Breaking down the House Republican plan to fix higher education
Plus: Bipartisan proposals to expand workforce training, and the Biden administration bungles the new FAFSA launch.
Welcome to The Tassel, FREOPP’s newsletter on higher education policy, written by senior fellow Preston Cooper. Each month, The Tassel dives into our latest work on higher education, along with a handpicked selection of research and articles from around the web that we think are worth your time. To manage your subscription preferences, visit your Substack settings.
It’s the first election-year edition of The Tassel, and I’m expecting higher education to feature as a campaign issue in a way it never has before. Politico reports that President Biden intends to run for reelection on a platform of student loan forgiveness. Biden is sure to tout his $475 billion expansion of student loan repayment plans, as well as ongoing administrative efforts to cancel student debt outright.
What will be Republicans’ response? Widespread discontent with elite universities is sure to fuel demand for accountability to ensure these institutions live up to their promises to students and taxpayers. But Republicans on the House Education and Workforce Committee have now translated those feelings into a concrete policy proposal.
How Republicans would remake higher education
This week, Rep. Virginia Foxx (R-NC), chairwoman of the House Education and Workforce Committee, introduced the College Cost Reduction Act. This far-reaching piece of legislation is the most ambitious conservative higher education reform proposal we’ve seen in years.
At the heart of their proposed changes are new incentives for colleges and universities to keep prices low and improve student outcomes. The legislation requires colleges to shoulder part of the cost to taxpayers when students do not earn enough to pay down their loans. Schools where students graduate with high debt burdens relative to their incomes could be on the hook for significant liabilities. But the legislation is generous in some respects as well. It repurposes some of those savings for a new direct grant to institutions that enroll lots of low-income students, keep tuition down, and generate strong labor-market outcomes.
FREOPP has an exclusive first look at how the legislation would affect colleges and universities nationwide. I find that public community colleges, particularly those with strong vocational programs, will receive nearly $2 billion per year in direct aid if the legislation passes. The bill rewards these schools for their low prices and socioeconomic diversity, as well as the fact that they largely don’t rely on federal student loans.
The story is very different for elite private universities. Despite their vaunted reputations, many graduates of these schools do not earn enough to pay back the loans they took out to afford the schools’ exorbitant tuition prices. This is especially true for top schools that rely on pricey master’s degree programs of questionable economic value for revenue. I estimate that elite private nonprofits would pay almost $2 billion per year in penalties under the Republicans’ plan. The biggest loser? The University of Southern California, which could have to pay nearly $170 million annually if it continues with business as usual.
Creating a more competitive higher education market
But the hope is that universities will not continue with business as usual. The incentives built into the carrot-and-stick framework Republicans have proposed will, ideally, encourage schools to cut tuition and close degree programs that charge students too much for too little return. The lawmakers also hope that competitive pressure will light a fire under incumbent universities to improve.
Perhaps the legislation’s most interesting section deals with reforms to accreditation. The federal government relies on private agencies called accreditors to decide which schools can access taxpayer funding. But as we’ve previously explored in this newsletter, accreditation is also a steep barrier to entry for new institutions. And there’s not much evidence accreditors are effective at the quality-assurance task we’ve assigned them.
The College Cost Reduction Act aims to open up the accreditation system by allowing state governments to designate new “quality assurance entities” that could provisionally allow new colleges and trades schools to access federal aid. Those new schools would still have to comply with existing federal laws, of course, and they’d be subject to the same penalties as incumbent institutions. But creating alternate paths to accreditation could allow new colleges to enter the market and drive prices down. Even if dinosaurs like USC don’t respond to carrots and sticks, they’ll certainly have to make some changes if they see startup colleges snaffle up students that used to be Trojans.
You can read my full analysis of the College Cost Reduction Act at Forbes. For a deep dive into how the bill could affect different schools, check out my issue brief at FREOPP.
What I’m writing
The bipartisan plan to expand workforce training. (Forbes) The top Republican and Democrat on the House Education and Workforce Committee reached a deal to expand funding for short-term training programs that lead to good jobs. Under current law, students can only use Pell Grants for programs with at least 600 hours of classroom time; the bill would drop that to 150 hours. But don’t hold your breath: many existing workforce training programs would not comply with the proposal’s strict requirements. More interesting is the offset for the program’s $160 million cost: cutting off federal student loans to around three dozen of the nation’s wealthiest universities. “Expand workforce training, and make Harvard pay for it” is certainly a political winner in our populist age.
What I’m reading
Another bipartisan deal could reauthorize a major law governing workforce training, reports Elyse Ashburn in WorkShift. Experts generally think the fragmented and underfunded Workforce Investment and Opportunity Act (WIOA) does a poor job achieving its goals, though it’s doubtful that the bipartisan deal would turn things around in a significant way. One welcome change: the reauthorization would require states to use at least half of their WIOA funds on actual worker training, rather than administration.
The launch of the new FAFSA is a “fiasco,” writes Andrew Gillen at Minding the Campus. In 2020, Congress passed a law mandating a simpler FAFSA, the form all college students seeking federal grants or loans must submit. The Biden administration had three years to get the new form ready. But the form, despite being theoretically “launched,” has been available for as little as half an hour each day. Students report constant errors and lockouts. Financial aid expert Mark Kantrowitz calls the site “practically unusable.” One bright spot? At least the memes have been good.
More than 40 percent of borrowers with student loan payments due have missed them, the Education Department reports. This is despite the Biden administration’s new income-driven repayment plan, which slashed payments to zero for millions of borrowers (at considerable cost to taxpayers). Some of those missed payments might be due to the administrative forbearance into which the Department unilaterally placed millions of borrowers in October. But the data still doesn’t augur well for the return to repayment, which I warned in September could be chaotic.
Transferring from a community college to a four-year institution may not always help students, according to fascinating new research from economist Lois Miller. She finds that “academically marginal” students who transfer tend to earn less during their early careers than similar students who did not transfer. One possible reason for the effect? Students who transfer out of community colleges are less likely to choose a high-paying field of study, especially business or a vocational program.
What I’m doing
I’m working on a couple of exciting new projects looking at barriers to entry in higher education. I’m especially focused on how well-intentioned rules around state authorization—that’s the permission all colleges need from their state government in order to operate—may protect incumbent schools at the expense of innovation. Do you have an experience with state authorization you’d like to share? Shoot me a message.
I stayed in town for the holidays, so I don’t have any travel updates for this edition. So please enjoy this picture of guanacos I snapped last December in Chile’s Torres del Paine National Park.
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