Opinion: Finding the Right Balance on College Regulation

"Republicans in Congress have no shortage of criticisms for the web of regulations that ostensibly hold the nation's colleges and universities to account. Now, with full GOP control of the federal government, many lawmakers want to act. A higher-education reform bill, the PROSPER Act, passed by Republicans on the House Education and Workforce Committee last month, would end several major regulations and modify others. While there's a case to be made for slimming down some of these rules (multiple regulations are meant to enforce the same thing) the PROSPER Act does not propose an adequate replacement," Preston Cooper and Jason Delisle from the America Enterprise Institue write for U.S. News & World Report

"Conservatives rightly see flaws in existing accountability regulations for colleges and universities that receive federal subsidies. But they also struggle to strike the right balance with these policies. Some want strict, central-planning-like regulations. Others want none, seeing them as intrusive federal overreach. The right balance would establish a floor to guard against fraud and waste.

The ideal accountability system should not, however, attempt to establish ratings for colleges as the Obama administration once proposed. Nor should it aim to make fine-grained judgements about value. No supporter of free markets should want a system under which lawmakers and bureaucrats use government money and standards to pick winners and losers in higher education. That critique also applies to the temptation to exempt broad swaths of institutions or carve out set-asides for a favored school or profession.

On the other hand, those who see little need for regulation are ignoring that the federal government is a primary financier of America's colleges and universities, which sets higher education apart from most other industries. Through grants, tax credits and heavily subsidized student loans, the federal government supports higher education to the tune of $120 billion per year. Colleges and universities must be held accountable to ensure that they use taxpayers' generous investment wisely.

Another reason for a larger government footprint: The federal government is the only entity that can provide reliable information on key outcomes for students who attend particular schools. Mainly, whether these students earn enough to justify the investment. Universities cannot reliably collect such data from their former students and nor can state governments. Markets are only as good as the information that drive them.

So where did the new House Republican plan for holding colleges accountable to taxpayers and students end up?

The PROSPER Act contains two major provisions on that front. The first would require that any higher education program receiving federal funding maintain a student loan repayment rate of 45 percent or greater. The repayment rate is defined as the share of former students who borrowed federal student loans and are no more than 90 days delinquent on their payments. Current law only counts loans against a university if they are over 270 days delinquent, and it measures defaults at the university as a whole, not individual programs as the proposed bill does.

In one sense then the House proposal takes a stronger stance on accountability. However, it also lets students who have low earnings relative to how much federal debt they took on make payments that do not even cover the accruing interest on those loans indefinitely, a holdover from current law. The House bill considers those students to be in good standing on their loans. Yet if most borrowers who attended a program do not earn enough money to pay even the interest on their loans years after leaving school, it's unlikely that taxpayers will ever see all the loaned money repaid. That seems like an ideal place to put a floor on eligibility for funds. Indeed, it's one the Obama administration favored, but only if it applied to for-profit colleges."

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: 1/17/2018

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