NAS Comments on Senator Tom Cotton's "Student Loan Reform Act"

National Association of Scholars

The National Association of Scholars (NAS) is pleased to see Arkansas Senator Tom Cotton address the cost and quality of college by introducing the “Student Loan Reform Act of 2022.”

College costs have more than doubled since 1980. Nearly 45 million borrowers owe $1.6 trillion in outstanding student loan debt. The Biden administration recently imposed a targeted debt forgiveness plan—but even if the courts confirm the legality of this executive action, Biden’s focus on loan forgiveness will only encourage universities to increase their prices and impose yet further debt on students. The Biden plan also doesn’t address why college has become so expensive, nor does it address why so many students struggle to repay their loans.

One of the problems is that students take out loans for programs that offer them poor long-term economic returns. Senator Cotton’s bill addresses this issue by effectively conditioning federal loans to a degree’s return on investment. His proposal prevents the government from issuing graduate student loans except to students who study healthcare or other “critical STEM-based professions.” Taxpayers deserve to see public funds put to good use, and this provision is a good start. In the future, policymakers should build on Senator Cotton’s bill to condition all federal student loans and grants on both a degree’s return on investment and the student’s academic merit.

The Student Loan Reform Act also makes universities responsible for 25% of loan repayments for all students who default on their student loans. This is a great way to hold universities accountable, either for their admissions decisions or for poor preparation of students.

Cost is not the only issue when it comes to higher education. Quality matters too. Higher education has traded academic rigor for political dogma. Universities erode academic integrity in areas such as the sciences, medicine, and national security by subordinating education to diversity, equity, and inclusion (DEI) ideology. Universities reward students based on their group identities and their commitment to the DEI regime instead of on their merits. Because universities no longer offer an education that provides a good return for tuition and therefore rely on public relations campaigns and government subsidies, universities invest in marketers and government relations officers rather than in expenses that are directly related to education.

Senator Cotton’s bill would slash at least 95% of DEI positions, effectively halting the degradation of higher education. Universities that receive federal aid also would be prohibited from discriminating against students or employees through race and sex quotas, whether they are disguised as affirmative action, diversity, equity, or any other label. Students, professors, and other employees should be judged for their individual merit.

We do think the Cotton bill can be improved. The Act should focus less on punitive measures such as the university luxury tax and more on altering the perverse incentives for employers that make college a bottleneck to decent jobs. The Act proposes a 20% luxury tax on undergraduate tuition above $40,000 to fund workforce education. We fear this provision would increase the price of college, since universities could pass on the tax’s costs to students by increasing tuition. In any case, many of the families of students who attend wealthy, prestigious universities can pay a luxury tax without blinking. This luxury tax may simply impose greater costs on middle-class and poor families.

The Act also assumes that the primary barrier to making workforce training a viable option for students is the lack of funds. But the actual obstacle that prevents students from entering workforce training is not a financial one, but rather a problem of incentives for employers and students. Existing anti-discrimination laws, along with judicial decisions such as Griggs v. Duke Power Company, create an unfortunate incentive for private employers to require college degrees even when such a requirement should not be necessary. True reform to improve workforce training requires legislative action and legal challenges focused on overturning the Griggs decision.

NAS believes that Senator Tom Cotton’s Student Loan Reform Act of 2022 would do a great deal to improve higher education. We also believe it should be modified in detail. Most importantly, we believe the Act should be the foundation for more far-reaching education reform. We hope that Senator Cotton will build on this excellent piece of higher education reform to address the structural problems afflicting higher education—above all, its perverse financial incentives and the counter-productive and discriminatory effects of Griggs and related aspects of employment law.

Image: Chad Stembridge, Public Domain

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