During the first 100 days of President Trump’s second term in office, he implemented the following actions, some of which will affect federal financial aid:
- Issued several executive orders
- Sent letters to universities inquiring about their support of anti-Semitic activities
- Suspended federal grants to Columbia and Harvard
- Cut the federal research grant administrative expense reimbursement percentage to 15% across the board
- Announced an intention to eliminate as many employees and activities in the Department of Education as he can within his legal authority
The Department of Education published notices of negotiated rulemaking addressing topics such as Public Service Loan Forgiveness (PSLF), Pay As You Earn (PAYE), Income Contingent Repayment (ICR), or other issues that would streamline current federal financial aid assistance programs. Comments from the public were due by May 5.
Showing an interest in higher education more than during the first White House term of President Trump, the U.S. House of Representatives’ Republican majority issued a draft bill that would upend how students and families pay for college. The major changes related to financial aid outlined in the draft include:
-
- The elimination of subsidized loans for future borrowers. This measure would start July 1, 2026. Currently, subsidized loans do not accrue interest for their borrowers while they are in college. After graduation, all borrowers have a six-month window before their loan payments begin. Approximately 30 million borrowers have subsidized loans totaling $294 billion. Pre-existing subsidized loan borrowers will have access to subsidized loans, but the amount they can borrow after the effective date will be based on the median cost of their program.
- The Grad PLUS loan program will be eliminated in its current form. Critics of that program (including me) have argued that its availability and lack of caps have led to increased tuition and costs of attendance for grad students. Under the proposal, loans will be capped at $100,000 for graduate students and $150,000 for professional students (medical doctors, lawyers, etc.).
- The Parent PLUS loan program will survive. However, it’s not clear what criteria will be used.
- Access to Pell grants for students with less than six credit hours will be denied. Students enrolled in workforce programs would be exempt from the credit hour cutoff. Additional funding for the program is anticipated, and funding is provided. Community colleges are likely the group most impacted by these changes.
- Four existing income repayment programs would be consolidated into one. The House suggests waiving interest if monthly payments aren’t enough to cover the principal and the accrued interest. Borrowers would see their remaining payments waived after making qualified payments for 30 years.
- Colleges would be required to report the median cost of degrees by program. The median cost concept would be to create a consumer price index by program for families.
- Colleges would be required to repay the government a portion of students’ unpaid loans.
As of this writing, the Senate’s HELP Committee has not yet released its plans for financial aid reform. The two chambers must agree before the bill can be reconciled and passed.
History of Financial Aid Legislation
Since student loans dominated discussions during the 2020 Democratic presidential primary and later during Joe Biden’s presidency, I thought it appropriate to build a timeline with the history of major financial aid legislation to provide perspective on the proposed changes as well as my comments.
National Defense Education Act (NDEA) (1958)
The National Defense Education Act (NDEA) was passed by Congress in 1958 as the Cold War and space race between the United States and the Soviet Union accelerated. Funds to enable more students to attend college were authorized, including STEM fellowships for students and need-based student low-interest loans of up to $1,000 per student per year.
The Senate’s version of the NDEA provided grants only. However, the House wanted to issue loans primarily. To guarantee passage of the bill, the Senate acquiesced to the House and added low-interest loans as the primary funding for undergraduates instead of grants. By 1960, the number of college students increased to 3.6 million, a 50% increase over 1950.
Higher Education Act (HEA) (1965)
The Higher Education Act (HEA) was passed in 1965 as part of President Johnson’s Great Society programs. It was the successor legislation to the NDEA. Title IV of the HEA authorized need-based financial aid to students, including grants, loans (Guaranteed Student Loans, or GSLs), and work-study.
Title IV also included rules for determining students’ financial need and required that a federally recognized accrediting agency accredit institutions participating in federal aid programs.
When the HEA was passed in 1965, approximately six million students were enrolled in college. Two-thirds of college students in 1965 attended public institutions. The ratio of men enrolled to women was 2:1. The expansion of financial aid enabled an increase in students from many different backgrounds to enroll in higher education.
HEA First Reauthorization (1968)
The first reauthorization of the HEA was in 1968. The maximum amount of the Basic Education Opportunity Grant was established as the lower of $1,000 or half of the sum of student financial aid under this title, including work-study and any private or state scholarship aid.
HEA Second Reauthorization (1972)
In 1972, the Title IX Amendment was added to the HEA. The amendment prohibited sex discrimination in any program or activity at an institution receiving federal financial aid. The amendment required colleges with sports teams to have an equal number of female athletes for every male athlete.
