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Coverage of legislation and regulatory activity that affects higher education

NACUBO Responds to Senate's Accountability Proposals

In preparation for the upcoming reauthorization of the Higher Education Act (HEA), Sen. Lamar Alexander (R-TN), chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP), recently asked for public input in response to three proposals to strengthen federal accountability measures for institutions of higher education.

The committee released three white papers outlining its concerns and offered a number of provocative policy ideas.

  • Risk sharing or "skin-in-the-game." One white paper focuses on realigning incentives so that colleges and universities have a "stronger vested interest and more responsibility in reducing excessive student borrowing." Proposed strategies include requiring institutions to assume a liability based on some factor related to former students' repayment rates, to guarantee a percentage of their students' federal loans, or to pay yearly premiums into an insurance fund.

In addition to joining a response prepared by the American Council on Education (ACE), and endorsed by 26 higher education associations, NACUBO submitted supplemental observations. These comments, based on an accounting, financial reporting, and auditing perspective, relate to two specific components of the proposal: repayment of federal student loans and cost structure.

On a plan to require colleges and universities to assume a liability based on some factor related to their former students' repayment of federal student loans, NACUBO pointed out: "As presented in the white paper, recording liabilities for assets (loans) that institutions do not own or make credit decisions on will result in unrealized losses that will (1) deflate unrestricted net assets and (2) negatively affect key balance sheet ratios calculated by analysts, investors, creditors, and the Department of Education."

Additionally, as noted in ACE's response, NACUBO stressed the social and financial unintended consequences, stating, "Institutions would be motivated under this proposal to control their financial destiny, and as such, may accept students with lower direct lending amounts ... . Such decisions will limit access to many higher education institutions for deserving students with financial needs."

  • Higher education accreditation. Another committee white paper questions whether the accreditation system, and the federal government's reliance on accreditation to determine eligibility for federal student aid, should be overhauled—suggesting the possibility that the federal government focus more on outcomes rather than inputs, and inquiring as to whether the current system stifles innovation.

The Obama administration is planning to release its new college rating system, known as the Postsecondary Institution Ratings System, later this year. NACUBO, at that time, will likely weigh in on how the federal government can best use, and streamline, the information sources currently available.

NACUBO, in a response prepared by ACE, together with 28 other higher education associations and accrediting bodies, argues that there is a reason for some gatekeeping, but stated that it is not opposed to more innovation and experimentation in this area.

The letter, however, stands firm on the role of states. "We strongly oppose giving states the authority to determine institutional eligibility for federal student aid, for several reasons," the groups assert. "First, it is not clear what problem this would solve. The reason for giving state governments this authority is unclear, and proponents of the idea have not made a compelling case that state governments need such authority to do things they cannot do already under state law."

They also note, "not only are many states failing to comply with their responsibilities under the HEA, the vast majority has flunked their most basic higher education role by slashing funding for public higher education over the last 20 years. We do not believe states that have consistently chosen to reduce financial support for their institutions should be given the chance to oversee those institutions for the purposes of federal student aid."

  • Data transparency and consumer information. The committee also identified goals to ensure public access to "accurate, comparable data" and ensure "purposeful and consumer friendly" information for students.

A third white paper suggests restricting data collections and disclosures to those related to student financing, success, or safety, and instead allow third-party organizations to continue voluntary data collections in other areas. The paper identifies potential solutions to improve the value of information, including that of allowing the Department of Education to collaborate with other agencies to link to their databases.

While NACUBO would concur that postsecondary data should fulfill certain needs, such as consumer information for students and parents, policy analysis and research, and institutional accountability for receipt of public funds, the association withheld comment. The Obama administration is planning to release its new college rating system, known as the Postsecondary Institution Ratings System (PIRS), later this year. NACUBO, at that time, will likely weigh in on how the federal government can best use, and streamline, the information sources currently available.

In addition to a number of different data sets currently in existence, the federal government also maintains a number of postsecondary data collections—College Navigator, White House College Scorecard, Know Before You Owe/Financial Aid Shopping Sheet, and the College Affordability and Transparency Center.

Sen. Alexander has also made FAFSA (Free Application for Federal Student Aid) simplification and deregulation top priorities for his efforts to pass a full-scale reauthorization of the Higher Education Act.

The Senate continues to hold hearings exploring higher education concerns. The current legislation expires on Sept. 30, 2015. While possible, it is highly unlikely that Congress will come to agreement on a comprehensive reauthorization by that date. Many in Washington expect a one-year extension, with consideration of these and other proposals to extend, at the very least, into 2016.

NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553, @lizclarknacubo