Tag Archives: federal

The Beltway For-Profit Witch Trials

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In mid September, the Congressional duo of George Miller and John
Tierney joined their Senate colleagues Tom Harkin and Dick Durbin and the
Department of Education in what might be described as the ongoing Beltway Witch
Trials, where the alleged witches are the colleges that are legally organized
on a profit-making basis. Messrs. Miller and Tierney proposed a new line of
assault to rein in these alleged evil doers that they have creatively named
the College
Student Rebate Act of 2012
. The objective of the proposed
legislation is to exert political control on how private sector colleges
allocate their financial resources, as the bill calls for a cap of 20 percent
for expenditures on “advertising and promotion activities, excessive
administrative expenses including executive compensation, recruiting, lobbying
expenses, or payments to shareholders.” Expenditures on these activities
exceeding the cap would need to be refunded to students and/or the government.

Rep. Miller told the Huffington
Post
that since “for-profit colleges tend to get a great deal of
revenue directly from the federal government…how schools spend this money must
be carefully examined.”Examination is one thing, but what the bill would really
do is enable politicians and unelected bureaucrats to limit the ability of
private firms to attract customers and strengthen their brands, compensate
their managers for successful performance, protect themselves from additional
onerous regulations, and reward owners for their investments. The bill would
seriously inhibit the incentive structure necessary to promote private investment,
innovation and growth in an industry greatly in need of improved efficiency. 

Continue reading The Beltway For-Profit Witch Trials

Universities Are Vocational Schools

Why do students go to college? A new poll has a one-word
answer: money. That’s one of the findings in a broad Gallup survey of college admissions officers done for Inside
Higher Ed
. The admissions officers seem to believe that those planning to
attend college view it largely as a signaling device that directs the best and
brightest young Americans to the best and highest-paying jobs. It is not
primarily about acquiring knowledge (“human capital”), critical learning or
leadership skills, or better perceiving the difference between right and wrong,
but more about achieving the American Dream of a comfortable, moderately
affluent life.

To cite one statistic, 99 percent of admission directors
at public four-year colleges agreed or strongly agreed that “parents of
applicants place high importance on the ability of degree programs to help
students get a good job.” With regards to the prospective students themselves,
“only” 87 percent of the counselors agree that getting a good job is
important/very important.  Most of the
counselors also agree, at all forms of higher education institutions, that
their schools are putting more emphasis on job placement.

Continue reading Universities Are Vocational Schools

Three Pell Grant Scams

Many politicians, including senators such as Tom Harkin and Dick Durbin, have grown indignant over the allegedly vast amounts of higher education money captured by for-profit institutions via the Pell Grant program. In fact, they consider this something of a scam. The truth, of course, is that throughout its history, including now, the vast majority of Pell Grant funds—at least 75 percent– have gone to students attending not-for-profit colleges.

The implication of the criticism, of course, is that for-profit institutions (or at least many of them) are diploma mills, whereas the educational experience offered by institutions untainted by the corruptive influence of profits is of high quality, and provided by selfless individuals working for the public good. I think that is hogwash, but that is a subject for another day. Suffice it to say that there are documented instances where for-profit institutions pressured relatively unqualified students to enroll using Pell Grants, but there are numerous examples of not-for-profit schools doing similar things. The scam here is much broader than the good senatorial critics claim.

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Some Hope for Higher Ed Reform

The current conversation on higher ed reform coming is unusually platitudinous even for an election year. This was clearest earlier this year during the battle between Barack Obama and Mitt Romney on the proposed federal student loan interest rate, a subject fairly inconsequential in larger problem of sky-high college costs. In his Democratic nomination acceptance speech, President Obama claimed he would work to “cut college tuition in half” in the next ten years. How he would do this, or if he truly grasped what he was saying, is anyone’s guess.

