by Dustin Broussard

Education is a salient issue for all facets of government. In 2013, President Obama outlined a plan on college affordability in three distinct sections. The first involves coupling funding to the performance of public universities, challenging states to participate in performance pay, and holding students and universities responsible for progress toward a degree. The second section promotes innovation and competition for schools by providing parents and students with an in-depth measurement of public universities. The final section of the plan engages student debt by allowing some students to cap debt repayments at ten percent of their income and addressing those students who may be behind in current payments by educating them on available options. Since 2013, portions of this plan have been implemented and there have been other proposals for college affordability, such as the FAST Act. The fundamental concepts of these plans are good. They would give students the autonomy needed to find work after college without limiting creativity and innovation. For instance, a student may want to invest in a business proposition that is slightly riskier than other options but has the potential to be beneficial later. This is an important attribute to protect. Nevertheless, I believe that decoupling votes from party priorities and states’ value rationality will produce difficulties for quick, substantive action in creating affordable alternatives. Changes in policy have always been deliberately sluggish but I believe quick, substantive investment in the future of education will be a function of progress in workforce development, financial stability, and global competition.

First, I will explore general ideas on college affordability. In the second post, I will try to identify the probability of the plan to pass Congress. In the following post, I’ll attempt to analyze the implementation of college affordability plans such as potential problems with performance pay and the merger of a federal performance measurement with the idiosyncrasies of state universities.

Generally, a federal uniform measurement like the one suggested by President Obama can limit the ability for state actors to influence the performance indicators within their state. This could result in a mandated program that does not account for limited state budgets and various state priorities and rationality.  There are examples scattered throughout our history. One instance includes the ambiguity of the Patriot Act’s surveillance clauses and how these clauses would be used in practice. Another instance that may be more relevant in that it relates to federal management of state and local protocols are the normative assumptions made by our incident command system and the empirical way our states enforce them. Although some federal mandates have struggled in the past, I believe it is a failure in framing the problem with a federal scope. In the book, Nudge, Richard R. Thaler and Cass R. Sunstein (2008) suggest that expecting error within government processes should be standard procedure for the implementation process and providing incentives to act are essential for the production of desired behavior. This idea is echoed by Dr. King Alexander of Louisiana State University, “…where we encouraged states through the SSIG program, of which only 19 had state student aid programs, federal matching programs encouraged states with matching funds to adopt student aid programs…within 4 years nearly 40 states had adopted those programs”, as he is referencing the necessity and ability for incentives to influence state behavior (Reauthorizing the Higher Education Act: Ensuring College Affordability, 2015). With this in mind, I reached certain conclusions. Federal mandates can be important in influencing behavior when they adequately produce incentives for states and reduce rigid measurements.

I would suggest allowing states to develop their own performance funding plans, along with implementing the simplification process outlined by the FAST Act, which fit state budgets and priorities. I would hope that competition prevent states from making radical cuts to higher education before examining other options during a budget shortfall; perhaps, it is possible to consider raising revenue regardless of its popularity. It has been shown that the benefits of developing and keeping a well-educated population within state lines could have effects on the median income and home ownership. Since value rationality – the idea that people make rational judgments based on belief in the intrinsic value of an outcome (i.e. maintaining Medicaid support over higher education due decisions to cut spending instead of raising revenue) – is a valid possibility, I believe that success for graduates is only true if they have the agency and opportunity to develop financially within their state; therefore, the process for maneuvering through financial aid should be simplified and cost have to be sustainable. This is especially true for low-income students. I do not believe this will happen without the cooperation between federal and state actors. The Fast Act is a good foundation for college affordability but simplifying the process by removing the FAFSA, relying on tax information, and shifting the initial payback option to opting out of income based repayment is a step forward.

Changing the initial payback method to the income-based repayment plan would be effective and allow students to maintain autonomy while securing positions. This concept is framed by Dr. Judith Scott-Clayton during the hearing on Higher Education in the U.S. Senate Committee on Health, Education, Labor, and Pensions, “…Second, streamline federal student loans into a single program with income-based repayment. Income-based repayment needs to be the default so that students don’t have to navigate additional paperwork to enroll…” (Reauthorizing the Higher Education Act: Ensuring College Affordability, 2015). The rest of her argument includes providing support to low income students and removing the FAFSA to simplify the financial aid process.

