Federal Policy & Reform

Overview

Federal Policy & Reform

The federal government provides billions of dollars in student aid and tax breaks to the nation’s colleges and universities each year, and it demands remarkably little in return.

The federal government provides billions of dollars in student aid and tax breaks to the nation’s colleges and universities each year, and it demands remarkably little in return.

In large part, that’s because the federal government has relatively few levers with which to hold colleges accountable. Unlike in K-12 education, where federal dollars flow through states to schools, most postsecondary aid goes directly to students, in the form of vouchers (Pell grants), loans, and tax benefits. To withhold money from an institution, the federal government effectively would have to punish its students as well.

The comparatively weak federal accountability levers in higher education are also a testament to the strength of the college lobby, which employed more lobbyists in 2014 than any other industry except electronics manufacturing and pharmaceuticals, according to the Center for Responsive Politics. With colleges in every congressional district, and millions of faculty and staff on voter rolls, college lobbyists have repeatedly beaten back efforts to link federal dollars to student outcomes and college costs.

Federal involvement in higher education goes back to the Morrill Act of 1862, which provided land to states to finance the creation of a system of agricultural colleges, known as “land grant” institutions. The federal role grew in the 1940’s and 1950’s, with passage of the GI Bill — which provided generous tuition benefits to veterans — and the National Defense Education Act, which created the first student-loan program.

But the real watershed was passage of the Higher Education Act, a 1965 law that laid the foundation for the modern student-aid system. The law, which created a system of grants and loans to help  students from low-income backgrounds pay for college, firmly established the federal role in ensuring equal access to higher education. In the years since, lawmakers have extended the bill’s benefits to middle- and upper-income students, providing unsubsidized loans and tax benefits to offset rising college costs.  

To qualify to award federal financial aid to students, institutions must show that they are financially “responsible” and administratively “capable,”  and have been approved by an accreditor and state regulators. Colleges can lose their eligibility if their state or accreditor revokes their approval, or if too many of their students default on their debt, but those conditions rarely happen. For-profit colleges can be kicked out of the programs if too much of their revenue comes from federal aid, but that, too, is uncommon.

Fifty years after the passage of the Higher Education Act, the government awards about $150 billion a year in grants, work-study, and loans to more than 15 million students. Policymakers and the public generally agree that the federal government should continue to make college accessible to all Americans.

Yet as college tuitions have risen, and student debt has skyrocketed, some lawmakers have questioned whether that federal aid may be fueling tuition growth — a theory known as the “Bennett Hypothesis,” which has been widely disputed in research. Others point to rising student loan defaults and lackluster graduation rates and ask why the government isn’t demanding more for the billions that it provides in student aid.

In fact, policymakers have tried to impose cost controls on colleges and condition small amounts of federal aid on student outcomes. But they have faced fierce opposition from colleges, who have branded such efforts “overreach” and accused lawmakers of intruding on academic affairs. In the end, most of the would-be reformers have had to settle for more “transparency” around college costs and student outcomes.

President Obama used both carrots and sticks to pressure colleges to lower their costs and graduate more students. He didn’t always succeed: His plan to reward high-performing colleges with additional Perkins loans went no where, and his controversial college “ratings” plan was reduced to a revamped “College Scorecard.” Still, Obama managed to tie aid to for-profit colleges to their graduates’ debt burdens, and to shine a spotlight on institutions with weak student earnings and low loan repayment rates.

At the same time, Obama sought to make applying for student aid easier and repaying student debt less difficult. He took steps to simplify the Free Application for Federal Student Aid, or FAFSA, and expanded income-based repayment for student loans. Congress might continue these efforts in the upcoming reauthorization of the Higher Education Act, which is expected to focus on streamlining and simplifying the student aid and loan repayment systems. 

Lawmakers might also look to reform accreditation and increase college accountability, giving institutions more “skin in the game,” i.e., responsibility for their students’ abilities to pay back their student loans.

What the federal role in higher education will look like going forward will depend, in part, on who is elected president next November. On the campaign trail, Democrats are pledging to make college free — or at least debt-free — while Republicans are promising to bring down the cost of college through new technology and alternative credentialing.

