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S. HRG. 114–627 

REAUTHORIZING THE HIGHER EDUCATION ACT: 

ENSURING COLLEGE AFFORDABILITY 

HEARING 

OF THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

ON

EXAMINING REAUTHORIZING THE HIGHER EDUCATION ACT, FOCUSING 

ON ENSURING COLLEGE AFFORDABILITY 

JUNE 3, 2015 

Printed for the use of the Committee on Health, Education, Labor, and Pensions 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys/ 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

LAMAR ALEXANDER, Tennessee, Chairman 

MICHAEL B. ENZI, Wyoming 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

SUSAN COLLINS, Maine 

LISA MURKOWSKI, Alaska 

MARK KIRK, Illinois 

TIM SCOTT, South Carolina 

ORRIN G. HATCH, Utah 

PAT ROBERTS, Kansas 

BILL CASSIDY, M.D., Louisiana 

PATTY MURRAY, Washington 

BARBARA A. MIKULSKI, Maryland 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

TAMMY BALDWIN, Wisconsin 

CHRISTOPHER S. MURPHY, Connecticut 

ELIZABETH WARREN, Massachusetts 

DAVID P. CLEARY, Republican Staff Director 

EVAN SCHATZ, Minority Staff Director 

JOHN RIGHTER, Minority Deputy Staff Director 

(II) 

C O N T E N T S 

STATEMENTS 

WEDNESDAY, JUNE 3, 2015 

Page 

COMMITTEE MEMBERS

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, Labor, 

and Pensions, opening statement ....................................................................... 1 

Prepared statement .......................................................................................... 4 

Murray, Hon. Patty, a U.S. Senator from the State of Washington ................... 7 

Collins, Hon. Susan M., a U.S. Senator from the State of Maine ....................... 50 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 52 

Cassidy, Hon. Bill, a U.S. Senator from the State of Louisiana .......................... 54 

Bennet, Hon. Michael F., a U.S. Senator from the State of Colorado ................. 55 

Murkowski, Hon. Lisa, a U.S. Senator from the State of Alaska ........................ 58 

Warren, Hon. Elizabeth, a U.S. Senator from the State of Massachusetts ........ 59 

Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia ....................... 61 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 63 

Scott, Hon. Tim, a U.S. Senator from the State of South Carolina ..................... 65 

Casey, Hon. Robert P., Jr., a U.S. Senator from the State of Pennsylvania ...... 67 

Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin .................. 68 

Murphy, Hon. Christopher, a U.S. Senator from the State of Connecticut ........ 70 

WITNESSES

Scott-Clayton, Judith, Ph.D., B.A., Assistant Professor of Economics and Education, Teachers College, Columbia University, New York, NY ...................... 9 

Prepared statement .......................................................................................... 11 

Akers, Elizabeth, Ph.D., Fellow, Brown Center on Education Policy, The 

Brookings Institution, Washington, DC ............................................................. 18 

Prepared statement .......................................................................................... 20 

Alexander, F. King, Ph.D., B.A., M.S., President and Chancellor, Louisiana 

State University, Baton Rouge, LA .................................................................... 26 

Prepared statement .......................................................................................... 27 

Mitchell, Michael, Policy Analyst, Center on Budget and Policy Priorities, 

Washington, DC ................................................................................................... 30 

Prepared statement .......................................................................................... 31 

Kennedy, James, Associate Vice President for University Student Services 

and Systems, Indiana University, Bloomington, IN ......................................... 41 

Prepared statement .......................................................................................... 43 

(III) 

(1) 

REAUTHORIZING THE HIGHER EDUCATION 

ACT: ENSURING COLLEGE AFFORDABILITY 

WEDNESDAY, JUNE 3, 2015 

U.S. SENATE, 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:06 a.m., in room 

SD–430, Dirksen Senate Office Building, Hon. Lamar Alexander, 

chairman of the committee, presiding. 

Present: Senators Alexander, Isakson, Collins, Murkowski, Scott, 

Cassidy, Murray, Casey, Franken, Bennet, Whitehouse, Baldwin, 

Murphy, and Warren. 

OPENING STATEMENT OF SENATOR ALEXANDER

The CHAIRMAN. Good morning. We’re looking forward to this testimony. We have a terrific group of witnesses—many Senators interested—on a subject that a lot of people care about, the cost of 

attending college. 

Senator Murray and I will each have an opening statement, and 

then we’ll introduce our witnesses. After the testimony, we’ll each 

have 5 minutes of questions so that we can have a conversation. 

We’ll ask the witnesses if they’ll try to summarize their remarks 

in about 5 minutes. That will give us a chance to have a good discussion. 

The question before us is: Can you afford to pay for college? I believe the answer for most Americans is yes. For millions, 2 years 

of college is free. It is never easy to pay for college, but it is easier 

than many think, and it is unfair and untrue to make students 

think that they can’t afford college. I believe we should stop telling 

students they can’t afford college. 

Four weeks ago, I spoke at the graduation ceremonies in Morristown, TN, at the Walters State Community College. Half the students are low-income. For them, 2 years of college is free, or nearly 

free. The Pell grant is up to $5,370, and tuition for an average community college across the country is about $3,300. So for the 4 of 

10 undergraduates in the United States who attend 2-year colleges, 

college is affordable, especially in Tennessee, where our State has 

made community college free for every student, every high school 

graduate. 

Another 38 percent of undergraduate students go to public 4-year 

colleges and universities where the average tuition is about $9,000. 

That means about three out of four of our undergraduate students 

are at public institutions. 

2 

At the University of Tennessee, Knoxville, one-third of the students have a Pell grant, and 98 percent of the freshmen have a 

State Hope Scholarship, which provides up to $3,500 annually for 

the first 2 years and $4,500 for the next 2 years. So for most students, a public university is affordable, and those include some of 

the best colleges and universities in the world. 

What about the 15 percent of our students who go to private uni- versities where the average tuition is $31,000? Here is what John 

DeGioia, the president of Georgetown University, told me this 

week. At Georgetown, the cost of college is about $60,000 annually. 

He said, 

‘‘First, we determine what a family can afford to pay. Then we ask students to borrow $17,000 over 4 years. Then we ask 

the student to work 10 to 15 hours under our work-study program. Then we pay the rest of the $60,000. That costs Georgetown about $100 million a year.’’ 

He said they work with 21 other private universities that have 

the same sort of plan. He said that Harvard, Yale, Stanford, and 

Princeton are even more generous. Even for these elite universities, 

they may be affordable. 

Finally, 9 percent of students go to for-profit colleges, where tui- tion is about $15,000. 

OK. Let’s say that your family still is short of money. Taxpayers 

will loan you the money on generous terms. We hear a lot about 

these student loans. Are taxpayers being generous enough? Is borrowing a good investment? Are students borrowing too much? 

One way to answer these questions is to compare student loans 

to automobile loans. When I was 25, I bought my first car. It was 

a Ford Mustang. The bank made my father co-sign the loan because I had no credit history and no assets. I had to put up my 

car as collateral. I had to pay off the loan in 3 years. 

If you are an undergraduate student today, you are entitled to borrow at least $5,000 to $6,000 from the taxpayers each year. It 

doesn’t matter what your credit rating is. You don’t need collateral. 

The fixed interest rate for new loans is 4.29 percent this year. 

When you pay your loan back, you don’t have to pay more than 

10 percent of your disposable income each year. If that doesn’t pay 

it back over 20 years, your loan is forgiven. 

Is your student loan a better investment than your car loan? 

Cars depreciate. The College Board estimates that a 4-year degree 

will increase your earnings by $1 million, on average, over your 

lifetime. 

Is there too much student loan borrowing? The average debt of a graduate of a 4-year institution is about $27,000. That’s about 

the same amount as an average car loan in the United States. The total amount of outstanding student loans is $1.2 billion. 

That’s a lot of money, but the total amount of auto loans outstanding in the United States is about $950 billion. Excuse me. The 

student loans is $1.2 trillion. Auto loans is $950 billion. I don’t 

hear anyone complaining that the economy is about to crash because of auto loans, nor do I hear that taxpayers should do more 

to help borrowers pay off their auto loans. 

You might say, ‘‘What about the $100,000 student debts? ’’ The 

answer is debts over $100,000 make up 4 percent of student loans, 

3 

and 90 percent of those are doctors, lawyers, business school graduates, and others who have earned graduate degrees. 

Nevertheless, it is true that college costs are rising and that a 

growing number of students are having trouble paying back their 

debt. Seven million, 17 percent, of Federal student loan borrowers 

are in default, meaning they haven’t made a payment on their 

loans in at least 9 months. The total amount of loans currently in 

default is about 9 percent of the total. All those loans get paid back 

one way or another, usually. 

The purpose of this hearing is to find ways to keep the cost of 

college affordable and to discourage students from borrowing more 

than they can pay back. I’m going to submit the rest of my statement for the record to save a little time and just summarize these 

remaining points. 

I suggest five steps the Federal Government could take to make 

college more affordable and to discourage students from borrowing 

more. 

One, is to stop discouraging colleges from counseling students 

about how much they should borrow. We’ve had witnesses here 

who have told us that they’re not allowed to require additional 

counseling before students borrow. 

Two, help students save by graduating sooner. Senator Bennet 

and I and others have introduced the FAST Act which would make 

the Pell grant available year-round. 

Three, make it simpler to pay off student loans. A Tennessee college president told me last week it took him 9 months to help his 

daughter pay off her student loan, and he had the help of his financial aid officer.

Four, allow colleges to share in the risk of lending to students. 

And five, point the finger at ourselves in Congress. In my opinion, State aid to public universities is down because of the imposition of Washington Medicaid mandates and a requirement that 

States maintain their level of spending on Medicaid. In the 1980s, 

Tennessee was paying 70 percent of the cost of a college education. 

Medicaid spending was 8 percent. Today, it’s 30 percent—Medicaid 

spending—and the dollars have come right out State-supported 

universities. 

Chancellor Zeppos of Vanderbilt told us that the Boston Consulting Group estimated that it cost Vanderbilt University $150 

million in 2014 to comply with Federal rules and regulations, about 

$11,000 per student, which is more than the average tuition and 

fees for a 4-year public university. Zeppos co-chaired a report to us 

that said that universities are ensnared in a jungle of red tape. 

We should take steps to make college more affordable. I believe 

we should also cancel the misleading rhetoric that causes so many 

students to believe they can’t afford college. 

Community college is free for many. At UT Knoxville, 75 percent 

of your tuition may be aid. Even at elite private universities, college may be affordable. If you still need to borrow money, your student loan is likely to be about the same as your car debt, and your 

student loan is a better investment. 

Dr. Anthony Carnevale of Georgetown says that without major 

changes, the American economy will fall short of 5 million workers 

4 

with postsecondary degrees by 2020. It’s a better investment for 

our country, too. 

[The prepared statement of Senator Alexander follows:] 

PREPARED STATEMENT OF SENATOR ALEXANDER

The question before us is, can you afford to pay for college? I believe the answer for most Americans is, yes. And for millions, 2 

years of college is free. It is never easy to pay for college, but it 

is easier than many think and it is unfair and untrue to make students think that they can’t afford college. 

Four weeks ago, I spoke at the graduation of 800 students from 

Walters State Community College in Morristown, TN. Half those 

students are low-income. Their 2 years of college was free, or nearly free, because taxpayers provided them a Pell grant of up to 

$5,730 for low-income students and the average community college 

tuition is about $3,300.

For the nearly 4 of 10 undergraduate students in our country 

who attend 2-year institutions, college is affordable. 

Especially in Tennessee, where our State has made community 

college free for every high school graduate. 

Another 38 percent of undergraduate students go to public 4-year 

colleges and universities where the average tuition is about $9,000. 

At the University of Tennessee, Knoxville, one-third of students 

have a Pell Grant. Ninety-eight percent of in-state freshmen have 

a State Hope Scholarship, which provides up to $3,500 annually for 

freshmen and sophomores and up to $4,500 for juniors or seniors. 

For most students, 4 years at a public university is affordable 

and these include some of the best colleges and universities in the 

world. 

What about the 15 percent of students who go to private universities where the average tuition is $31,000? 

Here is what John DeGioia, the president of Georgetown University, where college costs are about $60,000 annually, told me this 

week.

First, he said, 

‘‘We determine what a family can afford to pay. Then we ask students to borrow $17,000 over 4 years. Then we ask the student to work 10–15 hours under our work-study program. Then 

we pay the rest of the $60,000 which costs Georgetown about 

$100 million a year.’’ 

He said that 21 other private universities that work together on 

financial aid have the same policies and that Harvard, Yale, Stanford and Princeton are even more generous. 

Even these so-called elite universities may be affordable. 

Finally, another 9 percent of students will go to for-profit colleges, where tuition averages $15,230 a year. 

OK, despite all this, let’s say your family still is short of money 

for college. Taxpayers will loan you money on generous terms. 

We hear a lot about these student loans. 

Are taxpayers being generous enough? Is borrowing for college a 

good investment? Are students borrowing too much? 

One way to answer these questions is to compare student loans 

to automobile loans. 

5 

When I was 25 years old I bought my first car. It was a Ford 

Mustang. The bank made my father co-sign the loan because I had 

no credit history and no assets. I had to put the car up as collateral. I had to pay off the loan in 3 years. 

If you are an undergraduate student today, you are entitled to borrow at least $5,500 from the taxpayers each year. It doesn’t 

matter what your credit rating is. You don’t need collateral. The 

fixed interest rate for new loans this year is 4.29 percent. 

When you pay your loan back, you may elect to pay no more than 

10 percent of your disposable income. And if at that rate you don’t 

pay it off in 20 years, the loan is forgiven. 

Is your student loan a better investment than your car loan? 

Cars depreciate. The College Board estimates that a 4-year degree 

will increase your earnings by $1 million, on average, over your 

lifetime. 

Is there too much student loan borrowing? 

The average debt of a graduate of a 4-year institution is about $27,000—or about the same amount of the average new car loan. About 8 million undergraduate students will borrow about $100 

billion in Federal loans next year. The total amount of outstanding 

student loans is $1.2 trillion. That’s a lot of money, but the total 

amount of auto loans outstanding in the United States is $950 billion, and I don’t hear anyone complaining that the economy is 

about to crash because of auto loans—nor do I hear that taxpayers 

should do more to help borrowers pay off their auto loans. Well, you might say, what about all those $100,000 student loan 

debts?

The answer is, debts over $100,000 make up only 4 percent of 

student loans, and 90 percent of those borrowers are doctors, lawyers, business school graduates and others who have earned graduate degrees.

Nevertheless, it is true that college costs have been rising and 

that a growing number of students are having trouble paying back 

their debt. 

According to the Department of Education, about 7 million, or 17 

percent, of Federal student loan borrowers are in default—meaning 

they haven’t made a payment on their loans in at least 9 months. The total amount of loans currently in default is $106 billion or 

about 9 percent of the total outstanding balance of Federal student 

loans—although the Department also says that most of those loans 

get paid back to the taxpayers, one way or another. 

The purpose of this hearing is to find ways to keep the costs of 

college affordable and to discourage students from borrowing more 

than they can pay back. 

Here are five steps the Federal Government could take: 

• Stop discouraging colleges from counseling students 

about how much they should borrow. Federal law and regulations prevent colleges from requiring financial counseling for students, even those clearly at risk of default who are over-borrowing. 

At a March 2014 hearing our committee heard from two financial 

aid directors who said that there was no good reason for this. One 

said, 

‘‘Institutions are not allowed to require additional counseling 

for disbursement. We can offer it, but we’re not allowed to reVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\DOCS\94970.TXT CAROL
6 

quire it. And without the ability to require it, there’s no teeth 

in it.’’ 

• Help students save money by graduating sooner. For example, our bi-partisan FAST Act would make the Pell Grant available year-round to students so they can complete their degrees 

more quickly and start earning money with their increased knowledge and skills. 

• Make it simpler to pay off student loans. Last week, a 

Tennessee college president told me it took him 9 months and the 

help of a financial aid officer to make a full one-time payment on 

his daughter’s student loan.

• Allow colleges to share in the risk of lending to students. This could provide an incentive to colleges to keep costs 

down and to students to borrow no more than they can pay back. 

• Point the finger at ourselves. Congress is one cause of higher college costs. The main reason State aid to public universities 

is down is the imposition of Washington Medicaid mandates and a 

requirement that States maintain their level of spending on Medicaid. In the 1980s when Tennessee was paying 70 percent of the 

cost of its students’ college education, Medicaid spending in Tennessee was 8 percent. Today it’s 30 percent, and the dollars have 

come right out of State-supported colleges. 

Chancellor Nick Zeppos of Vanderbilt University told this committee that the Boston Consulting Group estimated that the cost 

for Vanderbilt to comply with Federal rules and regulations on 

higher education was $150 million in 2014, equating to about 

$11,000 in additional tuition per year for each of the university’s 

students. 

Zeppos co-chaired a report commissioned by a bipartisan group 

of Senators on this committee that told us that colleges and universities in this country are ensnared in ‘‘a jungle of red tape.’’ 

We should take steps to make college more affordable but we 

should also cancel the misleading rhetoric that causes so many students and families to believe they can’t afford college. 

This is untrue and unfair. 

It’s untrue because: 

• If you’re a low-income community college student your education may be free thanks to a taxpayer Pell Grant. 

• If you’re a 4-year UT Knoxville student—between a Pell Grant 

and the Hope Scholarship—75 percent of your tuition may be covered with student aid you never have to pay back. 

• Even at elite private universities, if you are willing to borrow 

$4,500 a year and work 10–15 hours a week, the university will 

pay what your family can’t.

• If you still need to borrow money to help pay for a 4-year degree, your average debt is going to be roughly equal to the average 

car loan. And your college loan is a better investment. 

• Your student loan is a better investment for our country as 

well. Dr. Anthony Carnevale of Georgetown University says that 

without major changes the American economy will fall short of 5 

million workers with postsecondary degrees by 2020. 

The CHAIRMAN. Senator Murray. 

7 

OPENING STATEMENT OF SENATOR MURRAY

Senator MURRAY. Thank you, Mr. Chairman. I want to thank all 

of our witnesses who are here today. 

You know, for many Americans, higher education can be a ticket 

to the middle class. It’s not just important for students and their 

future. It’s also important for our economy. A highly educated 

workforce is going to help our Nation compete in the 21st century 

global economy. We should be working on ways to help more students earn their degree and gain a foothold into the middle class.

I personally know how critical this is because I saw it with my 

own family when I was growing up. When I was just 15, my family 

fell on hard times, but because of strong Federal investments, all 

of my brothers and sisters and I were able to get a quality education. We were able to afford to go to college through Pell grants 

and other Federal aid programs. 

I really come to this believing that we should ensure students 

continue to have the success and the same opportunities that my 

family did. Today, skyrocketing costs can be a major barrier for 

students to go to college and to stay in school until they complete 

their degree. 

I was in my home State of Washington a few weeks back, visiting 

with some students at Central Washington University. Many of 

those students were the first in their families to go to college. They 

told me about the troubles they and their peers had even just 

imagining being able to afford college growing up in low-income 

communities. I have heard this over and over again from students 

and families in my State. 

Last week, I met with community college students in Seattle who 

told me about the challenges of having to hold down two jobs, while 

also being full-time students, just to keep up with the rising tuition 

and fees and rent. They will still end up with loan debt when they 

graduate. That really places an unfair burden on our students and 

their ability to succeed.

In our country today, many students are doing the right thing. 

They are working hard in school and they are getting into college. 

They want to take the next steps to move into the middle class, but 

the high cost of college creates insurmountable roadblocks. Across 

the country, average annual tuition at public universities has gone 

up by more than $2,000 since the recession alone. That is an increase of nearly 30 percent. 

Over the last 20 years, tuition has gone up far faster than inflation, while real family incomes, of course, have declined, but our 

investments in need-based aid have not kept up. This has made it 

much more difficult for young people, particularly from low-income 

families, to complete a college degree. 

A high sticker price can deter some students from even applying 

to college. Quite often, increasing tuition means students have to 

borrow more and more, saddling them with the crushing burden of 

student debt. 

According to the Federal Reserve, outstanding student debt is now more than $1.3 trillion. There are now 41 million Americans, 

41 million Americans, with Federal student loan debt today, up 

from 28 million in 2007. Seven in ten college seniors who are gradVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6601 S:\DOCS\94970.TXT CAROL
8 

uating from a public or private nonprofit college have student loan 

debt, with an average of $28,400 per borrower. 

Several factors contribute to the increase in college tuition. First 

and foremost, we have seen deep State funding cuts at public colleges and universities, which more than three-quarters of our students attend. Today, 47 States are spending less per student on 

higher education than they did before the recession, according to 

the Center on Budget and Policy Priorities and the analysis of one 

of our great witnesses today. 

When student funding is cut, colleges and universities look to 

make up the difference with higher tuition, cuts to educational and 

support services, or both. A recent analysis by Demos found that 

declining State support is responsible for 100 percent of the increase in tuition at community colleges and 79 percent at research 

institutions. 

In my home State, State support per student is down more than 

28 percent since the recession. Tuition at several of our 4-year universities has increased by more than $5,000 and by more than 

$1,000 at our community colleges. 

I have heard some of my colleagues argue that Medicaid and 

higher college costs are somehow directly linked. Nothing forces 

States to fund one at the expense of the other. Ultimately, State 

budgets, just like our Federal budget, are about values and priorities. State lawmakers have tough choices to make about spending 

cuts and raising revenue to fund vital priorities like healthcare and 

higher education. 

Even as the economy has begun to recover, State investments in 

higher education have not begun to bounce back fast enough. I believe this committee should look at ways to leverage Federal investments to stem the decline in State support for higher education. 

There are other ways I believe we should look at to help students 

and families to bring down the cost of college. I believe we need to 

protect need-based grant aid so low and middle-income students 

are not priced out of attending college. Students should also have 

access to simple, transparent consumer information on costs, expected debt and earnings, and available financial aid, so consumers 

can make fully informed decisions. 

As we embark now on a bipartisan process to reauthorize the 

Higher Education Act, we’ve got to make sure that all of our students from all walks of life have the opportunity to further their 

education and secure their ticket to the middle class. Expanding 

access to higher education is a crucial part of building an economy 

that works for all of our families, not just the wealthiest few. 

I look forward to hearing from all of our witnesses today on this 

critical question of how to make sure our colleges are affordable for 

today. 

Thank you very much. 

The CHAIRMAN. Thank you, Senator Murray. 

I’m pleased to welcome our witnesses. Our first witness is Dr. 

Judith Scott-Clayton, assistant professor of economics and education at the Teachers College of Columbia University. She has appeared before us before. We welcome her. 

Our next witness is Dr. Elizabeth Akers, fellow at the Brown 

Center on Education Policy at the Brookings Institution. 

9 

Welcome, Dr. Akers. 

I’ll ask Senator Cassidy to introduce our third witness today. 

Senator CASSIDY. Thank you, Mr. Chairman. I appreciate this opportunity. I’m honored to introduce and welcome Dr. King Alexander to this hearing. Among other things, he’s actually one of my 

bosses, so I feel obligated to say what a great guy you are, King. 

By the way, you pay me nothing, but could you pay me some more? 

[Laughter.] 

He’s the president and chancellor of Louisiana State University, 

which is also my alma mater. Prior to this appointment, Dr. Alexander was president of Cal State University Long Beach, one of the 

Nation’s largest public universities, and during his tenure twice 

named as the Cal State University Student Association President 

of the Year, which represents all 23 California State Universities 

and more than 440,000 students. 

Dr. Alexander previously served as president of Murray State 

University, faculty member at the University of Illinois Champaign 

Urbana, where he was the director of Graduate Higher Education 

Programs. As a teacher and administrator, Dr. Alexander has received many honors, served on numerous higher education and 

statewide organizational leadership boards, and often asked to represent public higher education colleges and universities before Congress. I’ll also add that in our conversations, he has taught me a 

lot about higher education financing. 

Dr. Alexander, thank you for being here. 

The CHAIRMAN. Thank you, Senator Cassidy. The only reason Dr. 

Alexander got a longer introduction is because he’s from Louisiana, 

and he has a fortuitous name. 

[Laughter.] 

Next, we’ll hear from Michael Mitchell, policy analyst at the Center on Budget and Policy Priorities. He focuses on State budget and 

tax policies there and has conducted research on the effects of 

budget cuts on communities of color and the impacts of the recession on young adults. 

Our final witness is Mr. James Kennedy, associate vice president 

of the University Student Systems and Services at Indiana University in his role there. He is also the university’s director of financial 

aid. 

Welcome to all of you. Why don’t we start with Dr. Scott-Clayton 

and go right down the line. If you would each summarize your remarks in 5 minutes or so, we’ll then go to questions. 

STATEMENT OF JUDITH SCOTT-CLAYTON, Ph.D., B.A., ASSISTANT PROFESSOR OF ECONOMICS AND EDUCATION, TEACHERS COLLEGE, COLUMBIA UNIVERSITY, NEW YORK, NY 

Ms. SCOTT-CLAYTON. Chairman Alexander, Ranking Member 

Murray, and members of the committee, thank you for the opportunity to testify today. I would like to provide a bit of background 

about college affordability, in general, and then focus on what the 

Federal Government can do immediately to improve it. 

