Thomas J. Botzman | A Higher Education Act rewrite that benefits students, taxpayers and the workforce | Editorials

Congress is preparing to rewrite the Higher Education Act (HEA), the landmark legislation passed in 1965 that signaled the federal government of the United States was committed to college access for all. 

The program has not been revised since 2008, so a thoughtful update is in order.

Federal support for higher education is substantial. In the 2016-17 academic school year, the federal government provided $123 billion to about 13 million students. Grants – financial support students do not repay – were $28 billion, and work-study – which supports salaries for eligible students performing work on campus – added another $1 billion. The largest subsidy, however, was student loans – nearly $94 billion.

At Misericordia University, we had 632 students receive Pell Grants in the 2017-18 academic year. One-hundred and ninety students also received an additional grant, the Supplemental Educational Opportunity Grant (SEOG), or work-study or both. Federal grants and work-study provided almost $3 million in assistance to our students who had demonstrated significant financial need. Overall, Misericordia’s students borrowed more than $16 million from federal or private lenders during this same period.

Nationally, 12 percent of federal student loans are in default, according to an analysis for the U.S. Senate Committee on Health, Education, Labor and Pensions. 

In 2016, about one in six people with federal student loan debt were in default. 

While Misericordia’s alumni have a default rate below 5 percent, we remain concerned about ability and obligation to repay these loans. The inability to stay current on a loan is even more troublesome for students who fail to complete a degree, especially if personal finances are the obstacle to completion.

As taxpayers, we provide the funding for the student loans that enable students to get an education. 

Of course, we also expect that they will get a job and repay the loans. 

The loan debt, though, is good debt when it leads to job-sustaining degrees.

One of the many proposals in the anticipated update to the HEA focuses on getting students to take sufficient courses to complete a degree in a timely fashion. It proposes a $300 bonus, or about 5 percent annually, for students who take 30 credits or the equivalent in an academic year. Most undergraduate degrees require about 120 credits, so moving along on time nets the student an extra $1,200. It also saves taxpayers up to $12,000 in additional grants for students who take the maximum six years to complete their degree.

I support this very interesting proposal. I also wonder if perhaps there could be a more aggressive version that could turbocharge the desire of students to complete a degree on time. 

The extra two years of employment, rather than being in school, would generate two more years of tax revenue and have other economic benefits to society as well as the student’s bank account. 

More importantly, I remember my days as an undergraduate when I received SEOG and work-study grants. I would have been thrilled to find a way to benefit from finishing my degree faster.

As part of the HEA revision, the National Association for Independent Colleges and Universities (NAICU) has proposed allowing students to receive their typical federal aid, or perhaps even the aid and a $300 bonus during their first two years in school. 

During their junior and senior years of study, however, the federal government would double the Pell Grant and the college or university would be required to match the extra federal funds.

In this scenario, the student would receive about $18,000 annually instead of $6,000 per year in grants that do not need to be repaid. The colleges would have substantial “skin in the game” to encourage students to graduate on time. Institutions of higher education already commit substantial internal resources – millions of dollars each year – to student financial aid, so NAICU’s proposal would clearly signal the new metric for success would be access and on-time graduation.

Students, of course, would need to borrow much less and would enter the job market earlier. Consider, for example, a student who graduates and makes $50,000 a year. On average, a taxpayer with that income pays about 10 percent in federal taxes, or about $5,000. The federal government recovers a substantial part of the grant via tax revenue. Students who have the capability and the drive to get a degree are going to graduate, begin their careers and will not be saddled with nearly as much debt.

The revised HEA proposes a new loan limit of $39,000 for dependent undergraduates and $60,250 for independent graduate students. 

Receiving about $24,000 in grants instead of loans in the final two undergraduate years could dramatically decrease lending for many students. 

And, remember, the federal government is already committing most of these funds to loans, a good portion of which new graduates entering the workforce are challenged to repay.

This is an audacious and pragmatic proposal to increase the number of college degrees and the number earned on time. Both results would bode well for a prosperous American future.

Thomas J. Botzman, Ph.D., is president of Misericordia University in Dallas, Luzerne County.

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