Dive Brief
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Lamar Alexander, chairman of the Senate Health, Education, Labor and Pensions Committee, released a framework for reforming the nation’s federally funded student financial aid programs. Given the hundreds of billions of dollars in federal support for higher education, the white paper argues for better financial stewardship of taxpayer dollars through better aligning costs with value and investing more in programs of study that have better returns on investments.
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Accountability measures, like cohort default rates and the 90/10 and gainful employment rules, fall short, according the white paper. It proposes creating the cohort repayment rate rule, which would calculate the percentage of federal student loan dollars that have been repaid five years after borrowers leave a school. If a college had a cohort repayment rate below 20 percent, the institution would be required to pay part of the difference to the federal government.
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Recovering the costs of the federal government’s $1.4 trillion higher education loan portfolio might be in jeopardy as trends show at a growing inability of students to pay back their education debt. For example, one out of every six student loans are in default and default debt topped $137 billion last year. Going forward, a new framework should avoid loading students with massive amounts of debt, and federal aid should be targeted at programs with the best employment options upon completion.
Dive Insight
Proposals in Alexander’s white paper reflect the direction that the Republican Party would like higher education reform to take. Underneath the paper’s lofty pronouncements about financial stewardship and accountability, lies a wide gulf of policy differences between congressional Republicans and Democrats. For some time now, Republicans have been eager to reform the nation’s massive student loan program, and and want institutions to take some responsibility when their students fail to payback student loans.
Shortly after its release, the ranking Democrat on the committee, Senator Patty Murray, sent a tweet against the paper’s framework, saying that “we have some serious and tough issues to work through.”
Congress needs to reform higher education as issues of affordability and access are urgent. However, there is little evidence that Congress can pass a big overhaul with the right mix of policy details that actually bode well for the sector. Looking at the two big legislative battles over healthcare and tax reform, the outcome could be worse for higher education. It might be smarter to take on higher education reform piece by piece.