Scholarships will improve schools

Posted: Thursday, April 08, 2010

The Governor's Performance Scholarship proposal would award substantial postsecondary scholarships to Alaska students who take a challenging curriculum in high school and meet thresholds for performance on grades and tests. The scholarships would be used at Alaska institutions, both technical and academic.

The goals are to increase rigor and graduation rates in high school, give students a better foundation to enter and complete postsecondary education, and place Alaskans in Alaska's high-skills, high-wage jobs.

The Governor's Performance Scholarships are an invitation to excellence. They provide pathways for parents to participate in their children's education. They challenge communities to provide rigorous schools. Alaska needs this. We cannot continue to do more of the same and expect different results.

Understandably, the proposal has raised debate about ways to finance students' postsecondary education. In particular, Alaskans who received benefits under the state's forgiveness program on state education loans made before 1987 fondly remember that program. However, to gauge that program's effectiveness one must look beyond the anecdotal reports and personal experiences, and instead examine the overall costs.

The basic facts are that between 1971 and 1987, state-funded education loans were offered on extremely generous terms, including 0 percent interest while in school, 5 percent to 8 percent interest while in repayment, and 50 percent debt discharge for those who completed the funded education certificate or degree program and then resided in Alaska for five years.

Even with those generous terms, only one in five Alaska borrowers eventually qualified for this financial aid. Those dismal results are, in and of themselves, an argument for supporting the Governor's scholarship proposal.

There is no evidence the loan forgiveness program improved Alaska's high school or college graduation rates. Rather, for two primary reasons, approximately 80 percent of borrowers did not qualify for forgiveness: They either failed to graduate their program, or they attended institutions outside of Alaska and did not return to live in the state following completion of their education.

Additionally, unintended consequences of that generous program included inadequately prepared students pursing postsecondary education only to lack the skills to persist and succeed; over-borrowing by students who assumed they would only have to pay half; and loan default rates and write-offs that almost ending the program in the mid-1990s.

Alaska is not the only state with less than exemplary results with similarly structured loan forgiveness programs. Generally, loan forgiveness and loan repayment programs are thought of as strategies to mitigate or resolve labor shortages within a state.

A 2001 national review of relevant programs, Advantages and Disadvantages of State loan Forgiveness and Loan Repayment Programs, concluded that loan forgiveness programs were, relative to outcomes, expensive to administer. The expense was due to the need to track borrowers from origination through repayment, the borrowers' entitlement to the benefit even if the state no longer experiences a shortage in a particular workforce field, and the cost of loan collection when recipients failed to qualify for loan repayment.

For its loan forgiveness program, Alaska invested more than $430 million in loans at an annual operating cost of $4 million to $6 million, and we garnered a 20 percent return -- and we achieved that result while requiring merely that graduates live in Alaska for five years.

It is our judgment that a loan forgiveness program would not meet the reform goals of a performance-based scholarship program. We want our high school students to work hard at school, doing more than the minimum to get by, because they view their education as a way to meet their personal goals. We want school boards and school districts to put in place a rigorous education wherever students live, whether it's a city or a village.

Perhaps the Governor's Performance Scholarships' greatest value is to empower families to feel ownership of their children's education.

Larry LeDoux is Alaska Commissioner of Education & Early Development.

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