Hillary vs. Bermie on College Affordability

This is a long and wonky post comparing Hillary and Bernie on college affordability. Readers should know what they are voting for. Hillary’s plan could extend accountability policy beyond K-12 schools into public institutions in poverty areas.

This month Hillary Clinton announced her bold plan to make college more affordable. The plan was introduced on a web page entitled “College Compact, Costs Won’t Be a Barrier.”

https://www.hillaryclinton.com…

This plan would fundamentally change the landscape of higher education. The proposed innovations, both conceptual and practical, warrant scrutiny and analysis. Some of the proposals may be greeted with enthusiasm, others with skepticism.

The word “compact” suggests the idea of a pact and augments it with the image of something built as small as possible, without waste: a compact car or compact disc. It is a word meant to neutralize the program in advance against the charge of “big government.”

And in the words “affordable” and “compact” there are hints of the Affordable Care Act, with which there are analogies.  

Generally the main emphasis of the program is to provide opportunity for students to get job training and lift themselves out of poverty. But there is also a philosophical point of view informing this policy, the application of accountability to higher education funding. Language and framing are important when they control the perception of an issue by the public.

Clinton’s recommendations fall into five categories: state funding, cost sharing, tuition assistance, loan repayment and accountability.

State Funding

“States will have to halt disinvestment in higher education, ramp up that investment over time, and work with public colleges and universities to cut costs and increase innovation.” States that agree to the compact would receive federal aid for guaranteeing that students graduate without debt and that they have cut costs. The areas of cost cutting are not specifically prescribed here. What the “innovation” involves is not specified.

Considering the experience of predicating federal funding on mandated K-12 policies and the difficulty states have in paying for the K-12 system, it is unclear that states would have the ability or the will to opt into this program. It would require states to embark on completely new formulas to meet the federal rules.  The imposition of cost and debt cutting requirements could affect collective bargaining requirements and teacher compensation packages, which vary widely from state to state. It is far from clear whether the cost cutting would address the problem of runaway executive salaries at universities.

From a positive point of view, if a state designs a program that meets federal guidelines, substantial federal aid could result in students graduating without debt.

The “reward” and “opt-in” provisions for states recall the Medicaid expansion policy under Affordable Care Act, which has resulted in “have” and “have not” states rather than a uniform federal program like Pell Grants.

Cost Sharing

The analogy with the Affordable Care Act becomes stronger with the requirement of individual contributions:

“Families will be expected to make a realistic and simplified family contribution. Students will contribute based on wages from ten hours per week of work. But students and their families should be able to afford college without borrowing for tuition, and with lower costs for other expenses.”

This is a clause we have to be careful about. It is also the recommendation that Bernie Sanders is challenging on his website. Clearly it is common for students to work during college. But that automatically puts students at a disadvantage with respect to grades and extracurricular activities and the ability to compete academically with students who are not employed. This policy can work for students training for technician level jobs, but not for those competing for medical school or graduate school in highly competitive, academically intensive fields like science and music.

The expectation that people make a “realistic” contribution has resulted in unaffordable copayments and premiums in health care, resulting in a continued discrepancy between having insurance and actually obtaining health care. There is a danger that this would extend to education if what policymakers define as “realistic” is not realistic for real people.

Tuition Assistance

Just as Medicaid provides basic, no-frills free medical care to lift the lowest income brackets out of poverty, similarly the Clinton plan would offer free tuition for community college. This would give students strong incentives not to aspire to academically more rigorous colleges.  Bernie Sanders, in contrast, has the goal of free tuition at all public higher education institutions.

That Clinton’s plan is geared towards basic vocational education is also evidenced by a complete lack of attention to postgraduate school opportunity, such as the affordability of law school, medical school, an MBA, or an academic degree. Whereas generally education results in affluence, this is not necessarily the case women who have hit the glass ceiling.

The GI bill will be expanded under the Clinton plan. And the American Opportunity Tax Credit, scheduled to expire in 2017, will be renewed.

