Senate Democrat Higher Education Bill Would Pay Colleges to Reduce Their Costs, Expand Direct Loan Program Schools Don’t Like

October 29, 2003

Boehner also noted the Senate Democrat plan lets colleges and universities continue to accept billions of dollars a year in federal subsidies without any new accountability to parents, students, and taxpayers, despite evidence questionable spending practices by institutions are contributing significantly to exploding costs. Instead of holding taxpayer-funded institutions accountable, as House Republicans propose, the Senate Democrat bill would create a new multi-million dollar federal grant program to pay selected colleges and universities to reduce their costs.

“Parents and students are being hurt by exploding college costs, and the Senate Democrat proposal would only intensify their pain,” Boehner said. “Regrettably, there is nothing at all in the Senate Democrat proposal that would discourage taxpayer-funded colleges and universities from engaging in hyperinflationary tuition hikes that hurt parents and students. Parents, students and taxpayers would continue to lack the information they need to hold institutions accountable for unfair tuition hikes and questionable spending practices. And resources that could be better spent strengthening Pell Grants for needy students would instead be used to coax schools to stay in a faltering loan program most schools don’t even like.”

The troubled direct student loan program, touted by Clinton as a good deal for students and taxpayers, has cost $4.6 billion more than expected to date, based on data published earlier this year by the Office of Management & Budget (OMB). Schools have been steadily and voluntarily dropping out of the direct loan program for years, favoring the guaranteed loan program in which the private sector, not the federal government, is the source for student loans. In addition to upsetting the careful balance between direct and traditional student lending struck by the Bush administration, Boehner said, the Democrats’ proposed direct loan expansion could hurt students by draining money away from Pell Grants, special education, the No Child Left Behind education reform law, and other education programs that enjoy bipartisan support.

“President Bush and his administration have maintained a careful balance between direct lending and more traditional lending programs that involve the private sector, and this balanced approach has resulted in the lowest student loan interest rates in history for American students. The misguided Democrat proposal offered today would upset that balance at the expense of students, schools, parents, and taxpayers,” Boehner said.

Boehner also noted the Senate Democrat bill unveiled today fails to include any reforms that would help parents and students by addressing the lack of transparency and accountability in college financing — a problem identified five years ago in the 1998 report to Congress of the National Commission on the Cost of Higher Education. As the report warned: “Institutions of higher education, even to most people in the academy, are financially opaque. Academic institutions have made little effort, either on campus or off, to make themselves more transparent, to explain their finances. As a result, there is no readily available information about college costs and prices nor is there a common national reporting standard for either.”

The shortage of information and accountability in college financing has prevented higher education consumers from fully exercising their power in the college marketplace, House Republicans argue.

Legislation introduced by Rep. Howard P. “Buck” McKeon (R-CA) would give parents and students better information about college costs, giving them more tools to fully exercise their power in the higher education marketplace. Beginning in 2011, if colleges engaged in tuition hikes that dramatically exceeded inflation for two or more consecutive years, the federal government would have the option of withholding a small portion of the school’s federal subsidy. The McKeon proposal would not give the federal government any role in setting college prices, and colleges would remain free to set tuition at the levels of their choosing.

Instead of giving consumers better information and holding taxpayer-subsidized institutions accountable for exorbitant tuition hikes that hurt parents and students, the Senate Democrat proposal — incredibly — calls for a new $5 million federal program that would provide grants to selected colleges and universities to reduce their costs. The New York Times earlier this month exposed millions of dollars in questionable spending projects at American colleges and universities for everything from giant jacuzzis to rock-climbing walls, expenditures Moody’s Investor Service confirms are significantly increasing the cost of higher education nationwide. (Winter, “Jacuzzi U.? A Battle of Perks to Lure Students,” New York Times, October 5, 2003)