too much pain to students or financial aid offices. Interest rates on undergraduate subsidized Stafford loans were set to increase from 3.4% to 6.8% on July 1 (and actually did for a few weeks), leading to the hashtag #DontDoubleMyRate. The rates ended up being tied to 10-year Treasury notes, yielding a rate of under 4% this year; however, advocates note that the rate is likely to rise over time. Thankfully, Senator Warren’s plan to set interest rates based on the Federal Reserve discount window (which is nearly riskless) never received serious discussion.

5. MOOCs expand, but their outcomes are questioned. Massive open online courses (MOOCs) are seen by some as having the potential to change how higher education is delivered, but it is safe to say that not all faculty support them—as evidenced at San Jose State. MOOCs have also been hammered for low completion rates, which are often below 10%. The always-astute Kevin Carey notes, however, that the low completion rates are partially due to people who sign up for the course but never really attempt to complete them. Additionally, large numbers of students may still be completing the course, even if completion rates are low. This issue will only get hotter during 2014.

4. Student loan debt grows amid possible reforms. The Institute for College Access and Success (TICAS) recently put out its annual report on student debt loads—and the results aren’t pretty. The average debt load of graduates was $29,400 in 2012, and 71% of students took out debt. (Even more concerning is the fact that TICAS can’t even get data on a lot of colleges’ graduates.) Increasing debt loads have led to innovative plans to make college more affordable. The most-discussed plan is Oregon’s Pay it Forward proposal, which would be a type of income-based repayment covering tuition and fees in that state. While I have serious concerns about whether the program could work (but think it’s worth a demonstration program), my dear friend and dissertation mentor Sara Goldrick-Rab makes her opposition clear.

3. One of the nation’s more prominent community colleges might actually lose its accreditation. The City College of San Francisco is currently slated to lose its accreditation next summer if they do not meet 357 goals set by the Accrediting Commission for Junior and Community Colleges. Since students cannot qualify for federal Title IV financial aid if they attend an unaccredited college, this would effectively shut down an institution that had nearly 100,000 students. Students and faculty went after the accreditor and nearly shut it down, although it was recently announced that the accreditor could operate for another year. I still think that CCSF will keep its accreditation, but the damage (in terms of enrollment) may already be done.

2. Gainful employment continues to be a hot political topic. The Obama Administration proposed gainful employment regulations several years ago, in which vocationally-oriented colleges would lose Title IV eligibility if they had poor employment and loan repayment outcomes. These rules have been in and out of court for several years, and a new set is now being developed. The Department of Education tried to reach consensus with stakeholders last week, but failed; this means that ED will write its own rules. For all the developments that will happen in 2014, I’ll defer you to Ben Miller’s great work covering the topic.

1. PIRS roars to the public’s attention, and colleges are not happy. As regular readers of this blog know, I’m the methodologist for Washington Monthly’s annual college rankings. Yet I was completely floored when President Obama announced the impending development of a college ratings system for the 2014-15 academic year. (The official title—Postsecondary Institution Rating System or PIRS—just got released yesterday.) Thankfully, I was able to recover quickly enough to go on MSNBC the next night to talk about the proposal.

The Department of Education has done a lot of listening on the college ratings proposal, and the vast majority of the feedback in the higher education community appears to be negative. A recently released poll of college presidents highlights the opposition amid concerns of the ratings favoring highly selective institutions. (Yet the only measure that a majority of college presidents supported using was graduation rates—a measure strongly tied to selectivity.) This recent conference panel also shows some of the issues facing the ratings.

While the long-term goal is to tie ratings to financial aid by 2018 or so, I don’t see this as being likely to happen given its requirement of Congressional approval. However, the ratings could potentially help students even if institutions don’t like the bright lights of accountability. Let’s just say that the discussion around the release of the first ratings this summer should be spicy.

I’ll post a not-top-ten list of higher education policy issues later this week. Send me your suggestions for that piece, and let me know what you think of this list!

