Ed Money Watch

A Blog from New America's Federal Education Budget Project

Friday News Roundup: Week of May 14-18

  • By
  • Clare McCann
May 18, 2012

North Carolina House GOP considers merit pay money for schools

Dispute over college tuition roils flagship Texas campus

Alabama education trust fund budget approved

Alaska Governor Sean Parnell vetoes $66 million from Alaska budget

North Carolina House GOP considers merit pay money for schools
North Carolina House Republicans voted in a closed-door meeting this week to reallocate some 2013 funds previously designated for merit pay raises for teachers and other state employees to support teacher salaries and general public K-12 education funding. With $258 million set to expire from the federal Education Jobs Fund, which supports teacher salaries, legislators are working to find replacement state funds and lessen the cuts. The fiscal year 2013 budget contains $121.1 million for the state’s merit pay program. Lawmakers plan to move some of these funds into general funding for K-12 schools to partially replace the Education Jobs Funds. Republican lawmakers have not specified how much funding they will transfer to K-12 schools, and the North Carolina Appropriations Subcommittee on Education is preparing its budget (to be released next week) without the extra infusion of funds. More here…

Dispute over college tuition roils flagship Texas campus
This month, the Board of Regents for the University of Texas system rejected a proposed 2013 tuition increase for in-state students, instead raising tuition for out-of-state students by about 2 percent to more than $33,000. UT-Austin president William Powers Jr. originally proposed the 2.6 percent in-state tuition increase, which would have brought the total cost for those students to over $10,000 a year.  The board vote is in line with Governor Rick Perry’s stated goal of holding in-state tuition costs down to no more than $10,000 through budget cuts. Powers has stated that the school will continue to provide a high-quality education, in spite of the tuition freeze. More here…

Alabama education trust fund budget approved
Alabama lawmakers this week approved a fiscal year 2013 education budget totaling $5.4 billion and sent it to Governor Robert Bentley for his signature. The 2013 budget would cut spending by about $208 million from fiscal year 2012 levels and eliminate about 200 faculty and staff positions in K-12 schools due to an anticipated decline in enrollment. Legislators also made some structural reforms in which they moved funding for several youth programs to the general fund, rather than the education trust fund. Additionally, the budget reduces the total education trust fund by about $190 million in 2013 from fiscal year 2012 levels because a law passed last year requires legislators to move any excess reserves in the fund to a separate reserves account. Nearly 70 percent of the fiscal year 2013 education budget is targeted to K-12 education, while about 27 percent will go to higher education. More here…

Alaska Governor Sean Parnell vetoes $66 million from Alaska budget
This week, Alaska Governor Sean Parnell vetoed more than $66 million in spending from the state’s fiscal year 2013 budget plan.  The governor had previously vetoed far more spending – more than $300 million in fiscal year 2010 and more than $400 million in 2011. Parnell said that the limited cuts in the 2013 budget reflected the legislature’s commitment to holding spending within the governor’s stated spending cap.  The vetoes this year were targeted in part to early childhood education; he cut $1.2 million from the statewide pre-K program and $2.8 million from a parent training program called Parents as Teachers. Still, according to the governor, the state will spend 38 percent more on young children in 2013 than it did in 2012 – almost $14 million total, half of which will come through the Head Start program. More here…

Issues:

House's Sequester Alternative's Effect on Education Spending Still Unknown

  • By
  • Jason Delisle
  • Clare McCann
May 17, 2012

The deadline for sequestration—the automatic, across-the-board spending cuts that were triggered last fall when the “supercommittee” failed to reach a deficit reduction agreement—is drawing near. It takes effect January 2013, part-way through fiscal year 2013. Experts and onlookers have been trying to figure out if and how lawmakers will cancel sequestration before that deadline. The Republican-led House of Representatives now has its answer.

