Higher Education Accountability: New Horizons

1. Higher Education Accountability: New Horizons Where will transforming expectations lead? Where SHOULD they lead? Controversies and Discussion Elizabeth Eynon-KokrdaEEKLegal, LLC eekokrda@eeklegal.com

2. What IS accountability in 2014? Is it transparency? Is it inputs? (% of students who get grants, net tuition by income level, etc.) Or is it outputs? • Graduation rates • Debt levels • Job placement rates • Graduate earnings • Graduate school enrollment rates • Career outcomes

3. The $150 BILLION Dollar Question • The federal government spends $150 billion dollars each year on student grants and loans • Yet student debt topped $1.2 trillion • The labor market is increasingly globalized and yet: • Most higher education institutions are organized and run the same way they have been for years. They organize schedules, policies, services and curricular pathways around “traditional students” • Student outcomes are about the same – 6 year graduation rates are hovering at about 60% and are significantly lower for minorities and low income students • The percentage of college graduates proficient at interpreting complex texts has declined – it was 40% in 1992; it was 31% in 2003. • Student values have shifted – the value proposition of traditional education is less clear to them • Technology makes it possible for less people to do more • As baby boomers retire, there will be more people leaving the workforce than are joining it.

4. More on the $150 Billion… • The cost of university per student has risen by 5 times the rate of inflation since 1983 • Between 2001 and 2010 the cost of a university education went from 23% of median earnings to 38% • Debt per student has doubled in the last 15 years • 2/3rds of students now take out loans • Non-faculty professional employees per 100 faculty members has nearly doubled since 1976

5. The Argument:Additional Value has not been the Result of Additional Spending • 43% of all grades at 4-year universities are A’s… • “Let’s make this a year of action…” President Obama State of the Union Address • “I’ve got a pen to take executive actions where Congress won’t…” President Obama, Jan 14 White House Summit of college and university leaders

6. Have we been here before? • 1980’s: A Time For Results (NGA) • 1990’s: Student-Right-To-Know Act (disclosure on grad rates and school safety) • 1992: State/Federal joint “state post-secondary review entities” (died in 1994 in the anti-government mood of the time) • 2004 National Commission on Accountability in Higher Ed (no action plan followed; focus on internal self-accountability) • Bush Administration Spellings Commission (2006) – costs are too high, grad rates are too low, and learning outcomes are a mystery • Rejected by NAICU and ACE – snowflakes rationale • Viewed as an anti-accountability gambit: if you are unique you can’t be compared; if you can’t be compared, you can’t be judged. • Obama Administration, Arne Duncan TIME Summit on Higher Education – costs are too high, grad rates are too low and there is too little accountability

7. Reform is coming… but in what form? • “College completion is a good goal…(but) no one has a collective strategy to get there” Chancellor Zimpher, State University of New York • Will private entities driven by profit motive take charge? (K-12 today versus 10 years ago) • Some argue the US News and World Report rankings are already causing this – institutions change their practices and behaviors to boost standing • Arizona State includes rankings-based performance bonuses in the contract of its president • MOOC providers, for-profits like Capella, publishing houses like Pearson, foundations like Gates, in-house industry (Deloitte University)… • Direct government regulation is another option

8. The traditional financial model appears to be weakening * • Most leaders of higher ed believe it is at a tipping point, and that it will soon look nothing like it does today • About one in three colleges is on an unsustainable financial track, per its CFO • Only 27% of campus CFOs express strong confidence in their institution’s financial model *Gallup and Higher Ed survey, 2012

9. Obama Higher Ed Priorities • Reduce costs and debt for students • Protect access for low-income students • Improve value • Inform the public • Targets are being identified by disgruntled employers and student complaints and “trolling” • Information sharing is increasing among various governmental entities

10. Obama Administration Proposal • A new rating system for colleges where colleges are evaluated on various outcomes - including affordability and access. Student aid is linked to these ratings. • Factors up for consideration include student performance indicators and: • % of students receiving Pell Grants • Institution’s average cost • Total scholarships institution awards to students • Average student debt • Post-graduation earnings of graduates • Students who enroll at high-performing colleges would receive larger Pell Grants and more favorable rates on student loans

