SPEAKER_01
Hello and welcome to Office Hours with EAB. We're excited today to welcome Under Secretary of Education James Caval to the program. The Under Secretary shares his thoughts on the Biden administration's efforts to cancel student debt as well as other federal programs he thinks are needed to make college more affordable.

He also touches on what he thinks needs to happen to get more of today's high school graduates to see college as a viable option and perhaps the best path forward to secure their own economic prosperity. Give Mr. Caval a listen and enjoy.

SPEAKER_00
Hello and welcome to Office Hours with EAB. I'm Sally Amaruso, Chief Partner Officer for EAB and we are incredibly fortunate today to have as our guest the Under Secretary of Education James Caval. Hello, thank you for joining us James.

SPEAKER_02
Thanks so much for having me.

SPEAKER_00
So perhaps we could start James with your path to this position and what actually engaged you about dedicating your life to education access and student success in particular.

SPEAKER_02
Well, you know, I started out my career working in higher education student aid here at the Department of Education and over time I was interested in what policy ideas happen and what ones don't. And I took a couple of jobs that were more at the intersection of politics and policy. I was policy director for President Obama's re-election campaign and I deputy domestic policy advisor in the White House and President Obama's second term.

And as I was thinking about what I wanted to do after government, it seemed to me that so many of our country's most important problems run through higher education. And President Obama talked a lot about income stagnation and the growth and income inequality as the defining issue of his second term. And it just seemed to me that it is hard to understand how you could solve those problems unless we had a higher education system that was reliably open to everyone and help them graduate and achieve a better life.

So you know, I think the questions that EAB is working on, that the administration is working on with respect to higher education are just so, so important for having the kind of country that we want to have.

SPEAKER_00
And clearly we agree with you here at EAB. And perhaps for those outside of the Beltway, those lay people out there, you could explain exactly what responsibilities your current role comprises and how you approach your job of advising Secretary Cardona and President Biden.

SPEAKER_02
Yeah, well, it's a little bit of being a conductor. It's a little bit of being a translator and it's a little bit being a spokesperson, I guess. So I work with offices that do higher education policy, career and adult education policy, and then we have a very large office that runs the student aid programs run by Rich Cordray and I set priorities and goals and Rich has quite a bit of autonomy over the actual operation of those programs.

And you know, I see my job, I have a very talented team starting with Rich, but we have a very deep, strong experience team. And so my job is to try to set them up for success, help them understand what they're trying to accomplish and where necessary, get guidance so that the work we're doing is consistent with the values and the priorities of the President, of the Secretary, and try and make sure that we smooth that all through. I spend some time on the problems that arise in disagreements in different divisions or a problem might have legislative component and a legal component and an operational component.

So I try to help the different offices disentangle problems like that. And then, you know, I try to play my part in clarifying what the administration is accomplished, what we're trying to accomplish and make sure people know all of the good work that's happening here.

SPEAKER_00
So I am out speaking to university presidents quite a bit and I think like almost every sector of American life these days, deep political divisions are having an impact on how universities are fulfilling their mission to students and their communities. As you're speaking to leaders at universities across the country, what are you hearing them ask for in terms of federal policy changes that you feel can have the most significant impact on that mission and the school's ability to fulfill that mission? And how are you navigating those political divisions as well?

SPEAKER_02
Well, you know, it's interesting because in a lot of ways, I think there is a lot of agreement on the type of higher education system, not that there's not disagreement, but the biggest differences are in the language that we use to talk about higher education. So you know, where, you know, progressives might talk about a system that promotes racial equity and is open to everyone and conservatives might be more sympathetic to talking about how colleges can drive workforce needs and help people find good jobs. You know, a lot of what we're trying to accomplish, you know, would achieve both of those things.

So I think it is important for us just to think about how we're communicating what we're trying to accomplish and who we're talking to. But I actually do think, you know, there's there's pretty broad support in the country for building a higher education system that is open to everyone, provides plentiful second chances, has high graduation rates, where degrees are valuable and need something in the workforce. So in a lot of ways, when you get down to the nuts and bolts of policy, there's maybe a little less division than there seems.

SPEAKER_00
Well, that's optimistic. And I am glad to hear that. And I agree that I think we all are aligned in what we hope comes out of higher ed.

