Education

An under-examined aspect of President Obama’s new early childhood education plan is his proposal to encourage states to create more full-day kindergarten seats – though only after states are able to guarantee access to pre-K for all 4-year olds from low and moderate-income families.

Last year, we demonstrated in painstaking detail that the Obama administration’s new Income-Based Repayment (new IBR) program for federal student loans, known as Pay-As-You-Earn, will be a boon to graduate students and the schools that enroll them. Because graduate students can take out federal student loans to pay for the full costs of their educations (including living expenses) using the Grad PLUS program, even students who go on to earn six-figure incomes will qualify for low payments under IBR and have substantial debt forgiven after 20 years.

Some observers might dismiss those warnings, arguing that such outcomes are outliers, something that will happen very rarely. But there are plenty of reasons why the new IBR’s graduate school benefits won’t go unnoticed or unused.

In fact, the evidence suggests that high-debt graduate students have already discovered the old IBR that has been available since 2009. According to data from the National Student Loan Data System, 10 percent of all borrowers enrolled in old IBR as of late 2012 have Grad PLUS loans. Yet Grad PLUS loans account for only about 2.5% of loans issued each year. (We excluded Parent PLUS loans from that count and used the number of loans issued as a conservative proxy for the share of all borrowers with Grad PLUS loans. However, the total universe of borrowers with Grad PLUS loans is likely an even smaller percentage of outstanding federal loans given that Grad PLUS is a newer program.) Thus, it appears that high-debt graduate students are significantly overrepresented among borrowers repaying through IBR.

What will those figures look like after the new IBR has been available for a few years and borrowers have had the chance to enroll, say in 2015 or 2016?  If borrowers with lots of graduate school debt find the program beneficial now, imagine how they will respond when they learn that, compared with the old IBR, the new IBR would cut their monthly payments by a third and would most likely cut their total payments by half once they receive loan forgiveness.

Undergraduates, on the other hand, are unlikely to receive a big increase in benefits compared with the old IBR. Undergraduate students qualify for the new IBR, but they are limited in how much they can borrow in federal student loans annually and in aggregate. While the program will lower their monthly payments by the same 33 percent, their lower debt levels mean that they will likely fully repay their loans before they reach 20 years of payments and qualify for loan forgiveness. The new IBR simply allows them to make lower payments but for longer.

Graduate students, on the other hand, will have their outstanding debt forgiven under the new IBR before the delayed effect of making low monthly payments ever catches up with them. Mathematically speaking, 20 years of payments at 10 percent of income (minus IBR’s cost-of-living exemption) won’t repay a $100,000 loan at current interest rates, even for someone who earns a six-figure income for the majority of those 20 years.

And here is another reason for policymakers and student aid advocates to heed our warnings about the new IBR: The average size of a Grad PLUS loan is growing, much faster even than undergraduate Unsubsidized Stafford loans (which are capped) or Parent PLUS loans (which have no cap, but also are not eligible for IBR). That means even larger amounts of Grad PLUS loans forgiven.

The Congressional Budget Office estimated in February that the average size of a Grad PLUS loan taken out in 2014 will be $16,578. Added to a borrower’s $20,500 Stafford loan for that year, the average Grad PLUS borrower is expected to take out $37,000 per year in federal loans. By 2020, the number will hit $40,500. Given that most graduate and professional programs are two years or longer, the average debt (after in-school interest accrues) for a Grad PLUS borrow easily tops $70,000, even before factoring in any debt from undergraduate studies.

Using the New America Foundation’s IBR calculator, we found that once a borrower takes on $65,000 in debt, he bears none of the incremental cost of borrowing an additional dollar under the new IBR, even if he goes on to earn over $100,000 for most of his repayment term.* The extra debt will be forgiven. Pair that with the average borrowing figures released by the Congressional Budget Office, and throw in the overrepresentation of Grad PLUS borrowers in the old IBR, and our warnings hardly look like an exaggeration.

Lastly, the Department of Education offers this nugget, buried among hundreds of pages of regulations it released last year. The agency expects that 24 percent of borrowers who enroll in the new IBR will not fully repay their loans and have an average of $41,000 forgiven.

Working together, Grad PLUS and the new IBR are set to provide massive subsidies to graduate students, graduate schools, and employers who no longer need to pay salaries that justify the debt incurred to obtain a graduate or professional education. Should the Grad PLUS windfall under new IBR go unnoticed and unused as some skeptics claim, it will be the first time in history that the federal government offers $41,000 or $100,000 checks to the most educated segment of society and nobody shows up to claim them.