First, the college affordability crisis is real. College attainment 

has never been more important for economic mobility. Yet State 

disinvestment in public institutions has led to both increases in tuiVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 S:\DOCS\94970.TXT CAROL
10 

tion and decreases in resources available per student. Both of these 

have consequences. 

College attainment is becoming increasingly unequal by family 

income, even among fully qualified students. As the economist, 

Susan Dynarski, noted in yesterday’s New York Times, among students with top test scores, only 41 percent of the poorest kids earn 

a bachelor’s degree, compared to 74 percent of kids from highincome families. This is a tragic waste of human potential. It’s getting worse, and it demands policy solutions. 

However, in terms of Federal policy, the challenges to college affordability may be different than what people usually think. If we 

focus on the wrong problems, we’re likely to end up with the wrong 

solutions. 

First, while tuition is rising, financial aid is higher than many 

people realize, and affordable options do exist. Only about a third 

of students pay full sticker price, and the average full-time undergraduate receives about $8,000 in grant aid, as well as $6,000 in 

other aid to help pay for college. Community college students receive enough, on average, to cover tuition and even some of their 

additional living expenses. 

This is not to say that aid is sufficient to completely meet all students’ needs or that affordable options are just as good as more expensive ones. Too many students leave money on the table, failing 

to apply for aid that might help them persist to a degree, or, even 

worse, failing to apply for college at all because they assume they 

can’t afford it. 

Second, student loan debt is lower than news headlines might 

lead you to believe. More than two-thirds of college entrants borrow 

less than $10,000. Those with higher levels of debt typically have 

higher levels of degree attainment and, thus, higher earnings potential. 

Still, the risk of default is concentrated among borrowers, particularly, who attend for-profit institutions or who leave school 

without any degree at all. The standard 10-year repayment schedule unnecessarily burdens borrowers when their earnings are lowest and most variable. 

The real college affordability crisis is not that we’re spending too 

much on college and saddling graduates with too much debt. The 

true crisis is that Federal student aid has become more essential 

for more students than ever before. The complexity of the system 

is undermining its effectiveness. 

For many families, the college decision is not an exciting and joyous one, but, instead, is scary and overwhelming. Unfortunately, 

the burdens of complexity and confusion fall most heavily on the 

very students who need aid the most—low-income students, minorities, and first generation college goers—who are the least likely to 

have a family member, friend, or counselor who can guide them 

through their options and help them fill out the FAFSA. 

Too many of these students fall off the path to college early, not 

because they ever actively decide that it’s not worth it, but because 

they simply assume that they don’t have a choice. We can’t keep 

tinkering around the edges of an aid system that was designed 

nearly half a century ago. We need meaningful Federal aid reforms, and we can’t afford to wait. 

11 

* Note: The views expressed are those of the author and should not be attributed either to 

Teachers College, Columbia University; the Community College Research Center; or the National Bureau of Economic Research.

First, we should simplify the unnecessarily complex Pell eligibility formula and get rid of the FAFSA. If eligibility were based 

only on tax information already available from the IRS, and if this 

information were drawn from a prior tax year, eligibility could be 

calculated automatically without the need for a separate application, and students can learn about aid early enough for it to actually influence their college choice. 

Second, streamline Federal student loans into a single program 

with income-based repayment. Income-based repayment needs to 

be the default so that students don’t have to navigate additional 

paperwork to enroll. The adjustment of monthly payments needs to 

be automatic, much like social security deductions, so that payments are based on current income, not income from several 

months or a year ago. 

To some ears, these recommendations might sound boring, too 

technocratic, or small-minded in light of the serious challenges that 

we’re facing. Complexity and confusion are far more than just an 

annoyance for low-income families. To the contrary, research has 

convincingly shown that when the complexity of financial aid is reduced, it significantly increases enrollments for low-income students. 

Importantly, the impact of these reforms could reverberate even 

beyond financial aid. The current system requires an army of high 

school and college staff, community-based organizations, and volunteers just to help low-income students figure out the FAFSA and 

their student loan options. 

If Federal policymakers could empower students with simple, 

early information about financial aid, these precious, highly skilled 

resources could be redirected to helping students figure out where 

to go, what to study, and how to succeed in college, not just figuring out whether they can afford to go at all. 

Thank you. 

[The prepared statement of Dr. Scott-Clayton follows:] 

PREPARED STATEMENT OF JUDITH SCOTT-CLAYTON, PH.D., B.A.* 

Chairman Alexander, Senator Murray, and members of the committee: My name 

is Judith Scott-Clayton. I am an assistant professor of economics and education at 

Teachers College, Columbia University, as well as a research fellow of the National 

Bureau of Economic Research and a senior research associate at the Community 

College Research Center. Over the past decade, I have conducted my own research 

on the impacts of financial aid policy, reviewed the evidence from others doing work 

in the field, and participated in policy working groups examining financial aid and 

other college access interventions at both the State and Federal level. Thank you 

for the opportunity to testify about the current landscape of college affordability and 

to suggest promising directions for reform. 

In the following testimony, I focus on three questions: (I) What is the affordability 

crisis? (II) Should public investments be broad-based in the form of tuition subsidies, or targeted in the form of financial aid? And (III) What does research suggest 

are the highest-impact directions for Federal policy reform? 

I. WHAT IS THE AFFORDABILITY CRISIS?

The answer to this question might seem obvious: ‘‘The price of college is rising 

out of control, and too many students are getting crushed under the weight of excessive student loans.’’ Indeed, it’s no mirage that prices are rising steadily. Over the 

12 

1 Note that current interest rates are lower than 6.8 percent. 

2The gap in college enrollment rates between the top and bottom quartiles of family income 

for cohorts born in the early 1960s was 39 percentage points, rising to 51 percentage points for 

cohorts born in the early 1980s. Controlling for differences in test scores reduces the gap to 14 

percentage points in the earlier cohorts and 26 percentage points in the more recent cohorts. 

past 20 years, published tuition and fees at public 4-year institutions has more than 

doubled in real terms, and stood at $9,139 in 2014–15 (Baum & Ma, 2014). Including room and board brings costs even higher, to $18,943 on average at public 4-year 

institutions. Private institutions are more than twice as expensive, on average. 

Nearly two-thirds of bachelor’s degree graduates take on student loans, with an average cumulative amount of close to $30,000 for those who borrow. The recent recession brought these problems into high relief, as public institutions enacted particularly steep tuition increases and the dismal economy placed strains on graduates 

saddled with high debt. 

The facts cited in the prior paragraph are absolutely real. But for the reasons I 

describe below, focusing on sticker prices and aggregate debt levels alone can be deceiving, and can distract us from the real factors driving the real affordability crisis 

we face today. We do have a college affordability crisis in this country, but 

it may be different from the one most people think we have. 

1. Tuition increases in the public sector largely reflect shifts in who pays 

for college rather than increases in the cost of providing a college education. Costs themselves are not spiraling out of control: over the past decade perstudent spending has risen by just 8 percent at public research universities, 1 percent at public master’s/bachelor’s degree granting institutions, and has actually fallen by 12 percent at community colleges (Hiltonsmith, 2015). However, tuition has 

been rising much faster than costs as institutions attempt to fill in the budget gaps 

caused by declining State support. States provide public institutions with 25 percent 

less funding per student than they did just a decade ago (Mettler, 2014; Desrochers 

& Hurlburt 2014). 

2. Increases in net tuition and fees (i.e., after accounting for grants and 

scholarships) have been less dramatic than increases in sticker prices. 

While students are picking up the burden of decreased State investment, students 

today also receive substantial amounts of financial aid, so focusing on sticker prices 

alone can be deceiving. In 2013–14, full-time undergraduates received an average 

of over $14,000 in aid, including over $8,000 in grants (College Board, 2014). After 

accounting for grants and tax credits, net tuition and fees at public 4-year institutions rose by 53 percent over the past two decades, compared to a 117 percent increase in sticker prices (Baum & Ma, 2014). The picture is further distorted when 

we focus on the most headline-grabbing prices of elite private institutions, rather 

than on more affordable options that do exist. For needy students, the current maximum Pell grant covers almost two-thirds of average tuition and fees at a public 4- 

year institution. For students attending community colleges, the maximum Pell is 

larger than average tuition and fees, enabling students to use the remaining 

amount to cover books, supplies, transportation, or basic living expenses. 

3. Rising returns to college credentials means that most graduates still 

will be significantly better off financially than non-graduates, even after 

subtracting out loan repayments. After taxes, median earnings of young workers 

with associate’s degrees are about $4,000 higher per year than for those with only 

a high school diploma. If these graduates devote half of that after-tax premium to 

loan repayment, they could repay a $22,000 loan at 6.8 percent interest in 20 years 

(Baum & Ma, 2014). For bachelor’s degree recipients, the earnings premium is even 

higher; a typical graduate could repay a $30,000 loan over 10 years without devoting more than 25 percent of their extra earnings to debt repayments (Baum & Ma, 

2014).1 Thus, average levels of student loan debt are not particularly worrisome; 

what is worrisome is when students incur loans without earning a degree, or when 

they experience financial hardships that leave them unable to manage even relatively small repayments. 

So what is the true affordability crisis we’re facing? 

1. Access to college is becoming increasingly unequal by family income. 

While levels of college enrollment have risen substantially over the past 30 years, 

the gaps in enrollment and completion between high- and low-income families are 

actually greater for recent cohorts than for those born in the early 1960s (Bailey 

& Dynarski, 2011).2 Income inequality in college degree completion is even higher 

than for college entry, and these gaps cannot be completely explained away by differences in preparation. 

13 

2. Students’ college choices require tradeoffs between affordability and 

quality, but both of these can be difficult to assess in advance. Even among 

those who enter college, institutions are increasingly stratified in terms of resources, 

and these resources matter for student success. Meanwhile, college costs are increasingly individualized, varying dramatically across students within an institution, as well as across institutions for a given student. This complexity leads to suboptimal decisions: some qualified students fail to enroll anywhere, while others 

incur the costs of college but leave before ever earning a credential. 

3. Student loans are structured to inflict maximum confusion and distress. Student loans are too confusing, which leads some students to take out too 

much while others take out too little, instead working so much that they have little 

time left for their studies. Student loan repayments are structured to be unnecessarily burdensome to recent graduates and those facing temporary economic hardship. Strikingly, default rates are not strongly related to the size of students’ 

debts—those with the highest debt levels are typically students with graduate degrees and the best prospects for repayment, while those who default often do so on 

relatively small debts (Dynarski & Kreisman, 2013; Akers & Chingos, 2014a). 

Thus, the true affordability crisis is not that we, as a Nation, are spending too 

much on college and saddling graduates with too much debt. The true crisis is that 

low- and moderate-income students are being left behind, either because they fail 

to enroll or because they enroll in under-resourced institutions that do not serve 

them well. The result is a waste of human capital, which in an era of global competitiveness, is what our Nation can afford least of all. 

II. HIGH-TUITION, HIGH-AID VERSUS LOW-TUITION, LOW-AID: AN ECONOMIC PERSPECTIVE

ON THE ROLE AND FORM OF PUBLIC SUBSIDIES FOR POSTSECONDARY EDUCATION

Before delving into the research evidence, it is worth stepping back to consider 

the role and form of government subsidies to higher education in the first place, as 

well as the role for private resources. The economic rationale for public intervention 

in higher education finance rests on three potential market failures (Barr, 2004): 

1. First, the social returns to higher education may exceed the private returns, 

thus justifying broad-based public subsidies. To the extent social returns are particularly high for disadvantaged groups, targeted subsidies may be justified on both 

equity and efficiency grounds. 

2. Second, private credit markets may not enable individuals to sufficiently borrow against future income to finance optimal educational investments, thus justifying public provision of (or at least public backing of) student loans. 

3. Finally, young people—particularly those from disadvantaged backgrounds— 

may have incomplete information leading them to underestimate the benefits (or 

overestimate the cost) of higher education, thus justifying the provision of targeted 

grants to improve access. 

Economic theory and decades of empirical evidence demonstrate that public subsidies for college work: when costs to students go down, enrollment goes up and vice 

versa (Long, 2008; Deming & Dynarski, 2009; Dynarski & Scott-Clayton, 2013). 

But what form should these subsidies take? The advantage of a high-tuition, highaid model is that it makes use of private resources from those students who can 

afford to pay, while enabling any given level of public subsidies to go further by better targeting to students who need assistance most. But as higher education has increasingly moved to a high-tuition, high aid model of finance rather than a low-tuition, low-aid one, the third type of market failure—information constraints—has become increasingly problematic and is undermining the impact of financial aid. Evidence suggests that aid programs that are most effective tend to have simple, easyto-understand eligibility rules and application procedures (Dynarski & Scott-Clayton, 2006) 

An alternative way to deal with information constraints is simply to return to a 

low-tuition, low-aid financing model that lowers prices for everyone. Lower sticker 

prices certainly simplify the marketing message, and indeed, many other countries 

offer free postsecondary education. But there are risks to reliance on public finance 

that ought to be acknowledged as well: in many countries, free higher education 

comes at the cost of limited enrollment slots, and/or lower quality. As the British 

economist Nicholas Barr (2010) explains: 

Countries typically pursue three efficiency goals in higher education: larger 

quantity, higher quality, and constant or falling public spending. Systems that 

rely on public finance can generally achieve any two, but only at the expense 

of the third: a system can be large and tax-financed, but with worries about 

quality (France, Germany, Greece, Italy); or high-quality and tax-financed, but 

14 

small (the UK until 1990); or large and high-quality, but fiscally expensive (as 

in Scandinavia) (Barr, 2010, pp. 3–4). 

As the United States falls behind other countries on measures of educational attainment and social mobility and leaps ahead on measures of inequality, now is 

hardly the time to reduce our investments in education. I would advocate strongly 

against any efforts to reduce Federal student aid as well as against State trends 

toward disinvestment. But whatever the level of public funding, the stakes have 

never been higher to ensure that every dollar spent has the maximum impact—not 

just for the sake of taxpayers, but for the sake of students themselves, who make 

the biggest investments of all. 

III. WHAT DOES RESEARCH SUGGEST ARE HIGH-IMPACT DIRECTIONS FOR

FEDERAL POLICY REFORM?

Proposal 1: Dramatically simplify the aid application and renewal process 

and get rid of the FAFSA 

• Base Pell awards for most students on a limited number of data elements that 

are available from the IRS so that aid is easily predictable and no separate application is needed. • Eligibility should be based on prior-prior year tax information so that students 

know how much Federal aid they will get well in advance of college application 

deadlines. • Ideally, Pell eligibility would be fixed for several years, eliminating the need to 

reapply each year during a course of study. 

Any college student who wants a Federal loan or Pell grant has to file a Free Application for Federal Student Aid (FAFSA), the complexity of which is well-documented. With well over 100 questions about income, assets and expenses, the 

FAFSA approaches the IRS Form 1040 in length, and is longer and more complicated than the 1040A and 1040EZ, the tax forms filed by a majority of taxpayers. 

Research has documented that most of the information on the form is unnecessary; 

students’ Pell eligibility can be determined with a high level of precision using just 

a handful of elements from the form (Dynarski & Scott-Clayton, 2006, 2007; 

Dynarski, Scott-Clayton & Wiederspan, 2013). 

What sometimes gets lost in discussions about FAFSA simplification is that this 

is not a technocratic obsession with making a form shorter, this is about making 

sure that financial aid reaches the very students who need it most, before they conclude that college is out of reach. Of course, for well-off students and their families, 

the process is just an annoyance. But for lower income and first-generation students 

who are unsure about their ability to afford college, when the time comes to file a 

FAFSA it may already be too late. College preparation starts well before the end 

of high school, and expecting students to just ‘‘trust us’’ that college will be affordable when they get there is foolish policy. Students that assume college is out of 

reach may never seek out the information that would challenge that assumption, 

and may not take the steps they need academically to be prepared. 

An influential experimental study by Bettinger, Long, Oreopoulos, and 

Sanbonmatsu (2012) provides dramatic supporting evidence. In the experiment, 

some low-income families who visited a tax-preparation center were randomly selected to receive personal assistance with completing and submitting the FAFSA. 

The intervention took less than 10 minutes and cost less than $100 per participant, 

but increased immediate college entry rates by 8 percentage points (24 percent) for 

high school seniors and 1.5 percentage points (16 percent) for independent participants with no prior college experience. After 3 years, participants in the full treatment group had accumulated significantly more time in college than the control 

group. Removing the FAFSA as a barrier to enrollment thus appears to be one of 

the most cost-effective strategies for reducing inequality in college attainment that 

researchers have identified. 

While the U.S. Department of Education has made progress in recent years in reducing the number of questions on the FAFSA and enabling some students to automatically import tax information from the IRS, these improvements have had an arguably limited impact on the application experience overall. In particular, they do 

not enable students to easily discern their eligibility well in advance of application. 

Two specific reforms would achieve that goal: (1) basing eligibility for most students 

on a very limited set of factors, such as adjusted gross income and family size, so 

that prospective students could easily determine their eligibility without having to 

fill out lengthy calculators, and (2) basing eligibility only on prior prior-year income 

tax data (e.g., 2013 tax year information for students enrolling in 2015), so that all 

students could have a firm determination more than a year in advance of enrollment. 

15 

Various teams have articulated how this could work (including the Financial Aid 

Simplicity and Transparency [FAST] Act introduced by Senators Alexander and 

Bennet; as well as proposals by The Institute for College Access and Success, 2007; 

Dynarski & Scott-Clayton, 2007; Baum & Scott-Clayton, 2013). There may be more 

than one workable model, as long as the goals of communicating eligibility early and 

eliminating the need for a separate application are achieved. While some have expressed concern that States and institutions might require additional aid applications if the FAFSA is eliminated, this is a surmountable problem. A simplified formula can replicate State aid awards as well as Federal aid awards (Baum, Little, 

Ma & Sturvesant 2012); the most elite private institutions already use additional 

forms and will continue to do so. If necessary, the Federal Government could use 

inducements to encourage institutions not to add forms. 

Proposal 2: Streamline student loan options and repayment plans. 

• Remove repayment risk by automatically enrolling all students who take loans 

into an income-contingent repayment plan. 

• Ensure that students understand the loan repayment process upfront, so that 

they are not afraid to take advantage of this important tool for access. 

While student loans are unpopular, they are still an important tool for maintaining college access. Quasi-experimental evidence from the United States and other 

countries suggests that access to student loans does increase college enrollments 

(Dynarski, 2005; Solis, 2013; Wiederspan, 2015; Dunlop, 2013). While non-experimental evidence also suggests that loans are not as much of an inducement as 

grants (Heller, 2008), this is unsurprising given that loans are not worth as much 

to students. But since they also cost the government only a few cents on the dollar 

to provide, they are likely to remain a critical element in college financing. And in 

fact, the vast majority of borrowers are able to repay thanks to strong earnings 

prospects for those with higher education (Akers & Chingos, 2014a). 

Nonetheless, students’ discomfort with student loans as they are currently designed is understandable. Many students don’t even know how much they have 

taken out in loans, let alone what their monthly repayments will be (Akers & 

Chingos, 2014b). Moreover, as Dynarski and Kreisman (2013) point out, the default 

loan repayment plan asks students to pay back their student debt over a 10-year 

period right after college, when earnings are lowest and most variable, creating nontrivial repayment risk. Moreover, the current provisions intended to protect students against default (including loan deferment, forbearance, and existing incomebased, income-contingent, and extended loan repayment plans) are themselves so 

complex that many students at risk fail to take advantage of them before they get 

into repayment trouble. 

Student loans need to be restructured to minimize students’ repayment risks and 

to better communicate both risks and protections upfront. Dynarski and Kreisman 

(2013) have proposed defaulting all student borrowers into an income-contingent repayment system that would collect repayments as a proportion of income automatically through the tax system. The repayment period would extend up to 30 years, 

or until the loan is paid off, whichever comes first. 

In the world of higher education policy, the issues of student loan repayment and 

ensuring college access upfront are too often separated. But this is precisely the 

problem with student loans—too many students (and policymakers) view them as 

a burden to be dealt with on the back end rather than as a potentially powerful 

tool for increasing access at the front end. Indeed, to many students, loans hardly 

feel like a form of college aid at all; counterintuitively, a loan which is meant to 

help students afford college may instead feel like a disincentive to enrollment. But 

with streamlined, income-contingent repayments and better guidance upfront, student loans might be much less scary and a much more effective tool for promoting 

access than they currently are. 

IV. CONCLUDING THOUGHTS

Federal student aid, particularly the Pell Grant and Stafford Loan programs, are 

at the foundation of our Nation’s efforts to increase college enrollment and attainment. Given the stakes involved—for both students and taxpayers—it is essential 

that every dollar of student aid have the maximum impact. The two sets of reforms 

suggested above are research-based and have the potential to substantially improve 

the effectiveness of Federal investments in postsecondary education. 

As a concluding thought, in the ongoing policy deliberations around college affordability, it is important to keep in mind that affordability isn’t just about what or 

how students pay for college, but also about value—the quality of education that 

students receive for their investment. There is tremendous variation in quality 

16 

across institutions, and even across programs within institutions, and evidence suggests that this variation matters for students’ future outcomes (Bowen, Chingos & 

McPherson 2009). The lower-cost option is not always better for either students or 

taxpayers; programs that appear more expensive in terms of costs per enrollee may 

actually be cheaper in terms of costs per graduate (Levin & Garcia 2013). 

Thus, figuring out the cost side of the college cost-benefit equation only gets a student halfway to a good decision. While efforts to provide more accessible information 

on college quality—by providing comparisons of graduation rates, employment rates, 

and default rates are laudable, research suggests information alone isn’t enough to 

help students make good college choices (Bettinger, et al. 2012; Nu ́n ̃ ez 2014). 

Ultimately, making good college choices requires individualized, personalized 

guidance that has proven to be effective (Castleman, Page & Schooley 2013; Hoxby 

& Turner 2013; Bettinger & Baker 2011) but is difficult for the Federal Government 

to provide directly. But if Federal policymakers can simplify the cost calculus for 

students and their families, it could free up armies of high school counselors, aid 

administrators, college advisors, and volunteers nationwide that are currently devoted to helping students fill out FAFSAs and navigate the student loan system. Instead, these ‘‘boots on the ground’’ could redirect their valuable time and expertise 

to helping students identify a high-quality college option that not only fits their 

budget, but furthers their educational aspirations. And students themselves could 

worry a little less about money, and a little more about what they need to do academically to prepare for and succeed in college. 

Thank you again for the opportunity to provide these comments to the committee. 

I look forward to your questions. 

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The CHAIRMAN. Thank you, Dr. Scott-Clayton. 

Dr. Akers, welcome. 

STATEMENT OF ELIZABETH AKERS, Ph.D., FELLOW, BROWN 

CENTER ON EDUCATION POLICY, THE BROOKINGS INSTITUTION, WASHINGTON, DC 

Dr. AKERS. Good morning, Chairman Alexander, Ranking Member Murray, and distinguished members of the committee. My 

name is Beth Akers. I’m an economist by training and presently a 

fellow at the Brookings Institution, where I carry out research on 

the economics of higher education. Thank you for giving me the opportunity to be here today to share my thoughts on this important 

issue. 

I’d like to start by laying out three facts that are related to the 

issue of college affordability, none of which will be a surprise to 

anyone in this room, I’m sure. 

No. 1, students and their families are spending very large sums 

of money in pursuit of college degrees. The average student earning 

a bachelor’s degree at a 4-year private nonprofit institution will 

pay upwards of $94,000 in tuition, fees, and room and board over 

the course of their enrollment. This amount is almost twice the median household income in the United States in 2013. 

No. 2, as a Nation, we’re spending a tremendous amount of 

money on higher education, and we’re relying heavily on debt to 

support that spending. U.S. households are now holding $1.2 trillion in education debt on their personal balance sheets. 

19 

And, last, No. 3, there are more households with student loan 

debt today than ever before, and the balances that they’re holding 

are at the highest levels in history. Thirty-eight percent of young 

households are now holding some level of student debt. That’s up 

from 11 percent in 1989. Their average balances have more than 

tripled during that time from about $5,800 to almost $20,000 

today. 

Discussions of college affordability often dwell on these three 

points. Unfortunately, without additional context, they tell us almost nothing about whether or not college is affordable. Rather, 

they simply tell us that college is expensive, and, unfortunately, 

that’s not the same thing. 

Let’s consider the first point again. The price tag of our education is high. We know that. In order to know whether it’s affordable, we need to know what that price tag is actually buying. Research tells us that education buys students access to higher earnings. 

While the exact figures vary across different studies, it’s been 

consistently found that the lifelong financial dividends of a college 

education exceed the up-front cost by a very wide margin. A recent 

report from the Federal Reserve Bank of New York indicated that 

the financial return on a college degree might be about 15 percent, 

which is a very generous return by pretty much any standards. 

