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Representative Virginia Foxx, a Republican from North Carolina, has outlined a comprehensive vision for higher education accountability in a new bill that could have significant ramifications for colleges and universities, though the exact impact is unclear.
Jabin Botsford/The Washington Post/Getty Images
House Republicans’ ambitious new plan to overhaul higher education would likely have a significant impact on colleges and universities.
Should the College Cost Reduction Act pass and be signed into law, colleges would be on the hook for unpaid student loans. Graduates’ earnings would play a key role in the evaluation of programs, too, among other changes that its sponsors say would lower the cost of college.
While it’s focused on affordability and accountability, the bill from Representative Virginia Foxx, the North Carolina Republican who chairs the House education committee, also contains a number of conservative policy priorities—such as barring accrediting agencies from requiring institutions to adhere to diversity, equity and inclusion standards—and is unlikely to move forward in a Democratic Party–controlled Senate.
Still, the bill represents a meaningful shift in how Republicans view the federal government’s role in holding institutions accountable. Historically, they’ve pushed for more transparency and data while favoring a more hands-off, market-based approach to accountability. Democrats, meanwhile, have sought stronger federal rules holding institutions, particularly for-profits, accountable for their student outcomes.
“The committee has a bold vision for accountability,” Foxx wrote in a recent opinion piece. “The structure we are building ensures universities are open and transparent about foreign funding, focused on increasing student outcomes and lowering costs, improving speech policies on campus, and other contributing factors to the decline in public faith in universities.”
Emmanual Guillory, senior director of government relations at the American Council on Education, which has several concerns about the legislation, said that Republicans are outlining a vision of higher education as nothing more than a set of job-training programs.
“Education is meant to be so much more than just job training,” Guillory said. “We are not just here to teach a skill so a person can get a job and make money. We’re here to have a human experience, holistically, to allow a person to excel in a multitude of ways once they leave.”
The 224-page bill, released earlier this month, is the latest and most significant in a series aimed at updating the Higher Education Act of 1965, which is overdue for reauthorization. Foxx is planning a piecemeal approach for her latest attempt at updating the law, which authorizes federal financial aid programs as well as other pots of funding that go to institutions. The HEA also includes a number of rules and requirements for colleges and universities.
This legislation resurrects many provisions from Foxx’s previous attempt to reauthorize the HEA in 2017, which made it out of committee but never received a floor vote. That includes requiring colleges to pay when students don’t repay their loans—a policy known as risk-sharing—along with ending some types of student loans and repayment options and tying some funding for institutions to their student outcomes.
Policy analysts said the legislation shows that Republicans and Democrats are beginning to agree on what big-picture issues in higher education need to be addressed, though differences remain in how they would solve those problems.
“The impetus here is to incentivize lowering costs and improving outcomes, and if you take that on its face, that’s not at odds with the Democratic platform, either,” said Michelle Dimino, director of education at Third Way, a left-of-center think tank. “We’re getting to that point where there’s more fertile ground here for talking about how you do those things.”
How the legislation will move forward is unclear. Democrats will likely balk at measures that roll back most of the Biden administration’s new regulations for colleges, as well as those that limit the Education Department’s ability to regulate and oversee online program managers, the companies that colleges contract with to run their online course offerings.
Key Provisions in the Bill
The College Cost Reduction Act includes a number of provisions aimed at giving students more information about the cost of college and how they would fare in programs. The bill also rethinks the loan options and repayment options available to students.
Here’s a snapshot of what the bill would do:
- Standardize financial aid offer letters.
- Add a universal net price calculator to the College Scorecard.
- Create a student-level data system.
- Eliminate interest capitalization for current and future borrowers.
- End the Grad Plus and Parent Plus loan programs.
- Set limits on student loans, though the amount students can borrow may vary by degree program. (Institutions also would be able to lower the limits for some students.)
- Replace current loan repayment options with two choices: a standard 10-year plan or an income-driven plan.
- Require accrediting agencies to create standards that measure student achievement as part of their assessment of institutional quality.
Some policy experts think the bill could pass committee as one package, while others say its provisions may be spun off into stand-alone bills that have a better chance of passing both chambers, such as one section that would standardize financial aid offer letters—an issue that lawmakers in both chambers and from either side of the aisle want to address. Another provision, codifying and authorizing the Postsecondary Student Success Grant program at $45 million for the next five years, likely will receive bipartisan support.
Higher education associations will likely oppose the bill, though there are some elements they may favor. The group representing for-profit colleges has praised the legislation.
Beth Akers, a senior fellow at the American Enterprise Institute, a conservative think tank, wrote earlier this month that the legislation represents a “major step forward” for House Republicans. It’s the “largest serious and comprehensive higher education reform package in decades,” she wrote.
Liberal-leaning and progressive groups are more critical of the bill, saying it would harm students and remove consumer protections the Biden administration has put in place.
“While the package shows that there is bipartisan recognition of the need to address affordability and the student debt crisis, the package does include proposals that would roll back significant gains that we’ve made to protect students and taxpayers from investing in low-quality programs, or being preyed upon by predatory for-profit colleges,” said Amber Villalobos, a higher education fellow at the Century Foundation, a progressive think tank. “Over all, the negatives of this package far outweigh the possible benefits.”
Carrots and Sticks
At the heart of the Republican overhaul is a new system designed to incentivize institutions to lower their costs.
The carrot in this case is a new performance-based grant program. Institutions that enroll and graduate low-income students and that have strong earnings outcomes and low tuition would be eligible for the grants, though the specific amount of funding would depend on a complex formula. Colleges and universities also would have to tell students up front how much a degree program will cost and guarantee that amount won’t change to receive the grant funding.
