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A New Course for Higher Education

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A New Course for Higher Education A New Course for Higher Education STRENGTHENING ACCESS, AFFORDABILITY, AND ACCOUNTABILITY January 2020 TA S K F O R C E Howard P. “Buck” Martha J. Kanter ON HIGHER McKeon (Co-chair) Executive Director, College Former U.S. Representative (R-CA) Promise Campaign EDUCATION Former Chairman, House Former Under Secretary, U.S. FINANCING Education and Labor Committee Department of Education A N D George Miller (Co-chair) Walter M. Kimbrough S T U D E N T Former U.S. Representative (D-CA) President, Dillard University Former Chairman, House Former President, Philander OUTCOMES Education and Labor Committee Smith College F. King Alexander William J. Lennox Jr. President-elect of Oregon Former Superintendent, United States State University Military Academy Former President of Louisiana Former President, Saint Leo University State University Thomas C. Leppert Garrey Carruthers Former Mayor of Dallas Former Chancellor, New Mexico Former Corporate CEO State University Former Governor of New Mexico Adam Looney Senior Fellow, Brookings Institution Michelle Asha Cooper Former Deputy Assistant President, Institute for Higher Secretary for Tax Analysis, Education Policy U.S. Treasury Department Former Deputy Director, Advisory Committee on Student Cheryl A. Oldham Financial Assistance, U.S. Vice President of Education Policy, U.S. Department of Education Chamber of Commerce Former Acting Assistant Secretary, James H. Douglas U.S. Department of Education Office Former Governor of Vermont of Postsecondary Education Former Chair, National Governors Association Wil Del Pilar Vice President of Higher Education Brian K. Fitzgerald Policy and Practice, The CEO, Business-Higher Education Trust Education Forum Former Deputy Secretary, Pennsylvania Member, Dean’s Leadership Council at Department of Education Office of Harvard Graduate School of Education Postsecondary and Higher Education Christine Gregoire John Tierney Former Governor of Washington Former U.S. Representative Former Chair, National Executive Director, Center for Arms Governors Association Control and Non-Proliferation Dianne G. Van Hook Chancellor, Santa Clarita California Community College District President, College of the Canyons 2 STAFF G. William Hoagland Kody Carmody Senior Vice President Policy Analyst Shai Akabas Elizabeth Middleton Director of Economic Policy Research Analyst Kenneth Megan Mariette Aborn Associate Director of Higher Education Project Associate Jinann Bitar Senior Policy Analyst ACKNOWLEDGMENTS The Bipartisan Policy Center would like to thank Arnold Ventures, the Bill & Melinda Gates Foundation, the Joyce Foundation, and Lumina Foundation for their generous support of this project. The task force members and BPC staff are grateful to the many individuals who assisted our work. BPC fellows Douglas Webber, associate professor of economics at Temple University, and Robert Kelchen, associate professor of higher education at Seton Hall University, provided ongoing guidance, analysis, and perspectives. Rachel Christeson and Brian Prescott of the National Center for Education Management Systems provided modeling support and technical assistance to the task force. Robyn Hiestand assisted in the development of the task force’s recommendation for the federal-state partnership. Numerous other experts offered valuable feedback throughout this process. Katie Sullivan and former BPC staff members Dora Engle and Jack Rametta made substantial contributions to the task force’s work. Jordan LaPier, Matthew Sifert, and Michele Nellenbach provided valuable insight and support over the course of this project. Olivia Yang, Christopher Kaiser, Sydney Levine, Annie Wu, Danni Li, and Kevin Gawora contributed to this report during their internships at BPC. Marika Tatsutani assisted with the revision and editing process. DISCLAIMER This report is the product of BPC’s Task Force on Higher Education Financing and Student Outcomes. The findings expressed herein are those solely of the task force, though no member may be satisfied with every individual recommendation in the report. The contents of this report do not necessarily represent the views or opinions of the Bipartisan Policy Center’s founders or its board of directors, nor the views or opinions of any organization associated with individual members of the task force. 