President Joe Biden’s student debt forgiveness program has generated many charged responses across the political spectrum. But one thing all parties can agree on is that the plan doesn’t fundamentally address the root causes of the college debt crisis.
“We have $1.6 trillion in debt and it’s going to come down to about $1.1 trillion,” said Kelly McManus, who leads the higher education portfolio for Arnold Ventures. “We’re estimated to be back to $1.6 trillion in outstanding debt by 2028. That’s not a path we can continue to follow.”
This leaves higher education funders concerned about student debt with a limited number of viable options. First, they can increase their financial aid support. While this doesn’t do much at the macro level, it clearly makes a huge difference for students facing lifelong debt. But McManus’ comment is a reminder that short-term relief for single individuals — whether from Uncle Sam or powerful alumni donors — will not alleviate, let alone solve, the crisis. Deliverance will only come in the form of a change of policy.
Many higher education funders tend to steer clear of the weeds of federal politics, often being overly wary of the rules around 501(c)(3) donations and advocacy. But for Arnold Ventures, the philanthropic LLC of billionaire couple Laura and John Arnold, advocacy and politics come with the territory.
“There is absolutely a role for donors, but I think people need to engage in politics,” McManus said. “I know it’s tricky for some funders, but there’s no way around it without people getting involved in the political process.”
And with no miraculous and sweeping legislative effort on the horizon, Arnold Ventures is stepping up specific approach – accelerating efforts to “ensure that when students go into debt to pay for higher education, the odds are in their favor to achieve economic mobility,” McManus said. This means providing students with the right information about graduate outcomes and ensuring that taxpayers’ money does not go to chronically underperforming institutions.
An expanding higher education portfolio
Arnold Ventures made its first big investment in higher education six years ago when it backed Harvard Law School’s Legal Services Center Project on Predatory Student Loans (PPSL). Launched in 2012, the project aims to speak out against predatory lending practices in higher education, focusing primarily on the for-profit college industry.
McManus joined Arnold Ventures in January 2019 as the funder’s first higher education portfolio manager. Prior to this role, she served as Director of Government Affairs for the DC-based Education Trust, leading strategy and legislative advocacy in the areas of early childhood, K-12 education, higher education and credits. . McManus said she was drawn to Arnold Ventures given the funder’s commitment to advocacy. “I’m very much a political person,” she said, “and that’s the approach Arnold takes.”
At that time, the management of Arnold Ventures recognized that while ending predatory behavior was necessary, it was also insufficient. “Even if the bad actors were weeded out, there were still too many students who weren’t getting the promise of a higher education, and taxpayers were largely responsible for that,” McManus said. “Much more work needed to be done to improve results across the board.”
In response, McManus and his team focused on increasing Data availability and accuracy to ensure students, families, policy makers, and other stakeholders can make informed decisions. This data-driven approach aligns with Arnold Ventures’ work in other areas such as criminal justice reform and democracy and civic engagement. The higher education team has also focused on institutional accountability and identifying scalable practices that improve student outcomes. “We still invest heavily in litigation, policy and advocacy work, trying to bring every lever we have to change policy in higher education,” McManus said.
Speaking of policy change, in August, PPSL announced that a federal judge had granted preliminary approval to the proposed joint settlement in the lawsuit. Sweet vs. Cardona. Assuming the court grants full approval, the settlement would cancel at least $6 billion in federal student loans for about 200,000 people.
The need for a “big market”
I spoke with McManus a few weeks after Arnold Ventures co-founder Laura Arnold wrote a CNBC op-ed outlining the funder’s higher education strategy in the wake of Biden’s announcement. “The student debt burden is a symptom of a failing higher education system,” she wrote. “It means making accountability and transparency mandatory in colleges and universities. Students deserve to know they’re not wasting time and money on broken promises. Taxpayers deserve to know that we are getting the best return from our public investment in higher education.
