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Reauthorizing the Higher Education Act

September 17, 2015
With the Elementary and Secondary Education Act well on its way to reauthorization, Congress will soon look towards enacting a series of reforms concerning the Higher Education Act of 1965, which expired in 2013. The HEA includes provisions for various programs that help students gain access to higher education, including the entire student loan system and Pell grants. Senator Lamar Alexander (R-TN), Chairman of the Senate Health, Education, Labor and Pensions Committee, aims to draft a bipartisan bill by September that will be out of committee by the end of the year. Areas for consideration include student loan debt, affordability and rising cost, and transparency in consumer information.

By Irina Bit-Babik, C’18

One of the most pressing issues debated this Congress, America’s soaring student debt figure, currently hovers around $1.2 trillion[1]. Estimates suggest that around half of the government’s student loan portfolio will not be paid back[2] and that default rates are at over 26%[3]. While Senator Alexander attempts to downplay the significance of this problem by comparing the average student debt ($28,400[4]) to a new car loan, he fails to address that the student loan default rate is much higher than that of any other type of debt. Further, the highest early delinquencies occur among borrowers who owe less than $5,000[5]. So where does the bulk of the problem lie? Students who fail to graduate, with low-income, Black, and Latino students more likely to drop out with significant debt[6]. That’s why proposed reforms to the HEA center on giving institutions “more skin in the game” to ensure that students graduate and pay back their loans on time. One suggestion is to hold schools financially accountable for some portion of a students’ inability to pay back loans, although some fear that this might discourage schools from admitting “high risk” students. Two other trending proposals include expanding loan counseling to reduce excessive borrowing and streamlining loan repayment. The Obama administration has already introduced income-repayment as an option, yet only a fraction of borrowers actually enroll[7]. S.85, the Repay Act, suggests that simplifying loan repayment into two streams (10-15% of income that can be forgiven after 20 years or the standard 10-year repayment plan) would best address high default rates.

Default Rate by Student Loan Cohort 

Beyond student loans, college affordability as a whole is being called into question. The wage premium of college degrees remains high[8], creating a “Catch-22” where college is at the same time become both more expensive and more necessary than ever before. However, instead of significantly increasing government funding for higher education, Congress prefers to more effectively communicate that college is affordable to many who might think otherwise. In 2013 alone, 47% of high school graduates failed to fill out the FAFSA, leading to $2.9 billion in unclaimed federal aid[9]. To increase completion rates, Senator Alexander proposed S.108 (the FAST Act) which would reduce FAFSA to two questions: family income and family size. On the other end of the political spectrum, representatives such as Sen. Bernie Sanders (I-VA) propose that a four year public education be made tuition-free. While this is unlikely to be successful in the current Congress, the Obama administration continues to push for its goal of free two-year community college. Introduced on July 8, H.R.2962 (America’s College Promise Act) would make this goal a reality over the next ten years.

Percentage Increase in Consumer Prices 

Lastly, policymakers aim to increase transparency in information surrounding colleges and universities. In a recent Senate hearing, Brookings researcher Dr. Akers suggested that overall, the lifelong return on college degrees surpasses upfront costs. However, negative returns do occur and can be reduced by ensuring that students have the information to make proper decisions[10]. Creating a national college rating system to address this issue, as proposed by the Obama administration, is now unlikely. In fact, the FY2016 Education Budget, which passed the Senate in July, prohibits the Department of Education from moving forward with the ratings system or defining gainful employment and credit hour[11] on grounds that such regulation could be misleading and has too much potential for error. Instead, Senate leadership has proposed mass collection of data currently unavailable to the federal government, including projected salaries, outcomes from specific degrees, and debt figures at each school. This data would then be distributed to and assembled by third parties for easy access to consumers of higher education. S. 1195, the “Student Right to Know before You Go Act of 2015,” would provide new tools for students to compare institutions based on factors including graduation likelihood and potential earnings. A similar bill failed to pass in 2008 due to concerns about student privacy.

Overall, the latter half of 2015 has potential for significant progress on higher education reform. With efforts to reauthorize the Higher Education Act beginning to make headway, America should expect proposals to reduce government regulation, increase access to student data, and streamline federal aid to gain the most traction in coming months.

  [1] Rayfield, Nicholas. “National Student Loan Debt Reaches a Bonkers $1.2 Trillion.” USA TODAY College. April 8, 2015. Accessed July 22, 2015.

  [2] Bidwell, Allie. “Half of Outstanding Student Loan Debt Isn’t Being Repaid.” US News. August 6, 2013. Accessed July 22, 2015.

  [3] Brown, Meta, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert Van Der Klaauw. “Looking at Student Loan Defaults through a Larger Window.” Liberty Street Economics. February 19, 2015. Accessed July 22, 2015. 

  [4] Reed, Matthew, and Debbie Cochrane. “Project on Student Debt: State by State Data.” The Institute for College Access & Success. November 1, 2014. Accessed July 22, 2015. 

  [5] Brown, Meta, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert Van Der Klaauw. “Looking at Student Loan Defaults through a Larger Window.” Liberty Street Economics. February 19, 2015. Accessed July 22, 2015. 

  [6] Huelsman, Mark. “

The Debt Divide: The Racial and Class Bias Behind the “New Normal” of Student Borrowing.” Demos. May 19, 2015. Accessed July 22, 2015. .

ave So Few Student-Loan Borrowers Taken Advantage of Income-Based Repayment?” TIME. June 12, 2012. Accessed July 22, 2015. 

  [8] Kelly, Andrew. “High Costs, Uncertain Benefits: What Do Americans without a College Degree Think about Postsecondary Education?” American Enterprise Institute. April 20, 2015. Accessed July 22, 2015.

  [9] Sen-Gupta, Gianna. “Students Left Over $2.9 Billion in College Money on the Table.” NerdWallet. January 12, 2015. Accessed July 22, 2015. .

  [10] Akers, Beth. “Reauthorizing the Higher Education Act: Ensuring College Affordability.” The Brookings Institution. June 3, 2015. Accessed July 22, 2015. 

  [11] “Senate Subcommittee Sets Priorities, Approves FY2016 Labor, HHS, Education Appropriations Bill.” United States Senate Committee on Appropriations. June 23, 2015. Accessed July 22, 2015. 

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