First, a refresher on how Congress got here: As part of an agreement to increase the limit on the national debt last summer, legislators passed the Budget Control Act of 2011, which sets up a framework by which lawmakers are to enact policies to reduce future budget deficits. If they don’t, the law automatically cuts spending through sequestration and sets limits on future appropriations.

Much of the deficit reduction outlined in the law was supposed to come from a bipartisan bill drafted by a joint House-Senate committee, known as the “supercommittee.” Supercommittee members were never able to agree on a bill, triggering the sequestration and spending caps. Unless Congress and the president now agree to override them, the cuts and caps will proceed as outlined in the law. The sequester will automatically cut fiscal year 2013 appropriations by about $93 billion, of which $55 billion comes out of defense programs and $39 billion comes out of non-defense programs. Within those amounts, the cuts will be distributed evenly across all non-exempt programs. (Pell Grants are the only exempt education program.)

Last week, the House passed a bill that, if signed into law, would cancel the sequester that applies to fiscal year 2013 appropriations. The bill includes policies that would reduce spending across a range of non-education programs funded outside the appropriations process. House lawmakers say those cuts would take the place of the automatic spending cuts that would have come through sequestration.

Nevertheless, education programs—nearly all of which are funded through the annual appropriations process—have not yet escaped unscathed in the House-passed bill. The bill leaves in place a cap on total appropriations funding for fiscal year 2013 that the House adopted earlier this year. That cap is $1.028 trillion, $15 billion below the total appropriations level enacted for fiscal year 2012.

The lower spending cap does not guarantee that lawmakers will cut funding for any or all education programs when they finalize fiscal year 2013 appropriations funding (fiscal year 2013 starts October 1, 2012), but education programs will compete with other programs for funding within a smaller pie. Even if the House bill becomes law, Congress must still determine funding levels for education programs during the appropriations process. Thus there is no meaningful way to predict how the House appropriations limit would affect education programs. Moreover, Congress has actually increased total appropriations for Department of Education programs in recent years even when it has cut appropriation funding across all agencies in aggregate.

It should also be noted that the House-passed bill leaves sequestration in place for programs funded outside of the appropriations process, so-called mandatory programs. This won’t mean much for education programs, since almost all are funded through the appropriations process. Some funding for Pell Grants is mandatory, but it is exempt from sequestration by law. That leaves student loans. The sequester would cut funding for student loans by increasing the origination fee borrowers pay when they take out new loans. That increase is likely to be about a half a percentage point, meaning the fee on a $5,000 loan will cost an additional $25.

To be clear, the Senate isn’t likely to take up the House bill. And the Senate shows no signs of adopting an alternative to cancelling the pending sequester.

In other words, if and how Congress will cancel the sequester is still anyone’s guess. Despite the action in the House, a definitive answer isn’t likely until after November elections.

Issues:

Focusing the Student Loan Conversation on the Average Borrower, Not the Average Loan

  • By
  • Jennifer Cohen
  • Jason Delisle
May 15, 2012

These days, anyone who follows the news can recite statistics on student debt. The media has repeated countless times phrases like “there is $1 trillion in outstanding student debt” and “borrowers have an average of $23,300 in loans.” But do these numbers really mean what the media, policymakers and advocates think they mean? Which is, do these numbers tell how much debt the typical student carries? Not at all.

First and foremost, it’s important to clarify that “$1 trillion” refers to the total outstanding balance of the entire universe of student loans. That’s all loans from federal and private sources, for undergraduate or graduate students attending or who attended any type of school. The loans could have been taken out in September of 2011 for the current school year or they could have originated in 1995 but have not been repaid yet.

Similarly, that $23,300 number, which comes from a New York Federal Reserve Bank study of a representative sample of all outstanding loan balances as of 2011, refers to the average student loan balance only for students who took out loans. It excludes students who have already paid their loans off or who did not take out any loans.

Despite their ubiquity, these numbers don’t actually paint a picture of student borrowing as experienced by the typical borrower. Yet most press accounts imply that the average student loan balance for borrowers reflects the student loan balance for the average borrower.

