Jeb Bush & Higher-Education Reform: Forget Free College 7/27/17, 9(47 AM

Jeb Bushs Plan to Help Students Pay

for College
January 18, 2016 4:00 AM

Federal higher-education policy is in shambles. The strategy of the past 40

years to increase student aid, watch tuition rise, and increase student aid
again has reached a breaking point. Federal loans flow freely with few
questions asked, giving colleges every incentive to raise tuition and enroll
more students, but less reason to worry about whether those students learn
anything. Tuition at the average public four-year college has nearly
quadrupled since the early 1980s, pushing more students into debt.
Meanwhile, low completion rates and stagnant wages have left 7 million
borrowers in default. Making matters worse, generous loan-forgiveness
programs pushed by the Obama administration effectively reward students
for borrowing more, not less.

Americans are looking to their leaders for help on this front, and most leaders
are providing the same old answers: spend more money, write more federal
rules, and hope for the best. Democrats hope to make public college tuition
free by spending hundreds of billions of dollars in new federal money and
placing state institutions under direct federal control, thereby rewarding
colleges for years of tuition increases, expanding Washingtons reach, and
sticking taxpayers with the bill.

Republicans have an opportunity to chart a different path, but most have

failed to step up. Today, Jeb Bush will. He will release a bold reform agenda
that would transform federal higher-education policy. (Full disclosure: We
worked as informal advisers on Governor Bushs higher-education plan and
think it would be a significant improvement.)

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At its heart is an idea proposed by Milton Friedman back in 1955. Rather than
issue loans, which require students to pay back a set amount with interest,
the federal government would let all eligible students finance their education
by agreeing to pay back a small share of their future income. Specifically, the
federal government would extend a $50,000 line of credit in a flexible
account to high-school graduates who wished to enroll in postsecondary
education or training. Students could draw that money down at their own
pace (within sensible limits) to pay for their education and would then repay 1
percent of their income for 25 years for every $10,000 they used. Draw down
$30,000, pay 3 percent of your income.

Thats a lot better than the deal President Obama enacted in 2010 and touted
in his State of the Union Address last week. Under his plan, student-loan
payments are capped at 10 percent of income and borrowers see their
balances grow with interest. Under Governor Bushs plan, interest is
eliminated altogether. Whats more, student payments would be capped at
1.75 times the original amount they draw down. That makes it fairer than the
current system, under which students who borrow the most those with
graduate degrees reap the biggest subsidies from loan forgiveness.

In addition, Governor Bushs plan would all but eliminate defaults by running
the repayment process through tax withholding dramatically simplifying
the process and ensuring that payments track a students income in real time.
There would be no need for costly collection agencies in this program, and no
student would have his credit wrecked for taking a federal loan.

Bushs plan demands Low-income students would still

get Pell Grants on top of the
more of colleges, giving $50,000 in available financing.
them skin in the game But instead of learning about their
when it comes to former eligibility only after applying to

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Jeb Bush & Higher-Education Reform: Forget Free College 7/27/17, 9(47 AM

students capacity to school and receiving a financial-

aid award letter, they would under
pay back into the system the new plan accumulate grant
after school. funding in their accounts over the
course of high school, the amounts
being based on their parents tax returns. Rather than filling out the
byzantine Free Application for Federal Student Aid (FAFSA), interested
parents of high-school-age kids could elect to have the IRS assess their
eligibility when they file their taxes. Using that information, the Department
of Education would, after each year of high school, credit an amount of grant
money to the account, which could be drawn down only after graduation.

Under the new system, then, a college student would start with a set amount
of federal aid in an account that follows him through his career. Students will
have incentives to spend wisely and more power to chart their own path.

Why should conservative reformers like the plan? Because it would eliminate
the systems worst-designed programs. First, it would replace the flawed
PLUS loan program which allows parents and graduate students to borrow
up to the cost of attendance with no lifetime limit with a single program
that has clear limits. It also does away with generous loan-forgiveness plans
that give students incentive to borrow more. Finally, the plan would do away
with inefficient higher-education tax benefits that have no effect on college-
going behavior, have been shown to inflate tuition, and do little to help low-
income families.

The plan also demands more of colleges, giving them skin in the game when
it comes to former students capacity to pay back into the system after school.
That means putting colleges on the hook financially for a portion of the credit
that alumni fail to repay in a timely fashion. Risk-sharing will encourage
colleges to consider their admissions policy, keep tuition low, and maximize

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Jeb Bush & Higher-Education Reform: Forget Free College 7/27/17, 9(47 AM

the value of their programs. Colleges that charge too much and fail to deliver
will have to change or lose their eligibility. Students, too, would have to meet
performance benchmarks to maintain access to their aid (as they do today).

Finally, Governor Bush also recognizes that todays students need a broader
array of options to choose from and that the system needs a healthy dose of
competition. His plan therefore would enable students to use their federal aid
for a broader array of services and providers short-term job training, prior-
learning assessments, apprenticeships, and innovations such as boot camps
and online micro-credentials. These new players would not have full access to
federal aid but would be reimbursed in amounts based on their performance,
keeping taxpayer dollars safe. An abundance of new, lower-cost paths to
credit and skills will put pressure on pricier colleges to compete.

Progressives will say this plan isnt better than free college. Thats a good
thing. Scarce taxpayer dollars should be targeted to those who need them
most, not spread across all students in a universal entitlement. Governor
Bushs plan is a big step in this direction.

Andrew Kelly and Jason Delisle are higher-education analysts who

served as informal advisers to Governor Jeb Bush on education policy.

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