U.S. Student Loan Debt: Use the Phone and the Pen

February, 2014

Washington -- Many U.S. colleges, public and private, are openly trying to maximize the student loan burden they place on low income students. Simultaneously, they are trying to make low income access to college something that is the responsibility of private charity rather than a good taxpayer investment. It is no wonder that total student debt burden in the United States has passed $1 trillion and continues to grow.

Granted: "openly" may not be the right word, because the policies behind the financial aid manipulations leading to this result are often marked confidential. But anyone without willful blinders can see what's going on.

A case in point is the University of Virginia. The trade paper Inside Higher Education has reported that UVa's policy henceforth will be to see how much debt load the low income can take on while still enrolling at UVa, up to $28,000. IHE linked to a "confidential" report prepared by an enrollment management consultant that called for experiments to determine how much grant aid could be taken away from low-income students and shifted to other "higher academic quality" students (i.e., so-called vanity or cocktail scholarships).

When I was at the U.S. Department of Education's Institute of Education Sciences (IES), I once asked my colleagues how we might conduct research to develop better evidence that our federal grant programs actually worked so as to reduce student debt. I was troubled by my own research, based on existing data that, taken as a whole, showed no relationship between federal grant aid expenditures and student debt in the low income population. My colleagues cautioned against any new research, in part because they felt it would be unethical to give some students more grants than others equally qualified in order to test grant effectiveness.

Yet UVa is doing exactly that, and going beyond experiments in order to implement maximum low-income debt load.

What should the federal government do about this? Beyond the ethical questions involved, this is a blatant exercise in undermining the investment of federal taxpayers, which is supposed to aid low-income access and keep debt low.

One thing the Secretary of Education could do is to require more transparency from institutions that participate in the Department's Title IV financial aid programs. Robert Shireman recently made a case for putting more financial and accreditation information from Title IV participants, already held by the Department, on line. Opponents often say there is already too much information available to prospective college students, as it only confuses them; but his point is that the audience for such information includes journalists, watchdogs, researchers, counselors, and think-tanks, which are in a position to understand and to question colleges' policies and practices.

College student newspapers should be an ally in demanding more transparency. The UVa student newspaper has now challenged the UVa board's decision to implement the recommendations of its enrollment management consultant. Last year the student newspaper at George Washington University revealed that GW's actual admissions and financial aid policies were quite the opposite of those claimed. It is surprising that more student newspapers have not requested that the Secretary of Education enforce the Student Right to Know Act (shorthand for 20 USC 1092 and 34 CFR 668.42), which covers these matters but has never been enforced.

Attempting to smooth over the UVa controversy with students and others, the UVa president pledged some of her salary to help low-income students. A UVa board member even put up $4 million for the cause. But this would be a one-time charitable gift; the "confidential" policy would be ongoing and more than wipe out the effects of his gift. (Apparently it's in vogue for college leaders to announce big personal "scholarship" gifts, perhaps to save reputations and obscure the effect of their actual policies. Donald Graham, formerly the owner of the Washington Post and still head of the Kaplan chain of for-profit colleges, has announced a $25 million scholarship fund. Unfortunately, it pales in comparison to the staggering debt load being carried by Kaplan students.)

There is good news, however, from an unexpected source. NASFAA, the National Association of Student Financial Aid Administrators once associated with the worst kind of kickback and profiteering schemes, is revising its code of ethics. It even calls for "transparency and clarity" in the administration of student financial aid programs, and "removal of financial barriers." If abided by, potentially it could create more internal resistance from financial aid administrators against institutions' rush to continue to grow the nation's student loan debt burden.

In the coming year, too much will likely be made of reauthorization of the Higher Education Act and the conflict between the President and the Congress over some of its arcane provisions. Too little attention will be given to what can be done right now, under current law, to help students and to halt the student loan spiral. The President has said he has a phone and a pen; he'd be well advised to call his own Secretary of Education and start to look more closely at the causes of our national student loan crisis, and perhaps even discuss remedies already on the books. Among the remedies would be the limitation, suspension, and termination powers under 34 CFR 668.93, but that must be a subject for a separate post.