America will have a new president and a new Congress in 2025, and with that change comes the opportunity to rethink federal policy towards higher education. The federal approach suffers from many problems, but the core one is that federal subsidies indiscriminately fund traditional colleges, regardless of their financial value, and shortchange promising alternatives, such as apprenticeships.
The current approach does give many students access to educational opportunities they would not otherwise have. But it also props up low-quality colleges and degree programs that leave students worse off. Moreover, students who could benefit from noncollege pathways often lack the means to pursue them.
In a new white paper for the Foundation for Research on Equal Opportunity (FREOPP), I explore three actions that the next president could take on his or her own to address these issues.
Executive Action 1: Continue and expand efforts to release student outcomes data. Administrations of both parties have agreed on the importance of transparency. The Obama, Trump, and Biden administrations have maintained and expanded the College Scorecard, which records information on students’ earnings and loan repayment rates after they leave college. The Biden administration has begun an initiative—not yet completed—to collect data from colleges on the net tuition prices they charge students, which are notoriously opaque. The next administration should support this initiative and find new ways to get the data into the hands of students.
Executive Action 2: Require federally funded colleges to meet performance benchmarks. The Secretary of Education has the legal power to develop a “quality assurance” system for colleges that rely on federal student loans, but no secretary has ever acted on this authority. The next administration could require colleges using federal loans to meet certain performance benchmarks, such as ensuring that graduates’ debt burdens do not exceed a set share of their incomes. One potential policy I developed could protect over two million students from taking on excessive debt for degrees of insufficient value, and could also save taxpayers $10 billion per year.
Executive Action 3: Launch pilot programs to fund high-quality college alternatives. Federal funding streams tip the scales in favor of traditional colleges, but they don’t have to. The Experimental Sites Initiative allows the Secretary of Education to conduct pilot programs that waive various laws and regulations governing the disbursement of federal student aid. The secretary could use this authority to experiment with funding nontraditional programs such as apprenticeships and microcredentials. Successful initiatives could then form the basis for legislative reforms.
The FREOPP paper also explores three reforms that Congress could tackle.
Congressional Action 1: Make colleges responsible for unpaid student loans. Schools participating in the federal student loan program should have “skin in the game”—that is, they should pay a penalty when their students do not earn enough to repay their loans. This provides a financial incentive for schools to either lower tuition to make student debt more affordable, or pivot to offering higher-value credentials that enable students to earn more money. Skin in the game also reduces the fiscal cost of the student loan program, freeing up funds to support students in other ways.
Congressional Action 2: Privatize graduate student loans. There is no effective cap on federal lending to graduate students, which has generated tuition hikes and propped up many low-quality graduate degrees. This is ironic, as most graduate students in high-quality programs such as law or medicine could easily secure financing from the private market. But privatizing graduate student loans would end the federal subsidy that expensive graduate programs of questionable economic value enjoy—and save taxpayers around $11 billion per year.
Congressional Action 3: Overhaul federal student aid to support college alternatives. Congress could use some of those savings to expand the scope of other federal student aid programs. For instance, students should be able to use their Pell Grants for short-term workforce education programs that lead to a return on investment. Pell Grants should also be available to pay for the classroom components of registered apprenticeships. The federal work-study program, which subsidizes the wages of student workers, could also be reorganized to support work-based learning.
Whoever wins November’s elections, a new leader in the White House and new elected representatives on Capitol Hill will bring a welcome change of perspective. Washington should use the opportunity to refocus higher education policy around ensuring that America’s students come out ahead when they pursue postsecondary education.
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