But Senators Ron Wyden (D-Oregon) and Marco Rubio (R-Florida) have shown a great deal of care in crafting the “Know Before You Go Act.” The bill, currently under consideration in the Senate, will “support statewide individual-level integrated postsecondary education data systems.” More specifically, under the proposed bill the federal government will help states coordinate student educational and postgraduate employment data. The bill’s aim is to help consumers make better choices about the products they are considering. Per a press release from Wyden’s office, the bill focuses on making the following metrics more accessible to consumers:

  1. Post-graduation average annual earning;
  2. Rates of remedial enrollment, credit accumulation, and graduation;
  3. Average cost (both before and after financial aid) of the program and average debt accumulated;
  4. The effects of remedial education and financial aid on credential attainment and a greater understanding of what student success can mean.

We should praise the Know Before You Go Act for several reasons. First, instead of trying to instituting IPAB style price-control to help reform educational choices and costs, it respects the consumer’s volition to make his or her own determinations as to what is best for their particular circumstance. As Rubio said, “We want people to know what the new jobs, skills, careers in the 21st century are. The reason you need to know what your professional prospects are is that you have to weigh that against how much you will borrow.” He continued, “I graduated with $125,000 in student loans. That’s nobody’s fault – it was an investment for me. We want kids to have access to information before they make this investment.”

Secondly, the bill does not create a new federal database to obtain data by tracking students. Instead, its coordinates already extant data gathering mechanisms in the states. In describing this aspect of the bill, Wyden sounded like a Republican. “The new database is state-based and individually considered. The states can do this on their own but there’s a problem. There’s no uniform standards. If there’s no standards…then the system is failing families.”

Lastly, of concern to many conservatives, Wyden emphasized that the bill would produce a glut of computer science or accounting majors, to the neglect of the liberal arts. “This legislation is about empowering students to make their own choices. Are we going to miss out on opportunities for rich liberal arts education? I reject the either/or choice. A lot of universities are starting to pick up on labor trends – after 9/11 and Arabic for instance. Is it liberal arts or an education for a high paying job? That’s a false choice.”

Granted, it still seems Congress is far from addressing the main driver of college cost inflation – federal subsidies in the form of loans for anyone who wants them. Said Wyden, “Federal education policy is at a fork in the road. Historically it is about access. I want to keep that focus – support Pell grants, Stafford Loans, and all of the assistance that ensures access.” Nonetheless, a respected Democratic policy thinker is supporting a bill that is conservative in its temperament. By supplying greater amounts of data to consumers, the Wyden-Rubio bill is the right move in reforming an industry badly in need of more transparency and accountability.

Three Things Colleges Don’t Want Us to Know

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Universities are in the knowledge business, and the creation and
dissemination of it is at the very core of what colleges do. Yet some forms of
knowledge about higher education itself are either unknown, or hidden from the
public. Why? Release of the information would prove embarrassing and possibly
even costly to the school.

1. What Are the Teaching Loads?

This is prompted by an email I received from Bill Armstrong, President
of Colorado Christian College and former two-term U.S. Senator. He is looking
for data on faculty teaching loads and cannot find it. Going to the latest Digest of Education Statistics, I learn
that there were 7,500 faculty members teaching agricultural or home economics
courses in 2003 between the ages of 35 and 39, or that there were 1,959
full-time equivalent faculty teaching in Delaware in 2009. But in over 20
tables on staffing, there is not a word on teaching loads.

Why? I suspect the reason is simple: faculty don’t teach very much, and
far less than they used to. I have been around higher education for over 50
years, and my recollection is that at middling quality state schools in the
early 1960s, most faculty taught around 12 hours a week. At those same schools
today, the average load is almost certainly not more than 9 hours. At
top-flight universities, faculty taught about six hours a week in the 1960s,
and often 3 hours or 4.5 hours (one semester, one course, the second semester,
two courses) now.  On average, we have
seen at least a 25 percent reduction in loads.

