Tag Archives: financial aid

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.

Continue reading Three Pell Grant Scams

Shirley Tilghman Leaving Princeton

Shirley Tilghman, who has just announced that she will step down as president of Princeton at the end of the academic year,  was chosen as the successor to former president Harold Shapiro in part because the powers that be thought it about time that the university had a female in that office.  She was the first president of Princeton not to have been a former student (graduate or undergraduate) and she didn’t come with extensive administrative experience.

Among her accomplishments is the increased financial aid package that Princeton now offers to students from lower and middle income circumstances.  Undergraduates at Princeton overwhelmingly come from upper-middle-class and affluent families, and there has been a push under Tilghman’s watch to bring in students (including whites) from less affluent backgrounds student body. The idea is a good one and Princeton has enough money in scholarship aid to pull it off.

And under her presidency the undergraduate student body expanded by over 500 through the addition of Whitman College (named after benefactor and Princeton grad Meg Whitman).  The big advantage of this is that the ratio of recruited athletes to other students goes down.  While racial affirmative action still prevails, in keeping the number of athletes constant while increasing the total number of students admitted, a higher proportion of students who get into Princeton now make it on their brains, not athletic ability.

One of her biggest mistakes: Her claim in the face of the Larry Summers affair that “the data that would suggest there are innate differences in the abilities of men and women to succeed in the natural sciences is nonexistent.”  This is ludicrous.  Textbooks (e.g. Diana Halpern’s Sex Differences in Cognition, and Doreen Kimura’s Sex and Cognition) have provided exhaustive data. Only the wilfully blind could ignore the facts.

Another dubious decision: her refusal to allow the student Love and Chastity group to set up a center on campus that would be comparable to the feminist-oriented Women’s Center and the LGBT center.  The purpose of the center would be to present a haven from the campus hook-up culture and a place for students of traditional values regarding sex and marriage to have a place where they could share ideas and feel comfortable talking with students of the opposite sex.  The students even offered to pay for the center with donations from supportive alumni but Tilghman nixed the idea.  Her response, an open letter printed in the student newspaper, seemed remarkably weak. Shirley Tilghman is a nice person without a strong political or ideological compass. In academia, this indicates someone who will almost automatically absorb the secular leftism of the dominant campus ethos and the New York Times editorial page.

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.

Real Costs and Sticker Price

Concordia University in St. Paul made news by cutting regular tuition costs by a hefty 33.7 percent–$10,000–leaving students to pay $19,700 if they receive no assistance or discounts.

But the reduction disguises a fact true at Concordia and at most every other private schools: up to half of undergraduates don’t pay the full fee.  At Concordia, the "discount rate" ("the amount it gave in institutional grants, compared with gross tuition revenue") was 48 percent in 2011-2012.  The article also notes that 99 percent of students that year received some grant or scholarship support from the school averaging $12,654.

This isn’t unusual.  Right now, according to a report by the National Association of College and University Business Officers, the national average for discounts was 43 percent last year. Given the bad publicity of rising tuition costs, combined with sagging enrollments, the report states that "this strategy is no longer working effectively at a large number of colleges and universities."

Cost, too, is no longer a guarantee of distinction.  In the old days, a high tuition fee signalled a superior education.  People thought that they got what they paid for.  But, according to a higher ed cost expert in the story, all colleges charge a lot, and "There’s no advantage of charging more if you can afford to charge less."

We’ll see how many other colleges follow that advice.

Three Things Colleges Don’t Want Us to Know

professor2.jpg

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

Wesleyan Abandons Need-Blind Admissions

200px-Wesleyan_University_Shield.svg.png

The
vast majority of American colleges and universities make admission decisions
without considering the financial need of applicants. Only a handful of private
institutions admit their entire first-year class need-blind and then fully meet
the financial need of all of their admitted students through a combination of
grants, loans and employment opportunities. These institutions tend to be our
nation’s most selective, in terms of entrance test scores, and wealthiest, in
terms of their endowment per student levels and their flows of annual giving.
 

Why
do these selective private institutions pursue such policies?  In part it is because as nonprofits they are
major beneficiaries of federal and state tax policies that reduce the federal
and state income tax liabilities of donors who make contributions to them, thereby
increasing the contributions they receive. These policies also exempt them from
having to pay federal and state income taxes on their endowment earnings,
exempt their property that is used for educational purposes from local property
taxes, and allow them to borrow funds for educational facilities at lower
tax-exempt interest rates.  Because of
all of these tax benefits, the public at large is subsidizing these
institutions to the tune of literally billions of dollars of lost tax revenue a
year and the willingness to do so is based upon the belief that the selective
private academic institutions are yielding benefits to society as a whole.  Because many of the leaders of society are
graduates of these institutions and a well-functioning democratic society
requires that leaders come from all socioeconomic backgrounds, these
institutions have long understood that they have a special obligation to admit
and enroll students from all socioeconomic backgrounds.