One of the most positive aspects of Hillary’s plan is in federal student aid for non-credit job training courses. This has already been done in programs for the unemployed as administered by the states. However, the range of approved courses and providers needs to be expended substantially beyond the approved lists in current programs. In Washington State, tuition is not available for courses offered by private companies and the list of public training providers is very limited. For example, the University of California extension is not on the approved list in Washington State, even though UC Berkeley and UCLA extension offer top notch programs. Hillary’s plan is to expand the range of allowed providers.

No attention has been paid or is being paid to the fact that displaced workers may need to retrain in completely new fields requiring both undergraduate and postgraduate education, far beyond completion of a certificate.

Student Loan Repayment

An important innovation in the Clinton plan is allowing borrowers to refinance their student loans at a lower interest rate.  Currently consolidated loans are locked at rates in the area of 9%, with prohibitions against refinancing.

“Everyone will be able to enroll in a simplified income based repayment program so that borrowers never have to pay more than 10 percent of what they make.”

How does this compare with the new rules the Obama administration is currently evaluating for implementation in December 2015? The Obama administration formula is 10% of the difference between the adjusted gross income and one and a half times the poverty level.  In other words, if X is the adjusted gross income, under the Clinton rule a borrower would pay a maximum of .1X, whereas under the Obama rule the payment would be .1(X-1.5P), where P is the poverty level. The difference is drastic for people with working class incomes.  On an income of $36,000, under Hillary’s plan the payment would be $300. Under Obama’s plan the payment would be $150.  For modest loans the difference is substantial. For those with enormous student loan debt, the payment would still be exorbitant.

Is this an intentional difference, or did Hillary’s policy unintentionally omit the word “discretionary” as an adjective for the income subject to the 10% charge? This is the adjective commonly used in describing Obama’s policy. At this point we have to go by what’s on paper.

Both the Clinton and Obama plans would forgive undergraduate students loan after 20 years of repayment. Under the Obama plan this would not occur for graduate students until 25 years. The Clinton plan says nothing about graduate student loans.

Clinton’s website advertises that her plan “would reduce loan payments by tens of billions of dollars in the next ten years, easing the burden on undergraduate borrowers.”

Neither the Obama administration nor Hillary’s policymakers address the issue of older students enrolling in either undergraduate or graduate education or the issue reported by the Huffington Post of courts confiscating the Social Security benefits of the elderly for student loan repayment, throwing the elderly into extreme poverty.

http://www.huffingtonpost.com/…

People who delayed college or enrolled in graduate school mid career could reach their late sixties or their seventies before their debt would be cancelled. The result would be to discourage older workers from seeking education.

There is no proposed student loan repayment policy offering one of the most needed innovations: stopping interest accumulation during periods of unemployment and hardship deferments.

One proposal for student loan relief in the Clinton plan would have highly questionable success in practice. Partial loan cancellation will be offered in return for AmeriCorps service:

“Clinton’s New College Compact will expand AmeriCorps from 75,000 to 250,000 members. And it will build on the current AmeriCorps Segal education award by partnering with state and university leaders to enable volunteers who complete two years of community service and one year in a public service job to attend an in-state public college or university without having to take out loans for any expenses or to have their loans forgiven upon completion of their service commitment.”

The implications of this should be seriously considered.  Currently AmeriCorps pays a salary of $800 per month. Very few students can live on it. (Senior citizens can use it to supplement their Social Security.) It is suitable for those who continue to live with their parents and pay their parents a modest amount of rent. It means that, in essence, the students are working in return for the tuition they just incurred and choosing to have their loans paid rather than receiving a real salary. This is a backdoor method of accelerated student loan repayment. It asks students to live poor for two years, during which they will not be able to set aside savings for interest accumulation.  After the two years the student would have to get a public service job to benefit from the program, but the plan does not say what would happen if students cannot find this type of job. This could occur in rural areas or in urban centers where there would be more applicants than jobs.

Another question the AmeriCorps expansion raises is the creation of jobs with training wages below the minimum wage and the replacement of regular full time, union-represented jobs with temporary sub-minimum wage jobs.

The tendency to shift public service work into sub minimum wage salary scales is already a problem in the hiring of graduate students as researchers and instructors and in the hiring of adjunct instructors in universities.  The problem of shifting work into minimum wage, part time, hourly categories also occurs in Washington State’s implementation of tutoring programs in the K-12 system.