The amendment also allowed proprietary schools to participate in Title IV programs. The programs offered by a proprietary institution were required to prepare students for “gainful employment in a recognized occupation.”
The Student Loan Marketing Association (SLMA, later Sallie Mae) was authorized to provide liquidity for student loan lenders. This liquidity option expanded the total capital base for student loans,
In the first seven years after the passage of the HEA, the number of college students increased to nine million, a 50% increase. Male students continued to outnumber female students, but the ratio declined. Approximately 15.4% of all males in the U.S. had earned a bachelor’s degree, while women with a bachelor’s degree comprised 9.0% of all Americans.
HEA Third Reauthorization (1976)
In 1976, an amendment to the HEA extended the Basic Education Opportunity Grant for low-income students. The amendment increased the grant ceiling from $1,400 per year to $1,800 per year. The reauthorization also encouraged the states to establish student loan guarantee agencies.
The cap on graduate loans was increased from $10,000 to $15,000.
The total number of students enrolled in higher education institutions reached 11 million.
The 1978 Revenue Act
The 1978 Revenue Act marked the beginning of a period where the federal government encouraged employers to cover some or all of their employees’ education costs. Section 127 of the Act stated that an employee’s gross income does not include amounts paid or expenses incurred by the employer for educational assistance if the assistance is furnished under a separately written plan of assistance to the employees.
1978 also marked the year that Harvard increased its undergraduate tuition by 10%, followed by a decade of increases averaging 8% annually. Many of Harvard’s elite peers followed with similar increases. Notably, Harvard’s CFO expressed a concern in a New York Times interview the same year that tuition was rising at a rate that priced out middle-class families.
HEA Fourth Reauthorization (1980)
The 1980 Reauthorization of the HEA established Title III – Institutional Aid. The Act authorized the Secretary of Education to provide short-term funding to institutions to improve their quality if they qualified based on a high percentage of low-income students using Basic Educational Opportunity Grants and relatively low educational and general expenditures per full-time equivalent (FTE) student.
The reauthorization provided that 50% of the aid under this title be awarded to institutions with special needs and 50% to institutions strengthening their educational programs. Basic Educational Opportunity Grants were officially renamed Pell Grants. A $3,000 annual limit was set on federally insured undergraduate loans.
Congress established the Parent Plus program ostensibly to help high-asset families (homeowners) create liquidity to cover their Expected Family Contribution (EFC).
Higher education enrolled 12 million students. The average student loan balance at graduation was $3,900.
HEA Fifth Reauthorization (1986)
In 1986, the HEA was reauthorized again. Title III was amended to specifically include HBCUs and other institutions with large concentrations of minority, low-income students under Part B. The bill also increased the loan limits under the Guaranteed Student Loan Program (GSL).
Provisions were added to prevent students from borrowing additional loans under the program if they defaulted on existing loans.
Institutions were required to not certify loans for amounts more than the student’s demonstrated need. The loan repayment period was decreased from 15 to 10 years. National Direct Student Loans were renamed to Perkins Loans. Loan limits under the direct loan program were increased.
Approximately 12.5 million students were enrolled in colleges and universities. The average undergraduate student loan balance at graduation had increased to $5,200, a 34% increase in six years.
The Bennett Hypothesis (1987)
In a February 1987 New York Times opinion article titled Our Greedy Colleges, Reagan Secretary of Education Bill Bennett wrote that every time Congress increased financial aid benefits over the previous six years, colleges and universities raised tuition at rates that far exceeded the increases in aid.
Secretary Bennett wrote that federal outlays for student aid had increased by 57 percent since 1980, while inflation increased by only 26 percent during the same period. Tuition increases had more than doubled inflation.
According to Bennett, higher education “is not underfunded. It is under-accountable and under-productive.” While many insiders at the time scoffed at Bennett’s hypothesis, nearly 40 years later his reasoning appears prescient. Tuition and other costs continued to increase at rates greater than consumer inflation for more than three decades after his article was published.
HEA Sixth Reauthorization (1992)
The HEA was reauthorized again in 1992. Despite Bill Bennett’s warnings, Pell grants were increased to $3,700 per year in FY94 and prorated each year thereafter to $4,500 in FY98. Pell grants were prohibited from being awarded to incarcerated students. An unsubsidized version of student loans was created.
Loan caps were increased for all loans, and annual and aggregate loan caps were removed for PLUS programs.
