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Every so often an idea takes hold in policy circles so quickly that nobody in those circles notices that it’s insane. “Skin in the game” for student loans is one of those ideas. But Massachusetts has come up with a variation that’s actually smart, so I’m hoping it displaces the current version. (And I won’t dwell on pride of authorship for having published a similar idea in 2006.)
The awful-but-popular version of “skin in the game” proposes holding colleges responsible for the loan payments of students who default. The theory is that if colleges are on the hook for student defaults, then they’ll make sure to do a good job with students while they have them. It’s the sort of idea that makes sense if you think of colleges as black boxes.
But if you know how they actually work, the issues become clear, quickly.
At a really basic level, community colleges are open-admissions, and student loans are legal entitlements. That means we don’t choose who to let in, and we can’t choose to whom to lend. Most students who default are not graduates; in fact, a plurality of them leave with zero credits. And although policymakers consistently get this wrong, there’s an inverse relationship between debt levels and default rates; students with the lowest debts default the most. That’s because they’ve typically only borrowed for a single semester, and didn’t finish that.
If we can’t choose students, and we can’t screen borrowers, then holding us accountable is merely punitive. How are we accountable for what we’re forbidden to control? If “skin in the game” applied only to actual graduates, there would at least be an argument for it, but applying it to anyone who ever borrowed, when borrowing is an entitlement, is absurd.
Massachusetts is taking a smarter approach; instead of punishing institutions when students walk away, it’s rewarding students for staying. As I understand it, the new “Commonwealth Commitment” offers students a ten percent rebate on tuition and fees for each semester that they’re enrolled full-time and get a GPA of 3.0 or better. (Massachusetts has an idiosyncratic relationship between tuition and fees; this applies to the sum of the two.) A student who finishes the Associate’s at a community college and transfers to a public four-year college stands to save over $5,000; if she transfers to UMass, she’ll save over $6,000. Also, as long as the student remains on track, her tuition/fee cost is frozen.
It’s a smart plan in several ways. It nudges students who could attend full-time into doing so, without penalizing those who can’t. It gets around the “delayed gratification” problem by front-loading the reward, so if a student has to stop out after a year, she at least got something.
Between the tuition/fee freeze and the rebate, the incentives to stay on track are palpable.
An experienced administrator can immediately come up with detail-y questions, of course. Do summers count? Remedial courses? Intersession? What happens with third-party payers? Does it apply to general enrollment fees only, or to lab fees and program fees, too? And at a really basic level, where does the money come from? Last week Kentucky announced a free community college program at the exact same time that it passed a budget cut for community colleges, in a textbook example of “be careful what you wish for.” Is this benefit funded, or will it come out of the colleges’ operating budgets? Having spent the last seven years in the Massachusetts community college system, I can attest that the campus operating budgets are already impressively lean; whether this mandate is funded or not will make a tremendous difference. If it isn’t, then it will be paid by a diminution of services to all students. That may be a trade-off for those who can attend full-time, but it would be an unalloyed loss for those who can’t.
Already, at most community colleges, full-time students are in the minority. Further slicing that group by GPA will make the number of beneficiaries even smaller. The number may surge at the next recession, when part-time work dries up, but that’s also when state funding tends to dry up. I don’t know enough details to know how recession-proof the program is. Folks who can only attend part-time due to outside obligations could be excused for muttering “must be nice…” while paying tuition and fee increases annually. And based on what I’ve heard about HOPE scholarships elsewhere, I wouldn’t be surprised to see students engage in more conservative course selection to maintain eligibility, which can be a mixed blessing.
Still, the idea of a refundable graduation deposit has some intuitive appeal. It focuses on the people with the greatest degree of agency in determining individual outcomes -- students themselves -- and gives them tangible rewards quickly enough to matter. It rewards desired behavior, and aligns institutional interest -- improved retention and graduation rates in a state that uses performance-based funding -- with student interest. If it comes with new money to offset the losses from tuition freezes and the rebates themselves, it could be a template for other states.
Well done, Massachusetts. I’ll be checking in with friends to see how it plays out on the ground, but it’s far smarter than any other variation of “skin in the game” that I’ve seen. If it’s able to withstand the next recession, I’d call it a game-changer.