Accountability

The most perplexing aspect of the Clinton Compact the accountability plan. The policies in this area are, to some degree, already in practice in the Obama administration. The policy is based on a bill introduced in the Senate August 5. While the policy is not new or a surprise, the supporting rhetoric on the Clinton website is alarming.

As in Arne Duncan’s K-12 education policies, schools are portrayed as adversaries to be put on the defensive: “The New College Compact Will Force Schools to Focus on Student Outcomes Rather Than Their Bottom Lines.” “Require colleges and universities to have some skin in the game.”

The Clinton plan makes a positive impact emphasizing incentives to increase graduation rates.

http://www2.ed.gov/offices/OSF…

But whereas Hillary’s document accurately identifies the problems of for-profit colleges potentially leaving students with unemployment and debt, the criticism of schools for focusing on the bottom line is replaced with the federal government’s focus on the bottom line. “Too many colleges are loading up students with debt for programs that don’t let them climb the economic ladder. And when things go wrong and students default on their loans, it is students and taxpayers who end up holding the bag. We need our nation’s colleges to have strong incentives to keep debt low, and they need to be penalized when their graduates are unable to repay their loans.”

This narrative of students vs. colleges implies that colleges are responsible for the failure of students to have an income or for assuming too much debt.  This is beginning to sound strikingly similar to attacks on K-12 systems and teachers, who are being held accountable for students’ performance on standardized tests.

Now colleges are being made the scapegoats, conveniently ignoring other factors that could lead to student loan defaults.  Colleges bear some responsibility if the quality of teaching or student advising is low. But other factors enter into a student’s ability to complete a degree and get a job rather than drop out: poverty, family and local area job prospects.

“Clinton will embrace bipartisan efforts for schools to share in the risk, such as the principles envisioned in the Student Protection and Success Act, introduced by Senators Orrin Hatch and Jeanne Shaheen. She will ensure that these efforts encourage, not discourage, enrollment in quality programs for underserved students.”

It is a cause for concern when the proposed higher innovation plan of a Democratic campaign is based on a bill whose prime sponsor is Republican Senator Orin Hatch. It turns out that the policies in the bill don’t effect drastic change. The specifics of the bill only penalize institutions that on the extreme end of saddling students with enormous dent with no return on investment. Whereas law enforcement against predatory for-profit colleges is beneficial, the rhetoric and the framing associated with these policies are, however, a cause for concern.

Senator Shaheen’s website describes the legislation. “The Student Protection and Success Act will take long-overdue steps to weed out poorly performing institutions who are good at getting students to enroll, but exceptionally poor at preparing students for the workforce and, therefore, shouldn’t be subsidized by federal assistance. This legislation will incentivize colleges across the country to improve the quality of their programs.”

Her website quotes Senator Hatch:

http://www.shaheen.senate.gov/…

“Schools that are not producing these returns are not good stewards of taxpayer dollars, and should be responsible for helping recuperate some of the money borrowed. We can argue that the cost of college is too high, but as long as the education prepares the student to enter the workforce and receive a substantial return on this cost, we can rest assured that the cost is merited. The dream of a college education should not come tied to an insurmountable mountain of debt, especially if the education it pays for does not provide the most basic skills and education to conquer it.”

“The Student Protection and Success Act replaces this flawed standard with a more robust formula that would measure the percentage of students at each school who go three years without making a payment of one dollar or more towards the principal of their federal loans. This new metric would include students who are in default, discretionary forbearance, income-driven repayment plans, and deferment for reasons of financial hardship or unemployment. It makes exceptions for qualified borrowers such as those attending graduate school or serving in the military or the Peace Corps. Under the bill, schools with repayment rates more than 10% below the national average over a 3-year period will lose eligibility to participate in the Title IV federal student loan system, and the appeals process is shortened substantially to no more than 75 days.”

And “many schools with student loans that are not being repaid will have to contribute to a fund to support institutions that serve a high percentage of low- and moderate-income students.”

Colleges that traditionally serve minorities would be offered extra help meeting the standards and are already receiving such help in the Obama administration.