In fact, most borrowers carry student loan balances well below the average. According to that same study, the median student loan balance is $12,800. This means that half of borrowers owe less than that amount and half owe more. Similarly, 75 percent of borrowers owe less than $28,000, and 90 percent owe less than $54,000 currently. While the press can certainly cite the average loan balance at $23,300, they should also make clear that most borrowers currently owe significantly less.

Now consider the discussion about debt owed by recent graduates. The most recent survey for the Baccalaureate and Beyond dataset, collected by the National Center on Education Statistics, provides data on cumulative student loan balances as of 2009 for the graduating class of 2008. These data show that the average student loan balance was $25,619 for students that took out loans.

But once again, the average borrower owed far less than that amount. Specifically, the data suggest that the typical borrower (the borrower with a loan balance at the 50th percentile) owed $19,857 one year after graduation. Seventy-five percent of borrowers owed less than $33,857 and 90 percent owed less than $50,000. On the other end, 25 percent of borrowers owed less than $10,000.

It is also important to note that the Baccalaureate and Beyond data show that 65.6 percent of students took out loans. So that means that 34.4 percent of graduates of the class of 2008 had no loans to begin with.

This is why the distinction between average and median student debt, and the distribution of debt among percentiles of borrowers matters. By focusing on average student debt, journalists, policymakers and advocates are skewing the discussion on student debt toward one extreme that affects a minority of borrowers. They’ve convinced their audience (and likely themselves) that the average loan balance (which is disproportionately affected by outlier loans with particularly large balances) should drive the discussion, not the debt of the average student borrower, nor the debt levels of the majority of borrowers.

As the discussion on student debt continues, journalists, policymakers and advocates should bear in mind what the data cited above say about the typical borrower: she is in less debt than the average loan size figures would have us believe.

Issues:

Friday News Roundup: Week of May 7-11

  • By
  • Clare McCann
May 11, 2012

Pennsylvania Senate approves alternative to governor’s budget

Missouri legislature sends budget to governor

Kansas House rejects state employee raises, allocates funds for disabled

University of Minnesota regents take wary look at proposed pay, tuition increases

Pennsylvania Senate approves alternative to governor’s budget
The Pennsylvania Senate this week passed a fiscal year 2013 budget plan that restores many of the cuts laid out in Governor Tom Corbett’s proposed budget. The budget, which must be signed by the governor by July 1 according to state law, passed the Senate and moved to the House for approval. It assumes state tax revenue will exceed earlier projections by about $900 million in fiscal years 2012 and 2013 and uses that additional money to increase spending in fiscal year 2013 by about $500 million over the levels Corbett proposed. The increased spending would help to temper proposed cuts to public colleges and universities. It would also increase aid for low-income school districts by $50 million over Corbett’s request. Similarly, it would provide an additional $50 million for accountability block grants, which school districts frequently use to fund full-day kindergarten programs. More here…

Missouri legislature sends budget to governor
Missouri lawmakers voted this week to approve a budget for fiscal year 2013 totaling $24 billion. The budget, now awaiting Governor Jay Nixon’s approval before the start of the fiscal year on July 1, 2012 increases funding for higher education by $3 million from 2012 levels, split across 7 public universities. It also retains funding for one department at the University of Missouri-St. Louis that had been on the chopping block in negotiations earlier this week. The $3 million will be used to help balance funding disparities across the universities. Another bill passed this week diverts revenue earned through casino fees from early childhood education to veterans homes. Instead, funds for early childhood education will come from a settlement reached in a national tobacco lawsuit. Governor Nixon stated that he planned to look carefully at the budget over the next several weeks before signing it. More here…

