Sen. Warren Outlines Plan To Make College Affordable Again

In a speech today, June 10, U.S. Sen. Elizabeth Warren laid out a comprehensive framework and a set of policies championed by both Republicans and Democrats to improve college affordability for all students by renewing investments in higher education and aligning incentives to ensure that the federal government, states, and colleges work effectively to increase quality and reduce costs.

Massachusetts’ senior senator delivered her remarks to kick off a panel hosted by the Albert Shanker Institute (ASI) and the American Federation of Teachers (AFT) titled “The Affordability Crisis: Rescuing the Dream of College Education for the Working-Class and Poor.”

Noting that $1.3 trillion in total student loan debt is crushing students, Sen. Warren called for dramatic reforms to make college more affordable and open up debt-free higher education options for students.

Embracing the central critiques of both Democrats and Republicans, she explained that effective reform must include both a renewed commitment to investing in higher education at the state and federal levels combined with an effort to strengthen accountability and realign incentives so that colleges are encouraged to keep costs down and provide a high-quality education.

“Democrats talk about resources, pointing out that we’re no longer investing in our kids the way we once did. Republicans talk about risk and incentives – arguing that students take on debt without fully understanding the consequences, and that colleges get access to federal dollars pretty much no matter the quality or cost of the education that they provide,” the Senator said in her remarks. “Here’s the truth – both sides are right… Our college crisis needs a one-two punch —more resources and better incentives to keep costs low.”

Sen. Warren went on to identify a set of specific proposals to make college more affordable. She highlighted ways to change incentives to ensure that colleges put students first, such as requiring colleges to share in the risks from student loans, implementing a rule against taxpayer waste, and rewarding colleges that keep costs down.

The Senator also called on states to refinance student loans in the face of Congressional obstruction, and to end cuts to higher education or face federal requirements to do so.

The speech also called for reform of the federal role in higher education, including state-federal partnerships to support public schools, fixing the Pell Grant system, simplifying financial aid, and changing the rules of the student loan program to prioritize students over federal profits.

The speech also expressed support for measures that would strengthen accountability for the Department of Education (ED) to ensure that there are real consequences for student loan servicers and colleges that break the law and cheat students.

“This is a critical moment in America, a moment at which we reconsider how to build a future,” the Senator said. “We cannot build a 21st Century workforce and a 21st Century economy if colleges keep raising prices, if states keep cutting support, and if the federal government squanders billions of student loan dollars on schools that do not serve their students. If we drown our young people in debt, we drown this country’s future… I believe that we can – and we must – make college affordable for every hard-working kid who wants to get an education.”

Public colleges and universities are the backbone of our higher education system, and today more than three-quarters of college students in the U.S. are enrolled in a public school.

State support for higher education, however, has fallen off dramatically. In the last 25 years, average state funding per student dropped 24 percent. That leaves families and the federal government to make up the difference.

States must renew their focus on higher education and provide relief from high borrowing costs by:

• Ending state disinvestment in higher education. Reduced state support for higher education is driving up tuition prices and increasing borrowing, as well as increasing the strain on federal education programs. If states want federal financial aid dollars, they should be required to maintain minimum levels of investment in their own schools.
• Implementing state-federal partnerships to support public higher education. The federal government should directly partner with states to support colleges and universities. As with the interstate highway system, federal support can be used to incentivize states to increase their own investments, as well as bring down prices and improve outcomes for students.
• Refinancing student loans. The federal government and private banks hold billions of dollars in student loans at interest rates much higher than government borrowing costs. States can provide immediate relief by creating state-level refinancing programs for residents. A North Dakota program implemented by a Republican governor has refinanced more than $125 million in loans so far, providing a break to nearly 3,000 borrowers, in just 8 months.The federal government can help jumpstart these programs by clarifying rules about using tax-exempt bond authority to refinance these loans.

Congress must change incentives for colleges to improve educational outcomes and keep costs down for students by:

• Requiring colleges to share in the risks from student loans. Today, colleges reap all the benefits of taxpayer-backed student loans, while students and taxpayers bear all the risk. Risk-sharing can encourage colleges to take action to prevent defaults, which means keeping costs down and supporting at-risk students. Increased accountability can also be paired with a streamlined set of reporting measures to replace overly burdensome reporting requirements and regulations.
• Implementing a rule against taxpayer waste to make sure colleges spend more on education and less on unrelated expenses. Taxpayers spend about $164 billion a year on college to help support affordable education for our young people3 – not to buy exploding numbers of administrators or elaborate college marketing departments. If colleges want access to that taxpayer money, then they should commit to investing a minimum portion of their federal financial aid revenues in an affordable education for their students.
• Rewarding colleges that keep costs down. A “shared savings” model where colleges get a portion of the savings generated through the more efficient use of federal money will give colleges an incentive to cut costs. For example, when colleges help more students graduate in four years instead of five or six, the students save money on tuition and the government saves money on Pell Grants, work-study, and other aid. If colleges can share in the savings, they will have an added incentive to keep down costs.

Congress must protect student borrowers by closing loopholes, enforcing the rules, and holding government accountable. Critical steps include:

• Penalizing college executives that break the law. At Corinthian Colleges, deceptive practices, mismanagement and the Department of Education’s failure to act led to disaster.Now the college is bankrupt and students are scrambling to start over, but its executives have walked away. Executives at colleges that defraud their students or abuse federal funds should face real penalties.
• Establishing a plan of action to identify, evaluate and punish violations. Navient, one of the nation’s largest student loan servicers, continues to profit from contracts with the Department of Education despite a $100 million settlement with law enforcement for overcharging members of the armed forces.The Department should make public a clear plan for how violations of the student loan rules will be identified, evaluated, and punished. For example, Federal Student Aid should include specific consequences for rule-breaking in its contracts with servicers and debt collectors.
• Closing loopholes to protect veterans and taxpayers. The federal government must strengthen rules to keep institutions from deceiving students and misusing federal funds. For example, it should close legal loopholes that permit for-profit schools to prey on veterans. The “90/10” rule caps for-profit college’s allowable revenue from federal financial aid at 90%, but it excludes military education benefits like the GI bill from the definition of federal aid. Ending this exclusion would eliminate the incentive to deceive veterans and servicemembers to get access to their funds.
• Increasing Department of Education transparency. The Department must be held to the same high standard as the schools and servicers it oversees. Decision-making should be clear, uniform, and consistent. Congress should provide better oversight of the Department’s actions, and should require the agency to make public the detailed data it collects on its own student loan program.
• Implementing external checks on the Department of Education. The student loan complaint system should be moved out of the Department of Education and over to the CFPB, which has independent expertise in this area. Borrowers should have a private right of action against the contractors who administer the federal loan program so students themselves can enforce their rights in court when they are harmed by a contractor and the government fails to act.