On the second point regarding the $1.2 trillion in outstanding 

student loan debt, as we consider the question of affordability in 

higher education, let’s not make the mistake of thinking that these 

dollars were effectively thrown into some sort of black hole of the 

economy. Rather, this debt is simply a derivative of a significant 

national investment we’ve had in higher education, which is an 

asset we believe pays large dividends to individuals and, therefore, 

necessarily also to the broader economy. 

Back to the third point on debt. It’s important that we don’t forget that debt is simply an instrument that allows borrowers to tap 

into their future earnings in order to make investments that they 

would not have otherwise been able to afford. It is not inherently 

good or bad. 

What we should be asking ourselves is whether our current system of student lending sufficiently enables this transfer of wealth 

across stages of life, from a time when an individual is reaping the 

financial benefits of an education with higher earnings to an earlier 

period when the individual is facing the up-front cost of investing 

in higher education. My recent work on this question showed that 

despite the dramatic tuition inflation we’ve seen over the last two 

decades, the month-to-month burden of student loan repayment 

has not increased for the typical borrower. 

I’ll conclude with three final points. First, college is affordable for 

the average student in the sense that it will pay for itself in the 

long run. Second, student loans are a critical tool for ensuring that 

all potential students, regardless of their wealth, are able to access 

the benefits, financial and otherwise, that higher education affords. 

And, third, college is affordable, on average, but it is inevitable 

that some students will not see a positive return on the dollars 

that they invest into higher education. Therefore, it’s important 

20 

that a streamlined system of income-driven repayment exists to ensure ex-post universal affordability. 

Thank you for your attention. I look forward to your questions. 

[The prepared statement of Dr. Akers follows:] 

PREPARED STATEMENT OF ELIZABETH AKERS, PH.D. 

INTRODUCTION

Good morning Chairman Alexander, Ranking Member Murray, and distinguished 

members of the committee. Thank you for giving me the opportunity to be here 

today to share my thoughts on this very important issue. 

My name is Beth Akers. I am a fellow at the Brookings Institution where I carry 

out research on the topic of higher education, with a particular focus on student 

loans. I’ve been engaged in research related to higher education policy since 2008 

when, in my role as staff economist at the Council of Economic Advisers, I assisted 

the Department of Education as they quickly implemented the Ensuring Continued 

Access to Student Loans Act. My testimony is informed by the time that I’ve spent 

engaged as a researcher in this field, first as a graduate student in the Economics 

Department at Columbia University and then as a Fellow at the Brookings Institution. 

BACKGROUND

Over the past two decades there’s been a dramatic increase in the share of young 

U.S. households with education debt. The incidence has more than doubled, from 

14 percent in 1989 to 38 percent in 2013 (Table 1). Not only are more individuals 

taking out education loans, but they are also taking out larger loans. Among households with debt, the mean per-person debt more than tripled, from $5,810 to 

$19,341 during the same period (2010 dollars). Median debt grew somewhat less 

rapidly, from $3,517 to $10,390 (Figure 1, Table 1). Among all households, including 

those with no debt, mean debt increased eightfold, from $806 to $7,382 (Table 1). 

Only a trivial number of households had more than $20,000 in debt (per person) 

in 1989/1992, whereas in 2013, almost one-third of those with debt had balances exceeding $20,000 (the change in the distribution is illustrated in Figure 2). The incidence of very large debt balances is greater now than it was two decades ago, but 


94970-1.eps
21 

it is still quite rare. In 2013, 7 percent of households with debt had balances in excess of $50,000 and 2 percent had balances over $100,000 (Akers and Chingos 

2014b). 

The large increases in education debt levels over the last two decades are often 

attributed to the increases in tuition charged by colleges and universities. There is 

also evidence that college students are relying more on debt to finance college costs 

and paying less out-of-pocket (Greenstone and Looney 2013b), suggesting that student behavior is changing in ways that favor loans over other ways of paying for 

college. Furthermore, there have been shifts in the level of educational attainment 

and demographic characteristics of the U.S. college-age population that could impact 

observed student borrowing. Estimates suggest that roughly one-quarter of the increase in student debt since 1989 can be directly attributed to Americans obtaining 

more education (both through increased enrollment and increased levels of attainment) while increases in tuition can explain 51 percent of the increase in debt observed during this period (Akers and Chingos 2014a). 

Recognizing that the increases in borrowing are driven by multiple factors, some 

of which are less concerning than others, highlights an important point. The growth 

in student loan debt is often discussed as a problem in and of itself. However, to 

the extent that borrowers are using debt as a tool to finance investments in human 

capital that pay off through higher wages in the future, increases in debt may simply be a benign symptom of increasing expenditure on higher education. On the contrary, if these expenditures were spent in ways that don’t pay dividends in the future, then the observed growth in debt may indicate problems for the financial future of borrowers. 

EVIDENCE ON AFFORDABILITY

Positive Return on Investment 

The most direct way to examine whether borrowers are using debt to finance investments that will pay off is to measure the financial return that their investment 

will yield in terms of lifetime earnings (relative to what they would have earned if 

they had not enrolled in a program of higher education) and compare it to the upfront cost of enrollment. Despite the recent recession, the significant economic return to college education continues to grow, implying that many of these loans are 

financing sound investments. In 2011, college graduates between the ages of 23 and 

25 earned $12,000 more per year, on average, than high school graduates in the 

same age group, and had employment rates 20 percentage points higher. Over the 

last 30 years, the increase in lifetime earnings associated with earning a bachelor’s 

degree has grown by 75 percent, while costs have grown by 50 percent (Greenstone 

and Looney 2010). There is also an earnings premium associated with attending college and earning an associate’s degree or no degree at all, although it is not as large 

(Greenstone and Looney 2013a). These economic benefits accrue to individuals, but 

also to society, in the form of increased tax revenue, improved health, and higher 

levels of civic participation (Baum, Ma, and Payea 2013). 


94970-2.eps
22 

Studies that seek to identify the causal relationship between education and earnings draw similar conclusions. A recent study, published by researchers at the Federal Reserve Bank of New York in 2014, suggested that the financial return on a 

college degree, when expressed as a rate of return, was 15 percent and had held 

steady at that level (a historic high) for the previous decade. A valuable insight from 

this work is that the return on college has not fallen, despite the growing cost of 

attendance and stagnant earnings growth across the economy. This counterintuitive 

result is driven by the decline of earnings among workers without college degrees 

(Abel and Deitz, 2014). These statistics indicating large financial returns on investments in higher education suggest that, for the average student, college will pay for 

itself in the long run. 

Month-to-Month Affordability of Student Debt 

The long run financial return is an important indicator of affordability, but it 

could potentially obscure more transient challenges faced by households. For example, an increase in debt may be affordable in the long run but impose monthly payments that squeeze borrowers in the short run, especially early in their careers 

when earnings are low. However, month-to-month affordability of student debt does 

not seem to have declined in recent history. The ratio of monthly payments to 

monthly income has been flat over the last two decades (Figure 3, Table 2). Median 

monthly payments ranged between 3 and 4 percent of monthly earnings in every 

year from 1992 through 2013. Mean monthly payments, which are larger than median payments in each year due to the distribution being right-skewed, declined 

from 15 percent in 1992 to 7 percent in 2013 (Akers and Chingos 2014b). 

The ratio of monthly payments to monthly income stayed roughly the same over 

time, on average, at each percentile and for each education category. By this measure, the transitory burden of loan repayment is no greater for today’s young workers 

than it was for young workers two decades ago. If anything, the monthly repayment 

burden has lessened. 

This surprising finding can be explained in part by a lengthening of average repayment terms during the same period. In 1992, the mean term of repayment was 

7.5 years, which increased to 12.5 years in 2013. This increase was likely due primarily to loan consolidation, which increased dramatically in the early 2000s (Department of Education 2014, S–16). Loans consolidated with the Federal Government are eligible for extended repayment terms based on the outstanding balance, 

with larger debts eligible for longer repayment terms. Average interest rates also 

declined during this period, which would also lower monthly payments (Table 3). 

In order to appreciate how much of a burden monthly payments place on households, it’s useful to compare student debt payments to other household expenses. In 


94970-3.eps
23 

Figure 4 average monthly student loan payment (based on data from 2010) is plotted together with the average monthly expenditure in each major consumption category (this data comes from the 2012 Consumer Expenditure Survey, which is administered by the Bureau of Labor Statistics). The largest categories of monthly consumption expenditure are housing ($1,407), transportation ($750) and food ($588). 

Monthly student loan payments are relatively small compared to these expenses, 

and at $242, are closer in scale to monthly spending on entertainment ($217), apparel ($145) and health care ($296). There is relatively little variation in monthly 

loan payments (due to consolidation with longer repayment terms for larger debts) 

(Akers 2014a). 

Student Debt is a Poor Indicator of Economic Hardship 

It might seem reasonable to be most concerned about the plight of individuals 

with large outstanding student loan balances, but evidence suggests that these individuals may not be faring any worse than households with smaller balances or no 

student debt at all. The highest rates of financial distress, as indicated by late payments on household financial obligations, are seen among households with the lowest levels of student loan debt. Households with large debts tend to have higher levels of educational attainment and earnings, on average, and miss bill payments less 

often. Among households with outstanding education debt in the lowest quartile of 

the debt distribution ($0–$3,386), 34 percent report having made a late payment on 

a financial obligation in the past year compared with 26 percent of households with 

education debt in the highest quartile (≥ $18,930). Households with student loan 

debt do not show indications of financial distress more often than households without student loan debt (Akers 2014b). 

CONCLUSIONS

This body of evidence contradicts the notion that a crisis of college affordability 

exists on a macro level. However, it is undeniable that many individuals and households are facing serious economic hardship that can be explained completely or in 

part by their spending on higher education. Like any other investment, the returns 

to higher education are not guaranteed. While the average student will see a large 

financial return on the dollars they spend on higher education, some students will 

find that their investment won’t pay off. We can reduce the frequency of this occurrence by ensuring that students have the information and resources they need in 

order to make good decisions about college enrollment. For instance, a national level 


94970-4.eps
24 

data base that reports earnings by institution would succeed in helping students to 

avoid enrolling at institutions that do not have a track record of success. This would 

succeed in creating more institutional accountability without additional government 

intervention. 

An additional way to improve outcomes for students is to simplify the Federal 

lending program both on the front end, with the menu of services, and also on the 

backbend with a more streamlined system of repayment. Recent work on this issue 

has revealed that students have relatively little understanding of their financial circumstances while they are enrolled in college. About half of all first-year students 

in the United States seriously underestimate how much debt they’ve taken on. Even 

more concerning is the fact that among all first-year students with Federal student 

loans, 28 percent report having no Federal debt and 14 percent report that they 

have no debt at all (Akers and Chingos 2014c). Removing the complexity of the Federal aid system could potentially succeed in making it easier for students to comprehend their circumstances and to make better informed decisions. 

However, some of the uncertainty about the payoff of college is unavoidable. For 

example, some students will invest in developing skills that will ultimately become 

obsolete due to unanticipated technological or policy innovation. It’s important that 

the government provide insurance against these types of occurrences both for the 

sake of ensuring individual welfare and also to discourage debt aversion among potential students. Income-driven payment programs, like the ones currently in place 

for the Federal student lending program, are the appropriate tool for providing a 

safety net to borrowers. 

In sum, college is affordable in the sense that on average it will pay for itself in 

the long run with heightened wages. However, to ensure that college is universally 

affordable ex-post, it’s necessary to maintain a robust system of income-driven repayment such that students are insured against their investment not paying off. 

Last, we need to ensure that both the system of Federal lending and the safety nets 

that exist to support it are simple enough that the benefits of these policy innovations can be fully realized. 

REFERENCES

Jaison R. Abel and Richard Deitz, ‘‘Do the Benefits of College Still Outweigh the 

Costs?’’ Federal Reserve Bank of New York Current Issues in Economics and Finance, vol. 20, no. 3 (2014), available at http://www.newyorkfed.org/research/ 

currentlissues/ci20–3.html. 

Elizabeth Akers and Matthew M. Chingos. 2014a. ‘‘Is a Student Loan Crisis on the 

Horizon?’’’ Brown Center on Education Policy, Brookings Institution, available at 

http://www.brookings.edu/research/reports/2014/06/24-student-loan-crisisakers-chingos. 

Elizabeth Akers and Matthew M. Chingos. 2014b. ‘‘Student Loan Update: A First 

Look at the 2013 Survey of Consumer Finances.’’ Washington, DC: Brown Center 

on Education Policy, Brookings Institution, available at http://www.brookings.edu/research/papers/2014/09/08-student-loan-update-akers-chingos. 

Elizabeth Akers and Matthew M. Chingos. 2014c. ‘‘Are College Students Borrowing 

Blindly?’’ Washington, DC: Brown Center on Education Policy, Brookings Institution, available at http://www.brookings.edu/research/reports/2014/12/10-borrowing-blindly akers-chingos. 

Elizabeth Akers. 2014a. ‘‘The Typical Household with Student Loan Debt.’’ Washington, DC: Brown Center on Education Policy, Brookings Institution, available at 

http://www.brookings.edu/research/papers/2014/06/19-typical-student-loandebt-akers. 

Elizabeth Akers, 2014b. ‘‘How Much is Too Much? Evidence on Financial Well-Being 

and Student Loan Debt.’’ Washington, DC: Center on Higher Education Reform, 

American Enterprise Institute, available at http://www.aei.org/publication/howmuch-is-too-much-evidence-on-financial-well-being-and-student-loan-debt/. 

Sandy Baum, Jennifer Ma and Kathleen Payea. 2013. ‘‘Education Pays, 2013.’’ 

Washington, DC: The College Board, available at https://trends.collegeboard.org/ 

sites/default/files/education-pays-2013-full-report.pdf. 

Department of Education. 2014. ‘‘Student Loans Overview: Fiscal Year 2015 Budget 

Proposal.’’ Washington, DC: U.S. Department of Education. http://www2.ed.gov/ 

about/overview/budget/budget15/justifications/s-loansoverview.pdf (accessed 

June 13, 2014). 

Michael Greenstone and Adam Looney. 2010. ‘‘Regardless of the Cost, College Still 

Matters.’’ Brookings on Job Numbers blog, October 5. http://www.brookings.edu/ 

blogs/jobs/posts/2012/10/05-jobs-greenstone-looney. 

25 

Michael Greenstone, and Adam Looney. 2013a. ‘‘Is Starting College and Not Finishing Really that Bad?’’ Washington, DC: Brookings Institution, Hamilton 

Project, available at http://www.hamiltonproject.org/files/downloadslandl 

links/MaylJobslBlogl20130607lFINALl2.pdf. 

Michael Greenstone, and Adam Looney. 2013b. ‘‘Rising Student Debt Burdens: Factors behind the Phenomenon.’’ Brookings on Job Numbers blog, July 5, available 

at http://www.brookings.edu/blogs/jobs/posts/2013/07/05-student-loans-debt 

burdens-jobs-greenstone-looney. 

Table 1.—Incidence and Amount of Debt Over Time, Age 20–40 

Year Incidence 

[In percent] 

Mean 

Debt 

Those with Debt 

Cell size 

Mean Median 

1989 ........................................................................................ 14 $806 $5,810 $3,517 971 

1992 ........................................................................................ 20 $1,498 $7,623 $3,730 1,323 

1995 ........................................................................................ 20 $1,475 $7,521 $3,577 1,429 

1998 ........................................................................................ 20 $2,539 $12,826 $8,027 1,362 

2001 ........................................................................................ 22 $2,881 $12,939 $6,156 1,307 

2004 ........................................................................................ 24 $3,402 $14,204 $7,503 1,246 

2007 ........................................................................................ 28 $4,583 $16,322 $9,728 1,144 

2010 ........................................................................................ 36 $6,502 $17,916 $8,500 1,865 

2013 ........................................................................................ 38 $7,382 $19,341 $10,390 1,623 

Notes: All amounts are in 2010 dollars. 

Source: Akers and Chingos 2014b 

Table 2.—Payment-to-Income Ratios 

Year 

Payment to Income 

Monthly 

payment 

Monthly 

Mean payment 

[In percent] 

P10 

[In percent] 

P25 

[In percent] 

P50 

[In percent] 

P75 

[In percent] 

P90 

[In percent] 

1992 ............ 15 1 2 4 10 20 $431 $4,367 

1995 ............ 11 1 2 3 7 15 $226 $4,433 

1998 ............ 11 1 2 4 10 22 $296 $4,694 

2001 ............ 6 1 2 4 7 13 $266 $6,323 

2004 ............ 6 1 2 3 6 11 $194 $5,247 

2007 ............ 5 1 2 4 6 10 $218 $5,789 

2010 ............ 7 1 2 4 7 15 $234 $5,424 

2013 ............ 7 1 2 4 8 16 $254 $5,420 

Notes: Includes households age 20–40 with education debt, wage income of at least $1,000, and that were making positive monthly payments. 

Source: Akers and Chingos 2014b 

Table 3.—Average Loan Terms and Interest Rates, Largest Loan 

Year Term 

Interest 

Rate 

[In percent] 

1992 ............................................................................................................................................................ 7.5 8.3 

1995 ............................................................................................................................................................ 8.8 8.3 

1998 ............................................................................................................................................................ 10.5 8.4 

2001 ............................................................................................................................................................ 9.9 8.0 

2004 ............................................................................................................................................................ 13.7 4.7 

2007 ............................................................................................................................................................ 14.1 5.5 

2010 ............................................................................................................................................................ 13.4 5.5 

2013 ............................................................................................................................................................ 12.5 5.9 

Notes: The average loan term and interest rate are calculated based on the largest education loan held by each household in the SCF. 

Source: Akers and Chingos 2014b. 

The CHAIRMAN. Thank you, Dr. Akers. 

Dr. Alexander. 

26 

STATEMENT OF F. KING ALEXANDER, Ph.D., B.A., M.S., PRESIDENT AND CHANCELLOR, LOUISIANA STATE UNIVERSITY, 

BATON ROUGE, LA 

Mr. ALEXANDER. Thank you, Chairman Alexander and members 

of the HELP committee, for this opportunity to share with you 

some of my thoughts regarding the important national issue of college and university affordability and access. 

I’m president of Louisiana State University, which is a LandGrant, Sea-Grant, and Space-Grant university with an enrollment 

of nearly 44,000 students. We take great pride in providing highquality educational opportunities at a student cost well below the 

national average. Our State ranks third lowest in student indebtedness in the country, and we’d like to stay that way. That’s why 

we’re asking you for your help. 

This morning, I’d like to focus my comments on the ongoing and 

greatest challenge facing public higher education today, which is 

the continual decline of State appropriations. I will also provide 

some policy recommendations and proven examples of how Federal 

Government can actually better utilize its leverage to ensure that 

there will be affordable public colleges and universities for students 

in every State for years to come. 

What no one expected in 1972 was that States would get out of 

the higher education funding business. What no one expected in 

1981 was that State—that’s when State reduction started to occur, 

and a 31⁄2 decade decline we’ve experienced in the State public 

funding decline. The result has been that State funding for higher 

education sits currently around 48 percent below where it was in 

State tax effort in 1981, which measures State spending by the percentage of per capita income by State. 

In other words, States began getting out of the higher education 

business to the point that the Federal Government has now become 

the primary funding source through tuition and fee-based programs, which it wasn’t intended to be in 1972. For example, if current State funding trends persist, Colorado will become the first 

State not to spend a penny on public higher education less than a 

decade from now. 

This means that existing primary school children in Colorado 

will have no affordable public college or university options in less 

than a decade. States that will soon follow Colorado in abandoning 

their public commitments will be Louisiana, 2 years later; Massachusetts; Rhode Island, 2 years later; Arizona in 2030; South Carolina in 2031; Vermont, 1932; Oregon, 1934; and so on. 

The interlocking relationship between student aid, public State 

funds, and student tuition increase is indisputable. If we do not 

look to new Federal policies to address this issue, we will continue 

to decline, watching our 25- to 34-year-olds rank 12th in the OECD 

standards in terms of college completion, compared to our older 

population ranking first—our 55- to 64-year-olds—in OECD standards. 

To assist in addressing the college affordability issue, first, we 

need to review all Federal policies to ensure that price sensitivity 

is not incorporated into the formulas. Campus-based Federal funding, SEOG, and work-study actually provides additional funding to 

27 

institutions that charge more, incentivizing institutions to charge 

more. 

For example, the California State University, with over 230,000 

Pell grant eligible students, receives the same amount of SEOG 

funding as the Ivy League institutions with only 10,000 Pell grant 

students. The Ivy League, with 10,000 Pell grant students, receives 

twice the work-study as California State University with 230,000 

Pell grant students. 

However, I would say the most important Federal policy recommendation that I would make today is to use Federal leverage 

to ensure that States maintain their public support of higher education. Today, the diversity of American higher education is, indeed, threatened by the elimination of public college and university 

student options. 

The time has come for a new Federal partnership. Federal partnerships are not new to higher education. We are a Land-Grant 

university, which was a Federal partnership established in 1862. 

That was a Federal-State partnership using Federal leverage. 

More recently, Federal leverage was used with the passage of the 

1972 Higher Education Act, where we encouraged States through 

the SSIG program, of which only 19 had State student aid programs. Federal matching programs encouraged States with matching funds to adopt State student aid programs. Within 4 years, 

nearly 40 States had adopted those programs. 

Further evidence was found with the stimulus packages. If the 

stimulus packages did not include the maintenance-of-effort provisions that said that States could not accept stimulus funds if they 

cut their budgets below 2006 funding levels, then those funds 

would not have been received by States. Nearly 20 States adopted 

the policies that cut their budgets nearly to the Federal limit of 

where they could go, but they would not cross the Federal leverage 

line. 

Before we increase Federal spending awards and expand Federal 

loan caps, we need to make sure that States are staying in the 

game, making sure that States are not disinvesting. Before we put 

$200 more into a Pell grant, we need to ensure that the back door 

of these houses is closed so that—it doesn’t do a Pell grant student 

any good if we increase it by $200 when our States are increasing 

their tuition and fees and $900. 

Now is the time that we do need Federal leverage to make sure 

States do not abandon their responsibilities to public higher education. 

Thank you very much. 

[The prepared statement of Dr. Alexander follows:] 

PREPARED STATEMENT OF F. KING ALEXANDER, PH.D., B.A., M.S. 

Thank you, Mr. Chairman and members of the HELP (Health, Education, Labor, 

and Pensions) Committee, for this opportunity to share with you some of my 

thoughts regarding the important national issue of college and university affordability and access.

I am president of Louisiana State University, which is a Land-Grant, Sea-Grant, 

and Space-Grant university with a total enrollment of more than 44,000 students. 

We take great pride in providing high-quality educational opportunities at student 

costs well below the average of our ‘‘Flagship’’ and ‘‘High Research’’ public university peers. 

28 

Before making my comments, I wanted you to know that I have been very fortunate to represent public colleges and universities in 2003 and 2007 to the U.S. 

House Committee on Labor and Education on this very same topic of college affordability. Because this issue has clearly not been resolved in the intervening years and 

continues to demand congressional attention, the time has come to explore new and 

proven policy directives to address college affordability and access.

This morning I would like to focus my comments on the ongoing and greatest 

challenge facing public higher education today, which is the continual decline of 

State appropriations. I will also provide some policy recommendations and proven 

examples of how the Federal Government can better utilize its fiscal leverage to ensure that there will be affordable public college and university options for students 

in every State.

STATE APPROPRIATIONS DECLINE

At the inception of the Higher Education Act in 1965 and throughout subsequent 

Federal debates that culminated in 1972 with the creation of numerous Federal 

grant and loan programs, it was assumed that any new Federal funding policies 

would simply supplement State funding, not replace it. Many policymakers believed 

that States would always be the primary funding source for public higher education 

with the Federal Government playing only a small complementary role, which is not 

the case today. Another assumption that would prove to be a major miscalculation 

on the part of Federal policymakers was that States would of their own volition 

maintain or increase their current levels of fiscal commitment to public higher education. To the detriment of public higher education institutions and leaders, this 

presupposition would prove quite erroneous as State governments began to reduce 

funding less than 10 years later in 1981, resulting in a continual ballooning of student tuition and fees that we have steadily experienced in State colleges and universities to this day. 

What no one could have anticipated in 1981 was that the State reductions experienced in the early 1980s were just the beginning of a 31⁄2 decade decline in State 

support for public higher education. The result has been that State funding for higher education sits currently around 48 percent to 50 percent below where it was in 

1981 in State tax effort, which measures State spending as a percentage of higher 

education support by State per capita income.

In other words, States essentially began getting out of the higher education funding business, to the point that the Federal Government has now become the primary 

funding source through tuition and fee-based programs. For example, if current 

State funding trends persist, Colorado will become the first State not to spend a single penny on public higher education in 2025. This means that existing primary 

school children in Colorado will have no affordable public college or university options in less than a decade. States that will soon follow Colorado in abandoning all 

their public higher education funding include my own State Louisiana in 2027, Massachusetts and Rhode Island in 2029, Arizona in 2030, South Carolina in 2031, 

Vermont in 2032, Oregon in 2034, and Wisconsin/Minnesota/New York/Montana in 

just a little more than 20 years from now.