The program, known as PROMISE, would be funded in part by repurposing the federal Supplemental Education Opportunity Grant, which provides direct aid to financially needy students. The other batch of funding would come from the sticks in the bill—risk-sharing payments.
Under the legislation, institutions would have to make annual payments to the Education Department for unpaid student loans. The payments would be determined by a formula that takes into account the balance of past-due payments in a cohort of students as well as the total amount of loans repaid via an income-driven repayment plan. The formula also will factor in graduates’ earnings and the price of programs.
The concept of requiring colleges to have a financial stake in the loans their students take out has picked up steam in recent years, gathering bipartisan support. Critics have argued, however, that such policies could harm institutions with fewer resources and disincentivize colleges from enrolling low-income students or those from disadvantaged backgrounds who might struggle to repay their loans. Proponents say it’s a needed accountability measure that would address the student loan crisis.
“This is long overdue, because up until now, colleges and universities have been able to draw down tremendous amounts of federal grants and loans with very little accountability for what they’re actually producing for students and what kind of prices they’re charging,” said Preston Cooper, a higher education research fellow at the Foundation for Research on Equal Opportunity, a market-friendly think tank.
Cooper analyzed current data for institutions and the proposed formulas to calculate which colleges would benefit or lose under the plan. Over all, he found that the government would collect about $6.7 billion in risk-sharing payments while paying out $5.5 billion in PROMISE grants. Public community colleges would be “big winners,” he said, netting $1.7 billion a year. Meanwhile, private four-year nonprofit colleges would take the biggest hit, paying out nearly $3.4 billion due to risk-sharing.
At the institutional level, for example, the University of Central Florida could see an additional $142 million, while the University of Southern California would be on the hook for more than $169 million.
Cooper said the proposed plan could “fundamentally reorient” the incentives for colleges and universities. “In order to qualify for bigger PROMISE grants and to avoid risk-sharing penalties," he said, “they’ll find it in their interest to reduce the reliance on federal student loans, lower their prices and offer more degree programs that have good labor market value.”
Although risk-sharing is not a new policy idea for Republicans, Cooper said this latest proposal is the most comprehensive that he’s seen. The entire legislative package, he added, also is a more comprehensive approach to accountability compared to previous Republican proposals, including the 2017 reauthorization attempt. He said the committee is now more focused on fixing the federal student loan system, particularly in light of the Biden administration’s push to forgive some student loans.
Cooper said the Biden administration’s student loan efforts highlighted flaws in the student loan system.
“This has lit a fire under Republicans to say, ‘Hey, we actually have to fix this program going forward,’” he said. “We can’t just forgive student debt and then have all the debt come back tomorrow, because the federal government is going to make a trillion dollars in new loans over the coming decade.”
Risk-sharing, historically, has been a nonstarter for colleges and universities, especially if they can’t limit how much students borrow. Although the bill does allow institutions to restrict student borrowing, Guillory said ACE has concerns over using earnings to calculate the risk-sharing payments, because institutions can’t directly control the types of jobs students take after graduation.
“We still cannot account for how students, when they complete a program, will actually perform in a labor market, because there’s so many outside factors that impact a student’s success,” he said. “Data will tell you gender plays a role in how much a student will earn. Unfortunately, race plays a role in how much a student will earn … We’re not all starting from the same point in the race, so we can’t all be held accountable at the exact same level.”
A New Earnings Metric
Under the legislation, colleges would face another stick: value-added earnings. The new metric created in the bill would be used to evaluate academic programs for the purposes of accreditation, to determine risk-sharing payments and to open up access to a boosted Pell Grant program.
The metric essentially sets a threshold for student earnings after graduation. For example, undergraduate students should make at least 150 percent of the federal poverty guidelines, or $21,870, four years after graduating with a bachelor’s degree. A graduate student should make at least 300 percent of the federal poverty level—$43,740—within four years of graduating. However, earnings for certificate programs at any level will be measured one year after completion. So institutions could face a penalty if students in graduate certification programs don’t clear the $43,740 earnings threshold after one year.
“It’s not a very high bar, but once again, you can’t guarantee that even a student with a graduate certificate in one year is going to be making that amount of money,” Guillory said.
The bill’s authors use value-added earnings as a metric throughout the legislation. For example, students in their third and fourth year of study could double the amount of Pell money they receive if they are enrolled in an eligible program. To be eligible, institutions have to provide students with a maximum total price for the degree program, similar to the PROMISE grant, and guarantee that the amount won’t exceed the median value-added earnings of graduates.
Whether the incentives and other provisions in the bill would actually lower the cost of college remains unclear, and more information is needed to better understand how the risk-sharing payments and grant funding would work.
Phillip Levine, a professor of economics at Wellesley College and author of A Problem of Fit: How the Complexity of College Pricing Hurts Students—and Universities (University of Chicago Press, 2022), said the bill has the potential to have an impact on the cost of college but needs some tweaks, including what exactly the universal net price calculator will include. He’d also like to see the Pell Grant doubled for all students rather than a boosted Pell Plus program that only benefits students in their third and fourth years of study.
Still, he’s pleased to see the calculator concept as part of the bill, along with provisions standardizing the financial aid offer letter. Both changes could help families be better informed about the cost of college, he said.
“It’s an unbelievable black box,” he said of college pricing and how families pay for it. “To the extent that we can shine the light inside the box, that would be extremely helpful.”
