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Report: We’re Building a Grad Nation, but Challenges Remain

  • By
  • Anne Hyslop
February 27, 2013

While many education advocates prepare for the looming sequester on March 1, the education policy news in D.C. wasn’t all bad this week. The nation is now on track – for the first time– to reach a 90 percent high school graduation rate by 2020, according to the fourth annual Building a Grad Nation report. Released at the Grad Nation Summit, hosted by America’s Promise Alliance, the report analyzes trends in the national graduation rate, which increased from 71.7 percent in 2001 to 78.2 percent in 2010, and celebrates the significant advances states have made.

States’ progress has accelerated since 2006, thanks in part to an outsized 2.7 percentage point increase in the graduation rate between 2009 and 2010. The recent gains are also largely due to improved graduation rates for Hispanic students (10.4 point gain) and for black students (6.9 point gain). Two states – Wisconsin and Vermont – have already hit the 90 percent mark, and eighteen more are on pace to meet it by 2020.

Notably, these gains come at a time when many states also increased high school requirements and when schools faced heightened accountability measures under No Child Left Behind. In 2012, nine states required students to pass end-of-course exams to graduate, compared to only two in 2002. Six more states required students to take end-of-course exams in 2012, but did not require a passing score. States are also continuing to raise the bar with adoption of the Common Core and other college- and career-ready standards.

Further, Grad Nation reports that over a million students are no longer attending dropout factories, compared to 2002, and the overall number of dropout factories fell by nearly 600 schools. Dropout factories are high schools where twelfth grade enrollment is 60 percent or less then ninth grade enrollment three years earlier. Again, the beneficiaries of this trend were mostly minority students: in 2002, almost half of America’s black students attended a dropout factory, but in 2011, only a quarter did so – a fifty percent decline.

While celebrating the achievements of the last decade, the report also cites the challenges that lie between today’s status quo and the 2020 goal. Over twenty states are not on pace to achieve a 90 percent graduation rate. More troubling, persistent achievement gaps remain. In 30 states, at least one-third of students with disabilities fail to graduate. The same is true for English Language Learners in 33 states, black students in 20 states, and Hispanic students in 16 states. In many cases, the proportion of students failing to graduate in these subgroups is much higher.

Another challenge lies within the data. The 78.2 percent mark was determined using the Averaged Freshman Graduation Rate (AFGR), rather than the 4-year Adjusted Cohort Graduation Rate – the uniform methodology states and the federal government agreed to use in 2008. The Cohort Rate will enable a more consistent measure of graduation rates and allow states to more precisely identify schools and strategies that are preventing dropout. But there are technical questions about how to calculate the new rates. After the switch to the Cohort Rate in 2012, the difference between the old and new calculation methods was over five percentage points in nine states. Without a consistent measure, it is unclear how far and how fast states will need to improve to meet the 2020 goal.

Because of these lingering challenges, it is incredibly important for states and the federal government to remain vigilant in reporting accurate data and holding schools accountable for graduation rates, especially for at-risk students. As Ed Money Watch previously reported, many states have backtracked on commitments to graduation rate accountability in their waivers from No Child Left Behind – giving schools equal credit for students that take longer than four years to graduate, or counting GEDs and other non-diplomas. Further, many states are not holding schools accountable for – or even reporting – other measures that are critical early warning indicators of dropout, like chronic absenteeism.

With increased attention on students’ preparedness for college and careers after graduation, schools cannot forget about supporting students who are struggling just to finish their high school degree. To help, U.S. Secretary of Education Arne Duncan announced a new grant competition to place more AmeriCorps volunteers in the nation’s lowest-performing schools. While admirable, this is hardly a comprehensive solution. Federal and state lawmakers must do more and consider both goals – preventing dropout and increasing college and career readiness – equally when creating policies to measure and improve student achievement in our nation’s high schools.

Issues:

Sequestration Deadline Imminent, but 2013 Funding Remains a Question Mark

  • By
  • Clare McCann
  • Jason Delisle
February 26, 2013

Everyone wants to know the latest news on sequestration, the spending cuts slated for Friday, March 1. Back in January, we ran a post that explained the unknowns and the knowns about sequestration; the latest news is that there is nothing new to report in either camp. We also explained that March 27, with the expiration of all appropriations funding, is where all the action will be – not at the March 1 sequestration deadline.