So the vernacular perhaps is standing in our way in terms of the vocabulary that we're using. You know, one thing that struck me across the last two years is how meaningful the hear funds were for allowing institutions, breathing space to continue to fulfill their missions. As those are coming to an end, I think there is some anxiety and, you know, some fear about a hearth cliff, if you will.

What are your thoughts about different proposals that you all are considering that could help institutions for whom this funding is really critical?

SPEAKER_02
Yeah. I mean, you know, we think the American Rescue Plan has had a really big impact and it's gratifying to hear presidents and students talk about the impact that these funds have had on campuses. And we hear people saying, you know, overwhelmingly, they help students stay enrolled or even sort of survive through the pandemic.

They helped colleges stay open, keep faculty and staff employed. They helped colleges slow the spread of the pandemic. So I think it is important for us to make sure that policymakers know the value that these funds have.

This is the first time that economic recovery legislation has included funding specifically for higher education, even though recessions regularly devastate our community. And I think it's important that people know the difference these funding makes so that the next time we have a recession, which will inevitably happen, higher education is again on the shortlist for relief. You know, in terms of looking forward, colleges have so far spent about 80% of the HIRF funds.

So we're well along in spending those resources. We did recently extend the remaining funds for an additional year. State budgets, you know, are overall in a relatively healthy space.

The negative impact on the pandemic on state revenues was not as great as we feared state rainy day funds seem to be doing okay. But I would say there's a lot of unevenness. And you know, I talked to some presidents who feel pretty comfortable with where their enrollments numbers are and some who are quite worried.

So I think we need to really focus on, you know, reaching out to high school seniors and encouraging them to come back to college in the same rates or higher rates than they were before. And also think about how do we design our programs to reach adults who might be considering coming back to school.

SPEAKER_00
So you were mentioning the state governments. I'd like to just double click on that a little bit because your commitment to access really was reflected in your support of federal subsidies to ensure that any student who wishes to attend a public university can do so regardless of their ability to pay. And you referenced a new partnership between federal and state governments to make that happen.

So why would you envision that kind of partnership working?

SPEAKER_02
Well, I'll tell you how the president's proposal works and it's really inspired by a lot of the things that communities and states are doing around college promise programs. And we've seen the real impact that free college programs can have on students motivations and decision making. After all, if a student is deciding whether or not to go to college, they don't want to know exactly what the Pell Grant number is.

They want to know what college is going to cost them. So putting it in terms that they that are clear and straightforward, you know, really can be much more effective in impacting decision making. Now college finance is something that both the federal government and the states have a really important role in.

And one thing that the president's free college plan would accomplish is to offer the states the opportunity to invest alongside them in accomplishing something that is really important rather than operating sort of in parallel as our programs do now. And the way that the president's proposal was structured, we would give states, you know, a certain dollar amount, something greater than the average revenue and tuition per student to every state based on their enrollment and their enrollment of low income students. And in return, states would have to commit to waiving tuition at their community colleges.

And you know, that structure does not penalize states for having kept tuition low historically. In fact, there were a lot of states that would have some additional revenue that they could use to invest in student success initiatives or other things. So you know, that way we think that structure would give states an incentive to invest more over time and also included some maintenance of effort requirements for four year public universities and some additional scholarship funding for public HBCUs and minority serving institutions.

So we thought that was a pretty, and we still think that's a pretty good idea for how to restructure the partnership between the federal government and states.

SPEAKER_00
So in looking at the federal student loan payment pause that just was announced recently, I think there's some speculation about whether this will be followed by additional pauses or provide even more significant or the federal government will provide even more significant relief. And certainly there are legislators that are pushing for that. What are your thoughts on the future of student loan relief and where that might go? And what methods are going to really allow for an affordable way for us to provide that relief?

SPEAKER_02
Well, we'll see what happens with the payment pause and we are watching the course of the pandemic closely. We're watching the economy and we're also studying options for broad based debt cancellation and those decisions have yet to be made. I can tell you we're focused now on making sure that students who are already eligible for relief get those benefits.

And one thing that we found when we got here is even when the federal government knew that a borrower was eligible for loan forgiveness, oftentimes those borrowers were not getting it. So of course, public service loan forgiveness has gotten a lot of attention when we got here. Only 7000 borrowers had gotten it in the history of the program.

