We need student loan reform that favors good economic outcomes and encourages all the players in the loan process to be more informed and accountable.
Currently, higher education can be a double-edged sword.
On the one hand, a college degree is strongly correlated with professional success and higher income over a lifetime.
On the other hand, the high cost of a university education forces crippling levels of debt on many of those who acquire a degree. The average amount of student loan debt today is a staggering $28,000, which can negatively affect a lifetime of family and economic outcomes. For example, student loan debt may lead to delays in marriage and homeownership, which in turn affects the economy.
The HERO Act seeks to reform student loan policies in a few ways: Universities would be required to be more transparent about student outcomes; federal loans would be capped, with longer repayment periods; and institutions would be obligated to repay a chunk of student default amount.
Requiring universities to share student outcome data is common sense. Capping federal loans can help keep students from taking on excessive debt. But since the cost of college is not likely to change in the short term, limiting student loan debt also raises questions about how soon-to-be students from low- and middle-income families pay for a college education.
Having universities pay a “default rate fine” may encourage them to do a better job of counseling students about debt, though it remains to be seen whether the prospect of paying 10 percent of a student’s defaulted loan is sufficient incentive to motivate universities to improve their practices. (Note: the bill also allows universities more flexible loan counseling options.)
We also need to reform accreditation so that effective innovations don’t get strangled in the name of “quality assurance.” All learning is noble and every student is different, but higher education does not yet offer students the range of educational options they deserve or the space for innovators to meet the needs of today’s students and industries.
Right now, federal financial assistance can only go to schools that are accredited by one of a few entities. Basically, this means that students who would like to pursue innovative forms of learning (that are currently not accredited) cannot get federal dollars to pay for it.
For too long, the accreditation process has reinforced the notion that the four-year degree, brick-and-mortar university experience is the most culturally acceptable form of “higher education.” But economic reality says this doesn’t have to be the case.
Many career pathways to a middle-class income are accessible through career and technical education, apprenticeships, massive open online courses (MOOCs) and distance learning.
Why shouldn’t accreditation allow someone to take out a student loan for a coding boot camp or aerospace engineering program offered by Boeing, when these will lead to a path best suited to the individual or a high-paying job that can support a family? If we truly care more about people than about process, our accreditation system should ensure that higher education can exist in nearly as many forms as there are students.
The HERO Act pushes in this direction by allowing individual states — according to an agreement with the U.S. Department of Education — to accredit any institution that provides postsecondary programs or courses that can be used toward a degree, certification or credential. These newly accredited pathways to higher learning would then qualify for federal financial assistance.
Opening up accreditation will create space for higher-quality, lower-cost pathways to a good job. This will, in turn, put pressure on universities to lower the cost of a college degree.
Expanding accreditation will also help reshape what our culture deems as acceptable higher education, reinstate respect for all kinds of learning, and encourage innovators to improve education. However, it’s worth asking how agreements will be reviewed, and if rejected, appealed. Ultimately, we’ll need to know whether the state will truly be on equal footing with the U.S. Department of Education in coming to an accreditation agreement.
Higher education needs reform. It’s a big task, and even with promising proposals, there are plenty of questions to ask. The good news is Congress is having the conversation, and we can join it.