A few months ago, a handful of lucky Gen Xers virtually won the lottery when the White House directed the Department of Education to “adjust” their student loan accounts, in some cases down to zero. Joel Lambdin, a 49-year-old string musician from New York City, became a poster child for this one-time forgiveness measure, as Business Insider reported. During his studies and bohemian career, Lambdin had accumulated $250,000 in student debt that remained in forbearance for more than 25 years — until suddenly, one day, a letter from the White House wiped his debt clean.
As Fox News host Jesse Watters commented to his audience: “Who paid for it? You did.”
Nobody on the right or left side of the political aisle denies the urgent need for reform in how the nation funds postsecondary education. America’s young people are being pushed into a one-size-fits-all college track that saddles many with large student debts — too often without preparing them for rewarding careers. But the left’s “solution” — transferring mountains of student debt to taxpayers, many of whom did not attend college — only encourages more bad behavior, including increased student borrowing and reckless spending by unaccountable universities.
The Biden Administration’s continuing difficulties in federal court — which just this week saw SCOTUS reaffirm the Eighth Circuit’s rejection of the Department of Education’s attempt to cancel student debt via changes to the income-driven repayment regulation — underline the need for a legislative solution. A better approach that addresses the root of mounting student debt has emerged from the House of Representatives: The College Cost Reduction Act (CCRA), a comprehensive higher education reform bill sponsored by House Education and Workforce Committee Chairwoman Virginia Foxx, R-N.C.
In her opening statement at the bill’s markup session, Rep. Foxx did not mince words: “We are scamming young Americans. College prices are skyrocketing, and college value is stagnating.” But unlike targeted debt cancellations, the CCRA focuses on the colleges themselves by requiring them to have skin in the game. Instead of students and taxpayers shouldering all the risk themselves, the bill would hold universities partially accountable for defaults by their student borrowers.
In this way, the CCRA’s core components would directly address the underlying causes of student debt concerns instead of trying to place a Band-Aid on the symptoms. The bill’s reforms would hold colleges financially accountable for overpriced degrees that leave students in debt without good job prospects. It would establish PROMISE grants to reward colleges that establish a maximum price at the time of enrollment for their entire program.
Under the bill, if poor student outcomes resulted, institutions would be financially responsible for a portion of any loans their students struggled to pay off. If a large percentage of these sub-prime student loans supported study in a specific department, the university could shed some liability by shuttering that underperforming program.
The CCRA also mandates transparency by requiring institutions to provide prospective students with clear, personalized information about the costs and expected return on investment (ROI) of their education. Taken together, these measures would create strong market incentives for schools to orient their program portfolio toward the needs of students and employers.
At the markup session, Rep. Foxx contrasted higher education with other types of purchases, highlighting the absurdity of what we are asking of young college-age Americans: “Students are the buyers and colleges are sellers. Yet in this market, the product is sold without the buyer knowing the real price,” she pointed out. “The product often underperforms expectations. And the product would not be viable at its price point without the injection of nearly two trillion taxpayer dollars industry-wide.”
Universities that offer low-ROI programs should be losing customers and going broke. Instead, bad federal policy rewards institutions that lead their students to a dead end.
This problem is too important to ignore because higher education is intimately tied to the American economy in myriad ways. University research and development facilitate the creation of new technologies; the curriculum establishes industry frameworks and provides credentials for professionals like doctors, lawyers, and engineers; and college campuses are community cultural and intellectual hubs.
The CCRA creates new incentives to improve quality by enhancing competition. Currently, universities are protected by an onerous accreditation system that gives existing institutions a competitive advantage over new entrants to the market. The CCRA will reform the accreditation process, making it more transparent and focused on outcomes rather than inputs or ideology.
By breaking up the accreditation monopoly, the bill would foster a more competitive environment, incentivizing existing universities to improve their programs and reduce costs while opening the marketplace to new and innovative institutions. This shift would not only benefit students by providing more educational options but would also pressure institutions to maintain high standards and provide value.
The benefits of the CCRA extend beyond students and parents. Taxpayers would appreciate how the CCRA restores fiscal sanity to education. The Congressional Budget Office has estimated that the bill would save taxpayers $92 billion over just the next four years, largely because it would reverse the worst excesses of the Biden administration’s debt cancellation agenda while forcing colleges to price tuition more competitively. It turns out that exploiting students so colleges can grow their endowments is not only unfair; it’s unsustainably expensive for the country.
The CCRA represents an overdue paradigm shift from the worn-out policy of giving higher education a blank check. Instead of arbitrary loan forgiveness, we need accountability. This bipartisan legislation would give universities skin in the game. When 18-year-olds agree to debt-finance four years on a college campus, they deserve to know the school has a financial incentive to prepare them for success in their career.
Andrew Cuff is a senior policy analyst for the Higher Education Reform Initiative at the America First Policy Institute.
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