President Barack Obama delivers remarks on interest rates on student loans at the University of Colorado Coors Event Center in Boulder, Colo., April 24, 2012. (Official White House Photo by Chuck Kennedy)
President Obama today announced a bold new plan for higher education that aims to make college more affordable. Many of the features of the Obama plan have been the subject of research and analysis by the New America Foundation’s Education Policy Program in the recent past. This blog post sets out how New America’s research links with, and can help to shape, the current round of higher education reform efforts. It is our hope that our readers will find it a helpful resource.
This post closely aligns with the White House’s fact sheet on the President’s plan to make college more affordable.
Paying for Performance
Policy 1. Tie financial aid to college value
What New America has said: “Colleges have traditionally received federal financial aid with few strings attached. In order to create new accountability mechanisms for improving data collection and to require colleges to provide more information about their success in serving students, we would hold colleges accountable for quality and affordability by extending broad accountability metrics to all higher education institutions.” (January 2013 report, Rebalancing Resources and Incentives in Federal Aid)
Policy 2. Challenge states to fund public colleges based on performance
What New America has said: "With the economy stuck in neutral, tuition prices and student loan debt skyrocketing, and parents and students increasingly questioning the value of a college degree, our public institutions urgently need a different approach to the challenge of educating an increasingly diverse mix of students at a reasonable cost. For this reason at the national level, there should be a competitive grant program, like Race to the Top for Higher Education, that challenges public higher education institutions to innovate." (May 2013 report, The Next Generation University)
Policy 3. Hold students and colleges receiving student aid responsible for making progress toward a degree
What New America has said: “One area ripe for experimentation is how colleges disburse federal student aid. Financial aid is typically distributed in one or two lump sums, which may work well for students attending traditional four-year colleges that generally require large upfront payments from students and their families. But in cases where the primary costs students face are not large upfront payments, but more regular, ongoing costs of living, it may be counterproductive to distribute aid in one or two large disbursements… Changing aid delivery to smaller, more regular disbursements at low-cost institutions could provide these students with more reliable income, create greater incentives to persist, and protect students who have to withdraw during the semester from having to pay back large amounts of aid.” (January 2013 report, Rebalancing Resources and Incentives in Federal Aid)
Promoting Innovation and Competition
Policy 4. Challenge colleges to offer students a greater range of affordable, high-quality options than they do today
What New America has said: “In an era when college degrees are simultaneously becoming more important and more expensive, students and taxpayers can no longer afford to pay for time and little or no evidence of learning. Federal policy should encourage traditional institutions to think differently about how they deliver and award credit for learning and also create a space for nontraditional institutions and organizations to prove their ability to help students achieve real, objectively verified learning outcomes.” (September 2012 report, Cracking the Credit Hour)
What New America has said: “At a time when a higher education is more important to individual and collective prosperity than ever before, students need online courses and degree programs that are effective, affordable, and grounded in public values. A State U Online model is achievable, but only if states and higher education institutions work together to share their resources and reduce barriers that prevent students from moving seamlessly through the system – credits in hand.” (April 2013 report, State U Online)
Policy 5. Give consumers clear, transparent information on college performance to help them make the decisions that work best for them.
What New America has said: “One of our biggest concerns with government consumer information tools is the assumption that students and families already have enough knowledge about higher education to understand what they are seeing. Higher education involves a lot of jargon. What does default mean? What is a 10-year repayment plan? What is a federal student loan? The [existing] Scorecard misses an opportunity here to raise overall higher education “literacy” for families.” (April 2013 blog post, “New College Scorecard: Will Students Use It?”)
Policy 6. Encourage innovation by stripping away unnecessary regulations.
What New America has said: “Higher education generally suffers from a lack of rigorous experimentation, both in terms of practice and policy. Federal financial aid is no exception...Fortunately, the ability to conduct such evaluations already exists, thanks to legislation passed in 1992. The Experimental Sites Initiative (ESI) allows the Department to waive regulatory and/or statutory financial aid requirements for a small, voluntary group of institutions to reduce burden, improve delivery of aid, or “otherwise benefit” students.” (January 2013 report, Rebalancing Resources and Incentives in Federal Student Aid)
Ensuring that Student Debt Remains Affordable
Policy 7. Help ensure borrowers can afford their federal student loan debt by allowing all borrowers to cap their payments at 10 percent of their monthly income.
What New America has said: “A redesigned federal student loan program would substantially reduce the dangers of borrowing by offering a single repayment plan that is similar to both the ‘Pay-As-You-Earn’ plan that the U.S. Department of Education recently enacted (which itself is meant to mimic a plan in statute set to take effect in 2014) and the income-based repayment plan that was enacted in 2007. Under this proposal, all borrowers would repay their loans as a percentage of their income. Such a system would recognize that some people will never earn enough to fully repay their debt, no matter how earnestly they try.” (January 2013 report, Rebalancing Resources and Incentives in Federal Aid)
Policy 8. Reach out to struggling borrowers to ensure that they are aware of the flexible options available to help them to repay their debt.
What New America has said: “Figuring out how to pay for college is a seriously complex process. Students need to be aware of the terms and conditions of their loans before they sign their promissory notes. But we can’t be complacent in thinking that all students are coming from the same place and have the same general understanding of student loans. For many students and families, a student loan is their first loan, and their unfamiliarity with loan vocabulary will add further mystery to an already opaque process. More needs to be done to educate borrowers about financial aid.” (June 2012 blog post, “What Borrowers Don’t Understand About Student Loans May Hurt Them”)
Stay tuned in the coming days for more analysis of the White House proposal.