Federal TRIO (Talent Search, Upward Bound, Student Support Services) programs were established during the 1992 reauthorization. The Secretary of Education was authorized to establish an income-contingent repayment collection mechanism.
Institutions that enrolled more than 50% of their students through correspondence courses were excluded from the Title IV financial aid program. The bill required that a proprietary institution have at least 15% of its revenues from sources other than funds under Title IV. It also defined a third-party servicer for the first time.
Approximately 14.5 million students were enrolled in colleges and universities.
Omnibus Budget Reconciliation Act (1993)
The Omnibus Budget Reconciliation Act of 1993 had several notable sections related to federal student loan programs that were not finalized in time to be included in the 1992 HEA Reauthorization.
The Direct Loan program was authorized to begin phasing in as more than a pilot program starting in 1994.
Income Contingent Repayment, Extended Repayment Plan, and Graduated Repayment Plan programs were established for the Direct Loan program.
HEA Seventh Reauthorization (1998)
The 1998 HEA reauthorization created the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP). States creating programs to provide post-secondary education information to at-risk students were granted matching federal funds. Proprietary institutions were now required to have at least 10% of revenues from sources not derived from funds under Title IV.
The Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act increased requirements for all institutions to publish information about crime and statistics on and off (nearby) campus.
The Distance Education Demonstration Program was authorized.
Approximately 14.3 million students were enrolled in colleges and universities.
The average undergraduate student loan balance at graduation was $14,590.
Higher Education Relief Opportunities Act (2003)
The Higher Education Relief Opportunities Act of 2003 granted the Secretary of Education the right to grant waivers of program regulations for students called into military service. Institutions serving students called into military service were required to award full tuition refunds to the students for the period of instruction they could not complete.
Higher Education Amendments (2005)
In 2005, Senate Bill 1614 – the Higher Education Amendments was passed and forwarded to President George W. Bush for signature. The bill allowed certain institutions of higher education (IHEs) to offer distance education programs waivers to the 50/50 rule, requiring at least 50% of the students enrolled in their courses to attend in person.
The maximum amount of Pell grants was reduced to $5,100 for FY2007 and increased via annual increments to $6,300 for FY2011. TRIO grant appropriations were extended for five years to FY2011. GEARUP appropriations were extended for five years to FY2011. The Federal Family Education Loan (FFEL) program appropriations were extended to FY2011.
The Federal Grad PLUS loan program was initiated with virtually no caps on borrowing.
Programs that used direct assessment of student learning were authorized as eligible programs, provided the Department of Education approved them for institutions offering them for the first time.
The bill authorized the Secretary of Education to issue waivers and modifications of specified HEA requirements related to institutions educating students who were evacuated due to Hurricane Katrina and the students.
Approximately 17.8 million students were enrolled in colleges and universities.
The average undergraduate student loan balance at graduation was $26,900.
College Cost Reduction and Access Act (2007)
The College Cost Reduction and Access Act was a 2007 update to several financial aid rules and regulations. The Act repealed the formula for calculating a Pell grant to ensure that students attending low-tuition institutions could receive the maximum grant. The maximum Pell grant was increased every year through FY13.
Interest rates under the Direct Loan program were lowered from 6.8% in July 2006 to 3.4% in July 2011. Under loan repayment regulations, direct loan balances owed by borrowers who made 120 payments or more after October 1, 2007, were cancelled.
The Act increased the family income level at which students under $20,000 were qualified to receive a full Pell grant from $20,000 to $30,000. It also excluded from needs analysis any untaxed distributions from state prepaid tuition plans or Coverdell education savings accounts.
HEA Eighth Reauthorization (2008)
Congress last reauthorized the Higher Education Act in 2008. The 2008 reauthorization included a few data publication requirements for institutions (Net Price Calculators) and the Department of Education (warnings to be published on the College Navigator website for colleges with the largest tuition increases).
The Department of Education was prohibited from creating or maintaining a federal database of personally identifiable student information.
Congress sought to streamline the Free Application for Federal Student Aid (FAFSA) to make it easier for students to apply for federal aid programs.
States were required to charge members of the armed forces and their dependents attending their institutions the in-state resident rate for tuition and fees. Higher ed institutions were prohibited from using federal higher ed funds to lobby for federal contracts, grants, loans, cooperative agreements, or earmarks.
The maximum Pell grant for FY2010 was set at $6,000, and the max for FY2015 was set at $8,000. The Reauthorization allowed students attending school year-round to receive an additional Pell grant. The number of periods a student could receive a Pell grant was capped at 18 semesters.
