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Reauthorizing the Higher Education Act: Issues and Options
The goal of this report is to contribute in three ways to the quality and
success of the Higher Education Act (HEA) reauthorization. First, the report
provides information about the HEA, its programs, and American higher
education in general. Second, it offers some historical context for
understanding the origins and purposes of the programs created by the HEA.
Third, and perhaps most important, it suggests an agenda of major policy
issues for the HEA reauthorization and options for dealing with these
KEY POINTS FROM THE REPORT
Basic Realities of American Higher Education
- Fifteen million students are enrolled in higher education.
- 48% of undergraduate students are "dependent" on their parents.
- All graduate students are, by legislative definition, "independent" of
- 75% of undergraduate students are "nontraditional," meaning that they
have one or more of the following characteristics: not a high school
graduate; did not enroll in an institution of higher education directly
after high school; are attending part-time; are working full-time; or are
financially independent, married, or have dependents.
- 25% of undergraduate students are "traditional," students, meaning
that they enrolled in an institution of higher education directly after high
school; are attending full-time; are working part-time or not at all; and
are financially dependent and unmarried without dependents.
- 10% of undergraduate students are "typical" students, i.e., they have
all the characteristics of traditional students and also attend a four-year
college, and reside on campus.
- 76% of students attend public institutions of higher education.
- 60% of first-year undergraduate students attend either a community
college (52%) or a proprietary school (8%).
- 9% of first-year undergraduate students report having a disability,
most commonly a learning disability.
- Nearly 40% of all students receive financial aid from one or more of
the federal programs.
- During their undergraduate years more than 60% of students attend more
than one institution of higher education.
- If current trends continue the nation will face a deficit of
approximately 12 million workers with at least some college education by
- More than 40% of faculty at nonprofit institutions of higher education
are part-time employees.
Academic Barriers to Higher Education
- Inadequate academic preparation is one of the significant barriers
to access to higher education. The principal federal efforts to improve the
academic performance of K-12 students are contained in the Elementary and
Secondary Act of 1965, the 2001 reauthorization of which is titled the No
Child Left Behind Act. The HEA includes several programs aimed at helping
students overcome academic barriers to postsecondary access.
- The main thrust of the HEA, with respect to overcoming academic
barriers to access to higher education, is found in the programs in Title II
that focus on improving teacher training and the quality of the teaching
- Research has shown a strong link between teachers' knowledge and
skills, and students' academic gains. Given the powerful effect that
qualified teachers have on student achievement, the teacher workforce has
the potential to exert a strong influence on reducing the current
achievement gaps. The No Child Left Behind Act calls for a highly qualified
teacher to be in every K-12 classroom by the 2005-06 academic year.
- Shortages in certain subject areas, such as mathematics and science,
are particularly critical. Teachers trained to educate students with
disabilities and LEP students, two very rapidly growing groups, are also in
especially short supply.
Financial Barriers to Higher Education Access and Persistence
- Grants are a more effective means of encouraging students to
enroll and persist in postsecondary education than other types of aid, such
as loans and work. Grant aid directly reduces students' uncertainty and
financial risk. Many low-income students do not have experience with
borrowing or do not have confidence that they will be able to repay a
- Most types of financial aid may enable access, but grants are
particularly well suited to promoting other goals of financial aid,
specifically, persistence for low-income students.
- There are three types of grants offered as a result of the HEA. They
are, the Pell Grant (originally named the Basic Educational Opportunity
Grant), the Supplemental Educational Opportunity Grant (SEOG, originally
called the Educational Opportunity Grant, or EOG), and the Leveraging
Educational Assistance Partnership (LEAP, first established as the State
Student Incentive Grant program).
- The SEOG is provided as a supplement to the Pell Grant for
undergraduate students and is dispensed through participating higher
education institutions. Institutions must match the federal SEOG dollars
they receive by at least one-third of the federal contribution.
