Opinion: Skin in the Game, Redux

"I get a little twitchy when millionaires demand 'skin in the game' from the poor. That said, the latest version, proposed by Rep. Virginia Foxx, makes a bad idea worse," Matt Reed writes in an opinion article for Inside Higher Ed. 

"Most versions of 'skin in the game' require colleges to shoulder some risk when student loan default rates go above a certain level. The theory behind it is that if colleges know that poor performance will cost them, they’ll either raise their game or get out of areas in which they can’t. The glaring flaw in the theory is that colleges don’t have the authority to deny access to student loans. For open-admissions colleges, such as community colleges, that means being on the hook for the performance of prospective students we aren’t allowed to turn away. Unlike, say, mortgage lenders, we can’t screen for risk. We could, I suppose, take a more circumspect approach to recruitment in high-risk communities, but I prefer not to embrace systematic racism as a solution.

The new version takes the insanity a step farther. As part of the reauthorization of the Higher Education Act, apparently Rep. Foxx is proposing lowering the bar from 'default' to '90 days late,' and applying it at the programmatic level, rather than the institutional level.

From a community college perspective, this is nonsense on stilts.  

For example, it doesn’t distinguish between students who graduated and students who dropped out in their first semester. We know that student loan balances are inversely correlated with the likelihood of default, which means that the student who drops out in the first semester owing $1,000 is likelier to default than a student who graduates owing $10,000. But the one-and-done student is taken as just as valid a reflection on a program as the graduate, even if the one-and-done barely bothered to show up.

For graduates and transfers -- a gratifyingly large portion of our students -- what happens when they move on to the four-year school and then miss some payments?  Are those missed payments held against us, or against the four-year school?"

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 12/6/2017

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