Published: January 2016

Latest News

At First, 55 Schools Faced Sexual Violence Investigations. Now The List Has Quadrupled

The Obama administration sent shock waves through higher education in 2014 when it released a list of 55 schools that faced civil rights investigations related to their handling of sexual violence reports.

The tally eventually quadrupled. On Wednesday afternoon, less than two days before President-elect Donald Trump is sworn into office, the Obama administration released its final list of pending sexual violence investigations.

Report

Fewer Borrowers Are Repaying Their Loans Than Previously Thought
New America

Today, the US Department of Education announced a critical error in the way it had previously been calculating repayment rates across the more than 4,150 institutions that receive federal loans each year. A coding error meant that many borrowers were incorrectly considered to be paying down their loans when in fact they were not making principal payments. As a result, many schools’ repayment rates are on average a third lower than originally reported.

Report

Fewer Borrowers Are Repaying Their Loans Than Previously Thought
New America

Today, the US Department of Education announced a critical error in the way it had previously been calculating repayment rates across the more than 4,150 institutions that receive federal loans each year. A coding error meant that many borrowers were incorrectly considered to be paying down their loans when in fact they were not making principal payments. As a result, many schools’ repayment rates are on average a third lower than originally reported.

Report

Fewer Borrowers Are Repaying Their Loans Than Previously Thought
New America

Today, the US Department of Education announced a critical error in the way it had previously been calculating repayment rates across the more than 4,150 institutions that receive federal loans each year. A coding error meant that many borrowers were incorrectly considered to be paying down their loans when in fact they were not making principal payments. As a result, many schools’ repayment rates are on average a third lower than originally reported.

Report

How Much Do For-profit Colleges Rely On Federal Funds?
Brookings Institution

The outgoing Obama administration placed for-profit colleges under a great deal of scrutiny. This includes gainful employment regulations that will require graduates of vocationally-oriented programs to meet debt-to-earnings requirements and borrower defense to repayment rules (which will likely be quickly abandoned by the Trump administration) designed to help students who feel they were defrauded by their college.

Latest News

Dozens of For-Profit Colleges Could Soon Close

The researchers found that when schools were threatened with the loss of access to federal aid, the percentage of Pell grant recipients (low-income students who depend on federal grants and loans to pay for their higher education) who enrolled declined by about 53 percent in the following five years. Interestingly, enrollment at neighboring for-profit schools also fell, even if they weren’t sanctioned, perhaps because the reputation of the entire sector was damaged by the sanctions.

Report

How Much Do For-profit Colleges Rely on Federal Funds?
Brookings Institution

I examined data from the Department of Education between the 2007-08 and 2014-15 academic years to look at how many for-profit colleges are close to the 90 percent threshold. As the table below shows, a sizable percentage of for-profit colleges get between 80 percent and 90 percent of their revenue from federal financial aid. In 2007-08 (the last year before the Great Recession), 23 percent of colleges were in this category.

Blog: Higher Ed Beat

Obama Ed Dept. Puts For-Profits on Notice, But Will Trump’s Follow Through?

With just days remaining in office, the Obama administration is still leaving its regulatory footprint, this time by releasing new data that show that nearly all of the career programs running afoul of federal student debt-to-earnings regulations are for-profit colleges. Scrutiny of the for-profit sector has been one of the signature drives of the Obama administration. How these institutions fare under President-elect Trump’s White House could be a key issue for the next four years.

Blog: The Educated Reporter

How Quickly Could Trump Change Public Education?

It’s shaping up to be a contentious year on the education beat, fueled in part by Donald Trump’s upset victory in the presidential election. For starters, in the days and weeks since his election, his campaign call for expanding school choice has sparked widespread discussion and debate.

EWA Radio

2017: Big Education Stories to Watch
EWA Radio: Episode 104

Kate Zernike, The New York Times’ national education reporter, discusses what’s ahead on the beat in 2017. How will President-elect Donald Trump translate his slim set of campaign promises on education into a larger and more detailed agenda? What do we know about the direction Trump’s nominee for U.S. secretary of education, Betsy DeVos, will seek to take federal policy if she’s confirmed? Zernike also offers story ideas and suggestions for local and regional education reporters to consider in the new year. 