As many recent reports have clearly indicated, while State appropriations continue to vanish from the higher education landscape, student tuition and fees for 

the vast majority of American students will continue to increase, forcing further 

growing reliance on Federal direct student aid grant and loan programs. In a report 

released earlier this year, ‘‘Pulling Up the Higher Ed Ladder: Myth and Reality in 

the Crisis of College Affordability’’ by Robert Hiltonsmith of the Demos organization, declining State support was responsible for almost 80 percent of net tuition increases from 2001–11. According to the report, as States withdraw from their responsibilities—as they have done since the early 1980s—tuition is raised to keep 

universities afloat. 

The interlocking relationship between public institutions, tuition and fee policies, 

and State appropriations is an area that seems to be pervasively misunderstood by 

both taxpayers and policymakers. Over the last decade, other studies have highlighted the instability of State appropriations and the effects of State policy on public institution tuition changes. In a congressionally mandated NCES study on college 

costs and prices in 2006, it was shown that State general fund appropriations were 

by far the most significant factor in determining public college and university resident tuition rates. 

If we don’t look to new Federal policies to address this ongoing State funding dilemma, we will continue to witness an international (OECD) decline in the percentage of our 25–34-year-old population with college degrees, which has fallen to a 

ranking of 12th. This declining international ranking is even more problematic 

29 

when you consider that our 55–64-year-old population ranks first in the same OECD 

category. If our young people can’t afford college, particularly public higher education, we will continue to plummet in these metrics and lose our international 

competiveness on a variety of levels. 

NEW FEDERAL POLICY DIRECTIVES

To assist in addressing the college affordability issue, a number of Federal initiatives should be considered. First, review all Federal student aid programs to eliminate or reduce ‘‘price sensitivity’’ formulaic factors. Many Federal student aid programs used price as an important financial component in qualifying for larger Federal assistance awards. Two of those programs are considered campus-based Federal 

assistance programs and include the Secondary Educational Opportunity Grant program and the Work-Study program. Evidence of the dramatic variations in award 

amounts exists throughout the United States. As just one primary example, in 

2013–14, SEOG funds distributed to all eight high-cost Ivy League institutions totaled about the same Federal funding as the total amount received by all 23 California State Universities. In the Federal Work Study program in 2013–14, nearly 

twice as much funding was granted to Ivy League campuses than the entire California State University. This is particularly problematic when you consider that the 

eight Ivy League campuses have about 100,000 total students with only around 

10,000 Pell Grant or lower income students combined, while the California State 

University has 430,000 students and nearly 200,000 Pell Grant or lower income students. 

Second, create Federal pressure to have States review their State student aid programs to eliminate or reduce ‘‘price sensitivity’’ as a formulaic factor. One important 

challenge created by the success of the Federal SSIG and LEAP program is that 

many of these State-based programs are extremely price sensitive, which means 

award amounts and the ability to receive awards are based in part on what the institution charges. Programs such as these exist in many States and a few have even 

been named ‘‘tuition equalization’’ programs. This essentially incentivizes many private not-for-profit and for-profit institutions to inflate pricing. Perhaps the most 

egregious example of this problem resided in the State of California through their 

Cal Grant A program. Three years ago, it was discovered after many years of State 

student aid funding that the average student award from this program varied from 

around $5,000 for California State University students to an average of $10,000 to 

$13,000 to students attending high-priced private and for-profit institutions—with 

no regard for the quality of education these students were actually receiving. These 

figures are also problematic since for-profit institutions not only receive larger State 

student aid grants in some cases like California, but enroll only 11 percent of the 

Nation’s student population while acquiring nearly 30 percent of all Pell Grants and 

registering approximately 47 percent of all student loan defaults. 

Third, whenever feasible, maintain Federal direct student aid loan limits and 

caps. When Federal student aid loan limits are increased, many institutions are 

incentivized to also increase their student tuition and fees. One example was the 

Middle Income Assistance Act in 1978, which expanded loan availability to middleand upper-income students eventually increasing loan caps years later. The result 

was that student loan debt increased rapidly, as did student tuition and fees. Many 

believe the combination of both State appropriation reductions in the early 1980s 

and the increased availability of Federal student loans at the same time dramatically fueled the student tuition and fee increases of that decade, creating the $1.3 

trillion student loan problem we face today. 

Finally, my most important Federal policy recommendation is to utilize Federal 

financial leverage to ensure that States maintain their public support of higher education. Today, the diversity of American higher education is threatened due to the 

elimination of affordable public college and university student options. The time has 

come for a Federal-State partnership or match to incentivize States to continue their 

public investments in their public colleges and universities. 

Federal-State partnerships are not entirely new to higher education in the United 

States. Perhaps our greatest example of how effective such Federal-State partnerships have been is the Morrill Act or Land-Grant Act of 1862. In this case, Federal 

lands were given to State governments throughout the United States in exchange 

for the creation of new public colleges and universities primarily developed to educate more engineers, agricultural scientists, and military science graduates. This 

Federal-State partnership could arguably be considered the foundation of what led 

the United States to become the world’s leader in higher education development a 

century later. The success of the Morrill Act also led to the creation of the second 

30 

Morrill Act in 1890, which required each State from the former Confederacy to designate a separate land-grant institution for persons of color.

More recently, Federal leverage was used again with the passage of the 1972 HEA 

reauthorization with the creation of the State Student Aid Incentive Grant (SSIG). 

This was a new Federal matching program designed to encourage States to create 

State student aid programs or increase funding to existing ones. In creating SSIG, 

the Federal Government sent a clear message to States to either reallocate funds 

to begin supporting these programs or match additional State funding to these grant 

programs. The Federal matching funds proved extremely effective and encouraged 

20 additional States to adopt State student aid programs within 4 years. This is 

proof positive that Federal matching programs work when it comes to incentivizing 

State funding behavior.

Further evidence of the effectiveness of Federal leverage can be found in the reauthorization efforts of the Higher Education Act in 2007 when a first ‘‘maintenance 

of effort’’ (MOE) provision was added to protect higher education from dramatic 

cuts. Then in 2008 and 2009, the same MOE language was successfully transferred 

into the American Recovery and Reinvestment Act (ARRA), which allowed for the 

use of education stimulus funds only if States didn’t cut their higher education 

budgets below 2006 State funding levels. Ironically, a few months after the MOE 

was passed by Congress, a critical mass of States began to cut their higher education budgets to the very edge of where Federal penalties would apply. The Federal 

leverage worked well and States remained very reluctant to cross the Federal line, 

ultimately stemming the mass State disinvestment trend across the Nation.

Before we further increase Federal student aid awards or expand Federal student 

loan caps, we need to ensure that States don’t continue disinvesting in their public 

higher education institutions. It makes little sense to increase a Pell Grant award 

by $200 or $300 when State funding reductions force public institutions to increase 

tuition and fees by $900. In short, we need to close the back door before we continue 

putting money through the front door. None of my other recommendations will 

make a difference without Federal incentives for State higher education support. 

Fifty years after the Higher Education Act was passed, the time has come for us 

to create a new Federal/State partnership that could incentivize States to maintain 

or even increase their levels of support. This could reverse the detrimental State 

funding trends that we continue to experience and perhaps save American public 

higher education by ensuring its accessibility and affordability for future generations to come. 

The CHAIRMAN. Thank you, Dr. Alexander. 

Mr. Mitchell. 

STATEMENT OF MICHAEL MITCHELL, POLICY ANALYST, CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, 

DC 

Mr. MITCHELL. Chairman Alexander, Ranking Member Murray, 

members of the committee, thank you very much for this opportunity to testify on college affordability. My name is Mike Mitchell. 

I’m a policy analyst with the Center on Budget and Policy Priorities, a policy institute which focuses on research and analysis on 

budget and tax policy issues at the State and Federal level. My research has focused on State investments in higher education. 

My oral remarks today will hone in on three key points. First, 

States have made dramatic cuts to higher education funding since 

the onset of the 2008 recession. Over that same time period, second, we have seen significant increases in tuition at public 4-year 

colleges. Then, finally, as this shift from State investment to higher 

tuition has occurred, there is the potential for harm to students, 

particularly low-income and students of color, at public 4-year and 

2-year colleges. 

State and local tax revenues play a critical role in funding higher 

education. Unlike private institutions, which may rely upon private 

gifts or large endowments, public 2- and 4-year colleges typically 

31 

rely on State and local appropriations to fund teaching and education purposes. 

In 2014, State and local dollars constituted slightly more than 

half of educational revenues used directly for teaching and education. For public colleges and universities, State support today is 

well below what it was in 2008. In aggregate, States are spending 

$13.3 billion less on higher education today than they were in 

2008. On a per-student basis, we see that this is about a 20 percent 

decline in higher education funding across 2- and 4-year public colleges. All but three States, as Senator Murray pointed out—Alaska, 

North Dakota, and Wyoming—are spending less per student today 

than they were before the recession. 

Over that same time period, we have seen increases in tuition at 

public 4-year colleges, in some States, dramatically so. In six 

States, for example, we’ve seen tuition increases above 60 percent—average annual increases above 60 percent. Over that same 

time period, in Arizona, the No. 1 State in tuition increases, it rose 

by 84 percent. 

Encouragingly, I will say that over the past few years, we have 

seen States start to put dollars back into their higher education 

systems. However, that reinvestment has not been enough to make 

up for the total amount of cuts. Again, over that same time period, 

as States have started to reinvest, we have seen tuition increases 

that have been much more moderate than they were over the worst 

years of the economic recession and major years of cuts. 

Again, what does this mean for students? It’s important to keep 

in mind that for low-income students and students of color, sticker 

shock is a very real phenomenon, and that, for these students, they 

are more likely to borrow and to take on higher levels of debt to 

fund their education, even at public 4-year institutions. 

Student debt levels overall for all students are increasing, and 

the share of students taking on debt is also going up. This can 

present a host of challenges threatening college completion, which 

is another population of students we need to be very mindful of in 

terms of having debt but not necessarily the diploma to be able to 

pay this off, but then also for those who do graduate, what higher 

levels of debt can do in terms of pushing off major lifetime milestones and other important actions and activities. 

Moving forward, strengthening State investments in higher education will play a huge role, at the very least, in ensuring that 

more students can enter higher education and complete. In order 

to make this happen, State policymakers will need to make the 

right tax and budget choices over the coming years and must avoid 

additional cuts to higher education that will make it much harder 

for students to enter and complete in college. 

Thank you very much for your time, and I look forward to answering any questions you may have. 

[The prepared statement of Mr. Mitchell follows:] 

PREPARED STATEMENT OF MICHAEL MITCHELL

Thank you for the invitation to testify today. I am pleased to be able to speak 

to you about college affordability, State support for higher education, and how rising 

costs have affected students across the country. I am Michael Mitchell, Policy Analyst at the Center on Budget and Policy Priorities. We are a Washington, DC-based 

policy institute that conducts research and analysis on budget, tax, and economic 

32 

1State Higher Education Executive Officers Association, April 2015. 

2 CBPP calculation using the ‘‘Grapevine’’ higher education appropriations data from Illinois 

State University, enrollment and combined State and local funding data from the State Higher 

Education Executive Officers Association, and the Consumer Price Index, published by the Bureau of Labor Statistics. Since enrollment data are only available through the 2012–13 school 

year, enrollment for the 2013–14 school year is estimated using data from past years. 

policy, policies related to poverty, and a number of social programs at both the Federal and State levels. The Center has no government contracts and accepts no government funds. 

My testimony today will focus on four key points: (1) States have made dramatic 

cuts to higher education funding since the onset of the Great Recession; (2) we’ve 

seen rapid growth in tuition costs at public 4-year institutions over the same time 

period; (3) higher costs have hurt students and families, especially those with low 

or moderate incomes and students of color; and (4) while States reduced higher education funding, the Federal Pell Grant program continued to provide important support to low-income students. I conclude with recommendations for Federal and State 

policymakers that would enable more students, particularly low-income students, to 

access and graduate from college. 

I. STATES HAVE MADE DRAMATIC CUTS TO HIGHER EDUCATION SINCE 2008

State and local tax revenue is a major source of funding for public colleges and 

universities. Unlike private institutions, which may rely upon gifts and large endowments to help fund instruction, public 2- and 4-year colleges typically rely heavily 

on State and local appropriations. In 2014, State and local dollars constituted 53 

percent of public institutions’ education revenue—the funds used directly for teaching and instruction.1

While States have begun to restore funding, appropriations are well below what 

they were in 2008—20 percent per student lower—even as State revenues have returned to pre-recession levels. Compared with the 2007–08 school year, when the 

recession hit, adjusted for inflation: 

• State spending on higher education nationwide is down an average of $1,805, 

or 20.3 percent, per student. 

• Every State except Alaska, North Dakota, and Wyoming has cut per-student 

funding. 

• Thirty-one States have cut per-student funding by more than 20 percent. 

• Six States have cut per-student funding by more than one-third. 

• Per-student funding in Arizona and Louisiana is down by more than 40 percent.2 (See Figure 1.) 

33 

Over the past year, States have moved to restore some of that lost funding. (See 

Figure 2.) Thirty-seven States are investing more per student in the 2014–15 school 

year than they did in 2013–14. Adjusted for inflation: 

• Nationally, spending is up an average of $268, or 4 percent, per student. 

• The funding increases vary from $16 per student in Louisiana to $1,090 in Connecticut. 

• Eighteen States increased per-student funding by more than 5 percent. 

• Four States—California, Colorado, New Hampshire, and Utah—increased funding by more than 10 percent. 

Still, in 13 States, per-student funding fell over the last year—declining, on average, by more than $50 per student. Adjusted for inflation: 

• Funding cuts vary from $6 per student in Illinois to $179 in Kentucky. 

• Five States—Alaska, Arkansas, Kentucky, Texas, and West Virginia—cut funding by more than $100 per student over the past year. 

• Three States—Kentucky, Oklahoma, and West Virginia—have cut per-student 

higher education funding for the last 2 consecutive years. 


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34 

3 CBPP analysis of Census quarterly State and local tax revenue, http://www.census.gov/ 

govs/qtax/. 

WHY DID STATES CUT HIGHER EDUCATION FUNDING?

The cuts resulted from State responses to the deep recession and a slow recovery. 

• While Federal aid prevented even deeper cuts, State tax revenues fell 

very sharply and are only now returning to pre-recession levels. The recession of 2007–09 hit State revenues hard, and the slow recovery continues to affect 

them. High unemployment and a slow recovery in housing values left people with 

less income and less purchasing power. As a result, States took in less income and 

sales tax revenue, their main sources of revenue for funding education and other 

services. By the fourth quarter of 2014, total State tax revenues were only 2 percent 

greater than they were at the onset of the recession after adjusting for inflation.3

States relied heavily on Federal assistance to stave off even deeper cuts to higher 

education in the early years of the economic downturn. The American Recovery and 


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35 

4 Nicholas Johnson, Phil Oliff, and Erica Williams, ‘‘An Update on State Budget Cuts,’’ Center 

on Budget and Policy Priorities, February 9, 2011, http://www.cbpp.org/research/an-update-onstate-budget-cuts. 5 CBPP calculation using the ‘‘Grapevine’’ higher education appropriations data from Illinois 

State University, enrollment and combined State and local funding data from the State Higher 

Education Executive Officers Association, and the Consumer Price Index, published by the Bureau of Labor Statistics. 6State Higher Education Executive Officers Association, April 2015. Note: while full-timeequivalent enrollment at public 2- and 4-year institutions is up since fiscal year 2008, between 

fiscal years 2012 and 2013 it fell by approximately 150,000 enrollees—a 1.3 percent decline. 7See, for example, ‘‘National Postsecondary Enrollment Trends: Before, During and After the 

Great Recession,’’ National Student Clearinghouse Research Center, July 2011, p. 6, http:// 

pas.indiana.edu/pdf/National%20Postsecondary%20Enrollment%20Trends.pdf. A survey conducted by the American Association of Community Colleges indicated that increases in Fall 2009 

enrollment at community colleges were, in part, due to workforce training opportunities; see 

Christopher M. Mullin, ‘‘Community College Enrollment Surge: An Analysis of Estimated Fall 

2009 Headcount Enrollments at Community Colleges,’’ AACC, December 2009, http:// 

files.eric.ed.gov/fulltext/ED511056.pdf. 8 National Center for Education Statistics, Enrollment in public elementary and secondary 

schools, by level and grade: Selected years, fall 1980 through fall 2023, Table 203.10, http:// 

nces.ed.gov/programs/digest/d13/tables/dt13l203.10.asp?current=yes. 9 CBPP analysis of data from U.S. Department of Justice, Bureau of Justice Statistics. 

10 CBPP analysis using the College Board’s ‘‘Trends in College Pricing 2014,’’ http:// 

trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-room-board-time. Note: in noninflation-adjusted terms, average tuition is up $2,948 over this time period. 

Reinvestment Act provided States with roughly $140 billion to fund existing State 

spending—including funds intended to support higher education. Unfortunately, this 

additional Federal fiscal support dried up after only a few years, despite the fact 

that States continued to face sizable budget gaps.4 Partially because of this, the 

most dramatic cuts to higher education occurred in fiscal year 2012, years after the 

recession’s start.5

• Limited revenues must support more students. Public higher education institutions are educating more students, raising costs. In part due to the ‘‘baby boom 

echo’’ causing a surge in the 18- to 24-year-old population, enrollment in public 

higher education was up by nearly 900,000 full-time-equivalent students, or 8.6 percent, between the beginning of the recession and the 2013–14 academic year (the 

latest year for which there are actual data).6

The recession also played a large role in swelling enrollment numbers, particularly at community colleges, reflecting high school graduates choosing college over 

dim employment prospects and older workers entering classrooms in order to retool 

and gain new skills.7

Other areas of State budget also are under pressure. For example, an estimated 

485,000 more K–12 students are enrolled in the current school year than in 2008.8

Long-term growth in State prison populations—with State facilities now housing 

nearly 1.36 million inmates—also continues to put pressure on State spending.9

• Many States chose sizable budget cuts over a balanced mix of spending 

reductions and targeted revenue increases. States relied disproportionately on 

damaging cuts to close the large budget shortfalls they faced over the course of the 

recession. Between fiscal years 2008 and 2012, States closed 45 percent of their 

budget gaps through spending cuts but only 16 percent through taxes and fees (they 

used Federal aid, reserves, and various other measures to close the remainder of 

their shortfalls). States could have lessened the need for deep cuts to higher education funding if they had been more willing to raise additional revenue. 

II. TUITION COSTS HAVE GROWN RAPIDLY AS STATE SUPPORT HAS DECLINED

Tuition costs in most States have climbed higher than they were before the recession. Since the 2007–08 school year, average annual published tuition has risen by 

$2,068 nationally, or 29 percent, above the rate of inflation.10 Steep tuition increases have been widespread, and average tuition at public 4-year institutions, adjusted for inflation, has increased by: 

• more than 60 percent in six States; 

• more than 40 percent in 10 States; and 

• more than 20 percent in 33 States. (See Figure 3.) 

36 

In Arizona, the State with the greatest tuition increases since the start of the recession, tuition has risen 83.6 percent, or $4,734 per student, after adjusting for inVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 S:\DOCS\94970.TXT CAROL

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37 

11 Ibid. 12 Costs reported above include both published tuition and fees. Average tuition and fee prices 

are weighted by full-time enrollment. 13This paper uses CPI–U–RS inflation adjustments to measure real changes in costs. Over 

the past year the CPI–U–RS increased by 1.47 percent. We use the CPI–U–RS for the calendar 

year that begins the fiscal/academic year. 14 CBPP calculation using the College Board’s ‘‘Trends in College Pricing 2013,’’ http:// 

trends.collegeboard.org/college-pricing. See appendix for fiscal year 2013–14 change in average 

tuition at public four-year colleges. 15State Higher Education Executive Officers Association, ‘‘State Higher Education Finance: 

fiscal year 2013,’’ 2014, p. 22, Figure 4, http://www.sheeo.org/sites/default/files/public 

ations/SHEFlFY13l04252014.pdf. 

flation. Average tuition at a 4-year Arizona public university is now $10,398 a 

year.11

As States have begun to reinvest in public higher education, tuition hikes in 

2014–15 have been much smaller than in preceding years.12 Published tuition—the 

‘‘sticker price’’—at public 4-year institutions increased in 34 States over the past 

year, but only modestly. Average tuition increased $107, or 1.2 percent, above inflation.13 Between last year and this year, after adjusting for inflation: 

• Louisiana increased average tuition across its 4-year institutions more than any other State, hiking it by nearly 9 percent, or roughly $600. • Four States—Louisiana, Hawaii, West Virginia, and Tennessee—raised average 

tuition by more than 4 percent. • In 16 States, tuition fell modestly, with declines ranging from $6 in Ohio to $182 in New Hampshire.14

III. COST SHIFT HARMS STUDENTS AND FAMILIES, ESPECIALLY THOSE WITH

LOW INCOMES

During and immediately following recessions, State and local funding for higher 

education has tended to plummet, while tuition has tended to spike. During periods 

of economic growth, funding has tended to recover somewhat while tuition has stabilized at a higher level as a share of total higher educational funding.15 (See Figure 

4.) 

This trend has meant that over time, students have assumed much greater responsibility for paying for public higher education. In 1988, public colleges and universities received 3.2 times as much in revenue from State and local governments 

as they did from students. They now receive about 1.1 times as much from States 

and localities as from students. 

Nearly every State has shifted costs to students over the last 25 years—with the 

most drastic shifts occurring since the onset of the Great Recession. In 1988, average tuition costs were greater than per-student State expenditures in only two 


94970-8.eps
38 

16State Higher Education Executive Officers Association, April 2015; government funding includes dollars from both State and local funding sources. 17See, for example, Steven W. Hemelt and Dave E. Marcotte, ‘‘The Impact of Tuition Increases 

on Enrollment at Public Colleges and Universities,’’ Educational Evaluation and Policy Analysis, September 2011; Donald E. Heller, ‘‘Student Price Response in Higher Education: An Update 

to Leslie and Brinkman,’’ The Journal of Higher Education, Volume 68, Number 6 (November– 

December 1997), pp. 624–59. 18Thomas J. Kane, ‘‘Rising Public College Tuition and College Entry: How Well Do Public 

Subsidies Promote Access to College? ’’ National Bureau of Economic Research, 1995, http:// 

www.nber.org/papers/w5164.pdf?newlwindow=1. 19 Eric P. Bettinger, et al., ‘‘The Role of Simplification and Information in College Decisions: 

Results from the H&R Block FAFSA Experiment,’’ National Bureau of Economic Research, 2009, 

http://www.nber.org/papers/w15361.pdf. 20 College Board, ‘‘Education Pays: 2013,’’ http://trends.collegeboard.org/sites/default/files/ 

education-pays-2013-full-report–022714.pdf. 21 In a 2008 piece, Georgetown University scholar Anthony Carnavale pointed out that ‘‘among 

the most highly qualified students (the top testing 25 percent), the kids from the top socioeconomic group go to 4-year colleges at almost twice the rate of equally qualified kids from the 

bottom socioeconomic quartile.’’ Anthony P. Carnavale, ‘‘A Real Analysis of Real Education,’’ Liberal Education, Fall 2008, p. 57. 

States, New Hampshire and Vermont. By 2008, that number had grown to 10 

States. Today, tuition revenue is greater than State and local government funding 

for higher education in half of the States, with seven—Colorado, Delaware, Michigan, New Hampshire, Pennsylvania, Rhode Island, and Vermont—requiring students and families to shoulder the lion’s share of higher education costs by a ratio 

of at least 2 to 1.16

The Effects of Shifting Costs on Students, Families, and the Economy 

The cost shift from States to students has happened over a period when absorbing 

additional expenses has been difficult for many families because their incomes have 

been stagnant or declining. In the 1970s and early to mid-1980s, tuition and incomes both grew modestly faster than inflation, but by the late 1980s, tuition began 

to rise much faster than incomes.

Rapidly rising tuition at a time of weak income growth has damaging consequences for families, students, and the national economy. 

• Tuition costs are deterring some students from enrolling in college. 

While the recession encouraged many students to enroll in higher education, the 

large tuition increases of the past few years may have prevented further enrollment 

gains. Rapidly rising tuition makes it less likely that students will attend college. 

Research has consistently found that college price increases result in declining enrollment.17 While many universities and the Federal Government provide financial 

aid to help students bear the cost, research suggests that a high sticker price can 

dissuade students from enrolling even if the net price, including aid, doesn’t rise. 

• Tuition increases are likely deterring low-income students, in particular, from enrolling. Research further suggests that college cost increases have 

the biggest impact on students from low-income families. For example, a 1995 study 

by Harvard University researcher Thomas Kane concluded that States that had the 

largest tuition increases during the 1980s and early 1990s ‘‘saw the greatest widening of the gaps in enrollment between high- and low-income youth.’’ 18 These damaging effects may be exacerbated by the relative lack of knowledge among low-income families about the admissions and financial aid process. Low-income students 

tend to overestimate the true cost of higher education more than students from 

wealthier households, in part because they are less aware of financial aid for which 

they are eligible.19

These effects are particularly concerning because gaps in college enrollment between higher and lower income youth are already pronounced. In 2012 just over half 

of recent high school graduates from families in the bottom income quintile enrolled 

in some form of postsecondary education, as opposed to 82 percent of students from 

the highest income quintile.20 Significant enrollment gaps based on income exist 

even among prospective students with similar academic records and test scores.21

Rapidly rising costs at public colleges and universities may widen these gaps further. 