It seems the White House didn’t read our post, because the Obama administration this week released a series of fact sheets detailing by state the jobs that will be lost and anticipated funding cuts as a result of the across-the-board cuts set to take effect on March 1.

According to the White House documents, California could lose as many as 1,210 teachers and teaching aides. Some 2,300 Pennsylvania children could be dropped from Head Start. Over a thousand low-income parents could lose access to child care in Illinois. And that’s just the start of the pain.

The across-the-board cuts were triggered when the Congressional supercommittee created by Congress and the White House in the summer of 2011 failed to reach an agreement on deficit reduction measures. Congress delayed the cuts from January 2 to March 1, 2013. Now, non-defense discretionary spending, including most federal education spending, faces a 5.1 percent cut beginning Friday.

In citing such precise numbers, the White House is pretending to know the 2013 funding levels that exist nowhere in federal law. Federal programs are currently operating under a “continuing resolution” (CR) – a temporary funding measure that maintains spending at the previous year’s levels – set to expire on March 27. That means there is no funding appropriated yet for the remainder of the 2013 fiscal year, which ends on September 30, 2013.

Once the CR expires, education funding drops to zero, at least until Congress passes a budget or a continuing resolution. When they do finally appropriate funds, contrary to the sequester’s blunt across-the-board cuts, lawmakers must set the specific funding levels for each program. And those funding levels need not match the post-sequester figures for any specific program that the White House is citing. In short, the sequester is in place for less than a month before the funding it cuts expires completely.

So, really, this isn’t any different than the routine expiration of CR, except for one caveat. Congress can’t pass a funding bill that exceeds post-sequester funding levels in aggregate for non-defense discretionary programs without it being enforced by – yes – another sequester. But it can allocate that lower funding amount (roughly equivalent to fiscal year 2008 levels) to whichever programs lawmakers choose and the president is willing to sign into law. That is what makes the White House’s precise numbers on the sequester cuts – down to the numbers of students – so absurd.

Moreover, members of Congress could pass an appropriations bill on or before March 27 that “busts the caps” by spending more than the aggregate limit, but in the very same bill turn off the resulting sequester. As an additional note, those spending caps are laid out in law through fiscal year 2021, a mechanism that will force lawmakers to return to the issue and make difficult spending decisions year after year if they don’t cancel the caps.

Republicans in the House, however, have adopted the continuing resolution as one of their latest strategies and look set to draft a CR right at those limits, even while the president shows every intention of demanding that they send him a bill that busts the caps and turns off the sequester. According to an article in National Journal, House Republicans will refuse to take up funding plans for 2013 until after the sequester hits and funding levels drop rather than before the sequester, just in case efforts to cancel the sequester are successful.

For their part, Democratic lawmakers have already successfully won at least one triumph. In a deal passed by Congress to delay the sequester at the eleventh hour (the so-called fiscal cliff deal reached January 1), Democrats in Congress successfully included new revenue increases. Republicans had considered tax hikes off-limits, but Democrats managed to pass the deal even without any spending cuts. Now Republicans have an opportunity to inflict spending cuts; whether or not revenue increases will be included remains to be seen.

Readers could be forgiven if they fail to notice the sky falling on Friday as the nation officially reaches the sequestration deadline – few of the education cuts, at least, will be felt immediately and nowhere near as precisely as the White House says. But they should continue to keep their eyes on the politics of the March 27 continuing resolution deadline.

For more on how this might affect early education, check out this post from our sister blog, Early Ed Watch.

Issues:

Free Money for Graduate Students Won't Go Unnoticed

  • By
  • Jason Delisle
  • Alex Holt
February 21, 2013

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.

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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.

GradPlusPercGrowthLoanSize.png

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.

GradPlusTotalLoanSize.png

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.

