Jon Fansmith: Hello, welcome to dotEDU, the higher education policy podcast from the American Council on Education. I'm your host, Jon Fansmith, in government relations here at ACE, and I am joined by my two highly esteemed colleagues, Sarah Spreitzer and Mushtaq Gunja today. Hi guys.
Sarah Spreitzer: Hey.
Mushtaq Gunja: Hi Jon. Hi Sarah.
Jon Fansmith: We are going to be talking with Beth Akers, who is a resident scholar at the American Enterprise Institute a little bit later and for people who have not heard her speak and frankly if you're following higher ed policy and you have yet to hear Beth Akers speak on a subject, I am shocked and disappointed but somebody who very wonderfully puts a lot of big issues into very straightforward terms and I think it will be a great conversation but before we get to Beth, things are happening, right? Things are always happening. Too many things are happening in Washington in higher ed policy but maybe Mushtaq I'll toss it to you first, what should people be thinking about right now as we record this?
Mushtaq Gunja: Well one thing I'm tracking actually isn't happening exactly in Washington but it certainly concerns sort of elections in general. So one thing that we have seen really since January is that legislatures around the country are re-examining their voting systems and one thing that has been troubling to ACE, to me is sort of this push by some legislators to make it harder for students to vote. We've seen this in a few states but just yesterday, I think it was yesterday afternoon, we're recording this on a Tuesday, on Monday afternoon, the Republican governor in Montana signed a voting rights law into effect that takes away the ability of students to be able to use their college IDs as an acceptable form of voter ID in Montana. For 20 years, students in Montana have been able to use their college ID as an acceptable form of voter identification and for some reason, the legislature has taken away that ability for future elections. This is a trend that we are seeing across the country. New Hampshire has been trying to make it harder for students to vote for quite some time and ACE has been worried about it and we organized a letter last week with a whole set of other organizations, or a statement rather, about this trend and I think it is something that we are definitely following and want to sort of shed as much light on the topic as we can because it's a real problem.
Jon Fansmith: Yeah, and I'm going to hazard a guess here that Montana has not had any documented instances of students illegally voting using their identification in the last 20 years?
Mushtaq Gunja: Not that I know of, and certainly not in numbers that probably justify making it so much harder for students to vote. I mean as it is, we're trying to trying to get our voter participation rates up for adults in their early twenties, early thirties and so doing things to make it harder for our citizens to vote, it just seems so undemocratic and it's a really troubling trend. Sorry to be a downer, Jon, that's what I'm following.
Jon Fansmith: That's usually my job though Mushtaq so you're kind of cutting in on my turf but that's fine, go ahead. You're coming around to my viewpoint. We'll put it that way.
Sarah Spreitzer: Mushtaq, won't there be ... Won't there be like lawsuits or court cases to test the legality of these laws being signed by the governors?
Mushtaq Gunja: Yeah, there sure are, and there's a set of folks that are tracking this and in fact I think lawsuits have already been filed in Montana once the legislature passed their law. So I think the lawyers were ready as soon as the governor actually signed it into law. Some of them will be struck down as unconstitutional but some may not be and so we need to be ... I think we as citizens need to push, we have to hope that ... I don't know that we can rely completely on the lawyers winning in all of these state and federal courts to protect our rights here. Speaking of sort of somewhat depressing developments Sarah, I feel like I have heard the acronym CFIUS come out of your mouth more than once over the last couple of weeks.
Jon Fansmith: Too often maybe.
Sarah Spreitzer: Yes. Yes.
Mushtaq Gunja: What are you tracking and what in the world is CFIUS, Sarah?
Sarah Spreitzer: Yeah, do you know what CFIUS stands for, Mushtaq?
Mushtaq Gunja: It is a cloud that is wispy in the air, is that right?
Jon Fansmith: It's low atmosphere, right?
