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The Daily Signal
Josh Hawley Wants to Break Up the College Monopoly. Why His Approach Could Help.
Mary Clare Amselem
July 19, 2019
Sen. Josh Hawley, R-Mo., introduced two bills this week to shake up higher education, and the proposals look promising.
One bill would expand access to career and technical education by
making career-focused education options—such as apprenticeships or
certificate programs—eligible for Pell Grant funding.
The second would require colleges to pay 50% of the student loan
balance for loans that enter default, giving colleges “skin in the
game” and a powerful incentive to provide an education that translates
well into the job market.
Hawley’s proposals are an effort to address serious underlying problems in higher education today.
Colleges and universities are too expensive and often send off
graduates with few marketable skills—if they graduate at all. Moreover,
colleges have no incentive to step up their game because they have an
open flow of cash coming from the federal government, students have few
alternatives, and colleges bear little accountability for the quality
of education they provide.
The best way to hold colleges accountable is to get the federal
government out of the business of lending to students. Federal lending
to students, though well-intentioned, has been the leading factor
driving today’s out-of-control tuition costs.
But there are positive steps that can be taken short of full reform.
Giving students other options and putting colleges on the hook for
student loan defaults could be a step in the right direction.
Making trade schools more accessible and affordable through Pell Grant funding could be life-changing for many students.
Currently, the outdated accreditation system allows only traditional
colleges to access federal dollars, maintaining a status quo that
discourages innovation in higher education.
For too long, the accreditation process has acted as a gatekeeper that
keeps out new providers who offer students real skills for less money
and less time, while protecting long-standing universities despite
their poor track records of success.
Hawley’s proposal would create an entirely new pathway—outside of
accreditation—for students who attend career-based programs to be able
to use Pell Grants to offset the cost of school.
While some may argue that bypassing accreditation may allow
poor-quality schools to receive taxpayer dollars, the senator’s
proposal would likely prevent that, since it includes eligibility
requirements that are arguably much stricter than those imposed by
accreditors.
For example, to receive certification under this alternative pathway, a
school must provide student outcome data such as job placement rate,
graduate median starting salary, and program completion rate.
Additionally, a school could lose its certification if, for example,
its job placement rate within 90 days of completing the program is less
than 50%, or if the graduate median starting salary is less than 200%
of the federal poverty level.
This would be a real advance from the current accreditation regime,
which places relatively little emphasis on student outcomes data and
focuses instead on how many books a school has in their library or how
many faculty members hold Ph.D.s.
Although it is never ideal to put in place federally defined metrics,
these relatively straightforward targets would provide needed
transparency to the taxpayers who fund Pell Grants.
Hawley’s second proposal, titled the Skin in the Game Act, is short and to the point.
In fewer than 200 words, the bill proposes that colleges and
universities participating in the federal student loan program be on
the hook for 50% of the loan balances that enter into default.
Additionally, colleges would be disallowed from raising their tuition
to try to offset the new financial burden imposed by paying off
defaults.
Student loan default rates are a growing problem. Nearly 40% of
students are expected to default on their loans by 2023. If students
find themselves without the proper training to compete in the job
market after spending tens of thousands of dollars to get a bachelor’s
degree, it’s safe to say that at some point, their university failed
them.
Colleges, like all businesses, should be held responsible for the
quality of their product. Requiring schools to pay off a percentage of
a student’s debt if they enter default is one strategy to encourage
schools to do better while protecting taxpayers and students.
It will be important to follow how this proposal ultimately treats
tuition increases. Indeed, having the federal government set a rate at
which schools must repay defaulted student loans, and preventing
schools from raising tuition to offset that cost, could create
distortive issues of its own.
However, the prohibition in the Hawley legislation seems to reflect
“supplement not supplant” language that is standard in many federal
programs. Such language states that a recipient of federal funds (a
state or other entity) cannot supplant, or replace, state spending with
the new federal spending, thus safeguarding against the recipient
relying on federal aid.
The Skin in the Game Act appears to apply narrowly to schools that
raise their tuition specifically in response to being liable for a
portion of their students’ loan defaults.
“Skin in the Game” policies could provide needed protection for
taxpayers. At the same time, conservatives should continue to keep the
big picture in mind: Restoring the private loan market is what
ultimately would drive tuition prices in a way that reflects the
quality of schools, benefitting students and taxpayers alike.
Breaking up the higher education monopoly is key to solving our $1.6
trillion student debt crisis. Making Pell Grants more flexible and
accessible to more schools would add much-needed competition into
higher education and encourage colleges to step up their game.
For those colleges that continuously fail students, the Skin in the
Game proposal could provide long-needed accountability—to the benefit
of students and taxpayers.
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