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Interviews and Opinions
10/31/07 INTERVIEW WITH JAMIE MERISOTIS, FOUNDER, INSTITUTE FOR HIGHER EDUCATION POLICY
This interview first appeared in the October 23rd version of HEWI's Student Lending
Jamie P. Merisotis, who has spent his entire adult life researching higher education, is founder of the Institute for Higher Education Policy in Washington, D.C. On Jan. 1, 2008, Merisotis, 43, will become president and CEO of the Lumina Foundation, the nation’s largest higher education foundation. Merisotis spoke with HEWI about current issues in student financial aid, and other aspects of higher education policy.
Congratulations on your selection as the new president and CEO of the Lumina Foundation. This is a huge step – you are leaving the Institute for Higher Education Policy (IHEP), which you founded. Tell us about your decision.
I’ve spent my entire professional career in D.C. It’s a pretty significant change for me. But the opportunity is too significant to pass it up. It’s one of the 50 biggest private foundations in the country. It’s the biggest foundation focused exclusively on higher education. It’s really a once in a lifetime opportunity. The challenge of figuring how to make investments, in partners and organizations that care about college access and success is really exciting, so that’s why I decided to do it, even though I’m giving up my baby (IHEP), that I started. It’s a complicated set of emotions.
You’re not at Lumina yet, so we know it is early to comment on the direction you would take the foundation. But can you comment on what you see as the biggest challenges to college opportunity and access for America’s students today?
It’s either two challenges or two goals. The first is we need to provide greater access to a high-quality affordable higher education for everyone who has the interest and the ability to succeed in college. The benefits of higher education are enormous, not for only for individuals but for us, as a society. That investment that we make as a society, whether it’s government, or individuals, or philanthropy, pays off manyfold in both public and private terms. We need to focus on that idea of improving access to high-quality affordable higher education – and high-quality affordable education has been one of our biggest challenges in the United States. The balance between cost and quality is something that a lot of countries are going through now. We have a lot of experience with it.
The second challenge or goal is to strengthen the quality of our workforce, of our economic security as a nation, by increasing postsecondary opportunity for adults, single parents, minorities and others who are looking for a chance to make it in our increasingly global economy. And I think that higher education does have a workforce development role that we shouldn’t be shy about acknowledging. It’s a critical element of what we do in higher education. That’s not to say that’s all higher education does, that it’s solely about preparing people for jobs, but preparing people for jobs is one aspect of what we do -- and people have been left behind in our workforce. That’s not acceptable. There are 64 million adults with no postsecondary credentials in the U.S. Those individuals are going to increasingly have problems making ends meet, making it in our rapidly changing economy and therefore contributing to our democratic, social and economic institutions. Seeing that as a critical aspect of higher education is terribly important.
Can we turn to some questions on student financial aid? At IHEP, you worked with several loan student programs of other nations. Can we in the U.S. learn anything from these programs?
The challenge of international comparisons, and I think it’s particularly true of student loans, is scale. There is no country in the world that comes anywhere close to the scale of our student loan program. There are interesting lessons to be learned -- in the income-contingent repayment experience in Australia, for example. Or that in the United Kingdom, a lot of students don’t really take out a student loan, they effectively have a line of credit that they can then use to build their credit history, and the banks are partners. So we can learn. but the issue of scale has some limitations. We have a very sophisticated student loan market with a robust set of guaranty agencies, lenders, secondary markets, servicers, and then of course you’ve got the private loans, FFEL, direct student loans, with all of them having different dimensions. I frankly think that the diversity of our student loan system is one of its strengths, even though I am terribly worried about excessive debt. But I think diversity breeds competition, and competition improves service to students, and that’s what I care about. I care about ensuring that students get the best deal and get the best-quality service possible.
What is your opinion of the argument that increasing student aid (such as the recent increase in the Pell Grant) makes it easy for colleges to raise tuition?
I’ve been a researcher in this field for over 20 years and I’ve never seen credible evidence that availability of federal student aid leads to price increases. I think the problem with the analysis is it lacks some understanding of how pricing decisions are made on college campuses. In very few cases I’ve ever come across, do people developing budgets on campuses look at the availability of financial aid as a key driver in their tuition decisions. The people who believe there is a correlation will say, it’s so much money, it has to be having an indirect effect . I can’t quantify that, so I don’t know for sure. But in terms of the direct effect, most colleges and universities do incremental budgeting. They look at what they spent last year and they say, what do we want to do this year, then they increase their budget, and then they look and see where the money is going to come from. The budgeting and tuition-setting processes just don’t function that way (based on aid) and it’s not clear that it would be a smart idea to do that, particularly in cases where the funding is not guaranteed. Pell Grant funding is not guaranteed.
