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New America Ed Launches EdCentral

November 11, 2013
New America education policy analysis and information is now available on a fantastic new platform: www.edcentral.org. Please update your bookmarks and head over to our new website. We look forward to welcoming you to our EdCentral community.

Cohort Default Rates Provide Insights into Outstanding FFEL Loans

October 23, 2013

Updated 10/24/2013 6 PM: This post was updated to include a better description of the Asset Backed Commercial Paper conduit program.

Hidden amidst the shutdown furor was the annual release by the U.S. Department of Education of new student loan default rates. The data measure how many borrowers who entered repayment in a single year defaulted on their federal student loans within two or three years. This year, the data show that 10 percent of borrowers default within two years of entering repayment and 14.7 percent do so within three years. As has historically been true, for-profit and community colleges had the highest default rates, well above those at public or private non-profit 4-year schools.

The overall trend here is not pretty. This is the sixth consecutive year in which two-year default rates increased, and they are now at the highest they’ve been since 1995. But with the growth in borrowing, this means there are significantly more people entering repayment and defaulting. More than 1.1 million more borrowers entered repayment in fiscal year 2011 compared to two years prior, and 10 percent defaulted, as compared to 8.8 percent in fiscal year 2009—an increase of more than 230,000 defaulters. Over those two years, enrollment in postsecondary education also increased, by more than 590,000 students, while the number of borrowers who entered repayment skyrocketed by 1.8 million students. See the chart below for more specific default rate figures.


Source: U.S. Department of Education

But beyond the school-based cohort default rates, the Department of Education also released some other interesting default rates: those for guaranty agencies and lenders under the Federal Family Education Loan (FFEL) Program.

FFEL is the now-defunct program replaced by the Direct Loan Program. Vestiges of the program remain, however, in the form of more than $400 billion in outstanding loans issued before the change. Under FFEL, government-backed loans were issued through a set of lenders, and 35 private non-profit organizations called guaranty agencies performed various administrative tasks, including providing federal default insurance to the lenders.

Default rates for lenders don’t carry much weight – there are no sanctions associated with high default rates. Each lender has a calculated two-year and three-year default rate, both for loans they originated and for loans they currently hold. Current lender two-year default rates range from 0 percent for over 500 lenders, including many who don’t hold any loans anymore, to a shocking 89 percent for Citibank, which still holds about 2,000 loans. Among the largest FFEL loan-holders (the 28 companies that hold 10,000 or more loans), rates average about 7 percent. Sallie Mae, the largest FFEL lender, has a default rate of 4.1 percent on the nearly 27,000 loans totaling almost $20 million it still holds from this cohort.

And the Department holds one set of loans with a very high default rate. During the financial crisis, in order to help FFEL lenders continue to make new loans, the Department of Education set up a financing vehicle called the Asset Backed Commercial Paper conduit program. The Department purchased some of the participants' FFEL loans, including all loans that were more than 210 days delinquent, as required by the contract. Those loans, now held by the Department but purchased through the conduit, carry a two-year default rate of 51.7 percent and a three-year rate of 56.6 percent. The requirement that the Department purchase those delinquent loans explains the abnormally high default rate.

The guaranty agency default rates provide another way of judging the results in the FFEL program. When a FFEL borrower defaults, the lender can file a claim to a guaranty agency to recover most of the outstanding loan balance. Then the guaranty agency—a true middleman—uses federal money to reimburse the lender, and the Department of Education reimburses those costs (this is known as “reinsurance”). But guaranty agencies with high default rates can’t receive the full amount of reinsurance reimbursement. If guaranty agency rates are below 5 percent, they get a 95 percent reimbursement; for rates between 5 percent and 9 percent, 85 percent; and for default rates that are 9 percent or higher, 75 percent.

As it turns out, at least when it comes to two-year cohort default rates, five of the reported guaranty agency default rates exceeded 9 percent for the 2011 cohort – Student Loan Guarantee Foundation of Arkansas, Texas Guaranteed Student Loan Corporation, Higher Education Assistance Authority (Alabama and Kentucky), Florida Department of Education, and Oklahoma College Access Program. Still, in every one of those states except Oklahoma, the statewide student two-year and three-year cohort default rates are even higher than the guaranty agency two-year default rate.