Don’t Dismiss Performance Based Funding Research

Performance-based funding (PBF), in which at least a small portion of state higher education appropriations are tied to outcomes, is a hot political topic in many states. According to the National Conference of State Legislatures and work by Janice Friedel and others, 22 states have PBF in place, seven more are transitioning to PBF, and ten more have discussed a switch.

The theory of PBF is simple: if colleges are incentivized to focus on improving student retention and graduation rates, they will redirect effort and funds from other areas to do so. PBF should work if two conditions hold:

(1) Colleges must currently be using their resources in ways that do not strongly correlate with student success, a point of contention with many institutions. If colleges are already operating in a way that maximizes student success, then PBF will not have an impact. PBF could also have negative effects if colleges end up using resources less effectively than they currently are.

(2) The expected funding tied to performance must be larger than the expected cost of changing institutional practices. Most state PBF systems currently tie small amounts of state appropriations to outcomes, which could result in the cost of making changes smaller than the benefits. Colleges also need to be convinced that PBF systems will be around for the long run instead of until the next governor ends the plan or state budget crises cut any funds for PBF. Otherwise, they may choose to wait out the current PBF system and not make any changes. Research by Kevin Dougherty and colleagues through the Community College Research Center highlights the unstable nature of many PBF systems.

For these reasons, the expected impacts of state PBF plans on student outcomes may not be positive. A recent WISCAPE policy brief by David Tandberg, an assistant professor at Florida State University, and Nicholas Hillman, an assistant professor at the University of Wisconsin-Madison, examines whether PBF plans appear to affect the number of associate’s and bachelor’s degrees awarded by institutions in affected states. Their primary findings are that although some states had significantly significant gains in degrees awarded (four at the four-year level and four at the two-year level), other states had significant declines (four at the four-year level and five at the two-year level). Moreover, PBF was most effective in inducing additional degree completions in states with long-running programs.

The general consensus in the research community is that more work needs to be done to understand the effects of state performance-based funding policies on student outcomes. PBF policies differ considerably by state, and it is too early to evaluate the impact of policies on states that have recently adopted the systems.

For these reasons, I was particularly excited to read the Inside Higher Ed piece by Nancy Shulock and Martha Snyder entitled, “Don’t Dismiss Performance Funding,” in response to Tandberg and Hillman’s policy brief. Shulock and Snyder are well-known individuals in the policy community and work for groups with significant PBF experience. However, their one-sided look at the research and cavalier assumptions about the authors’ motives upset me to the point that writing this response became necessary.

First of all, ad hominem attacks about the motives of well-respected researchers should never be a part of a published piece, regardless of the audience. Shulock and Snyder’s reference to the authors’ “surprising lack of curiosity about their own findings” is both an unfair personal attack and untrue. Tandberg and Hillman not only talk about the eight states with some positive impacts, they also discuss the nine states with negative impacts and a larger number of states with no statistically significant effects. Yet Shulock and Snyder do not bother mentioning the states with negative effects in their piece.

Shulock and Snyder are quite willing to attack Tandberg and Hillman for a perceived lack of complexity in their statistical model, particularly regarding their lack of controls for “realism and complexities.” In the academic community, criticisms like this are usually followed up with suggestions on how to improve the model given available data. Yet they fail to do so.

It is also unusual to see a short policy brief like this receive such a great degree of criticism, particularly when the findings are null, the methodology is not under serious question, and the authors are assistant professors. As a new assistant professor myself, I hope that this sort of criticism does not deter untenured faculty and graduate students from pursuing research in policy-relevant fields.

I teach higher education finance to graduate students, and one of the topics this semester was performance-based funding and accountability policy. If Shulock and Snyder submitted their essay for my class, I would ask for a series of revisions before the end of the semester. They need to provide empirical evidence in support of their position and to accurately describe the work done by Tandberg and Hillman. They deserve to have their research fairly characterized in the public sphere.

What Should Be in the President’s College Ratings?

