Senate Majority Leader Mitch McConnell is asking the Education Department to skirt its rules and make an exception to provide federal dollars to a college in his home state — even though a high percentage of its graduates defaulted on their students loans for the last three years.
McConnell’s move is part of a larger debate about the criteria to determine whether a college should receive federal funding or be cut off. Currently, the Education Department uses data on what is known as the cohort default rate — or how many of a college’s graduates default on their loans — to decide whether the school is a good investment for taxpayer money.
Some lawmakers have said schools with high student loan default rates should lose federal funding. But McConnell, as well as the Obama administration and loan experts, have questioned whether that method takes the school’s circumstances into account.
In September, the Senate Appropriations Committee added to a bill funding the Education Department language from McConnell encouraging Secretary Betsy DeVos to provide flexibility on default rates to schools in economically depressed regions.
McConnell’s amendment doesn’t name any schools, but would apply to a very specific area that includes Harlan County, Kentucky, home of Southeast Kentucky Community and Technical College.
The technical college is in danger of losing its federal funding after recent data from the Education Department showed that more than 30 percent of graduates have defaulted on their loans for the past three consecutive years.
“If students are unable to find jobs, they are unable to pay their student loans and not everyone can afford to move to a different region,” a McConnell spokeswoman said in a statement. “This is exponentially true in high immobility and high poverty communities, such as in eastern Kentucky where there’s been a rapid and steep decline in coal employment. Economic factors, such as these, are outside of the control of the schools in that region who are simply trying to reach students who are arguably some of the most challenging to reach.”
Located in one of the most economically distressed counties in Appalachia, Southeast Kentucky Community and Technical College is a two-year public school with about 3,000 students, more than half of whom qualify for Pell Grants, a need-based aid program.
College default rates have been used for several decades as an indicator of how well a school is preparing students for the workforce. If a school doesn’t adequately prepare students for a career, the graduates struggle to find jobs with salaries high enough to repay student debts.
Schools with high default rates are expected to find ways to improve outcomes for their students, said Ben Miller, the senior director for postsecondary education at the Center for American Progress.
“What McConnell did is essentially push for an earmark — give preferential treatment to a favored school from requirements that Congress created,” Miller said. “Schools get three shots to keep their default rates low. We should be asking what happened last year and the year before that this school couldn’t improve.”
McConnell isn’t the first federal official to attempt to give schools with high default levels a break. In 2014, the Obama administration tweaked the default rates for some colleges at risk of losing their funding by not counting graduates who held multiple loans and had only defaulted on one.
Other factors can affect a school’s default rate.
Graduates can use methods to avoid defaulting on loans while not being able to make progress on paying them off. And there are other factors, including what type of students attend a school, how many borrow money and the average level of debt, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.
“What Sen. McConnell is getting at is something that folks have been talking about for a long time,” Draeger said. “Anytime you take a hatchet to enact some sort of federal policy, the result is not going to be nuanced.”
Lawmakers have defended the cohort default rate in the past. After the Obama administration tweaked how the rate was measured in 2014, two Democrats, Sen. Tom Harkin and Rep. George Miller, criticized the move in a letter to then-Education Secretary Arne Duncan.
“Institutions with exceptionally high default rates are not adequately providing credentials meaningful enough for students to be employed and repay their debts,” wrote the lawmakers, who have since retired. “The consequences of defaulting for borrowers are swift and unyielding, including scarred credit histories, wage and tax garnishment, and greater difficulty renting an apartment or finding a job.”
Health, Education, Labor and Pensions Chairman Lamar Alexander also noted in a 2015 white paper that colleges with high default rates can appeal a decision to remove their federal funding. Many schools, the Tennessee Republican wrote, “escape any serious consequences and are given little incentive to lower tuition, reduce student debt, or increase program performance.”
Alexander also argued that colleges have no incentive to lower the default rate until it nears the 30 percent threshold.
“A college with an 18 percent cohort default rate is treated just the same as one with a 27 percent rate,” he said during a 2015 hearing. “So this may not work that well.”
Lawmakers will have a chance to revise the rule on the default rate when they revisit the Higher Education Act — an update both Alexander and House Education and the Workforce Chairwoman Virginia Foxx have listed as a priority.
But McConnell’s request to spare a school shows there might not be much incentive to change the current standard, said Jason Delisle, an education policy fellow at the American Enterprise Institute.
“What you’re seeing is Congress sort of having its cake and eating it too,” he said. “They can say ‘We have an accountability measure to make sure we’re not making loans to schools with high default rates,’ but then also never have it cause a school to lose out eligibility when push comes to shove.”