And although some guaranty agencies are private non-profit organizations, while others are state-based and may receive some state resources, there doesn’t seem to be much difference in their performances. The non-profits’ average default rate is 6.2 percent – effectively identical to the 6.3 percent default rate among state-based guaranty agencies.

Two-year cohort default rates don’t set a particularly high bar, as it stands, either for guaranty agencies and lenders or for students. Guaranty agencies are not held accountable for their borrowers’ defaults. Schools are – for rates at or above 25 percent three years in a row, or higher than 40 percent in one year, schools lose eligibility for Title IV federal financial aid – but not as much as they once were. The last time rates reached about 10 percent, in 1995, more than 200 schools were sanctioned by the Department of Education. Since then, the number of schools subject to sanctions has dropped precipitously – to just 8 colleges for the 2011 cohort. The 2010 cohort – the most recently available class of students – illustrates the limitations of the default rate. Consider that schools’ two-year default rates jumped from 9.1 percent to 14.7 percent when a third year was included in the window. And default rates in a cohort (unsurprisingly) continue to grow every year – even outside the 2-year or 3-year window.

Thanks to a change enacted in the 2008 Higher Education Act reauthorization, cohort default rates will get moderately stronger next year as the Department finally transitions to relying on three-year rates to determine whether a disconcertingly large share of a school’s students are unable to pay their loans. This year, over 130 schools would be in danger of facing sanctions if their default rates did not change in the third year of calculations (to date, only two official three-year default rates have been calculated). The hope is that a longer window would be harder for schools to game by utilizing temporary measures such as deferment or forbearance to avoid default up to the edge of the two-year window.

Default rates are by no means a perfect measure of a school’s value to students, but they are part of a scaffolding of restrictions on colleges – a sort of baseline quality metric to help students avoid low-value schools and to avert wasted taxpayer dollars. The numbers released by the Department offer valuable insights into students’ struggles.

What to Think About the DC IMPACT Study

October 17, 2013
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Few teacher evaluation reforms have been as contentious as the IMPACT system in D.C. Public Schools. But a new study published by Thomas Dee and James Wyckoff provides the first empirical evidence that the controversial policy could be encouraging effective teachers to stay in the classroom – and improve their practice.

Dee and Wyckoff examined teachers that scored on the cusp of various IMPACT performance levels– namely, teachers just above and just below the cutoff for effective and highly effective (HE) ratings. The idea is that teachers near the cut points share similar characteristics, regardless of their final rating. By examining these teachers’ outcomes in subsequent years, researchers can isolate the effect of IMPACT’s incentives on teacher behavior. Do teachers that barely receive a HE rating fare differently than those that just missed the distinction? And do minimally effective (ME) teachers close to the effective cut point respond differently than teachers who barely cleared the effective hurdle?

Turns out, they do. The incentive structure within IMPACT had significant effects on retention and performance, particularly after the second year of implementation (2010-11) when IMPACT gained credibility. At that time, teachers with two ME ratings became eligible for termination and those with two HE ratings earned permanent salary increases, not just bonuses. Teachers that received their first ME rating after the 2010-11 year were significantly more likely to leave DCPS (over 10 percentage points) than teachers that scored just above the cut point. Further, the threat of dismissal improved the performance of ME teachers that chose to stay for the 2011-12 year – their scores improved by 12.6 IMPACT points compared to teachers that just received an effective rating, an increase of five percentile points. Similar effects were seen for teachers that could become eligible for increases in their base pay if they remained HE – their 2011-12 IMPACT scores improved by nearly 11 points compared to teachers that missed the HE cutoff, an increase of seven percentile points.

So what do these results tell us about IMPACT and teacher evaluation reform overall? Is this a moment for cautious – or all-out – optimism?