Sarah Spreitzer: You're very close, you're very close. It's the Committee On Foreign Investment in the U.S. and it's a committee that sits at ... It's chaired by the Secretary of Treasury that looks at very large business transactions between U.S. companies and foreign investors and we are dealing with ... I think we talked about this on the last podcast. There is a large package of China legislation moving forward in the Senate. There is a lot of bills that are looking to be attached to it. One of those bills is the Strategic Competition Act of 2021 which is a bipartisan bill that was introduced by Senator Menendez from New Jersey and Senator Risch from Idaho, the ranking member, and it contains a provision in it that would actually tie university gifts and contracts over a million dollars that are conditional, meaning that they have to be spent for a certain purpose, or deal with critical technologies that those would be subject to CFIUS review. Obviously colleges and universities report gifts and contracts over 250K to the Department of Education already through Section 117, we've talked about that a lot. This would just be a huge expansion. CFIUS is not set up to deal with non-profits. There's enormous filing fees that businesses pay for CFIUS to review the transactions. It's unclear whether or not universities would be subject to the same fees. There is also like a six month to one year period when they actually review the transaction meaning if this was an international partnership to carry out a research project like say perhaps developing a vaccine to fight COVID, it would be delayed by six months to a year as it kind of underwent this review. So we're worried about it. The bill is actually scheduled to be marked up tomorrow which is Wednesday. We expect to see a manager's amendment and so we'll see if anything has changed but yeah, universities are very worried about that, that provision and trying to communicate those concerns.
Jon Fansmith: I want to add the one thing I know about this which is that Terry Hartle and I did a public policy popup yesterday and during that, as Terry's one to do, he dropped a nugget of information which is the perhaps previous highest profile use of the CFIUS committee was to block the purchase of the Port of Baltimore by I believe Bahrain in 1996?
Mushtaq Gunja: Dubai I think?
Sarah Spreitzer: I think it was Dubai. It's not 1996, it's actually 2006.
Jon Fansmith: Oh well, we got it wrong on the pop-up.
Sarah Spreitzer: CFIUS I think over the last few years, they review around 200 to 300 transactions and they flag very few ... President Trump actually stopped one transaction from going forward, but if you add in all the conditional gifts and contracts to universities over a million dollars, it would be an additional 700 transactions that they would have to review. So it's unclear if CFIUS could actually even handle this and then the other interesting thing I learned is they are very focused on China and moneys that universities may be receiving from China and they pulled in the Section 117 reports I think it was something like 250 gifts over a million dollars from China in 2019 but there were over 200 gifts from England. So you're going to be examining a lot of different gifts and contracts and a lot of the gifts that we get, especially over a million dollars, are conditional. They're to endow a chair, they're to set up a scholarship fund. CFIUS was just not set up to kind of review those types of transactions.
Jon Fansmith: Higher ed was on the Hill in a couple of other ways last week too. There were hearings on the nomination to be undersecretary for James Kvaal and higher ed was also in front of the Senate Banking Committee. Sarah, you were following that hearing in front of the Senate Banking Committee. Do you want to tell us a little bit about it?
Sarah Spreitzer: Yeah, and that was actually the one that Beth who we're speaking to in a few minutes testified before ... It was a big hearing, there were two different panels. It was actually a subcommittee chaired by Senator Warren and I think the ranking member was Senator Kennedy, they seemed to be the two with the most questions. It was focused on student loan debt and kind of the impact of student loan debt on the economy, racial justice impact, and just on individuals and as you know Senator Warren is an advocate for blanket loan forgiveness, especially post-pandemic as a way to help people that may be struggling to help the economy, and I think overall what they heard was that it's really not a magic wand. If you wave the magic wand and do blanket loan forgiveness, it's not really going to have that big of an economic impact. The people that it's helping may not be the people that actually need the most help. In Beth's testimony she talked about the fact that folks that default on student loans tend to fall into two categories. The first is people who drop out, never complete a degree, and are carrying debt from not completing the degree, so they're unable to get a job that requires an associate's or a bachelor's. Then the second category was folks who completed a degree but for some reason the career that they are seeking doesn't pay enough to pay back the investment that they made on the degree, that there is this imbalance between those two things. Those folks, nothing would really improve by just kind of waving away their debt. Those that didn't finish their degree would still not have a degree, and so Beth talked a lot about nuanced things that could be done with existing programs to help folks. So it was an interesting hearing.
Jon Fansmith: Also I think most of the coverage of it was less about student loan debt and more about the servicers, there were some I think pretty high profile clashes between Senator Warren especially and some of the representatives from the student loan servicers who were on the panel.
Sarah Spreitzer: Yeah, it's always fun to watch your own student loan servicer testify before Congress, right?
Jon Fansmith: Depending on your feelings towards your servicer, yeah.
Sarah Spreitzer: You're like, "I know those guys."