President Obama’s August announcement that his administration would work to develop a college rating system by 2015 has been the topic of a great deal of discussion in the higher education community. While some prominent voices have spoken out against the ratings system (including my former dissertation advisor at Wisconsin, Sara Goldrick-Rab), the Administration appears to have redoubled its efforts to create a rating system during the next eighteen months. (Of course, that assumes the federal government’s partial shutdown is over by then!)

As the ratings system is being developed, Secretary Duncan and his staff must make a number of important decisions:

(1) Do they push for ratings to be tied to federal financial aid (requiring Congressional authorization), or should they just be made available to the public as one of many information sources?

(2) Should they be designed to highlight the highest-performing colleges, or should they call out the lowest-performing institutions?

(3) Should public, private nonprofit, and for-profit colleges be held to separate standards?

(4) Should community colleges be included in the ratings?

(5) Will outcome measures be adjusted for student characteristics (similar to the value-added models often used in K-12 education)?

After these decisions have been made, then the Department of Education can focus on selecting possible outcomes. Graduation rates and student loan default rates are likely to be a part of the college ratings, but what other measures could be considered—both now and in the future? An expanded version of gainful employment, which is currently used for vocationally-oriented programs, is certainly a possibility, as is some measure of earnings. These measures may be subject to additional legal challenges. Some measure of cost may also make its way into the ratings, rewarding colleges that operate in a more efficient manner.

I would like to hear your thoughts (in the comments section below) about whether these ratings are a good idea and what measures should be included. And when the Department of Education starts accepting comments on the ratings, likely sometime in 2014, I encourage you to submit your thoughts directly to them!

“Bang for the Buck” and College Ratings

President Obama made headlines in the higher education world last week with a series of speeches about possible federal plans designed to bring down the cost of college. While the President made several interesting points (such as cutting law school from three to two years), the most interesting proposal to me was has plan to create a series of federal ratings based on whether colleges provide “good value” to students—tying funding to those ratings.

How could those ratings be constructed? As noted by Libby Nelson in Politico, the federal government plans to publish currently collected data on the net price of attendance (what students pay after taking grant aid into account), average borrowing amounts, and enrollment of Pell Grant recipients. Other measures could potentially be included, some of which are already collected but not readily available (graduation rates for Pell recipients) and others which would be brand new (let your imagination run wild).

Regular readers of this blog are probably aware of my work with Washington Monthly magazine’s annual set of college rankings. Last year was my first year as the consulting methodologist, meaning that I collected the data underlying the rankings, compiled it, and created the rankings—including a new measure of cost-adjusted graduation rate performance. This measure seeks to reward colleges which do a good job serving and graduating students from modest economic means, a far cry from many prestige-based rankings.

The metrics in the Washington Monthly rankings are at least somewhat similar to those proposed by President Obama in his speeches. As a result, we bumped up the release of the new 2013 “bang for the buck” rankings to Thursday afternoon. These rankings reward colleges which performed well on four different metrics:

Have a graduation rate of at least 50%.
Match or exceed their predicted graduation rate given student and institutional characteristics.
Have at least 20% of students receive Pell Grants (a measure of effort in enrolling low-income students).
Have a three-year student loan default rate of less than 10%.

Only one in five four-year colleges in America met all four of those criteria, which highlighted a different group of colleges than is normally highlighted. Colleges such as CUNY Baruch College and Cal State University-Fullerton ranked well, while most Ivy League institutions failed to make the list due to Pell Grant enrollment rates in the teens.

This work caught the eye of the media, as I was asked to be on MSNBC’s “All in with Chris Hayes” on Friday night to discuss the rankings and their policy implications. Here is a link to the full segment, where I’m on with Matt Taibbi of Rolling Stone and well-known author Anna Kamenetz:

http://video.msnbc.msn.com/all-in-/52832257/

This was a fun experience, and now I can put the “As Seen on TV” label on my CV. (Right?) Seriously, though, stay tuned for the full Washington Monthly rankings coming out in the morning!

Financial Aid as a Paycheck?

President Obama is set to make a series of speeches this week addressing college affordability—a hot topic on college campuses as new students move into their dorm rooms. An article in this morning’s New York Times provides some highlights of the plan. While there are other interesting proposals, most notably tying funding to some measure of college success, I’m focusing this brief post on the idea to disburse Pell Grants throughout the semester—“aid like a paycheck.”

