Senators Take Aim at College Affordability, Student Debt as HEA Work Continues

By Allie Bidwell, Communications Staff

The Senate education committee continued gathering information to develop a bill to reauthorize the Higher Education Act (HEA) on Tuesday, turning their attention to issues around college affordability and student loan debt — and what role federal financial aid has and should play in addressing those problems. But as the committee's hearings on HEA reauthorization progress, differences of opinion have emerged between the two parties in how to address various issues.

Leading up to Tuesday's hearing, Sen. Lamar Alexander (R-TN), who chairs the Health, Education, Labor, and Pensions (HELP) Committee, released a white paper outlining his ideas to improve accountability and transparency in higher education. The following day, Senate Democrats released a document outlining their policy priorities for a reauthorization bill. While it appears there may be a small amount of agreement on some issues, such as incorporating a loan repayment rate in addition to or instead of a cohort default rate for accountability purposes, the Democrats' document included some ideas that may be met with resistance among Republicans, such as lifting the ban on a student-level unit record system.

During the most recent hearing on Tuesday, the differences of opinion were again apparent in the rhetoric of how Republicans and Democrats address college affordability.

"While it is never easy to pay for college, it is easier than many think, and it is unfair and untrue to suggest that for most students college is out of reach financially," Alexander said in his opening remarks. He went on to say that during the reauthorization process, the committee should take into consideration the "Bennett Hypothesis" — the idea that increases in federal student aid have contributed to or caused increases in tuition. Alexander noted that research has indicated loans may have more of an effect than other types of federal aid.

Ahead of the hearing, NASFAA submitted a letter for the record disputing the hypothesis and claiming continued support of the theory "has become harmful, irresponsible, and will lead to misguided policy decisions if not refuted."

Within the letter, NASFAA President Justin Draeger wrote that the higher education funding landscape "is far too complex to attribute price increases to any single factor or source of funding."

"The diverse structure of the higher education system in the United States, combined with the fact that institutions of higher education are complex, unique organizations, makes it very difficult to isolate cost increases," he continued.

Indeed, Sen. Patty Murray (D-WA), the ranking member of the committee, said in her opening remarks that discussions on college affordability need to take a holistic approach, considering all aspects of the full cost of college, including room and board, textbooks and supplies, child care, transportation, and other indirect expenses.

"I'm sure there will be a number of issues we don't agree on — but I believe there is one question that should guide our negotiations," she said. "The question we have to ask ourselves is, ‘Will this reauthorization of the Higher Education Act leave students better off?' I am confident, if we work together and negotiate in good-faith, we can answer 'yes.'"

During the hearing, one of the witnesses — Jenna Robinson, president of The James G. Martin Center for Academic Renewal — spoke extensively about the Bennett Hypothesis and the nuances of applying that theory to different types of aid and different types of institutions.

"Each institution raises as much money as it can. Without federal student aid, ‘as much money as it can' has very clear limitations," Robinson said, outlining one explanation to support the theory. "Students and parents have very limited funds to spend on college. The availability of aid increases those funds considerably. So when universities identify new needs or wants … they can raise tuition to cover it, with student aid footing the bill."

She went on to say that of the more than two dozen studies she examined, seven found no link between increases in aid and increases in tuition, while 14 studies found some positive effect. Many of those studies, she said, found support, which ranged in "size and explanatory power," across all sectors of higher education.

But Robinson also noted that it's important to take into account the differences in types of aid and institution when discussing the Bennett Hypothesis. More studies, she said, found loans were more strongly correlated with tuition increases than grants. Likewise, she said the effect was "more pronounced" at certain types of institutions than others, such as more expensive institutions and for-profit institutions.

She made several suggestions to improve college affordability, including limiting the total amount of loans available to students, targeting the Pell Grant to the neediest students, requiring some form of risk-sharing among institutions in student borrowing, and changing the student aid eligibility formula to use the median cost of attendance. Using cost of attendance "discourages students from choosing less expensive schools since the current ‘need' formula awards students more money when they attend institutions with higher tuition," she said in her written testimony.

Still, other experts on the panel of witnesses stressed that affordability can vary greatly between institutions and students.

"Contrary to popular imagination, students today have to work far more than past generations did to pay for college," said Zakiya Smith, strategy director for finance and federal policy at the Lumina Foundation. "These affordability concerns aren't just in their heads. The challenge of paying for college today is greater than it was in the past."

Smith went on to explain the Lumina Foundation's Affordability Benchmark — the idea that affordability should be based on what the student can pay, rather than what college should cost.

"As we think about how to address this concern, we must recognize that affordability means different things to different people," Smith said. "What's a bargain for one person may feel like an unattainable luxury to another."

Likewise, Sandy Baum, a senior fellow at the Urban Institute, said affordability also depends on the value of the education, as well as "the prices and resources available to students at the time of enrollment."

"Making college cheaper will not on its own make it more affordable," she said. "High and rising tuition prices create a real challenge, but non-tuition expenses … create the greatest financial hurdles for many students and families."

Baum also said that "reliable literature" has shown federal student aid "is not a significant explanation for rising prices."

"Increases in both institutional grants and and federal aid have reduced the barriers to college education and lowered the net prices for many students," she said. Congress' goal, she continued, "should be ensuring more students can access and succeed in high-quality programs."

Baum made three core suggestions for addressing college affordability: ensuring aid programs are "simple, predictable, and easy to apply for" and that students and families have information about aid early on; enacting policies to help students make better choices, such as placing restrictions on institutional eligibility for Title IV aid; and designing an "effective federal incentive" to increase state funding for need-based grant aid and public higher education.

During a period of questioning, Sen. Elizabeth Warren (D-MA) asked Lumina's Smith whether certain reforms alone — such as increased counseling, FAFSA simplification, risk-sharing, or accreditation reform — would fix the college affordability problem.

It would be difficult, Smith said, to improve affordability without investing more money.

"The higher education law we write in this country could be the law of the land for the next decade," Warren said. "It would be unconscionable for us to write a law without making college more affordable and without dealing with the more than 40 million Americans who are struggling to pay off $1.4 trillion in student loan debt. I think that should be our first job."

 

Publication Date: 2/7/2018


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