Jon Fansmith: I see them every month. And hopefully Sarah, you are seeing them every month and you're making payments even though payments have been suspended during the pandemic.
Sarah Spreitzer: Of course.
Jon Fansmith: There are a lot of other things that were going on and Mushtaq, you touched on it. James Kvaal's nomination, there was a hearing last week on his candidacy to be the undersecretary of the U.S. Department of Education. I think if you are supportive of his nomination as ACE is and as 40 or so other associations who joined us on the letter supporting his nomination, our hearing went well. I think at the end of the hearing Senator Burr who is the ranking member, the senior Republican, he even said that he was likely to vote in support of his nomination. One of the reasons we have been so supportive of James Kvaal's nomination is we know him very well. He worked in the Clinton administration, he worked in the Obama administration, he's worked at the Department of Education, he's worked in the White House, he's currently the president of TICAS which is The Institute for College & Success. This is just a person with a phenomenal knowledge base, a phenomenal experience base and through it all a really strong commitment to ensuring that students can access college and benefit from their time in college. I mean Sarah you made the point about Beth's testimony, who gets hurt, it's those people who don't complete who have a bad experience and James Kvaal is a person who is acutely attuned to those issues and will be well-positioned as Undersecretary of Education to address that. They are as we record this, Mushtaq mentioned, it's a Tuesday. They will vote in committee tomorrow, Wednesday. Like I said, we expect that he will be passed forward and then at some point will be scheduled for the full Senate to vote hopefully with a similar result and we'll have him in place soon. But even beyond that, hearings-wise, we are recording this ... As we are recording this, there are three separate higher education hearings going on right now. Right now guys. Why are you doing this? Why aren't you watching the hearings?
Sarah Spreitzer: Oh I'm watching on my other screen.
Mushtaq Gunja: I am watching. Yeah, I'm not listening to you, Jon.
Jon Fansmith: I'm familiar with that experience. But right now as I said, there are three. One is on investment in community colleges, it's being done by the appropriators. That's particularly significant, the appropriators are the people who decide where the money goes. If they're holding a hearing on the importance of investing in community colleges, it's probably a good sign that community colleges might see some additional investments going forward and considering the Biden administration has already put forward the idea of billions in money in infrastructure funding for community colleges, money for workforce training programs, some of which will be performed on community colleges, it's not just timely but it's an indicator of what I think is a pretty clear policy trend in Washington right now which is getting more resources to those institutions that historically have been under-resourced. But beyond that, there's a ... Education and Labor Committee in the House is holding a hearing on for-profit conversions. This is when for-profit institutions convert to non-profit institutions and this has been growing numbers recently and there's been some policymaker concerns about what the implications of that are. And then finally over in the Senate, they're doing a hearing on workforce training and what are the ways to provide quality educational experiences for workers who are seeking training or seeking to retrain or acquire new skills. So as you can see it is a very good time to have Beth Akers come on and join us because everyone's talking higher ed, and we'll be talking higher ed too. My colleagues are nodding, they're not jumping in. I am offering you the opportunity to join me in the enthusiasm. We're a hot ticket, guys.
Mushtaq Gunja: I've been waiting for years for us to be a hot ticket and finally my patience has paid off. I knew it was going to happen one day.
Jon Fansmith: Your moment has arrived.
Mushtaq Gunja: I mean and honestly, I was walking down the street the other day and I heard somebody talking about CFIUS and so our ... No, no that's not true. Nobody...
Jon Fansmith: Nobody's talking about CFIUS.
Sarah Spreitzer: Everyone always makes fun of my topics, just wait, just wait. Soon this podcast will shift totally to CFIUS discussions.
Jon Fansmith: It will become a niche CFIUS-focused ... I mean you said there's going to be hundreds of investigations right or reviews, so a wealth of material.
Sarah Spreitzer: Yeah. True.
Jon Fansmith: Well we'll be sure to bring up CFIUS with Beth when she joins us after the break. We'll be right back.
Mushtaq Gunja: And welcome back. We are joined today with my very special guest, Dr. Beth Akers as a resident scholar at the American Enterprise Institute where she focuses on higher education. She is an economist by training and she is the co-author of a book called The Game of Loans: The Rhetoric and Reality of Student Debt, which I read back when it came out in 2016 and she's about to be the author or I guess she is the author of a book that's about to come out called Making College Pay. You may well have seen Beth in her testimony before Congress. I feel like she is always testifying before Congress including last week. I want to ask her a little bit about that but we are so pleased to have you on the podcast. Welcome to dotEDU, Beth.