1. Evaluation systems like IMPACT don’t necessarily improve the performance of teachers across the effectiveness spectrum.  That’s because Dee and Wyckoff only examined a narrow band of DCPS teachers: those scoring right at the cut points between ratings. These teachers are the most likely to be influenced by the incentives built into IMPACT – say, when the ratings affect job security. Instead, the research demonstrates the effect of certain incentives, on a certain group of teachers. Those incentives worked –and worked well – but we still don’t know how the performance of most teachers changed in response to the new evaluation system.

2. That said, the research is rigorous, and the results are encouraging. There is evidence that the district’s teacher workforce improved overall. Some ME teachers voluntarily chose to leave DCPS, and the newly hired teachers that replaced them in the 2011-12 year had higher IMPACT scores, on average. And there is no evidence that highly effective teachers were pushed out of the system by IMPACT. Further, many ME and HE teachers tended to improve on IMPACT when they remained with DCPS.

However, more research is needed to determine what interventions were most effective in helping these teachers improve – and to determine whether other teachers (not just those near the cut points) saw similar outcomes. Evaluation systems must define what effective teaching is, and also provide the knowledge and support for teachers to meet these expectations. We know far more about identifying effective teachers than we know about what to do next.

Of course, that brings up another important caveat: improvements in performance here are measured based on changes in IMPACT scores. The authors don’t link these results to student learning explicitly – another area for future research.

3. Finally, while the results are positive and provide some of the best evidence to date on the success of IMPACT, the research may not be widely applicable to other districts and states. IMPACT and DCPS remain outliers in many respects:

  • IMPACT uses value-added data to measure an individual teachers’ contribution to student learning, which many evaluation systems have eschewed.
  • IMPACT includes not one, not two, but five observations of classroom practice over the course of the year. Further, two of these observations are conducted by master educators, rather than school principals. Hiring and training objective observers takes time, capacity, and resources that many states and districts do not have – or are unwilling to dedicate – for evaluation.
  • IMPACT’s improvement and incentive structures are also well-developed and supported. DCPS has made a concerted effort to improve the quality of its coaching and professional development and link it to IMPACT. Further, the bonuses and salary increases for highly effective teachers are substantial, thanks in part to foundation funding. While this external support may raise questions of sustainability, these incentives have been institutionalized in the district’s contract with the Washington Teachers Union.
  • In a way, IMPACT operates at both a state- and district-level. Some of the lessons learned from IMPACT may not be applicable in states, which face additional layers of governance and greater heterogeneity. On the flip side, IMPACT may not be a model for other districts, where administrators could have less autonomy to develop, implement, and revise evaluation systems.

In other words, the results from D.C. are encouraging, but there is still much to learn. More worrisome, as teacher evaluation reform takes hold across the country as part of Race to the Top and states’ ESEA waiver plans, these positive results may prove to be a one-off. IMPACT is as rigorous and comprehensive as teacher evaluation systems get – especially compared to the rudimentary, half-baked, and vague evaluation systems described in many states’ waiver requests. While it is important for states to follow through with their promises to implement new evaluation systems, the quality of this implementation should be of equal – or even greater – concern to policymakers, educators, and advocates moving forward. 

Our Long National Nightmare…Will Return Shortly

October 17, 2013

This post also appeared on our sister blog, Early Ed Watch.

Last night, as the 16th day of the federal government shutdown drew to a close, the House and Senate approved, and President Obama signed into law a budget deal that restored funding for federal agencies and brought the nation back from the brink of a debt default. But celebrations will be short-lived. The temporary spending bill will expire again on January 15, and the increased debt ceiling will run out again on February 7 – evidence that the last month of congressional debate had virtually no long-term implications.

The shutdown began just over two weeks ago, with House Republicans insisting on defunding or at least delaying a portion of the Affordable Care Act, the healthcare law President Obama pushed through Congress in 2010. But Senate leadership and President Obama remained dead-set against the changes. (Only one, relatively minor change to “Obamacare” was made in this latest deal, requiring the Department of Health and Human Services to verify the incomes of those applying for tax credits or cost reductions under the law.) So instead, the debate morphed into one over a more workable issue: spending levels.