- The goal of the LEAP program is to encourage states to continue
expanding state grant and work-study programs with a focus on community
service programs. States must match federal LEAP funds dollar for dollar,
except if the contribution amount goes above $30 million then the match is a
- Loan programs offered under the HEA are the Federal Family Educational
Loan Program (FFELP, originally the Guaranteed Student Loan Program), the
Direct Loan Program, and the Federal Perkins Loan Program. In contrast to
the HEA grant programs, students receive many more dollars in loan programs.
Justification for continued loan programs include individual personal and
public benefits received from attendance in higher education programs.
- Initially, the FFELP was provided as an alternative to tax-credit
proposals and targeted the needs of middle-income students. Students who
demonstrated need would receive subsidized loans (interest is paid while
students are in school) and students who did not demonstrate need could
receive unsubsidized loans (interests starts accruing immediately at the
receipt of loan).
- The Direct Loan program was initiated as a demonstration program under
the HEA in 1992, and in this program the federal government provides the
loan capital to institutions. Direct Loans can offer graduated and income
sensitive repayment options, whereas, the FFELP does not. Because of this
option, Clinton (during his administration), proposed doing away with the
FFELP loans, but the political compromise was to allow institutions to
choose which programs their students would participate in. Therefore,
institutions can participate in either one of or both the FFELP and the
Direct Loan program
- The Perkins loan is the smallest of the HEA loan programs and
originated under the National Defense Education Act in 1958 as the National
Defense Student Loan, NDSL. Similar to the Direct Loan, capital for the
Perkins Loan is supplied by the federal government. Perkins Loans are
awarded on the discretion of the campus financial aid officers and are
awarded solely on the basis of need.
- The report states that the goal of the loans offered under the HEA are
no longer achieving their original purpose and are inadequate. Three
reasons cited for this claim are:
- Annual loan limits for first-year borrowers cover only
a diminishing portion of higher education prices.
- The level of unmet need has grown steadily in recent years and
reached unprecedented levels.
- There has been an immense growth in student borrowing from sources
outside of the HEA programs.
- The report cites student credit card spending demographics to support
the assertion that students are borrowing with a credit card to fund their
higher education. Specifically, more than 80% of college students own
credit cards and of this total 20% used them for tuition and fees and 57%
for books and supplies. The report suggests that students may be using their
credit cards because annual loan limits may not be meeting their cost of
attendance needs, and/or more familiarity with credit cards than with the
loan programs. Unfortunately, the credit card borrower rates are much less
favorable than the rates under the HEA loan programs.
- The awarding of student financial aid through the HEA programs is
based predominantly on the nation's tax laws since they set many of the
determining requirements for eligibility of aid. When Congress reviews the
HEA during the reauthorization process it also reviews current education
specific tax laws and their interactions with federal financial aid
- Between 1997 and 2001, Congress enacted several tax provisions that
would help pay for a students' higher education cost of attendance by
creating incentives to save for college, rules that help in applying
payments for tuition, and tax treatments of student loans. Those tax
provisions established by Congress are: HOPE and Lifetime Learning Tax
Credits, Coverdell Education Savings Accounts, Above-the-Line Tuition
Deduction, Tax-Free Employer-Provided Educational Benefits, Student Loan
Interests Deduction, Section 529 Savings Plans, and Penalty Free IRA
The Federal Role in Accountability for Quality in Higher Education
- The DOE's role in quality assurance has expanded over the years,
from a historic interest in program administration and financial integrity
in the student aid programs, to an interest in broader questions of
institutional performance and academic program quality.
- Currently, the DOE's role covers promoting market-based strategies,
providing direct regulation of institutions and students, leveraging other
nonfederal forms of quality control, and conducting research and collecting
data. Specific responsibilities for each of these areas can be found in the
The U.S. Department of Education's Role in Quality Assurance of
| Protection and Promotion of Market Strategies
|| Direct Regulation of Standards or Terms of Eligibility
|| Leveraging other Processes for Quality Assurance
|| Data Collection and Research|
| Giving market power to student-consumers through financial aid
|| Financial standards for institutions in the student aid programs
|| Regulation of accreditation
|| Common definition of terms|
| Providing consumer information to students and employers
|| Administrative standards for institutions in the aid programs
|| Requirements for state licensure
| Ensuring consumer choice among diverse types of institutions
|| Student eligibility for aid programs
|| Facilitation of linkages between K-12 and higher education
||Raising of policy issues through research via PEDAR and other
| Facilitating transfer of credit without mandating terms of
|| Program eligibility for aid
|| Performance standards for teacher education
|| Facilitation of state and institutional accountability systems through
public reports using comparable measure|
| Mandating public information such as through Student Right to Know
ADDITIONAL COMMENTS/OPTIONS FOR CHANGE
- The report offers possible suggestions for restructuring the Pell
Grant, SEOG, and LEAP grant.