Beth Akers: Thank you so much for having me. It's really fun to be with you today.
Mushtaq Gunja: So what made an economist interested in studying higher ed? How did you get into this field, Beth?
Beth Akers: Good question. So I was in the middle of graduate school doing PhD in economics when I got so sick of school that I needed a break and somehow the opportunity to go to the Council of Economic Advisors kind of fell on my lap through some mentors at Columbia and I thought it was going to be a boring year, it was the end of the Bush administration, and it turned out to be the beginning of the financial crisis and so at that time there was ... A little known crisis in student lending and I was tasked with working with this small team at Department of Education to implement some emergency legislation to basically make that market work for the coming year. So I had never worked before, I went from undergraduate to graduate school and then had this year of firsthand policy experience in higher education, and when I went back to graduate school to write my dissertation it was sort of the obvious thing to write about. It was the only piece of the world that I really knew very well and had something to say about and I have continued to have something to say about it since that time and I have been lucky to have opportunities to have perches where I can say it.
Mushtaq Gunja: That's great. You have this new book, Making College Pay, that I think is coming out next month. Is that right?
Beth Akers: Yes. May 18 is our launch date.
Mushtaq Gunja: Would you tell us a little bit about it?
Beth Akers: Yeah. So this book is ... I initially started out thinking I was going to write a book called for academics and policymakers and I was going to say, "Look, you guys are solving the wrong problem here. College is not too expensive, it's too risky." In the process of starting to write that book, starting to pitch that book, I realized that these aren't the people who need my message, the people who need my message are the ones who are putting it all on the line to go to college. So this book became a guide for aspiring students and their families to help them think about how to pick and pay for college like an economist would. By that I mean taking all the romance factor out of the equation, look at the hard numbers, be very practical about the trade-offs you're making and don't get caught up in the excitement of posting your new T-shirt on social media. So this book is really a guide that says if this is how you want to make your decision, here are the resources that are available to you.
Mushtaq Gunja: Beth, when you say that college is not too expensive but potentially too risky, what do you mean by that?
Beth Akers: Yeah. So I get in trouble when I say this because people really like to say that college is too expensive. Economists will tell you all day long that college is a good investment, that a bachelor's degree yields upwards of a million dollars of extra earnings over the course of your lifetime. So if you think about education as an investment, you're putting in kind of a lot of money upfront, but you're getting a huge amount of money on the backend. So in that sense, it's an investment that's expensive but it's one that pays huge dividends. So in that sense it's not too expensive. What does Harvard cost these days, like $200,000.00 or something. I mean that's a bargain for what it is that they're delivering, even though the price tag is huge. Of course there are institutions with a huge price tag that do not offer those dividends and so my point is to say let's stop hammering on those institutions that are offering a huge return on a pretty big price tag and point out that the problem is that not every institution and every major pays.
Mushtaq Gunja: So what should students be looking at as they're sort of making these decisions? What should students know that they don't know?
Beth Akers: Yeah. What I like to say is we've got to get away from the idea of what I'll call the golden ticket fallacy. This idea that you just got to get in through college and prosperity will be delivered to you on a silver platter. That's just not how education works, even though we sometimes talk about it that way. So what I say is know where you're headed. So you can't just start college and kind of hope that you kind of find a path that works out. Well you can I guess if you've got a huge financial backstop and don't need for your investment to pay off, but the vast majority of people who are going to college in this country need it to pay a financial return. So the point is know where you're headed after school so that you can kind of work backwards and make sure the path that you're choosing is going to get you there. It sounds kind of basic and practical but I don't think enough people are doing that.
Mushtaq Gunja: Do they get surprised Beth, that you sort of discovered as you were researching for this book and talking to students and colleges?
Beth Akers: Yeah. One thing I really wanted to encourage in this book was that people could consider options outside of traditional associate's and bachelor's degrees. So I wanted to give people a sense of how to shop for credential programs and more innovative models like boot camps and things like that and the thing I struggled with really was advising readers on how to do that. I realized that that realm of education is more difficult to navigate than the traditional space. We've got like oodles and oodles of new books every year ranking institutions for bachelor's degrees within different majors and things like that, but if that's not what you're looking for, it's much harder to find an opportunity and then beyond that it's much harder to know which of those opportunities are really going to be valuable. We don't have a great ranking system for credentials, we don't have a great system of accountability or a place that consumers can go to learn what those options are. So that's something that I learned through this process.
