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NACUBO Responds to Senate Accountability Proposals

May 18, 2015

In preparation for the reauthorization of the Higher Education Act (HEA), Sen. Lamar Alexander (R-TN), chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP), asked for public input on three white papers that outline the committee's concerns and offer a number provocative policy ideas.

Risk-sharing ("skin-in-the-game"). The white paper titled Repayment of Federal Student Loans and Cost Structure 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, guarantee a percentage of their students' federal loans or pay yearly premiums into an insurance fund.

In addition to joining a response prepared by the American Council on Education (ACE), and endorsed by 25 other higher education associations, NACUBO submitted its own observations on two ideas presented in the white paper with an accounting, financial reporting and auditing perspective.

NACUBO points out, "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."

NACUBO stresses, "As students graduate, the repayment of student loans becomes a more multi-faceted responsibility." The letter continues, "We urge you to consider additional stakeholders—including communities and employers, not just colleges and universities—as partners in meeting the committee's goal of realigning federal incentives to reduce borrowing and promote completion. Just as investment managers mitigate risk by diversifying investment portfolios, are there federal policy mechanisms that can incentivize other parties to share the responsibility of student-to-employment success?"

Higher education accreditation. Another committee white paper questions whether to overhaul the accreditation system and the federal government's reliance on accreditation to determine eligibility for federal student aid.

NACUBO, joining with 28 other higher education associations and accrediting bodies in a response prepared by ACE, notes there is a reason to use caution when reviewing programs that could place the academic integrity of institutions in jeopardy, but it is not opposed to innovation and experimentation.

The letter, however, firmly opposes giving states the authority to determine institutional eligibility for federal student aid. "First, it is not clear what problem this would solve," the groups assert. "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."

Data transparency and consumer information. In a third white paper, the committee identifies goals to ensure public access to "accurate, comparable data" and ensure "purposeful and consumer friendly" information for students.

NACUBO withheld comment on this topic. The expected release of the administration's college ratings plan later this year will create an opportunity to respond in greater depth on the federal role in data transparency and consumer information.

The Senate recently convened a hearing exploring "The Role of Consumer Information in College Choice." NACUBO anticipates the committee will soon announce hearings on accreditation and risk-sharing.

The current Higher Education Act authorization expires on September 30, 2015. It appears highly unlikely that Congress will agree on a comprehensive reauthorization by that date. Many in Washington expect a one-year extension, with consideration of other proposal to extend into 2016.

Contact

Liz Clark
Director, Federal Affairs
202.861.2553
E-mail