The definition of public service jobs for Direct Loan cancellations was clarified. The Act banned the accrual of interest on DL loans to individuals serving on active duty during a war or special operation. Such a suspension would not last longer than 60 months.
The Act required institutions of higher education (IHEs) to disaggregate completion and graduation rate data by student gender, race, and ethnicity, receipt of a Pell grant, receipt of a subsidized FFEL or DL but not a Pell grant, and non-receipt of a Pell grant or subsidized FFEL or DL.
The HEA reauthorization also sanctioned proprietary IHEs that did not earn at least 10% of their revenue from non-Title IV sources, including suspension of their Title IV eligibility after two consecutive years of non-compliance. Rules were established for calculating non-Title IV revenue.
The Act required accreditors to demonstrate that their standards effectively addressed an IHE’s distance education programs without requiring them to have separate standards for such programs.
The Secretary of Education was prohibited from issuing regulations regarding the specific standards an accrediting agency or association uses to assess an IHE.
Approximately 19.1 million students were enrolled in colleges and universities.
The average undergraduate student loan balance at graduation was $23,300.
Health Care and Education Reconciliation Act (2010)
In 2010, the Health Care and Education Reconciliation Act was passed by Congress and signed by President Obama. The purpose of the bill was to amend the Affordable Care Act, President Obama’s signature health care bill. At the time of its passage, the Student Aid and Fiscal Responsibility Act (SAFRA) was attached as a rider to the main bill.
SAFRA effectively ended the federal government’s subsidy program for private banks to issue federally insured loans. The Federal Family Education Loan (FFEL) was phased out, and all new federal student loans were directed to the Direct Loan (DL) program. This change was intended to reduce the costs of issuing guaranteed loans and align loan servicing with non-profit organizations.
SAFRA increased the maximum annual Pell grant award and allowed new borrowers to cap the amount they spent on monthly loan repayment to 10% of their discretionary income, a reduction from the previous 15% cap.
For new borrowers after 2014, loans would be eligible to be forgiven for any borrower who made timely payments for 20 years, a reduction from the 25-year period previously required.
Parents would be allowed to borrow PLUS loans only from the federal government. This would save many parents money since the direct loan interest rate was 7.9% a year, and many private lenders charged 8.5%.
Approximately 21 million students were enrolled in colleges and universities.
The average undergraduate student loan balance at graduation was $24,200.
Gainful Employment Regulations Expanded (2011)
In 2011, the Department of Education attempted to define “gainful employment” for the first time in a series of regulations. The term mainly applied to proprietary institutions and the Department’s proposal was to measure students’ outcomes through a ratio of loan repayment and debt-to-earnings ratios, the latter designed to measure the ability of graduates to repay their loans.
While these regulations were arguably designed to shrink the number of proprietary institutions with access to federal financial aid programs, the debt-to-earnings discussions led to a broader discussion about why all institutions were not measured under the same rubrics.
Student Loan Forgiveness Act (2012)
The Student Loan Forgiveness Act of 2012 (H.R.4170) established a 10/10 Loan Repayment Plan that FFEL and Direct Loan (DL) borrowers to limit their monthly payment on their loans to 1/12 of 10% of the amount by which their adjusted gross income (AGI) and that of their spouse if applicable exceeded 150% of the federal poverty level.
Eligibility for the plan was restricted to borrowers who had made the equivalent of 120 monthly payments (10 years) before or after the plan’s enactment. Student borrowers who were officially in deferment due to economic hardship received credit for the months they were in deferment.
Coronavirus Aid, Relief, and Economic Security Act (2020)
In March 2020, student loan borrowers were given 60 days of temporary relief from repaying their loans due to the COVID-19 pandemic. This relief was extended several times and expired at the end of June 2023. Ultimately, the interest-free period was extended to September 1, 2023 with payments to begin on October 1, 2023.
American Rescue Plan (2021)
During the years of for-profit universities’ heady growth, Democrats called for eliminating the 90-10 “loophole” where some for-profit universities recruited veterans and active-duty soldiers by utilizing education benefits programs to reduce their exposure to revenues counted in the 90-10 calculation.
With Democrats controlling the White House and Congress after the 2020 election, the Moran-Carper Amendment was added to the American Rescue Plan of 2021 to eliminate the “loophole.” Specifically, VA benefits and Tuition Assistance (TA) benefits were to be included in the numerator of the 90-10 calculation. Subsequent “neg-reg” hearings controlled by the Biden Administration added all government employee benefits to the calculation in addition to VA and TA.