Kansas House rejects state employee raises, allocates funds for disabled
The Kansas state House voted this week to move $50 million in fiscal year 2013 funding from the transportation department to public K-12 education. Under the funding plan proposed by the House, basic state aid to schools would increase in the 2013 school year by $37 per pupil over current-year levels; that provision will cost the state $25 million. An amendment to devote half of the $25 million to kindergarten-through-fourth-grade literacy efforts failed. Another $25 million taken from the Kansas Department of Transportation budget would provide supplementary property tax aid to school districts. In contrast, a Senate proposal would add $50 million for basic state aid to schools, or $74 per pupil more than the state paid out in fiscal year 2012, and $27 million for property tax funding. The Senate plan allocates the money from the state’s surplus, rather than moving it from another agency. The state legislative session is scheduled to end this week, but with numerous tasks still on its agenda, the legislature may extend the session. More here…

University of Minnesota regents take wary look at proposed pay, tuition increases
The University of Minnesota recently proposed a fiscal year 2013 budget that would increase faculty salaries by 2.5 percent, in-state undergraduate tuition by 3.5 percent, and total spending by 1.5 percent over fiscal year 2012 levels. The Board of Regents, though, is asking for more details on the proposed tuition hike before approving the plan. The tuition growth would raise the cost of attendance to $12,060 for in-state residents, not including fees, room, and board; additionally, out-of-state tuition would increase by 4 percent, up to $17,310. In total, the tuition increase would add $24.6 million to the university’s revenue next year. In addition to increasing salaries for staff and faculty, the extra spending would fund more merit scholarships, new hiring, and a new Center for Social Media at the university. State funding, meanwhile, has declined in recent years and will reach 1998 levels next year. When the university received a smaller cut to state funding than anticipated last year, it saved much of the money to apply to its fiscal year 2013 budget. More here…

Issues:

Capped Variable Interest Rate Proposal Comes with a Hefty Price Tag

  • By
  • Jason Delisle
May 10, 2012

While Congress has debated extending the 3.4 percent interest rate on Subsidized Stafford loans issued this year to undergraduates, advocacy groups are gearing up for a debate on longer-term reforms. They know the odds don’t favor Congress adopting a one-year extension of the lower rate again next year. Besides, spending $6 billion to save college graduates $9 a month isn’t a great deal for borrowers or taxpayers. So it’s good that student aid advocates want a better plan. But they aren’t off to a great start. They are gathering support for an outrageously expensive proposal that turns a blind eye to far more worthy aid, like Pell Grants.

The student loan interest rate proposal that is dominating discussions among advocates and other stakeholders would provide borrowers with variable interest rates that would be capped at the current fixed rates of 6.8 percent on Stafford loans and 7.9 percent on PLUS loans for parents and graduate students.

The rate on all newly-issued federal loans would be adjusted annually based on interest rates on short-term (three month) U.S. Treasury debt, plus a markup of two to three percentage points to partially offset costs. Today, that would translate into an interest rate of about 3 percent. If short-term U.S. Treasury rates rise, the rate borrowers pay would too, though it would never exceed 6.8 percent. Such a proposal would represent a return to the policy of the 1990s and early 2000s, except the cap on the variable rate then was 8.25 percent.

This variable-rate-with-a-cap proposal would give borrowers a “heads-I-win, tails-you-lose” arrangement. If short-term rates stay low, borrowers benefit. If short-term rates rise, the loans convert to low, fixed rates and the borrower wins again. When short-term rates decline, the fixed-rate loan converts back to a variable rate, and the borrower wins again.

The policy effectively shelters borrowers from the financial tradeoffs that they would normally face when they choose between fixed and variable interest rates on loans in the private market. Variable rates are lower at first, but can go higher. Fixed rates might be higher on average, but they provide certainty.

The variable-rate-with-a-cap proposal doesn’t, however, make that fundamental tradeoff disappear. It just shifts the cost entirely onto taxpayers.

How much would taxpayers have to pay to provide borrowers with this no-lose insurance policy? According to sources on Capitol Hill, the Congressional Budget Office says it would cost $200 billion over 10 years.