*This statement is true for a borrower who earns a starting salary of $65,000 (or less), plus a 3.5 percent (or less) annual raise for eight years; in year nine of repayment he earns $101,000 and a subsequent annual raise of 3.0 percent (or less); and, he has one child to claim as a dependent by year six of repayment. The borrower has $44,000 in Unsubsidized Stafford loans and $21,000 in Grad PLUS loans.

The Equity and Excellence Commission, a board established by Congress in 2010 to study school finance issues, released its final report this week, For Each and Every Child.

On June 9, 1904, Harvard's president, Charles W. Eliot, wrote a letter to Charles Francis Adams Jr. A former railroad executive, Adams was a member of the college's Board of Overseers and, as a grandson of John Quincy Adams, a multigenerational Harvard legacy. The two men were quarreling over the question of raising tuition to ease a financial crisis. Wrote Eliot:

Yesterday, President Barack Obama reiterated his call from the State of the Union to provide universal pre-K to all children in America. But tucked in with his remarks was a pitch for another proposal from Tuesday's speech: to reward high schools that are preparing their students to be not only college-ready, but also career-ready. The competition would be aimed at high schools that have reimagined how they operate: partnering with colleges and businesses, focusing on emerging fields in science, technology, and engineering, and even offering students valuable industry credentials or an associate degree while they complete high school. The administration hopes this would challenge schools to provide real-world learning experiences in their curriculum, so that students attain the “skills today's employers are looking for to fill the jobs that are there right now and will be there in the future."

Unfortunately, the administration has offered no further details on the plan. Do they envision a Race to the Top-style competition? As Alyson Klein noted on PoliticsK-12, a competitive grant aimed at high school curriculum – not just the standards high schools teach, but also how they are taught – could meet stiff opposition from conservative lawmakers. And how much money is the Department seeking for this competition? Would funding be distributed directly to high schools and their higher education and industry partners, or through states?

To complicate the matter further, it is unclear if the president is even proposing anything new at all. Last April, the Department of Education released A Blueprint for Transforming Career and Technical Education, its plan for reauthorization of the Carl D. Perkins Career and Technical Education Act. The Blueprint included “within-state competitions” to distribute Perkins funds to consortia of secondary and postsecondary institutions, with a matching contribution from employers, rather than through the formula used today. The goal of these consortia competitions would be to encourage programs that are meeting regional labor-market needs. Sounds like a “challenge to redesign America's high schools,” right?

The related initiatives President Obama proposed in the State of the Union to promote skills leading to high-quality, high-wage jobs are all ideas he has introduced (with little success) before: a STEM Master Teacher Corps of 10,000 of America’s best teachers and an $8 billion Community College to Career Fund to bolster and improve job training in two-year higher education institutions. Maybe the competition to redesign high schools is old news too.

While it is promising that the administration is focusing on the oft-neglected “career” component of college and career readiness and looking to innovative models like early college high schools, it is hard to say how effective these proposals could be without more details. Unfortunately, the answers likely won’t be provided until the president releases his budget in March. Stay tuned to Ed Money Watch for the all the specifics then. 

In President Obama’s State of the Union address Tuesday, he called on Congress to expand high-quality early learning opportunities to low- and moderate-income children. Today, with the release of a White House document and a speech at a Decatur, Ga. pre-K center, Obama sketched more of the plan’s details.

Tuesday was a big night for early education and higher education. But what about all the education that happens in between? Teachers were mentioned once, but in the context of deficit reduction, not education. No Child Left Behind (NCLB) and waivers fared even worse, with nary a word. But never fear, waiver watchers got all the coverage they needed last week from the Senate HELP Committee and Council of Chief State School Officers (CCSSO). In a hearing and subsequent CCSSO panel, policymakers and experts debated the early lessons from the waivers and implications for a near- or distant-future NCLB reauthorization.

For those following the waivers, however, the hearings were largely a disappointment – offering few specific insights from year one of implementation. District waivers? Still a possibility. Super subgroups are diluting accountability? Old news. If anything, the discussions mirrored  the HELP Committee markup over a year ago in its attempt at ESEA reauthorization. In fact, we learned more about reauthorization’s prospects than we did about the waivers. The hearing may have promised “lessons learned,” but those lessons depended entirely on who you asked:

Secretary Duncan – obviously – is a big cheerleader for the waivers, as opposed to working with Congress on a reauthorization: “My team and I put in hundreds and hundreds of hours in what proved to be a fruitless effort over the past two years. In all candor, I would like to have gone to waivers earlier.” He highlighted how states are focusing on subjects beyond math and reading, how more schools are being held accountable for student subgroup performance, and how states are promoting teacher quality, instead of credentials.

