Alexander’s Higher Ed Act Agenda

The leading Senate Republican, working to rewrite the law, outlines possible new ways to hold colleges accountable for student outcomes and to improve federal higher education data.

March 24, 2015

WASHINGTON -- The leading Republican in the Senate who is working on a rewrite of the Higher Education Act is weighing new ways to hold colleges accountable for their students’ success and is considering a federal database to keep track of student outcomes.

Senator Lamar Alexander on Monday released three policy papers outlining ideas on making colleges share in the financial risk of the federal loans they provide students, overhauling accreditation and changing how the federal government collects data from colleges.

The documents offer the most expansive look yet at Alexander’s priorities for rewriting the Higher Education Act, which he has said he wants the Senate to vote on by the end of 2015. Alexander has spent much of the last year promoting his efforts to simplify the federal student aid form known as the FAFSA and to reduce regulations on colleges and universities.

The outline does not stake out many clear policy positions, and instead reviews a range of proposals that are up for debate. For instance, it says that a student-unit record database, opposed by many Congressional Republicans, is up for consideration. But it also lays out an alternative plan that would maintain the federal ban on such a system while pushing for limited graduate earnings data through a partnership between the Department of Education and Social Security Administration. 

New Accountability Ideas

One issue that emerges clearly in the set of proposals is holding colleges more accountable for their students’ success, including their levels of debt and ability to repay it.

The outline backs the concept of risk sharing or “skin in the game” proposals for colleges when it comes to federal student loans. Under those proposals, an institution may be forced to repay some amount of their former students’ defaulted debt or otherwise be held responsible for a share of the federal loans they give out.

In addition, the paper floats the idea of making colleges annually pay into an insurance fund based on risk factors such as the rate at which their students withdraw or drop out.

Such risk-sharing proposals would “ensure that colleges and universities have a clear financial stake in their students’ success, debt and ability to repay their taxpayer-subsidized student loans,” the document says.

Some of Alexander’s most liberal colleagues in the Senate have called for a similar approach. His policy paper references a proposal in 2013 by Democratic Senators Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island and Richard Durbin of Illinois that would require colleges to pay penalties, on a sliding scale, based on their default rates.

Notably, though, while the Senate Democrats’ proposal would exclude community colleges and historically black colleges from risk sharing, Alexander’s paper emphasizes that such policies ought to apply to “all colleges and universities.” That’s a common refrain of for-profit colleges, which argue that they are unfairly singled out for scrutiny and federal regulation  in a way their nonprofit counterparts are not.

In spite of those differences, though, Alexander’s papers suggest that there is emerging, bipartisan consensus that cohort default rates -- the federal government’s main accountability tool right now -- are too blunt and ineffective.  

Alexander’s paper says that colleges are “afforded a generous appeals process that results in minimal consequences,” citing a Congressional Research Service report that found the Department of Education had actually terminated federal funding for only 11 institutions since 1999 because of high default rates.

It references allegations, often made by consumer advocates, that default rates are easily gamed by colleges, which push struggling borrowers into loan deferments to avoid getting penalized for defaults.

The policy documents also take aim at the Obama administration’s announcement last year that it had tweaked the default rates for some colleges, allowing those institutions to have lower rates and avoid penalties. That decision, Alexander's paper asserts, raised “serious concerns about the efficacy of cohort default rates." Federal law should limit the department’s ability to engage in such “nontransparent practices,” it added.

Two prominent Democratic lawmakers raised similar concerns in a letter to Education Secretary Arne Duncan last year.

Despite some bipartisan overtures, though, Alexander’s outline also criticizes some accountability measures that the Obama administration, Congressional Democrats and consumer advocates like -- and want to see strengthened in many cases. It takes aim, for instance, at the gainful employment regulations targeting for-profit colleges and the 90/10 rule that limits the amount of federal money that can flow to those institutions.

Overhaul of Accreditation

The policy white papers also float a number of drastic possible changes to higher education accreditation, with a general focus on reducing federal regulation of accreditation while making it easier for nontraditional and innovative models of education to gain approval.

Among the possibilities: decoupling accreditation from eligibility for federal student aid, allowing tiered levels of accreditation (as opposed to the current binary system) and permitting accrediting agencies to focus on “institutions that truly need the most assistance” while expediting the review of institution with good track records.  

The outline also references a proposal by Senator Mike Lee of Utah, a Republican, that is aimed at creating a new pathway to federal funding for education offerings provided by noncollege entities like businesses, trade associations or unions.

Alexander’s paper concedes that questions remain about how to police the quality of these nontraditional models. Such quality control, it says, could potentially come from state regulators (as in Lee’s proposal), existing accrediting agencies or a new accreditor.

An Agenda for Reauthorization

Many of the ideas in Alexander’s policy papers echo proposals outlined last fall by Andrew Kelly and Kevin James of the American Enterprise Institute.  

Kelly, who directs higher education research at A.E.I., said Monday that Alexander’s proposals, taken together, represent an important “proactive and coherent conservative agenda” for reforming higher education.

He called the proposals a “credible counterpoint and countermessage” to efforts by Democrats, led by the Obama administration, to promote accountability through “top-down” regulatory efforts like gainful employment and the college ratings system.

“This is not just a no to those things,” he said. “It’s an alternative approach that I think is in keeping with conservative, market-based principles of accountability.”

Senate Democrats, meanwhile, are hoping the Higher Education Act includes provisions that look to rein in rising tuition and provide direct relief for Americans with existing student loan debt.

A group of lawmakers, led by Warren, the Massachusetts Democrat, earlier this month reintroduced legislation that would allow existing federal student loan borrowers to lower their monthly payments by refinancing their debt.

Senator Patty Murray of Washington, the top Democrat on the Senate education committee, said in a statement Monday that she appreciated Alexander “highlighting” the issues in his outline.

“I am looking forward to continuing the conversation on ways to update the Higher Education Act to make college more affordable, reduce the crushing burden of student debt and give more Americans the chance to further their education, training and skills,” she said. 

Alexander is seeking public feedback on his policy papers. Comments are due by April 24. 


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