The 90/10 calculation has practically prevented most for-profits from cutting tuition over the years as loan caps increased to the point where the loan cap met or exceeded the total tuition and fees charged.
Cutting tuition below the federal loan caps would allow students to borrow more and not result in additional cash contributions that would increase the 10 percent portion of the formula. Therefore, most for-profit institutions participating in Title IV programs have had to set their tuitions at a rate above the undergraduate federal loan caps.
Leaving aside the issue that the Democrats changed the original intent of the 90-10 rule to apply to the federal financial aid program only and not employee benefits, the Moran-Carper amendment and the neg-reg final regulations did not recognize any exception for for-profit institutions with tuition rates less than the loan caps or less than the average in-state university tuition in their home state.
Other Loan Suspension Initiatives
An excellent summary of the initiatives to suspend student loan repayments due to the COVID-19 pandemic, as well as other administrative actions by the Biden administration, was provided by Congress in September 2024. This summary includes the 2022 attempt to forgive up to $10,000 per borrower, invoking authority from the HEROES Act of 2023. The U.S. Supreme Court ruled in June of 2023 that the Administration had exceeded its authority in proposing such a wide-scale reduction of student loan debt.
Approximately 42.7 million student loan borrowers owe $1.777 trillion as of March 16, 2025. The average federal student loan balance is $38,375. The average public university student in the U.S. borrowed approximately $31,960 to attain a bachelor’s degree.
The most recent data show that 35 million student loan borrowers are no longer enrolled in college, and only 12 million are making their loan payments on time (35%). It’s likely that the Biden Administration’s initiatives to extend the pause on loan repayments and forgive debt left a material percentage of borrowers unable or unwilling to repay their loans.
What Should a Reenvisioned Student Loan System Look Like?
Before I reinvented a series of recommendations, I thought I would review my recommendations from the last article I wrote about the student loan situation in 2023. My recommendations in 2023, if I “were King for a day” were:
- Step 1: Separate the proposed solutions for previously issued student loans from student loans going forward. Prioritize the solutions for student loans going forward (note: Before we try to implement single solutions to reduce or forgive student loans, we should acknowledge that if students are free to make financially different decisions such as attending private or out-of-state public institutions, taxpayers should not bear the responsibility of those more costly decisions as it relates to blanket loan forgiveness).
- Step 2: Separate proposed solutions for undergraduate degree and certificate loan programs from graduate and certificate programs. Prioritize the solutions for undergraduate degree and certificate programs.
- Step 3: Phase out Parent PLUS and Grad PLUS loans over three years. Do not replace them. These programs subsidize institutions at the expense of students and their parents.
- Step 4: Publish earnings and debt information for graduates of all programs and all students at all Federal Student Aid participating institutions not just those who receive Pell grants or borrow federal loans.
- Step 5: The database above should include cumulative information for all students stacked by credentials. Graduate degree earnings and debt evaluations should consider the debt incurred for the required bachelor’s degree. Earnings for graduate degrees should consider the total cost and total debt to achieve them. These metrics are no different from the evaluation and decisions made by individuals when they decide to attend graduate school.
- Step 6: With data from the unified student and program dataset, institutions should be encouraged to find ways to reduce total costs, such as allowing students to earn a bachelor’s in three years and a master’s in four years. Law schools could be encouraged to eliminate the third year of law school. Competency-based programs could be implemented to eliminate time-in-seat requirements.
- Step 7: Implement a Gainful Employment rule for all degrees and certificates at all institutions. For degrees and certificates deemed to be important to our economy (e.g., childcare), allow institutions to reduce tuition to match required returns as a first violation resolution, or allow students to acknowledge, before enrolling in the program, that the income earned may not justify the costs incurred.
- Step 8: Implement a national classification system for general education courses like the Texas Higher Education Coordinating Board’s Core Curriculum. Institutions that do not agree to accept this will be required to place a prominent disclosure on their website and application. Students will be required to acknowledge reading this disclosure. This ensures the transferability of all general education courses, another source of added college costs.
- Step 9: Provide federal funding or financial incentives for high school and college dual enrollment programs. Courses would be required to map into the core classification system to be eligible for funding. Increased participation at the state and national level should decrease the time to degree and improve college preparation.
Step 10: Separate Pell Grants into Pell Tuition and Fees Grants and Pell Cost of Living Grants. Cost of Living Grants would not decline based on non-full-time enrollment.