Continue reading Wesleyan Abandons Need-Blind Admissions

Pundits Wrong on the GI Bill

As part of its series on higher ed issues in
the 2012 campaign, the Chronicle of Higher Education has a long opinion
piece
in the form of a news article accusing Republicans of hypocrisy.

In “Self-Sufficient,
With a Hand From the Government
,” author Scott Carlson claims to find “a
striking dissonance” between the moving “pull-oneself-up-by-the-bootstraps
narrative” a number of speakers at the Republican Convention told of their
fathers’ and their benefitting from the GI Bill, “one of the biggest federal
programs in recent history.”

This “irony,” Carlson reports, “wasn’t lost
on liberals. Paul Begala, the Democratic strategist and consultant, jumped all
over the remarks on his Twitter feed
on Tuesday night: ‘Christie: Dad went to Rutgers on the GI Bill. Dems built
that.'” Begala thinks these Republican fathers did not succeed “on their own,”
in President
Obama’s now famous words
. They did not succeed because they were “just so
smart” or because they worked hard. They were successful only with the help of
a “hand from the government.”

Carlson finds it “interesting to ponder …
whether Governor Christie’s father would have been able to get that degree
today, given the recent history of receding state support and inflating costs.”
Seen from Carlson’s and Begala’s angel, Republican calls to scale back the size
and scope of government amount to biting the government hand that fed them.

What this complaint of hypocrisy ignores,
however, is a crucial distinction between government programs to which
beneficiaries have contributed, such as the GI Bill, and open-ended entitlement
programs that require no such contribution. Assume for a moment that after the
Civll War all freed slaves received “40 acres and a mule.”
Would anyone, even President Obama or Paul Begala, seriously claim that former
slaves who had become successful later in life owed their success to the
government program and not to their own sacrifice and hard work? Well, maybe,
but would anyone listen to them if they did?

The GI Bill, like the hypothetical 40 acres
and a mule, was not an entitlement or an example of beneficent government
generosity. It was partial compensation for sacrifices made for and services
rendered to the nation. Finding an “irony” in Republican proposals to scale
back massive federal borrowing and debt, including funds for higher education,
even though the fathers of many current party leaders benefitted from the GI
Bill requires assuming that if one limited government program compensating one defined
group of people for a limited time is good, all government benefits are good;
that if some spending at one time was good, more spending all the time is
better.

That “narrative” is more mythical than
anything coming out of the Republican convention.

Dartmouth Costs $62,125 a Year

(reprinted from Joe Asch’s Dartblog)

While the College takes pride in extending generous financial aid to 57.4% of the student body, the other 42.6% pays full whack. That’s an amazing thing when you think about it. The average American family income is $49,445, yet a great many Dartmouth families can pull together $62,125 (according to the recent estimate below by the College) to send a son or daughter to Hanover for three terms.

Continue reading Dartmouth Costs $62,125 a Year

A Response to Peter Sacks

I’d like to respond to Peter Sacks’ critique of my new study. Something that I think is lacking from Sacks’ critique is any sort of acknowledgement of what the paper is about. So, for those that haven’t read it yet, here is the basic story of my report…

Continue reading A Response to Peter Sacks

More College Aid for Low-Income Families, Please

college campus.pngWhen individuals seek higher education, why should all of us have to pay? After all, individuals decide whether to seek a college degree based on their own calculations of expected costs and benefits. That taxpayers must bear the burden of financial aid to these individuals seems unfair.

Given the billions of dollars governments pay individuals to help finance their college expenses, taxpayers must be assured that their investment is not wasted.

In short, we would rather not be sucked dry to pay for C students — whose weak academic preparation makes them unsuited for higher education — just so they can party hard for four or five years.

In a policy paper released this week, Andrew Gillen, the research director at the Center for College Affordability and Productivity, says he has the solution to creating rationality in our messy and unaccountable financial aid system.
Continue reading More College Aid for Low-Income Families, Please

Too-Large Subsidies for Too-Selective Colleges

A new report on higher education from the American Enterprise Institute, out today, contains an eye-catching finding likely to generate a lot of headlines: the more selective a school is, and the fewer low-income students it serves, the larger its taxpayer subsidy.  Calling this system of funding “perverse,” the report says: “Average taxpayers provide more in subsidies to elite public and private schools than to less competitive schools where their own children are likely to be educated.”