• Tuition increases may be pushing lower-income students toward lessselective institutions, reducing their future earnings. Perhaps just as important as a student’s decision to enroll in higher education is the choice of which college to attend. A 2013 study by the Brookings Institution revealed that a large proportion of high achieving, low-income students fail to apply to any selective colleges 

39 

22 Christopher Avery and Caroline M. Hoxby, ‘‘The Missing ‘One Offs’: The Hidden Supply of 

High-Achieving, Low-Income Students,’’ National Bureau for Economic Research, Working Paper 

18586, 2012, http://www.brookings.edu//media/projects/bpea/spring-2013/2013alhoxby.pdf. 23Patrick T. Terenzini, Alberto F. Cabrera, and Elena M. Bernal, ‘‘Swimming Against the 

Tide,’’ College Board, 2001, http://www.collegeboard.com/research/pdf/rdreport200l3918.pdf. 24 Eleanor W. Dillon and Jeffrey A. Smith, ‘‘The Determinants of Mismatch Between Students 

and Colleges,’’ National Bureau of Economic Research, August 2013, http://www.nber.org/papers/w19286. Additionally, other studies have found that undermatching is more likely to occur 

for students of color. In 2009 Bowen, Chingos, and McPherson found that undermatching was 

more prevalent for black students—especially black women—relative to comparable white students. 25Stacey Dale and Alan Krueger, ‘‘’Estimating the Return to College Selectivity Over the Career Using Administrative Earning Data,’’ Mathematica Policy Research and Princeton University, February 2011, http://www.mathematica-mpr.com/publications/PDFs/education/return 

tocollege.pdf. 26 Christina Chang Wei, Laura Horn, and Thomas Weko, ‘‘A Profile of Successful Pell Grant 

Recipients: Time to Bachelor’s Degree and Early Graduate School Enrollment,’’ National Center 

for Education Statistics, July 2009, http://nces.ed.gov/pubs2009/2009156.pdf. 27See Susan Dynarski and Judith Scott-Clayton, ‘‘Financial Aid Policy: Lessons from Research,’’ The Future of Children, Spring 2013, http://futureofchildren.org/futureofchildren/publications/docs/23l01l04.pdf. 28 Brandon DeBot, ‘‘House Budget Would Reduce College Access by Cutting Pell Grants,’’ Center on Budget and Policy Priorities, March 25, 2015, http://www.cbpp.org/blog/house-budgetwould-reduce-college-access-by-cutting-pell-grants. 29 College Board, ‘‘Cumulative Debt of 2011–12 Bachelor’s Degree Recipients by Dependency 

Status and Family Income,’’ October 2014, http://trends.collegeboard.org/college-pricing/figures-tables/net-prices-income-over-time-public-sector. 

or universities.22 Even here, research indicates financial constraints and concerns 

about cost push lower income students to narrow their list of potential schools and 

ultimately enroll in less-selective institutions.23 In a different 2013 study, economists Eleanor Dillon and Jeffrey Smith found evidence that some high-achieving, 

low-income students are more likely to ‘‘undermatch’’ in their college choice in part 

due to financial constraints.24

Where a student decides to go to college has broad economic implications, especially for disadvantaged students and students of color. A 2011 study by Stanford 

University and Mathematica Policy Research found students who had parents with 

less education, as well as African American and Latino students, experienced higher 

postgraduate earnings by attending more elite colleges relative to similar students 

who attended less-selective universities.25

IV. FEDERAL FINANCIAL AID HELPS LOW-INCOME STUDENTS AFFORD HIGHER

TUITION COSTS, BUT DEBT IS STILL GROWING

Federal financial aid has played a critical role in partially offsetting higher costs 

for students and families. Pell Grants are the signature form of Federal grant support, and help more than 8 million students afford college. Research shows that Pell 

Grants and other need-based aid help students attend and graduate from college. 

Students qualifying for Pell Grants are more likely than other students to face significant hurdles to completing college, such as single parenthood and lack of financial support from their own parents. Controlling for these risk factors, a Department 

of Education study found that Pell Grant recipients who graduate do so faster than 

other students.26 Further, research on need-based grant aid more generally has 

shown that such aid increases college enrollment among low- and moderate-income 

students.27

As noted, college costs—even at 2-year and 4-year State institutions—have risen 

sharply. Congress increased the maximum value of Pell Grants and modestly increased eligibility between 2007 and 2010, though it later pared back some of these 

expansions. It also indexed the maximum Pell Grant to inflation from 2013 to 2017, 

though college costs have been increasing faster than inflation, a trend that is projected to continue. The increase in Pell Grants has partially offset reduced State 

support and the erosion of Pells’ value as a share of total college costs over time. 

Still, Pell Grants now cover only about 30 percent of the cost of attendance at public 

4-year colleges, the lowest share since 1974.28

While Federal financial aid has helped lessen the impact of tuition and fee increases on low-income students, the overall average cost of attending college has 

risen for these students. As a result, the net cost of attendance at 4-year public institutions for low-income students increased 12 percent from 2008 to 2012, after adjusting for inflation. For low-income students attending public community colleges, 

the increase over the same time period was 4 percent.29

40 

30 College Board, ‘‘Trends in Student Aid, 2014: Median Debt Levels of 2007–08 Bachelor’s Degree Recipients by Income Level,’’ October 2014, Figure 2010l9, http://trends.collegeboard.org/ 

sites/default/files/2014-trends-student-aid-final-web.pdf. Low-income dependent students are defined as students from families earning less than $30,000 annually, while high-income students come from families earning more than $106,000. 31The Institute for College Access and Success, ‘‘Pell Grants Help Keep College Affordable for 

Millions of Americans,’’ March 13, 2015, http://ticas.org/sites/default/files/publfiles/overalllpelllone-pager.pdf. 32Federal Reserve Bank of New York, ‘‘Quarterly Report on Household Debt and Credit,’’ February 2015, http://www.newyorkfed.org/householdcredit/2014-q4/data/pdf/HHDCl2014Q4 

.pdf. 33 College Board ‘‘Trends in Student Aid,’’ Figure 13A, 3http://trends.collegeboard.org/studentaid/figures-tables/average-cumulative-debt-bachelors-recipients-public-four-year-time. 34 Brandon DeBot, ‘‘House Budget Would Reduce College Access by Cutting Pell Grants,’’ Center on Budget and Policy Priorities, March 25, 2015, http://www.cbpp.org/blog/house-budgetwould-reduce-college-access-by-cutting-pell-grants. 

Low-Income Students Still Face High Levels of Debt 

Because grants rarely cover the full cost of college attendance, most students— 

and low-income students in particular—borrow money. In 2012, 79 percent of lowincome students—from families in the bottom income quartile—graduating with a 

bachelor’s degree had student loans (compared with 55 percent of graduating students from higher-income families).30 Nearly 9 of 10 Pell Grant recipients who graduate from 4-year colleges have student loans, and their average debt is nearly 

$5,000 larger than their higher-income peers.31

Debt levels have risen since the start of the recession for college and university 

students collectively. By the fourth quarter of 2014, students held $1.16 trillion in 

student debt—eclipsing both car loans and credit card debt.32 Further, the overall 

share of students graduating with debt has increased since the start of the recession. Between the 2007–08 and 2012–13 school years, the share of students graduating from a public 4-year institution with debt increased from 55 to 59 percent. 

At the same time, between the 2007–08 and 2012–13 school years, the average 

amount of debt incurred by the average bachelor’s degree recipient with loans at a 

public 4-year institution grew from $22,000 to $25,600 (in 2013 dollars), an inflation-adjusted increase of $3,600, or roughly 16 percent. By contrast, the average 

level of debt incurred had risen only about 3.7 percent in the 8 years prior to the 

recession.33 In short, at public 4-year institutions, a greater share of students are 

taking on larger amounts of debt. 

V. CONCLUSION

States have cut higher education funding deeply since the start of the recession. 

These cuts were in part the result of a revenue collapse caused by the economic 

downturn, but they also resulted from misguided policy choices. State policymakers 

relied overwhelmingly on spending cuts to make up for lost revenues. They could 

have lessened the need for higher education funding cuts if they had used a more 

balanced mix of spending cuts and revenue increases to balance their budgets. 

The impact of the funding cuts has been dramatic. Public colleges have both 

steeply increased tuition and pared back spending, often in ways that may compromise the quality of education and jeopardize student outcomes. Students are paying more through increased tuition and by taking on greater levels of debt. 

Strengthening State investment in higher education will require State policymakers to make the right tax and budget choices over the coming years. A slow economic recovery and the need to reinvest in other services that also have been cut 

deeply mean that many States will need to raise revenue to rebuild their higher 

education systems. At the very least, States must avoid shortsighted tax cuts, which 

would make it much harder for them to invest in higher education, strengthen the 

skills of their workforce, and compete for—or even create—the jobs of the future. 

At the Federal level, to enable low-income students to access and succeed in higher education, policymakers should ensure adequate support for the Pell Grant program and targeted refundable tax credits. My colleagues at the Center who specialize in Federal budget and tax policy have identified specific policy recommendations that Federal lawmakers could pursue to help students access higher education: 

• Protect and maintain the current assistance level of the Pell Grant program by continuing to index the maximum grant to inflation after 2017. As 

the costs of college have increased over time, the value of the Pell Grant has fallen; 

the maximum grant now covers roughly 30 percent of the average cost of a 4-year 

public college, the lowest share in 40 years.34 The maximum Pell Grant is currently 

41 

35David Reich ‘‘Sequestration and Its Impact on Non-Defense Appropriations,’’ Center on 

Budget and Policy Priorities, February 19, 2015, http://www.cbpp.org/research/sequestrationand-its-impact-on-non-defense-appropriations. 36 Chuck Marr, Chye-Ching Huang, Arloc Sherman, and Brandon DeBot, ‘‘EITC and Child Tax 

Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds,’’ 

Center on Budget and Policy Priorities, April 3, 2015, http://www.cbpp.org/research/eitc-andchild-tax-credit-promote-work-reduce-poverty-and-support-childrensdevelopment’fa=view&id=3793. 

indexed to inflation through 2017, after which the grant’s value will erode further 

as it is frozen and loses some of its real value each year. 

• Reach a bipartisan agreement that undoes and replaces sequestration 

to relieve the pressure on non-defense discretionary funding. Under current 

law, this funding will continue to fall as a share of the economy, which will put further pressure on the discretionary portion of Pell Grant funding, as well as other 

student aid and education programs. While discretionary spending was not responsible for our long-term deficit/debt problems, the share of spending (as a percent of 

our economy) on non-defense discretionary programs is headed to the lowest levels 

ever since 1962 as a result of the 2011 Budget Control Act and other appropriations 

cuts.35

• Make permanent the American Opportunity Tax Credit (AOTC) and key 

provisions of the Child Tax Credit (CTC) and Earned Income Tax Credit 

(EITC) that are set to expire at the end of 2017. The AOTC, which is refundable up to $1,000, reaches millions of low-income students who did not benefit from 

its predecessor, the Hope Credit (which is not refundable and to which the AOTC 

will revert if no action is taken). In addition, research suggests that income from 

the working family tax credits (EITC and CTC) may boost college enrollment and 

completion, both because of the skill gains made from better K–12 educational attainment, and by making college more affordable in the spring before enrollment 

(through increased tax refunds).36

A large and growing share of future jobs will require college-educated workers. 

Sufficient funding for higher education to keep tuition affordable and quality high 

at public colleges and universities, and to provide financial aid to those students 

who need it most, would help the Nation develop the skilled and diverse workforce 

that is critical to our economic future. 

The CHAIRMAN. Thank you, Mr. Mitchell. 

Mr. Kennedy. 

STATEMENT OF JAMES KENNEDY, ASSOCIATE VICE PRESIDENT FOR UNIVERSITY STUDENT SERVICES AND SYSTEMS, 

INDIANA UNIVERSITY, BLOOMINGTON, IN 

Mr. KENNEDY. Chairman Alexander, Ranking Member Murray, 

and distinguished members of the committee, my name is James 

Kennedy. I’m the associate vice president of University Student 

Services and Systems at Indiana University. Thank you today for 

giving me the opportunity to discuss the initiatives underway at 

Indiana University that assist students to better manage student 

debt and cost of their college experience. 

One of my primary responsibilities is working with all seven Indiana University campuses on financial aid issues. Indiana University consists of 110,000 students, of which 84,000 receive some type 

of financial assistance. Providing programming and advising for 

students regarding financial aid and debt management continues to 

be a high priority and is included in the Bicentennial Strategic 

Plan for Indiana University. 

I’m here to discuss our success with three major initiatives in 

lowering student loan debt. Through our comprehensive financial 

literacy program started a little more than 2 years ago, a detailed 

review of financial aid processes, and the university’s commitment 

to student success and degree completion, we have helped Indiana 

University undergraduate students lower their borrowing substanVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 S:\DOCS\94970.TXT CAROL
42 

tially, approaching 16 percent over 2 years with savings of approximately $44 million. 

Indiana University’s Office of Financial Literacy and its IU 

MoneySmarts financial education program were established to assist students in making informed financial decisions before, during, 

and after college. The goal is to provide students with information 

that will increase the likelihood of them making smart personal finance choices. Initiatives include one-on-one appointments, classroom-setting education, interactive online material, and events and 

workshops. 

A 60-minute online financial training module was initiated in 

2013 for all new students. This module includes information on student loans and financial basics such as savings, budgeting, and 

credit. In the 2 years since implementation, we have averaged an 

80 percent completion rate. 

Moneysmarts.iu.edu is our main source of financial information 

for students. Included in this tool are weekly financial sessions and 

episodes of our ‘‘How Not to Move Back in With Your Parents’’ pod 

cast. This pod cast is averaging over 3,000 play requests per 

month. In addition, a group of undergraduate students from various disciplines constitute an IU MoneySmarts Team that provides 

one-on-one peer mentoring financial sessions and/or group presentations to students. 

Starting in the 2012–13 academic year, Indiana University started sending annual debt letters to all student borrowers. In our discussions with students, we discovered that many did not have 

knowledge of their overall student loan debt until graduation or 

when they started repayment. 

While students completed the required Department of Education 

entrance and exit loan counseling requirements, there was no information actively provided to the students while they attended. The 

annual debt letter gives students information on all Federal loans 

as well as the private loans processed though Indiana University 

and includes cumulative debt, estimated monthly repayment, estimated interest rate, and remaining eligibility based on dependency 

status. Other important information is also provided to students. 

The annual debt letter has been well-received and has resulted in 

many student inquiries about managing student loan debt. 

In the fall of 2015, Indiana University will start sending to all 

new transfer students a debt letter before they start classes to assist with financial planning. Our analysis has shown that transfer 

students who have accumulated excessive student loan debt from 

previous institutions will need additional counseling to be successful in completing their degree. 

Financial aid process changes have also been implemented, including the cost of attendance methodology, how information is presented on financial aid award letters, earlier interventions with 

students not meeting satisfactory academic progress requirements, 

limited aid appeals, and continuing touch points to counsel students with debt issues and more targeted institutional aid to keep 

the net cost down. 

Under the direction of Indiana University President Michael 

McRobbie, we have implemented several completion initiatives, 

which have the secondary benefit of decreasing the amount of 

43 

* Retrieved from Federal Student Aid Data Center https://studentaid.ed.gov/sa/about/datacenter/student/title-iv. 

money students will need. The ‘‘15 to Finish’’ campaign promotes 

taking 15 credits per semester to graduate in 4 years and minimize 

debt. Interactive degree maps are used to provide students a clear 

pathway to finish their baccalaureate degree in 4 years. 

Early alert systems allow professors to identify students with 

academic issues and direct them to their advisors for assistance. 

The financial aid staff and campus advisors work closely together 

to counsel students on credit completion standards and the impact 

of withdrawal on State and Federal aid eligibility requirements. 

These partnerships allow for improved counseling to students and 

have been strongly promoted through our student loan debt initiatives. 

Together, the goal of these three major initiatives is for students 

to have manageable levels of debt once they achieve their goal of 

a college degree. 

Thank you for the opportunity to share our student loan debt initiatives at Indiana University. 

[The prepared statement of Mr. Kennedy follows:] 

PREPARED STATEMENT OF JAMES KENNEDY

Chairman Alexander, Ranking Member Murray, and distinguished members of 

the committee, My name is James Kennedy and I am the associate vice president 

of University Student Services and Systems. Thank you for giving me the opportunity to discuss the initiatives underway at Indiana University that assist students 

to better manage student debt and costs through their college experience. 

One of my primary responsibilities is working with all seven Indiana University 

campuses on financial aid issues. Indiana University consists of 110,000 students. 

Over 84,000 students receive some form of financial assistance. Bloomington is our 

flagship campus with over 46,000 students, Indiana University Purdue University 

Indianapolis (IUPUI) is the urban and medical school campus with over 30,000 students and the Indiana University regional campuses with an additional 34,000 students. Providing programming and advising for students regarding financial aid and 

debt management continues to be a high priority and is included in the Bicentennial 

Strategic Plan for Indiana University. 

I’m here to discuss our success with three major initiatives in lowering student 

loan debt. Through our comprehensive financial literacy program started a little 

more than 2 years ago, a detailed review of financial aid processes, and the university’s commitment to student success and degree completion, we have helped Indiana University undergraduate students lower their borrowing substantially—approaching 16 percent over 2 years with savings of approximately $44 million.* 

OFFICE OF FINANCIAL LITERACY

Indiana University’s Office of Financial Literacy and its IU MoneySmarts financial education program were established to assist students in making informed financial decisions before, during, and after college. The goal is to provide students 

with information that will increase the likelihood of them making smart personal 

finance choices relevant to their goals. Initiatives include one-on-one appointments, 

classroom-setting education, interactive online material, and events and workshops. 

The program also provides tools, resources, and tips from experts to assist students 

in learning positive financial decisionmaking.

A 60-minute online financial training module was initiated in 2013 for all new 

students. This module includes information on student loans and financial basics 

such as savings, budgeting and credit. In the 2 years since implementation we have 

averaged an 80 percent completion rate. Moneysmarts.iu.edu is our main source of 

financial information for students. Included in this tool are weekly financial lessons 

and episodes of our ‘‘How Not to Move Back in With Your Parents’’ pod cast. This 

pod cast is averaging over 3,000 play requests per month. In addition, a group of 

undergraduate students from various disciplines constitute an IU MoneySmarts 

44 

2 Indiana 15 to Finish-http://www.in.gov/che/3126.htm. 

Team that provides one-on-one peer mentoring financial sessions and/or group presentations to students.

FINANCIAL AID BUSINESS PROCESSES

Starting in the 2012–13 academic year, Indiana University started sending annual student loan debt letters to all student borrowers (attached). In our discussions 

with students, we discovered that many did not have knowledge of their overall student loan debt until graduation or when they started repayment. While students 

completed the required Department of Education entrance and exit loan counseling 

requirements, there was no information actively provided to the students while they 

attended. The annual debt letter gives students information on all Federal loans 

and private loans processed though Indiana University including cumulative debt, 

estimated monthly repayment (based on 10-year repayment), estimated interest 

rate, remaining eligibility based on dependency status, and other important information to assist students with understanding their student loan debt. The annual 

debt letter has been well-received and has resulted in many student inquiries about 

managing student loan debt. 

In fall 2015, Indiana University will start sending to all new transfer students 

a debt letter before they start classes to assist with their financial planning. Our 

analysis has shown that transfer students who have accumulated excessive student 

loan debt from previous institutions will need additional counseling to be successful 

in completing a degree. 

Based on student feedback, Indiana University has made several revisions to the 

financial aid award letter provided to students. Before these changes, combining aid 

types caused confusion for students. Now the letters separate gift aid (grants and 

scholarships) from self-help (loans, work-study). Indiana University uses the Department of Education Shopping sheet for all students, and, with additional steps in the 

student loan processes, has created more awareness about student loans and provided more opportunities for the student to reduce loans and ask questions. 

Other financial aid process changes include the cost of attendance methodology 

(including options for reducing the cost of books), earlier interventions with students 

not meeting Federal aid satisfactory academic progress requirements, limited aid 

appeals, continued review of touch points to counsel students with debt issues, and 

more targeted institutional aid to keep the net cost down. 

STUDENT SUCCESS AND COMPLETION

Under the direction of Indiana University President Michael McRobbie, we have 

implemented several completion initiatives, which have the secondary benefit of decreasing the amount of money students will need. The ‘‘15 to Finish’’ campaign promotes taking 15 credits per semester to graduate in 4 years and minimize debt.2

Interactive degree maps are used to provide students a clear pathway to finish their 

baccalaureate degree in 4 years. Early alert systems allow professors to identify students with academic issues and direct them to their advisors for assistance. The financial aid staff and campus advisors work closely together to counsel students on 

credit completion standards and the impact of withdrawal on State and Federal aid 

programs eligibility requirements. These partnerships allow for improved counseling 

to students and have been strongly promoted through our student loan debt initiatives. 

The Finish in Four Program freezes tuition and fees for those students on track 

to graduate in 4 years after their sophomore year. Summer discounts and targeted 

financial aid have also been implemented to encourage graduation in 4 years. Indiana University had 20,000 students receive an Indiana University degree in May. 

This is a new record for the university. 

For assistance after a student has left, Indiana University has partnered with an 

outside firm to counsel all student loan borrowers at the Indiana University regional 

campuses to ensure borrowers understand the various student loan repayment options. Students are also contacted when they become past due. Indiana University 

is committed to taking all steps to ensure students understand loan obligations and 

avoid default. While it’s too early to measure the overall impact of contacting students once they are no longer attending, Indiana University has seen a significant 

decrease in the campus 2012 draft cohort default rates released in February 2015. 

While we would like to see students not have the need for loans, financing a college degree through debt is the only option for many students. As noted by many 

studies, the value of college degree continues to grow. Counseling students to gradVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6621 S:\DOCS\94970.TXT CAROL
45 

1See the ‘‘Important Information’’ section on the other side of this letter regarding all loan 

estimates. 

uate with a manageable amount of student loan debt is the goal of Indiana University student loan debt initiatives. 

NEXT STEPS TO REDUCE STUDENT LOAN DEBT

Looking forward, with 2 or 3 years’ experience and data, Indiana University will 

continue to measure the overall impact on our student loan debt initiatives. We will 

continue to find other ways to educate students on financial literacy. Upcoming initiatives include targeted, proactive financial literacy interventions with students 

with excessive yearly/cumulative debt. For the Indianapolis and regional campuses, 

the university is considering moving to a banded tuition model as currently in place 

at the Bloomington campus. This would promote on-time graduation by having a 

flat fee for taking 15 credits versus a per credit charge. Payment plan options to 

assist families with more flexible monthly options to reduce their reliance on loans 

are being reviewed. Financial aid 4-year maps to assist families with aid planning 

is another concept under review. 

CONCLUSION

Our goal at Indiana University is to address student loan debt through the Office 

of Financial Literacy, the financial aid office business processes, and the focus from 

the entire university on student success and degree completion. With strong support 

from Michael McRobbie, Indiana University president, on addressing student debt 

issues, our initiatives are having an impact. Together, our goal is for students to 

have manageable levels of student loan debt once they achieve their goal of a college 

degree. 

Attachment: Example—Indiana University Student Loan Debt Letter 

JOHN DOE, 

222 INDIANA STREET, 

Elkhart, IN 46517–9999. 

DEAR JOHN: This is a personalized summary of your estimated current student 

loan indebtedness. This information is being provided to you before you take on additional debt for the upcoming academic year. We encourage you to make use of the 

academic and financial planning resources suggested here (see other side) to minimize future borrowing while you complete your degree at Indiana University. 

Estimate of Your Total Education Loans: $12,0001

Interest Rates 

Student loan interest rates vary based on when you borrowed and the loan type. 

Calculations in this letter are estimated at <<IntlRate>>. 

Estimated Monthly Payment—All Loans 

Total Education Loans: $12,000 

Standard Repayment Term: 10 years 

Assumed Interest Rate: 6.8 percent 

Monthly Payment: $138.10 

Cumulative Payments: $16,571.38 

Projected Interest Paid: $ 4,571.38 

Federal Stafford Loans 

The Federal Stafford Loan program provides the majority of funds for IU students. The total you have borrowed from this program, including both subsidized 

and unsubsidized loans, is $12,000. 

The maximum you may borrow for your dependency status and degree objective 

is $31,000. 

You have borrowed 39 percent of your current limit. 

Other Education Loans 

The estimated total of your education loans includes amounts below, based on Indiana University’s records about your borrowing history: 

Federal Perkins Loans: $0 

Private Loans Certified at IU: $0 

46 

2 IMPORTANT: Figures provided in this notice are NOT a complete and official 

record of your student loan debt. 

