Wanted: More Transparency from Colleges
"Nothing about private borrowing for college concerns us more than the fact one out of five students taking out a private loan has not exhausted their eligibility for federal student loans first."
-Stephen Burd
New America Foundation
Higher Ed Watch
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Now that Congress has approved a substantial increase in need-based, federal financial aid, it is important that students, families, and policymakers learn more about how colleges are spending their own institutional financial aid dollars. It would be disappointing if the new infusion of need-based, federal financial aid had the unintended consequence of encouraging colleges to either cut their own institutional financial aid budgets, reduce their rate of growth, or shift dollar-for-dollar their own institutional financial aid resources toward non-need based, "merit" aid programs.
Currently, the federal government collects very little information from colleges about institutional aid practices. College leaders have been resistant to efforts secure greater sunshine in the area. They warn against unnecessary government intrusion in their affairs. Of course, they tend not to mention all the benefits the government, make that the public, provides them -- not the least of which are the very valuable benefits they receive as a result of their tax-exempt status.
We at Higher Ed Watch think that government and the public has an interest in knowing the degree to which institutions of higher education may be acting in ways that counter public policy goals. For example, to what extent are schools engaging in financial aid leveraging – that is, taking money that would normally go to admitted, but financially needy students, and instead giving it to admitted, high achieving high school students who overwhelmingly come from wealthy families. Such practices may thwart the federal government's public policy goal to increase access to college for those who need the most financial help.
To their credit, lawmakers say they want to get to the bottom of institution financial aid practices. Both the House and the Senate have approved bills that call for colleges to report more detailed information about their aid policies. But both measures could be improved.
For example, both bills would have colleges report to the Department of Education on the average amount of grant aid that the institutions provide their students and the proportion of students who receive these awards. But "average" grant aid doesn’t tell us much if the aid is skewed toward non-needy students. It would be more useful to break down the numbers by looking at the average amount and proportion of institutional aid that goes to Pell Grant recipients, and the average amount and proportion of aid that goes to non-Pell-eligible students each year. That way we would know which colleges tend to reward wealthier students.
The Senate bill appears to leave it up to colleges to decide whether they want to provide the consumer information that has been requested. Under the measure, participation in the new "University and College Accountability Network" would be voluntary. In contrast, the House bill would require colleges to disclose the information. But it contains an odd provision that would effectively prohibit the Education Department from challenging erroneous information provided by colleges. We would like to see these provisions stripped out of their respective bills. It makes no sense to add reporting requirements and then allow colleges to skip out or provide faulty data.
Finally, it would be very useful for students and their families, as well as policymakers, to know how much private loan debt a college's students are shouldering. While both bills require colleges to report on their federal student loan debt, we'd like to see more information on the private loans that colleges package. And it would be helpful to know what types of policies college financial aid offices are pursuing to insure that their students are exhausting their federal loan eligiblity before taking out higher cost private loans. Nothing about private education borrowing concerns us more than the fact one out of five students taking out a private loan has not exhausted their eligibility for federal student loans first.
Hopefully as Congress moves forward with legislation to renew the Higher Education Act, lawmakers will redouble their efforts to make colleges’ financial aid policies more transparent. A little sunshine almost never hurts.
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Except When It's A Prelude To More Regulation
No wonder there is resistance from the schools. Nobody likes to be told how to spend their money (institutional or otherwise). Especially when the direction is based on someone else's conception of what constitutes good public policy. That's inconsistent with basic democratic freedoms.Besides, if the public had a true accounting of how well it's money is being spent vis-a-vis higher education the whole system would come tumbling-down in my humble opinion.
You've got it backwards-the move should be from the black cauldron of regulation to the sunshine of the free market.
Free Market?
Patrick, we are talking about a higher education system that includes many public institutions, and in which private institutions receive a great deal of financial support from both the federal and state governments. This is not a free market situation, and no "sunshine" would be gained by there being less oversight and fewer reporting requirements.
The student loan scandals should be a clear signal that there needs to be more effective regulations about what goes on at college financial aid offices.
The public is entitled to set some institutional priorities at public colleges, so long as they are consistent with academic freedom, and they should also have access to information that can be used to judge whether current policies (increases in financial aid) are effective. If public or private colleges are taking the the financial aid hike as an opportunity to decrease institutional aid to low-income students, Congress and the public has a right to know.
You don't need more scrutiny on financial aid offices.....
You need to get rid of them (at least in the sense that they direct people to loans). It's also time to rethink the role of government (both state and federal in higher education). The word is out. People are aware of the benefits that accrue to them by obtaining a degree. Private industry has also responded (private non-subsidized government-free financing is available). Government is no longer needed to guarantee access to higher education (or encourage folks to seek higher education). Privatize the state universities and colleges-give the tax savings back to Americans. Only in less competitive markets like those "regulated" by the government do you find consistently rising prices. In competitive markets, participants are always looking to gain an advantage relative to the competition by lowering price while maintaining quality. Make "less is more" mean something to colleges and unversities by having them answer directly to their customers instead of to bureaucrats who spend other people's money with impunity.
These are but a few of the benefits of a more liberal (and I don't mean the socialist liberal) higher education system. Our government exists to maintain "equality of opportunity" not "equality of outcome". That's why the vested interests (guardians of the status quo) have done a smear job on private industry this last year-they know their days are numbered. Time to dig a little deeper. Take a closer look at that higher education bill that passed the Democratic Congress recently (Jason Delisle of the NAF does a nice job highlighting its shortcomings). See what those vested interests have in store for you.
Packaged Private Loans?
Disclosure can be a very good thing, because indeed higher education funding is not a free market. And I agree with the suggestion that knowledge of the amount of institutional gift aid allocated to needy students is fundamental when shaping public policy in the future. But to restrict the definition of needy students to only Pell Grant recipients may be inappropriate, not telling enough of the story. There are extremely needy students in colleges today who do not qualify for Pell Grant. If the reporting is so restricted, there will be a lack of understanding that much institutional need-based gift aid is focused on these extremely needy students who have NO federal or state support because they fall off the cliff of government gift aid eligibility. If reporting of institutional gift aid is to become reality, it should be crafted to allow for the reporting of these funds by family income, much like is currently done for campus-based aid on the FISAP, but with a broader and more rational income distribution grid.
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