| 摘要 | Editor’s note: The next president is in for a rough welcome to the Oval Office given the list of immediate crises and slow-burning policy challenges, both foreign and domestic. What should Washington do? Why should the average American care? We’ve set out to clearly define US strategic interests and provide actionable policy solutions to help the new administration build a 2017 agenda that strengthens American leadership abroad while bolstering prosperity at home.
What to Do: Policy Recommendations for 2017 is an ongoing project from AEI. Click here for access to the complete series, which addresses a wide range of issues from rebuilding America’s military to higher education reform to helping people find work.
For-profit colleges are no strangers to scrutiny, and they don’t stand up well to it. A new study by economists Stephanie Riegg Cellini and Nicholas Turner, using Department of Education and IRS data on 1.4 million students, found no evidence of improved earnings for the majority of students who left a for-profit institution between 2006 and 2008. In fact, on average their earnings were actually worse after enrolling.
A 2015 Brookings study found that 47 percent of student loan borrowers who exited for-profit schools in 2009 defaulted within five years. Seventy-four percent of for-profit borrowers who left school in 2012 actually owed more on their federal loans two years later.
There’s no way around it: These folks were sold a shoddy product that doesn’t pay off. And, yet again, taxpayers will have to front the costs. The Obama administration recently announced new rules to make it easier for borrowers – especially those who attended for-profits – to have their loans forgiven if their institution defrauded or misled them (the so-called borrower defense to repayment rules). The estimated tab for all these write-offs? Between $199 million to $4.23 billion annually. The regulatory language is sufficiently vague that the forgiveness provisions could wind up being even more expensive than expected.
The defense to repayment fiasco keeps with the Feds’ typical approach to higher education: mitigating the costs of a broken system in lieu of actually fixing it. We enact policies to help students manage their debt – forgiving much of it – so as to limit the damage after it’s already been done. This approach is shortsighted and distracts from the real challenge: changing the incentives for institutions on the front end. It’s time policymakers take seriously the need to protect taxpayer investments across higher education. Both parties have talked a big game, but taxpayers are still getting shafted.
To their credit, Democrats have called for greater accountability for years. But the vast majority of their energy has been dedicated to corralling the for-profit sector. For their part, Republicans have had a standard response: Shouldn’t we hold all colleges to reasonable standards? They, too, have a point; failure in higher ed transcends tax status. But Republicans haven’t backed up their tough talk with much action. And their reserve appears more like a knee-jerk defense of the for-profit sector than a credible advancement toward realigning incentives writ large.
Here’s what should happen instead. On the one hand, Republicans should take a page from the Democrats and acknowledge that Congress must step up to protect students and ensure the country’s dollars are well spent. On the other, Democrats could take the Republicans at their word and focus on higher education as a whole, not just a subset of schools – especially when that portion enrolls 8 percent of students. Both sides could agree to some fair, generally applicable rules and guidelines regarding accountability.
Sound like a pipe dream? Well, one idea is already out there, and it has some bipartisan backing: institutional risk-sharing. Risk-sharing (aka “skin in the game“) would hold colleges accountable by requiring them to pay back a fixed percentage of the loan dollars that their students default on. (Other proposed variations use different measures such as loan repayment rates.) As such, schools would no longer be held harmless for serving their students poorly.
“Rather than encouraging students to file claims after they’ve received a worthless education, a skin-in-the-game policy encourages colleges to offer a valuable education from the get-go.”
Rather than encouraging students to file claims after they’ve received a worthless education, a skin-in-the-game policy encourages colleges to offer a valuable education from the get-go. It hits colleges square in their pocketbooks; if they don’t want to pay a fee, then they better provide decent outcomes for their students. Colleges thus have a continual motive to concern themselves with cost, quality and student readiness.
Those for-profits with rampant defaults and lackluster loan repayment? Under a risk-sharing arrangement, they’d have to pay hefty fines, potentially large enough to stop them in their tracks. But it’s hard to reason why we’d endorse some institutions having skin in the game and not others. Taxpayers deserve to know they’re getting the most for their money, wherever it’s spent. More importantly, students deserve to know that an institution has an active stake in their success, wherever they enroll.
To be clear, risk-sharing would not overhaul every perverse incentive that plagues higher education today. But it would be a step toward better safeguarding our federal dollars in higher education. And it would proactively place real pressure on schools to shape up or ship out. |
