In a significant move that has captured the attention of higher education leaders, the Senate education committee has unveiled a draft plan aimed at reforming the federal student aid system. This proposal, which has been met with relief from many in the education sector, emphasizes the importance of holding colleges accountable for the outcomes of their students.
The Senate’s strategy links a university’s eligibility for federal loans to the post-graduation earnings of its students. This approach is seen as more straightforward and effective compared to the House’s risk-sharing proposal, which would impose penalties on colleges based on their students’ outstanding loan balances. Education experts argue that focusing on student earnings is a more direct measure of a program’s success.
Jordan Matsudaira, director of the Postsecondary Education and Economics Research Center at American University, highlights the correlation between low earnings and student loan defaults. He describes the Senate’s proposal as a necessary step towards establishing accountability in higher education.
This new plan appears to draw inspiration from existing regulations known as gainful employment, which assess whether for-profit and non-degree programs adequately prepare students for the job market based on their earnings and debt levels. However, the bill’s sponsors have been cautious about directly associating it with previous regulations, opting instead for a broader application across all degree programs.
Historically, Republicans have criticized the Democratic policies implemented during the Obama administration, arguing that they disproportionately targeted for-profit institutions. The previous administration rolled back these regulations, but the current political climate has prompted some Republicans to reconsider their stance on student debt and the accountability of higher education institutions.
As the Senate moves forward with its proposal, there is a growing belief that the earnings test could gain traction and become law. This is seen as a more palatable option compared to the House’s plan, aligning better with conservative values. However, some critics argue that this new measure is merely a different approach to accountability rather than a genuine improvement.
The Senate’s accountability measure is currently part of a larger legislative package aimed at reducing spending to fund tax cuts and immigration policies. With the reconciliation process in play, the Senate only requires a simple majority to pass the bill, which could expedite its approval.
Understanding the Accountability Measure
The core of the Senate’s accountability measure involves tracking the median earnings of students in specific programs and comparing them to the average earnings of adults aged 25 to 34 with only a high school diploma. If a program’s graduates do not earn more than their peers without a college degree for two out of three consecutive years, it risks losing access to federal loans for a minimum of two years.
For baccalaureate programs, earnings will be assessed four years after graduation, a timeline some experts believe is insufficient for accurately evaluating a program’s effectiveness. Additionally, the earnings of high school graduates will not be considered until they reach 25 years of age, which raises concerns about fairness in comparisons.
Similar evaluations will apply to graduate and professional programs, with income levels compared to those holding a bachelor’s degree. While the Senate has not released specific data on its plan, previous studies on gainful employment regulations provide insights into which programs may be most affected.
Data from the Department of Education indicates that a small percentage of programs currently exempt from gainful employment regulations would fail under the new earnings test. Notably, graduate programs and for-profit bachelor’s degrees are expected to be significantly impacted, with a higher failure rate compared to nonprofit institutions.
A More Equitable Approach?
The Senate’s proposal retains the existing gainful employment rules, while House Republicans seek to eliminate them entirely. As the Trump administration defends these regulations in court, there is uncertainty about their future.
Experts caution against viewing the Senate’s proposal as merely an extension of the Biden administration’s gainful employment rules. They argue that while the Senate has adopted some concepts from the previous regulations, it has also introduced significant changes that aim to create a more equitable framework for all educational institutions.
One notable difference is the exclusion of credential programs from the Senate’s accountability measure, which some experts believe is a missed opportunity, especially as discussions around expanding financial aid for these programs continue. The Senate’s approach focuses solely on earnings, whereas previous regulations considered both income and loan repayment capabilities.
Debate continues over whether to include students who do not complete their degrees in the earnings calculations. Some argue that accountability should only apply to those who finish their programs, while others contend that institutions should be held responsible for all students who enroll.
Despite differing opinions, many in the higher education sector express optimism about the Senate’s proposal, viewing it as a step in the right direction. This sentiment reflects a broader recognition of the need for accountability in higher education and a commitment to improving student outcomes.