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I get a little twitchy when millionaires demand “skin in the game” from the poor. That said, the latest version, proposed by Rep. Virginia Foxx, makes a bad idea worse.
Most versions of “skin in the game” require colleges to shoulder some risk when student loan default rates go above a certain level. The theory behind it is that if colleges know that poor performance will cost them, they’ll either raise their game or get out of areas in which they can’t. The glaring flaw in the theory is that colleges don’t have the authority to deny access to student loans. For open-admissions colleges, such as community colleges, that means being on the hook for the performance of prospective students we aren’t allowed to turn away. Unlike, say, mortgage lenders, we can’t screen for risk. We could, I suppose, take a more circumspect approach to recruitment in high-risk communities, but I prefer not to embrace systematic racism as a solution.
The new version takes the insanity a step farther. As part of the reauthorization of the Higher Education Act, apparently Rep. Foxx is proposing lowering the bar from “default’ to “90 days late,” and applying it at the programmatic level, rather than the institutional level.
From a community college perspective, this is nonsense on stilts.
For example, it doesn’t distinguish between students who graduated and students who dropped out in their first semester. We know that student loan balances are inversely correlated with the likelihood of default, which means that the student who drops out in the first semester owing $1,000 is likelier to default than a student who graduates owing $10,000. But the one-and-done student is taken as just as valid a reflection on a program as the graduate, even if the one-and-done barely bothered to show up.
For graduates and transfers -- a gratifyingly large portion of our students -- what happens when they move on to the four-year school and then miss some payments? Are those missed payments held against us, or against the four-year school?
I’ll also point out that many colleges have “curriculum committees” whose job it is to vet and approve new programs. If you knock down my “liberal arts” program, I can come back with a “general education” program. If you knock that down, I can come back with a “pre-transfer” program. And so on. Academics are very, very good at renaming and repackaging things.
And, if it comes to that, we’re fairly clever about gamesmanship. For example, if the HEA were amended as Rep. Foxx suggests, we could require every graduating student who hasn’t yet taken out a loan to take one for $50 shortly before graduation, and to pay it off to receive the diploma. Simply by enlarging the denominator, we’ve lowered our percentage of problem loans. Problem solved. Better hope the internet doesn’t figure that one out. Oh, wait...
In a way, community colleges’ affordability would become a liability. Given our relatively low tuition levels, most students here don’t borrow. The median debt of our graduates is zero. That means that only the most strapped students -- the highest risk group -- would show up in the sample. More expensive schools would push more students into the borrowing pool, simply because fewer families can afford $50,000 a year than $5,000. With a more affluent group of students in the pool at more expensive schools, I’d expect to see higher repayment rates there. What looks like a neutral policy would actually punish us for being affordable.
(States with free community college would get hit the hardest. There, the pool of borrowers would be even more heavily skewed towards the strapped. Sorry, Tennessee…)
The idea is so deeply flawed as to be essentially irredeemable. Instead, we should take a look at the philosophy underlying it. If there’s a rash of fires in a city, do we cut funding to the fire department, on the grounds that it isn’t performing? If there’s a crime spree, do we cut funding to the police? Of course not -- in those cases, we rightly associate resources with the ability to do a job. The same applies here. If you want to get student loan debt under control, provide colleges the resources to enable on-time completion. With well-educated students graduating on time, repayment will take care of itself. Among graduates, it already does.
Students already put skin in the game through work, lost time, and handling complicated lives. Colleges put skin in the game when they live and die by enrollments. All this proposal would do is stack the deck even more against the people who already struggle the most. No, thanks.