Why? We are told it is because of the need to expand research output.
And surely the number of academic journals and other outlets has exploded.  But what percent of the research gets
seriously read or cited? Mark Bauerlein of Emory, a regular contributor to
Minding the Campus, has demonstrated that vast amounts of research are seldom
even cited, and that the number of articles written in the last 25 years or so
about, say, Shakespeare, reaches into the tens of thousands. Do not diminishing
returns set in regarding academic research like it does everything else in
life?

Continue reading Three Things Colleges Don’t Want Us to Know

Oppositional Gay Culture and the Future of Marriage

Parade.jpgThese are banner days for the gay-rights movement. “Banner Days” is in fact the front page headline in The New York Times Book Review for a review of Linda Hirshman’s new book, Victory: The Triumphant Gay Revolution. The reviewer, Rich Benjamin, praises Hirshman’s work but feels the need to chasten her on the extent of the “victory”–

There are no federal protections against anti-gay employment discrimination. Same-sex marriage is explicitly forbidden in 38 states. Most Southern states have passed constitutional amendments banning same-sex marriage. Gay families face codified and implicit discrimination when adopting children. Gay youth across the country are stigmatized by their peers.

Benjamin is surely right that these are fairly large discrepancies to
accommodate to a thesis that the gay-rights movement has achieved
unalloyed victory. Gays and lesbians are a lot more mainstream than at
any earlier time in American history, but they nonetheless remain divided
from American culture and society in significant ways.

Continue reading Oppositional Gay Culture and the Future of Marriage

A Great Article on a Disastrous Act of Federal Meddling

Sandy Hingston has captured, in an article of extraordinary importance, the fruits of political correctness in the Dept of Education (the insistence that colleges make it almost impossible for men to be found innocent of charges of sexual misbehavior), the infantilization of women; the grotesque joining of careerism, cynicism, and ideological blinders to actual justice in what is now the sexual assault racket; the painful vulnerability of every male on our campuses; the contempt for due process and fairness in emerging campus judicial systems; and the certain human tragedies that will follow in the wake of this.

We have criminal courts, of course, but they sometimes actually find innocent males innocent, so that will not do. And there, on the Main Line, sits the huckster Brett Sokolow, getting rich by trivializing actual rape and conflating it with voluntary sex or even touching on a few drinks, often initiated by the women themselves. I once asked the long-ago Vice-Provost for University Life at Penn, Jim Bishop, when this stuff—now mandated by the federal government—was first coming in at the University.

Continue reading A Great Article on a Disastrous Act of Federal Meddling

The One Trillion Dollar Misunderstanding

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At the beginning of 2011 the portfolio of the federal government for education loans was nearly one trillion dollars.  The portfolio consisted of loans for students currently in college extended either directly by the Department of Education or loans from financial institutions like Sallie Mae and banks with repayment guaranteed by the United States Treasury as well the education loans of students who had graduated from college or had quit before graduating but had not been fully repaid.  Its size exceeded the credit card debt of the American population in early 2011 and it continues to grow; whatever part remains unpaid contributes to the national debt.

An optimist views the large portfolio of student debt as “no problem.”  After they graduate, nearly all students will pay off their debts gradually, although they may have to live frugally in order to do so.  A pessimist views student debt as likely to be a permanent drain on taxpayers, as upwards of 40 per cent of borrowers will ultimately default on their loans or die before paying them off.  Meanwhile the portfolio of federal student loans will continue to grow. 

This pessimistic prognosis for student loans rests on the assumption that loans were often given to the wrong students for the wrong reasons and still are.   Pessimists believe that the existing student loan program has become unsustainable, as the subprime mortgage lending program was unsustainable, because of imprudent risks.  The risks were imprudent because of two main misunderstandings:

Continue reading The One Trillion Dollar Misunderstanding

Dealing with the For-Profits

For-profit colleges are having a tough time these days, thanks to the Obama Education Department’s looming new “gainful employment” rules that threaten federal aid cutoffs to an industry that derives 87 percent of its revenue from government loans and grants to its students—along with steep declines in new enrollments (due partly to new federal caps on commissions to recruiters, and partly to the colleges’ own efforts to select students more carefully in order to secure lower default rates) and just plain bad publicity, which seems to have trickled down to potential applicants.
Just this past week four of the largest publicly traded players in the for-profit arena—Apollo Group Inc. (parent company of the 400,000-student University of Phoenix), Education Management Corp., the second-largest for-profit chain, DeVry Inc., and Strayer Education Inc.—reported continuing steep declines in their share prices—as much so that Standard & Poors’ Education Services Index, which reached a high last year of $105.37 in April (according to a Reuters report), closed on Jan. 11 at $81.04. The 20 percent drop just about matched the 20 percent average fall-off in new enrollments that for-profit colleges at the beginning of the year.
For-profit colleges may be in trouble, and their current and former students may be in even bigger trouble (Education Department statistics indicate that 46 percent of outstanding loans to students enrolled at for-profits will ultimately go into default, in contrast to 16 percent of student loans overall), but there is one entity that does not appear to be in trouble at all: the U.S. government, which not only guarantees the troubled loans but, thanks to an Obama-pushed change in the law last year, now originates all of them. A fascinating analysis of White House budget figures recently published the the Wall Street Journal indicates that the Education Department expects to recover “85% of defaulted federal loan dollars based on current value,” as Journal reporter Melissa Korn wrote. That recovery percentage is outstanding, compared with the percentage for other kinds of consumer credit. Banks, for example, as Korn reported, get back less than ten cents on the dollar on overdue credit cards. Indeed , according to White House figures for fiscal 2011, “the federal government expects gross recovery of between $1.10 and $1.22” for every dollar of loan principal extended, Korn wrote. (About $49.9 billion of federally guaranteed loans and loans directly from the government were in default as of Sept. 30, 2010, out of a total outstanding federal loan balance of $713.4 billion).

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Could the Feds Tell College Students What to Do?

Women-in-Science.jpgIf the Obama administration’s argument that Congress has the authority to require every individual to purchase health insurance is upheld by the Supreme Court, many students may be in for a big surprise.
Yes, students. The administration argument, briefly, is that access to affordable health care is so essential to both personal and national security that individual choice of when or even whether to purchase insurance must be subordinated to the government’s authority to regulate the health care market. Congress’s authority to regulate interstate commerce is so pervasive, the administration argues, that it necessarily includes the power to require individuals to participate in that market, and to fine them if they refuse.
Here’s how Judge Henry Hudson of the United States District Court for the Eastern District of Virginia summarized the government’s argument, on his way to rejecting it:

Continue reading Could the Feds Tell College Students What to Do?

Alas, the Feds Take Over Student Loans

As an observer of the national political scene for over a half of a century, and as a former employee of the U.S. Senate, I have seen a lot of political sleaze and chicanery. But nothing tops what happened as the Congress, using a relatively arcane procedure designed to correct spending excesses in budget bills, radically changed a system of federal student loans, against the wishes of millions of users, against many colleges whose tuition fees necessitate the loans, and, most shamefully, against the wishes of probably a majority of the Congress itself.
The Obama Administration will be taking private providers, with one exception, out of the business for servicing federally subsidized student loans. I believe the reason for this is largely ideologically driven -a deep distrust and contempt for private business, and a belief in governmental control if not ownership of the means of production (which we used to call socialism). But the stated rationale is that this is to save money – over $60 billion over a decade -to fund needed expansion of Pell Grants, among other things.
I don’t like the student loan provisions of the new law for many reasons. First, as indicated above, it is an affront to the democratic process on which this nation was founded. Proponents of the student loan changes had come to realize that they very likely would not be able to get them through the House and the Senate, so they stuffed them into the health-care legislation. Members of Congress who supported the health-care bill but opposed the student loan changes were forced to vote contrary to their wishes on one or the other of those issues.
Second, the alleged $60 billion in savings under the bill are highly dubious in a narrow technical sense -and non-existent if a broader perspective of savings is used. It is true that the Feds do make payments to private providers servicing loans, and it may well be that ending the payments will reduce cash outflows from the Treasury, although even here there are good reasons to be suspicious of the $60 billion figure.