3 Table of Contents 9 LETTER FROM THE CO-CHAIRS 12 SECTION I: THREE CHALLENGES 16 I.A Challenge: Access and Affordability 40 I.B Challenge: Outcomes and Accountability 53 I.C Challenge: Data and Information 59 SECTION II: TASK FORCE RECOMMENDATIONS 59 II.A Reforms to Improve Access and Affordability 85 II.B Reforms to Improve Outcomes and Increase Institutional Accountability 96 II.C Reforms to Improve Data and Information for Students 103 SECTION III: CONCLUSION 104 SECTION IV: APPENDIX 5 Tables and Figures 12 SECTION I: THREE CHALLENGES 15 Figure 1: Undergraduate Enrollment, by Sector 15 Table 1: Share of Undergraduate Enrollment, by Federal Poverty Level 15 Figure 2: Undergraduate Enrollment Patterns, by Race 18 Figure 3: Percent Increase in Published and Net Tuition, Fees, Room, and Board (TFRB) from 1999–2000 to 2019– 20, by Sector 20 Figure 4: Enrollment in Public Higher Education, State Appropriations, and Net Tuition Revenue 21 Figure 5: State Fiscal Support for Higher Education as a Percentage of Personal Income 22 Table 2: Government Funding for Higher Education 23 Figure 6: Median Amount Borrowed Among Undergraduate Completers, by Sector 25 Figure 7: Average Annual Borrowing Among Graduate Students 26 Table 3: Major Types of Federal Loans 29 Figure 8: Maximum Pell Grant Relative to Published In- State Tuition, Fees, Room, and Board (TFRB) at Public Four-Year Institutions 33 Table 4: Student Loan Repayment Plans 43 Figure 9: Total Volume of Federal Student Loans in Default and Delinquency 44 Figure 10: Portion of Outstanding Direct Loan Portfolio Held in Income-Driven Repayment Plans 6 59 SECTION II: TASK FORCE RECOMMENDATIONS 66 Table 5: Summary of Federal-State Partnership Projected Outcomes 104 SECTION IV: APPENDIX 105 Table 6: Federal-State Allocation Formula: Metrics, Weighting, and Data Sources 106 Table 7: Projected Maximum Federal Grant Allocations and State Contributions 108 Table 8: Metrics, Calculations, and Data Sources Used to Determine Estimated Return on Investment 109 Table 9: Estimated State Outcomes 112 Table 10: Data Sources and Variables Used: Premiums and Capacity Grants 113 Figure 11: Combined Effect of Premiums and Capacity Grants Policies, by Sector 115 Figure 12: Median Effect on Institutional Revenues of the Federal- State Partnership, Premiums, and Capacity Grants Policies, by Sector 7 8 Letter from the Co-Chairs High-quality and broadly accessible higher education is a key driver of social mobility for any country. It is also critical for maintaining an internationally competitive workforce and fostering economic growth. America’s higher education system has long been heralded as the best in the world, attracting top faculty and researchers, and positioning students to succeed in the workplace. But this primacy is under threat, as higher education has grown increasingly unaffordable, especially for low- and middle-income families. At the same time, too few students make it to graduation and too many are burdened with oppressive levels of student debt. These disturbing trends can be partly attributed to an outmoded policy apparatus that is not equipped to manage a landscape characterized by rapid innovation and demographic change. Policy changes are needed because higher education in the United States is evolving, as postsecondary institutions experiment with different learning models, forge links to labor markets, and develop new opportunities for skills training. Colleges and universities are also being challenged to serve growing numbers of adult learners, who are more likely to require multiple, flexible pathways to degree attainment. At the same time, declining birth rates and lower levels of international enrollment have led to shrinking demand for higher education in certain regions of the country, placing financial strains on some institutions. Despite these major shifts and challenges, the Higher Education Act, which guides federal involvement in higher education, has not been updated since 2008, when the two of us led the House Education and Labor Committee. Because the original HEA and subsequent HEA updates were largely designed with traditional four-year institutions in mind, the current federal policy framework fails to adequately incorporate other pathways to postsecondary credentials, such as short-term training programs, many of which provide students with in-demand skills. In addition, accessing and completing a postsecondary degree has become overwhelmingly expensive. While a college degree, despite its cost, remains a good investment in most cases, too many students are failing to realize positive returns on their educational expenditures, particularly if they fail to graduate or graduate from institutions with lackluster student outcomes. Many of these students finance their education with debt that they are unable to repay, threatening long-term financial security. Taxpayers are also exposed to risks from the current system, given that most student debt is issued by the federal government. Ultimately, 9 tens of billions of federal dollars flow each year into a higher education system that lacks transparency, accountability, and adequate consumer protections. In response to these challenges, the Bipartisan
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