April, 2015
Washington -- Those of us who find fault with the current model of higher education finance – above all, too much reliance on student indebtedness – have an obligation not simply to complain but to offer constructive alternatives. I feel the obligation more acutely than other critics, perhaps, because I have worked in the institutions, in the states, in the Congress, in the interest groups, and in the federal agencies. For several years, I was liaison for higher education between the Department of Education and the Congress. Uncomfortable as it is to admit, not only have I been close to the situation, I may have contributed from time to time to its current sorry state.
So let me offer an alternative, what I will call R & R for higher education – in this case, Revival and Rebalance.
The Revival part is a look back over four decades to funding expectations and practices of an earlier time, and to the reasons our efforts worked better back then. In the 1970s, for example, states made greater funding commitments, grant-based student aid made a real difference, and student loan burden was comparatively small.
The Rebalance part is to shift current funding and funding incentives, so as to re-create the same kind of environment that once served the country well. There was a time in the living memory of many of us when college was affordable, access was expanding, and inequities by class and by race were diminishing.
The following ideas are offered with an eye toward getting bipartisan agreement in Congress. This is still possible in higher education. What is necessary is for members of the House and Senate to put aside their stale talking points for a few months and look carefully at what might be common ground. For Democrats, adoption of the following ideas would lead to higher grant levels and less reliance on loans; for Republicans, these ideas would use the mechanisms of federalism and achieve savings through cutting back waste, fraud, and abuse. Each side would have to acknowledge that such goals and principles are not the monopoly of either party, but are actually shared within both caucuses and can be touchstones for agreement.
• Move $6 billion from the Pell accounts so as to add $3 billion each to SEOG and SSIG.
• Scrap the old SEOG distribution formula and replace it with incentives for institutions to package student financial aid to reduce loan burdens for Pell-eligible students. In other words, the more institutions move away from loans for this population, the more they are rewarded in the SEOG distribution. I would also put a hold-harmless on SEOG so no institution would get less than the previous year, using the significant expansion of SEOG as the opportunity to revise the oft-criticized, current SEOG formula. I'd also put in an incentive for institutions to get more SEOG if they would cut back on athletic expenditures. At many institutions, this would give the academic leadership needed leverage over its athletic department.
• Reauthorize the state-federal SSIG matching program as it successfully operated in its first years after 1972. A $3 billion level of funding would draw states back in to providing more funds where they are needed, not for flashy facilities and top-heavy administration, but in keeping net prices down for middle and lower income students and families. This would result in more skin-in-the-game for states and engage them more in protecting both their students as consumers and their taxpayers. States would have considerable flexibility under SSIG to do their own incentivizing and prioritizing in matters of higher education access.
• Recognize that the Pell program has an estimated $6 billion of annual abuse in the form of displacement, or crowding out Pell. Many institutions routinely reduce their own institutional aid efforts for Pell recipients as part of enrollment management plans that move their funds to chase non-needy students and superficially higher "rankings." See the work of Lesley J. Turner, Stephen Burd, and Henry J. Riggs, for example. The widespread practice of discounting tuition so as to be able to manipulate student financial aid packages may soon result in the failure of many financially unstable colleges that have followed this strategy, unless other, saner models can be developed. The $6 billion figure does not include the incredible waste of Pell funds spent on fraudulent proprietary schools.
• Give current borrowers the relief they are due but of which they are unaware because of conflicts of interest and low prioritization at the Department of Education. Give borrowers back the bankruptcy protections they formerly had. (Those stories of bankruptcy abuse were largely untrue.) Permit borrower refinancing of current loans. Move loan servicing and collection out of the Department of Education if necessary.
Some of these ideas will run into immediate opposition from those who would rather make the coming higher education debate merely about the level of Pell grants, or student loan interest rates, or excessive regulation, or any other shopworn subject. I would ask those who really care about higher education opportunity not to allow arguments about Pell levels to obscure the more imporant issues of total grant aid, and to whom it goes; or allow arguments about future student loan interest rates to obscure the issues of loan principal and loan refinance; or allow arguments about federal regulation to obscure the potential that states can bring to the effort both in terms of funding and better oversight.
Most of all, there needs to be an admission in the higher education community, and especially on the Hill, that the current model of higher education finance is failing and that now is not the time to trot out old slogans but to roll up sleeves and get to work on restoring higher education opportunity to its rightful place in the American dream.