Recommendations Compared to Changes Proposed by Congress
I haven’t read the House of Representatives’ Bill or the Senate’s Bill in their entirety to be confident that my earlier summary captured all their proposed changes impacting federal financial aid. As usual, I have a few thoughts related to those items that will impact financial aid.
I understand why eliminating federal loan subsidies has been proposed. It’s a huge cost for taxpayers. During my undergraduate years, I benefited from loan subsidies for my National Defense Student loans (3% interest). Opponents of the House proposals indicate that this proposal hurts low-income students. From an income perspective, I believe the subsidy should continue for Pell-eligible students. Higher-income families should not receive the subsidy.
The Grad PLUS loan program will be eliminated. Graduate loans will be available but capped at $100,000 for graduate students and $150,000 for professional students. I think those loan caps as proposed are unreasonable. The cost of tuition and fees for an in-state resident for a 36-semester-hour master’s degree is far less than the cost of tuition and fees for a private institution and is far below $100,000.
Under the existing program, costs other than tuition and fees are almost whatever a student suggests. The existing program is too generous, and I’m not sure these proposals fix that for most of the loans. One idea is to announce a phase-out period (three years would be my proposal) and let the market (financial institutions) take over these programs. One size does not fit all.
The House draft bill suggests that the Parent PLUS program will survive, but no concrete proposals are on the table. I believe this program needs to end. It subsidizes expensive schools that are unable to meet the financial needs of all students. The evidence is obvious when you see the net price (cost of attendance less all grants, federal and state) of colleges and universities for students whose family income falls into the $0-30,000 and $30,001-45,000 range.
Phase Parent PLUS loans out over a period of time, if need be, but phase them out quickly (three years or less). Colleges should be required to post the criteria that they use for awarding financial aid when they do not meet all the financial needs of an accepted student. I have no problem with the concept that a college states it is unable to meet the financial needs of all applicants.
I agree with eliminating Pell grants for students enrolled less than half time (under six credit hours). This proposal is said to impact community colleges, but many community colleges have very low to no tuition programs for local or in-state residents.
I agree that the existing income repayment programs can be consolidated into one (going forward). The existing options are far too confusing for most borrowers to understand.
I agree that colleges should be required to repay the government a portion of students’ unpaid student loans. The question is: under what conditions does the government have in mind? My first suggestion is to limit the colleges’ exposure to the portion of the loans that applies to tuition, fees, and other expenses directly received by the college.
I would base any other suggestions for risk sharing on whether Congress enacts regulations like those I proposed in Steps 3 through 7. We need to know the income outcomes for all students, not just those who borrow or receive Pell grants. We need to see the return on investment for all programs, all degrees, and certificates. We need to define what constitutes an institution’s student for risk sharing. Approximately half of all college students attend two or more institutions and more than 30% attend three. Why should an institution absorb any risk if a student completed less than one semester? All of the elements in any accountability formula need to be transparent, not described as a “black box.”
Final Thoughts
Change is hard. There are countless articles and even books about implementing organizational change. More than a few critics of higher education cite traditions and practices that appear to have remained unchanged for decades, if not hundreds of years.
Throughout the 60-plus-year history of college financial aid programs, Congress has favored student loans over grants. Unfortunately, the Bennett Hypothesis is likely a more valid explanation for the broken system. Congress ignored the impact of the higher-than-CPI college tuition inflation when Pell grants weren’t increased at the same rate as the loan programs. As Congress increased loan limits and lifted caps on loans, institutions increased tuition and increased the administrative bloat criticized by many today.
The original premises of our country’s financial aid system were solid and are still relevant. An educated populace benefits all of us. At the same time, the primary beneficiaries of the financial aid system should be students. The system evolved over the years to support colleges and universities and their escalating tuitions, fees, and other costs of attendance.
Tweaking the existing system will not solve the problem of too much aid being funded by loans, many of which will never be repaid. That’s why I suggested in Step 1 of my recommendations that we separate solutions for existing student loans from solutions for student financial aid going forward.
Several of my other steps required data collected that we do not collect today. Institutions and students vary widely in their capabilities. No solution meets the needs of all students, regardless of the institution they attend. Data, collected and published transparently, could assist with the development of a better student financial aid system.
There will be disagreements about how to fund a college education. The party controlling Congress and the White House will undoubtedly influence the system. Trace Urdan penned a recent article about the consequences of the swinging political pendulum. Better data that tracks all students’ earnings outcomes by program, degree, and institution could narrow the divide.