Continue reading Alas, the Feds Take Over Student Loans

A Clarification

Andrew Gillen of the Center for College Affordability and Productivity wrote this note to Charlotte Allen to clarify comments of his in Allen’s article today on student loans:

Charlotte, I saw your article on student loans is up at Minding The Campus. I liked it, but at the very end, you have a long quote from me that is problematic.
The quotation says: “I think that having a federally run program makes some sense, as long as the government is limited to determining eligibility and setting interest rates. Get rid of lender subsidies, let interest rates vary, and let the government subsidize students directly if it wants to. The problem with the private loans was that they happened because federal loan limits got mazed out. So drop the cumulative loan limit and let people borrow what you can pay back. Drop the non-dischargeability, but let lenders pursue borrowers to a limit of, say, $200,000 or $300,000.”
This is sort of a merging my views on both gov and private loans, but it’s not clear from the quote which program I was talking about when. You probably wrote it down correctly, since I tend to be all over the place when talking, but as it is, it could be misinterpreted very easily. Probably the easiest thing to do would be to replace it with this “I think that having a federally run program makes some sense, as long as the government is limited to determining need based eligibility and setting the loan limits. Get rid of lender subsidies, let interest rates vary, and let the government subsidize students interest payments directly if it wants to. For private loans, drop the non-dischargeability and let the market determine the terms of lending.”
Thanks,
Andrew

Waste And Folly In Student Loans

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Shortly after his inauguration in January President Obama announced a proposal to get rid of a 44-year-old program known as the Federal Family Education Loan (FFEL) program. In the FFEL system, the federal government guarantees loans to students from private banks and similar institutions under a variety of programs (the best known is the so-called “Stafford” loan) to help pay for the students’ education, whether at the undergraduate or postgraduate level. The idea behind FFEL, part of a massive piece of 1965 legislation designed to make higher education more attainable and affordable to larger numbers of Americans, is to encourage private lenders to extend credit for college to a cohort of society that would otherwise not qualify for loans that these days can total tens of thousands of dollars a year. In return for guaranteeing student loans against their borrowers’ default, the U.S. Education Department charges the lenders modest fees and sets maximum allowable interest rates.
Under Obama’s plan all students needing higher-education loans would instead obtain them through the William D. Ford Federal Direct Student Loan Program (Direct Loan for short), a Clinton administration creation of 1993 in which the U.S. Education Department itself lends money for post-secondary education. The only role that private banks and other institutions such as Sallie Mae (the formerly government-backed but, since 2004, completely private entity that currently originates about a fourth of all FFEL loans) would continue to play in student lending would be to service some of the loans under contract with the department.
The administration argues that eliminating private financial institutions as middlemen (until the administration embarked on its anti-bank stance Sallie Mae and other private entities accounted for 80 percent of the $92 billion federally subsidized loan market, and it continues to issue about 58 percent of those loans), would save the government $87 billion over the next 10 years in default payouts and interest subsidies to institutions that lend to students who demonstrate financial need. (For subsidized loans, the government pays the interest until the student leaves school; for unsubsidized loans, the interest accumulates, but the student is not obliged to make payments before leaving school, and there is also a variety of repayment and forgiveness plans geared to income levels after graduation.) Under Obama’s proposal the government would use part of the anticipated savings to put another $40 million into beefing up funding for Pell grants, yet another federal aid program for college students launched in 1973 and named (in 1980) after the recently deceased Democratic Sen. Claiborne Pell of Rhode Island. Under the Pell program, which costs the government $18 billion annually, about 7 million low-income college students (the ceiling family income is $40,000) receive outright grants from the government (the current annual maximum is $5,350), to help pay for their college educations.

Continue reading Waste And Folly In Student Loans