Civil Rights, Education Groups’ HEA Principles Include For-Profit Regulations, Protections for Borrowers

By Joelle Fredman, NASFAA Staff Reporter

Forty-eight civil rights and education groups signed on to a list of principles for the reauthorization of the Higher Education Act (HEA) as of late last week, which touched on a host of issues being debated among policymakers and higher education stakeholders, such as stricter regulations for for-profit colleges and stronger protections for student loan borrowers.

In the principles, the groups wrote that as Congress works to update the legislation, lawmakers should bear in mind why the HEA was drafted in the first place — to allow more students to access higher education and leave with degrees “they knew would mean economic, social, and political opportunity in the United States.”

“While some challenges remain the same, new challenges have arisen in the 50 years since the law was first passed. The fundamental desire of communities, however, and the obligation of the federal government to assist, remain the same,” they wrote. “It is in this spirit that we offer the following principles that must be included in a reauthorization of the Higher Education Act if we’re going to strengthen and build a higher education system that provides equitable access to and success in a high-quality postsecondary education for all students, especially for those students who have historically experienced and continue to experience barriers to success in higher education.”

One way for Congress to do so, according to the groups, is to “exclude for-profit colleges, including covert for-profit colleges masquerading as non-profit, from federal financial aid programs unless they have demonstrated their value to students through increased student earnings and they rely, at least partially, on non-federal sources of funding.”

This priority touched on two accountability metrics for for-profit institutions that Sen. Lamar Alexander (R-TN), Senate Health, Education, Labor, and Pensions (HELP) Committee chair, proposed to eliminate in a white paper listing his principles, which he released following a hearing on accountability, for the HEA back in February — the 90/10 rule and gainful employment. Alexander wrote that the 90/10 rule, which requires that for-profit institutions receive no more than 90 percent of their funding from the federal government, really measures “the socioeconomic status of students enrolled at the school,” not an institution's quality.

With regards to gainful employment, Alexander argued that the measure, crafted to identify and sanction predatory institutions, should apply to all institutions, not just for-profit schools, and criticized the debt-to-earnings metric used to judge institutions.

“Rather than using a government definition of what is an ‘acceptable’ amount of debt, federal policymakers should explore whether measures of actual loan repayment are more useful for determining whether to continue to allow student loans to pay for specific programs or institutions,” he wrote.

In the final session of negotiating rulemaking for gainful employment last month, negotiators spent four days debating similar questions as to the merits and drawbacks of applying the regulation to all institutions, as well as the best way to measure an institution's status. Unable to agree on fundamental issues of the regulation, they concluded with no consensus.

Senate Democrats also expressed a need for tighter for-profit regulations in their list of principles, more generally stating that “the HEA must include strict rules to ensure institutions are not taking advantage of their students.”

In addition to regulating for-profit institutions, the civil rights and education groups also insisted that Congress include measures to protect student loan borrowers from “abusive and fraudulent practices and exploitation in the federal and private student loan servicing and debt collection markets,” as well as mandate that students are provided accurate information about their loans, affordable repayments plans, administrative loan discharges, and, when necessary, legal recourse to build a case for being granted relief.

Just last week, the Government Accountability Office (GAO) came out with a report that found that some consultants hired by schools gave students inaccurate information about repayment options, and pushed them to choose forbearance a way to avoid defaulting on their loans, even when it was not the best option for them. In fact, GAO found that “borrowers in long-term forbearance defaulted more often in the fourth year of repayment, when schools are not accountable for defaults, suggesting it may have delayed—not prevented—default.”

NASFAA President Justin Draeger said that this report shed a light on the shortcoming of solely relying on cohort default rates to determine an institution's eligibility for federal funds, calling it “a poor proxy for institutional quality.”

“Default rates are one metric among many that should be taken to into account when determining institutional eligibility for student aid. We look forward to working with lawmakers to determine how default rates, repayment rates, and other student outcomes can be taken into account—fairly and equitably—when determining student aid eligibility,” Draeger wrote in a statement.

Alexander proposed to stop using the cohort default rate in his white paper because, “the focus on cohort default rates fails to account for and hold schools responsible for the large share of borrowers who are not in default, but are still struggling or unable to repay their loans.”

The groups also called on Congress to improve institutions’ accountability, without disincentivizing them from enrolling riskier populations of students by ensuring that “accountability is differentiated and takes into account an institution’s history, mission, and resources.” They wrote that Congress should incentive institutions to improve the quality of education they offer by requiring that federal funds from aid are spent on instruction and students, and more support be funneled into institutions “that serve large shares of low-income and historically marginalized students and that are actively working to provide the supports necessary to improve student outcomes.”

NASFAA, in a letter responding to Alexander’s white paper, outlined similar concerns to the groups — that creating a new system of accountability for institutions while ignoring the population that they are comprised of can lead to schools closing their doors to the neediest students.  

“A poorly designed risk-sharing system could have the perverse incentive of increasing the number of institutions (most likely community colleges) that choose not to participate in the federal loan programs, choking college access to thousands of students who would not be able to attend without those dollars,” NASFAA wrote. “Colleges that are not open enrollment might become more selective in their admissions policies, thereby shutting out riskier populations. These unintended results would reduce access for students or necessitate a greater reliance on private borrowing where consumer protections are inferior to federal loans.”

The groups’ remaining principles focused on issues of affordability and barriers to education such as a lack of childcare, harassment on campus, and the lack of data available to students and families on program quality and investigations of abuse by institutions, among others.

 

Publication Date: 5/1/2018


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