Once state measurements are produced, the federal government could provide information on their success and regulate the stability of incentives and redeployment by producing a modified version of the incentive system suggested by President Obama’s plan. The incentive system would allow states to develop a measurement protocol based on the value of their own schools. This could include graduation rates, gainful employment and successful repayment based on post-secondary longitudinal studies and a reduction in repayment defaults, economic development within states that are beneficial to businesses, a reduction in students from four year institutions seeking additional payment options after Pell Grants, and an increase of in-state, low income students at four year public institutions. Once this concept is uniform within the country, the federal government could then seek regional incentives based on performance funding in the form of a threshold improvement measurement grounded in the region’s established performance system. However, it is still possible that these plans could have an adverse effect on the ability for schools to maintain competitive levels of attendance. This could have an effect on socio-economic equity within a state or within regions.

A counter-argument is that a plan isn’t needed at all. Dr. Elizabeth Akers deduced that while college may be expensive, the problem we may be experiencing is the way we frame the argument. She alludes to the rising costs for students and young households; however, she suggests that these costs are a natural product for replacing up-front costs with affordability later as long as solvency is sustainable, “…The price tag of higher education is high, we know that, but in order to know whether it’s affordable we need to know what that price tag is actually buying…a recent report from the Federal Reserve Bank of New York indicated that the financial return on a college degree might be about 15%…” (Reauthorizing the Higher Education Act: Ensuring College Affordability, 2015). It is a valid argument. The College Affordability and Transparency Center shows a large amount of network traffic per month to both the site depicting the largest rate increases per state and standard costs for all universities (A. Miller, personal communication, June 8, 2015). Since that number may be a fraction of the number of students that relied on a Pell Grant during the same year, a solution may be found in awareness at earlier education levels. Senator Alexander (R-TN) is intrigued by the comparison of car debt to student loan debt, an idea that states these two types of debt are compatible and the  during the hearing on Reauthorizing the Higher Education Act hearing in the Senate. While contributors for Forbes do not speak for the organization one contributor had the same argument, “…in the class of 2013 had any student loans, and their average debt was $28,000…Coincidentally, the percentage of new car buyers that take out a loan (70%) is about the same as the 69% of students with college loan debt.” (Lapovsky, 2014), based on an assumption on the beneficiaries of financed car loans. While I do understand the similarities between a car loan and a college loan, I believe that those who support this argument may be making premature assumptions about the similarities between the two groups. My argument is that the market will dictate the demand for automobiles as seen by the decrease of the number of cars sold during the recession but the demand for college graduates will eventually overshadow the supply of positions available. For this reason, I believe underemployment may have an impact on the ability for students to repay debt. It may be that research shows those with college educations earn more in their lifetime than those without college educations on average; however, more individuals than ever before are entering college and this will only increase the number of individuals who see a smaller or no return on their investment due to over-saturation of the market. For instance, there is a statistic that the number of positions requiring a college degree will increase. However, the number of available positions can only increase based on an increase in supply so as the number of positions  that require college degrees replace those that do not, students with degrees will be left out.

In conclusion, I believe a marriage of the FAST Act’s principles coupled with an incentive program from President Obama’s college affordability plan would be the most effective solution to producing an environment amenable to college affordability. Nevertheless, I believe it is necessary to ensure that the availability of positions for college graduates is equal to the number of graduates so that underemployment is not a factor in repayment. Before any plans can be implemented, the political environment is an important barrier. In the next post, I’ll attempt to diagnose this environment.

References

Davidson, Roger H, Francis E. Lee, and Walter J. Oleszek (2012). Congress and Its Members. Washington DC: CQ Press.

Financial Aid Simplification and Transparency Act of 2015, S.108, 114th Cong. (2015)

Kahneman, Daniel (2011). Thinking, Fast and Slow. New York: Farrar, Straus, and Giroux.

Lapovsky, Lucie (2014). Student Debts vs. Car Loans. Retrieved from http://www.forbes.com/sites/lucielapovsky/2014/11/23/student-debt-vs-car-loans/

Office of the Press Secretary. (2013, August 2). FACT SHEET on the President’s Plan to Make College More Affordable: A Better Bargain for the Middle Class. Retrieved from http://www.whitehouse.gov/the-press-office/2013/08/22/fact-sheet-president-s-plan-make-college-more-affordable-better-bargain

Sunstein R. Cass, and Richard H. Thaler. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. New York: Yale University Press.