Basing college selectivity on Barron’s Profiles of American Colleges, the authors of the report, Mark Schneider and Jorge Klor de Alva, write that for public institutions, there is a consistent increase in subsidies across the first four levels of selectivity, with substantially more in the most competitive schools. Among not-for-profits, subsidies per student are between $1000 and $2000, but for the most selective (and already well-endowed) schools, taxpayer subsidies jump to more than $13,00 per student.

Continue reading Too-Large Subsidies for Too-Selective Colleges

The Cupcake War as a Religious Event

Berkeley bakesale.jpgBy now the “Cupcake War” in which the Berkeley College Republicans sold cupcakes with different prices for various ethnic/racial/gender groups is well known. Drawing less attention is why it produced the panicky overkill reaction, including strong condemnations from some university administrators. After all, the anti-affirmative action bake sale hardly threatens the diversity infrastructure and is a far cry from past disruptive student protests. An impartial outsider might reasonably argue that the affirmative action cause would be better served by ignoring the bake sale to deprive college Republicans of any free publicity.

Let me suggest that the true purpose of the outrage is not to stamp out opposition to racial preferences. Rather, the overreaction is best understood as a reaffirmation of a faith that is slowly (but inevitably) going wobbly. And, I suspect, this includes most Berkeley students. If beliefs about the value of legally imposed racial preferences were rock solid, the over-the-top indignation would be unnecessary.

Continue reading The Cupcake War as a Religious Event

Does Student Debt Really Matter?

IOU.jpgIn a recent essay in The Atlantic, Andrew Hacker and Claudia Dreifus lament that most students have to take out college loans. They write: “At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors.”

While Hacker and Dreifus blame the universities for encouraging students to take on more debt to pay for lavish facilities and other non-educational amenities, others focus on student debt itself as perhaps the key barrier to college facing millions of students from families with low and modest incomes. Indeed, entire organizations have been founded on that very notion, such as the Project On Student Debt.

Analysts who belong to the debt-is-bad school of financial aid policy are correct in noting that student borrowing increased dramatically in the past decade, ballooning 128 percent to more than $96 billion, according to the College Board’s annual survey of financial aid trends. On the other hand, federal grants and institutional grants mitigated the rising student debt. From 2000 to 2010, federal financial aid shot up 136 percent to more than $146 billion; and institutional grants rose 69 percent to more than $33 billion.

Continue reading Does Student Debt Really Matter?

Attitudes in the Admissions Office

A recent survey of college admissions officers, sponsored by insidehighered.com, has attracted some attention in the press, such as this story in the New York Times and, of course, this account at Insidehighered.com (there is a link to a pdf of the full survey report).  It’s a valuable document that reveals attitudes and policies among admissions officers at a time of financial strain and fierce competition among institutions.

Indeed, the main finding in the survey is that admissions personnel are increasingly seeking out students who can pay full tuition.  Public institutions want more out-of-state and international students (who pay a much higher fee than in-state students).  About one-in-ten four-year colleges, the survey found, even practice affirmative action for full-pay applicants, lowering academic standards in order to admit them.

Continue reading Attitudes in the Admissions Office

Where’s All the Money Going?

By Andrew Gillen, Matthew Denhart, and Jonathan Robe

As they defend tuition increases to irate students and parents, college and university leaders often argue that tuition does not cover their costs and that they are therefore subsidizing their students’ educations. Take, for example, what Southwestern College President Dick Merriman said in an October 2010 piece for The Chronicle of Higher Education

“None of you, not even that very rare student who receives no financial aid from the college, will come close to paying what it is going to cost the college to educate you.”

However, this is emphatically not the view held by the students, parents, and many taxpayers who are paying the tuition bills. After paying thousands of dollars, students are often taught by adjuncts or stuffed into classrooms with hundreds of other students. This quite reasonably leads them to ask, “Where is all of our money going?”

Continue reading Where’s All the Money Going?

