Hillary Clinton’s New College Compact includes every policy idea in higher education but the kitchen sink. The plan sprawls from loan refinancing, to expanding AmeriCorps, to free community college. Some of the ideas like ensuring state investment in higher education through a federal incentive program are timely and needed. While others, like how the state and federal partnership would work don’t provide enough detail to judge their effectiveness. And some of the ideas like renewing the American Opportunity Tax Credit would continue directing federal resources to those who need them the least.
The Clinton plan calls for a new program that would provide an incentive to stop state disinvestment from higher education. The idea of creating a new federalism in higher education that ties the state and federal investment together is urgently needed. Only two years ago, state and local funding for higher education was at the lowest level per full-time student in 25 years. Even now, those funding levels have not recovered to where they were before the recession hit in 2008. There is no point in increasing federal financial aid if states continue to divest in higher education. This type of proposal will make it more difficult for states to cut funding without losing federal money. That in turn could be the beginning of a shift where higher education is no longer the ballast of state budgets.
The idea of creating a new federalism in higher education that ties the state and federal investment together is urgently needed.
Another good idea is simplifying income-based repayment. The proposal recommends consolidating the four IBR programs, each with different terms and conditions, into one with the same rules for everybody: 10 percent of disposable income for 20 years with the remainder forgiven. This kind of simplification would be good for borrowers.
Clinton’s plan also proposes simplifying the FAFSA. While there is no detail in this proposal, it seems like there is policy consensus emerging around FAFSA fixes that ease the burden on students and their families.
The Jury is Still Out
While the idea of a new federalism is needed and timely, the design of Clinton’s state and federal partnership raises questions. The New College Compact would create a grant program that routes funding from the federal government through states to public four-year institutions, based on the number of students in each state. In order to remain eligible for funding, states are required to maintain, and at some future point increase, investment in higher education. But the key requirement to remain eligible is that states ensure:
“that no student should graduate with debt for tuition – and limiting costs for non-tuition expenses.”
The Clinton campaign states that low-income students would use their Pell Grants to cover their non-tuition expenses, making this a first-dollar plan. Beyond that, it’s unclear how this policy would work in practice. Would the federal government come up with a definition of an affordable amount of debt for living expenses and hold states and colleges accountable for that? How would states determine what is affordable for families to pay without debt? And how would the federal government encourage states and institutions to continue enrolling the low-income students who would have the hardest time paying tuition without taking on debt?
The plan above only applies to public four-years and excludes community colleges. There is a separate section that requires states to provide tuition-free community college. The reason for adding the additional complexity of carving out particular requirements for community colleges is unclear. Perhaps it has to do with the simple marketing of ‘free’ community college to students. Or perhaps it is about expanding free K-12 education to K-14. Whatever the reason, the implication is that the Clinton team wants to provide a larger subsidy to community college students regardless of their ability to pay. This would mean that a relatively well-to-do student at a community college won’t have to pay anything, while a similar student at a four-year public institution would be required to pay the tuition they could afford without debt. There needs to be a clearer justification for why this is necessary.
The plan also includes a proposal for a new grant for private, nonprofit colleges, with small endowments, that serve a high percentage of Pell Grant students. The funds would be used to lower the cost of attendance and support improved student outcomes at these schools. The program also looks like it could have a special focus on Minority Serving Institutions. But it remains unclear whether there would be requirements that these colleges serve low-income students well. It also unclear whether there would be a limit on the prices they could charge these students. A well designed program that rewards schools who graduate, rather than just enroll, Pell students could go a long way toward improving educational opportunities for them.
The plan also calls for pushing colleges to improve graduation rates. To do this, it proposes “building on initiatives like TRIO and GEAR UP”, yet these programs focus more on college access than graduation . The new grants would go to colleges that invest in student supports like “quality child care, partnerships with early childhood providers, and emergency financial aid”. These much needed supports will be a boon for a group of vulnerable, low-income students. They also represent an important acknowledgement that the majority of students are no longer what most of us would think of as traditional. How would these types of supports work with the more academic focused completion agenda? We need more details about how this program would work, what kind of incentives it would create, and why.
On accountability, the plan proposes requiring schools to be up front on things like graduation rates, earnings, and debt while providing insight into how those metrics compare with other schools. Yet, existing data are severely limited in their capacity to meet these needs, because they do not provide data student level. Adopting a system of limited student-level data collection, as Marco Rubio has called for, is critical to providing a clearer understanding of value of different institutions and programs. Does this mean the Clinton plan will call for a federal student unit record system so students can have access to this data in a central location through a trusted government source? To reach the goal set out in the plan of accountability and transparency, we would need to create that kind of system.
The New College Compact promises to cut higher education loan interest rates so the government does not generate revenue, regardless of the accounting standards used. Setting aside the controversy as to whether loans actually do make money for the federal government, this proposal is expensive and doesn’t actually do that much for students. Similar interest rate cuts, such as those proposed by Elizabeth Warren, would only decrease the average monthly payment of someone facing default by about $16. Since cutting interest rates represents a third of the total cost of the proposal, this money could be better spent on other priorities.
The blueprint also extends the American Opportunity Tax Credit indefinitely. According to the College Board, about a quarter of the benefits from higher education tax credits and deductions in 2010 went to families with incomes over $100,000. AOTC is the largest of these tax credits, and has much higher income limits than other education-related tax benefits. There are more effective ways to allocate resources that support students and families who need it most.
The new Clinton plan includes most of the ideas for fixing the system floating around in higher education policy. As this campaign season continues, Clinton has set a benchmark for an inclusive blueprint. Her campaign says that affordable college will be a big focus of her run for the presidency. Hopefully, additional details on some of the bigger proposals will be forthcoming.