Sarah Spreitzer: So Beth, I love the idea that the book is coming out right around graduation time. I've already bookmarked it that I'm going to buy it for several cousins that are graduating from high school and are trying to figure out their pathway. So it just seems like it's going to be a great resource.
Beth Akers: Well thank you. I appreciate that very much.
Sarah Spreitzer: Yeah. So Mushtaq alluded to this. Last week you testified before the Senate Banking Committee on student loan debt. Obviously they were thinking ... There's been a lot of proposals about student loan debt and forgiveness, mass forgiveness of student loan debt, but I thought maybe you could start ... As you did in your testimony by kind of laying the groundwork, like why is this impacting the U.S. economy now and what is the impact on individuals?
Beth Akers: Yeah. So we have seen a couple changes that have contributed to the trend of student loans becoming just a huge issue for this country. First college has gotten more expensive. So people aren't financing it out of pocket. So even people who were able to pay before in cash are taking on debt to go to school. So we've got more people borrowing for that reason. We've also got more people from economically disadvantaged backgrounds going to college which is great but they're using debt to get there. So that also contributes to this ballooning figure that we have in the economy.
We often hear in media stories people citing there's $1.6 trillion in outstanding student loan debt and without much context for that number, as if this, the number itself is scary enough and we don't need to think about it. When it surpassed the amount of credit card debt in the economy, that was a big news story. But what I always like to point out is that $1.6 trillion represents dollars that were invested in education and we know that dollars invested in education, at least for associate's and bachelor's degree yields about a 15% rate of return. So broadly speaking, student debt I believe has been a wealth-enhancing activity both at the individual level and also nationally. So the country is wealthier because of that debt just as many individuals are wealthier because of the debt that they took on to pay for a degree. So then the problem comes about with this issue of risk that I talk about in the book and that's that ... While on average, these investments pay huge dividends, sometimes they don't and often they don't for black and brown students who have attended institutions that have not delivered them either to graduation or to opportunities in the labor market where they can get that return and so we also ... In addition to having this system that allows people to finance investments in themself, we need a safety net for that program because in this economy, the structure of the U.S. economy, we need people to have access to mechanisms for social mobility and education is the most important one. But we can't have it sometimes just not work and so that's why I do believe the role of income-based repayment and the forgiveness provisions in that program are really important so that education can be something that people can try and if it doesn't work it doesn't leave them worse off than where they are, where they started.
In the testimony I was talking about that a lot. I was saying ... When someone borrows from taxpayers to make an investment in themself that pays huge dividends, I think they should be able to pay it back. Or they should pay it back. On the other hand if someone makes an investment using taxpayer dollars, it doesn't pay dividends for them, I don't want to live with that for the rest of their life. So as opposed to the proposals coming from Senator Warren and the left wing of the Democratic Party which are looking for mass cancellation I want a more nuanced solution that says if you're one of those people who made the investment and it didn't pay off, I want you protected, I want you to have access to reduced payments. I want you to have access to having your loans ultimately forgiven if they prove to be unaffordable in the long run. That was kind of the gist of my testimony.
Sarah Spreitzer: Yeah, I thought ... I really liked how you referred to blanket loan forgiveness as a blunt instrument and this kind of need for more nuanced programs and you talked a bit about ... The programs that we have right now are very much a patchwork. So we have a bunch of different programs with IDR, we have different loan forgiveness programs already in place. If you had a magic wand, what would you do with a nuanced approach to kind of fix the system that we have?
Beth Akers: Yeah. Well first I'll say the system that we have today is not one that anyone would ever design if they had a magic wand. It's complex, not because the complexity adds nuance to the policy or makes it more efficient or anything like that, it's complex just because of the way that it was developed through executive action and then the piece of legislation and so on and so forth. So if I could just do whatever I like, I would basically wipe away everything that we've got in place today, replace it with a single loan program that people would automatically repay through income-based monthly payments, and then have administered by the IRS. So that rather than individuals having to apply for income based repayment, certify their income. They can have their student loan repayments collected as they would their tax obligation through the IRS and I think ... I once heard an economist say parents don't stay up at night worrying about whether their children will be able to pay their taxes, but they do stay up at night worrying about whether their children will be able to repay their student loans. So I think automating the process would really go a long way in making people feel better about their student debt and I'm an economist, so these feeling things aren't my forte but I think that's a big part of the problem so I think making that fix would go a long way.