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What to Think About AEI’s Cage-Busting Leadership Event

  • By
  • Kristin Blagg
February 20, 2013
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Last week, the American Enterprise Institute (AEI) hosted a panel of education reform leaders to discuss the role of transformational mindsets and management in celebration of Rick Hess’ new book, Cage-Busting Leadership. Hess argues that most would-be education reform leaders feel hemmed-in by a cage of regulations, policies, and collective bargaining agreements that prevent them from implementing real change. However, most of these perceived roadblocks are the result of group mindsets – “a culture of can’t” – rather than actual restrictions.

“Cage-busting” education leaders, like those featured on the panel, work to find places where they can play through the rules to break organizational habits and achieve true reform. Here are the lessons they’ve learned:

Human Capital is Key (And A Good Lawyer is Essential)

Nearly every leader mentioned a time when they were told they couldn’t implement an initiative because of legal or contract barriers. But in each case, the rule either didn’t exist or was superfluous. Instead, institutional culture had built up to the point where the status quo was perceived as carved in stone.

Rhode Island Commissioner of Education Deborah Gist recalled the power of asking “why?” – pushing others to think beyond “the way it’s always been done.” Michelle Rhee, CEO of StudentsFirst, referenced her experiences in a contentious contract negotiation with the Washington Teacher’s Union (WTU) over a pay-for-performance system. When talks stalled, outside mediator Kurt Schmoke found a “cage-busting” solution by writing a provision that gave DCPS the power to institute a pay system that the WTU would not have to oppose or endorse.

Others cited the importance of bringing on employees who share the same vision. Chris Barbic, of the Tennessee Achievement School District (ASD) and former CEO of charter network YES Prep Public Schools, spoke of “unplugging from the Matrix” those teachers who had spent several years in traditional schools. He estimated that only about half of them were able to shift their mindset and adapt to the charter school culture.

Collaboration Should Be Goal- and Vision-Oriented

To many on the panel, collaboration was another means to get change going. As a school principal, Adrian Manuel wanted to move all of his teachers’ prep time to one day to allow for cross-grade collaboration, site visits to model schools, and more intentional planning. In the process, teachers would need to teach more periods on other days, a move prohibited by the contract. Manuel sent teacher representatives on a weekend retreat with the contract to find a way to implement the idea. The representatives returned with a solution that they presented to the staff, bringing the majority of teachers onboard without making the measure feel like a top-down initiative.

A shared vision is also critical in the central office. When D.C. Public Schools reallocated funds after closing fifteen under-enrolled schools, Chancellor Kaya Henderson’s leadership team initially pushed for more of the same programming they already had. Rather than stick to the status quo, Henderson asked a different question – what would you want to spend money on if your child was in DCPS? This new framework pushed her staff to imagine beyond what they had already done to consider new enrichment programming and technology initiatives.

Flexibility and Vertical Integration of Policy Is Crucial

Education reform doesn’t happen in a vacuum; each of the leaders also cited the importance of flexibility and cohesiveness within federal, state, district, and school policy.

When the Providence Public School District wanted to establish a new labor-management contract as part of their School Improvement Grant (SIG), Gist and her staff were able to work with the U.S. Department of Education to implement the reform under the “Restart” model, which is normally used to transform traditional schools to charters. This flexibility allowed the district to gain ownership and tailor reform to their needs.

Barbic found that implementation and alignment of state policy to the local level was also a challenge – even within the state-led ASD. It took two separate pieces of legislation to get the parameters of the ASD right, and even then, the effects of reform often didn’t trickle down to schools. Tennessee eliminated a last-in, first-out policy for teacher layoffs, but when Barbic visited principals in Chattanooga, they hadn’t even heard of the change.

Questions Remain

It is clear from this panel that flexibility in regulation can be a useful tool for school leaders – an important point given ongoing debates over No Child Left Behind waivers and the implementation of reforms like Race to the Top that allow for state innovation. However, it seems to be equally important to push for a deep bench of future “cage-busting” leaders. Can “cage-busting” be taught, and if so, how should policymakers think about preparing future principals and superintendents? Policy can include all the flexibility in the world, but it won’t matter if schools don’t have leaders with the determination and vision to use it well.

Issues:

SOTU: A Career-Ready Race to the Top or a Call for Perkins Reauthorization?

  • By
  • Anne Hyslop
February 15, 2013
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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. 