Other Loans Certified at IU: $0 

(May include Grad PLUS and Federal Health Profession Loans) 

Academic & Financial Planning Resources 

Loans offered for the upcoming academic year are not included in the figures provided in this letter. There is still time for you to reduce future debt by planning 

your expenses carefully and borrowing only what you really need. Meet with your 

advisor and set a plan to expedite completing your degree, if possible. We encourage 

you to make use of these resources to find ways to balance your budget: 

MoneySmarts: http://moneysmarts.iu.edu/index.shtml. 

You are also invited to make an appointment or drop by the Financial Aid Office 

to review your loan debt figures, talk about future borrowing and discuss repayment 

options with a counselor. 

The standard 10-year repayment plan for Federal Stafford Loans is one of many 

options. To find out about alternatives, visit this site: https://studentaid.ed.gov/ 

repay-loans/understand/plans. 

To calculate payments on loans of all types; or to estimate your monthly obligation for your cumulative debt under various repayment options, visit this web site: 

http://studentaid.gov/repayment-estimator. 

Loan Terms Glossary—https://studentloans.gov/myDirectLoan/glossary.action. 

Important Information About These Loan Estimates2

The most accurate information about your Federal student loans (excluding Title 

VII and VIII Health Profession Loans) is available in the National Student Loan 

Data System (NSLDS). http://www.nslds.ed.gov/nsldslSA/. 

Log in using your personal information and the 4-digit PIN you used to sign your 

FAFSA. 

Please read this important information about why loan totals in this letter 

may be incomplete or inaccurate. 

• Students who have borrowed at multiple institutions, who have consolidated 

loans, had loan debt discharged or forgiven, or who have repaid a portion of their 

debt may find that these estimates are inaccurate. 

• Grad PLUS Loans, Federal Health Profession Loans, State or institutional 

loans and private loans from other institutions are not included in these estimates. 

• Federal Health Profession Loans, institutional loans and private loans certified 

at IU before the 2004–05 academic year are not included in these estimates. 

• Interest that accrues while you are enrolled, which must be paid first or capitalized (added to your debt), has not been projected here and therefore has not been 

included in these estimates. 

• The Federal Stafford and Perkins Loan figures in this letter are based on the 

most recent information sent to Indiana University by NSLDS and should include 

loans from any institution. However, if you recently received Stafford or Perkins 

loans at another institution, these may not have been included in the information 

provided by NSLDS. 

• State Teaching scholarships and Federal TEACH grants, which may be converted to loans if scholarship terms and conditions are not met by the recipient, are 

not included in these estimates. 

• Education loans your parent took out on your behalf, and parent loans you may 

have taken for your children, are not included in these estimates. 

• Loans included in this letter may have been discharged or forgiven. 

The CHAIRMAN. Thank you very much. We’ll now begin a 5- 

minute round of questioning. 

Dr. Scott-Clayton, you know what this is, right? I wanted to do 

that before Senator Bennet did it. 

[Laughter.] 

This is the Federal student loan application, 108 questions long, 

correct? 

Ms. SCOTT-CLAYTON. That’s the FAFSA. 

The CHAIRMAN. Would it surprise you if I told you that the president of Southwest Community College in Memphis says that he 

47 

thinks he loses 1,500 students a semester because of the complexity? 

Ms. SCOTT-CLAYTON. That would not surprise me. 

The CHAIRMAN. Are you familiar with the FAST Act that Senator 

Bennet and Senators Burr and Isakson and Senator Booker and 

Senator King have introduced? 

Ms. SCOTT-CLAYTON. Yes, I am. 

The CHAIRMAN. It has these provisions. It would reduce this 108 

questions to two. It would tell families that they could fill it out 

in their junior year of high school. It would combine two Federal 

grant programs into one Pell grant program and reduce the number of loan programs. It would provide for year-round Pell grants, 

discourage over-borrowing, and simplify repayment options. Are 

you familiar with the proposed FAST Act? 

Ms. SCOTT-CLAYTON. Yes, I am. 

The CHAIRMAN. Do you think it would address the testimony that 

you gave that the complexity of the Federal aid system is a significant barrier to a large number of students? I might ask you also 

before you answer: Would you be surprised to learn that a college 

president in Tennessee took 9 months to help his daughter pay off 

her student loan because they kept finding there was no way to 

fully pay it off, even though there is a very generous procedure for 

paying off loans? 

Ms. SCOTT-CLAYTON. That does not surprise me. At community 

colleges, in particular, people may be surprised that the rate of Pell 

grant receipt at community colleges is about the same as at private 

4-year institutions. The reason for that is because of low application rates, low FAFSA application rates. There are likely many 

more students at community colleges who could qualify for more 

aid than they’re getting if they could get through the application 

process. 

I do think that the FAST Act would be a significant improvement, a meaningful improvement, and would potentially bring 

more students into college. We should not be looking at that—we 

get into trouble when people think that this is just about a form 

and making a form easier for people who are already going to go 

to college and already have a parent or a counselor who can help 

them fill out this really annoying form. 

It’s not just about the form. It’s about being able to communicate 

to students early, not just in 11th grade, but in ninth grade, in 

eighth grade, that there is money available to help them go to college. This is not a trivial reform. This is something that could 

make a real difference, and it has an unusual degree of consensus 

from across party lines. I think it would be a very helpful policy. 

The CHAIRMAN. Let me ask you and Dr. Akers this question. I’ve 

been intrigued by the fact that the average car loan in the United 

States is about the same as the average student loan for an undergraduate. It’s about $27,000. The total amount of student loans is 

about $1.2 trillion, and the total amount of auto loans is about 

$950 billion. 

Why do we not hear anything about auto loans being a great burden for Americans? Why do we not hear anything about auto loans 

causing individuals to not be able to pay their other responsibilities 

when it’s demonstrably true that a $27,000 student loan is a better 

48 

investment than a $27,000 car loan? Are we exaggerating the difficulty of student loans? 

Dr. Akers, do you want to try that? I mean, I was thinking as 

you testified if I could substitute car loan for every time you mentioned student loan, you could have made some of the same testimony. 

Dr. AKERS. Sure. There’s a tremendous amount of anxiety around 

student debt right now. Some of that might be driven by the fact 

that we have, really, a new population of borrowers in the Federal 

student lending system than we had—— 

The CHAIRMAN. Why aren’t they worried about borrowing $27,000 for a car? 

Dr. AKERS. I can’t tell you that, to be honest. I do know that 

there is a lot of concern—— 

The CHAIRMAN. It seems to cause nobody any problem. I mean, 

I’ve yet to see one report that says that’s about to bring down the 

American economy. Yet there are all these reports about the student loan bubble, and the student loan bubble is about the size of 

the car loan bubble, the way I can figure it. 

Ms. SCOTT-CLAYTON. Can I just add two things to that? One is 

that people have a lot more experience with car loans than they do 

with student loans. Student loans are something that you do once 

in a lifetime, and, as Beth said, many students aren’t—their parents didn’t have to go through that themselves, so they’re not able 

to advise students the way they might be able to about a car loan. 

Second, a lot of the anxiety comes from the fact that people know 

that college is absolutely essential, that it’s absolutely necessary, 

and that’s what creates this high level of anxiety, whereas with a 

car loan, frankly, you might be able to get away without one, or 

you can borrow your brother’s or your friend’s. 

The CHAIRMAN. My time is up. 

Senator Murray. 

Senator MURRAY. Or you can sell it if you need to. 

[Laughter.] 

Dr. Alexander, we have heard from today’s witnesses that it will 

take increased investments from States to accomplish the goal of 

making college more affordable, especially at our public institutions 

which serve about three-quarters of our students, actually. In Louisiana, State support per student is down 43 percent since the recession began, and now you’re facing more cuts, I understand. 

In your testimony, you mentioned the importance of leveraging 

Federal resources in order to encourage States to invest more in 

their colleges and universities. In your experience, have Federal incentives or leverage been effective in the past? 

Mr. ALEXANDER. From my experience and what I’ve studied, it 

has been very effective. Go back to SSIG and State student aid programs that I mentioned in 1972. Within 4 years, the number of 

States that adopted those programs for the Federal match had doubled. 

More recently, with the stimulus packages, what most people 

don’t realize about the stimulus packages is that they did have a 

floor, and that floor was the 2006 funding level. Many States, nearly 20 States, cut their budgets to where that floor was and did not 

cross that threshold during the stimulus era. 

49 

When the packages left, States such as California and others 

where I was at the time immediately dropped their budgets to 1994 

and 1995 funding levels, because there was no more Federal leverage. Federal leverage works, and it works in many ways. 

The latest is the fact that Tennessee does offer free community 

college education. Seventy-five percent of those funds were provided by the Federal Government to offset tuition and fees that the 

students paid. The big piece of the Tennessee leverage issue is that 

Tennessee must keep their 25 percent leverage, their 25 percent 

State appropriations, in place for 2- and 4-year institutions in order 

to receive those funds. 

I wish we had that plan working for us in Louisiana right now, 

because we’re looking at an 82 percent budget reduction that basically knocks us down to the lowest level that we have had in funding since we started measuring it before 1961. 

Senator MURRAY. Any thoughts on how we could mirror some of 

those successful efforts when we reauthorize the Higher Education 

Act? 

Mr. ALEXANDER. I think that we have $170 billion at the Federal 

level going into revenues for higher education, and we need to utilize as much of that as possible. Even incentivizing $10 billion of 

that to encourage States to reinvest, to continue investing, to reward States that are not cutting their budgets, to reward States 

that put money into public higher education—that could be the 

most affordable tactic that we take at the Federal level, to reward 

States for remaining affordable, keeping students out of debt, and 

keeping their effort at higher levels before they get out of the higher education business. 

Senator MURRAY. Mr. Mitchell, let me turn to you. Your research 

shows that even while the economy is beginning to recover, 47 

States are spending less per student than they did before the recession. In Washington State, cuts like these have led to a nearly 60 

percent increase in tuition at our public universities in just 6 years. 

The University of Washington’s State funding has been cut in 

half since the recession. Students attending the UW in the fall of 

2007 owed a little more than $6,000 in tuition and fees, and today 

that has almost doubled, more than $12,000. By the way, that 

doesn’t include rent or food or transportation or all those other 

costs that a student has to pay. To me, this is really unacceptable. 

I wanted to ask you, from your perspective as a State budget analyst, what is keeping States from making these important investments? 

Mr. MITCHELL. First and foremost, I don’t think you can overstate just how dramatic the decline in revenue was right after the 

recession. States cumulatively saw budget shortfalls above $100 

billion for multiple years, and so cuts were deep in higher education. Many States at that time when they were facing these 

shortfalls chose dramatic budget cuts over looking at a balanced 

approach of revenue—targeted responsible revenue increases 

matched with some kind of budget restrictions. 

As you said, revenues are starting to come back to pre-recession 

levels. However, when we look across the States, it’s only at about 

2 percent above revenues prior to the recession. In many States, 

50 

it’s still very difficult for them to put these resources back into 

higher education, especially across a larger population of students. 

I did want to make one other point regarding the chairman’s earlier question on why we care about debt. For low-income students 

and for students of color, we’re seeing these students take on higher levels of debt, but not necessarily completing college. The question of is it a good investment—sure, if you complete the investment. 

For students who are dropping out who do not necessarily have 

the diploma but do have the debt—because some of the $1.2 trillion 

in debt is held by those students as well. We need to keep that in 

mind. 

Senator MURRAY. Is the debt that is growing for them part of the 

deterrent of why they don’t finish college? 

Mr. MITCHELL. Oh, there’s absolutely concerns for students who 

are looking at college and questioning whether or not it is an investment, even though, as other panelists here have said, it absolutely is. However, because they do not have the information on the 

front end to make that decision, it becomes much more muddy for 

them. 

Senator MURRAY. Thank you. My time is up. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Murray. 

Senator Collins 

STATEMENT OF SENATOR COLLINS

Senator COLLINS. Thank you very much, Mr. Chairman. 

Prior to my election to the Senate, I worked at a college in 

Maine, Husson University, and at that time, some 85 percent of the 

students there were first-generation college students, and virtually 

all of that group received some sort of Federal financial aid. It was 

there that I learned that there was often a lot of pressure on the 

students to drop out of school, get a job, buy that car, because of 

the cost that they were bearing despite the financial aid that they 

were receiving. 

That’s the group that I am most concerned about. We know and 

we heard from Dr. Akers today that individuals who complete their 

college career are going to have lifetime earnings that are far higher than those with just a high school degree. There are those in the 

middle who have gone to college for a couple of years, amassed 

debt, and then dropped out, who are really in the worst situation. 

That’s why I’d like to ask the panel your opinion of programs like 

the TRIO program, which helps to provide counseling support, not 

only to students who are thinking of going to college, but throughout their college careers. I’ve also seen programs at Eastern Maine 

Community College in Maine called College Success programs that 

work with this vulnerable group to encourage them to hang in 

there and helps them deal with whatever issues that they have so 

that they complete their college degree. 

If we could go down the list—because if you think about it, that’s 

the group that really is most vulnerable. They amass debt, and yet 

they don’t get the benefit of the higher earnings that come from 

college completion. 

51 

Ms. SCOTT-CLAYTON. Your concern is absolutely on target, and 

one way that the Federal policy reform can help here is—so these 

guidance and support services that you’re talking about are absolutely critical in the current system. What if we could simplify student aid so that it didn’t have to be so complicated, so it didn’t require this army of support services? 

If we could take that off the table so that students could borrow 

without that worry, without having a fear that they’re going to go 

into default, and if they could get all the aid that they’re entitled 

to—what if we could re-devote all of those guidance and support 

services to helping students figure out what classes they should 

take, what program they should be in, what do they need to do academically to get their degree so that they get that payoff. 

Dr. AKERS. I absolutely agree that we could be doing more to 

help students make better decisions on the front end, whether it 

be first-generation or not. Simplification is important in achieving 

that objective. I also think additional counseling could potentially 

have a positive impact there. 

We do have evidence that students in their initial years of school 

have very little information about their personal financial circumstances, and given that, it’s difficult to imagine that they’re 

really making the correct decisions or the decisions that are in 

their own best interest. 

Last, I’ll say that, given all of that, we can improve front end decisionmaking. We will never get rid of the inevitability that some 

students will make bad investments, and so I want to emphasize 

the importance that we do need to maintain safety nets for borrowers who don’t see a positive return on their investments. 

Mr. ALEXANDER. TRIO programs do work, but they only impact 

1 of 20 eligible students that need them. I’d like us to revisit an 

idea the Federal Government could certainly do, and it’s in 1972. 

Currently, there are no incentives to educate and enroll low-income 

students, particularly for private rankings for cost. Low-income 

students cost more money, and there are no incentives to enroll 

more Pell grant students. 

I’d like us to revisit what happened in 1972. When we passed the 

Pell grant program in 1972, Congress also passed the cost of education allowances, which allocated $2,500 to every institution following the Pell grant student to those institutions, much like a 

Title I school gets extra Federal support. 

We authorized it in 1972. That would incentivize institutions to 

take the $2,500 per Pell and put them in the programs that help 

the low-income students stay and graduate. With no incentives in 

place right now, there is no—we’ll see a continual decline of lowincome student success. 

This is one way that we can do—it’s already been authorized. 

We’ve just never put any money into the cost of education allowances to encourage institutions to succeed with low-income students. 

Mr. MITCHELL. From a State perspective, I would want to point 

out that as State cuts have taken shape, higher education—institutions of higher education have had to make choices about where 

they’re going to pare back their own budgets in the instances 

where tuition revenue wasn’t able to make up the difference. One 

52 

of those areas that we’ve seen cuts occur is student support services, and some of those services go toward helping students, especially those students most at risk of dropping out—preventing that 

from happening. 

There are absolutely, as you said, things at the Federal level, but 

also States need to be mindful of this as well. 

Mr. KENNEDY. Senator Collins, I would just add that I believe we 

need to keep track of these students and keep—if they’re not doing 

well academically or if they’re having financial issues. The key is 

really keeping on track. Nobody wants to see a student leave after 

a couple of years, and that does, unfortunately, happen, especially 

when they have student loan debt. 

Having manageable amounts of debt and the students feeling 

like they’re in control, really helps. If it gets to be too much, and 

they feel they have to go work too much, or take away from their 

studies, that really hinders their ability to move forward. 

Senator COLLINS. Thank you. 

The CHAIRMAN. Thank you, Senator Collins. 

Senator Franken. 

STATEMENT OF SENATOR FRANKEN

Senator FRANKEN. Thank you, Mr. Chairman. 

Dr. Alexander, I have a bill that I plan to introduce this year 

called the College Access Act that would address the college affordability problem at the front end before students take on debt. 

Under my bill, as a condition for receiving Federal funds, States 

would agree to implement reforms to make college more affordable 

and increase the percentage of first-generation and low-income students attaining a postsecondary credential. 

My question to you is how would you design such a program to 

encourage States to best support college access and affordability to 

first-generation and low-income college students? 

Mr. ALEXANDER. The best design in this program would be to 

match States that maintain certain levels of per-student spending 

and to incentivize them by giving them a higher amount of support 

through the program if, indeed, they are succeeding in enrolling 

Pell grant and low-income student populations. Ten years ago, we 

finally got institutions to start admitting how many Pell grant students were at their institutions and how many were succeeding. 

I know at California State University and at Louisiana State 

University, we make this information available to parents, taxpayers, students, consumers just to show how many of our Pell 

grant students or low-income students are on our campus so we 

don’t move back away from low-income serving populations. The 

danger in having what we have had with the U.S. News and World 

Report and many of the current measures that have been in place 

is that they encourage institutions not to enroll low-income students. 

In fact, with State appropriation reductions, what we’ve also seen 

is an increased interest and an increased attractiveness of out-ofState students, such as Colorado, Oregon, and others, that supplant the in-State low-income populations of those various States, 

because they come in with more revenues, they come in with greater test scores, and at the expense of the low-income population of 

53 

those States. We’ve seen in many instances a supplanting of lowincome students with out-of-State students because of State appropriation reductions. 

Any bill that addresses that issue, that encourages us to attract, 

retain, and graduate more low-income students must be consistent 

with keeping our States—their tax effort and per-student spending 

at a certain level in order to receive those funds. 

Senator FRANKEN. Exactly, and thank you for that answer. 

Mr. Kennedy, right now, financial aid award letters are confusing. They often don’t clearly indicate what a grant is versus 

what a loan is. Sometimes they’re called award letters, and I don’t 

know how many people consider a loan an award. 

I have a bipartisan bill with Senator Chuck Grassley that would 

make sure that students and their families and counselors get clear 

and uniform information so that they can make apples to apples 

comparisons between what the different schools that the students 

have been accepted to are offering. I’m pleased that Indiana University has changed its financial aid award letter to separate 

grants and scholarships from loans. 

Can you elaborate on how the initiatives you’ve introduced at Indiana, such as uniform financial aid award letters and additional 

funding aid to counseling, have affected student borrowing? 

Mr. KENNEDY. Yes, Senator Franken. You know, we had some 

focus groups with students—that’s where most of it started—just 

to find out what the confusing parts were for students. Like you 

mentioned, that was very confusing to students, having all the 

awards or how you want to categorize—all the aid types together, 

and we really wanted to separate that so students would really understand that this is a student loan and they have to repay it 

versus a grant or a scholarship. 

Our experience has been that any touch point that we have with 

students, whether it’s the financial aid notification, it’s counseling, 

it’s some of our financial literacy initiatives, it’s working with advisers—anything that we can do as a touch point to talk to students about aid, because one of our pieces with our student loan 

debt letter was we realized that students—and I guess we were 

pretty much horrified by the fact that when talking to students, 

they would say, ‘‘I have $10,000 in student loan debt’’ when it was 

actually $25,000. 

They didn’t really have a clue at all as to how much they had 

accumulated up to a certain point. For planning purposes, we really wanted to make sure that throughout their whole experience, 

they understand exactly how much money they have out in student 

loan debt and what the repayment is going to be so they can plan 

accordingly once they leave the institution. 

To answer your question, anything we can do, any touch point 

with students to talk about student loan debt is very important. 

Senator FRANKEN. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Franken. 

Senator Cassidy. 

54 

STATEMENT OF SENATOR CASSIDY

Senator CASSIDY. I enjoyed all of your testimonies. Thank you. 

As you spoke, I had this sense of the Greek myth of Tantalus, because we have incredible pressure to increase financial aid to students. But the more we offer—and Senator Warren, has offered 

good legislation—I don’t like your tax position. The more we offer, 

the more the States received. 

If the goal is to make tuition affordable, and we try and raise 

aid, again, like Tantalus, it just receives because the States pull 

away. By the way, I read this—or I heard it from you, from you, 

from you, from you, from the GAO, and from this report that States 

cutting aid is the principal reason tuition has increased. There is 

quite a consensus on this. 

Dr. Alexander, you mentioned something that I heard Lamar say 

when I was in Congress. You mentioned that Tennessee’s Medicaid 

has gone from 8 percent of its budget to 30 percent of the budget, 

implying concomitantly that Tennessee’s support for higher ed, except in the community college where there’s essentially a maintenance of effort requirement, has declined. One has risen. One has 

declined. Dollars are fungible, and States are moving it to where 

there’s a maintenance of effort. 

With that preamble, I’m against States being mandated to do 

something. It appears unless States are mandated to do something, 

they’re not going to do so. 

Let me ask you again, seeing that we have a maintenance effort 

for secondary education, and we have a maintenance of effort for 

Medicaid, please explore with me this maintenance of effort. I don’t 

think the States should be told what to do. On the other hand, except where we tell them what to do, they’re going to shift dollars 

to where we tell them what to do. Does that make sense? 

Mr. ALEXANDER. It certainly does, and Senator Alexander’s question is right about the Medicaid growth in all this. The challenge 

is that this cost isn’t going away, and as States back out of their 

responsibilities, the cost is falling on the backs of students, and it’s 

falling on the backs of the Federal Government. 

The Federal Government was not supposed to be putting in 21⁄2

times what States do in support of revenues for higher education. 

That will be 31⁄2 times. That will be 41⁄2 times, because the $80 billion that States are putting into it will diminish and this will 

quickly grow for the Federal Government’s burden, whether it’s 

Pell grants, SEOG grants, subsidized loans. 

This burden will be transferred to the Federal Government, and 

we will have a Federal system of higher education, no longer State 

systems, but we’ll have a Federal system of higher education unless we stop States from getting out of the higher education business. I think you’re exactly right. ESEA actually is a great example 

of what States will do with certain incentives. 

In 1965, when we decided that Title I schools should be in existence and the Federal Government should put extra money into 

poor schools, the first thing that States did was start backing their 

money out. They backed their money out in numerous States, and 

that led to numerous court cases culminating with Bennet v. The 

Department of Education in Kentucky in 1985 that said States 

55 

can’t supplant their money with Federal money. Currently, we’ve 

got a supplanting situation in higher education. 

Senator CASSIDY. Let me stop you. Paradoxically, the only way 

we maintain a State role is if we mandate a State role. 

Mr. ALEXANDER. That actually has worked in so many different 

areas, because the States are getting out and will continue to get 

out of the higher education business. We have States who have 

turned down Medicaid funding matches but still cut higher education at the same time. 

Senator CASSIDY. I also understand, which I did not appreciate 

before. Dr. Akers, I was struck by what you said. This is actually 

a bargain. Most people are able to pay off their student loans, as 

Chairman Alexander said, because the people with $100,000 loans 

are, frankly, making a lot of money, and they’re able to pay it off 

over time because their income befitted. 

On the other hand, Mr. Mitchell, you make the point that it’s 

going to be the poor person, the person of color, that is actually 

going to disproportionately suffer as States withdraw their contribution and the cost of tuition rises. If you will, if we’re concerned 

about income inequality, this issue of States backing out of tuition 

support actually contributes to income inequality. Is that what I 

got from you? 

Mr. MITCHELL. The concern there is that those students, those 

low-income students and students of color, who either never make 

it onto a college campus or don’t complete to graduation, won’t see 

the investment returns that some students do, especially higher income students. That is a problem, not only for those students, but 

also just for our broader economy and for a country that’s becoming 

more diverse. 

There was one other point, though, on State budgets and kind of 

the pressures on State budgets. There are a number of areas we 

look at with State priorities and what States need to spend on. One 

of those other areas that we’ve looked at is correction spending. 

This is not a place where there is an interaction with the Federal 

Government, but yet increases in cost at the State level have been 

rising over the past few years. 

State policymakers do have to make decisions about whether or 

not to increase revenue, cut spending in other areas to make investments in higher education possible. It’s important to note that 

at the State level as well. 

Senator CASSIDY. I’m out of time. Thank you very much. I yield 

back. 

The CHAIRMAN. Thank you, Senator Cassidy. 

We’ll have a second round of questions because Senator Cassidy 

got into my favorite subject, which is what is the true cause of the 

loss of State support for higher education. I’m not going to abuse 

my chairman’s position to take up time to do it until my turn 

comes. 

Senator Bennet. 

STATEMENT OF SENATOR BENNET

Senator BENNET. Thank you, Mr. Chairman. Thank you for holding this hearing, and I won’t dwell on the FAFSA or even unroll 

my FAFSA but just say that I hope with your leadership we’re 

56 

going to be able to get this across the finish line. It would make 

a difference to millions of people in the country. 