It would also mean that people who were in trouble wouldn't need to know about these solutions or know how to apply for them or jump through the hoops to take advantage of it and it would be sort of automatic and I think that's an important aspect of whatever solution we have in place. I like the idea that monthly payments are tied to income and I also like that over a long period of time, debt is ultimately forgiven and it does take a while to have debt forgiven and I think that's the way it should be. The reason for that is if someone comes out of school and has a few rough years, we can have their payments reduced and they're not going to be having to make unaffordable payments that affected their quality of life and maybe then they go on to get a great job and if that's the case, I think they should pay back their debt. But somebody who has a lasting hardship should have their debt forgiven. So basically it takes a little time to know whether or not a degree pays off and so even though people don't like that aspect of the program, I think it's important.
Mushtaq Gunja: Beth, when I was in the Obama administration the last couple of years, we tried to do a big push to get consumers to get students to enroll, graduates I guess to enroll in IBR. We made some progress but not quite as much as I think we wanted to. As an economist, and somebody who studies behavior, what do you think the barriers are? Why aren't more graduates taking up IBR?
Beth Akers: Well I'll say the big thing is that it's confusing as all heck. So I'm an economist that studies these things for my living and yet I can't list off all of the income-based or payment programs that exist or the terms that they offer. So I think that the information barrier here is just huge. The idea that you could overcome that and get people to understand what options are available to them and actually get them to enroll, I think it's just ... I think we're just reaching. I don't think that's actually practical and I think probably what would happen if we continued down this path of trying to inform people about the current options is that we get more and more sophisticated borrowers into these programs who are probably the ones who need it the least. So the people who I'm most concerned are probably the last to come on board through any sort of information campaign and I think information campaigns work great. In the absence of the ability to do something bigger that's definitely the way to go is to try to make sure everybody knows how to do these. Obviously another aspect of that hearing last week was Senator Warren really coming down on the servicers for not ... For what she suggested was not doing a good job of getting borrowers into these income-based repayment programs and I'm not on the ground, I'm not on those phone calls, I don't know if they've done what they should do or not, but I also know that if I were designing a program to help the servicers do a good job, it would not be the one that we have in place today. So I think we would be in a much better place if we could just have that streamlined program and I think there's support for it on both sides of the aisle. I mean Republicans are in it right now because they need to be in it for something and they're not in it for widespread load cancellation so they're on board and if we could just get Democrats to come a little bit back to the center then we can get this kind of universal support for a streamline of the safety net which I think would be really great for students but we'll see how things pan out.
Jon Fansmith: It's such an interesting point too because when you look at the Higher Education Act reauthorization proposals, that is bipartisan actually, this idea of streamline the repayment programs to a standard one and an income-based one, clarify the terms. So it's a really great point about if you look at the people who are writing the laws, they tend to already agree on this. You just tend to have this debate about forgiveness sort of more at the extremes going on right now.
Beth Akers: Yeah, I mean wonks have been arguing ... We sit around tables for years talking about this idea of like complexity, complexity, complexity is the problem. First it was on like the FAFSA complexity, then it became the income-driven replacement complexity, and so we're all in agreement but then the political conversation moved way left while we were sitting in these rooms having wonky conversations about complexity. So I think the people who have followed the debate very closely are all on board with that idea but the political momentum on this issue has just swung so far that it seems to be ... I mean it's also not a really sexy idea for politicians to be out pitching, right? Like can you imagine Biden's campaign platform is like, "Well I'm not going to make college free or forgiven in your student debt but I'm going to streamline income-driven repayment and eliminate the administrative burden." It's like, "That's not going to sell."
Jon Fansmith: I mean you couple it with improved servicing. People are just going to go nuts, right?
Beth Akers: I'm not sure which people you're talking about but I don't think so.