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Waiver Watch: The Real Lessons Learned from the Senate Waiver Hearing

  • By
  • Anne Hyslop
February 14, 2013
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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.

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Financial Alchemy: Call Student Loan Refinancing Proposal What It Is

  • By
  • Jason Delisle
February 14, 2013

Yesterday, the Center for American Progress (CAP) released a paper arguing that Congress should reduce the interest rate on outstanding federal student loans, a concept it refers to as “refinancing.” Congress sets the rate on federal student loans – somewhat arbitrarily – at a fixed 6.8 percent, and CAP is calling on lawmakers to re-set it lower for existing loans.

Leaving aside CAP’s rationale for the policy, which is critiqued in an earlier post, it is worth pondering why CAP goes to so much trouble to describe how the refinancing program would work. The paper walks through byzantine financing trusts the Department of Education set up to make student loans during the financial crisis; an emergency lending program run by the Federal Reserve; federally-backed funds; and a loan consolidation program that could be used to provide borrowers with lower interest rates. Why all this complexity?

CAP could instead simply propose that the federal government cut a check to everyone with a federal student loan in some proportion to the amount owed and the interest rate on the loan. This would be far simpler than CAP’s complex suggestions, and it would have exactly the same outcome for both the borrower and the government. Borrowers would have more disposable income, and the government would be out by the same amount.

But the unnecessary financial transactions make it appear as if there is some logical connection between refinancing student loans and refinancing and low interest rates on other types of debt in the private market. All day, every day, borrowers and lenders in the private debt markets, and private buyers and sellers, respond to market forces that drive interest rates lower on everything from auto loans and home mortgages to corporate bonds.

But there is no such refinancing market for federal student loans because borrowers already have a better rate than the market will offer. The only way to lower what borrowers pay on those loans is for Congress to cut the rate even further below the market rate.

Given that the government holds the loan (or backs it) and sets all of the terms on it, cutting the interest rate is effectively the same as sending checks to borrowers. Yet knowing that Congress is a sucker for a Rube Goldberg machine, CAP hopes that by calling it “refinancing” and erecting complicated legislative and financial machinery to execute the plan, observers will mistake it for a market transaction. Lest you think this is an unfair characterization, here’s how the authors put it:

One benefit of a federally backed student loan refinancing and modification program… is that it is relatively simple to grasp—many Americans are familiar with similar mortgage-refinancing programs.

CAP, here is a way to make the proposal even simpler to understand: Design it to issue government checks directly to people with student loans. That will leave no doubt as to what the program does or how it works. 

If the program still sounds like a good idea in those terms, remember that the rates on federal student loans are already below market and carry benefits that no lender can beat, with protections galore for struggling borrowers – including deferment, 3-year forbearance, interest-only payments, extended terms, and income-based repayment with loan forgiveness. Refinancing is simply a different way to describe the government sweetening the deal just a little bit more. Some borrowers are indeed struggling to repay their loans, but too often underutilize the benefits Congress and the Department of Education have already provided. That is where more work is needed. 

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Court Ruling Finds Texas Public Schools Funding Inequitable, Unconstitutional

  • By
  • Lindsey Tepe
  • Clare McCann
February 12, 2013

Last week, a district court in Texas ruled in favor of more than 600 Texas school districts, finding that the state’s education finance system is unconstitutional. This is nothing new for Texas – all told, six school finance lawsuits have been tried against the state since 1984, the last in 2005. Each round of lawsuits has prompted the legislature to tinker with the funding formulas. That has added complexity and apparently exacerbated underlying inequities.

Using data and statistics from the New America Foundation’s Federal Education Budget Project (FEBP), we were able to reveal that the inequities across Texas school districts are in fact significant. Worse yet, the inequities have indeed increased over the past several years.

The latest litigation in Texas was brought on by $5.4 billion in cuts that the legislature made to public education in the 2012-13 biennium. The cuts break down into three figures: (1) $2.2 billion from shifting public funds for schools to the 2014-15 biennium; (2) $1.8 billion from assuming no student enrollment growth over the two years; and (3) $1.4 billion from the elimination of programs such as the state pre-kindergarten grant program, as well as reductions in many other public education programs.

