A Pragmatic Education Agenda


In 2016, most of the political discussion on education revolved around proposals to either make college free or debt free.   Many people believed these proposals were too expensive.  Moreover, the discussion did not sufficiently cover many other aspects of education policy.  In particular, there was insufficient discussion of details of many lending programs, the availability of information about the value and cost of colleges and issues pertaining to better preparing students for college.

This page outlines a comprehensive progressive education agenda. The proposal emphasizes four areas -- (1) the cost of college, (2) issues related to student debt, (3) providing better information about cost and value of different colleges and (4) better preparing students for college.  In addition, this page provides links to more detailed papers and posts on these proposals and issues.

The Cost of College  

Proposal One: Debt Reduction for First-Year College Students:

The free or debt free public college proposals of 2016 were extremely ambitious and expensive.  The alternative proposal presented here targets additional financial aid towards first-year students.  This proposal targets students who are most likely to be deterred from entering college due to financial risk and who would have problems repaying loans if they failed to obtain a degree.  The goal of the program is to substantially reduce the number of students with college debt after the completion of the first year of college.  The proposal will also not result in a substantial reduction in private school enrollment or enrollment in historically black colleges.

My current work on this proposal is summarized in the paper "Debt Reduction for First-Year College Students."

Debt Reduction for First-Year college Students

Student Debt Issues

Proposal Two:  Interest Rate Reductions And Shorter Repayment Schedules on All Student Loans After Ten Years of Student Loan Payments:  

Under this proposal, interest rates on student loans and amortization schedules would be reduce after 10 years.  The revised student loan would have a smaller IRR and a shorter duration than current student loans.  (In other words, lenders would receive a lower return but would be repaid quicker.)

Many student borrowers are likely to prefer the revised student loan to the Income Based Replacement (IBR) loans favored by the Obama Administration.

A technical paper comparing traditional student loans, interest concession loans, and IBR loans will be available shortly.

Proposal Three:  Improve the Income Based Replacement Loan Program:

The IBR program allows people with student debt and low income to set their debt payment as a percent of their income rather than the amount determined by the contract.  Once a person makes payments for 25 years the remaining debt on the IBR program would be forgiven.

There are a lot of problems with the IBR program including -- (1) the long repayment period, (2) federal taxation of forgiven debt, (3) non-inclusion of PLUS loans to parents, (4) small impact on households with a combination of student, business and consumer debt and (5) administrative complexity.

My review has identified two potential improvements to the IBR loan program.

·      Allowing married couples to obtain IBR debt reduction without having to actually file separate tax returns,
·      Making PLUS loans to parents and consolidated student loans with a PLUS loan eligible for the IBR loan program, 

A description of this program was outlined in the post below.

Proposal Four:  Tax Incentives for Employer Contributions to Student Loan Repayment Plans:

The tax code currently encourages employers to match employee benefits to 401(k) pension plans, does not tax any contributions to 401(k) plans as ordinary income, and defers all taxes on returns from assets inside a 401(k).   By contrast, there are no  tax-preferred mechanisms through which employers might help  their employees reduce student loan.

Most financial planners favor asset accumulation in 401(k) plans over quicker debt reduction of student loans.   Certainly, the current tax code favors this choice.   In my view debt reduction is more important than accumulation in 401(k) assets especially for people who are just starting out their career and forming a family.

The tax code should be modified to allow for tax-free payments from employers towards reduction of student debt.

A paper examining the choice between reduction in student debt and contributions to 401(k) plans will be available shortly.

Proposal Five:  Modify Chapter 13 Bankruptcy Rules Pertaining to Priority of Student Loans:

The 2005 change in bankruptcy law favored Chapter 13 bankruptcy over Chapter 7 bankruptcy.  Chapter 7 bankruptcy provides for immediate discharge of student loan.   Chapter 13 bankruptcy mandates payment plans prior to discharge of consumer debt.   However, student loans are seldom discharged in bankruptcy.   Moreover, in most circumstances student loans do not receive priority over consumer debt under chapter 13 plan.

One purpose of bankruptcy is to provide debtors with a fresh start, however, student debts are not discharged.   The equal priority attached to consumer debt in chapter 13 results in many student borrowers leaving bankruptcy without substantially reducing their student debt levels.  The rules governing the repayment of consumer and student debt in chapter 13 bankruptcy should be modified to facilitate repayment of student loans.

This change protects both the student borrower and taxpayers guaranteeing student debt.

Proposal Six:  Allow Private Student Loans to be Discharged in Bankruptcy:

The 2005 bankruptcy law made private student loans non-dischargeable in bankruptcy under most circumstances.   Private student loans have interest rates that are set by market forces and in general resemble private consumer loans and credit cards.   The government does not guarantee private student loans; hence, defaults on these instruments do not create losses for taxpayers.

There is no theoretical or moral reason for treating private student loans different from credit cards in either chapter 7 or chapter 13 bankruptcy.   These private loans should be dischargeable in bankruptcy.

A description of issues related to student loans in bankruptcy can be found in the following essay.  (The essay also contains information on the IBR loan program.)

