Student loans are morphing from a social catastrophe for indebted students into a fiscal disaster affecting taxpayers. For years, U.S. government officials insisted that the student loan portfolio, which now exceeds $1.4 trillion, would remain profitable. But the feds now project that debt repayments will fall $36 billion short of what’s needed to cover outstanding debt and accrued interest.
There are multiple causes of the emerging deficit, which the U.S. Department of Education is acknowledging in the wake of a 2016 Government Accounting Office study, according to the Wall Street Journal. Nearly five million direct-loan borrowers have defaulted (defined as going at least a year without making payments). Other borrowers are going to private lenders to refinance at lower interest rates, eliminating an income stream the government had been counting on. Yet others are being relieved of debt obligations contracted from schools deemed to have defrauded them with deceptive recruiting. Finally, thousands of students are enrolling in repayment plans that cap repayments at a percentage of their income.
Two years ago, the government expected to run a surplus. Last year, the bean counters projected an $8.4 billion shortfall. This year projected losses stand at $36 billion. If student repayment rates continue to worsen, the projected deficit could well grow.
Meanwhile, back on the ranch…. As the federal just-lend-’em-more-money model for dealing with the tuition crisis sputters and wheezes toward a breakdown, what is happening in here in Virginia? Legislators have submitted several bills in the General Assembly this session designed to rein in runaway tuition increases. Only one of them has gained traction.
HB1473 submitted by Del. Jason Miyaris, R-Virginia Beach, would require colleges and universities to allow public notice and public comment on proposals to raise undergraduate tuition and fees. To members of the House of Delegates that modest proposal seemed uncontroversial. The Appropriations Committee passed it 22 to 0.
But the companion bill in the state Senate, SB824, submitted by Sen. Chap Petersen, D-Fairfax, hit an obstacle in an Education subcommittee. Three legislators — including Sen. Richard L. Saslaw, D-Springfield, Sen. John A. Cosgrove, Jr., R-Chesapeake, and (voting by proxy) Richard H. Black, R-Leesburg — voted to recommend killing the bill.
That vote came as a surprise to more than one observer attending the subcommittee meeting. When Petersen walked into the subcommittee hearing to discuss his bill, he said, “We have peace in the valley.” One lobbyist took that as a reference to Petersen’s discussions with higher-ed institutions that had differing views on the bill. “He believed that he was presenting a bill that the institutions were OK with,” said the lobbyist.
But in the hearing Saslaw and Cosgrove proceeded to pick apart the bill, the lobbyist said. Saslaw observed that requiring public input amounted to “micromanaging,” and noted that only a handful of other states imposed such a requirement. Cosgrove asked questions insinuating that the requirement would impose a hardship on higher-ed governing bodies.
No higher-ed lobbyist was willing to oppose the bill openly. But Peter Blake, executive director of the State Council of Higher Education for Virginia (SCHEV) confirmed that the higher-ed community was divided on the issue. “Different institutions are looking at this differently,” he said. ‘Some are saying they don’t like it — they don’t want to have the public comment period. Others are saying, ‘Why not?’ Opinion is not uniform.”
Another lobbyist attending the subcommittee hearing suggested that the University of Virginia and the College of William & Mary worked the legislators behind the scenes. The University of Virginia Board of Visitors has a long history of being anti-open government, he said. He sarcastically described the colleges’ unwillingness to state their opposition publicly as “real profiles in courage.”
Lobbyists for the University of Virginia and the College of William & Mary declined to return Bacon’s Rebellion phone calls.
Petersen’s bill is still alive. He amended it — and Miyaris made a similar amendment to his House bill — to give higher-ed institutions a bit more flexibility in how to go about holding the public hearings. The House Education and Health Committee went on to pass the bill.
Bacon’s bottom line: One of the most important decisions that boards of visitors make every year is to set tuition, fees, room and board. Students and parents have zero input into that decision-making process, and board members are insulated from the impact of their decisions as a result. While board members are fully versed in the dreams and schemes of college presidents to grow the institutions, they get no feel for the hardships of those who pay the bills. Thus, the practice of excluding the public biases the system toward higher tuition & fees.
Opening up the process may not change much — boards likely will continue to rubber stamp tuition increases. Students will continue to pay higher tuition and take out bigger loans, and Uncle Sam will continue to write off billions of dollars in bad loans. But giving higher-ed’s customers a voice — a voice that potentially could be magnified by news reporters covering the hearings — could create enough push-back to slow the tuition increases. And that would be a very good thing.There are currently no comments highlighted.