Under a law passed by Congress in 2011, known as the Budget Control Act (BCA), lawmakers established a congressional “supercommittee” to create a framework for $1.5 trillion in deficit reduction. When they failed to do so, the law reverted to Plan B: spending limits for fiscal years 2012 through 2022. Mid-2013, the White House was required to sequester a portion of that year’s spending with across-the-board spending cuts, but an eleventh-hour deal in Congress (the American Taxpayer Relief Act) meant that a portion of the cuts were pushed off to fiscal year 2014 instead. This year, then, the spending cap drops by another $18 billion.

That is a key point that has been lost in the debate: The “second sequester” was not part of the original Budget Control Act as passed in 2011. It came later, through the American Taxpayer Relief Act of 2013 (the law that extended most of the Bush-era tax policies), which Congress passed with overwhelming, bipartisan support in January 2013.

The trouble is, the spending bill passed last night, like both the House and Senate proposals that came out ahead of the shutdown, continues funding the government at 2013 post-sequester levels (about $985 billion this year, instead of $967 billion as required under the BCA as modified in early 2013). That means another sequester will hit federal programs on January 15 – the same date that funding expires under this plan.

That’s no accident. Senate Majority Leader Harry Reid (D-NV) wanted to push the deadline for the continuing resolution up against the deadline for sequestration to force the issue further. He hopes to use the next debate over funding the government in just a few short months to press Republicans to provide federal agencies with flexibility to implement the sequester, rather than to apply it evenly to all programs, or even to cancel the sequester entirely. (The proposal to give agencies flexibility was discussed during these budget negotiations, but was ultimately left out of the final bill.)

And Senate Democrats effectively queued up this situation when they passed their budget earlier this year, ignoring sequestration and setting spending at $1.058 trillion instead of at the House Republicans’ approved (and the Budget Control Act’s mandated) $967 billion. (President Obama followed suit, with his budget clocking in at $1.057 trillion.)

Republicans, meanwhile, have little incentive to alter sequestration – and got cold feet when it came time to actually draft an education spending bill that meet the new spending caps. Efforts earlier this year to bolster funding for the Department of Defense by reducing substantial amounts of funding for the Departments of Labor, Health and Human Services, and Education failed because of internal dissent among House Republicans about the size of the reduction. But spending cuts remain a major priority of most GOP lawmakers, and the political will doesn’t yet exist—among Republicans or some Democrats—to cancel sequestration.

Another provision of last night’s agreement, though, would attempt to end such “governing by crisis” in favor of a return to regular order in Congress. A bicameral, bipartisan budget conference committee will begin meeting soon to attempt to reach an agreement on government funding – undoubtedly, with a focus on altering or eliminating sequestration in favor of more targeted cuts.

Sound familiar? That’s because the supercommittee whose failure spurred the implementation of sequestration in the first place was tasked with a similar goal of reaching a broad deal on budget policy. Some of the committee’s appointees – Rep. Clyburn (D-SC), Rep. Chris Van Hollen (D-MD), Sen. Patty Murray (D-WA), Sen. Rob Portman (R-OH), and Sen. Pat Toomey (R-PA) – even served as supercommittee members a few years ago.

It seems unlikely that enough has changed politically to spark much agreement. And if that’s the case, we’ll be right back in the same place, facing a potential government shutdown (and soon after, another possible government default), by mid-January. 

Shutdown Got Your Data? Check Out Our Federal Education Database

October 15, 2013
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The federal government has been officially shut down for over two weeks now, and the impact has been real: furloughed employees across the country, Head Start programs shut down (and some reopened), and confusion and delays in many federal programs. But for education experts and data geeks, another issue has been highly inconvenient, if less severe: the disabling of federal education data websites.

Fortunately, Ed Money Watch’s parent initiative, the Federal Education Budget Project, maintains one of the most comprehensive federal education databases in the country for every state, school district, and institution of higher education. The data are collected from state and federal sources and updated regularly. The PreK-12 data for more than 13,700 school districts and every state include:

  • Federal funding information, like per pupil expenditures, Title I and IDEA allocations, and school lunch awards;
  • Pre-K information for state-funded pre-K, Head Start, and special education preschool grants;
  • Demographic information on enrollment and racial, economic, and academic subgroups; and
  • Achievement data for math and reading in 4th grade, 8th grade, and high school, both for state standardized tests and the NAEP exam.