Jon Fansmith: Yeah, it is. It's a funny ... It's not just that ... It's encapsulated in that higher education debate space, it's a really national public policy debate that exploded in a way that very few things have but actually sort of related to that I wanted to ask you about ... We're talking about the backend of paying for college, right? Repayment. The front end is pretty important and getting a lot of national attention right now too which is the idea of what do you do, do you make college free, do you expand the Pell grant, double the Pell grant is something that ACE is supportive of. This idea about do you give supports upfront that eliminate the costs of borrowing and then eliminate ... That's a way of addressing debt, it's also a way of improving access. I know you have publicly weighed in on this but I thought it would just be an opportunity to sort of sound off a little bit on what you think is ideal policy in that space and sort of where you see the currents going in the debate right now.
Beth Akers: Yeah. I'm not a big fan of making college "free", but I also want to clarify that I think that's a bit of a technicality. Because for a lot of people college is already free. You can go to a low cost community college for no cost if you're a low income student through the Pell grant program. So I'm all for expanding the Pell grant program, it's sort of overdue to increase the subsidy to keep pace with both inflation and the rising cost of attendance at institutions. So I think that needs to be done. What I'd like to see ... Rather than us implementing some sort of socialized national regime of community colleges is that we take Pell grants and expand them in the initial years of enrollment so that we in effect get free community college but that it's done through something that looks like a voucher program. So that is the government gives dollars to individuals going to school, but then those dollars can go to whatever institution the student decides will serve them best. Maybe that's not a community college or maybe it is, but to me that's a much more flexible program that benefits the students because it doesn't constrain them to going to a particular institution and I do think it makes sense to have expansion in those benefits focused in the initial years of enrollment for these students because coming back to that theme of risk against, this is the riskiest time for students. We know that one of the deepest problems we have today is that people start college, borrow, leave school, and then don't get a degree.
So I think ... We're going to ultimately subsidize those individuals in the long run anyway through forgiving their loans. I'm okay with ... Even though I'm supposed to be the conservative here, I'm okay with saying let's spend more of that money upfront so that someone's not stuck with that unaffordable debt until it's ultimately forgiven. We're spending the money anyway, let's just make it a little bit more humane for them to try college and if it doesn't work for them be able to walk away kind of unscathed.
Jon Fansmith: Yeah, and I like this idea, we've talked about this before on the show too that when you look at who holds student loan debt, overwhelmingly the majority of people who hold student loan debt are high income families and they're able to repay, but if you look at the people who default on student loan debt, they're people who actually borrowed a very little amount of money, $7,000.00 or less is the overwhelming majority of defaulters, so I think you're right on the point. If you allow those people to lower their risk, I like this framing of risk versus expense, it just makes a lot of sense. I think you will find some people who will say that front-loading Pell ... If you move on through four years of education and your Pell benefits are decreasing, that may be a challenge towards getting to completion. So I don't ... But it's an interesting concept, I like the idea. I'm not criticizing it, I'm just sort of curious. I think the other thing you mentioned was this idea of a voucher system and I think that's one of those things that has been a real argument in favor of Pell, it was always created to give the choice to the student, unlike K12 policy where federal money goes directly to schools and then they make the decisions at the local educational agency, this empowers the student to make those choices and particularly with the free community college proposal that the Biden administration is putting forward, can you just talk a little bit more about the value of that, especially from an economics perspective, the value of that voucher and what it does to make decision making in students' hands?
Beth Akers: Yeah. So I mean if you just think of the case of an individual in some small city across the country and they've got access to either free community college or they've got enough Pell grants to pick which college they want to go. It might be that they look at the community college in their community and they have pretty terrible outcomes. I mean graduation rates at community colleges are pretty bad, and their student loan repayments are equally problematic. There may be that based on who that student is, what they want to study, what they want to ultimately do, that there is a better option for them. If we tie the money to community colleges, then that student doesn't have the option of going to the for-profit, non-profit, technical school or whatever it may be that will give them a more direct, more reliable pathway to a career. So I'm in favor of that model. I think the Biden administration or people who are advocating for a more socialized system of community colleges would argue that the quality at these institutions would be better if we would just fund them adequately. Maybe, I mean I tend not to believe that that's the case. I think that if they're forced to compete for Pell dollars, that's the greatest incentive for them to produce the best outcomes they can.
Jon Fansmith: We've also seen all the research about education deserts and the fact that a lot of students, college choices are very local. They apply to the institutions that are near them so this idea of constraining your choices to one sector of higher education obviously ... Not to play economist, but it would significantly impact your decision making in ways that may not be to your advantage.
