Washington, D.C. — Policymakers are increasingly interested in the idea of having institutions of higher education shoulder some of the risk when students struggle with federal student loans. Properly designing such a system can be complex, and deciding how to address a few key decision points can produce substantially different outcomes in terms of which schools are held accountable and how much risk they might have to shoulder.
A new report out today from the Center for American Progress lays out these key choices for creating a higher education risk-sharing system and describes different ways of approaching them. It also includes a short summary table showing how different experts address these challenges.
The report’s analysis draws on eight different papers on higher education risk sharing commissioned by CAP last fall. This series features authors across the ideological spectrum representing different constituencies. Papers discussed in the synthesis report include contributions from experts who work at CAP, The Institute for College Access and Success, the Manhattan Institute, the Urban Institute, University of Wisconsin–Madison, Nexus Research and Policy Center, the American Association of State Colleges and Universities, and Temple University. Many of the non-CAP papers represent the opinions of their authors, not the organizations involved.
“When colleges fail in setting up students for the real world, it’s taxpayers and students who get left with the bill,” said co-author Ben Miller, senior director for postsecondary education at CAP. “Having colleges share in the risk of student loans can align incentives for schools to focus more on student loan success. At the same time, any risk sharing proposal must be carefully designed so that institutions are not unduly penalized solely based on the students they enroll. Helping policymakers understand the tradeoffs and design choices discussed in this report can result in improved, efficient risk-sharing proposals.”
“The growing cost of tuition means that college has become a riskier proposition for both students and tax-payers,” said Beth Akers, a senior fellow at the Manhattan Institute and a co-author of the paper. “This set of proposals provides new ideas for how policy can help address this challenge.”
The report addresses three questions crucial to designing a risk-sharing system:
- What metrics should be used to measure institutional performance?
- In what way should financial requirements for institutions be calculated?
- How should institutions that serve vulnerable populations be treated?
Click here to read “Designing Higher Education Risk Sharing Proposal: Evaluating Choices and Tradeoffs” by Ben Miller and Beth Akers.
For more information on this topic or to speak to an expert, contact Devon Kearns at email@example.com or 202.641.6290.