Senators Push to Make Colleges and Universities “Have a Skin in the Game” of Student Debt
Currently, colleges and universities aren’t held responsible for what happens to students’ financial lives once they leave school. Lawmakers across party lines have sought to create policy that would hold colleges more accountable for students’ ability to repay their loans, though members of Congress and advocates for affordable higher education recognize the challenge of getting schools to share in the risk.
Both Democrats and Republicans agree that there should be measures in place to hold schools accountable for default rates of their students, and have supported the idea of risk-sharing for federal loans. The government’s current accountability metrics–or, lack thereof–make the burden of student loan defaults on federal loans fall on taxpayers, rather than the institutions students attend.
Last week, the Senate Committee on Health, Education, Labor and Pensions held a hearing on higher education, where Chair Senator Lamar Alexander (R-TN) stressed the need for schools’ having a stake, or a “skin in the game” in loan repayment.
“If colleges and universities have this incentive, it may not only help students make wiser decisions about borrowing, it could help reduce the cost of college–thereby reducing debt,” said Senator Alexander.
According to the senator from Tennessee, colleges could help prevent students from over-borrowing and advise them on how best to complete college efficiently and on time. By having a “skin in the game” in the student debt crisis, colleges would also likely have to become more efficient with costs so that tuition does not continue to rise as it has over the past several decades. Since 1978, the cost of attending college has risen1,120 percent.
Colleges could have a big influence in keeping students from taking on extra debt, particularly because extra time in college equals money. Senator Alexander said during the hearing, “Today nearly half of college students take longer than 6 years to complete any degree or certificate or never finish one at all. Completion is important– according to the Department of Education, nearly 70% of these borrowers who default on their federal student loan never finished their education.”
The hearing last week marked the Senate Education Committee’s third hearing on Congress’ reauthorization of the Higher Education Act. Senator Alexander urged the ease with which students can take out student loans, and how that can cause problems for the whole economy.
The committee has proposed several policy approaches to make colleges have a “skin in the game.” The FAST Act was introduced by several members of the committee that would ensure part-time students cannot take out as much in loans as full-time students. Other policy solutions include giving colleges more authority to counsel student loan borrowers more frequently or to cap the amount students can borrow. The committee also wants to hold colleges accountable by ensuring their students graduate on time.
Ensuring institutions of higher education have a stake in student loan debt could lift much of the burden off students, who are simply doing the responsible thing of getting a college degree.
“Currently, students are held accountable for studying and making progress toward a credential, but there are few consequences for schools that fail graduate large shares of students or consistently leave students with debts they cannot repay,” said Lauren Asher, the president of the Institute for College Access and Success (Ticas), in a letter supporting Chairman Alexander’s move to hold colleges accountable for student debt.
Posted on 3 June 2015
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