Report: Federal Government Fails To “Leverage” Student Aid Investment

By Katy Hopkins, Communications Staff

“How is it that consumers can get more product information to help them purchase a new $160 printer than they can get to purchase a $160,000 college degree?” the think tank Third Way asks in a new report that urges for more student data and tighter financial aid restrictions, among other policy changes.

In “A New College Compact: Addressing the Cost & Quality Crisis in Higher Education,” Third Way authors David Brown and Kenneth Megan argue the federal government hasn’t worked to ensure both educational quality and affordable prices -- and many of their policy recommendations weave the two aims together.

“[T]he federal government, … as one of the principal payers of college tuition, could have immense and unique leverage over postsecondary education,” the authors write. “...In fact, the federal government spends around $126 billion per year on undergraduate student aid, contributing 69% of total state, local, federal, and private aid. But Washington has neglected to use that leverage.”

According to the report, consumers need the ability to connect available information, such as average debt levels, with educational quality data they can’t currently access. Through information from a federal student unit record system, consumers could trace the possible lifecycle of their higher education financial choices, from price, to debt, to income after graduation. 

There is currently a ban on such a system, though calls for repeal are increasing. In June 2014, NASFAA’s board of directors voted to support a limited student unit record system as one of 15 ways to improve consumer information for students and institutions.  

Third Way’s report also recommends automatically enrolling borrowers in an income-driven repayment plan -- a policy change that NASFAA has studied extensively and supports. Currently, the plans are “difficult to enroll in, difficult to understand, and underutilized,” Third Way alleges.

The authors also argue that automatic enrollment needs to be coupled with other financial aid restrictions, including a cap on PLUS loan borrowing and possible limits on Stafford and Perkins loans, among many other recommendations.

“[T]he quality crisis in higher education is chipping away at the American dream,” the authors conclude. “A new compact with American colleges is essential if we hope to foster a new era of middle class prosperity.”


Publication Date: 2/23/2015

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