The higher education data cover more than 7,500 institutions and all 50 states, plus Washington, D.C. and Puerto Rico, and include:

  • Tuition and fees, price, endowment, and net price for all and for low-income students;
  • Federal finance data on student loan recipients and disbursements for schools, as well as Pell Grant and other federal aid data;
  • Student demographics, including full-time, part-time, and graduate student enrollment, as well as racial subgroups;
  • Outcomes as defined by graduation rates, retention rates, student loan default rates, and repayment rates; and
  • The share of students receiving federal, state, and local financial aid, as well as the average award size.

Check it out now, and until the shutdown is over! For some background on the data and on other education policy topics, check out our Background & Analysis pages.

Tensions on Capitol Hill Driven by Spending Limits

October 14, 2013

Two weeks into a government shutdown, and only a few short days from reaching the federal debt ceiling, negotiations between Republicans and Democrats in Congress and the White House have gone nowhere. But the debate is not primarily about defunding or delaying the implementation of the Affordable Care Act (“Obamacare”) anymore. In fact, Democrats seem to have co-opted the fight so they can argue against their greatest nemesis of late: sequestration.

With negotiations in the House of Representatives stalled, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell entered the arena last week to work out a deal. But though the negotiations are allegedly more productive in the Senate than the House, reports suggest they hit a roadblock this week over the spending level at which the government would be funded when it reopens. Democrats are insisting on higher spending levels, even as Senate Republicans have dropped most of their other demands. Meanwhile, Republicans would like to maintain the spending levels set after sequestration last year. (In the interest of full disclosure, Reid has denied that he wants to increase spending levels in this bill. Other Democratic leaders apparently disagree.)

First, some background. (You can find this information and many other details in a New America Foundation issue brief published in April, Federal Education Budget Update: Fiscal Year 2013 Recap and Fiscal Year 2014 Early Analysis.)

Sequestration, as we’ve written before, was the result of a 2011 law, the Budget Control Act (BCA). The BCA required a congressional “supercommittee” to hunt down and pass through Congress $1.5 trillion in deficit reduction over 10 years.

When the supercommittee inevitably failed, though, there was a failsafe in place. $1.2 trillion of that deficit reduction would be guaranteed through spending caps – and to a lesser extent, reductions in non-appropriations, or “mandatory” funding – enforced by sequestration. In fiscal year 2013, discretionary spending was cut midyear from $1.043 trillion overall to $984 billion through a sequester, which amounted to a 5.0 percent cut for most domestic programs, including most federal education programs. And, in fact, the cut should have been deeper (about 8.2 percent), but Congress (Democrats and Republicans) reached a last-minute agreement to push off some of the cuts to the following year. That means in fiscal year 2014, the spending limits is now $966 billion, lower than in 2013, but has not yet been enforced by sequestration.

However, throughout the start of the fiscal year 2014 budget process, the Senate has ignored that spending limit, despite voting for it in early January, arguing that enough deficit reduction has occurred and the harm to key federal programs does not justify the further costs. Instead, the Senate Democrats’ budget appropriated spending at the pre-sequester $1.058 trillion level, and the White House acted similarly to appropriate at $1.057 trillion in its fiscal year 2014 budget.


So what does this all mean for the ongoing shutdown/debt ceiling negotiations?  Well, just as House Speaker John Boehner attempted to make Obamacare his last stand, Senator Reid has apparently made the higher, $1.058 trillion spending limit his last stand.

Both the House Republican and Senate Democratic temporary spending bills, as they were first introduced, continued appropriations at the fiscal year 2013 post-sequester level of about $986 billion. That funding level, however, exceeds the cap in place for 2014 and would trigger a second sequester in 2014, and neither the House or Senate bill included a provision to turn that off, ensuring that the further $18 billion in cuts owed to the Budget Control Act would come automatically in early 2014.

