Higher education reform can be bipartisan

While the recent midterms have provided little respite from the near-constant partisan bickering in Washington, the ingredients for bipartisan progress on higher education reform are already in place. 

American families are seriously concerned about the cost of college, and policymakers are searching for answers. Up to now, highly polarized debates about a few hot topics—for-profit colleges and student loan interest rates—have masked the opportunity for policymakers to rally around reforms that have support from the left and right. 

{mosads}We see four opportunities for reform: 

Student Loans 

While tales of six-figure student loan debts have preoccupied the media, these high debt borrowers are not the norm. Instead, the real student loan crisis is among college drop-outs who default on more modest amounts of debt ($14,000 on average). Even though the federal loan program offers struggling borrowers the opportunity to limit monthly repayments to a percentage of their income, many fail to take advantage of this program because the process rivals the tax code in its complexity. 

Unfortunately, well-known proposals to help borrowers—refinancing loans at lower interest rates or expanding loan forgiveness—offer limited relief to those in real distress while providing sizable benefits to borrowers who aren’t struggling. Instead, the repayment process should be streamlined so all borrowers are protected from financial hardship, but with reforms to ensure those protections are targeted to those who need them most and are budget-neutral. A bipartisan group of lawmakers from both houses of Congress have introduced proposals on this front, but they have not gotten far. 

Even more important is helping prospective students choose worthwhile programs in the first place—ones that will help them graduate and find a job. Under new private financing options called income-share agreements (ISAs), students agree to pay a percentage of their future income for a defined period of time in exchange for private financing. Unlike traditional student loans, the amount a student pays depends on his or her success, thus giving ISA providers a strong incentive to help the student find a quality program that sets him or her up for success. 

Regulatory uncertainty, however, has stunted this market. Luckily, a few lawmakers have taken initial steps to clarify the legal treatment of ISAs, a reform that would provide students with a new, beneficial financing option at no cost to taxpayers. 

Accountability 

President Obama has worked to increase higher education accountability for the past six years. But his quest to tighten regulation of for-profit colleges has generated predictable and justifiable opposition because of its unabashed targeting of one particular sector. More recently, his plan to rate all colleges and universities, including thousands of diverse institutions, is proving to be a gargantuan task, well beyond what the Department of Education can or should be doing. 

Needed is a simple measure based on loan performance to kick out the worst performing programs, regardless of tax status. Whether students are able to pay back their loans is a basic measure of program quality that we can measure objectively. It’s true that colleges are currently held accountable for their Cohort Default Rate, but this measure is easily gamed. Fortunately, proposals to modernize it are gaining support. 

Above that bar, policymakers should give colleges “skin in the game,” putting them on the hook to pay back a portion of any loans not repaid by their students. This idea has received support from both sides of the aisle—from Sen. Elizabeth Warren to Rep. Paul Ryan—and could be applied fairly and effectively. 

Innovation 

Encouraging existing colleges to improve is worthwhile, but the higher education market would also benefit from an influx of new competitors, some of whom may not look like a traditional college at all. But accreditation—the process that guards access to federal student aid money—acts as a barrier to entry. Under federal law, only accredited institutions can receive federal loans and grants, and the process focuses heavily on inputs—such as faculty qualifications and facilities—rather than student learning. As such, the system favors organizations that have all the trappings of a traditional college and is biased against innovative models that could provide a more cost-effective education. 

Accreditation reform proposals abound, but there is little consensus about which one to choose. There are, however, concrete steps policymakers can take to lower barriers to entry. For instance, taking a page from charter schooling in K-12, reformers should create an alternative pathway to federal financial aid eligibility whereby innovative providers could get greater freedom to teach the way they want in exchange for increased accountability for results. This pathway could be overseen by new, independent authorizers—like groups of employers or state governments—who would be well-positioned to judge which programs will meet the needs of employers. 

Transparency 

These individual reforms will benefit from greater transparency around higher education costs and outcomes. Higher education is often a worthwhile investment, but not every program is worth the money. Unfortunately, students rarely have a good sense of the value of the programs they’re considering. Critical information—data on completion rates, student debt, and graduate earnings for particular degree programs—is not systematically available. Some states collect these data, but they cannot track graduates across state lines. 

In 2008, Congress banned the federal government from collecting data that could answer these questions. Sens. Ron Wyden (D-Ore.) and Marco Rubio (R-Fla.) have put forward a proposal to reverse this prohibition, which would empower students and families to choose programs that will serve them well. Without informed choices, the market cannot drive worthless degree programs out of business. 

After years of tinkering and partisan bickering, there are now opportunities for meaningful reform. Congress should not let those opportunities slip away over the next two years. 

Kelly is a resident scholar at the American Enterprise Institute (AEI) and director of AEI’s Center on Higher Education Reform where James is a research fellow. AEI is a non-profit, conservative think tank.