America’s education system has become a conveyor belt for high school graduates (many of whom are academically unprepared, despite their diplomas) to institutions of higher education that are alarmingly reliant on federal loans and grants. This “certainty of funding” has resulted in sharp increases in the cost of college for families.
Since 1980, the first year in operation for the U.S. Department of Education, average college tuition, room, and board has increased nearly 800 percent–five times the rate of inflation. Yet, despite this vast outlay of taxpayer resources, far too many students wind up poorly educated, unprepared for careers, and heavily in debt to the federal government.
With a loan portfolio of over $1.7 trillion, the Education Department’s Office of Federal Student Aid (FSA) currently functions as one of the biggest banks in the world. Yet, its programs have become politicized, and its executive suite has suffered from a constant leadership churn. Despite the best intentions of its employees, FSA has become a catastrophic policy failure, burdening Americans with unnecessary debt while making college only marginally more accessible.
Radical reform of federal higher education aid is in order. To protect taxpayers and students, DFI supports policies that require professional governance and management of FSA and the student loan portfolio. More deeply, public K-12 systems must accept responsibility for graduating poorly prepared students, and policymakers must not allow the federal student loan system to prop up a struggling K-12 system. We must develop new higher education financing options that reduce taxpayer risk, provide incentives for college completion, discourage over-borrowing, and encourage high-demand alternatives to four-year degrees.