December, 2021
Washington — In the previous post, I offered initial thoughts about Elizabeth Tandy Shermer's book, Indentured Students: How Government-Guaranteed Loans Left Generations Drowning in College Debt. It is an important work, worthy of further dissection and debate.
It is the work of an outsider to the student-loan industry, a historian who brings formidable skills to her subject and whose analyses are often a refreshing departure from lesser works by authors who bring hidden and not-so-hidden agendas to their product.
Conversely, I am a student-loan insider — and political scientist, as opposed to historian — whose observations and experiences sometimes do not line up in quite the same direction as Professor Shermer's analyses. Let me illustrate with a working paper I wrote while at the U.S. Department of Education in 2003, and then turn to how the findings apply to Shermer's book.
Using the databases of the National Center for Education Statistics, I looked at student financial aid distributions over time. Here is some of what I found:
1. Whether federal Pell grant funding for financially needy students went up or down over time, loans in students' financial aid packages went up, especially to the low-income. Institutions superimposed their own, often conflicting priorities over federal grant and loan programs.
2. Low-income Black students were given the greatest loan burdens in student financial aid packages. Non-needy students of all races were favored in aid packaging.
3. Many colleges placed private loans in student financial aid packages, with less favorable terms that federal guaranteed loans, even for students who had remaining federal eligibility.
None of this was a big surprise. I had previously written a peer-reviewed paper in 1997 that demonstrated how grants and loans were fungible in student financial aid packages, so the actual beneficiaries of various types of financial aid might not be those for whom it was intended.*
More surprising were the reactions to the 2003 working paper.
From the outset, it was difficult to work with NCES to get the data, as they did not want to see presentations by race by income. I had been asking for this presentation for some time in NCES reports, but pressure from institutional interests prevented it. Colleges did not like the idea of showing how grant aid was going to higher income students in general, let alone how bad this appeared from multiple angles when broken out by race.
Several policy analysts in think tanks and advocacy organizations reviewed the working paper. Will Marshall at PPI arranged a session to review it, along with other works on student financial aid. One economist said she agreed with every aspect of the paper and its findings, but that they must not be shared outside the confines of the room because they revealed too much about how student financial aid practices actually worked. If Congress knew, the thinking went, much of the advocacy work for more student aid funding would be undermined.
The reactions to the working paper from my connections in the Black policy community were muted. Analysts and advocates are organized around HBCUs and around TRIO aid programs, not around the issues of the bigger picture. Sometimes they had been lukewarm to me in other circumstances, such as when I had previously worked in the Office of Legislation and Congressional Affairs and was known for thinking beyond the legislative agendas of those particular, more narrowly focused, interest groups.
The reaction was more positive with regard to the paper's finding that private loans were being placed in the aid packages of students who qualified for loans with better terms. This was a message I passed along to colleagues in organizations like NASFAA and NACAC. Within the year, word went out within the financial aid community that this should not be happening. Private loans lost their luster for a few subsequent years (although they soon made a comeback).
Which brings the discussion back to Professor Shermer's work and where it may or may not line up well with my own.
Shermer is on-target in pointing out that "operations is policy" (p. 237). How programs are operated in practice may be different, even wildly different, from the statutory language and intentions that created them. However, the context in which she explains this deals with how the Nixon Administration did not implement key 1972 legislation as Congress thought it would. A better and more consequent illustration is how institutions subsequently came to implement neither version, but established their own, more self-serving operations, through which much of federal aid intended to benefit students has been deployed to serve institutional interests. It was this that NCES was pressured not to show, and why representatives of institutional interests did not want to discuss research findings outside of friendly confines.
As to matters of race, my experience suggests too much attention is paid in the book to HBCUs (thirty-one references in the index), as if "developing institutions" should be in the forefront of the discussion on racial inequities. I make this observation fully aware that this is the customary approach of many scholars and journalists. But HBCUs enroll fewer than ten percent of Black students. Their institutional needs should not dictate policy on matters such as PLUS loans, and their frequent photo-ops with presidents should not mislead any of us into thinking that directing a few billion dollars their way will solve systemic, nation-wide issues in distributing student financial aid more equitably.
In other words, consideration of Title III of the HEA must not eclipse dealing with longstanding disparities in Title IV operations. Likewise, Title IV problems should not take a back seat to the idea that inequalities in society at large are responsible for those most in trouble with student loan debt, as suggested in this passage (p.199): "Only later did researchers uncover that increasing enrollments and opportunities to borrow did not erase longstanding inequalities after graduation."
Some researchers knew all along that the way Title IV operated, with its "opportunities to borrow" and its troublesome distribution of debt, was leading to big trouble. Those problems would only be heightened when the Department of Education, already complaisant on the growing problems of student debt, came to be led by appointees from the loan industry itself who encouraged an anything-goes approach to lending in the early 2000s.
Readers should know that the student financial aid foundation was already cracked well before that corruption-riddled era, with its explosion of dubious lending, commenced.**
Next month, I will participate in a panel with Professor Shermer and others who will have read her book. I look forward to a good discussion.
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* See subsequent corroboration and further explanation, including that of "enrollment management," in Stephen Burd's four-part series, Undermining Pell.
** For an account of the period 2002-2019, see Dan E. Moldea, Money, Politics, and Corruption in U.S. Higher Education, 2020.