So it’s odd for Senator Reid to now insist on a higher spending level that restores all sequestration cuts – especially given that he didn’t insist on that when the Senate voted to lower the 2014 spending capin early 2013, or when he penned his own continuing appropriations bill a few weeks ago. In effect, this weekend he came out against his own temporary spending bill of a few weeks ago and a “bipartisan compromise” bill that his chamber passed that further reduced spending caps in 2014.

This is all another sign of the tensions in Washington that make any deal difficult. We’ve been writing for months that House Republicans and Senate Democrats are so far apart on spending limits, opportunities for compromise seemed virtually nonexistent. And indeed, those differences in top-level spending amounts have come back to haunt members of Congress in the current debate. Meanwhile, about 500,000 federal employees remain furloughed, along with thousands of contractors; schools and students remain uncertain about their status; Head Start programs are struggling to remain open; federal loans are frozen; and federally funded museums, monuments, and parks are closed. 

Zero Education Debt: The Promise of Income Share Agreements

October 8, 2013
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Last Friday, the New America Foundation’s Education Policy Program, in partnership with the Lumina Foundation, hosted a “Zero Education Debt” event. Panelists looked at the concept of Income Share Agreements (ISA), a new financial vehicle in which a student completes school with no loans and no debt, but instead agrees to pay an investor (or the government) back a set share of his income for a set number of years.

We started off the event with comments from Jamie Merisotis, president of the Lumina Foundation. Merisotis helped contextualize the topic with a much larger question: how to provide students with access to a high quality, low cost education. New America’s Alex Holt then presented a theoretical framework of Income Share Agreements and where they fit into the existing higher education financial system.

Panel One: Implementing Income Share Agreements

Our first panel focused on practitioners – people who are attempting to implement these plans. The panelists included people implementing plans both in the private market and also via the government. The discussion was lively, with John Burbank, Executive Director of the Economic Opportunity Institute, defending the proposed Oregon Pay It Forward program that he helped to develop. That plan would be a publicly funded one – the first in the U.S.

Others on the panel discussed alternate arrangements for private Income Share Agreements. We had representatives from the major existing private ISA providers: Dave Girouard of Upstart; Tonio DeSorrento, formerly of Pave; Miguel Palacios of Lumni; and Gordon Taylor of 13th Avenue Funding.

Panel Two: Are Income Share Agreements Viable?

The second panel, moderated by Zakiya Smith of the Lumina Foundation, had a more focused policy perspective. Michelle Asha Cooper of the Institute for Higher Education Policy started the session off with a healthy dose of skepticism towards these plans, pointing out that the higher education policy community tends to “become fixated on the next big thing” and offering some concerns of some unintended consequences.

Miguel Palacios, professor at Vanderbilt and cofounder of Lumni, and Alex Holt of the New America Foundation both had a more optimistic outlook towards ISAs, arguing their potential to inject consumer certainty and price signaling into the higher education market. Rohit Chopra of the Consumer Financial Protection Bureau added the unique perspective of a regulator in the space, asking some very useful questions for the audience and the panel to think over.

Given the lively debate from the panels and terrific questions from the audience, we hope this will be the first of many discussions on the topic of Income Share Agreements. Check back with the New America Foundation’s Ed Money Watch and Higher Ed Watch blogs as the debate continues.

House Republicans Fight to Keep Loophole in For-Profit Colleges’ 90/10 Rule

October 7, 2013

Update 10/15/2013 2 PM: This post was edited to reflect that the proposed reform would include Tuition Assistance in the 90 percent calculation, not the 10 percent.

Congress failed to reach an agreement on funding the government for fiscal year 2014, which began on October 1, 2013, shutting down the federal government. That high-stakes budget battle has overshadowed a different disagreement between the House and Senate that could have a big effect on education benefits for members of the military – and for-profit colleges.  

The disagreement is on the Department of Defense Appropriations Act, one of the annual bills that funds the DOD. The House passed the bill back in July and sent it to the Senate. The Senate Appropriations Committee passed the bill on August 2 – but included a change to an existing test for colleges called the 90/10 rule.

