AILSA CHANG, HOST:
Tucked inside the House Republicans budget bill is a really bold idea, to punish colleges whose students leave with mountains of debt that they can't pay off, or, as Secretary of Education Linda McMahon has said, to force colleges to have, quote, "a little skin in the game." NPR education correspondent Cory Turner explains what the plan looks like.
CORY TURNER, BYLINE: This bold idea around college risk sharing would work like this.
JORDAN MATSUDAIRA: So, like, a particular student might have a $200 loan payment.
TURNER: Jordan Matsudaira was a top education department official in the Biden administration.
JORDAN MATSUDAIRA: If the student is delinquent and misses that payment, the institution becomes responsible for some fraction of that $200 that the student failed to pay.
TURNER: The Biden and Obama administrations worked on their own version of, let's call it, college accountability. But they largely focused on for-profit colleges. Preston Cooper, with the conservative-leaning American Enterprise Institute, says House Republicans are trying to go bigger.
PRESTON COOPER: They are actually trying to target bad outcomes regardless of the sector.
TURNER: Meaning any institution of higher education could get hit with one of these penalties. The Congressional Budget Office estimates that if enacted, the full risk-sharing proposal would save the government more than $6 billion over the next decade. There are a few wrinkles, though. For one, there are already signs that Republicans in the Senate may not be on board. Also, when it comes to the house plan, Dominique Baker at the University of Delaware says the math behind these school penalties has a hole in it.
DOMINIQUE BAKER: The amount that would get charged for this would not include loan balances that were in default, which is very odd.
TURNER: That's right - a plan to punish schools for burying students in debt would exclude loans once they go into default. Multiple experts told me this was likely done out of fear that including defaults would make the penalties too painful for some schools. As it is, AEI's Preston Cooper estimates that the schools on the hook for the biggest penalties would mostly fall into two categories - for-profit colleges, like Strayer University and the University of Phoenix, and some big, private, nonprofit schools.
COOPER: The University of Southern California really is the classic example.
TURNER: Cooper says USC's undergrads seem to leave with pretty manageable debts. But in the 2019-2020 school year, he says, USC's graduate programs were responsible for more than half a billion dollars in debt. In total, Cooper says, USC was responsible for...
COOPER: Almost 1% of the student loans issued in the United States every year.
TURNER: House Republicans' plan isn't all stick. There's also a carrot. These penalties that schools pay would be recycled into bonuses to reward schools that give low-income students the biggest bang for their buck. Instead of debt machines, think of them as social mobility engines. And of the 10 schools in line to get the largest bonuses, Cooper estimates nine would be public universities - three in Florida and six in California. Cory Turner, NPR News.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
