On October 21st, The Hamilton Project hosted a forum focusing on the evolving role of higher education in American society and released three new policy proposals by outside experts on how changes in student lending and financial-aid policies can help improve college outcomes. Key findings from each of the papers are outlined below.
Improving Graduation Rates for Pell Recipients
With Pell expenditures more than doubling over the past five years, critics are increasingly raising questions about whether the program’s results justify its cost. Unfortunately, credential completion rates for Pell recipients, measured six years after entry, are frustratingly low.
Student-loan debt has mounted to $1 trillion, more than the amount owed on either credit cards or auto loans, and now stands as the largest form of consumer debt outside of mortgages. With 7 million student loans in default and rising tuition prices, it is reasonable to wonder, "Is there a student-debt crisis?" But the facts do not support this narrative: In 2009, among those who had started college six years earlier, 69 percent had borrowed $10,000 or less and 98 percent had borrowed $50,000 or less.
In Loans for Educational Opportunity: Making Borrowing Work for Today’s Students, Susan Dynarski and Daniel Kreisman argue that the current system allows reasonable levels of debt to grow into crippling payment burdens that can prevent young workers from attaining financial independence and stability. They propose a new, income-based repayment system for federal student loans, where payments automatically rise and fall with a borrower’s income.
The net price of college attendance — what students actually pay after factoring in financial aid — may be quite lower than the sticker price. But in many cases students are not aware of the possible financial aid programs available. At Wellesley College, for instance, families up to the 90th percentile of the income and wealth distributions are likely to be eligible for financial aid.
In Simplifying Estimates of College Costs , Phillip B. Levine discusses the Quick College Cost Estimator he developed at Wellesley College, and proposes expanding this estimator to other colleges and universities through collaboration with the College Board and affected universities.