Reforming Higher Education: A Policy Overview for a Stronger Future

Introduction

Higher education plays a vital role in individual and societal advancement. Recognizing this, policymakers have historically strived to make college education accessible to as many people as possible. The Higher Education Act (HEA), first enacted in 1965, stands as a cornerstone of this effort, governing federal higher education programs and aiming to strengthen educational resources while providing financial assistance to students. As the HEA undergoes reauthorization, it presents a crucial opportunity to address the evolving challenges in higher education and ensure its continued effectiveness in promoting academic and economic goals. This article provides an overview of key policy recommendations aimed at improving access to, affordability, and value of higher education, particularly concerning graduate and professional studies.

Addressing Student Loan Costs

Lowering Interest Rates

A primary concern is the substantial profit generated by the federal Direct Loan program, largely due to interest rates charged to students exceeding the government's borrowing rate. For instance, in the 2020-21 academic year, graduate student interest rates were set at 4.30 to 5.30 percent, while the government could borrow at under 1.50 percent for 30 years. These high rates contribute to escalating student loan debts. Lowering interest rates would alleviate costs for students while still allowing the government to cover programmatic expenses, including the cost of capital, loan servicing, collection costs for defaulted loans, and losses from debt discharges.

Eliminating Origination Fees

Federal student loans also include origination fees, a percentage of the loan amount charged for processing, which reduces the disbursed amount. These fees, currently between 1 and 4 percent, generate revenue for the government but increase costs for students who have already demonstrated financial need. Eliminating these fees would provide much-needed relief to students.

Expanding Access and Support

Including Bar Exam Preparation Costs in Cost of Attendance

Current law allows the "one-time cost of obtaining the first professional credentials" to be included in the cost of attendance for federal loan eligibility. However, this excludes costs associated with preparing for professional licensure tests. For law students, this means only the bar exam fee itself is covered, not bar review courses or living expenses during the study period. This lack of funding can force students to rely on high-cost alternatives or forgo preparation courses, potentially impacting bar passage rates and job prospects, which in turn affects loan repayment. Including bar preparation costs would mitigate these risks.

Exempting Emergency Grants from Financial Aid Calculations

To ensure timely distribution of emergency grants from schools, charities, and private donors, Congress should remove restrictions related to financial aid awards. Categorizing these funds as "estimated financial assistance" can prevent students who have already received maximum aid from accessing them.

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Protecting Access for Underrepresented Students

Any changes to federal graduate loan programs should not limit access for students from traditionally underrepresented backgrounds. Federal financing has enabled many students who would otherwise be unable to afford it to pursue advanced degrees. Severely limiting or eliminating federal graduate loans could disproportionately harm the neediest students, particularly Black borrowers and Historically Black Colleges and Universities (HBCUs).

Allowing Use of Remaining Pell Grant Funds

Students who have not used their maximum Pell Grant amount as undergraduates should be allowed to use the remainder to finance their graduate or professional degrees. This would provide additional support for needy students pursuing advanced education.

Reinstating Subsidized Stafford Loans for Needy Graduate Students

Prior to July 1, 2012, graduate students could borrow both subsidized and unsubsidized Stafford Loans. The elimination of subsidized Stafford Loans for graduate students means they now accrue interest on their loans while in school, potentially adding thousands of dollars in capitalized interest. Reinstating subsidized Stafford Loan eligibility for graduate students who received a Pell Grant as undergraduates would alleviate this burden.

Fully Funding Title III Programs

Congress should authorize full funding of Title III programs supporting Historically Black Colleges and Universities (HBCUs) and other minority-serving institutions. These programs, which support institutions serving a high percentage of minority students from low-income backgrounds, have never been fully funded despite being authorized in 2008. Fully funding programs like the Historically Black Graduate Institutions (HBGI) program would support increasing the number of Black individuals in various professional fields.

Simplifying Loan Repayment

Implementing a Single Income-Driven Repayment Plan

The existence of five discrete federal income-driven repayment plans creates unnecessary complexity and confusion for borrowers. Implementing a single plan with the most favorable repayment options would simplify the process and ease the financial burden on borrowers.

Preserving and Strengthening Public Service Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program encourages individuals to enter public service fields by offering loan forgiveness after 120 qualifying payments. Despite its importance, implementation issues have led to a low approval rate. Congress should preserve and strengthen the PSLF program to ensure its effectiveness.

Enhancing Data and Counseling

Overturning the Student-Level Data Ban

More comprehensive higher education data is needed to assist stakeholders in making informed decisions related to accountability, policymaking, and consumer choice. Overturning the 2008 student-level data ban would allow for the creation of a federal student unit record data system, providing valuable information while maintaining necessary privacy and security. This system could offer accurate post-graduation data, including earnings and job types, to better understand the value of higher education.

Allowing Additional Loan Counseling

Financial aid administrators should be able to require additional loan counseling for graduate and professional students, given their high levels of borrowing. Current law limits schools from requiring additional counseling beyond the minimum requirements. Enhanced loan counseling would benefit both students and the federal government.

Tailoring Loan Counseling to Graduate Students

Loan counseling and financial education should be specifically tailored to the needs of graduate and professional students, recognizing that their needs may differ from those of undergraduates. This would ensure that students receive relevant and appropriate information to make informed financial decisions.

The Broader Context of the Higher Education Act

The Higher Education Act (HEA) is a federal law that governs the administration of federal higher education programs. Its purpose is to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education. First passed in 1965 to ensure that every individual has access to higher education, regardless of income or zip code, the HEA governs student-aid programs, federal aid to colleges, and oversight of teacher preparation programs. It is generally scheduled for reauthorization by Congress every five years to encourage growth and change. The HEA has been reauthorized multiple times since its inception, with current authorization extended while Congress prepares changes and amendments.

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