Regulatory Reforms in Store for the Higher Education Act

Policy
Posted By Derek Johnson on July 10, 2015 at 10:16 am
Regulatory Reforms in Store for the Higher Education Act

Congress is expected to pass a reauthorization of the Higher Education Act (HEA) later this year. The legislation, which governs everything from the student loan and financial aid process to reporting and regulatory requirements, must be renewed every five years. Each time the legislation is up for reauthorization, lawmakers are provided an opportunity to update or amend the law. This year, the Republican-controlled Senate will get the first crack at one of its major priorities for higher education: deregulation.

Sen. Lamar Alexander (R-TN), chairman of the Senate Committee on Health, Education, Labor and Pensions, wants to roll back regulations and mandates that have built up in the law over the years. The committee is considering a raft of reforms aimed at simplifying the lending process and easing the cost and burden of compliance on the part of universities.

“The Higher Education Act we see today—a nearly 1,000 page law with an equal amount of pages devoted to higher education regulations—is simply the piling up of well-intentioned laws and regulations, done without anyone first weeding the garden,” said Alexander in a statement last month.

Setting the stage

Earlier this year, the committee set up a task force made up of university leaders to study the law and look for regulations that are ineffective or unnecessarily burdensome. The task force released a report recommending an array of rollbacks, and Alexander said the report will act as a “blueprint” for the reauthorization process.

Some of the proposed changes have support across the aisle and among industry experts. One example is the disclosure requirements for financial aid eligibility, where students are required to report their family income using tax records from the current year.

According to Mamie Voight, director of policy research at the Institute for Higher Education Policy, this creates complications because most students apply for financial assistance before tax season and don’t have current year records to provide. Lawmakers are considering tweaking the law to allow students to use financial data from the prior tax year when applying for aid like student loans. Voight said research has shown that in the vast majority of cases, tax records from the previous year are suitable to measure a student’s financial circumstances.

“It’s pretty clear now that incomes change over time but they don’t change that dramatically when it comes to eligibility of aid,” said Voight.

However, the Institute for Higher Education Policy and other organizations argue that the task force was comprised of officials from universities and higher education institutions with no student representation, and as a result, it mainly reflects the thoughts and desires of organizations that would directly benefit from deregulation.

““I don’t think it’s surprising that a report written by industry for industry would say, ‘Thanks for the money, now leave us alone,’” said Amy Laitinen, deputy director for higher education at the non-profit New America Foundation, to PBS NewsHour.

Risk sharing

Other proposals are more significant. One of the biggest changes being considered in the lead up to reauthorization is a proposal to make universities financially responsible for a portion of students’ unpaid federal loans. The idea behind this proposal is to give universities “skin in the game,” and push them to discourage students from over-borrowing and better prepare them for the workforce. The current system shares the risk between the federal government and students, but leaves the individual universities off the hook.

“Colleges should be preparing students to enter the workforce and begin repaying that debt,” said Voight. “Students are still going to be on the hook for quite a bit of the funds and the consequences of defaulting, but moving at least some of that [burden] onto institutions will reinforce the need to prepare students for repayments and [help them] stay current on their loan.”

senator alexander

Senator Lamar Alexander. Source: The Huffington Post

A white paper released by the Senate Committee on Health, Education, Labor and Pensions laid out the potential benefits of risk sharing:

“This would ensure that colleges and universities have a clear financial stake in their students’ success, debt, and ability to repay their taxpayer-subsidized student loans. It would encourage colleges and universities to establish appropriate admissions practices for at-risk or uncommitted students, motivate students to complete more quickly, and graduate students with less debt.”

While the concept of risk sharing has momentum, community colleges are pushing back, arguing that only a small percentage of their students over-borrow and that they shouldn’t be on the hook for every student who defaults. The presidents of both the American Association of Community Colleges and the Association of Community College Trusts sent a response to Alexander’s white paper on the topic saying that they “fundamentally opposed” the idea:

“We believe that implementation of risk sharing at community colleges will inevitably result in either increased tuitions or reduced educational services for students, and very likely both. The financial picture at our institutions precludes any other outcome,”

Overturning the student unit data ban

Despite the vast amount of student information that is reported by universities each year, there is no federal database that keeps track of individual student outcomes. How much money on average does a graduate with an engineering degree from the University of Texas earn? How many recipients of federal Pell Grant funding went on to actually graduate? Which majors (or universities) result in the highest rates of student loan default? This kind of consumer information could help policymakers measure the value and effectiveness of individual universities and draw broader conclusions about the federal lending process – and help students decide which colleges to apply for and which majors to pursue.

Much of this data is actually already available though a number of existing federal databases. However, since 2008, linking those systems together to create a student unit database has been illegal. According to Laitinen, the ban was the result of a 2007 data breach and a full-court press lobbying effort by the National Association of Independent Colleges and Universities (NAICU). The association, which represents a collection of mostly for-profit higher education schools, successfully argued to lawmakers that the database would violate student privacy. Laitinen’s research found that NAICU “feared the federal government would use the data to tie funding to institutional outcomes,  potentially disastrous for low performing institutions largely dependent on federal financial aid.”

Now, though, there are growing calls to overturn the ban. In April, the Postsecondary Data Collaborative, a coalition of 27 education organizations, sent a letter to Alexander and Sen. Patty Murray (D-WA) urging an end to the ban.

A note of caution

While the push to streamline aspects of the act does have support outside of Republican circles, some supporters have expressed concerns that an overzealous approach could result in cutting good regulations as well as bad.

“It would be a mistake to roll back important protections for faculty, students and families,” said Murray, according to Inside Higher Ed.

While there appears to be a consensus among lawmakers and policy experts that there is fat to be trimmed from the reporting process, Voight said it is important not to lose sight of the broader purpose of these regulations: to ensure that taxpayer investment in higher education is being put to good use.

“It’s important to keep in mind that colleges and universities receive billions and billions of dollars from the federal government. So there is some need for compliance and regulation in return for those dollars,” Voight said.

Image: Wikipedia

Derek Johnson
Derek Johnson is a writer, journalist and editor based out of Virginia. He received a Master’s degree in Public Policy at George Mason University and a bachelor’s degree in Communication from Hofstra University.

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