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

Seminar

Election 2016: New President, New Education Agenda
Washington, D.C. • November 14, 2016

The election of Republican Donald Trump is sure to reshape federal policy for education in significant ways, from prekindergarten to college, especially coupled with the GOP’s retaining control of Congress.

Although Trump spent relatively little time on education in his campaign, he did highlight the issue from time to time, from his sharp criticism of the Common Core and high student debt loads to proposing a plan to significantly expand school choice. And Congress has a long to-do list, including reauthorization of the Higher Education Act.

Seminar

The U.S. Elections & Education: Part 1
Washington, D.C. • August 30, 2016

Now that the White House race has narrowed to Hillary Clinton and Donald Trump, how is education playing out as an issue in the campaign? Will it prove an important fault line between the Democratic and Republican candidates? Will Trump offer any details to contrast with Clinton’s extensive set of proposals from early childhood to higher education? What are the potential implications for schools and colleges depending on who wins the White House? Also, what other races this fall should be on the radar of journalists, whether elections for Congress, state legislatures, or governor?

Blog: Higher Ed Beat

Higher Education and the 2016 Presidential Election

Flickr/Michael Vadon (CC BY-SA 2.0)

The first total solar eclipse to sweep across the entire continental United States in 38 years will occur on August 21, 2017. Don’t expect reauthorization of the Higher Education Act (HEA) anytime before then.

The HEA expired at the end of 2013 and it’s likely nothing will happen with it in an election year or soon thereafter, agreed a panel of journalists discussing key higher education issues and the 2016 presidential election, at the Education Writers Association National Seminar in Boston in May.

Blog: Higher Ed Beat

Higher Ed: Hunger on Campus

Flickr/Salvation Army USA West (CC BY 2.0)

The stereotypes of the financially struggling college students are well-known. They live on ramen, share an apartment or house with several roommates, and work part-time for money to buy beer. They get summer jobs to cover college tuition and expenses. And they come from middle- and upper-class families, so if they do struggle sometimes to pay the bills, that scarcity is hip and cool.

Blog: Higher Ed Beat

State-by-State Rankings of College Affordability

Atomic Taco/Flickr (Highline Community College)

An affordable college education. Politicians and bus stop ads promise it, students and parents dream of it. But can anyone define it?

Authors of one data-rich report tried their best to bring this vague yet crucial concept into focus by answering a simple question: What percent of your income would you need to pay to go to college in each state?

Blog: Higher Ed Beat

Former Chancellors of Research Universities Warn Their Future Is in Peril
New Report Urges Dramatic Changes to Save a System That’s “Breaking Down”

Flickr/Sharada Prasad CS (CC BY 2.0)

The system for funding American flagship public universities is “gradually breaking down,” said Robert J. Birgeneau, a former chancellor of the University of California, Berkeley, and the co-chair of a two-year project to examine the role of public research universities and recommend changes to help them stay competitive.

Blog: Latino Ed Beat

‘Lives in Limbo’: Supporting Undocumented Students

Yehimi Cambron, middle, shares her immigration story at the Center for American Progress event, "Harnessing the Talent of DACA and Unauthorized Students at the K-12 Level." She was joined by, from left, Richard Loeschner of Brentwood High School in New York, Frances Esparza of Boston Public Schools, Roberto Gonzales of Harvard University, and moderator Scott Sargrad of CAP. Photo by Natalie Gross/ EWA

When Yehimi Cambron crossed the U.S. border from Mexico with her parents, they told her she would not have documented legal status in this country. But as a third-grader, she had no concept of how that would affect her.

It wasn’t until she was 15 and denied a $50 prize in an art competition because she didn’t have a Social Security number that she grasped its meaning.

Report

Jeb Bush & Higher-Education Reform: Forget ‘Free College’
Andrew Kelly and Jason Delisle for National Review

Federal higher-education policy is in shambles. The strategy of the past 40 years — to increase student aid, watch tuition rise, and increase student aid again — has reached a breaking point. Federal loans flow freely with few questions asked, giving colleges every incentive to raise tuition and enroll more students, but less reason to worry about whether those students learn anything. Tuition at the average public four-year college has nearly quadrupled since the early 1980s, pushing more students into debt.

Report

A New Look at Tuition Tax Benefits

Nearly everyone agrees that tuition tax benefits do little to expand college access. But the benefits are popular with the middle class, so policymakers won’t touch them. This brief by the New America Foundation examines who qualifies for the most generous benefit  – The American Opportunity Tax Credit —  and finds the biggest beneficiaries to be better-off students, and students attending for-profit colleges.

Report

Balancing Risk and Responsibility: Reforming Student Loan Repayment

Income-based repayment plans are supposed to make student loan repayment more manageable for low-income borrowers. But critics say the programs offer a windfall to high-income, high-debt professionals, and encourage graduate schools to raise tuition. This paper by the American Enterprise Institute suggests steps to reduce this “moral hazard” and target the programs’ benefits to the neediest students.

Report

Tough Love: Bottom-Line Quality Standards for Colleges

Education reformers have long argued that more should be done to hold colleges accountable for the billions they receive in federal student aid. In Tough Love, Ed Trust proposes a system that would cut off aid to institutions with the lowest enrollment of low-income students (which it dubs “engines of inequality) and the worst graduation and loan- repayment rates (“dropout factories” and “diploma mills”).

Report

Trends in Student Aid

The College Board’s annual “Trends” reports are the go-to for statistics on student aid and college costs. The latest iteration of “Trends in Student Aid” shows that total student borrowing declined for a fourth straight year in 2014-2015, while grant aid continued to climb. Even so, borrowers continue to struggle with student debt, with nearly one in ten completers (and one in four drop-outs) defaulting within two years of entering repayment.