The Lumina Foundation has made college attainment its primary focus. One major impediment to its “big goal” of increasing “the proportion of Americans with high-quality college degrees, certificates, or other credentials to 60 percent by 2025" is the cost of college.
That’s how Jamie P. Merisotis, the foundation’s president and chief executive officer, teed up the “Lumina Ideas Summit” on new models of student financial support here on Monday.
The summit—and 15 papers released in conjunction with it—focused on three issues: what it means for college to be affordable, student-loan repayment policies, and the role of the states.
Lumina is not the first organization to round up proposals for fixing the financial-aid system. The Bill & Melinda Gates Foundation’s “Reimagining Aid Design and Delivery” project, now in its second phase, commissioned papers considering how aid could be used as a “lever to increase student success.” Andrew P. Kelly, director of the Center on Higher Education Reform at the American Enterprise Institute, and Sara Goldrick-Rab, an associate professor of educational-policy studies and sociology at the University of Wisconsin at Madison, held an event last summer to discuss a set of research papers on financial-aid innovations that will form the core of their forthcoming book. Back in 2008, the College Board released a set of recommendations for improving federal financial aid.
Lumina’s goal for the summit and papers was to “encourage big thinking,” Mr. Merisotis said. The foundation plans to advocate for turning at least some of the ideas raised in the papers into policy, he said.
‘Affordable,’ not ‘Cheap’
The summit began with a panel discussion of college affordability, and the challenge of defining exactly what that means.
An affordable education is not necessarily the same thing as a cheap one, said Sandy Baum, a research professor at George Washington University and one of the panelists. If going to a particular college doesn’t improve a student’s life, she said, then “the low price is not enough.” College affordability is multifaceted, Ms. Baum said, and the paper she co-wrote offers a number of ways to think about it.
For students, the idea of affordability often comes down to a “gut feeling,” said Robert M. Shireman, executive director of California Competes. After all, prospective students must weigh the risks and rewards of each college option. California Competes worked with College Abacus, a net-price calculator aggregator, to design a “college considerator” to help prospective students think through those trade-offs. The tool is designed to show the break-even age at which “the benefits of college outweigh the cumulative costs” for each option, he said.
Affordability isn’t just a question of what happens to students as they begin college, said Barbara Gault, vice president and executive director of the Institute for Women’s Policy Research. Students’ return on investment hinges on their major, and women and members of minority groups often choose less lucrative fields. Colleges, she said, should encourage these students to pursue higher-paying options.
A second panel, addressing what a 21st-century student-aid system should be like, discussed two papers on the role of states and one on remaking the student-loan system. But the paper that got the most attention was one co-written by Ms. Goldrick-Rab that argues for redirecting existing resources to make the first two years of college at any public institution free for all eligible students.
Financial aid, Ms. Goldrick-Rab said, is a “tiny bandage on a gushing wound of rising prices.”
The current system is not only not working, but “ruining the country,” Ms. Goldrick-Rab said. “It’s time for a change.”
And even at a meeting when many of the recommendations seemed unlikely to materialize any day soon, her solution stood out as especially outside-the-box.
“I thought David and I had an ambitious paper,” remarked panelist Brian T. Prescott of the Western Interstate Commission for Higher Education, “but then I read Sara’s.”
Improving Borrowers’ Options
The summit then turned to the question of loans. Income-based repayment plans have received a lot of attention lately, and some experts believe that if more borrowers were in them it would vastly reduce the problem of loan default. A good number of the papers in the Gates Foundation’s project recommended making such programs the standard or even the only repayment option.
One member of the third panel, Brent Evans, an assistant professor of higher education and public policy at Vanderbilt University, made the case for such a shift, saying behavioral economics research suggests that it would encourage more borrowers to enroll in income-based plans. Participation in such plans remains low, despite the Education Department’s recent outreach efforts.
But not all of the panelists thought that was the right approach. For one thing, there simply isn’t much evidence about whether income-based repayment plans are effective, or even clarity about what they are meant to achieve, said Jacob P.K. Gross, an assistant professor of higher education at the University of Louisville.
Lauren Asher, president of the Institute for College Access & Success, argued that income-based repayment isn’t the best choice for every borrower, since it could lead them to make more total payments and pay a larger sum. Besides, she said, if all borrowers were in income-based repayment plans, it would change students’ perceptions of affordability and colleges would not be held accountable for rising prices. However, she did argue for automatically enrolling severely delinquent borrowers in income-based repayment.
Beth Akers, a fellow at the Brookings Institution, called for eliminating the program’s loan-forgiveness component, arguing that it’s unnecessary and encourages overborrowing. Her research for the Lumina Foundation found that loan forgiveness accounts for half of the programs’ costs, while lower monthly payments—the “core mission” of the programs—accounts for only a quarter to a third.
The most controversial idea for remaking loan repayment came from Mr. Evans, who suggested eliminating loans in favor of arrangements in which students commit a portion of their future earnings to repaying the government or a private investor for their education. The idea, which is being tested by the state of Oregon and a handful of companies, could help combat loan aversion among low-income students, Mr. Evans argued.
But Ms. Akers warned such an approach could make students less sensitive to price, and Ms. Asher worried it could encourage states to shift additional costs onto students.
A Call for Cooperation
A fourth panel focused on building partnerships to push for policy change. Alisa Hicklin Fryar, an associate professor of political science at the University of Oklahoma, suggested that policy makers “empower and engage” regents, trustees, and state governing and coordinating bodies, and forge “meaningful coalitions” with college leaders. Lawmakers, she argued, “know very little about how institutional leaders perceive policy changes.”
Russ Deaton, associate executive director for finance and administration for the Tennessee Higher Education Commission, suggested that the federal government grant states waivers to craft “data-driven, state-specific” Pell Grant distribution schedules. His research into Tennessee’s community-college system found that increasing aid to low- and middle-income students, while reducing it slightly for the poorest students, would make a two-year degree more affordable for significant numbers of community college students.
Brad Hershbein, an economist with the W.E. Upjohn Institute for Employment Research, called on the federal government to work with school districts to provide students with earlier information about net prices, debt burdens, and potential earnings.
“Students need to know how much college is going to cost them, and they need to know early,” he said, arguing that sticker prices can scare students away from college.
But David Bergeron, a longtime Education Department official who is now at the Center for American Progress, was skeptical that local educational agencies would cooperate in the effort. During a question-and-answer period, he told Mr. Hershbein that the department tried to work with local districts to roll out its College Scorecard, and “no one was interested.”
Mr. Hershbein acknowledged that many school districts are feeling “overburdened” already, but said his proposal would require “very little effort” on their part. His report suggests a centralized database and website where schools could download a net-price information sheet to send to students, and where students could find information on projected earnings and repayment estimates.
Zakiya Smith, strategy director for the Lumina Foundation, closed out the event with a promise to “continue to engage in all fronts in pushing these ideas forward.”
“Not all the ideas,” she added quickly, “but the concepts.”