The goal of “aid like a paycheck” is to spread grant aid disbursals out through the semester so students take ownership of their education. Sounds great, right? The problem is that it’s only been tested at a small number of community colleges in low-tuition states, such as California. If a student has more financial aid than the cost of attendance, then there is “extra” aid to disburse. But this doesn’t apply to the vast majority of students, particularly those at four-year schools. Spreading out aid awards for students with unmet need creates an even bigger financial gap at the beginning of the semester.

In order for “aid like a paycheck” to work for the vast majority of students, we have to make other costs look like a monthly bill. If students still have to pay for tuition, books, and housing upfront (or face a hefty interest rate), this program will create a yawning financial gap. If colleges want to be accountable to students, perhaps they should bill students per month for their courses—that way, dropped courses hurt the institution’s bottom line more than the student’s. This would delay funds coming in to a college, which can result in a loss of interest given the large amounts of tuition revenue.

Before we try “aid like a paycheck” on a large scale, Mr. President, let’s try making colleges get their funds from students in that same way. And let’s also get some research on how it works for students whose financial need isn’t fully met by the Pell Grant. The feds have the power to try demonstration programs, and this would be worth a shot.

Does This Explain Opposition to Market-Based Interest Rates?

As of this writing, it appears that the U.S. Senate has finally reached an agreement on student loan interest rates after subsidized Stafford rates doubled from 3.4% to 6.8% on July 1. The general terms of the agreement are similar to what President Obama proposed in his FY 2014 budget and what the House of Representatives agreed to back in June, with some compromises on each side.

The big difference between current law and the Senate agreement is that interest rates for nearly all student loans will be tied to the 10-year Treasury rate, which currently sits at about 2.5%. (Undergraduates would pay a 2.05% premium above the Treasury rate on Stafford loans to account for program costs and the risk of offering the loans.) However, the Treasury rate is expected to increase to 5.6% by 2016, pushing the interest rate for undergraduates to 7.65% from less than 5%. The plan includes a cap at 8.25%, which may be reached according to the CBO report.

The Senate agreement is not without its critics, particularly on the political Left. Senator Bernie Sanders, a Vermont independent and a self-described “socialist,” criticized the plan as “dangerous” in an article in The Hill. His criticism lies in the fact that interest rates can rise well above the current 6.8% over time, a very real concern given the interest rate projections. While the plan is expected to pass the Senate (and the House), some other Senate Democrats will likely vote no as well.

At this point in the great interest rate debate, I have to wonder if there is another reason some politicians oppose market-based interest rates. Tying student loan interest rates to the 10-year Treasury note directly connects students’ future payments to the cost of federal borrowing. And that cost of federal borrowing is influenced by the federal government’s fiscal policy.

This connection between federal borrowing and student loan rates could potentially have the following repercussions. If loans are tied to Treasury notes—and there is no way to fix the rate as has been done for the past seven years—students should have an incentive to push for federal policies which lower the federal government’s cost of borrowing. (With the decline in home ownership rates among younger adults, fewer 20- and 30-somethings have mortgages, which are affected by federal borrowing costs.)

The policy that best reduces the cost of borrowing is a balanced budget, which reduces the need for additional borrowing. The passage of the Omnibus Budget Reconciliation Act of 1993, which reduced the budget deficit through a combination of tax hikes and spending cuts, had the effect of driving down long-term interest rates. (For more on this, I highly recommend reading Bob Woodward’s Maestro about Alan Greenspan’s role in the policy discussions.)

My question to readers is whether you think that some politicians may oppose market-based interest rates because more young adults may place pressure on Congress to find some legislative solution to balance the budget—although the solutions certainly vary by political persuasion. Say it’s 2016 and undergraduate Stafford rates are 7.5%, with hitting the 8.25% cap becoming more likely. Could we see student advocacy organizations pushing for a balanced budget to bring down interest rates? I don’t know how many people will think this way, but it’s something to consider.

