5 Years On, Renewed Higher-Ed Act Has Lost Its Luster

Five years ago this week, President George W. Bush signed into law legislation to reauthorize the Higher Education Act, the major law governing federal student aid.

The 1,158-page bill, which was itself five years in the making, was expected to leave a lasting imprint on American higher education, holding colleges and states accountable for skyrocketing tuition and reining in abuses in the student-loan system. It was supposed to simplify the process of applying for federal student aid and help students make better borrowing and college-going decisions, courtesy of a shorter application form and a slew of new disclosures.

In some concrete ways, the 2008 reauthorization has achieved those goals. Applying for student aid is easier than it used to be, and consumers have access to more information about college costs and outcomes than ever before. States are being forced to justify cuts in higher-education spending, and institutions with “preferred-lender lists” are being asked to explain their choices.

But the bill has failed in its larger goals of making college more accountable and more affordable. Since 2008, tuition at four-year public colleges has increased significantly, as states have slashed their higher-education budgets. At the same time, public confidence in the nation’s colleges has declined, with lawmakers and families increasingly questioning the value of a college degree.

Meanwhile, major changes in student-aid policy are being made outside of reauthorization, in spending bills and federal rules. Since the bill passed, the Education Department has defined a “credit hour,” expanded state oversight over distance education, and sought to end aid to colleges that fail to prepare students for “gainful employment"—all through regulation. Congress has tightened eligibility for federal student aid, undoing some of the 2008 expansions, and changed how student-loan interest rates are set.

With so much student-aid policy being made outside reauthorization, the act’s renewal is less momentous than it once was. By the time lawmakers get around to it, “all Congress is left with is to regulate and crack down on colleges or tinker around the margins,” says Becky H. Timmons, assistant vice president for government relations at the American Council on Education.

As Congress prepares for the next renewal of the Higher Education Act, due in 2014, many of the changes in the 2008 reauthorization now seem less transformative than trivial. For colleges and their accreditors, the law’s chief legacy may be greater federal oversight and a mountain of new reporting requirements.

“It was a lot of words, and a lot of ink, but with very little accomplished,” says David Bergeron, a 35-year veteran of the Education Department who left this year. “But it felt really significant at the time.”

Here’s a look at what the bill has accomplished in three key areas: affordability, accountability, and transparency.

Affordability

The 2008 reauthorization sought to streamline the Free Application for Federal Student Aid, make it easier for students to compare colleges based on price, and prevent unnecessary private-loan borrowing.

It also aimed to eliminate conflicts of interest in the student-loan program, ensuring that institutions recommend lenders that offer the best deals for borrowers, not those that provide kickbacks to the colleges.

Since it took effect, the Free Application for Federal Student Aid, or Fafsa, has gained four questions, although “skip logic” technology lets students bypass some items, and the IRS fills in some of the rest.

Colleges have developed calculators that estimate net price, and the Education Department has updated its College Navigator site to include net-price data and a wealth of additional consumer information. Hundreds of institutions have adopted a model financial-aid award letter developed by the department.

Private lenders now provide students with various disclosures about the terms and conditions of their loans, and require students to self-certify their cost of attendance. Preferred-lender lists, the source of so much controversy in the last reauthorization, have become much less common.

But it’s not clear that the new information is getting through to students, or that it’s influencing their behavior. While surveys suggest that cost calculators are catching on, they also show that roughly half of traditional-age students still use sticker price rather than net price to make decisions about where to apply. Some colleges’ calculators are difficult to find, and to use, and a lack of standardization makes cost comparisons tricky, according to the Institute for College Access & Success.

The Education Department’s financial-aid “shopping sheet” has made it easier for students to compare offers from the 770 colleges that have adopted it, but student-aid lobbyists have resisted efforts to make it mandatory, saying they need the flexibility to tailor award letters to their student populations. As a result, many students still find it difficult to evaluate financial-aid offers side by side.