Arnold struck a cautiously optimistic tone, noting that the Biden administration “smartly moved to impose accountability rules that will help ensure taxpayer funds are only spent on schools that can prove their value to students.” . For example, the paid employment rules “Will end federal funding for any career program whose graduates do not earn enough to repay their loans.
She went on to note that Biden “is already on the right track with a new College Completion Fund (CCF) to invest in evidence-based completion and retention efforts at colleges serving large numbers of low-income students. This accountability work, McManus told me, will naturally require strong congressional support — the CCF fund received just $5 million in appropriations in 2022 — and data illustrating how schools serve different groups of students.
“I think the area where the most work needs to be done is to put in place an accountability system that promotes better student outcomes and protects taxpayer dollars,” McManus said. “Something that needs to happen is a big bargain where we really think about how we fund higher education and what we should expect from schools in order to continue to have access to tax dollars. It’s a conversation that’s only just begun.
From my perspective, this conversation should ensure that any accountability mechanism designed by the federal government does not unwittingly contribute to rising tuition fees. administrative burden. It should also include university administrators themselves, many of whom, McManus rightly argues, have been “left behind” when it comes to the student debt crisis.
“I think there are ways to explore how to put those pressures back on the institution,” she said. “Colleges sign program participation agreements. It may be useful to consider situations where an institution commits, for example, not to increase tuition fees beyond the rate of inflation. The institutions and their lobby have been very effective in preventing these kinds of conversations, but I don’t think they can anymore.
“A New Kind of Prestige”
This all brings me back to another important part of the student debt equation: past donors. In February, I spoke with Ann Kaplan, the author of the Council for Advancement and Support of Education’s landmark report on higher education fundraising in fiscal year 2021. Supported by a resurgent stock market , alumni “came together to fund primarily scholarships, not buildings,” Kaplan said.
While encouraging, this support remains a drop in the bucket given the current student debt balance of $1.1 trillion. Nor is it sustainable in the long term. After remaining relatively stable during the pandemic, tuition fees slowly rising Across the country. The U.S. stock market, with a proven track record of alumni generosity, plunges in and out of bear territory. And with former baby boomers slowly giving way, universities can’t expect their debt-ridden millennials to match the support of their parents’ generation.
While McManus won’t engage directly with former donors, she hopes Biden’s plan and the debate surrounding it will generate some overdue soul-searching. “Schools look to their donors, so donors have enormous power, and they have to ask themselves, ‘Why wouldn’t I do something that will actually help economic mobility in this country?’ “, she said. “It requires a change of mindset which I think will not come easily.” For example, donors who support financial aid rather than political work can donate prioritizing needs-based aid, which “can be transformative in terms of economic mobility”.
I spoke to McManus around the same time that US News and World Report published his much maligned college rankings. I took a closer look the 10 categories he weighs to establish his ranking and found that while “undergraduate academic reputation” had a weight of 20%, “social mobility,” defined as graduation rates and Pell Grant performance, only reached than 5%. Is it any wonder that some alumni have prioritized gleaming new buildings over gifts that advance social mobility?
McManus is nonetheless optimistic, citing increased attention to open access universities like community colleges and Third way, a ranking system that prioritizes economic mobility over reputation and selectivity. If that mentality can take hold, McManus envisions a future where universities all a “new kind of prestige” defined as advancing economic mobility instead of rejecting 95% of applications and refusing to significantly expand the undergraduate population. She also realizes that while providing more needs-based aid is a solid short-term strategy for donors reluctant to engage in full-blown advocacy, it will not be enough to solve the student debt crisis. over $1 trillion.
“Ultimately, lawmakers, administrators, and alumni have to start making different choices, whether it’s politics or philanthropy,” McManus said. “Anyone connected with higher education has to ask themselves, ‘What behavior am I inducing? What am I enabling in this system?’ Because we wouldn’t be here if everyone didn’t activate some part of the current system in some way.