Something Old, Something New: The FY 2014 Obama Budget

Even though I know that it has no chance of being passed in anything resembling its current form, I am excited to get my hands on President Obama’s long-delayed budget for Fiscal Year 2014 (short version, long version, six-page summary of the education portion). The funding request for the Department of Education is for $71.2 billion in discretionary spending, 4.6% higher than this year’s (pre-sequester) budget; ED is unlikely to see an increase of greater than inflation this year given the current political climate.

I tweeted my way (follow me!) through some of the key points relating to higher education yesterday, and am now back with a more detailed summary of the budget. (I also recommend Libby Nelson’s excellent summary in today’s Inside Higher Ed.)This year’s theme is “something old, something new,” as many of the proposals are recycled from last year—but with one key difference that will affect millions of students.

First of all, not much changes with respect to the Pell Grant. The President proposes a $140 increase in the maximum Pell Grant to $5,785, while the program is on more solid financial footing for the next few years. He is again trying to get a higher education version of Race to the Top passed this year, which will look similar to the plan from last year. Again, there is a strong focus in the STEM fields and for program evaluation (the latter of which is welcome from my perspective). The biggest program boost I could find was to FIPSE (the Fund for the Improvement of Postsecondary Education), going from under $2.4 million to $260 million. Although it is unlikely to be adopted, it does show a commitment to demonstration projects in K-12 and higher education.

The most controversial part of the President’s budget is the proposed shift to market-based interest rates. A day after Republican Senators Coburn, Burr, and Alexander introduced a bill to tie all interest rates to the ten-year Treasury rate (currently 1.8%) plus three percentage points, the President’s budget also proposed tying interest rates to the same measure. His plan is more nuanced, with different loans having different premiums over the Treasury rate (see p. 344-350):

Subsidized Stafford: Treasury plus 0.93% (about 2.75% currently)

Unsubsidized Stafford and Perkins: Treasury plus 2.93% (about 4.75%)

PLUS: Treasury plus 3.93% (about 5.75%)

GOP plan: All loans are Treasury plus 3% (about 4.8%)

These rates are far lower than the current rates (3.4% for subsidized Stafford, 6.8% for unsubsidized Stafford, and over 8% for graduate unsubsidized loans), but do shift risk onto students as the rate for new loans would change each year. There would also be no interest rate cap, which is lamented by many advocates. (Income-based repayment provides another alternative, however.)

If either of these plans is adopted, the interest rate cliff would be eliminated as students would no longer have to wait on Congress to know their rates. However, students are likely to see rates rise as Treasury yields return toward their historical norm. The Congressional Budget Office predicts that 10-year Treasury notes will yield 5.2% by 2018, which would put unsubsidized loans just over 8%. (This is still lower than the recent rate for unsubsidized graduate loans, with which I am quite familiar.) If rates go higher than that, I expect Congress to enact an interest rate cap in several years.

The federal budget process does not move quickly, especially with a divided Congress. While I do not expect large increases in the Department of Education’s budget, I am optimistic that a market-based solution to interest rates will be adopted in order to provide more certainty in the short run and to bring graduate loan rates closer to what the private market would otherwise offer.

The Benefits of Biennial Budgets

The federal government had a substantial problem with its budgeting process over the past several years, with funding being provided by a series of continuing resolutions outside the annual process for more than three years. With bipartisan frustration over this process growing, a group of centrist Senators, led by Jeanne Shaheen (D-NH) and Johnny Isakson (R-GA), have proposed a switch from annual to biennial budgets. This proposal was introduced in the past Congress and was not seriously discussed, but is likely to be considered this time around with the interest of Senate Majority Leader Harry Reid (D-NV).

Biennial budgets are not uncommon at the state level. A 2011 report from the National Conference of State Legislatures shows that 19 states have biennial budgets, including Ohio, Texas, and Wisconsin. Only four of these states have legislatures that only meet every two years, meaning that 15 states have actively chosen the biennial path.