Seven Ways to Provide Student Loan Debt Relief

Consumer Information

Proposal Seven:   Provide consumers with accurate information and rankings on different colleges:

President Obama proposed that the federal government provide better information about the value and cost of different colleges and universities.   This proposal was strenuously opposed by several university presidents.   The Obama Administration did create a web page that provides data on different colleges.   However, the web page currently lacks important financial variables and does not rank schools.

It would be useful to modify the College ScoreCard database to include more information on college value and costs.  It should also be possible to rank and compare similarly situated colleges. For example separate ranks could be provided for highly selective, moderately selective and less selective schools.

Additional information on ways to improve the CollegeScore Card can be found in the following post.

Ranking Colleges

Proposal Eight:  Provide Students With Detailed Information on University AP Exam Credit Decisions:

The Wall.Street Journal recently reported that several major universities are now denying students credit on AP exams even when the student receives a passing grade.  The denial of college credit to students who pass their AP exams can cost students thousands of dollars and delay graduation.   There may even be some students who must leave school and fail to graduate because of the denial of AP credit.

Schools are entitle to reward credit as they deem fit.   However, students and the families that pay the tuition bills are entitled to detailed information about the likelihood of receiving credit for AP work.  Information on university AP credit policy and detailed subject-level data on the percent of people getting AP credit at each university should be published on the federal web site.

Better Preparing Students For College

Proposal Nine:   Allow Private Course Providers to Teach Courses Inside Public Schools and Charter Schools:

The main focus of the debate on education reform in this country is on competition between traditional public schools and charter schools organized and run by private firms.   The no-child-left-behind law allowed for closure of poorly performing schools and replacement with charter schools.  It is often economically infeasible to replace entire schools.

An alternative approach to competition between schools is competition inside schools from different course providers.   There are many private course providers that could either complement or replace courses taught inside public school.  For example, many students do better with on-line courses in math than courses taught by the local school.

The local school can replace an entire academic department with a private on-line department whenever students underperform on tests.  Its is far easier to close a poorly performing math department than to close an entire school.

Private instructional firms will provide superior and prove to be more cost effective than public school departments for foreign language instruction where there are often severe teacher shortages and relatively small demand for certain languages.

For similar reasons, private firms will also out-perform public schools teach many computer courses.   It makes little sense using tenured computer science teachers in a field that changes rapidly.

Private firms might also replace public school AP exam courses in high schools with low AP exam pass rates.

These issues were discussed in one of my most highly scrutinized post discussed the issue of competition inside school

Competition In Education Industry

Proposal Ten:  Improving Performance on AP Exam:

Most policy makers and educators have focussed on increasing the number of high school students taking AP exam.   They have been successful in this goal but there has also been a steady increase in the proportion of AP exam takes who fail their exam.

Many people take and fail multiple AP exams.   There is no published research on the number of people who fail to pass multiple AP exams and the impact of poor performance on multiple AP exams on future educational endeavors.

There are also substantial difference in AP exam rates across schools.  There is not much literature on causes of the dispersion in AP exam pass rates or discussion on how to improve performance in low-performing schools.

In some cases AP exam performance could be improved by designing exams to cover one semester of college material rather than two semesters.   The physics AP exam was recently revamped along these lines.   It might be beneficial for the AP history exam to be similarly changed.

It would be highly useful if the Department of Education and the College Board funded and facilitated research fully evaluating these concerns about AP exams.

Proposal Eleven:   Along With Private Sectors Fund Summer Camps for Computer Programming and Languages:

Speaking and understanding languages requires constant practice.  People tend to learn more about computers while completing a project than by taking a test.

Many students learn more about languages and programming in summer camps than in schools.
Camps for languages both spoken and for computers exist but they are expensive and are not affordable for most students.

I believe private donors would match tax payer funds for scholarships to private camps specializing in these two important skills.  

Appendix: Statistical Trends Impact Student Debt

Many older people are skeptical about whether increases in student financial aid is needed.  The view that I commonly hear is that "I paid off my student loans, why can't the current generation of students?"  Several of my posts provide statistics that students today end school with much higher debt levels than  previous cohorts.

This post looks at the trend growth rate of student debt for students receive a Bachelors Degree from a four-year institution.

Trend Growth of Student Debt:

This post looks at growing use of PLUS loans along with income and repayment ability of PLUS loan borrowers:
Plus loans for Parents and Parent income:

Appendix:   Some Information and Proposed Research on AP Exams

I am very interested in conducing empirical research on the role of AP Exams.   Here are some of my previous posts on this topic.

In a recent post, I look at recent AP exam performance on 20 of the most frequently taken AP exam.   The average grade was below a C on 14 of the 20 exam.   The mode grade was an F for 6 of the 20 exams.

The high failure rate on AP exams suggests a need to make changes to this program, better prepare students for their tests and provide guidance on course selection.   There is a lot of things we don't know about this program including statistics on how many students fail multiple tests.   This essay discusses issues and proposes research.

AP Exam Research Proposals:

No comments:

Post a Comment