Although giving states options has benefits, not all states made good choices. As Andy Rotherham asked later, what do waivers look like in the hands of not-so-great state chiefs? Many declined to take advantage of new measures of student growth or postsecondary readiness. Worse, states often backtracked on plans to strengthen graduation rate and subgroup accountability, concerns highlighted by the Alliance for Excellent Education and Education Trust.

Democratic Senators and their allies, including Education Trust’s Kati Haycock, are no fans of NCLB, but have still taken issue with many of the features emerging in states’ waivers: super-subgroups, uneven goals that do not close achievement gaps and are not linked to any consequences, toothless school improvement policies, and more. Unfortunately, these groups are pointing out flaws in states’ waivers, but offering fewer solutions to fix them.

One option is for the Department to require states to amend their waivers if they don’t sufficiently meet the needs of vulnerable students (states can also voluntarily do so, with Department approval). But chiefs, like New Jersey’s Chris Cerf and Kentucky’s Terry Holliday, aren’t keen on the idea of mid-course corrections and more negotiations with ED. Given their reluctance and questions about how to monitor waivers, it seems unlikely that states will make significant changes. This doesn’t mean policymakers won’t learn anything from the waiver experiment, but it may take years for these lessons to be applied.

Another option is to push strongly for reauthorization. But this carries risks for civil rights groups given the preference for local control and even more state flexibility among Republican legislators, state chiefs, and governors. While HELP members like Senators Tom Harkin (D-IA) and Michael Bennet (D-CO) spoke of reauthorization, they appear unable to offer any new solutions that would present a departure from NCLB, recognize the concerns of the civil rights community, and maintain a strong federal role in education.

State schools chiefs, however, are advocating for reauthorization, but for a variety of reasons. First, they point out that many states do not have waivers. To New York Commissioner John King, this means there is no “floor” for state policy to safeguard against poor decisions. Alternatively, Holliday cited the need for long-term stability, because the waivers are subject to the Secretary of Education’s priorities. Regardless, all chiefs would welcome a new NCLB that maintains – or expands – flexibility. And most likely, the level of flexibility in the waivers would be the default starting point for any reauthorization right now. Lawmakers would receive incredible pushback if a new NCLB required states to dramatically alter the plans in which they’ve already invested a great deal of time, energy, and resources.

Republican Senators appear to be aligning most closely with the chiefs on reauthorization – less so in supporting waivers. Senator Lamar Alexander (R-TN) equated the waivers to an inside-the-beltway version of 'Mother May I,’ while Senator Pat Roberts (R-KS) lambasted the “regulatory purgatory” the Department created. In particular, Alexander was adamant that the government should not require states to adopt teacher evaluations based on student achievement. In one exchange with King, Alexander pressed: “We only give you 10 percent of your money. Why do I have to come from the mountains of Tennessee to tell New York that’s good for you?” But despite Alexander’s strong opinions, there is no consensus among the minority either – Senator Johnny Isakson (R-GA) seemed quite pleased with what his state accomplished in their waiver.

In short, reauthorization has not stalled because the waivers are popular. Rather, Republicans cannot make a strong-enough case for the level of local control many in their caucus seek, and Democrats prefer the temporary waiver policy to a decade of local control with little federal oversight. Without a clear alternative to NCLB that also provides a strong, compelling case for federal involvement in education, waivers really are their best choice.

The silver lining, as Bellwether Education Partners' Andy Smarick pointed out, is that with another year, or two, or three of waivers, some actual lessons might emerge that could inform and transform the thinking of those who seek a stronger federal role in K-12 policy – and those that don’t. We’ll be watching for them. Stay tuned.

President Obama’s State of the Union call to expand access to pre-K for low and middle-income four-year olds leaves the early childhood world excited, but with many questions. The biggest: How does the president plan on funding this ambitious proposal? What might he be able to do using just the executive branch, and what would require cooperation from an often-recalcitrant Congress?

In a wide-ranging State of the Union address delivered to the full House and Senate last night, President Obama earned a long applause when he called for a new initiative to “work with states” to expand high-quality preschool to every American child.