A New Plan for Student Debt?

By Watson Scott Swail, President & Senior Research Scholar, Educational Policy Institute

Although four years late, House Republicans and Democrats are looking at a potential reauthorization of the Higher Education Act of 1965, which used to be reauthorized every four years during the 70s, then pushed to six years in the 80s and 90s, and now will likely be 10 years for the last two reauthorizations (2008 and 2018). Yet another sign that Congress has trouble doing their base job.


In December 2017, Representative Virginia Foxx (R-NC) introduced H.R. 4506, the “Promoting Real Opportunity, Success, and Prosperity through Education Reform Act,” aka the PROSPER Act. The Act contains many provisions which are non-starters for every Democrat and likely many Republicans, including removing or reducing certain grant and loan programs. In fact, the PROSPER Act calls for the dismantling of the DIRECT Loan program, which was initiated by the Clinton Administration and completed by the Obama Administration. DIRECT loans basically took the programs away from banks, who had, for years, made billions on the back of students. Interestingly, the PROSPER Act focuses on reducing and removing many programs. The GOP, as a core philosophy, believe that federal subsidies, in the form of grants and loans, provide incentives to institutions to increase the price of higher education. Justin Draeger, the President of the National Association of Student Financial Aid Administrators (NASFAA), said this: “On its surface, the idea that federal, state, or other public subsidies would lead to higher, inflated prices resonates. But the higher-education funding landscape is far too complex to attribute price increases to any single factor or source of funding.” He is correct, because for many Republicans, this message does resonate. And they aren’t altogether wrong, either. Anytime increases in subsidies are made, there is an associated increase in price. While Draeger is correct that the system is sufficiently complex to make a 1:1 comparison, many of us policy analysts have noted this for several decades. It’s true that it isn’t pretty, but it rings pretty true nonetheless.

This week, House Democrats are making their pitch for the HEA reauthorization through the Aim Higher Act, with a major piece of the proposal focused on establishing free, or at least debt-free, college for students. According to Democrats, the plan is to reduce student debt, which, according to information on their website, has resulted in a 35 percent decline in homeownership since 2007.[1]

Both parties are in favor of reducing debt, but only one party is truly interested in a free higher education. Thus, the Democrat response is also a non-starter. I’ve written and spoken often about “free” higher education. I’m not a proponent of it because it isn’t appropriate or prudent public policy. At a time of high deficits, now made remarkably higher by the imprudent tax cuts from last year, removing the cost of college is far too costly a burden for the federal government, especially when public higher education is a state issue. An idea in theory, but not one that is politically or financially palatable to policymakers.

It is true that affordable and equitable higher education is critical for this nation’s future. Higher education isn’t for everyone, especially university-level education, but it should be an affordable option and choice for everyone who desires it. And while we talk much about the cost of college, we understand that the real barrier to college isn’t cost, although it is a significant barrier to many potential students, but rather, academic preparation. Many students do not go to college because they simply do not have the academic wherewithal to succeed at that level. Still, other students do go to college and dropout because they aren’t appropriately prepared. So, if we really want to get more people to college, yet another worthwhile discussion, then we need to do the nitty-gritty work of providing all students with an adequate and relevant primary and secondary education. Without that, the remainder of this conversation about free higher education is completely moot.

The Democrats, of course, have another large challenge to push their college free agenda, and that is that public higher education remains a state responsibility, paid mostly by state funds. Sure, the federal government provides assistance via federal voucher (e.g., Pell Grants) and subsidized and unsubsidized loan programs, but it is miniscule compared to what states invest. Any federal reauthorization of the HEA that involves forcing certain actions on states will receive major push back from those states, including those headed by Democrat lawmakers, in many cases.

Both bills would work to simplify the FAFSA, and the GOP would streamline federal aid programs while Democrats would tinker and up funding for the programs, or at least authorization. The Democrats bill would provide more focus on student supports. The Republican bill would focus more on changing the nature of the HEA in many ways. Both have valid points, but some are more untenable than others. Visit the Chronicle of Higher Education and INsideHigherEd.com for more details about these ultra-complex discussions.

In the end, this is where we are. Given that it is July 2018, there is little chance that we will see an HEA before 2019. But at some point the Congress has to do their job. Congress works best when the two parties collaborate and negotiate middle ground. Unfortunately, that just isn’t the nature anymore, as there is little or no trust between colleagues. The Supreme Court nomination process has seen to that.

That’s our Swail Letter for July 25th 2018. We welcome your thoughts and questions, so please post your viewpoint. As always, please share this Swail Letter and associated Podcast with your friends and colleagues.

[1] https://pocan.house.gov/media-center/press-releases/pocan-leads-house-democrats-in-introducing-debt-free-college-act.

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