Why and how we should overhaul the financing of remedial education

published in Inside Higher Education- Sept 25, 2019

Over more than a half century, federal student aid programs have helped many millions of students go to college, providing them with a range of educational opportunities that they otherwise would not have had. But the existing student aid system has many problems that desperately need to be fixed. At the top of that list is changing how remediation is financed.

Every year, because of inadequacies in the K-12 education process, millions of students enrolling in college must take at least one remedial course in math or English because they are not fully prepared for college or career. Although estimates vary, it seems at least one half of community college students and one-fifth of students in four-year colleges take at least one remedial course; many more students enrolling in for-profit schools require remediation, whether they take a course or not. It is also clear that rates of remediation are higher for students from low-income families than they are for the average college student. Of even greater concern, the probability that students taking remedial courses will graduate is much smaller than the already modest completion rates in American higher education.

The most objectionable part of the current student aid system is how this remediation is financed. Students who take remedial courses are typically charged the same tuition as for college-level courses, even though remedial courses usually cost institutions less because class sizes are large and adjunct professors or instructors teach these courses.

Moreover, the amounts that many students borrow to take courses that are not even college level are extraordinary. That happens because federal and state student grants typically do not cover the full cost of remedial course work, and most institutions and other providers of remediation do not provide discounts for such courses. As a result, many students who require remediation are forced to borrow large sums to pay for courses that do not provide college credit.

In addition, students taking remedial courses are among the biggest users of student loans to pay for living expenses. Given that the students who take remedial courses are the least likely to receive a degree or certificate, they are also the group that is most likely to default on their loans.

For these reasons, this system of paying for remediation must be fixed so that we avoid a continuation of current situation in which millions of students take on large debts they have little chance of repaying. The high school dropouts and graduates requiring remediation also deserve a system in which the chances of their improving their basic skills are significantly improved. And to the extent these changes would improve the basic skills of those who now can’t compete in today’s workforce, this may be the single most important thing we can do to improve our national ability to compete globally.

To do this, the financing of remediation should be overhauled so that providers are compensated based on their ability to improve the basic skills of students taking remedial courses and students no longer pay tuition or need to borrow for these courses. That would require moving to a performance-based system of remediation in which students would not be charged tuition for any remedial courses they take. Instead, federal, state and local governments would pay colleges, schools and the other providers of remediation a fee by for doing so. Those providers who do the best job of increasing the competencies of students getting the most reimbursement and the most business.

We should also note that remediation is probably the form of post-secondary education and training that can make the most appropriate use of online and distance learning techniques. It is also the area in which for-profit providers may have the greatest likelihood of providing the best service at the lowest cost. Moving to a performance-based system of remediation would be a welcome and cost-effective way of expanding the for-profit and online presence in post-secondary education and training.

The important corollary to the approach I’m suggesting is that we must also change the borrowing policy for students taking remedial courses. If students taking remedial courses under this formulation were no longer be charged tuition, they would not have to borrow to pay for such courses. They should also be ineligible to borrow for the living expenses while enrolled in remedial course work but allowed to borrow once they demonstrate they can do college- level work. Meanwhile, these students should remain fully eligible for Pell Grants so that they can have a chance to take remedial courses and then try college and prove themselves without taking on high levels of debt that may well prove to be un-repayable.

The first step to ensure that the reforms described above would be successful would be to define what constitutes remediation and how much it costs.Defining the scope of remediation is not a trivial exercise, but it is also not impossible. It would involve an assessment of what courses are remedial in nature. While, in many cases, that would be fairly straightforward, there are a number of instances where institutions would have to devote more thought to the definition.

For example, many campuses now offer what are called co-requisite courses, where students taking remedial courses are also enrolled in college-level courses at the same time. I believe that students enrolled in these programs should be eligible to borrow, but others may have a different opinion. It would also be important to estimate the costs of providing remediation. In any case, defining remediation would be a key first step in moving forward on financing reforms.

How would a performance-based system be financed? Several sources of financing should be tapped. The most prominent source would result from students no longer borrowing for remedial courses. The government savings that would result would include not paying for the large amount of defaults that are the result of lending to students who have the least chance of success. These savings could easily be several billion dollars per year, as 10 percent or more of loans are made to students taking remedial courses and a larger share of defaults are attributable of these current borrowers.

Another source of savings would be if a risk-sharing fee is introduced into the student loan system. Risk-sharing fees should be designed to ensure that all institutions have skin in the student loan game by requiring that they pay a fee on new loans that is based on the non-repayment rates on their past borrowers to offset the costs of future defaults. It seems quite reasonable that the revenues collected from this fee be used to help prevent students taking remedial courses from having to borrow. Still another way of paying for this innovation would be to require states and localities to contribute to a remediation fund to reflect the fact that these students should have gained these skills in high school.

To illustrate how this might work, a student who borrows $5,000 to pay for tuition for remedial courses would no longer be charged tuition and would not need to borrow for those expenses. Instead, the provider of the remedial course would be reimbursed to cover the costs of providing this course, which might be closer to $1,000 to $2,000 per student, depending on the nature of the course and the number of students taking it. The amount that a provider would receive would vary directly with how successful it is in raising student basic skills, as measured by how those students did on a basic skills test given before and after taking the course.

To be sure, many details would need to be worked out by federal, state and local policy makers and the various providers of remediation before such a performance-based approach could be fully adopted. But the key point is to get the reform process started now. The current system is grossly shortchanging students who most need the help in making college or career training a reality.

Art Hauptman has been a public policy consultant specializing in domestic and international higher ed finance issues for nearly a half century.

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