11. Rationales for Federal Proposal • The market can’t hold schools provide the best education • Accrediting agencies, despite their increased roles, are a process of self-study and peer review (seems likeaccountable to students when there is little or no information about which institutions self-accountability). • they don’t require information that provides a full picture of how well institutions are achieving their mission as it relates to outcomes – historically they have focused on things like financial integrity and faculty governance • Accreditation is a floor, and most institutions are above its minimums, so accreditation is more about compliance • Loss of accreditation, tied to student aid, amounts to a death penalty accreditors are reluctant to impose • State accountability systems have foundered – lots of data but not tied to an agenda; not focused on needs of students but to aggregate economic terms (a focus on financial efficiency such as average credits taught per faculty member, total number of degrees awarded, etc.) Not much on quality of teaching or level of student learning. No “performance funding” being implemented. • The VSA is largely a re-packaging of existing information, not all institutions want to participate and database designs aren’t aligned to permit ready comparisons among institutions. • The DOE’s own “college navigator” website relies on self-reporting and has no comparison function

12. The Student Bill of Rights for Borrowers • H.R. 3892 and S. 1803 • Proposed regulations for servicing private student loans (about 14% of outstanding debt) • Proposed rights and disclosures for borrowers with private student loans • Borrowers permitted to pay most expensive loans first • Contracts requiring arbitration invalidated • Services have civil liability if they violate the “bill of rights” • Proposed rights (similar but not identical) for servicing federal student loans – which is the vast majority of loans • Focus is on disclosure, repayment plans and how payments must be applied to minimize what is owed

13. Protect Student Borrowers Act • S. 1873 - risk sharing • Makes colleges responsible when students can’t keep up with their federal student loans: IHEs with 25% of student body participating in Direct Loan program to remit risk-sharing payments. • Depending upon the percentage of students that default on their loans, colleges could be fined from 5-20% of the amount the student owes. • Colleges could reduce fines by developing “student loan management plans” approved by DOE • For-profits would face the stiffest fines • No fine if 15% or less default • Community colleges and historically black institutions exempt • Admission offices would be barred from rejecting applicants perceived at being at risk of default

14. Other pending legislation of note • S. 114: “Fairness for Struggling Students Act” – private student loans would be like other types of private debt in bankruptcy • S.406 : “Students First Act” – DOE would be required to review all programs where there was serial forebearances or default rate manipulation, where more than 20% or revenue was spent on recruiting/marketing, or where 85% of revenue comes from Title IV aid. • S. 528: “Protecting Financial Aid for Students and Taxpayers Act” – prohibits IHEs from using Title IV funds for advertising, marketing or recruiting • S. 1659: “POST Act of 2013” – changes the 90/10 rule to 85/15 and includes all federal funds in the 85% • S. 1904: “Higher Education Reform and Opportunity Act” – expands state authority to act as accreditors • S. 1969: “College Affordability and Innovation Act of 2014” – waiver from certain Title IV regulations for innovations in outcomes • S. 2033: Amends the Higher Ed Act to allow the DOE to award job training federal Pell Grants

15. NASFAA Study on Reimagining Financial Aid to Improve Outcomes • Focus is on students • Use a Super Pell to incentivize students to enroll in more credit hours • Use a student loan eligibility index to introduce minimal underwriting standards on federal loans “to shield academically-unprepared students from loan indebtedness” • Implement an “automatic income-based repayment plan” for all borrowers • Provide schools with the authority to limit borrowing for groups of students

16. Innovate or Die…Arne Duncan says: • “It’s time to end the buck-passing and blame game, where college leaders blame high schools for sending ill-prepared students, where high school principals blame the elementary schools, where elementary school principals blame the pre-school programs, and preschool teachers blame the parents.” • “We don’t need a Kumbaya moment, where everyone joins hands together and sings…I’m talking about tough-minded partnerships that drive transformational change and deliver a first-in-the-world system of higher education opportunities for all Americans.”

17. Issues for Discussion Time for you to participate, please! • The disconnect between institutions and federal legislation trends and how to close it – is there a fundamental recast of federal financial aid that is due? • Outcome accountability issues: For example, are post-graduate earnings relevant? • If so, when do you take this measurement? • Does outcome accountability favor wealthy institutions? • Do they attract the “best prepared students”? • Do they enroll “well-connected” students • Do their endowments help them make more generous financial aid packages?

18. Issues, cont. • What is best for colleges and students? • Data that permits straight-forward comparisons? • Tying pay to rankings based on criteria like success in helping students learn? • Goals for success in areas like student learning, grad rates, scholarship, research tied to funding incentives, public reporting, etc? Should these goals be ranked against other spending, such as spending on marketing and intercollegiate athletics? • Should IHEs share the risk of student loans, and if so, how? • If higher ed doesn’t become “strongly accountable” will it be able to compete with Medicaid, K-12 education, and public safety so that policy makers continue to fund it, and fund financial aid programs?