Biennial budgeting allows for more time for debate and discussion of tricky matters, but the budgets often have to be adjusted because of the balanced budget requirements. (Budget repair bills are well-known here in Wisconsin.) The lack of such a requirement at the federal level makes biennial budgeting even more feasible. While I am a staunch supporter of a balanced budget, I recognize that a small error in economic growth or demographic assumptions can result in a slightly unbalanced budget over a two-year period. As long as the assumptions are reasonable, I’m fine with a small error which can be addressed in the future.

Requiring a budget every two years instead of one can help provide more stability to federal education funding, particularly regarding policies and levels of student financial aid and education research. This stability has the potential to have positive impacts which are independent of the actual funding levels. For example, if the exact dollar amount for the maximum Pell Grant is known, a push should be made to communicate that level to students who are likely to qualify upon entering college. Providing earlier information of financial aid could induce the marginal student to enroll in college and perhaps even take an additional high school course which would lower the likelihood of remediation. This push toward earlier notification of financial aid is consistent with other parts of my research agenda, and would have the added benefit (in my view) of allowing Pell Grant funding to be flexible as needed in the future.

A biennial budget process could also have the benefit of making student loan interest rates more predictable. Under current law, undergraduate subsidized Stafford interest rates are currently set to double (from 3.4% to 6.8%) on July 1. (This is a budgetary matter because the interest rate does determine the level of profit or loss for the federal government.) While I am a strong supporter of plans to tie student loan interest rates to market conditions—such as the rate paid on Treasury bills plus 3%—biennial budgeting would at least allow interest rates to not face a cliff every single year.

Biennial budgeting has the potential to result in more stability in education funding, as well as result in budgets which are well-discussed and passed under regular order. For those reasons, I am supportive of moving from annual to biennial budgets. I would love to hear your thoughts on this proposal in the comments!

Tying FAFSA Data to IPEDS: The Need for “Medium Data”

It is safe to say that I’m a fan of data in higher education. Students and their families, states, and the federal government spend a massive amount of money on higher education, yet we have relatively little data on outcomes other than graduation rates and student loan default rates for a small subset of students—those who started as first-time, full-time students. The federal government currently operates on what I call a “little data” model, with some rough institutional-level measures available through IPEDS. Some of these measures are also available through a slightly more student-friendly portal in the College Navigator website.

As is often the case, some states are light years ahead of the federal government regarding data collection and availability. Florida, Texas, and Ohio are often recognized as leaders in terms of higher education data availability, both in terms of collecting (deidentified) student-level data and tying together K-12, higher education, and workforce data outcomes. The Spellings Commission in 2006 did call for a student-level dataset at a national level, but Congress explicitly denied the Department of Education this authority in the reauthorization of the Higher Education Act. Although there are sporadic movements toward “big data” at the national level, making this policy shift will require Congressional support and a substantial amount of resources.

Although I am willing to direct resources to a much more robust data system (after all, how can we determine funding priorities if we know so little about student outcomes?), a “medium data” approach could easily be enacted by using data sources already collected by colleges or the federal governemnt. I spent a fair amount of the morning today trying to find a fairly simple piece of data—the percentage of students at given colleges whose parent(s) did not complete college. The topic of first-generation students is important in policy circles, yet we have no systemic data on how large this group of students is at most colleges.

FAFSA data could be used to expand the number of IPEDS measures to include such topics as the following, in addition to first-generation status:

(1) The percentage of students who file the FAFSA

(2) Average/median family income

(3) Percentage of students with zero EFC

(4) Information on means-tested benefit receipt (such as food stamps or TANF)

(5) Marital status

Of course, these measures would only include students who file the FAFSA—which would exclude many students who would not qualify for need-based aid, as well as some students who are unable to navigate through the complicated form. But these measures would provide a better idea of institutional diversity beyond racial/ethnic diversity and the percentage of students receiving Pell Grants and could be incorporated into IPEDS at a fairly low cost. Adding these FAFSA measures would help move IPEDS from “little data” to “medium data” and provide more useful measures to higher education stakeholders.