State Considerations for a Federal-State College Affordability Partnership

SHEEO
4 min readOct 3, 2022

Written by: Tom Harnisch, Kelsey Kunkle, and Casey McCoy-Simmons, State Higher Education Executive Officers Association

President Biden’s recent announcement of a sweeping federal student loan forgiveness plan has led to renewed questions on the effectiveness of federal policies designed to make college affordable. In response to the Administration’s announcement, Democratic and Republican lawmakers on Capitol Hill have touted policy reforms to expand financial aid and reduce student debt. House Education and Labor Committee Chair Bobby Scott (D-VA) unveiled the Lowering Obstacles to Achievement Now (LOAN) Act, which would double the Pell Grant over five years and create more favorable terms for student loans. Virginia Foxx (R-NC), the top Republican on the committee, has introduced the Responsible Education Assistance through Loan (REAL) Reforms Act, which extends Pell Grants for short-term programs, provides targeted relief for borrowers, and creates new limits on certain federal loan programs.

Neither of these proposals, however, recognize a key player in the college affordability discussion: states. With nearly three in four students attending public colleges and universities, states hold tremendous influence over college affordability through institutional appropriations, tuition policy, and student financial aid. States, however, often cut higher education to balance their budgets, particularly during difficult economic periods, which has led to increased tuition prices. If states fail to maintain their support for higher education, the impact of new federal investments in student financial aid will be negated, students will increasingly resort to debt financing, and public higher education’s role as a portal of opportunity will be diminished.

The link between federal and state college affordability policy, however, has been historically weak, if often nonexistent. This is in marked contrast to other policy areas, such as K-12 education and transportation, which have longstanding partnerships between the states and the federal government. To make sustained advancements on college affordability, states and the federal government need to better incentivize investments to prevent working at cross purposes. Several proposals to build a long-term state-federal financing partnership for higher education have been created over the past decade, but Congress has yet to pass a bill.

One reason federal-state college affordability proposals have failed to garner sufficient support is because they have not fully accounted for the views of state officials, including higher education executives, in the policy design. This includes, but is not limited to, acknowledging and respecting states’ existing efforts to make college affordable, understanding the feasibility and challenges associated with new federal policy requirements, and fully addressing the costs and benefits associated with targeted vs. universal program design. These challenges were evident during the 2021 discussion on America’s College Promise, a free community college program championed by President Biden and leading Democrats on Capitol Hill.

Federal-state partnership proposals need to acknowledge existing state college affordability efforts. As the laboratories of democracy, states have implemented a diverse range of programs designed to make college affordable, including tuition-free college promise programs, generous student financial aid programs, and matched college savings. In some states, these programs have been around for years, are widely familiar and popular with state residents, and relied upon by students and families. Concerns remain that a federal-state partnership is a blunt instrument that could undermine successful state programs that have taken years to develop and hinder further creative efforts in make college more affordable.

A second challenge are requirements put on states by the federal government. In some cases, these could be financially or politically unworkable, resulting in many states choosing not to participate. Matching requirements, for example, may be beyond their capacity. For example, financial capacity to meet matching requirements included in President Biden’s tuition-free community college proposal was of particular concern in several states, despite interest from state leaders to participate. Further, if a specific segment of higher education is free via federal-state partnership model, it could have negative effects on other campuses. Federal requirements on states could also be beyond their direct control, as decisions on tuition rates and other policies could occur at the campus or system level.

Lastly, making college affordable brings up longstanding questions of targeting policies for those in financial need against universal programs that provide a clear, simple message on college affordability. States have gone in a variety of directions on this longstanding question, with the growth of college promise programs in recent years signaling a move toward universal programs. Any partnership program will have to define its policy goal and recognize tradeoffs associated with its program design.

A federal-state partnership is increasingly seen by higher education associations, thinktanks, and lawmakers the best avenue to make college more affordable. Designing a workable partnership model that makes college more affordable will require flexibility and a nuanced understanding of state higher education policy. Through increased engagement with state officials and understanding of state policy, better policies can be crafted that will lead to broader state participation, a stronger base of support, and more affordable college opportunities.

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SHEEO

Helping states develop and sustain excellent systems of higher education.