Barack Obama's historic victory last night ensures that a change in direction is coming to the U.S. Department of Education and hopefully to federal higher education policy.
Starting tomorrow, we will take a closer look at Obama's signature higher education proposals. (Got to give him at least a one day honeymoon, right?) Today, we will present our wish list for the incoming administration. Here are some changes we would like to see:
- Emphasize Oversight and Enforcement at the Department of Education: Over the last eight years, the Bush administration officials in charge of the Department looked the other way as widespread abuses occurred in the Federal Family Education Loan (FFEL) program. To this day, the Department has not disciplined a single lender for violating a federal law that prohibits loan providers from offering inducements to secure student loan business. At the same time, the education secretary allowed lenders to keep more than $1 billion they illegally obtained in improper subsidy payments. Federal leadership is sorely needed to protect the integrity of the federal student loan programs, for the sake of both the students who depend on them and the taxpayers who finance them. For starters, the new administration should take a close look at the conflict-ridden relationship between Sallie Mae and USA Funds, the guarantee agency it effectively controls. As we have noted, there is compelling evidence that the loan giant has exploited this arrangement to take advantage of borrowers who are having difficulty repaying their federal loans. A thorough investigation is needed.
- Lead the Way on Federal Student Loan Reform: The time has come for the government to reassess the way we provide low-cost federal loans to students. Do we still need two competing federal student loan programs to fulfill this function? If so, we need to focus on finding the most efficient ways to run these programs. Currently, the way the government sets subsidy rates in FFEL is arbitrary, wasteful, and subject to political manipulation. In addition, the program's complexity makes it ripe for abuse and makes good oversight by both the Department and Congress more difficult. Hopefully, Obama and his Democratic colleagues in Congress won't let the lenders' scare tactics frighten them away from pursuing reform. If anything, the credit crunch provides even further evidence that policymakers need to fundamentally change the way the government compensates student loan providers.
- Provide Relief to Student Loan Borrowers in Desperate Straits: In 2005, Congress tucked a provision into bankruptcy reform making it extremely difficult for financially distressed borrowers to discharge private student loans. As we have said before, we don't see any good reason for private loans to be accorded the harshest bankruptcy status. Individuals who borrow private loans are trying to better their lives. They certainly shouldn't be treated more harshly than those with excessive credit card debt. This summer, Obama unveiled a plan to rewrite federal bankruptcy law to make it easier for financially strapped senior citizens, military families, and individuals suffering from medical emergencies to get relief from debilitating debt. We would like to see Obama extend this relief to struggling private student loan borrowers as well.
- Strengthen Consumer Protections for Students Against Unscrupulous Trade Schools: Over the last decade, some of the largest publicly traded for-profit higher education companies have come under intense scrutiny from federal and state regulators and have faced numerous lawsuits by former employees, shareholders, and students over allegations that they have engaged in deceptive recruiting and admissions tactics to inflate their enrollment numbers. Yet at the same time, the Bush administration and Congress, under both Republican and Democratic control, have weakened provisions in the Higher Education Act that aim to protect students from questionable schools. If Obama and the Democratic-led Congress are serious about changing Washington, they need to put the interests of students before those of deep-pocketed trade school lobbyists. The new administration can get off to a fast start on this front -- by using the Department of Education's upcoming negotiated rulemaking sessions to overturn regulatory changes the Bush administration made in 2002 that made it easier for unscrupulous trade schools to take advantage of low-income and working-class students.
- Concentrate on Redesigning and Simplifying Federal Student Aid, Rather than Adding New Programs: The federal student financial aid system is not working as well as it should. Financially needy students are taking on too much debt and working an excessive amount of hours at jobs outside of school to pay for college. The last two Congresses have seen new additions to the federal student aid programs, including the introduction of new grant and loan forgiveness programs aimed at increasing the academic preparation of low-income students and encouraging students to go into low-paying, public-service careers such as teaching. While well-intentioned, lawmakers have created a mish mash of programs that are redundant and don't always interact well together. We would suggest that the new administration step back and consolidate, coordinate and simplify financial aid in ways that make it clear where students can get the best deal as it relates to paying for college and paying student loans back. The federal government doesn't need new programs, it needs a coherent system. It's also time for a president who is willing to take institutions of higher education head on in the debate over rising college prices.
That's our wish list. How about yours? Please send us any higher education recommendations you may have for the next president. We look forward to reading them.