Exploring institutional risk-sharing
Good morning, Chairman Alexander, Ranking Member Murray, and distinguished Members of the Committee, and thank you for giving me the opportunity to share my views on the concept of risk-sharing in higher education.
My name is Andrew Kelly and I am the director of the Center on Higher Education Reform at the American Enterprise Institute, a non-profit, non-partisan public policy research organization based here in Washington, DC. My comments today are my own and do not necessarily reflect the views of AEI.
I’m here today to discuss how the federal government can give the colleges and universities it helps to finance a greater stake in student success and college affordability. Specifically, the question before us today is how a risk-sharing policy, where colleges would bear some financial responsibility for a portion of the federal loans that their students do not repay, might better align the incentives of colleges, students, and taxpayers. This idea has received increasing attention from both sides of the aisle of late, and it is an opportune time to discuss it.
Today I will start by briefly outlining the problems with our current approach to determining student aid eligibility, explaining the principles of risk-sharing and why I believe it would represent an improvement over the status quo, and discussing basic policy design principles the Committee could consider. I will conclude with some important caveats that we must keep in mind…
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