Congress will have its fair share of contentious issues in higher ed in January, beginning with debt-free-college proposals backed by a growing number of Democrats. But a bipartisan consensus appears to be forming behind measures to hold colleges and universities more accountable for student financial outcomes like loan repayments.
Members of Congress on both sides of the aisle have introduced legislative proposals to introduce risk-sharing measures that would hold institutions accountable for student outcomes. The idea is that colleges and universities should have a greater stake in the outcomes of the student borrowers they graduate — if large numbers of students graduate and are unable to pay back their student debt, their institutions could see access to federal programs restricted. And both the Clinton and Trump campaigns have embraced the concept in their policy platforms. Observers in the policy analyst sector expect Congress to take up the issue once the dust settles from the 2016 elections — as part of a piecemeal approach to the student debt issue or, more likely, as part of a reauthorization of the Higher Education Act.
Policy thinkers say the main question marks beyond the politics of the campaign season and a larger reauthorization bill are what specific metrics colleges and universities would be graded on under such a rating system. Many who have concerns about the idea represent colleges that educate larger numbers of low-income students and feel the institutions will be punished for fulfilling that mission. At the same time, many experts say the federal government needs a tool for holding all colleges and universities accountable for how well they serve their students.
Ben Miller of the Center for American Progress said if risk sharing is to happen in the next Congress, it would likely be in the context of a reauthorization of the Higher Education Act. “Apart from the woefully inadequate cohort default rate, they don’t really have to produce any particular results,” Miller said of colleges and universities that would be judged on a risk-sharing formula. “I think folks are concerned that the investment in debt is too big to not expect more from the schools.”
Organizations representing sectors likely to be most affected by such a measure have staked out remarkably different positions. On one hand, the main industry group for for-profit colleges has said it is open to the tool, as is the Thurgood Marshall College Fund, which represents public historically black colleges and universities. But the United Negro College Fund, which represents private HBCUs, and organizations representing community colleges are outright opposed to any “skin in the game” measures.
Advocates for risk sharing say it’s necessary to align the incentives of institutions with students — to push colleges to think more about who would succeed on their campus and to provide better guidance to the students they do admit. Currently, the only real standard for institutional accountability is the cohort default rate — should a college go over 30 percent in three consecutive years, it can lose access to federal student loan and grant programs for students. But risk-sharing skeptics argue that the proposals being discussed are punitive measures that would discourage institutions from admitting underserved student populations who pose a high risk of default on loans.
The idea of risk sharing is part of an evolving focus on issues of higher education in the policy-making realm. Whereas advocates and policy makers in the past were concerned with improving enrollment numbers and later graduation rates, there is a growing preoccupation with outcomes like student indebtedness.
“We’ve seen more and more proposals and more and more conversation about the fact that federal policy should be looking at the end game and be looking at the success of the students and incentivize institutions to do the same for these dollars that way,” said Julie Peller, director of federal policy for the Lumina Foundation.
Lumina funded a risk-sharing policy brief released by Seton Hall University professor Robert Kelchen, which envisioned standards that would measure colleges and universities against peer groups serving similar student populations. The plans would also have separate components for Pell Grants and federal student loans. Currently, colleges with poor outcomes on student loans can see access to Pell Grant funds reduced as a consequence. Other proposals for the idea have been released by the American Enterprise Institute and the Institute for College Access and Success.
All three plans suggest replacing the cohort default rate as the standard by which colleges maintain eligibility for federal funding. The TICAS plan proposes that accountability measures be based on a Student Default Risk Indicator, which accounts for both the cohort default rates and the borrowing rate at a college. The AEI plan also calls for protections against economic factors outside of an institution’s control that affect graduates’ ability to find work and pay back loans. It proposes tying a risk-sharing formula to the national unemployment rate.
Those proposals attempt to address concerns over access as well. The AEI plan suggests offering colleges more Pell Grant funds to award to students in their first year, so they can spend their first year without taking on significant debt. The TICAS plan would offer financial incentives based on enrollment of low-income students to schools with low default risk indicators.
On the Hill, Senator Lamar Alexander, a Tennessee Republican who is chair of the Senate education committee, released a white paper on risk sharing along with a request for comments. Other bills were introduced by Senate Democrats Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island and Dick Durbin of Illinois.
A handful of organizations whose members serve large numbers of low-income, first-generation or minority students remain outright opposed to any risk-sharing plan. Cheryl Smith, senior vice president of the United Negro College Fund, said such proposals would create a perverse incentive for those institutions to admit fewer disadvantaged students.
“People are looking for kind of the quick fix to solve a lot of different things, whether it’s rising college costs, student debt, increasing graduation rates, and, you know, if you use a blunt instrument, we think you’re going to have unintended consequences,” she said.
Groups advocating for community colleges have likewise taken a dim view of risk sharing. The American Association of Community College said in a policy paper last year that risk sharing poses a threat to community colleges, which already have “massive ‘skin in the game.’” Even small declines in revenue from risk-sharing penalties would be costly for those institutions, and the policy could lead more community colleges to opt out of participating in federal loan programs, the association argues.
The idea of risk sharing is intuitively attractive but would not be easy to carry out without drawbacks, said Terry Hartle, senior vice president for the American Council on Education.
But there’s significant disagreement about the implications of risk sharing even among institutions likely to be impacted by those measures. Johnny C. Taylor, the president and CEO of the Thurgood Marshall College Fund, said schools serving low-income and first-generation students should be even more cognizant of elite universities that they are admitting students who can succeed.
“I think the concept of risk sharing is not only appropriate, but it’s wise. The issue is how you go about doing it,” he said. “At the end of the day, if we establish what are going to be standards for which you will be held accountable and then we are comparing like for like institutions, then it is totally appropriate.”
The likelihood of some kind of risk-sharing proposal appears to be growing with or without the cooperation of skeptical stakeholders. Steve Gunderson, president and CEO of Career Education Colleges and Universities, said leaders of both parties have committed to the concept as an element that should be included in any reauthorization of the Higher Education Act in the next Congress. And the for-profit association is open to being held accountable for student outcomes.
“We are not going to have in this country a premise that says everyone is entitled to free college with no accountability,” he said. “That’s just not it’s not realistic in today’s age.”
One of the challenges for any debate over risk-sharing measures is that there isn’t one single proposal for various stakeholders to critique. The proposals already released for risk-sharing measures show an awareness of the concerns raised by skeptics. Those fears aren’t without merit, said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.
He said any plan adopted by Congress will have to thread the needle between insufficient accountability for colleges and limiting access.
“The test here is a simple one — institutions should generally leave the vast majority of students they admit better educated and better off, not worse off,” he said.
Source: INSIDE Higher ED