While these cuts sparked the latest lawsuit, the districts involved in the suit have indicated that restoring these funds would not be enough to fix the broken system. The court ruled that the state not only provides insufficient funding for education, but that it is unfairly distributed to school districts. In other words, increasing funding through an inequitable formula does not, by definition, make education spending more equitable.

The FEBP data make that abundantly clear. In 2006, per-pupil spending in Texas varied on average 9.3 percent, or $693, from district to district. Three years later in 2009, per-pupil spending varied on average 9.7 percent, or $831, from district to district. And this growing disparity is even more evident at the local level.

Consider Penelope Independent School District. According to the National Center for Education Statistics, the Waco-area district is relatively property-poor – it gets only 14 percent of its per-student revenue from local taxes. And overall, it spent just over $9,300 per student in 2009 (slightly above the state average). Meanwhile, Glen Rose Independent School District outside of Dallas received more than 83 percent of its per-pupil revenue from local sources. That district spent more than $11,300 per student in 2009.

But those figures don’t necessarily align with the two districts’ needs. Whereas nearly 75 percent of Penelope ISD’s student body was eligible for free and reduced price lunches (a proxy for student poverty), only about 40 percent of Glen Rose ISD’s students were eligible. Penelope students struggled more in 2009 state achievement tests, too, with only half of fourth-grade students proficient in reading and math, while Glen Rose fourth graders were 88 and 95 percent proficient in reading and math, respectively.

Of course, research has shown that the payoff from spending more money on students is not always improved academic success. But wealthier districts tend to be at an advantage in hiring more experienced teachers and providing extra support services. Fair and equitable funding should be an essential element of state education policies.

The inequalities in Texas’s school finance formulas are mirrored in federal and state funding formulas around the country – and this week’s ruling is just the latest update to a long history of attempts to ensure equal access to quality education.

Click here to search for your state or school district.

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Friday News Roundup: Week of February 4-8

  • By
  • Lindsey Tepe
February 8, 2013
Alabama lacks funds for $200 million of Department of Education requests
 
UF, FSU face off over Governor Rick Scott's proposed $15 million bonus
 
Iowa Senate panel OKs more school aid spending bills
 
Governor Nixon reverses $8.5M in cuts to Missouri higher education
 
Alabama lacks funds for $200 million of Department of Education requests
Alabama state Superintendent Thomas Bice this week submitted a $4.1 billion budget request for fiscal year 2014, a $405.5 million increase from fiscal year 2013. Alabama state officials have indicated that they will only be able to fund around half of the requested increase; the Department of Education is now determining how to trim its request by $200.0 million. Of the additional funds requested, 90 percent were meant for distribution directly to schools; only 10 percent of the funds, or $40.0 million, were requested for the state Department of Education. Bice indicated that his budget request sought funds for what the state needs, not necessarily what the Department thought would be available. He indicated that the budget will be adjusted in the coming weeks, now that revenue projections are available from state forecasters. More here…
 
UF, FSU face off over Governor Rick Scott's proposed $15 million bonus
When Florida Governor Rick Scott unveiled his $74.2 billion budget last week, a $15 million line item caused contention amongst Florida’s largest universities. Scott’s higher education spending package includes an increase of $118 million and an additional $167 million tied to performance for the Florida university system. However, under Scott’s budget, the University of Florida would receive an additional $15 million bonus toward the goal of elevating it to one of the nation’s top universities. The entire sum would be allocated for new faculty hiring. The funds allocated specifically for UF have caused controversy in Florida’s Senate, especially for FSU alumni. Currently, UF is ranked 17th in the nation according to the U.S. News and World Report, with FSU ranked 42nd. FSU supporters have called for a matching allocation to help that school become more competitive, as well.  More here…
 