Beth Akers: Right, and another thing too is you think about ... A lot of students will think, "Okay, I'll start college at a community college and then transfer to a four year school." We know that students are much more likely to cross the threshold for the bachelor's degree if they start at a four year institution. So for them being able to take those dollars to a four year institution to start in a four year program rather than start in an associate's program and then transfer over is going to be a more sure path for them.
Sarah Spreitzer: So Jon, you mentioned the reauthorization of the Higher Education Act and -
Jon Fansmith: My favorite subject.
Sarah Spreitzer: I don't know if your thinking has changed, if it's going to suddenly get done this session now hope for Higher Ed re-authorization.
Jon Fansmith: Any day now. Any day now.
Sarah Spreitzer: Any day now. But a lot of the things that you're talking about, right, would generally be done through re-authorization and we're kind of looking forward to the end of the pandemic or whatever post-pandemic is going to look like and Beth I know you talked about this a bit in your testimony, but those students that have had their loan payments paused, what are we going to be doing to try and encourage people to go back to school to get the better jobs post-pandemic? Is there an appetite and is there the ability to make some of these changes outside of a re-authorization of the Higher Education Act?
Beth Akers: Yeah. I mean I have no confidence that a "re-authorization of the Higher Education Act" will ever happen at this point. I just don't think it's necessary because ... Like for example we are awaiting ... In the past we have had re-authorizations happen when they're triggered by something. So an interest rate is going to sense that. So if Congress doesn't act, everyone's interest rates are going to jump up five points or something like that. That doesn't happen anymore. We've tied interest rates to market rates and so there is no longer a cliff over which we're going to fall if we do not act. The closest thing I thought could push for a higher ed re-authorization was the tax burden on student loan cancellation through income driven repayment but that was then fixed through the COVID relief legislation. I think a new window has even opened for Democrats to pass legislation that are related to higher ed through reconciliation. We saw that the Senate parliamentarian ruled that Democrats or whoever the controlling party is can do multiple reconciliation bills which will allow them to pass legislation of certain forms at least with just 51 votes which gives them in theory the power to go ahead and do student loan cancellation without the White House or to increase Pell grants, things of that sort. Of course legal scholars might disagree about exactly what would be allowable through that channel but I think we're going to continue to see these piecemeal approaches to whatever party is in power picking off the issues that are of political interest to them at the time.
Jon Fansmith: And one of those arguments against HEA happening too is that Senator Alexander's FAFSA reform simplification was done outside of HEA re-authorization at the end of the year.
Beth Akers: Yeah, exactly, I forgot about that one too.
Jon Fansmith: Yeah, tied to IRS database which you've sort of touched on the idea of expanding that. These pieces are being dropped in over time without a comprehensive reauthorization. So it's an interesting process and reconciliation certainly throws open the doors for a lot of things.
Beth Akers: Yeah, and it's a lot easier to do policy through incremental change. You can sell people on incremental changes on existing programs much easier than you can sell them on something that's entirely new and so I don't think we're going to see a sweeping re-authorization.
Jon Fansmith: I'd say a 1,000 page bill, getting agreement on a 1,000 page bill versus getting agreement on a 100 page bill is a very different matter, so yeah.
Beth Akers: Right. Right.
Jon Fansmith: Thank you for coming on and joining us. It really was a wide-ranging conversation and I feel like we could do this conversation pretty regularly.
Beth Akers: Sounds good. We'll do it next week.
Jon Fansmith: Yeah, we could -
Sarah Spreitzer: Maybe after we've read the book.
Beth Akers: Okay.
Jon Fansmith: That's right.
Sarah Spreitzer: Maybe with like a Q&A, meet the author.
Beth Akers: That would be awesome.
Jon Fansmith: I was going to pitch you could have us on your podcast because you are also a podcaster now too. To be honest, I'm not really happy about people moving into the higher ed podcasting space. We're already struggling against the two other ones that are out there, so ...
Beth Akers: I'm still a novice.
Jon Fansmith: Somebody talented like you. Yeah.
Beth Akers: So you got some time.
Jon Fansmith: All right. We got a little bit of a run-up to hold you off for a while.
Beth Akers: That's right.
Jon Fansmith: All right, well Beth, thank you so much for joining us and we will ... I'm sure be talking to you in the future.
Beth Akers: Thanks so much. Take care everyone.
Jon Fansmith: Bye.
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