Simplifying Higher Ed Accountability -- or Complicating It?

The rules that hold most colleges accountable for the debt their students leave campus with are widely regarded as broken.

A Government Accountability Office report last year found that colleges easily game standards applying to loan default rates. Policy shops and lawmakers, meanwhile, have spent years debating the right approach about the degree to which institutions should be on the hook for poor results on student loans.

Senator Lamar Alexander, the Tennessee Republican who chairs the Senate education committee, this month released the latest gambit to overhaul federal accountability for colleges. He proposed in a speech at the American Enterprise Institute that a single accountability system measuring students’ progress paying back their loans should apply to all colleges and majors.

It’s a simple concept, but policy makers would quickly run into complications drafting such a rule, representatives of college groups say. So far, the proposal is getting tepid responses from those groups, who say it could hurt access and create new administrative challenges on campus. But they could be facing a tougher political environment to oppose accountability outright.

“I think the plan is consistent with Senator Alexander's admirable desire to simplify federal student aid as much as possible,” said Terry Hartle, senior vice president for government and public affairs at the American Council on Education. “Unfortunately, simplification sometimes turns out to be very complicated. I suspect that will be the case here.”

Alexander is offering his plan, though, as the ground has started to shift politically around college accountability, said Lanae Erickson, senior vice president for social politics and policy at the think tank Third Way. "It shows that the conversation has really moved over the last few years," she said.

Alexander's proposal would replace a patchwork of existing accountability rules that many argue don't effectively measure outcomes at most colleges. The cohort default rate, which applies to all colleges, tracks the share of borrowers at each institution who default on their loans within three years. But it doesn't track what happens to borrowers after that window, and few institutions ever face the loss of federal aid because of the rule.

An Obama-era regulation called gainful employment targeted for-profit and career education programs by assessing borrowers’ debt burdens after graduation. Critics -- especially representatives of career colleges -- charged that gainful employment was unfair because it targeted only certain higher ed programs and not those at most public and private nonprofit institutions.

Unlike those rules, Alexander argued his framework would "simplify and expand" on what gainful employment tried to accomplish by measuring whether students are actually paying off their loans.

Public and nonprofit colleges have long argued that it's inappropriate to apply the same rules to four-year colleges as career education programs -- the payoff may not be immediate, but students benefit from higher earnings for many more years, they argue. And they warn holding four-year programs accountable will be much more complex.

College Groups Raise Access Concerns

Some Republicans expect that colleges would either close low-performing programs -- as some institutions did in response to the early gainful-employment ratings -- or discount the price of programs with lower earnings.

But Sarah Flanagan, vice president for government relations and policy development at the National Association of Independent Colleges and Universities, said that would have the effect of steering students who rely on financial aid toward lower-priced programs.

"If you’re a low-income student, you’re the most price-sensitive student,” she said. “It’s going to undermine equality of opportunity, not help it.”

Colleges have slowly started to move toward differential pricing for programs in recent years. Business and engineering are two fields of study where some institutions have set higher tuition rates than for liberal arts degrees.

However, David Sheppard, senior vice president and chief of staff at the Thurgood Marshall College Fund, whose members are mostly public historically black institutions, said those colleges have limited flexibility to set different tuition levels depending on the program. And he said historically black institutions want to preserve the ability for students to pursue postsecondary programs like teaching, especially when there is a dearth of black male teachers in the U.S. education system.

“Our schools don’t want to be deterred from offering that opportunity to students,” Sheppard said. “It’s fair to say our group feels there needs to be additional thought given to the accountability aspect of the proposal.”

Pursuing accountability by program rather than at the college level is still preferable, said Preston Cooper, a research analyst at the American Enterprise Institute, because there can be a wide variation in quality within a single institution.

“There may be some reductions in access,” he said. “I think we have to accept some of those if we actually want to hold low-quality institutions and low-quality programs accountable.”

Erickson of Third Way said the boom in high-priced four-year degree programs at for-profit colleges over the last decade also shows low-income students aren't always sensitive to cost.

"What students say they want is to make enough money to have a stable career," she said. "If they're having to take out so much in loans they can't pay it back, they're not getting what they're asking for."

The Alexander proposal also raises questions about how to count outcomes for each program. Nearly a third of students at public and nonprofit institutions switch majors at least once within their first three years.

“Things get very complicated very quickly,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. “The issue of compliance burden is a fairly significant one here.”

While it’s not surprising college groups would take issue with the outlines of the proposal, higher ed associations have beaten back previous attempts at the federal level to overhaul accountability rules. And the absence of federal data on program-level outcomes for student borrowers means many institutions can’t say how they would perform under the new accountability regime even with more details about Alexander’s plan.

That lack of data is a perennial problem for higher ed, Cooper said. He said lawmakers could allay those concerns in legislation by cutting off aid only after multiple years falling short of the new standards.

Growing Interest in Measuring Loan Repayment

The interest in using loan repayment to assess higher ed programs isn't new -- the Obama administration's original gainful-employment rule, which was later struck down by a federal court, incorporated the metric.

And Alexander isn’t the first lawmaker to call for linking federal aid to loan repayment at the program level. But Robert Kelchen, an assistant professor of higher education at Seton Hall University, noted that there is no consensus in recent proposals on what qualifies as loan repayment or what thresholds the federal government should set for colleges to meet the standards.

House Republican legislation to reauthorize the Higher Education Act in 2017 would have cut off federal student aid to institutions where 45 percent of student borrowers weren’t in repayment on their loans within three years. Meanwhile, Utah Republican Orrin Hatch and New Hampshire Democrat Jeanne Shaheen introduced a Senate bill the same year that would have blocked federal aid to colleges where less than 15 percent of their students haven’t begun repaying their loans within three years of leaving school.

The Hatch/Shaheen bill used a more stringent definition of repayment that assessed what percentage of borrowers had paid down at least $1 of their loan principal. Alexander’s proposal would likely use a similar definition, because he wants borrowers to have their loan payments automatically deducted from their paychecks.

Kelchen said policy makers would have to sort out other thorny issues like the appropriate thresholds for triggering sanctions against colleges or the time frame they would have to come into compliance.

“Accountability is one of the biggest challenges in getting an agreement for [Higher Education Act] reauthorization,” he said. “Democrats are pushing hard for different rules for for-profits. Republicans want to treat each sector the same. Senators in both parties want to make sure colleges in their state are not adversely affected.”