Two Hearings, Two Suggestions

March, 2019

Washington -- The House and Senate both held hearings this week on troubled programs of the Higher Education Act.

The Senate Health, Education, Labor, and Pensions Committee heard testimony on simplifying the onerous student financial aid application, the FAFSA. Some interests don't want it simplified too much.

Before the Committee gives up or makes too many concessions to those who favor retaining many of the questions as they currently exist, it should review how the answers to those questions are used to undermine the purpose of federal grant programs. When states and institutions say they need FAFSA information to distribute their own financial aid, it may be to countervail rather than to complement the federal aid. (That is, to put greater rather than lesser loan amounts in students' aid packages.) The FAFSA is the sine qua non of the enrollment management industry, which thrives on showing institutions how to manipulate financial aid packaging.

Stephen Burd of New America has illuminated how this works and who does it in his series "Undermining Pell." Research by Leslie Turner and others has shown that several billion dollars of Pell Grants are annually subjected to "displacement" through packaging practices that burden low income students with loans.

Suggestion: simplify the FAFSA but also require the Department of Education to have its program review teams look at how institutions package state and institutional aid, and require the Secretary to limit, suspend, or terminate (LS&T) institutions that undermine federal programs. Require the Secretary to make such evaluations a part of accreditation as well.

The House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies heard testimony on predatory for-profit colleges. These colleges exploit low income students and set their tuition rates at the sum of federal grant and loan aid. They often provide an inferior education; excessive numbers of their student borrowers default on their loans. The cost to federal taxpayers is enormous, not to mention the ruined credit and financial burdens on the borrowers themselves.

One member of the subcommittee, incredibly, tried to change the subject by suggesting that the real scandal in higher education involves highly paid coaches at public and non-profit institutions. Two members said they would be amenable to more oversight of for-profit colleges if the same standards were also applied to all higher education sectors.

Much attention was given to the 90-10 rule, under which for-profit colleges must generate at least 10% of their revenue from other than Department of Education sources in order to qualify for participation in the Department's programs. Panelist Robert Shireman provided a good history lesson about 90-10. There was a time when for-profit colleges like the University of Phoenix generated much revenue from employers who paid the institution for training workers. Educational quality was upheld by the marketplace. When it became easier to tap federal programs, however, through federal relaxation of standards in 2002 and 2006, UoP changed its financial strategy to go after the easy federal money, as did most of the rest of the for-profit sector as well.

Suggestion: Go back to the original HEA of 1965 and make federal programs matching at $3 dollars federal for ever $1 non-federal (in cash or in-kind), as they were then. Apply the requirement to all sectors equally. For-profit institutions would then have to prove their worth in the marketplace to come up with match from employers, full-paying students, and profits plowed back into endowments, rather than making well-placed political contributions to ensure inadequate (even corrupt) federal oversight.

You want uniform standards, based on the marketplace, and fewer complicated federal regulations? There you go. Not to mention "skin in the game" and a precursor to the inevitably necessary matching programs at the heart of even more significant efforts to deal with the cost of college.