Making college possible - new student aid program proposed by Bill Clinton

Washington Monthly, April, 1994 by Jonathan Cohn

Ways and Means' decision to protect its turf should have set off Clinton's alarm bells. But the arm of the administration in the best position to fight for the IRS collections--the Department of Education--also wanted to hold on to its authority to oversee collections. "The Education people saw a piece of their action slipping away, so they jumped up and said all this needed 'further study'" says a Democratic congressional staffer. In late July, the conference committee on the president's economic bill jettisoned the IRS provision. In its place, the committee authorized "further study," with a report due back from an IRS/Education team in six months. (That would have made it due around February 1994; now, the administration has put it off until June while insiders say the IRS makes a case that it's too complicated, and Education nods in agreement.) Meanwhile, Education is contracting out collections or doing the job itself.

What's so bad about that? After all, even without the IRS, the feds doing 60 percent of the lending--which is the current plan--should save more than $4 billion by 1998. (In effect, Education will act as a bank, lending money directly to students.) What's so troubling is there are still billions more to be had if the default rate can be cut--the task for which the IRS is especially suited and Education is uniquely unsuited.

The General Accounting Office, for example, has repeatedly criticized Education for loan mismanagement. Education lost 33 percent of its personnel during the Reagan and Bush administrations, and the ones who are left have made a mess of many of the programs they are charged with overseeing. "The department has always been a thinly staffed, low-prestige agency with suspect administrative skills," says one veteran higher education lobbyist. In other words, these are the last people we want administering billions in loan collections. After all, these are the bureaucrats who, to take just one example from a February New York Times series on Education's mismanagement, failed to notice that Anthony Russell, a University of Miami athletic administrator, falsified $220,000 in grant applications to finance his crack habit. Even David Longanecker, the assistant secretary for post-secondary education, acknowledges that the department does not expect the default rate to decline significantly unless the IRS takes over.

But until Clinton gets his administration in order and fights off the wealthy private interests, that's the system we're stuck with. And that is especially sad considering how far he has already come. Saving money from the program--IRS collection could bring in an additional $1 billion a year--frees up money for grants, lower interest rates, and lower fees. The IRS may have its problems, but at least it's in the business of collecting money full-time.

Any long-term solution to the high cost of higher education involves keeping tuition down. One answer may be to have a federal agency report on the number of undergraduate hours taught by full-time faculty and publish itemized accountings of how much of each university's dollar goes to administration. That way, if universities aren't interested in economy just to do the right thing, at least there would be the threat of having potential consumers knowing where the money goes.