DeVos’ useful reform in federal student aid

The most destructive thing that has happened to higher education in America is the Federal Student Assistance Programs (FSA) of the past 50 years. As a result of the FSA, the costs of higher education for students have skyrocketed, learning has declined, and the educational attainment of low-income Americans, those the FSA was designed to help, s ‘is deteriorated in a relative sense. If America’s worst enemies wanted to weaken future generations of Americans, they could hardly do more damage than what the FSA has done.

Education Secretary Betsy DeVos, along with Bill Bennett, the best of our Education Secretaries, are well aware of this and want changes. In a speech today to the administrators of student financial aid, she proposed useful reforms designed to simplify the FSA for student applicants as well as to improve the appalling administration of the program.

Specifically, DeVos wants to turn the FSA bureaucracy into an independent crown corporation likely somewhat similar to the Federal Reserve, ultimately accountable to the public (unlikely the devilishly designed Consumer Financial Protection Bureau) but free from the daily control of politicians controlling department managers. education. DeVos is that rare leader who genuinely wants to reduce his own power and the number of minions reporting to him in his redoubt in the heart of the Washington Marshes.

Something must be done. Let me quote DeVos’ speech today talking about the complexity of our FSA offerings: “Eight different repayment plans… each with different eligibility conditions. Over 30 variants of deferral and forbearance options. Fourteen forgiveness options. And 11 different servers, all with totally separate websites…. “

Think it’s bad: it’s much worse. As DeVos puts it, “Is it any surprise… that principal and interest are currently only being repaid for one in four loans? Almost 11 million borrowers have bad or defaulting loans? And 43% of all loans are considered “distressed”? “

Almost everyone thinks the system needs major reform. The government has failed in its task, so DeVos wants to reduce its role, making the FSA less governmental, more like lending in the dynamic private financial services sector. Why can’t the FSA be more like, say, JP Morgan Chase or the Bank of America? Why a bureaucracy that for at least a dozen years has not been able to do something as small as simplify the FAFSA (Free Application for Federal Student Aid) form can’t she just go away and let someone else try to institute some sanity in FSA?

Is the DeVos proposition perfect? Absolutely not, far from it. However, perfection is not possible in America’s governance environment today. In a perfect world, we would support more (or only) private funding for student aid. We would get schools to have their skin in the game. We would impose minimum academic standards on borrowers. We would be in favor of participating in a program without a diploma. We would offer alternatives to borrowing, such as revenue sharing agreements.

The devil is in the details, and DeVos’ speech doesn’t give them all. Simply transferring the federal administration of student aid from one federal bureaucracy (the Department of Education) to another (an independent corporation) will not solve all of the endemic rent-seeking problems in the economy. public employment in a non-competitive environment with little or no market discipline. That said, however, the adoption of this proposal (sadly unlikely in a bitterly partisan Congress largely obsessed with impeaching DeVos boss) could lead to some useful reforms: simplification of the FSA process, introduction of a few standards. modest commercial type banks, etc.

I once had a dream where I decreed a four-step plan for the Ministry of Education. First, declare it bankrupt and order all employees and others to safely move away from its headquarters on Maryland Avenue. Second, have the Air Force bomb the building. Third, have the Army Corps of Engineers clean up the debris. Fourth, build something that truly promotes learning and wisdom, perhaps an extension of the air and space museum located near the Smithsonian Institution. I think Betsy DeVos would join me in celebrating the demise of the department. In the short term, however, it would be useful to take a small step in this direction.

My most recent book is Restoring the Promise: Higher Education in America.