- With respect to the Pell Grant, the report reviews the pros and cons
of front-loading the grant. The idea of front-loading involves increasing
the amount of the Pell Grant award a student would receive in the first few
years. Proponents of front-loading believe it will reduce the number of
loans students would have to take during this time, subsequently, increasing
persistence rates for low-income students. Further, proponents of
front-loading suggest that after two years of successful persistence in
college, low-income students might feel more confident in taking out loans
and procuring debt. Critics of the front-loading recommendation believe
that because more students drop out in the earlier years of college, the
increased grant awards could possibly be wasted and/or encourage students to
attend shorter degree granting programs.
- An option presented for restructuring the SEOG is to change the
allocation formula, which some critics say is outdated. Other possibilities
for restructuring the grants are to change the nature of the relationships
that exists between federal, state, and institutions of higher education,
such as, rewards for enhancing LEAP, matching state funds to specifically
supplement the Pell Grant, and reward programs for states that focus more in
meeting the needs of low-income students, and overall changing of the Pell
Grant structure with a formula grant that awards funds to the state to then
distribute to the more needy students.
- One of the options for changes to the HEA loan programs was to
increase the loan limits, particularly, for first year students and as a
result decrease the need to rely on other borrowing options (e.g., credit
cards) with less favorable loan rates.
- The report also suggests some options for making loan repayments less
burdensome. A few of the options recommended include, increase grant
assistance, controlling the rate of increase in higher education prices,
decreasing interest rates on loans, making it easier for others to repay
loans (e.g., employers), and restructuring deferment of repayment options.
- The report reviews several recommendations for policy interventions in
rising college costs. One recommendation is to impose direct federal
regulations on costs or prices. Advocates of this option believe this would
allow the federal government to mandate increases in various university
costs such as faculty salaries. Critics of this option believe that these
controls would not work for the following reasons:
- The increased involvement of federal government will
cause conflict between the federal and state roles.
- The controls will not work because of the complexity of pricing
decisions and the large number of factors involved.
- Potential effects on access and institutional quality may be
detrimental by limiting the number of spaces for enrollment at
- Potential effects on students' choices of
- Included in the DOE's quality assurance goals for the HEA
reauthorization are, the improvement of the quality of postsecondary
education, greater emphasis on achieving results, improved student
achievement, and ensuring accountability for taxpayer funds. Overall, this
suggests an increased agenda for greater accountability for institutions.
One recommendation was to direct regulation of institutional and student
eligibility for financial aid by linking eligibility to measures of
retention, graduation, and time-to-degree surrogates. The report states
that this would cause a fundamental shift in the role of the DOE from one
that was predominantly focused on access to one that bases funding on
institutional performance. Critics of this option believe that this would
benefit institutions that have more selective admissions policies. Other
recommendations suggested are:
- Leveraging standards through accreditation.
- Differentiating standards for accountability between public, private
nonprofit, and proprietary sectors.
- Leveraging market strategies to enhance accountability by increasing
public information about student learning.
- Increasing quality through expanded competition in higher education.
(e.g., restrictions of distance learning could be removed).
- Setting federal standards for quality by removing accreditation from
the triad and defining degree standards in the statute.
Wolanin, T. R. (2003, March). Reauthorizing the higher education act:
Issues and options. Washington, DC: The Institute for Higher
Submitted by R.M. Johnson, May 2004. This is a report summary and
excerpts are quoted directly from the text.
Iowa State was the first chartered land-grant institution.