Calls for ‘Skin in the game’ in higher education ignore an existing, effective program

Legislative proposals that work at cross-purposes are nothing new, but watching the latest Higher Education Act reauthorization discussions might cause a serious case of whiplash among even seasoned political spectators. On one hand, Congress has ramped up its rhetoric in support of risk-sharing or “skin in the game,” to financially incentivize and/or penalize colleges based on whether students graduate and successfully repay their loans. On the other hand, Congress is on the cusp of eliminating the federal Perkins Loan Program, the only financial risk-sharing student aid program in existence — and a successful one at that.

Everyone–colleges, policymakers, students–is in favor of accountability. Yet all this talk of institutional “skin in the game” suggests that universities do not currently have a financial stake in their students’ success. Nothing could be further from the truth. The most troubling part about these conversations is the complete lack of discussion about the Perkins Loan Program, which requires schools to jointly fund low-interest loans to needy students with the federal government. If Congress does not extend the program by October 1, it will simply expire.

The Perkins Loan Program is predicated on shared risk and investment, with both the federal government and institutions making contributions. Institutions have shown a great commitment to this program–as evidenced by the fact that participating schools have continued to invest in Perkins, even though the federal government has for nearly a decade failed to meet its financial obligatory contributions.  Colleges have even covered the federal share when borrowers qualify for one of the program’s loan forgiveness provisions.

Some have justified the elimination of Perkins by arguing that having multiple federal loan programs creates too much complexity for students. That may be, but that conversation is best addressed in a comprehensive Higher Education Act reauthorization bill, which clearly does not fit into the 2015 legislative docket. Failure to renew the Federal Perkins Loan Program until these vital conversations can happen in the context of a comprehensive bill not only undermines the push for accountability, but also undercuts efforts to improve college affordability, leaving thousands of future students with an average $2,000 gap in their student aid packages.

Pushing for collegiate skin in the game while ignoring this decades-old, successful program is intellectually dishonest at best. At worst, sun-setting the program without addressing the funding gap future students would experience is gross negligence.

Let’s urge Congress to make the sensible and responsible choice to engage institutions in appropriate risk-sharing and to provide students with affordable, low-interest loans by renewing the Federal Perkins Loan Program by October 1.

Draeger is president and CEO of the National Association of Student Financial Aid Administrators.


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