To put this price tag in perspective, Congress could fund an $8,000 maximum Pell Grant (up from $5,550 today) for the next 10 years if it allocated an additional $200 billion to the program over that time period.

Still, there are other options for policymakers to modify student loan interest rates that would make meaningful improvements for borrowers without breaking the bank. One even generates savings (read more here).

Students and aid advocates would be wise to rally around some version of a more feasible interest rate reform proposal in the coming months. But if they really want to get behind a proposal that costs $200 billion, please make it one that supports the Pell Grant program rather than college graduates’ monthly budgets.

Issues:

Applying Lessons Learned from SIG to RESPECT

  • By
  • Dani Greene
May 9, 2012

This year, the president and the Department of Education (ED) have taken on a new challenge — re-imagining the teaching profession through the Recognizing Educational Success, Professional Excellence, and Collaborative Teaching (RESPECT) program. The White House rolled out RESPECT on February 15 of this year with the mission of transforming the teaching profession into a highly respected, effective, and well-paid career. Last week, ED released additional details about RESPECT, focusing on strategies to elevate teachers, which were developed after consulting teachers, school leaders, analysts, and policymakers.

The newly released details about RESPECT read like a manifesto, full of lofty ideas and aspirations that would, ideally, dramatically alter the teaching profession. Proposed strategies include:  reorganizing classrooms, schools, and the school year to allow for more flexibility in serving students; shared responsibility for student achievement between teachers and principals; an overhaul of teacher training programs; greater opportunities for professional advancement; teacher evaluations; and higher teacher and principal compensation.

To further this agenda, the White House has requested $5 billion from Congress. But instead of including the program in its ten year budget request, the administration proposed it outside of the regular 2012 appropriations. This would effectively mean that the spending would not have to be offset.

As proposed, ED would distribute the funds to states and consortia of school districts through a competitive grant process. Winning states and districts would be selected based on applications they submit proposing work based on the strategies outlined above.

While existing research supports these strategies, the real question is whether or not states have the capacity to tackle such a wide-reaching reform program amid budget cuts and personnel reductions. One need not look any further than the School Improvement Grant (SIG) program. As we discussed in a previous post, states distributed millions of dollars in SIG grants to districts to turnaround the lowest-performing 5 percent of schools. According to the Government Accountability Office, many states and districts ultimately lacked the capacity to successfully implement the required reforms. As a result, progress on school improvement has stalled while districts spend their time developing data systems or competing with other districts to re-staff their schools.

If states struggled to find the capacity to support their districts during SIG implementation, how will these same states build the capacity to re-envision the entire teaching profession, from training to evaluation to compensation? While crafting a competitive grant program that relies on states to shape the direction of the efforts and provide capacity provides states with greater control over education, it could  set up states to flounder or fail once again.

Both RESPECT and SIG have the potential to foster innovation and push bold reform agendas. But ED should consider the challenges that states have faced in implementing SIG grants, including the fact that capacity is not established overnight, regardless of available funds. Of course, RESPECT is far from a done deal – it seems unlikely that Congress will pony up $5 billion for a new education initiative during tough fiscal times.  But if RESPECT is implemented, the Obama administration should be wary of the limitations of state capacity. It is likely that the Department of Education will have to provide states and districts with significant support to ensure the funds are spent wisely and in a way that has a real impact on students.

Issues:

No-Cost Solution to Student Loan Interest Rates Hidden in Plain Sight

  • By
  • Jason Delisle
May 8, 2012

Congress is now officially deadlocked over how to pay for a one-year extension of the 3.4 percent interest rate offered on newly-issued Subsidized Stafford student loans. The disagreement isn’t over extending the rate, but where to find the extra $6 billion needed to pay for it. In the midst of all the partisan bickering, wouldn’t it be great if Congress could magically lower interest rates for all borrowers without cutting other programs or raising taxes, while reducing budget deficits in the meantime? Take a look at the Congressional Budget Office’s “Reducing the Deficit: Spending and Revenue Options” publication from March 2011 (page 32).

