Research shows that current federal higher education policy neither promotes student success nor encourages colleges to maintain affordable tuition. In a testimony at 10:00am before the Senate Committee on Health, Education, Labor, and Pensions, Director of the Center on Higher Education Reform Andrew Kelly explains how risk-sharing can help alleviate these problems:
“…existing policies have given rise to a system where colleges that effectively originate student loans bear little of the risk if borrowers are then unable to pay those loans back. This creates little incentive for poorly performing colleges to keep tuition low, enroll students who are likely to be successful, or change institutional practice so as to maximize student success.
A risk-sharing policy would change these incentives for all colleges. Risk-sharing here refers to a policy that would require all colleges who participate in the federal loan program to retain some portion of the risk that their students will be unable to repay their loans…The intent of such a policy is to give all colleges—not just those with the highest default rates—stronger incentive to consider changes to institutional practice, resource allocation, and tuition pricing that would lower the probability that borrowers experience problems in repaying their loans. Risk-sharing is thus designed to change institutional behavior by holding colleges accountable for student outcomes, not dictating specific changes from Washington. Colleges would maintain the flexibility to figure out how best to accomplish student success goals.”
Read his full testimony, “Exploring Institutional Risk-sharing.”
To arrange an interview with Andrew Kelly, or another AEI scholar, please contact AEI media services at mediaservices@aei.org or 202.862.5829.
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