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Rubio and Reform

The choice to pursue a higher education often comes with a large bill--and for many, that bill just keeps getting bigger. As tuition continues to rise, so does student loan debt. In 2012, the average student owed more than $24,000 in loans. But students across the country have faced anywhere between $54,000 to $200,000 in borrowed money for their education.(1)  Prospective students need to know that their education will be more than just a life-long burden of debt… that a postsecondary education will add value to their lives and careers.

Last Monday, Florida Senator Marco Rubio – himself no stranger to student debt – announced a set of national higher education reforms to address the expense of college and to help students determine the value of their education. His reforms, including the “Student Right to Know Before You Go Act,” highlight the fundamental need for families to know that their investment in college will net a positive return. If students are to spend thousands of dollars for their education, they have the right to know what’s included in that education and what their employment opportunities will be after graduation.

In 2011, HCM managed the Voluntary Institutional Metrics Project. This coalition of college presidents decided on some core measurements to evaluate college success, including the median annual wages of graduates five years after college. Senator Rubio’s plan embraces several of these metrics, creating a relationship between higher education accountability and a student’s ability to find quality employment after graduation. Being transparent about what outcomes a student can expect from an institution will provide students and families valuable insight as they make their college decisions. It also creates an incentive for higher education to teach the skills and knowledge students need to be relevant in the workplace of the future.

Financial aid programs are another key piece of the current predicament. We need financial aid students can access and easily understand. As part of HCM’s “Doing Better for More Students” report, we suggest simplifying financial aid in several ways. Rubio endorsed two of these ideas: a single student loan repayment system based on students’ income to prevent default, and a single tax credit to ease access to this benefit while saving taxpayers money and simplifying the tax code.

After graduation, many students are left scrambling to send in large monthly payments on their student loans. By creating a single income-based repayment plan for student loans, students would face no confusion in choosing a repayment plan and instead would make payments based on the size of their income.  As a graduate’s income grows over the course of her career, so too would the size of her monthly loan payment.  Senator Rubio rightly expressed concerns over the unintended incentives that could be created through loan forgiveness.  And he is right.  But the program could be designed in a way to minimize risk for both borrowers and taxpayers.

The senator also proposes consolidating the current array of tax credits into a single Higher Education and Skills Obtainment Credit as part of the “Higher Education & Skills Obtainment Act.”  In fact with the current 14 higher education tax credits, about 14 percent of tax filers fail to claim the credit or deduction for which they are eligible. In “Doing Better for More Students” we recommend simplifying the four major tuition related tax benefits into a single tax credit. Having a single tax benefit and IBR program for students can simplify the federal financial aid system to help students understand their option, while saving taxpayers billions of dollars.  

We are excited to see a growing number of members of Congress building a movement towards reforming our higher education system. Our current system has dramatically increased access to higher education, but it must be modernized to ensure that students not only get into college – but they succeed in college and in their lives as a result of their education. Rubio’s initiatives have the potential to bring much needed change and efficiency to the way the United States manages education and financial aid. In the end, this type of reform is good for students, institutions and the entire U.S. economy. 


(1) http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html