The CBO has provided a cost estimate for a proposal that would link the interest rate on all newly-issued federal student loans—Subsidized and Unsubsidized Stafford, Graduate and Parent PLUS—to long-term U.S. Treasury borrowing rates.  (The CBO isn’t endorsing the proposal, just showing lawmakers how it would ‘score’.) Interest rates would still be fixed for the life of the loan, but the rate would change each year loans are offered based on market rates for Treasury notes. The proposal sets the rate for newly issued loans based on the interest rate on 10-year Treasury notes at the time the loan is issued, and adds a premium of 3 percentage points to it.

That formula would make the rate on loans issued this fall fixed at 4.9 percent, a big drop from the current 6.8 percent rates. What’s more, that rate would be available to all undergraduate and graduate borrowers, unlike the proposal pending in Congress to provide lower rates for only some undergraduates. Of course, next year the rate could be higher or lower depending on what happens to interest rates in the market. The CBO assumes it will be higher. That’s where the deficit reduction (i.e. cost savings) comes in.

If and when the interest rates on 10-year U.S. Treasury notes rise, the fixed interest rate on newly-issued student loans will also increase. Once rates on those securities rise above 3.8 percent – the rates are currently 1.9 percent – the interest rate on newly issued student loans will exceed 6.8 percent, the current fixed interest rate. Because CBO assumed that interest rates will rise in the future, it assumed that borrowers will pay higher rates in the future than under current law, reducing spending and the deficit. According to the estimate, this new rate structure would reduce the deficit by $52 billion over ten years.

Keep in mind that CBO calculated this estimate in early 2011 when long-term interest rates were higher. That means the savings that would be ‘scored’ under the same proposal today are likely less. At the same time, the proposal CBO used for its estimate would charge the same interest rate on PLUS loans to graduates and parents of undergraduates as the rates on Stafford loans, a break from historical policy. If lawmakers opted to charge a higher interest rate for PLUS loans like they do currently, the total savings would be more in line with CBO’s 2011 estimate. 

Some student aid advocates and policymakers will likely dismiss this proposal because it could mean that future borrowers take out loans at rates higher than 6.8 percent. Still, that seems like a better policy than what we have today – fixed 6.8 percent rates on loans issued every year no matter what happens in the market. Furthermore, it will make rates on newly-issued loans more closely resemble the interest rates private lenders charge on home mortgages, something many student aid advocates seem to want.

The market-based, fixed-rate proposal like the one CBO scored in its 2011 publication is also better than a variable rate structure where rates are reset on all outstanding loans once a year. Too many advocates and policymakers seem to be falling for the allure of low variable rates as a way out of the current interest rate debates. But variable rates are a shortsighted solution. In fact, the drawbacks of variable rates – uncertainty and the risk that rates remain higher for years – are why Congress adopted fixed rates in the first place.

The lesson here is that fixed rates are an important benefit for borrowers as they provide a measure of certainty – but the rates on newly-issued loans do need to adjust when interest rates in the market change. The proposal outlined in a 2011 CBO cost estimate shows that Congress can adopt exactly that policy and save money at the same time.

Issues:

Friday News Roundup: Week of April 30-May 4

  • By
  • Dani Greene
May 4, 2012

Hawaii teachers union leader wants to revisit contract members rejected earlier this year

Who would pay for proposed Michigan free-tuition plan with annual price tag in the billions?