We've now identified 150,000. We had some 400,000 borrowers who we knew had total and permanent disabilities based upon the evaluations done by the Social Security Administration. We've now identified those loans for discharge.

And of course, there are large numbers of borrowers who alleged they had been cheated by their colleges in many cases with very strong evidence. Just yesterday, we granted about 26,000 students who attended the Marinella Schools of Beauty. So we've now canceled the debts entirely for 750,000 borrowers.

We also are working now on a new repayment plan that we think will be simpler and more affordable. So there's still some decisions to be made. But regardless of how those things play out, we are accomplishing really meaningful relief for large numbers of students and we're putting in place things that we think will work better on a permanent basis, not just for current borrowers, but also for future students.

SPEAKER_00
Thank you. You know, on the other side of that process, we're seeing states start to mandate high school graduates filing the FAFSA. And I think Texas was the most recent to mandate that following a handful of other states.

FAFSA is not an easy application, being the parent of a 20 and 22-year-old that I recently went through that. And I understand that it has been automated and simplified across the last decade. But what do you see the federal government's role in simplifying that process of the underrepresented minorities and first gents are able to fulfill that obligation more easily?

SPEAKER_02
Well, Congress has done a lot of work for us on this subject. Of course, it was a passion of Senator Lamar Alexander. And so they have given us authority now to ask students whether they want us to use IRS data to pre-populate the FAFSA.

And we can do that in a much simpler and more automated way. And also to remove from the FAFSA a bunch of the questions that IRS could not answer. And we had a bunch of questions like, did you earn any income from being a clergy member and stuff like that that had no impact on the vast majority of students' Pell grants.

So those changes will go into place this fall. And I think for the vast majority of students, you will see a much smoother, easier process, also be more accurate FAFSAs. So I think the work ahead of us now, one, I mean, there are some students where the process may not be designed if their parents have gotten divorced and changed filing status or recently or situations like that.

It's also really important to work with states and with colleges to encourage them to, to the greatest extent possible, use this new formula rather than adding supplemental forms, which could go back down the road of making the process more complicated again. But I think we are going to see some really substantial improvements, hopefully some reductions in bulk purchases of Advil. Maybe, maybe just in time for you, Sally.

SPEAKER_00
That's really welcome news. Thank you. You know, one of the most concerning trends that we've seen across COVID is the precipitous drop in enrollment for community colleges that have always played such an important role in driving economic mobility, even as more states are beginning to offer free community college tuition.

What are your thoughts on the federal government stepping in and making free community college universal?

SPEAKER_02
Well, I think that's another reason why it's valuable now even more so. And, you know, in community colleges, too, there's there's a ton of variation. But of course, you look at the national numbers and they're very concerning.

And I've talked to presidents who are looking at 30 percent declines in enrollment. So we need to take this very, very seriously. And one of the things that we've seen from studies of free community college programs is a substantial increase in enrollment.

There were some fears that the additional students would not be as likely to persist. We're not seeing that. Students are succeeding at the same rates.

There are some fears that the students would be drawn away from four year schools. You know, we haven't seen that by and large in in Tennessee. Four year enrollment is up in Tennessee as well.

So, you know, we think there's a lot of value in making college more affordable, which has long been a primary lever to encourage more people to enroll. But there's also something really important about just sending the signal that, you know, by making it free, we're saying this is something that everybody should consider. It's something that our economy and our society demands now.

And it can create a really positive momentum, a pure effect where people are considering college that maybe they wouldn't have before. So I think that is a big part of the solution.

SPEAKER_00
One of the biggest areas of focus for our work at EAB, as you know, is closing equity gaps in terms of both college access and completion rates. And certainly the Biden administration has been very supportive of minority serving institutions. Many underrepresented minorities are still predominantly white institutions.

And so we take a view that really is a both and approach that is required. But what are your thoughts about the federal government's role in encouraging and incentivizing schools to do more to close those equity gaps?

SPEAKER_02
Yeah, this is a big focus of the secretaries. And he talks a lot about how we need a higher education system that is built around inclusivity, not selectivity, around affordability, not wealth, around demonstrated outcomes, not long held reputations. And, you know, when you look at our system as a whole, you see low income students and students of color are more likely to go to colleges and universities that are underfunded and that have lower graduation rates.

