Think Tank Urges Policymakers To ‘Rethink’ Federal Higher Ed Oversight

By Brittany Hackett, Communications Staff

As the conversation continues on how best to improve the U.S. higher education system, the American Enterprise Institute (AEI) is urging national policymakers to improve college accountability through the use of new metrics and “modernized” oversight, rather than increased regulations. 

In a paper released last week, AEI argues that “significant cracks” have recently emerged in the country’s higher education system due to “a federal higher education policy that is almost exclusively focused on ensuring access, with insufficient attention paid to whether the education students are accessing is worth the price of admission.”

Subpar graduation rates and measures of student learning, as well as increases in student loan default and delinquency, have led higher education reformers to question the current approach of the federal student financial aid system, which is largely built on the “pillars” of consumer choice and hands-off regulation that relies on accreditation. 

AEI proposes three areas for reform in its paper that would improve protections for taxpayers and consumers, “while maximizing education opportunity,” including bringing in new authorizers, rather than the traditional accreditors, to oversee academic quality, such as nonprofit groups and professional associations or a consortia of employees. Such entities “would be better suited” than accreditors “to play an oversight role and be more receptive to innovative models,” the authors write.

The group also suggests modernizing the federal government’s oversight role by implementing a performance floor that would render low-performing institutions ineligible for Title IV funds. 

Unlike the current cohort default rate regulations, the proposed performance floor would use loan repayment rates instead of default rates as a measure to “assess the proportion of students who are making progress in paying down their loan balance.” Such a measure would also hold institutions accountable for students who take advantage of existing repayment protections like forbearance but are unable to make progress on repayment.

As part of modernizing the federal oversight role, AEI also proposes that policymakers:

  • Create a risk-sharing mechanism to give institutions more skin in the game and create more pressure for them to improve;
  • Utilize rewards like bonuses for Pell Grant graduates as a way to acknowledge potential unintended consequences to low-income students and prevent institutions from being more selective in the admission program, “potentially locking out students;” and
  • Give institutions more control over the things they are being held accountable for, such as more discretion with placing limits on student loan borrowing.

AEI also suggests that policymakers take steps to improve and expand market accountability to better help students evaluate different programs. Among the suggestions for how to achieve this are:

  • Collecting and publishing better student-outcome data like graduation rates and expected earnings for each program of study;
  • Encouraging new private financing tools to help student navigate their education, such as Income Share Agreements; and 
  • Capping federal PLUS loans to mitigate the risks associated with giving consumers access to large amounts of loan debt “with few questions asked.”

Policymakers “should take steps to correct the flawed assumptions of past reformers” and “thin[k] more broadly about who can guarantee academic quality, who bears the risk when students fail to pay back their loans, and how to equip consumer to more effectively vote with their feet,” the authors conclude in the report. “When combined, these reforms will help protect students and taxpayers while maximizing educational opportunity.”


Publication Date: 10/8/2014

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