University of Wyoming trustees hear that Gov. Mead’s request for 8 percent budget cuts will cost $15.6M

Louisiana panel rejects testing bill

Hawaii teachers union leader wants to revisit contract members rejected earlier this year
Facing the threat of losing $75 million in Race to the Top funds this year, the Hawaii State Teachers Association (HSTA) is asking teachers to reconsider a proposal for a new teacher evaluation system that incorporates student test scores in teacher ratings. HSTA members rejected the measure in January, citing that they didn’t have enough information or time to review the plan to make an informed decision. Without a comprehensive evaluation plan, the U.S. Department of Education is likely to rescind the state’s remaining Race to the Top funds. Hawaii governor Neil Abercrombie noted that a new “clear, current, and correct” agreement must be crafted and voted on because the original agreement is no longer valid. This time, HSTA will be invited to assist with development of the new teacher evaluation tools. More here.

Who would pay for proposed Michigan free-tuition plan with annual price tag in the billions?
This week, Democrats in the Michigan State Senate introduced legislation that would allow Michigan high school graduates to attend state colleges and universities for free. The proposal would be costly—an estimated $1.8 billion annually—and would be paid for with increased revenue from closing unspecified tax loopholes. Lou Glazer, founder of the think tank Michigan Future, testified that an investment in higher education is an investment in the economy. James Hohman from the Mackinac Center free-market think tank disagreed with Glazer’s analysis and contended that jobs, not better higher education, would strengthen the state’s economy. Based on the lack of support from Senator Jack Brandenburg (R-Harrison), the Finance Committee Chairman, the bill is unlikely to pass. More here.

University of Wyoming trustees hear that Gov. Mead’s request for 8 percent budget cuts will cost $15.6M
According to an order from Governor Matt Mead, Wyoming must make steeper cuts to its fiscal year 2013 budget than anticipated. The culprit is the drop in natural gas prices from an expected $3.25 to $2 per thousand cubic feet. For each dollar reduction in natural gas prices, the state loses $200 million in revenue. As a result, state agencies—who were already preparing for a 4 percent cut in their budgets—must now brace themselves for an 8 percent cut. The University of Wyoming, which is the only four-year public university in the state, will see its budget cut by $15.6 million in the 2013 fiscal year. Because approximately 80 percent of the university’s budget accounts for personnel costs, the university will likely have to make cuts to staff in addition to athletic recruiting, student services, class sizes, and scholarship money. More here.

Louisiana panel rejects testing bill
Louisiana’s House Education Committee rejected a Democrat- proposed bill that would allow students—with parental permission—to opt out of taking state academic assessments. The measure was rejected by a vote of three in favor to twelve against. Representative Patricia Smith (D-Baton Rouge), the bill’s sponsor, defended the bill by calling it a vehicle to increase parental choice. Erin Bendily, an assistant deputy superintendent for the state Department of Education, attacked the legislation and noted that testing requirements are mandated at the federal level, not the state level. More here.

Issues:

Will ED Take a Stand on Subgroups in ESEA Waivers This Time?

  • By
  • Dani Greene
May 3, 2012

Ever since the Department of Education (ED) released guidance on the Elementary and Secondary Education Act (ESEA) waivers, policymakers have debated the merits and problems surrounding the new accountability systems that states proposed. The waivers, if ED approves them, allow states to replace the accountability system Congress put in place under No Child Left Behind (NCLB) – Adequate Yearly Progress – with their own rules.  ED just released letters from their peer reviewers to each of the 27 states that submitted waiver applications in the second round. After comparing these letters to the first round of approved waivers, it looks like ED is not holding states to the reviewers’ recommendations.

Thanks to EdWeek, 13 of these letters are publicly available. Among the many shortcomings the reviewers identified, states’ treatment of student subgroups (students with disabilities, English language learners, minority students, and students living in poverty) in their school accountability grades featured prominently in the letters. It is not surprising that the reviewers were concerned about the treatment of subgroups in the waivers – many stakeholders have expressed similar concerns. Indeed, even the Department of Education’s guidance on how it will evaluate ESEA waiver applications explicitly requires states to address subgroup achievement. Has ED changed its tune after recognizing the challenges this created for the majority of schools?

