Nearly everyone agrees that the federal student-aid system is broken, perhaps irreparably so. The Pell Grant hasn’t kept pace with rising tuition, students are saddled with too much debt, and many states have shifted the burden for financing colleges onto the federal government and families. At the same time, the system’s reliance on vouchers has made it hard for lawmakers to hold colleges accountable without hurting students in the process.
So what if instead of reforming the system, we blew it up? That’s the premise behind a new paper by the think tank New America, appropriately titled “Starting From Scratch.” It proposes scrapping the decades-old student-aid system and replacing it with formula grants to the states.
To qualify for the grants, states would have to maintain their spending on higher education and match at least 25 percent of the federal aid. Colleges seeking a share of the state grants would have to enroll at least 25 percent low-income students, not charge students more than their expected family contribution, and meet new accountability measures.
Students could attend any participating college and pay only their expected family contribution. There would be no federal loans or federal tax credits, though students with higher out-of-pocket costs could still take out private loans.
The think tank’s plan wouldn’t come cheap: The paper’s authors estimate that it would cost $38.6 billion a year on top of what the federal government now spends on student aid. But as they pointed out to reporters on Wednesday, that’s roughly in line with the cost of the presidential candidate Hillary Clinton’s plan to make college debt-free for some students.
“Plans that keep the current system in place and tinker with it aren’t the solution,” said Kevin Carey, director of the education-policy program at New America. With the looming election, and the pending reauthorization of the Higher Education Act, he said, “the time is right” for a more radical restructuring.