I want to say how much I appreciated Senator Cassidy’s preamble, because I don’t disagree with it. The important part of this 

is to think about the practical effect of how our Federal system has 

conspired against young people in this country over decades. It has 

resulted—the polite way of saying it, I guess, is the way Dr. ScottClayton has said. College attainment is increasingly becoming less 

equal—was your testimony. 

Another way of saying it, is that our system of higher education—and I would say combined with our system of K–12 education—is conspiring to compound income inequality in this country rather than relieve income inequality in this country, and it is 

certainly true. The evidence is absolutely clear. 

While we can speak in averages about the average experience 

that people have in this country, the way people in poverty intersect with our system of K–12 and higher education bears no resemblance to the way people that are more affluent intersect with the 

system. It’s very important for people to understand that on this 

committee and in this Senate. 

Forty years ago, if you were 22 years old, your Pell grant covered 

67 percent of the average cost of college. Today, it covers 27 percent 

of the average cost of college. Interestingly enough, the average age 

in the U.S. Senate is 62 years old. When we were in college, we 

were content with a system that provided 67 percent of aid. Today, 

it covers only 27 percent. That doesn’t seem fair to me. 

I know the reasons why, but we have to figure out as a country, 

working with States and local governments, how we’re actually 

going to provide a deal that’s different than the one people are getting today and looks more like the one people had when we had 

a rising middle class in this country. Otherwise, we’re not going to 

have a rising middle class in this country. 

In 2012, if you were in the bottom quartile of income earners in 

the United States, the net average cost of the average college to 

you after student aid is accounted for, after Pell grant is accounted 

for, was, I think, 85 percent of your annual income. If you were in 

the top quartile, it cost you 15 percent of your annual income. 

I don’t know what that is except a recipe for cementing income 

inequality in this country rather than relieving it. I wish that the— 

I’m sorry to go on so long, but I wonder if the panel—and I’ll start 

with you, Dr. Scott-Clayton—can give us your best idea for how we 

can deal with this. Dr. Alexander has spoken to it a little bit, but 

why don’t we just go down the list? 

Or tell me that I’m wrong. Give me the evidence that actually 

our system of K–12 education and our system of higher education 

and the billions of dollars that we are spending on those are actually diminishing income inequality in the United States of America. 

If you’ve got that evidence, I’d love to see it. 

Ms. SCOTT-CLAYTON. One thing I do want to say is that part of 

the anxiety that we’re feeling, as you mentioned, is looking back on 

a prior era when it wasn’t this hard. One of the reasons why it 

wasn’t so hard in a prior era is because not as many people were 

going to college. I do think we need to be a little bit careful. If we 

57 

look internationally at the places where college is free, they achieve 

that by restricting access. 

Senator BENNET. That’s a very fair point. I’d say in response that 

we are in a global economy today that is requiring that if you want 

to live in a middle class family, you need some attainment north 

of a high school education. It only means it’s more challenging for 

us, because we have to do it. 

The second thing I would say to that is from the perspective of 

the student, the individual, that’s pretty cold comfort. 

Ms. SCOTT-CLAYTON. Absolutely. What it means is that the role 

of financial aid is more important than ever. 

Senator BENNET. Because while the purchasing power in this 

country for things like television sets and bicycles and other things 

has grown dramatically, the percent of your income that you’re 

going to have to spend just to hang on in college is dramatically 

different than it was 30 years ago. Sorry to interrupt. I’ll stop. 

Ms. SCOTT-CLAYTON. I completely agree with you. Goal No. 1 

should be to make sure that every dollar that is invested has a 

maximum impact, and then let’s continue this conversation and not 

lead down the road of State disinvestment and Federal disinvestment in student support. 

Dr. AKERS. One thing that’s captured in your remarks is the fact 

that price has increased dramatically. Federal support for higher 

education hasn’t kept pace with that, obviously. That’s in regard to 

your comments about the Pell grants. 

What this means is that in order to invest in higher education, 

students have to become more levered than they were historically, 

so essentially putting all of their eggs in one basket when that 

wasn’t the case before. That just reflects a fundamental change in 

the market for higher education. 

What I would add to that is what that really emphasizes is a 

critical need for safety nets, because, as I said before, there are investments that will not pay off despite the fact that they pay off 

on average. Those are going to be a part of the Federal loan system 

that’s growing in importance over the coming years. 

Mr. ALEXANDER. The richest institutions in this country, the ones 

that are most capable of serving larger low-income populations, 

have the smallest number of low-income students. We need to reincentivize this and reward the institutions who are the most affordable and the ones that are keeping students out of debt and 

who are serving low-income populations and serving them well. 

That’s where the funding should go. We should examine whether 

we should be giving money to industrial park universities that are 

leaving 50 percent of all their graduates in defaults. 

Mr. MITCHELL. You raise a wonderful point around the Pell, and 

I wanted to say at the Federal level, one thing that could happen 

is just making sure that we protect and maintain the purchasing 

power of the Pell. 

Currently, the maximum grant is indexed to inflation. However, 

after 2017, that will no longer be the case, and that maximum 

grant will be frozen, which will only accelerate kind of the decline 

in the ability of Pell to help low-income students afford higher education. That’s another point to keep in mind. 

58 

Mr. KENNEDY. I’d say we have to continue our commitment to 

low-income students. We’re very fortunate in Indiana to have a 

very good State aid program, and we also use a lot of our institutional aid because we want to have those low-income students be 

successful at our institution. We have to continue with that. 

Senator BENNET. Thank you, Mr. Chairman. I apologize for going 

over. 

The CHAIRMAN. Thank you, Senator Bennet. 

Senator Murkowski. 

STATEMENT OF SENATOR MURKOWSKI

Senator MURKOWSKI. Thank you, Mr. Chairman. 

Thank you to each of you. We have a very interesting panel here 

this morning. 

I appreciate very much the comments by my colleague from Louisiana in talking about this supplanting of the State’s dollars for 

Federal and the direction that we really take in that regard. In 

looking at some of the numbers, Alaska is out there as being one 

that’s still in the winning category. 

Not so much right now. The price of oil is down. We’re looking at a $2 billion hole in our State’s budget. The pressure then on the 

State and where dollars are going for education is, again, a consideration and a factor for us. 

We are seeing, again, the same situation that you’ve seen with 

so many other States, where you’re seeing State support for the 

University of Alaska system going down. The costs are going up for 

faculty, for maintenance, and so, as a consequence, our tuition 

costs also are rising. 

This is a concern that I have, and I’m trying to understand—Dr. 

Alexander, you have mentioned several times now that we need to 

be utilizing the Federal leverage that we have. You mentioned, 

$170 billion to reward States. 

Again, how we as policymakers here with a tough budget situation as well—you know, you’ve got the States that are saying, ‘‘We 

can’t piece it together.’’ They’re looking to the feds to help do that. 

Do we really have $170 billion that we can provide for incentives 

to the States? 

I understand what you’re saying in terms of there must be a way 

to reward the States. Again, short of the actual appropriation dollars that we’re looking at, what more do we need to be doing to leverage the Federal side? 

Mr. ALEXANDER. The $170 billion is the aggregate. You need 

about $10 billion to incentivize States. The argument is we keep 

coming here over and over again to increase a Pell grant at a ratio 

that is much less than what our public universities are having to 

increase. 

We’re completely negating any increase in student aid each and 

every year, if we don’t close the back door, the back door being 

States, and if we don’t incentivize States to prioritize higher education, like we have highways, like we have Medicaid, like we’ve 

done other things. 

I do think that we need to put a priority on the next generation 

of students, and that priority is that we need to rethink how we’re 

using the $170 billion, because, as Senator Bennet pointed out, as 

59 

Chancellor Charlie Reed once said, if you’re poor and you’re smart, 

you have about a 10 percent chance still to graduate from college. 

If you’re rich and you’re stupid, you have a 90 percent chance— 

that’s a quote that we gave here about 5 years ago—even despite 

the $170 billion that we’re putting into this to change that around. 

I’m hoping that we use those resources more effectively, encouraging States to remain affordable, encouraging States to—— 

Senator MURKOWSKI. How do you do that more effectively, then? 

Mr. ALEXANDER. You put matching funds on the table for States 

that put money into higher education or at least, at this time, 

maintain the current funding levels in per-student funding for 

higher education. Those matching funds were utilized, certainly, in 

stimulus packages throughout the United States and could be utilized, and it could get our legislators to be more serious about not 

cutting higher education at a time when higher education is probably the easiest cut to make in every State in the country. We sit 

out there with no dedications, and that’s one reason why we’re declining at such a rapid pace. 

Senator MURKOWSKI. We’ve had good discussion about just this 

issue a lot this morning. I don’t want to belabor it more. Again, 

looking to those ways that we can encourage the States to make 

that commitment, is going to be huge. 

Senator Collins mentioned a point, too, that as the States are 

making these decisions on where they find their cuts, the cuts so 

often come in the student services, the counseling, those services 

for those who most need that help in understanding what their 

debt burden is. Those are gone, and then the students are left 

hanging. 

Mr. Kennedy, I appreciate the student loan debt letter that you 

have attached as part of your testimony. I looked through it. It 

looks readable. Hopefully, it’s just on 1 page, two-sided, so that it’s 

there for the student. It’s transparent in terms of what it is that 

the student is then obligated for. 

I don’t know whether Indiana is on the cutting edge in terms of 

making something readable and understandable and other universities are following suit. I’m going to make sure that the University 

of Alaska system looks at it, because it’s helpful for us. The more 

that we can do that, the more it’s going to help as our students are 

trying to understand what they’re facing and the burdens when we 

see these cuts and these reductions. 

My time has expired, Mr. Chairman. Thank you. 

The CHAIRMAN. Thank you, Senator Murkowski. 

Senator Warren. 

STATEMENT OF SENATOR WARREN

Senator WARREN. Thank you, Mr. Chairman. 

We need to reduce the cost of going to college, but we can’t do 

it until we get the facts straight on what is driving the cost of college and how student loan debt is affecting our families. 

Dr. Akers, you’ve written several analyses of the impact of student loan debt, and you gave some summary of that here today. 

You used data from the Survey of Consumer Finances, which is 

conducted by the Federal Reserve Board. I noticed that your conVerDate Nov 24 2008 10:59 May 23, 2017 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6601 S:\DOCS\94970.TXT CAROL
60 

clusion based on these data contradicts the Federal Reserve’s analysis of its own data. 

For example, you say that typical borrowers are, ‘‘no worse off 

now than they were a generation ago,’’ while Federal Reserve Chair 

Janet Yellen seems to think that many borrowers are worse off. 

Chair Yellen analyzed Federal data about families in the lower half 

of the income spectrum, and data show that in less than two decades, outstanding student loan debt jumped from 26 percent of average income up to 58 percent of average income. That’s more than 

double. 

Do you dispute the Fed’s analysis of their own data? 

Dr. AKERS. Absolutely not. There’s room here for both of us to 

be contributing valid points—— 

Senator WARREN. Let’s start. You think the Federal Reserve got 

this part right? 

Dr. AKERS. Sure, sure. I think they’re right. There’s truth in both 

of the claims. 

Senator WARREN. Let me ask about that. This is a huge increase 

in the debt to income ratio, and yet you say in your published work 

that you believe borrowers are no worse off than their counterparts 

were 20 years ago, and I’m trying to understand that. 

Dr. AKERS. Sure. The basis for that statement perhaps is what 

I can offer here. First of all, when we look at the long-run affordability of these student loan debts, we lean on the information that 

we have that the returns to college education are positive, on average. In a long-run sense—— 

Senator WARREN. So wait. The question is not whether or not it’s 

still good to go get a college education. I think everyone in the room 

signs on to that proposition. The question is whether or not people 

who are trying to do it now are in a much tougher spot than people 

who were trying to do it a generation ago. You describe it as no 

worse off. 

Yet, based on your numbers, borrowers’ annual income over this 

time period has gone up by 17 percent. Their debt load is up by 

150 percent. They have a little more money and a lot more debt 

over the last generation. How can you say they’re not worse off? 

Dr. AKERS. It’s important to remember that when we’re comparing income to debt accumulation, we need to be thinking about 

lifelong income and not just annual income. 

Senator WARREN. That is what we’re talking about. 

Dr. AKERS. We don’t need annual income to keep pace on a dollar-for-dollar basis with the amount of debt that’s increased or the 

increase in price, essentially, in order to do the cost-benefit analysis for college, in general. 

Senator WARREN. I’m sorry. We’re back to the original point. The 

question is not does it make sense financially by the time you’re 

65 to have gotten a college diploma. It certainly does. 

I’m looking at your published statement that today’s generation 

is no worse off than 20 years ago. Yet all I can see is that income 

has gone up 17 percent. Debt has gone up 150 percent. It seems 

to me that means that people today are a whole lot worse off, on 

average, if they have to borrow money to go to school. 

Dr. AKERS. I’ll offer an additional statement to support that 

claim, and that’s based on the transitive burden that student loan 

61 

debt is imposing on these households. What we look at is what is 

the ratio of monthly payments to monthly income for these young 

households who are carrying student loan debt, and we see, surprisingly, that it has remained flat or even declined over the past 

20 years. 

Senator WARREN. In fact, I looked at that part of your research, 

and what that part of your research says is that families today are 

stretching it out—a much bigger debt burden, but they’re stretching it out over decades longer than they used to. You say they are 

no worse off, even though they will be paying more interest, and 

they will be paying for a much longer period of time. They’re no 

worse off because they can pay more, they can pay longer, they can 

pay when they should be working on helping their own children get 

an education, and when they should be saving money for retirement. 

You know, a lot of people would think that being able to pay off 

your debt in 10 years versus being able to pay it off in 20 years 

or 30 years, you’re worse off if you have to make those same payments over a much longer period of time. 

Dr. AKERS. Yes, absolutely. That piece of evidence alone doesn’t 

tell us anything about what’s happening to the long-run well-being 

of these borrowers and how it’s changed over time. There are two 

aspects of affordability. First is the long-run affordability. The best 

evidence we have on long-run affordability comes from our estimates of the financial return on the investment and then the transitive burden or the month-to-month affordability. 

Senator WARREN. As I said, what we’re trying to get is the 

intergenerational, because what I’m focused on is the question of 

whether or not kids are doing worse today. It just seems to me, 

based on your research and on the Fed’s research, both of which 

show a substantial increase in debt loads, that it is a serious problem. 

I don’t think it’s responsible to sit here and claim that borrowers 

are, ‘‘no worse off’’ while people are still struggling to make much 

higher student loan payments than ever before and carrying their 

debt for much longer than ever before. It seems clear to me that 

the Federal Reserve, the Consumer Financial Protection Bureau, 

the Treasury Department, and other experts who have been sounding the alarm on student debt got it right. 

Rising student loan debt is hurting our families and it’s hurting 

our economy. We need to make changes. We need to make them 

now. That means taking an objective look at our student loan program instead of trying to sweep this problem under the rug. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Warren. 

Senator Isakson. 

STATEMENT OF SENATOR ISAKSON

Senator ISAKSON. Thank you, Mr. Chairman. You know, I was 

thinking when I listened to Senator Bennet—I went to the University of Georgia in 1962, which was back when the earth was cooling 

a long time ago, and I know things aren’t necessarily relevant, but 

we’re all sitting here on a ham sandwich starving to death. 

62 

When I went to the University of Georgia in 1962, they admitted 

every applicant who was a graduate of a Georgia high school. Dean 

William Tate, who was the dean of students, would get you in the 

Fine Arts Auditorium on the first day—2,000 freshmen—and he 

would say, ‘‘Look to your left and look to your right, and one of you 

won’t be here next quarter.’’ They managed the cost of the university through attrition of academic achievement, but they took everybody who applied. 

Today at the University of Georgia, they have 71⁄2 applicants for 

every one person they accept, No. 1. No. 2, the graduation rate is 

probably not 100 percent, but it’s certainly in the 1990s. Every one 

of those students enters the University of Georgia on some type of 

a scholarship because of the Hope Scholarship Program. 

We have a lot to be thankful for in terms of what our education 

has done over the last 53 years. I remember my dad calling me in 

the living room when I graduated from high school, and he said, 

‘‘Son, I’m going to make you two promises for higher ed. One 

is if you go to the University of Georgia, I’ll pay for the cost 

of your education as long as you don’t go 1 day longer than 4 

years.’’ 

I went to the University of Georgia, and I went to summer school 

for three summers to make sure it was 4 years when I got out. Necessity is the mother of invention, and therein lies part of our problem. 

We need to start educating students on what it’s going to take 

them to pay the debt that they owe and give them enough relevant 

information early in the decisionmaking process so they borrow on 

a more reasonable basis, No. 1; and, No. 2, recognize our university 

system cost is in large measure because of the competitive nature 

of our university system. 

Everybody is trying to have the best student personal fitness program, the best football team, the best library, the best everything 

else. We’ve got a lot of bricks and mortar costs and everything, and 

it’s going to continue to go up. 

The point I want to make is that you can’t compare apples and 

oranges. You’ve got to compare apples and apples, and we’re lucky 

to be where we are. We’re at a break point. We’re at a point where 

we may kind of invert because of the rising cost of higher education 

and because of the rising debt of students. 

What you’re doing at the University of Indiana system is really 

remarkable. I agree with Lisa in terms of what she said about the 

letter, but, more often, recognizing early that tracking students, 

making students aware of the cost of borrowing, and helping them 

and counseling them in borrowing makes all the difference in the 

world, and I commend you for doing that. We ought to be doing 

that at every institution in higher learning. 

Second, there are lots of examples where students who have fallen through the cracks—minority students, poor students, people 

like that—are now being helped by universities—two in Georgia, 

for example. Georgia State University has developed a program 

called Panther Grants, where they track 24,000 students at Georgia State University, and if they see one falling through the cracks 

because of finances, they call them in. More often than not, a small 

63 

amount of money at a critical time in their education can keep 

them in school versus dropping out to work. Georgia State’s average Panther Grant is $300, yet they’ve saved 

countless students from dropping out of school and going to work. 

Georgia Tech has a program now called the Wayne Clough Full 

Scholarship Program, where if you’re academically qualified and 

economically not able to pay for tuition, you go to the Georgia Institute of Technology on a full boat as long as you do $2,500 in student work during the course of the year. That’s the Wayne Clough 

Scholarship Program. 

We have universities in Georgia that are creating ways to bring 

those students who might fall through the cracks or the shrinking 

middle class back into our university system. I know I’m supposed 

to ask a question and I’m not doing it. 

[Laughter.] 

The point I want to make is we’ve got a lot to be thankful for 

about where we are. I don’t know how much the State of Georgia 

spends on the University of Georgia, but probably 75 percent of its 

revenues in 1962 when I went there. I think it’s 23.5 percent. I 

don’t know what Louisiana State is. 

Mr. KENNEDY. Thirteen. 

Senator ISAKSON. Thirteen? What is Indiana? 

Mr. KENNEDY. A little bit higher than that. I think about 18 percent. 

Senator ISAKSON. Most universities in the country are 25 percent 

or less—State universities. That’s down from 75 percent or more 50 

years ago. Look at what we have as a product. 

The important lesson on the cost of higher education is that the 

university systems of the United States of America have an obligation to the potential students of those universities to give them the 

best debt education they can, the best timely information they can, 

and the best creative opportunities they can to continue to go to 

those universities, and recognize every brick and mortar that you 

put on that campus contributes to the higher cost of the university 

that you’re running. Every now and then, when we look for alternatives to bricks and mortar, we’re probably going to be a lot better 

off in terms of managing our cost. 

You’re welcome to comment on that if you want to. I just had to 

get that out. That’s my story and I’m sticking to it. 

The CHAIRMAN. Thank you, Senator Isakson. 

Senator Casey is not here. Senator Whitehouse. 

STATEMENT OF SENATOR WHITEHOUSE

Senator WHITEHOUSE. Thank you, Mr. Chairman. It seems fairly 

recently that we had the news that student loan debt in the country broke through a trillion dollars, and now it appears to be at 

$1.3 trillion. It’s accelerating at an astounding rate. 

Behind those big numbers are stories like my constituent, Ashley 

Kenihan from Riverside, who is a nurse at Miriam Hospital, one 

of our great hospitals. She loves her work. She’s proud of what she 

does. She may be an expert nurse, but she wasn’t an expert financier, and she’s now carrying six different student loans, some of 

which have very high interest rates. She’s estimating her payoff is 

over $200,000. 

64 

She’s looking around for fairly simple measures, like is there a 

way to consolidate all those loans at a lower rate. Given that we’re 

loaning the big banks money at virtually zero percent, why not 

help students like Ashley or, I should say, nurses like Ashley, because she’s through her student years. 

All of us are sympathetic to that problem, and we all want to 

help. We also want to make sure that it’s really helping. 

This business of flooding more student aid into the higher education system—if you’re not backstopping to make sure that— 

you’re actually really funding the State general assembly by allowing them to offset every additional dollar you get with State cuts 

and also taking the incentive out from the universities to meet any 

kind of basic cost or, at least, cost reporting standards, what—are 

there any good examples out there at the State level perhaps or 

even at the individual university level where somebody has addressed the danger of that kind of gamesmanship in the system 

and tried to hold both the university and the State alternative 

funding source accountable? 

Do we have good models to work off, or are we in terra incognita 

here? 

Mr. ALEXANDER. We have very good viable models. The key, is 

protecting those models and protecting the institutions that have 

done exactly what you said. Only 30-plus percent of the students 

that get out of Louisiana State University graduate with any debt 

whatsoever. The national average is almost 75 percent. 

We need support to stay where we are. We need support to ensure that the States help keep us where we are. If this continuation of a shift from the State to the Federal student aid program 

moves forward as it’s been going, and this trend continues, where 

States get out of higher ed and the Federal Government picks up 

through the programs, students will be in much, much greater debt 

each and every year as we go forward. 

There are many institutions that could be supported through 

State support but also through Federal recognition of the institutions nationwide who are affordable, who are keeping students out 

of debt. 

Senator WHITEHOUSE. Maintenance of effort is a doctrine that 

has a long history, often of rather squirrelly definition. Are there 

examples of how you can hold, for instance, a state’s feet to the fire 

on this with terms that are more definite and more measurable 

and less amenable to gamesmanship than just the old maintenance 

of effort game? 

Mr. ALEXANDER. I can say with regard to the stimulus package 

for higher education, it was the most important part of that stimulus package, because you had many States that even cut their 

budgets within half a percent of the line that they couldn’t cross. 

And once that line was removed, those States cut their budgets 

back to 1994 and 1995 levels. They had nothing to maintain them 

at 2006 levels. In addition to that, I’ll use ESEA and Title I 

schools. 

Senator WHITEHOUSE. Is that because this is something as simple and measurable as a State appropriation, and so maintenance 

of effort doesn’t get fogged into—— 

65 

Mr. ALEXANDER. You cannot cut below a certain level if you accept Federal funds. This also applies to ESEA and Title I schools. 

Senator WHITEHOUSE. Then what’s the universities’ commitment 

not to just take that extra funding both from the Federal Government and the State and give everybody a new uniform and everybody a—— 

Mr. ALEXANDER. I can speak on behalf of the public universities. 

The public universities’ commitment is, we don’t want to go up in 

tuition. We don’t want to go up $900. If we get enough State support or maintain State support, we don’t have to increase our cost. 

Therefore, our students do not have to incur greater debt upon 

graduation, and/or students will get into debt at graduation. 

Senator WHITEHOUSE. My time has expired, Mr. Chairman. I just 

want to let you know that I appreciate the process that you and 

the Ranking Member have embarked on on the Higher Education 

Act. I thought we had a really great outcome on the Elementary 

and Secondary Education Act, and I appreciate how well the committee is working together on this set of problems. 

The CHAIRMAN. Thank you, Senator Whitehouse. We all have enjoyed the quality of the witnesses and the opportunity to work together on such important issues. Thank you for your comment. 

Senator Scott. 

STATEMENT OF SENATOR SCOTT

Senator SCOTT. Thank you, Mr. Chairman, and thank you for 

holding such an important hearing on such an important issue. 

Dr. Akers, I appreciate you putting the point on the core of the 

problem and talking through the cost and challenges that so many 

students face in obtaining what is a very important component to 

success in America, which is, of course, more education. 

As I talked throughout the State of South Carolina with many 

of the presidents at colleges in South Carolina, I ran across a Dr. 

Miller, who is the president at Greenville Tech. He talked about 

the important role that technical schools can play in reducing the 

overall burden and cost of education for students. One point that 

he made was that if you compare Greenville Tech to other 4-year 

institutions, the cost savings per semester is around $4,500 per semester. 

He also mentioned the fact that many schools, at least in South 

Carolina and other States, are moving to a model where you can 

allow—you have transfer agreements so you lose no credits whatsoever. Could you talk a little bit about—if you agree, can you talk 

a little bit about the opportunities of reducing the cost of college 

by using technical schools? In Senator Alexander’s State of Tennessee, they’re moving toward making technical schools virtually— 

or 2-year schools—free. 

The CHAIRMAN. Yes. That’s been done. 