You know, I think the good news is a lot of people are making progress on this problem. And I know EAB plays a role in that it's inspiring when you travel the country and sort of 10 years ago or 15 years ago, we knew there were certain programs, some of them expensive that that could help many more students graduate, then we saw people doing it across a college or university, Georgia State. And now we see entire systems driving up graduation rates Cal State, three colleges of Chicago.

We see our national graduation rate improving. So I think there really is an important untold story how quickly we are improving and helping students from all backgrounds graduate. Now, despite raising rising graduation rates across the board, there is still an equity concern, as you said, the gaps are somewhat stubborn.

And I think we do need to focus on not just higher rates overall, but how do we close those gaps? For the administration, you know, one part is trying to make sure we're investing in those inclusive institutions. So we have made big investments so far in historically black colleges and universities, other minority serving institutions, community colleges. We are seeking resources to help colleges invest in particular in the things that are proven to help more students graduate that are guided by data.

And again, I think part of it is cultural. You know, we need the people that are leading institutions, not just presidents, but boards and state legislators and the other people who have a voice and the goals and institution sets to keep in mind that, you know, it's great to have institutions that are at the top of the US news rankings. It's great to have our one universities, but we also need places that serve their communities that are inclusive, that reliably promote upward mobility.

And there are a lot of different ways for colleges and universities to be excellent. So I think that cultural change is as important as the policy levers here.

SPEAKER_00
Sure, I agree with you. And the equity gaps, of course, start even before they get to college, right? So the college going rates already show gaps. That's right.

What are your thoughts on the connection to the K through 12 system and and efforts there that need to happen to to basically create solutions upstream that will flow through?

SPEAKER_02
Well, I think our system of higher education is tremendously diverse. And that is a real strength. We have lots of different kinds of colleges and universities.

They offer really broad choices and different kinds of programs. And, you know, the challenges in helping young people, some of them don't have family members who went to college, try to understand the scope of these offerings and put together the academics, the career, the financing. It can be a bit overwhelming.

And so I think whatever we can do to try to focus on, you know, those break points, the secretary has proposed a new college and career pathway program that would invest in dual enrollment programs and work based learning and additional advising, those types of things that can give students exposure to what the next steps might be, even if, you know, even if they end up earning college credit that doesn't transfer, it doesn't advance them to their degree, having that experience of being on a college campus and being able to visualize it and understand what it's about a little bit. You know, there's really strong evidence that that can help students take that

SPEAKER_00
next step. Before we go, I'd like to ask you just one final question about what we call the non-consumption market, right? Those students that are potential students that are choosing not to seek post-secondary education. We recognize college may not be the right path for everyone, but earning a college degree is correlated with higher pay, greater job security, greater home ownership and on and on.

Why is this message getting lost and how do we do a better job of helping those young people evaluate their options?

SPEAKER_02
Yeah, it's a good question. I mean, there are, of course, the pandemic plays a role in it. The very hot labor market plays a role and those may be contributing factors in the short term.

I don't think we can necessarily assume that things will just naturally go back to where they were in 2019. We see, for example, fast applications are still down relative to last year. So we have quite a bit of work to do there.

You know, I think one factor is, you know, going to college is not always a reliable investment. Our national graduation rate is 62%. There are a lot of people out there who have student loans and no degree.

And so I think that for people out there trying to make this decision, they probably know someone in their circle of friends or their extended family who is in a situation where they're struggling to repay a student loan and don't have much to show for it. So I do think we have some work to do in terms of pulling up our sleeves and trying to make the college investment as reliable as possible in terms of a vehicle for upward mobility. But I also do deeply believe that there's few things that our country can do to promote living standards, higher living standards and equitable opportunity than a college education.

So I think we are on the right path and we need to make sure that the reason that that we're all doing this work, that we're choosing to spend our careers this way is consistent with the experiences our students have.

SPEAKER_00
James, thank you so much for joining us today. We really appreciate your insights and also your inspiration for bringing us together around a shared objective to help these students.

SPEAKER_02
Thanks so much for having me, Sally.

SPEAKER_01
Thank you for listening. Please join us next week when two of the top recruiters in the nation share strategies for figuring out whether your next university president is already working on your campus or whether they need to be found elsewhere. Until next week, thank you for your time.