I think it’s very difficult to see a clear correlation and I think the unfortunate thing part about the dialogue is, it largely misses the point –which is that financial aid is designed to help the neediest students. If we decide our strategy should be to cut back on financial aid because then tuition will be reduced, you are literally hurting the students you are trying to help. If we want to get at price increases of colleges and universities, I think there are certain incentives you can provide to colleges and universities -- a modest amount of incentive funding for cost management, for creative tuition policies. But the idea that if we just turn off the federal student aid spigot, tuition will come down -- A – only hurts the neediest students and -- B – it’s not clear it would have the desired effect, it could have negative effects. I think we spend a lot of energy on a discussion that does nothing to improve access or quality of higher education.
The 110th Congress just passed a large increase in Pell funding and funding for several new programs. The Congress paid for this by cutting the student loan program (FFEL). Does this trade-off concern you? Some people think this method of payment – always touted as “no new cost to taxpayers” -- means Congress is not really willing to invest in student aid.
There are two sides. One is a fiscal discipline argument, which is if you can make investments in people who need support without increasing taxes or raising revenue externally, you’re being fiscally prudent. The flip side is, are you robbing Peter to pay Paul? I think the unfortunate part of the politics of the last 20 years is that anytime a proposal to cut subsidies was put forward, there was a hue and cry about how disastrous it would be for the federal student loan program. No such thing happened. The loans continued to grow, access was quite wide. So in this case when it came up again, I think unfortunately enough members of Congress thought, “we’ve heard this wolf cry before.” And now, did these cuts go too far? I don’t know. I’m not sure if these cuts were too significant for us to have a viable, diverse student loan system. I think looking ahead, we’re going to have to make some very tough choices about investments in financial aid. That’s going to require us to find new resources. I think we're so far short of where we need to be. The federal government needs to do its part, as do other players in the system.
Let’s turn to the student loan marketing scandal. As a keen observer, are you concerned this has discouraged parents and students from trusting their financial aid administrator?
I think misdeeds of a few have impugned the integrity of an entire profession. I continue to think the people who are most responsive, are the best source of credible, accurate information, are the people on the front lines, the financial aid administrators. I do not think there is an endemic problem. I think that some individuals lost perspective. That hurt the image of the entire profession. That’s unfortunate because I don’t see any other way of getting accurate information into the hands of students.
What would you recommend that Congress, the FFEL community and schools do to restore confidence in the integrity of the student loan programs?
I believe that old line, “sunshine is the best disinfectant.’’ Certainly in the federal student loan program, there’s a significant amount of transparency. In private student loans, there has been less so. We’re now on a trajectory for some truth in lending improvements, which I think are helpful. I supported the Sunshine Act because I think that transparency is the critical element.
Imagine you are Secretary of Education. What would you propose to increase student access to, and success in, higher education?
Three things. First, invest in what we know already works. That includes Pell Grants, campus –based financial aid. More investment is not a terribly exciting policy proposal, but it is one of the most important things we need to do, particularly Pell Grants. Second, we really need to invest in lifelong learning models. There is an idea that has been floated around for the last few years – lifelong learning accounts. The federal government, individuals, employers, philanthropy, would contribute to a lifelong learning account, and the individual could draw from that account over the course of their lifetime, to get re-training and skill development. Third, we need to do a better job of targeting the people who have already expressed an interest in the system, but for various reasons we have not been successful with. For example, there’s a large number of students who are qualified to go to college, but do not go to college. Also, some people start higher education, but for some reason, don’t finish. We need to do a better job of increasing the success of people who enter the system, but don’t exit. That would require a targeting of resources to those groups of students, to really aim at the qualified non-attenders and to develop mechanisms to get them in, whether with supplemental grant support to encourage their attendance, or in the case of people who are already in the system, incentives for degree or credential completion.
I think the generic issue of accountability in higher education is important, but we need to be accountable to students. There’s been this endless loop of criticism of institutional performance that I think is not very helpful. Graduation rates, retention rates, accreditation, what are students learning – all of these things need better focus, but my paradigm is accountability to the students. By the way, not all of those other issues are federal issues. They may be national issues, but they are not necessarily federal issues. There’s a line that’s difficult to draw, beyond which I worry that if we end up with a sort of federal ministry model, that you see in other countries, that you really reduce what is one of American higher education’s greatest strengths, which is its diversity, its plurality. That’s something I’m not willing to give up.
Following up on that, should we then even compare American higher education with higher education in other countries?
I think it’s a difficult comparison. I think the international comparison paradigm has a limit. What the national goals are, between countries, is different. I do think the motivation to do better because of our global economic position – is correct. But I don’t want to overstate the international comparison. To get us back to No. 1 in terms of participation, in terms of degree attainment rates, I’m not sure would be sufficient to achieve the workforce, economic and social needs of this country. It can be a motivator, but I don’t want it to be an obsession.
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Copyright 2007. Higher Education Washington, Inc.
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