Latest News

What Will Be Obama’s Lasting Education Legacy?

President Obama and his former education secretary Arne Duncan exercised more power and influence over education policy than many predecessors. The administration placed a focus on testing, trying it to federal funding. In higher education, he emphasized the importance of college and reducing student debt. Alison Stewart talks to Education Week’s Alyson Klein and Inside Higher Ed’s Scott Jaschik.

Blog: Latino Ed Beat

What’s Next for the White House Initiative on Educational Excellence for Hispanics?
A Q&A With Outgoing Executive Director Alejandra Ceja

Alejandra Ceja has been the executive director of the White House Initiative on Educational Excellence for Hispanics since 2013 — a position she’ll give up at noon on Jan. 19, the day before the presidential inauguration. I recently sat down with her at the U.S. Department of Education to talk about the state of Latino education, the Initiative’s first 25 years, and what we can expect from the Initiative under the next administration. 

Editor’s note: This interview has been edited for length. 

EWA Radio

Who Is Betsy DeVos?
EWA Radio: Episode 102

Veteran education reporters from the Detroit Free Press and The Washington Post discuss Betsy DeVos, the billionaire school choice advocate nominated by President-elect Donald Trump. David Jesse of the Detroit newspaper sheds light on DeVos’ Michigan track record on legislative causes, and what is known about her tactics and negotiating style. Plus, he explains how DeVos’ strong religious beliefs have influenced her policy agenda. Emma Brown of The Washington Post details why Trump’s proposal for $20 billion in school vouchers might be a tough sell, even to a Republican-controlled Congress. And she sheds light on the potential for the next administration to dismantle President Obama’s education initiatives, including scaling back the reach of the Office for Civil Rights at the Education Department.

Latest News

For-profit College Accreditor ACICS Loses Appeal

Federal education officials are standing by their decision to cut ties with the nation’s largest accreditor of for-profit colleges — a ruling that will bar hundreds of schools from providing federal financial aid and likely force some to close.

The Accrediting Council for Independent Colleges and Schools, which oversees more than 250 institutions nationwide with a combined enrollment of 600,000 students, had appealed a September Education Department decision to strip it of credentialing authority.

Latest News

Will Higher Education Be ‘Trumped’ by State Lawmakers?

As the impact of the 2016 elections takes shape in statehouses, there are early signs that some policy proposals made by President-elect Donald J. Trump are prompting reactions from governors and state legislators. For those who work on higher-education policy in Washington and in statehouses, the most common reaction to the new administration is uncertainty about the direction in which the president-elect and his nominee for education secretary, Betsy DeVos, may steer the Department of Education when they take office, in January.

Latest News

Donald Trump’s Huge, Ambitious School Voucher Plan, Explained

When Donald Trump set out to pick the next education secretary, he faced a stark choice. He could choose an insider who had shaped education policy for a state or large school district. Or he could bring in an outsider — someone who views traditional public schools as a failed system in need of dismantling.

He picked an outsider.

Latest News

A Year Before Public-Service Loan Forgiveness Kicks In, Uncertainty Looms

A program that would erase the federal loans of graduates who worked in public service for 10 years was passed by Congress and signed by President George W. Bush in 2007. Its goal was to use the carrot of loan forgiveness to steer graduates toward careers in the public interest — to be public defenders, teachers, and the like. Next October, borrowers who learned of the program early on can be among the first batch to apply to have their loans forgiven. But as that deadline approaches, neither government officials nor borrowers know exactly what to expect.

EWA Radio

Why A Trump Presidency Has Higher Ed on Edge
EWA Radio: Episode 98

Benjamin Wermund of Politico discusses the uncertainties ahead for the nation’s colleges and universities following the presidential election. While Donald Trump has offered few specifics on education policy, his surrogates suggest he will reverse course on many initiatives put in place under President Obama. That could have a significant impact on areas like Title IX enforcement, federal funding for research, and more. Higher education leaders are also facing a surge in reports of hate crimes and harassment on campuses that were already struggling with issues of free speech and diversity.