A judicial clerkship doesn’t pay much, but many new law school grads pursue that job to get a foot in the door and move on to a more lucrative career.
But under a bill recently passed by the House of Representatives, this is just the type of job that colleges and universities would be punished for helping their graduates obtain.
That’s because House Republicans have resurrected a formula from the proposed but never passed College Cost Reduction Act. The formula would impose punitive fees, primarily on private colleges and universities, under the auspices of “risk-sharing,” based in part on their students taking low-income jobs after graduation.
This is a wildly destructive solution aimed at an ill-defined problem. As attention turns to the Senate, lawmakers need to understand how damaging this provision would be for American private colleges and universities — and, more importantly, their students.
If this proposal really aimed to make universities share risk — in other words, to require them to bear a portion of the cost when graduates default on federal loans — that would be rational. But that’s not what the formula is based on, as private institutions have long had the lowest default rates. Instead, the formula is based primarily on degree programs’ total cost versus a single year of graduates’ earnings shortly after graduation. Given massive government subsidies received by public universities, the penalties are skewed heavily against private universities.
Further, the plan penalizes programs that draw students who choose professions that do not offer massive paydays, such as teacher education and social work programs — and yes, even law schools, where many graduates begin their careers as judicial clerks, are punished for what any attorney recognizes as success.
Are the bill’s proponents trying to coerce private universities to stop meeting workforce needs in lower-income occupations, or occupations that may not be high-paying immediately after graduation? Or are they just trying to push some private universities out of business?
The bulk of the savings from this measure would come, according to the Congressional Budget Office, from universities choosing “not to participate in the federal student loan program,” choosing to “close certain institutional programs” or to “close altogether.” Any of these decisions pose dire consequences to students and local communities.
Private universities deliver the best outcomes for Pell Grant recipients. They produce graduates with skills demanded by employers. They develop future business and community leaders. Private universities serve public purposes, especially when it comes to workforce development and economic mobility.
Contrary to widespread misperceptions, private universities are already taking steps to become more affordable. Most have little in common with the pricing structure of elite colleges that garner the most headlines. Indeed, many private universities have narrowed or even closed the gap with public universities on price. Although market dynamics push tuition “sticker prices” higher, the actual net price trend line is flat and declining when adjusted for inflation, as private universities bring costs down through scholarship aid and tuition discounting.
Private universities are doing a better job at adjusting their business models to meet prospective students’ needs, even though this often requires significant expense reductions. Take my school, for example. In 2023, the average debt for the 56 percent of University of St. Thomas undergraduates who took out federal loans was just over $20,000. And according to the Census Bureau, the median annual salary for our alumni five years after graduation is more than $73,000.
In the end, the House bill creates a massive new tax on private colleges and universities and adds a modest new grant program (titled “PROMISE grants”) that will primarily go to public universities with a portion of the risk-sharing proceeds.
Given their traditional strong support of faith-based institutions, why would House Republicans sign off on a bill that transfers significant funds from faith-based colleges to state university systems? No one in private higher education expects the same financial support public universities receive, but we also do not expect to subsidize the state schools as part of a penalty for preparing students to help meet pressing economic needs.
If Congress wants to explore new ways of ensuring private institutions continue to be prudent stewards of federal financial aid, we are open to those conversations. But the ill-conceived formula pending before the Senate is not the answer. In terms of generating new government revenue, the proceeds are not even a rounding error in the federal budget. In terms of causing both short-term and long-term harm to a key source of workforce development and economic progress, the impact is undeniable — and inexplicable.
Robert K. Vischer is president of the University of St. Thomas in St. Paul and Minneapolis, Minn.