The 90/10 rule states that private for-profit colleges must get at least 10 percent of their total revenue from non-federal sources, namely tuition collected from the student or his family. Failure to do so can result in losing access to Title IV funds. The 90 percent includes federal Title IV aid – Pell Grants, federal student loans, and more. It does not include nearly $12 billion spent annually on servicemembers’ and veterans’ education benefits through the Department of Defense or the Department of Veterans Affairs (VA), nor does it include more than $25 billion annually lost to tax expenditures.

The new proposed language in the DOD fiscal year 2014 bill would change some of those exclusions. Military education assistance for spouses of servicemembers or off-duty training and education for servicemembers themselves would be included in the 90 percent calculation. Additionally, for-profit colleges couldn’t use any of that Tuition Assistance (DOD) funding to advertise, recruit, or market to students.

All in all, the provision is pretty limited. The Department of Defense spends only about $517 million per year on these benefits, a small share of the DoD budget or even of federal higher education funding. VA benefits, the much larger pot of money that includes the Post-9/11 GI Bill, among other education provisions, would not be affected by the new NDAA provision.

And because there are no publicly available data that provide the institution-level breakdown of the dollar amount of DOD and VA benefits spent, it’s impossible to know exactly how many schools might be affected. A paper published by financial aid expert Mark Kantrowitz this summer used national averages to estimate that adding in DOD and VA benefits would add about 2 percentage points to a school’s 90/10 amount (for example, a school that received 88 percent of benefits from federal Title IV sources under the current system would receive 90 percent when military benefits were added in. Click here to search for a school and see its 90/10 percentage, alongside other data).Those effects could be more or less severe, depending on the school’s reliance on military student benefits.

Kantrowitz also suggested the effects of banning the use of federal money for marketing would be far more drastic. Since the largest for-profit schools spend about 20 percent of their total revenue on advertising and recruitment, he argues it would effectively increase the threshold for schools to 80/20. Again, though, the largest for-profit schools may not be a good sample to judge the effects on all schools subject to 90/10 – for some schools, it could be far less than 20 percent, or for some schools, even more.

Last week, four Republican members of the House – John Kline, Chair of the Education and Workforce Committee; Jeff Miller, Chair of the Veterans’ Affairs Committee; Buck McKeon, chair of the Armed Services Committee; and Bill Flores, chair of the Economic Opportunity Subcommittee on the Veterans’ Affairs Committee – sent a letter to key members of the House Appropriations Committee disparaging the Senate provisions. They asked that the new restrictions be removed before the defense appropriations bill passes the House again.

Their reasoning?

The marketing provision implies schools are “preying” on unsuspecting members of the military and their families, and the 90/10 rule is both unproductive and unable to account for the fundamental differences between Title IV and military education benefits.

They aren’t the first to suggest concerns with the 90/10 rule, writ large. The rule is intended as a kind of rough, imperfect metric of quality – schools that aren’t able to garner at least 10 percent of revenue from non-federal sources have presumably been labeled by the market as not worth paying for. But it can have other, unintended effects, mainly discouraging schools from serving low-income students or compelling them to raise tuition. Since the 90/10 rule includes no measure of outcomes or of how well the school serves those students, it may just be leading to the exclusion of students who can’t contribute the school’s 10 percent of non-federal revenue. (Incidentally, better data in the form of a student unit record data system could allow for better quality measures and make the 90/10 rule irrelevant.)

But including military benefits within the 90/10 rule is a no-brainer, whether or not the rule is revised to avoid these unintended consequences or to incorporate additional quality measures. The question at hand is whether students and families are willing to shell out for a particular school at which many students receive federal aid – at least 10 percent of the school’s total fiscal intake. DOD and VA benefits, as federal benefits for students, fall squarely on the 90 percent side of the equation. Failing to include them creates a perfect loophole for exploitation of servicemembers and veterans by schools that can’t otherwise meet a basic financial test.

The Federal Education Budget Project, Ed Money Watch’s parent initiative, maintains a comprehensive database that includes data on the 90/10 rule for all institutions of higher education subject to the rule, as well as other cost, finance, demographics, and outcomes data. Click here to search for your school or here to download the institution-level research file.

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