Members of the 115th Congress take their seats for the first time today, with a unified Republican government for the first time since 2006. While tax and healthcare reform will undoubtedly be at the top of the agenda, the new Congress should devote some time to reforming the federal government’s role in higher education. Senator Lamar Alexander (R-TN), the incumbent chairman of the Senate committee tasked with overseeing education policy, and Representative Virginia Foxx (R-NC), his incoming House counterpart, certainly have their work cut out for them. Here are five areas where they could start.
Put a cap on federal student loans. The federal government offers multiple types of student loans. Stafford loans provide students with credit to attend college up to a specified cap, but the PLUS loan program allows graduate students and parents of undergraduates to borrow up to their cost of attendance—effectively an unlimited amount. This gives colleges free reign to raise tuition, since the government will always meet the student’s borrowing needs.
There is a role for the government in helping students pay for college, but that role should be finite. As the benefits to college are not unlimited, college subsidies should not be unlimited either. To stem future increases in college costs and limit the government’s role in the higher education sector, the new Congress should cap or eliminate the PLUS loan program.
Crack down on excessive subsidy reliance. Speaking of limiting the government’s role in higher education, the new Congress should also take on colleges which rely too heavily on federal student aid programs. Currently, 88% of for-profit institutions get more than half their revenues from the government. (These statistics are unavailable for the public and nonprofit sectors, but I suspect many have similarly high figures.) Despite the label “for-profit,” such excessive corporate welfare is inconsistent with a free market.
The legal framework to deal with this problem already exists. The so-called “90/10 rule” mandates that for-profit colleges receive no more than 90% of their revenues from federal student aid programs. Colleges must turn to the private sector for the remainder (with some exceptions). Private financiers apply a higher level of scrutiny before disbursing funds than does the overgenerous government. Applying the 90/10 rule to all colleges and turning it into an 80/20 or 70/30 rule would introduce market-based accountability to the higher education sector and reduce taxpayer exposure to the risky student loan business.
Accreditation reform. Accreditors, the bodies which decide which colleges get access to federal funds, are rife with problems. Many have serious conflicts of interest, and others have failed to identify and sanction poorly-performing schools. Reforming these agencies is a tricky business, but the new Congress should tackle it to make sure students and taxpayers only invest in promising colleges.
There are a few broad principles accreditation reformers should keep in mind. First, accreditors should make more of an effort to examine the outcomes of students at various colleges. Second, accreditors should stop employing so many decision-makers with clear conflicts of interest. Finally, accreditation reform is not synonymous with granting all institutions access to federal aid—indeed, bringing promising new educational models into the established system might just saddle them with all the established system’s problems.
Rein in regulatory overreach. Republicans who rightly decried President Obama’s aggressive regulatory agenda should not fall into the trap of assuming that a Republican president means the end of regulatory overreach. Specifically, congressional Republicans should not give up their campaign to pass the REINS Act, which would require Congressional approval for major new regulations.
The Obama Education Department has promulgated many major regulations, including the defense to repayment rule, which grant the Department and other government bodies arbitrary power over colleges. These have been coupled with smaller regulations with which the administration has sought to wage culture wars. In addition to advancing the REINS Act, Congress should put an end to this nonsense by placing clear limitations on the Education Department’s power.
Reform student loan repayment. As I wrote last month, new student loan repayment plans based on the borrower’s income will cost taxpayers far more than expected—especially if (when) interest rates rise. While so-called “income-driven repayment” is a good idea in principle, the current system grants large borrowers excessive amounts of loan forgiveness.
The current statutes governing income-driven repayment are vague and grant plenty of discretion to the Education Department. Congress could solve this problem by requiring the share of income student borrowers pay back to vary with principal balance. After all, there is no reason someone who borrows $20,000 should have the same repayment rate as someone who borrows $100,000. A cap on federal student loans, as described above, would also curb excessive borrowing—and with it excessive forgiveness.
This is certainly not an exhaustive list. Other areas for reform—both higher education-related and not—abound. But these five priorities should form the bedrock of any comprehensive Republican education reform agenda. With united government, Senator Alexander and Representative Foxx have a unique opportunity to advance a bold package of reforms. Students and taxpayers should hope they use it.