Having been introduced on August 5, 2015, the bill sponsored by Hatch and Shaheen does not yet have a number. The text is available here.

http://www.shaheen.senate.gov/…

A first instinct might be to consider this an attack on the arts and humanities. But a perusal of federal data on default rates, as well as Best Colleges ratings in the media, reveal that liberal arts colleges often have much lower loan default rates than large state universities. One can conjecture that the improved advising and interaction with faculty in a small liberal arts college helps students succeed. In addition, liberal arts graduates may be more willing to take lower paying jobs with non-profits and in government, giving them the ability to make loan payments, however burdensome.

The default rates for all US colleges and universities are provided in this chart.

http://www2.ed.gov/offices/OSF…

Private liberal arts colleges will not suffer under this bill, as they tend to have low default rates. For example, only 3.9% of students default after graduating from St. John’s College in New Mexico, 0% from Pomona College and 6.7 % from California Institute of the Arts. Lists of schools that have been penalized for a 30% and 40% default rate reveal a small number of specialized, private vocational schools in occupations such as barber and beautician.

This website also provides information on low default rates of liberal arts colleges.

http://www.liberalartspower.or…

So where is the problem of student default coming from? What is driving this policy initiative?

Here is the US Department of Education’s chart on student loan default rates by type of institution.

http://www2.ed.gov/offices/OSF…

The cause for concern in the Clinton and Obama administrations is the cost of for-profit colleges that saddle students with large debt and without employment upon graduation.  Kaplan University is an example of such risk, with defaults in the range of 20-30% except for most California locations and one in Nevada, where they are in the teens.  

But the data reveal other trends that could cause accountability to kick in at public institutions, particularly in areas of rural poverty. In Washington State the default rate for Spokane Community College is 27.3% and for Spokane Falls Community College it is 24.6%. For Shoreline Community College the rate drops to 16.9%, with 0 default at Seattle Central Community College. The picture is not always this clear, but similar patterns appear across the nation. Rural states may be disadvantaged, with Central New Mexico Community College having a high default rate of 31.7 and the University of New Mexico at 13%, which is high for a large state university.

CollegeMeasures.org is cited by ALEC in its10 questions legislators should ask about higher education. The project is spearheaded by Mark Schneider, Professor Emeritus at SUNY and US Commissioner of education statistics in the Bush administration from 2005-2008. It conducts performance measurement of colleges based on completion rates and the economic success of graduates. Used by Money Magazine to develop its Best Colleges list, it provides data to allow students to choose higher education based on data on the economic success of graduates.

But whereas Schneider’s view places the responsibility for defaults on the schools, another scholar, Laura Choi, takes an alternate view, in which student loan default is affected by poverty and family background. (Here, “LMI” refers to low and middle income.)

http://www.frbsf.org/community…

“In addition, another cause for concern is the negative relationship between family income and degree attainment, as seen in Fig. 9.  Among students from the lowest family income group (less than $32,000) who first enrolled in 2003‐2004, 25.5 percent received a bachelor’s degree by spring 2009. In contrast, 58.6 percent of students from the highest income group (more than $92,000) received a bachelor’s degree by spring 2009, more than double the rate among the lowest‐income students. LMI students tend to have more risk factors than their higher‐income peers for postsecondary attrition, including being older, less likely to receive financial support from parents, and more likely to have multiple obligations outside college, like family and work, that limit their full participation in their educational experience.  A full exploration of the barriers to college completion among LMI students is beyond the scope of this paper, but the pattern of LMI students carrying similar debt burdens to their higher‐income peers, but attaining bachelor’s degrees at half the rate, is troubling.”

So while the Clinton Compact aims to protect students from for-profit colleges that don’t deliver results, will the accountability measures open the door to penalties for public institutions in rural and poverty areas? How many public institutions will fall more than 10% below the national average? What measures would the federal government demand of such schools?  How can such schools ever be rated as successful if there are no employers in the area? Will some states opt out of the compact and refuse federal funding because of demands they can’t meet? Would public institutions in poverty areas be required to eliminate courses that don’t lead to employment, thus affecting the arts and humanities? Would this create a two-tiered system in which the liberal arts become a luxury activity for private school students?

And should the US be subjected to another national debate on the subject of school accountability rather than poverty, this time at the level of higher education?

These questions should enter the dialog about what we are voting on in 2016.

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