Iowa Senate panel OKs more school aid spending bills
The Iowa Senate Education Committee has approved two bills that will increase school funding by approximately 4 percent for the 2014-2015 school year. The bills would increase the “allowable growth” for spending from around $106 million to an estimated $114 million in that year. Additionally, $15 million was added for a teacher’s compensation supplement. Earlier in this session, the Iowa Senate passed $187 million in school aid and property tax relief for the next 2013-2014 school year. Under state law, however, legislators are required to authorize school aid for the following academic year within 30 days of receiving the governor’s budget proposal, so they moved quickly to pass the second bill. The Democratic-controlled Senate is set to vote on the two bills next week, and both will likely pass, despite likely Republican opposition to the bills. More here…
 
Governor Nixon reverses $8.5 million in cuts to Missouri higher education
Citing an unexpected increase in state tax revenue projections, Missouri Governor Jay Nixon this week reversed his plans to cut $8.5 million in cuts to state higher education. Missouri state revenues are up by 9.5 percent at this point in the fiscal year, as compared to the same point in the previous year. He also stated his plans to reverse several hundred thousand dollars in cuts to child care subsidies and other social programs. Despite his earlier decision, Nixon has still blocked other budgeted spending, including $6.0 million for K-12 schools and school social services. Funding decisions for those other programs will depend on state revenues over the course of the next month. More here…
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New Pell Grant Estimates Buy Time, Long-Term Fix Still Needed

  • By
  • Jason Delisle
February 7, 2013

The Congressional Budget Office this week released updated cost projections for the Pell Grant program – and the estimates show an unexpected surplus over the past several years. The figures are much awaited because they dictate what lawmakers must allocate to the program in the upcoming fiscal year 2014 appropriations process if they want to keep the program running at its current level of benefits and with existing eligibility rules.

In 2010 and 2011, those estimates sparked panic. The program was burning through money faster than anyone expected, prompting Congress and the Obama administration to shift funding from other programs and cut parts of the Pell Grant program itself three separate times. (A more complete history and funding table is available here.)

The funding emergency was exacerbated by the fact that congressional lawmakers and the Obama administration had tried to maintain a large increase in the maximum grant, first funded without any long-term funding plan by the American Recovery and Reinvestment Act of 2009. The latest round of temporary funding was set to dry up in 2014, leaving a $5.8 billion hole in the program. In 2015, the number would jump to $8.7 billion, and stay at about that level indefinitely.

Luckily for procrastinators in the White House and on Capitol Hill – and for Pell Grant supporters – the latest Congressional Budget Office estimates have come to their rescue. According to CBO, the program was actually overfunded the past few years, leaving a surplus of $9.2 billion. The CBO doesn’t give much explanation as to what changed. For that we’ll have to wait for the president’s budget request due in late March.

But this means that Congress can fund the Pell Grant program with the same appropriation it provided in 2012 for two more fiscal years without supplemental funding or eligibility changes. Moreover, the fiscal year 2015 appropriation needs to be only $1.4 billion larger, rather than $8.7 billion larger, because lawmakers can apply a big chunk of the $9.2 billion surplus to that year’s funding. (To be sure, a $1.4 billion increase will be no easy feat, given that lawmakers must now contend with spending caps on appropriations enforced by sequestration.)

CBOPellEstimate20134.png

Still, for the long term, the Pell Grant program needs a funding plan. Come fiscal year 2016 and each year thereafter, lawmakers will need to increase the annual appropriation between $7.2 billion and $4.9 billion, depending on the year (see above table). If not, lawmakers will have to drastically reduce the maximum grant or change eligibility rules. Favorable estimates from the CBO can delay the day of reckoning, but they won’t solve the underlying problem: Temporary funding is only temporary.

As a final note, Pell Grant supporters – who no doubt are excited about the new estimates – should understand that lawmakers could steal the Pell Grant surplus to pay for something else. There is some tricky accounting involved here. Technically speaking, Congress could use the surplus to supplant regular appropriations funding this year (or in 2014) for Pell Grants, and then spend the surplus on some other program. The temptation to carry out such a scheme will be intense given the ongoing budget battles on Capitol Hill. That would jeopardize college aid to millions of students from low-income families. And it would make the tough spending choices and eligibility changes Congress and the Obama administration made to shore up the program in the recent years all for naught.

Got that, Congress? Don’t steal the Pell Grant surplus. We’re watching.

 

2/7/2013: Table was updated to correct the 2015 Pell Grant funding shortfall.

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