After watching the U.S. Senate Health, Education, Labor and Pensions (HELP) hearings on financial aid simplification and transparency on January 18, I find myself slightly hopeful—but even more concerned—about the fate and future of our system. The conversation started out on the right note when Sen. Alexander (R-Tennessee) spoke about the need to simplify the process and reduce red tape so financial aid professionals can spend more time working with, and advising, students.
But the most important thing that can be taken from the recent Higher Education Act Reauthorization hearing is that simplification should not be used in place of accountability. Instead, we should be using this opportunity to put structure and accountability standards in place for all organizations that touch the student financial services process.
Accountability: In College, Skipping Tests Earns an ‘F’
Is it preferable to reduce repayment options and loan forgiveness—just because the Department of Education is incapable, or unwilling, to hold loan servicers accountable for high-quality support to students? This doesn’t feel like an answer that would be acceptable in any other industry. So, why is this the go-to response for student loans?
At a time when default rates are on the rise for borrowers with some of the smallest loan balances, we need to be thinking not just about total loan debt but about what is considered a reasonable amount to have to repay, based on income. The recommendation to immediately move to an income-driven repayment process that would be auto-withdrawn from paychecks (like state and federal taxes) is another area of concern. So is the idea of a federal income-share agreement that, to date, has no long-range studies completed—even in the private sector.
That a program of this nature could be implemented without a pilot program, as was suggested, may be one of the most concerning statements I have ever heard. Overhauls like this, without the ability to forecast financial impacts on students and taxpayers, appears not to be a strength of our legislators—as has been proven with current income-based repayment programs and the recent health care reform act.
Eliminating Grants and Subsidized Loans Eliminate Students with High Financial Need
In an attempt to simplify the number of funding options and to increase transparency, the senate committee has suggested eliminating programs targeted at low-income students. If public service loan forgiveness, FSEOG grants, and subsidized student loans were eliminated—as suggested in the PROSPER Act—we would be damaging students further by eliminating programs that help reduce their cost of education.
The answer to creating more accessibility in higher education is not to limit funding to students who are least able to afford it. Instead, we should focus on controlling the cost of higher education and on ensuring that colleges and universities are not inappropriately inflating those costs—eliminating the ability for the neediest students to afford college.
Standards for Award Letters Is a Solid Step Toward Simplification
A great deal of discussion in the committee hearing centered around access to student loans, education about loan repayment, consequences of a one-loan program, and communication surrounding borrowing.
With regard to the latter, testimony from research recently conducted by uAspire & New America provided some very troubling insights. Inconsistent and confusing award notifications are regularly sent to students, with up to one-third of award letters missing necessary cost information, presenting inconsistent calculations of remaining cost, and using inconsistent terminology (e.g., “Federal Direct Unsubsidized Loan” was referenced in 143 unique ways). Additionally, two-thirds of award letters provided no clarification between grants and loans.
Sample award letters provided to the senate committee were confusing; lacked consistency in layout—and appeared to be samples that would not render well on mobile devices. We owe it to students and their families to ensure that award notices meet certain standards to enable informed and sustainable financial decisions about college. This is not to say that a template should be mandated through legislation. Instead, a standard glossary of terms and minimum requirements should be consistently defined. Institutions also should provide award letters to students in a format that can easily be displayed on mobile technology, since one-third of families living below the poverty line rely on mobile technology for internet access.
Solutions Are Needed—Starting with the Cost of College
As we look at increasing access to higher education, and reducing student borrowing, a key component in the simplification process should be about controlling the cost of higher education. That was a topic absent from the senators’ discussion, but will hopefully be on the docket in future sessions. It is impossible to increase college access and reduce student borrowing without managing the cost of education in the United States.
If we want to fix the higher education funding model, we need to make sure we’re curing the disease—rather than simply treating the symptoms.