Meanwhile, the department is providing little oversight of colleges’ preferred-lender lists, ignoring the bill’s requirement that it collect annual reports from colleges that maintain the lists. While there’s no evidence that students have been harmed by the lapse, the lack of scrutiny has left borrowers vulnerable to bad advice.

Accountability

In an effort to educate consumers and pressure colleges to control costs, the 2008 reauthorization created a series of “watch lists” that were to single out the most- and least-expensive institutions, by sector.

At the same time, it threatened to punish states that cut their higher-education budgets, tying a portion of federal aid to a “maintenance of effort” requirement.

The reauthorization sought to make accreditation more transparent and more accountable to Congress, and set new standards for the oversight of distance education and credit-transfer policies. But it steered clear of academic affairs, explicitly barring the Education Department from dictating how accreditors assess an institution’s success in measuring academic achievement.

Five years later, the Education Department has published three rounds of “cost lists,” publicly shaming the high-cost colleges and providing news-release fodder to the low-cost ones. In 2012 it cut off $21.6-million in aid to eight states for failing to maintain consistent spending on higher education.

But the penalties appear to be having little effect on colleges’ pricing decisions or on states’ spending. From 2008 to 2013, state fiscal support for higher education fell by 10.8 percent, according to the annual Grapevine reports, produced by the Center for the Study of Education Policy, while tuition and fees at public four-year colleges have shot up 27 percent, according to the College Board.

The net-price cost lists have limited usefulness for students, too, since they look only at first-time, full-time freshmen who received grant or scholarship aid.

Accreditors, meanwhile, now publish their decisions online. They ensure that colleges are verifying the identity of online learners and confirm that they have disclosed their credit-transfer policies. The federal committee that oversees accreditors has been restructured to include 12 members appointed by Congress and six named by the education secretary, rather than 15 appointed by the secretary.

Yet lawmakers’ doubts about accreditation have only grown, along with calls for accreditors to do more to promote innovation and ensure quality in American higher education. Many in Washington want to “fix” accreditation, and some, including President Obama, have even called for the creation of a federal system.

“There’s a strong bipartisan sense out there that accreditation is broken,” says Judith S. Eaton, president of the Council on Higher Education Accreditation. “We’re in a rough patch.”

Transparency

The 2008 reauthorization also aimed to make higher education more open, largely through hundreds of reporting requirements covering subjects as varied as campus crime to textbooks.

Yet the bill blocked the Education Department from developing a tool that would shine more light on student outcomes than all the disclosures combined—a unit-record system. Lawmakers feared that such a system, which might track students from kindergarten into the work force, would lead to a loss of privacy.

Five years later, colleges complain that the cost of complying with the new rules is undermining their efforts to hold down tuition. They are urging Congress to streamline the rules in the next reauthorization of the act, even as they acknowledge that it’s unlikely lawmakers will do so.

Meanwhile, the federal government has poured more than $650-million into state-level unit-record databases since 2007, according to the Data Quality Campaign. While some of the databases stop at high-school graduation, and some exclude private colleges, their proliferation is a sign that the action has simply shifted to the states. Some supporters hope to eventually string the systems together into a de facto federal database, though they concede it would be technically difficult.

Congress isn’t likely to lift the ban in the next reauthorization, but it will almost certainly require colleges to disclose more information about graduate employment and wages. For-profit colleges, which have felt unfairly singled out by the Education Department’s “gainful employment” rule, hope that lawmakers will apply the new requirements to all colleges.

“There’s no question it will be all about transparency,” says Steve Gunderson, president of the Association of Private Sector Colleges and Universities. “The focus is going to be on outcomes and accountability, and it’s going to be for everyone.”

Many Programs, Few Financed

The 2008 reauthorization of the Higher Education Act created more than 50 grant and loan-forgiveness programs, but only about a quarter of them have been financed. The following is a sample of topics to which Congress has, and has not, give a high priority.