Senator SCOTT. If that is a fact, can you talk about, (a) many students want to go to the college of their choice and spend 4 years 

there, and (b) perhaps you can save 30 percent to 40 percent of the 

cost of education by going to a 2-year school and then transferring 

with those credits going forward to that alma mater of your choice? 

Dr. AKERS. Sure. Thank you. Some of the sentiment that you’re 

capturing in your remarks is we’ve placed a lot of emphasis on this 

66 

dream of going to college, living on the campus, having this experience, which is, in fact, a great experience and a valuable experience. It has pushed consumers away from thinking critically about 

the cost that they’re paying for college on the front end and really 

being critical consumers and demanding that their institution is 

providing a service to them that meets the dollars that they’re contributing. 

The use of community colleges or alternative non-bachelor granting institutions as a stepping stone to higher education is a reasonable approach that is probably under-utilized. 

Senator SCOTT. Has anyone quantified the actual savings? 

Dr. AKERS. I’m not familiar with work in that area, but it might 

exist. 

Senator SCOTT. I spoke as well with some of our 4-year institutions—and this question and go to whoever wants to answer it. Dr. 

Pastides at the University of South Carolina and I talked yesterday 

about making Pell grants available during the summertime again. 

He talked about the opportunity cost that is lost in the fifth and 

the sixth year of education. If I have the figures right, the opportunity cost for the extra time in school for those 2 years—the fifth 

and the sixth year—is about $77,738. 

It seems like if you’re spending more time in school, you’re actually, (a) accumulating more debt because, typically, your 4 years 

are done with your financial aid and (b) you’re missing the opportunity of working and paying taxes, which is an opportunity cost 

as well. If someone wants to comment on—Mr. Kennedy—on the 

opportunity cost as well as the savings if we were to make Pell 

grants available during the summertime. 

Mr. KENNEDY. Thank you, Senator Scott. We really liked having 

the year-round Pell, because we could use it for our students who 

were not completing the 30 credits. We’ve been really focused on 

the 15 credits per semester so somebody will graduate in 4 years. 

Senator SCOTT. Yes. 

Mr. KENNEDY. We use the summer as kind of the make-up time. 

If somebody is not on track to graduate, they can use the summer. 

What we found is that the funding for summer is pretty limited. 

Most students have already used their Federal eligibility. There’s 

a little bit of State eligibility. We feel that putting that back in 

place would be very helpful to keep students moving through and 

graduating in 4 years. 

Senator SCOTT. One quick thought, Mr. Kennedy, while we’re on 

that topic. Dr. Pastides mentioned the fact that many of the interns in accounting and other areas are going to focus during a semester. If you’re a CPA or if you’re an accounting major, the 

chances of you getting an internship January to April is far better 

than June to August. If you want to give that student the opportunity to get real skills at work, perhaps the summertime Pell actually allows that to happen more often than not, as well. 

Mr. KENNEDY. Very much. 

Senator SCOTT. My time is up. Did you have a—Dr. Scott-Clayton? 

Ms. SCOTT-CLAYTON. Yes. I was just going to jump in with a couple of points there. First, in terms of the student loan debt and the 

tradeoffs between a 4-year versus a 2-year technical degree, when 

67 

we hear about the $30,000 typical debt, that’s referring to bachelor’s degree graduates who borrow. 

If we look instead at 2-year institutions, the rates of borrowing 

overall are far, far lower, and the amounts that students borrow, 

conditional on borrowing, are also lower. Students at those institutions, if they’re receiving a Pell grant, are probably going to have 

their tuition fully covered and even get some help paying for their 

other expenses. 

Senator SCOTT. It certainly would then reduce the cost of a 4- 

year education for those students who transfer without any debt at 

all. 

Ms. SCOTT-CLAYTON. Yes. 

Senator SCOTT. Mr. Chairman, my time is up, unfortunately. 

Thank you. 

The CHAIRMAN. Thank you, Senator Scott. 

Senator Casey. 

STATEMENT OF SENATOR CASEY

Senator CASEY. Mr. Chairman, thank you. I want to thank you 

and the Ranking Member for the hearing. 

One of the issues that so many of us in both parties have been 

focused on is the issue of the middle class or the inability for folks 

at a more regular rate to get into the middle class. Some of that 

is what I would call a 40-year wage growth problem. If we’re not 

talking about higher education when trying to solve the lack of 

wage growth over the last 40 years, we’re probably not getting to 

part of the solution. This is a timely hearing in so many ways. 

I wanted to focus more narrowly on the Perkins program and, in 

particular, the value of it but also the particular impact in my 

home State of Pennsylvania. We have over 50,000 students impacted by Perkins and more than 100 institutions. It has a huge 

impact. We know that it’s going to expire at the end of this fiscal 

year, September 30 of this year. 

I wanted to start with Dr. Alexander. In your testimony, you 

stated—and I’m quoting in part on the first page—you were referring to recommendations you would make of, 

‘‘how the Federal Government can better utilize its fiscal leverage to ensure that there will be affordable public college 

and university options for students in every State.’’ 

I would just ask you if you would include Perkins as one of those. 

Mr. ALEXANDER. I would certainly—I think you can use any of 

the $170 billion—Perkins is in that $170 billion—in support of encouraging States to do the right things and remaining affordable. 

Perkins will grow if tuition grows, and the need for Perkins will 

grow. 

Other campus-based programs that we’re aware of—SEOG, as I 

mentioned, and work-study—also need to be carefully examined, 

because, currently, they’re more price-based than they are studentbased or institutional-based. We need to examine the fair share of 

which institutions are providing the best opportunities. 

All of that can be looked at and can be incentivized to States so 

that States are also keeping their costs low, but also keeping student indebtedness lower as well as they go forward. 

68 

Senator CASEY. In terms of your own institution, LSU, can you 

put a metric or a description of what Perkins means at LSU? 

Mr. ALEXANDER. Perkins is very important. Because we’re lower 

cost, Perkins is vital to most of our institutions, primarily because 

we’re a poor State. We need revenues, and we need support from 

the Federal programs to offset what our States are unable to do. 

My worry is that we don’t remain the affordable State that keeps 

students out of debt, and two-thirds of our students don’t graduate 

with any debt whatsoever. That’s the goal at the end of the day, 

to keep our students out of debt as they go forward. 

If they choose to have debt, we want to make sure that they understand the low-interest rate debt, and we want to encourage 

them to take as little as possible but enough to keep them on track 

to finish. So Perkins is very important. 

Senator CASEY. The low interest rate connected to Perkins, of 

course, is an important feature. 

Mr. Kennedy, for Indiana, can you speak to Perkins in terms of 

the impact or the value of it? 

Mr. KENNEDY. Yes, I can, Senator Casey. We have roughly about $10 million a year we give out in Perkins loans to our low-income 

students. We feel it’s a very vital program because it gives us some 

flexibility with the low-income students. 

We really like that program, and we’ve used it a lot just to help 

students, especially getting over—that have some issues financially. That extra little amount can really help them stay in school 

and finish their degree. We really like the Perkins program, and 

we have strongly worked on that program at Indiana University. 

Senator CASEY. That’s great. Before I wrap—I’ve got about a 

minute. Anyone else on Perkins? Any comments? 

Ms. SCOTT-CLAYTON. I would just make the comment that a concern is that students probably don’t know about Perkins until 

they’re already on campus, and it can be very confusing not only 

to have two different types of Stafford loans, but also to have Perkins loans. If there’s some way to get the benefits of the institutional flexibility while reducing the confusion and complexity that 

students face, That’s something to keep in mind. 

The second piece is that campus-based aid programs are extremely unequal in their allocation, and particularly with respect 

to Federal work-study, which has been shown to be effective. It’s 

shown to be effective for the students who are least likely to be getting it right now because their institutions aren’t getting sufficient 

funds. 

Senator CASEY. Thanks very much. 

The CHAIRMAN. Thank you, Senator Casey. 

Senator Baldwin. 

STATEMENT OF SENATOR BALDWIN

Senator BALDWIN. Thank you, Mr. Chairman and Ranking Member, for continuing in this series of important hearings. As we take 

a deeper look at the investment that our States are making in public university systems, I would make some observations about my 

home State of Wisconsin. 

Unfortunately, we are seeing my home State as an example of 

this trend of disinvestment. Just by way of example, at our flagship 

69 

university, the University of Wisconsin Madison, State funds today 

account for only 17 percent of total revenue. This is down from 43 

percent in the year 1974. 

Earlier this year, our Governor proposed further slashing of 

State support for the University of Wisconsin system, cutting another $300 million in the next biennial budget. Last week, a key 

legislative committee approved an ever so slightly more modest cut 

of $250 million. 

If approved by the full legislature, this will mark the sixth budget in the last 7 years that cuts State support for higher education. 

I fear this cut and others like it will limit opportunities for more 

Wisconsinites, it will saddle more families with student debt, and 

it will dim the job prospects of the next generation and harm our 

Wisconsin economy. 

I regret that I was unable to join this hearing during some of the 

earlier opening remarks. At the risk of having you repeat some of 

your earlier answers to questions and testimony, I guess I want to 

start with you, Dr. Alexander. 

You’ve noted that this trend is sadly not unique to my home 

State of Wisconsin. Can you talk about the impacts that State disinvestment has had and could continue to have on students and 

families and the future vibrancy of our State economies, and, 

frankly, just tell us what’s likely in store for the students and families in my State facing this massive additional cut? 

Dr. KENNEDY. We’ve watched Wisconsin very closely—— 

Senator BALDWIN. I’ll bet you have. 

Dr. KENNEDY [continuing]. Because I think you’re second in the 

budget reduction right behind us. I’m very concerned about the 

cuts that are going on in Wisconsin because I’m the father of a 

daughter that goes to Wisconsin, and I know my tuition and fees 

will be jumping rather rapidly. In addition to that, I’m a graduate 

of the University of Wisconsin. 

Without any utilization of Federal leverage to encourage States 

and our State legislatures to keep their investments in public higher education, the consequences will be that this will shift onto the 

backs of students and families. The societal gain or the societal 

support of our neighbor’s child will go away. It will become simply 

an individual benefit paid for by the families and the individuals 

who receive it. 

That will become a sad day in this country when we do not have 

societal support on behalf of other State citizens to support other 

children who may not be our own. That’s the direction we’re going, 

and that’s why I do think Federal leverage is needed to encourage 

States to stay in the game and not abandon these commitments. 

Senator BALDWIN. Mr. Mitchell. 

Mr. MITCHELL. If I could, just to make two other observations, 

specifically to Wisconsin, over the past few years, there have been 

significant tax cuts in the State of Wisconsin that have made it 

very difficult for policymakers within the State to put money toward higher education, cumulative cuts that are around $2 billion 

over the past few years, largely in property tax and certain income 

tax reductions that haven’t actually even been targeted toward lowincome households in the State. That’s very important to keep in 

mind, especially for potential budget cuts coming up in Wisconsin. 

70 

I also just want to point out that this shift that we’re talking 

about is not as long-term as we sometimes communicate it to be. 

When we look at education revenues right now in the States, tuition is now about 50 percent of educational revenues. Even 12 to 

15 years ago, it was only at around 30 percent. 

For lawmakers at the State level and at the Federal level, It’s 

very important to keep in mind that it’s not so long ago that we 

had made a commitment to higher education funding. 

Senator BALDWIN. Thank you. 

The CHAIRMAN. Thank you, Senator Baldwin. 

Senator Murphy. 

STATEMENT OF SENATOR MURPHY

Senator MURPHY. Thank you very much, Mr. Chairman. 

Thank you for sticking around for the last series of rounds of 

questions from those of us who had other committee meetings to 

attend. Let me add my thanks to the Chair and the Ranking Member for the way in which we’ve conducted this discussion. 

I wanted to continue to talk about this question of accountability. 

I’m totally on board, Dr. Alexander, with the idea that we should 

look at higher education funding in somewhat the same way we 

look at transportation funding, whereby we require a minimum 

State contribution; Medicaid funding, for which we require a minimum State contribution. As the numbers go up from the Federal 

Government, it just seems like we should expect something from 

the State governments other than cuts after cuts after cuts. 

Your testimony also talks about this idea of return on investment 

for a student, which is not just about the amount of money they’re 

spending, but it’s about the outcome that they receive as well. 

When you talk about accountability and affordability, it is all relative to the benefit that they get once they graduate and the 

amount of money that they’re making and whether that lives up 

to their expectations when they made the decision to take out all 

of these loans in the first place. 

It strikes me that as part of this conversation—and I’d love to 

get the range of thoughts from the table—that we should be talking 

about a couple of additional things. One is making sure that students have really good information when they decide to take out 

loans as to what the predictability is going to be of their ability to 

repay it. 

Today, we just don’t have that data. We just don’t have the ability—in part because of a ban in our statutes on something called 

the student union record—to actually tell students what the average graduate of a particular institution is making, how many of 

them are employed. 

The second thing we can do is have a little bit tougher accountability for schools, at least to catch the outliers who aren’t delivering results. Right now, the only hammer we have is this default 

rate, this cohort default rate. If 30 percent of your graduates aren’t 

paying back their—no, are defaulting on their loans, not paying 

back their loans, then you’ll get cutoff from student aid. That’s it. 

We have no other way to try to push schools toward accountability. 

Should this be part of our conversation about affordability, giving 

students some more information about the return on investment 

71 

that they’re going to make, and perhaps talking about some—you 

know, maybe even, at the outset, light touch tools that the Federal 

Government can use to try to ratchet up the accountability for results that schools are getting? 

Ms. SCOTT-CLAYTON. Thank you so much for this question and 

comment. The first thing I want to respond to is the need for better 

data on student outcomes, as well as better data about student 

loan repayment and default. 

There are critical holes in researchers’ ability to figure out what’s 

going on, let alone students and their families. There are movements afoot to make the problem even worse by limiting a researcher’s ability to use student record data to look at things like 

what are the outcomes of students who enroll in and complete different degree programs. That’s a very important point. 

The second is that going back to this discussion about affordability, affordability of the cost is just one-half of the cost-benefit 

equation, and it’s pretty complicated enough, just to figure that 

piece out. Besides that, students also have to make complicated 

tradeoffs about which program is right for them and what their 

outcomes are likely to be if they go. Providing better information, 

as there have been movements to do, is helpful. 

Students do need more than just information. They need guidance, they need individualized and proactive assistance to make 

these decisions, and there may be some light touch things the Federal Government could do, just pushing out information on where 

students can turn to for support with these decisions. 

If the Feds could simplify the Federal financial aid piece of it, 

again, that would free up resources, community organizations, volunteers, college counselors, high school counselors to help students 

with the even more difficult question of where they should go. 

Senator MURPHY. My time is running down, but there’s a couple 

of other people who want to jump in. 

Mr. ALEXANDER. You ought to take a look at the institutions that 

are fighting against this type of information. I’d love to have a blue 

book where parents can walk in and assess what the value of that 

institution is, because there are many institutions that are overcharging in this Nation, and we had to get—in the last reauthorization act legislated, they had to admit how much student indebtedness they had. 

We post what our starting salaries are. We post what our midcareer earnings are, age 42 to 45. We post what our student indebtedness is upon graduation. That’s what parents want to hear. 

That’s the information that they can’t get through private news 

sources. This value-based discussion needs to be pushed forward 

from the Federal Government to force every institution to admit 

outcomes. 

Senator MURPHY. Dr. Akers, I’m a little over my time, but I’d 

like to hear your—— 

Dr. AKERS. Sure. Thank you. I appreciate it. I couldn’t agree 

more that we need more data available on institution-level and program-level outcomes that students can use to make better decisions 

about where to go to college, where to invest their dollars. 

We talk about creating a system of accountability, but we’re sort 

of ignoring the most fundamental system of accountability, which 

72 

is the consumers choosing where to spend their dollars in higher 

education. Improving access to that data through potentially the 

creation of a record system or other means, would go a long way 

in creating the appropriate incentives for institutions to be serving 

their students well. 

Senator MURPHY. I just remember an incredibly sophisticated 

young man at a preparatory school in Hartford, CT, public school, 

saying that he was taking out a boat load of loans to go to MIT 

because he had made a decision that it was going to pay off for 

him. The other kids around the table were just glazed over. They 

had no idea what he was talking about because they had really no 

information about how to make that choice and no information 

given to them about the ways in which they would go about doing 

that. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Murphy. 

This has been a terrific discussion, and you can see from the interest of the Senators that we all feel that way. Let me ask Senator 

Murray if she has any further questions or comments that she’d 

like to make. 

Senator MURRAY. I do have one more. 

Dr. Scott-Clayton, I wanted to come back to you. You noted that 

the Pell grant can cover tuition and fees for some students like 

those who enroll at community colleges, and more students ought 

to recognize just how affordable college really is. 

Students and families in my State tell me that tuition isn’t their 

only expense. It’s, in fact, less than half of what they have to pay 

just to survive. The Federal data that I see shows that students 

from the lowest income families have to pay almost $12,000 a year 

for college after the grant aid. 

I wanted to ask you do you think we have done enough to make 

college more affordable, or should we be providing additional support for low-income students? 

Ms. SCOTT-CLAYTON. I don’t think we’ve done enough. I do think 

we can do better. I do think, absolutely, for community college students, tuition is not usually even the biggest barrier. 

There’s been programs such as the ASAP program at CUNY that 

make tuition completely free. The designers of that program were 

actually surprised that that was not the expensive part of the 

intervention. The expensive part was the metro cards and the student advisers. I do think we can do more. Let’s also make sure that 

students know about the aid that’s out there. 

Senator MURRAY. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Murray. I have just a couple 

of questions. 

Mr. Kennedy, we had testimony at a March 2014 hearing from 

two financial aid directors who said that Federal laws and regulations prevented colleges from requiring financial counseling. One 

said institutions are not allowed to require additional counseling 

for disbursement. ‘‘We can offer it, but we’re not allowed to require 

it. Without the ability to require it, there’s no teeth in it.’’ 

Do you agree with that? Do you find the rules and regulations 

in your way as you try to step up your counseling efforts? 

73 

Mr. KENNEDY. Mr. Chairman, I feel what we’ve done with financial literacy, kind of adding onto it—we haven’t made it required, 

but we’ve had great participation in that. We haven’t been hindered in our efforts with those regulations. It should be strongly 

encouraged, with our success, that any type of additional counseling is very much needed. 

The CHAIRMAN. Do you think you should be prohibited from requiring it? 

Mr. KENNEDY. I would say, no. Whatever we can do, I would 

strongly encourage. 

The CHAIRMAN. Thank you. Among the things I heard today—the 

importance of counseling, the importance of clear information, the 

importance of reducing complexity as a way of releasing this army 

of people who could advise on other things. I thought I heard general approval of the year-round Pell to help speed students through 

more rapidly and, in fact, hopefully, reduce the cost of college, if 

you get in the workforce more rapidly. 

One Senator mentioned we loan money to big banks at zero and 

to students at 4.29. That’s not exactly right. The Federal Reserve 

loans money to banks overnight at near zero. We loan money to 

students for about 10 years at 4.29. 

It’s also important to go back to where I started. The message 

that always comes through at these discussions is how much more 

we’d like to do, because it’s never easy to pay for college. It never 

comes through quite as clearly how affordable things are. 

I mean, if you’re a low-income student in Tennessee, community 

college is—or if you’re any kind of high school graduate in Tennessee, community college is free. If you’re a low-income student in 

any State, community college is free or nearly free. 

If you’re a 4-year student at the University of Tennessee Knoxville, 75 percent of your tuition is typically covered by student aid. 

The president of Georgetown pointed out that even if you want to 

go to one of the so-called elite universities and you’re willing to borrow $4,500 a year and work 10 to 15 hours a week, the university 

will pay for whatever your family can’t, and that the average student loan is about the same as the average car loan. All that information suggests to most students that there’s a way to go to college. 

The last thing I’d want to discuss a little bit before we conclude 

is that we have Alexanders going in different directions here. Dr. 

Alexander would have the Federal Government require States to 

spend money on higher education. I’d go just the opposite direction. 

I would say the Federal Government ought to stop requiring States 

to spend money on Medicaid. 

I know anecdotal evidence isn’t sometimes as good as research, 

but I’ve had a vantage point that’s pretty unique. I’ve been a Governor in the 1980s and a university president and a secretary of 

education, and now I’m here. 

I’ve watched Medicaid spending in Tennessee go from 8 percent 

to as high as 33 percent of the State budget, and I’ve made up 

those State budgets, and what we did was we took money from 

higher education and put it into Medicaid. I resisted that, and during the time I was there, we increased funding for higher education 

74 

more than any other State for 3 years. It was a struggle even in 

the 1980s. 

This isn’t anything very recent. The reason for it is very simple. 

The Federal Government defines what the Medicaid benefits are. 

It mandates what States should do about them. The States have 

to pick up 30, 40, 50 percent of the cost, and the percent goes from 

8 percent to 30 percent in Tennessee. 

It’s exactly true that as State support for the University of Tennessee or LSU goes down, or California, tuitions go up. I believe 

it’s exactly true that as Medicaid mandates get stiffer, tuition goes 

up. 

If I were the Governor of Tennessee still, I would be saying the 

reverse, Dr. Alexander. I’d be saying, 

‘‘Give us more flexibility, give us fewer Federal definitions 

and fewer maintenance of efforts, and let us put the money 

where the priorities are.’’ 

My priority was on higher education. Our current Governor’s is 

on higher education. He’s the one who made community college free 

in Tennessee, which really doesn’t cost very much money, actually, 

because it’s almost already free for every low-income student. 

Dr. Alexander, I’ll ask you this. Why would you adopt a policy 

of more Federal mandates when it’s Federal Medicaid mandates, in 

my opinion, that have basically caused the higher tuition fees at 

LSU, Tennessee, University of California, and every other State institution in the country? 

Mr. ALEXANDER. There are two points I’d like to make with regards to that. By the time you get that behemoth turned around 

and get that tackled, we’ll have 15 States that will be out of the 

public higher education business, that will not be funding a single 

penny of higher education from Colorado to South Carolina to Louisiana to Iowa. 

The second point is that we did have 48 Governors against us 10 

years ago when we proposed the maintenance of effort provision 

through the—the National Governors Association was completely 

against it. We got Governor Schwarzenegger to be neutral on it. As 

that went forward, within 6 months to a year, those maintenance 

of effort provisions mattered to 20 States immediately. 

Our response to the National Governors Association was, 

‘‘If this was such a bad idea, why did it work so well, and 

why did our States only cut their budgets to where the Federal 

penalty kicks in? ’’ 

The effectiveness—that period is the only time of fiscal stability 

we’ve had with our State governments. 

Without some kind of Federal support, without a redesign of how 

we’re using Federal funds to at least encourage States to stay in 

the game, I think it will be well too late at the end of the day for 

our States. They will bow out. It’s my responsibility to do everything I can to fight for the next generation of students as others 

have done for an aging population in healthcare. 

The CHAIRMAN. I’m completely opposed to a Federal maintenance 

of effort for higher education. If you have that, you might as well 

just have the Federal Government take over all the States. There 

wouldn’t be anything left for Governors or legislators to decide. 

75 

Mr. ALEXANDER. I know you are. 

The CHAIRMAN. I would respectfully disagree and say that my 

goal would be to increase flexibility in the spending of Medicaid 

funds and allow States to take that money and put it into higher 

education, because for 30 years, I’ve watched it go the other way. 

We’ve had a lively debate in this committee about that ever since 

I’ve been here with very different opinions about it. We’ve had a 

good one from the panel today. It’s been very helpful. If any of you 

have additional—Senator Murray? 

Senator MURRAY. I just want to make one comment. We won’t 

debate Medicaid right now, although I would say that many of the 

students who are trying to pay their tuition don’t want to have 

their parents who are in nursing homes all of a sudden be living 

at home with them. That’s an additional cost. That’s a debate for 

another day. 

I will just say that this panel has been excellent, and I really do 

appreciate all of your input. The cost of college is a roadblock to 

many young people today as well as the long-time burden that student debt puts on them. It’s a complicated question, and I really 

think our committee needs to tackle it in a bipartisan way. 

I appreciate the Chairman’s emphasis on the FAFSA form, and 

that’s an important area that we can look at. The whole issue of 

college affordability is very complex and one that does need to be 

tackled comprehensively. 

Thank you very much. 

The CHAIRMAN. Thank you, Senator Murray. We’ve made good 

progress. As most people know, we were able to deal with the Elementary and Secondary Education Act in a good way after 7 years 

of failure, really. We’re trying to apply the same sort of bipartisan 

participation to the Higher Education Act and getting very good 

participation by both Democrats and Republicans, thanks to Senator Murray’s leadership. 

Our hope is to be able to have a markup for the Higher Education bill in the early fall. We’ll see. We’ve got some more hearings 

to have and a lot of work to do between now and then. This has 

been very helpful. 

I’d like to invite the witnesses—if they have something to say, 

but they didn’t get to say it today, we’d like to hear it. 

The hearing record will remain open for 10 days to submit additional comments and any questions the Senators may have of you 

to followup. We plan to hold the next HELP hearing on Reauthorizing the Higher Education Act on Wednesday, June 17. 

Thank you for being here. The committee will stand adjourned. 

[Whereupon, at 12:18 p.m., the hearing was adjourned.] 

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