A Closer Look at the House Risk-Sharing Proposal

In recent years, lawmakers on both sides of the aisle have sought to ensure increased college accountability in exchange for the billions of dollars institutions receive each year via federal aid to students. These proposals have taken different forms and would apply to different sets of colleges, but they share a common purpose: giving institutions some “skin in the game” by creating financial consequences for their students’ outcomes.

For instance, some proposals would establish minimum standards for programs’ outcomes, like requiring that graduates’ typical earnings exceed those of a typical high school graduate, or the programs would lose eligibility for federal student aid. Others, like the House Republicans’ bill, would assess financial penalties on schools. All seek to incentivize institutions to change their practices, ideally in ways that lead to better results for students. However, the efficacy of any of these approaches hinges on getting the design right, so that the incentives created are transparent, fair, and encourage institutions to act in line with the policy’s goals.

A deep-dive into the House reconciliation bill’s risk-sharing provision uncovers some flaws that do not live up to these principles, and would likely undermine the accountability sought by the proposal. A complex maze of goals—seeking to address high debt loads, low completion rates, low earnings returns even for those who complete, and low rates of repayment, all within a single framework—would likely make it challenging for colleges to assess the right ways to lower the penalties they would face under the plan.