Legislative proposals that work at cross-purposes are nothing new, but watching the latest Higher Education Act reauthorization discussions might cause a serious case of whiplash among even seasoned political spectators. On one hand, Congress has ramped up its rhetoric in support of risk-sharing or “skin in the game,” to financially incentivize and/or penalize colleges based on whether students graduate and successfully repay their loans. On the other hand, Congress is on the cusp of eliminating the federal Perkins Loan Program, the only financial risk-sharing student aid program in existence – and a successful one at that.
Everyone – colleges, policymakers, students--is in favor of accountability. Yet all this talk of institutional “skin in the game” suggests that universities do not currently have a financial stake in their students’ success. Nothing could be further from the truth. The most troubling part about these conversations is the complete lack of discussion about the Perkins Loan Program, which requires schools to jointly fund low-interest loans to needy students with the federal government. If Congress does not extend the program by October 1, it will simply expire.
The Perkins Loan Program is predicated on shared risk and investment, with both the federal government and institutions making contributions. Institutions have shown a great commitment to this program – as evidenced by the fact that participating schools have continued to invest in Perkins, even though the federal government has for nearly a decade failed to meet its financial obligatory contributions. Colleges have even covered the federal share when borrowers qualify for one of the program’s loan forgiveness provisions.
Publication Date: 8/31/2015