For example, reviewers dinged Kansas’ waiver application for proposing to measure the achievement gap by comparing the performance of the top- and bottom-performing 30 percent of students instead of separating out student subgroups. Kansas also proposed using alternative assessments for subgroups and failed to demonstrate how they would collect data on individual subgroups over time to identify trends. The reviewers concluded that as it stands, the state’s new accountability framework could potentially mask the performance of struggling subgroups.

This is not the first time that reviewers have been concerned about subgroups. We recently examined three state waivers—from Colorado, Florida, and New Mexico—approved in the first round of waiver applications. ED approved Florida’s and New Mexico’s applications even though their school grade frameworks did not include the achievement of individual subgroups.

From our read of Florida’s original waiver application and the reviewer feedback on the proposal, reviewers criticized Florida’s application because, like Kansas, the state did not include individual subgroup achievement in school grades. Specifically, Florida’s plan ditches traditional ESEA subgroups and instead accounts for the performance of the 25 percent of students with the least test score growth from year to year, assuming that this 25 percent captures most of the students in these subgroups.

Florida’s response to the comments? Not much. Florida did concede by adding that they would use school improvement plans to intervene in schools in which any subgroup of students failed to meet the state’s achievement goals for two years in a row. But as far as we can tell, Florida made no changes to its school grade system in its approved waiver plan. Instead, Florida justified its use of the lowest-performing 25 percent of students by claiming that many schools did not have enough students in each subgroup to be properly measured under NCLB’s accountability system.

So the real question is—is ED taking the reviewers’ feedback about subgroups seriously? In the case of Florida, the Department approved the waiver even though the state made no substantive changes to its inclusion of subgroups in school grades. Will ED take a firmer hand with this second round of waivers? Or will states be allowed to obscure the performance of their neediest students in their school accountability grades? 

Issues:

Subsidized Stafford Student Loans are Already Interest-Free for the Unemployed

  • By
  • Jason Delisle
May 3, 2012

This post was first published as a response to a prompt on the National Journal’s Education Experts Blog on May 1, 2012. The prompt and responses from other experts can be viewed on the National Journal’s website here.

It’s important to think about “what protections [for borrowers] would be needed,” if Congress made changes to the interest rates on federal student loans. Even so, it seems hardly anyone understands the protections borrowers already get under the current federal loan system. What else could explain President Obama and Mitt Romney’s mutual misunderstanding that charging lower interest rates on Subsidized Stafford loans helps borrowers who can’t find a job?

Subsidized Stafford loans for undergraduates – the only type eligible for the 3.4 percent interest rate – include a special interest-free benefit. The interest clock on these loans is frozen while a borrower is enrolled in school and for up to three years if a borrower is unemployed or meets the rules for economic hardship. This means that keeping the interest rate on newly-issued Subsidized Stafford loans at 3.4 percent will not affect unemployed borrowers. The interest rate for these borrowers is automatically 0.0 percent.

Borrowers working part-time or in low-paying jobs need not worry about the interest rate on Subsidized Stafford loans (for three years) either if they enroll in the income-based repayment plan. This plan caps a borrower’s monthly payment at a share of his disposable income, regardless of the interest rate on the loans. But the deal is even sweeter for Subsidized Stafford loans. If a borrower’s monthly payment is too low to cover the interest that accrues, the government forgives it – up to three years’ worth.

These protections make the rhetoric about lowering interest rates to help college graduates weather a weak job market ill-informed at best. By definition, the campaign to keep interest rates lower on Subsidized Stafford loans is about keeping rates lower only for those borrowers who are employed and earn enough to be ineligible for the income-based repayment program. It is those fully-employed borrowers who are most able to swing the extra $9 a month (at most) that another year of loans offered at a 3.4 percent interest rate would otherwise save them.

Targeting a precious $6 billion right now to borrowers who have jobs and incomes high enough to cover the higher rate seems out of touch, especially when the Pell Grant program needs approximately that much next year to stave off a massive cut to the aid it provides.

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