The Book That Shook the Campuses

9780226028569.jpgNeither liberals nor conservatives take the education part of higher education very seriously. Instead, college gets used as an arena for special interest promotion and ideological dispute. The right publishes lists of “The 101 Most Dangerous Academics in America” while fulminating about post-modernism and the hedonist student culture. The left pours endless billions of taxpayer dollars into student financial aid programs without holding anyone accountable (or at least not traditional non-profit colleges) for how that money is spent. Everyone is simultaneously horrified and entertained by college sports.
This happens in large part because everyone assumes that the core business of higher education doesn’t require much scrutiny. Our K-12 schools may be mediocre, but we all know our colleges are the best in the world. Just ask them!
Now Richard Arum and Josipa Roksa’s landmark study, Academically Adrift, has blown a gaping hole in the wall of assumed competence that has long shielded colleges and universities from criticism. The warranty that accompanies the college degree–that students have undergone a rigorous course of study and emerged ready to tackle the challenges of the workplace and further education–turns out to be, in many cases, a fraud.
During their four years of college, 36 percent of students studied made no progress at all on the most widely-used measure of collegiate critical thinking, analytic reasoning, and written communication skills. The average gain was less than half of one standard deviation. Results for minority students and those from academically disadvantaged backgrounds were even worse.
The list of culprits is long: Poor preparation, lax accreditation standards, faculty incentives that privilege scholarship over teaching, a low equilibrium of mutual expectation where professors ask students to do little and provide little in exchange. The modern university has evolved haphazardly over time to accommodate a huge variety of interests, functions, and concerns. Somewhere along the way, the core business of educating undergraduates faded from view.
But this learning-deficient ecosystem only persists because there is little or no outside pressure to become otherwise. Contrast this with the vigorous national conversation about elementary and secondary education. A whole constellation of organizations from across the ideological spectrum exist to analyze, criticize, and improve schooling for children. Many disagree, often stridently, about the necessary means, with perspectives ranging from big government regulation to wholesale privatization and many points in between. But they all begin from the same underlying premise: too many American K-12 students are failing to learn.

Continue reading The Book That Shook the Campuses

College Is Cheaper Than in the Mid-1990s? No Way

By Andrew Gillen and Robert Martin

The annual release of Trends in Student Aid and Trends in College Pricing are big news in the higher education world, and rightly so. Since Department of Education data often take a year or two to become available, these reports provide the earliest and most comprehensive preliminary look at recent developments in tuition charges and financial aid. This year’s two reports supposedly show that net tuition was lower in 2009-2010 than it had been in at least 15 years.

Sandy Baum (the main author of the reports) and Michael McPherson are puzzled by the apparent inconsistency between public perception and reality regarding net tuition increases, and ask “Why is it so hard for people to believe the numbers about declining net prices?”

The answer is quite simple. To begin with, as the College Board report points out, students and parents pay not just net tuition and fees, but room and board as well, and most of them find the price goes up each year. Even at the few institutions that guarantee the same tuition as long as students are continuously enrolled and making normal progress towards their degree, institutions manage to increase the net price students pay by increasing fees, room, and/or board.

Continue reading College Is Cheaper Than in the Mid-1990s? No Way

Don’t Pay Sticker Price, Part 2—the National Universities

————————————-
Read Part 1 here.
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In examining the gulf between sticker price and real cost, let’s consider the top 10 national universities as defined by U.S. News & World Report in its most recent rankings. Using U. S. Department of Education data, I compiled the average net prices that students from different family income groups would pay at the top 10 national universities combined.
Despite total sticker prices averaging more than $50,000 a year at these top 10 universities, net prices range from a low of $4,652, paid by students from poorest family income group, to a high of more than $35,000 paid by students from the richest category of family income.
These averages, however, mask the significant differences in net prices paid by poor and rich students at the individual institution. At Harvard, students from families in all income categories fare significantly better in terms of net price than they might at Harvard’s competitors. Harvard’s poorest students, whose parents earned $30,000 or less, paid net prices averaging just $2,170, significantly less than the average net price charged low-income students at all the Top 10 national universities.

Continue reading Don’t Pay Sticker Price, Part 2—the National Universities

Don’t Pay Sticker Price for College

By Peter Sacks
Jeffrey Selingo, the editor of The Chronicle of Higher Education, should have known better. He told ABC News: “students that maybe 10 or 15 years ago came from families who can easily afford to pay for their son’s or daughter’s education are now being forced to apply for financial aid.” That sounds like an obvious statement on college costs, but it’s wrong. The published prices of higher education are virtually meaningless. The far more important number is net price, which is the cost of attendance (tuition sticker price plus expenses) less federal, state and, especially, institutional grants.
Despite the water-cooler lamentations about the skyrocketing cost of college, both public and private universities have lower net prices today than they did in 1994. And the less money your family makes, the larger the discount is likely to be.
If your annual family income is less than $30,000, you can go to Harvard for $2,170 per year, and to Williams for $1,679. If family income is between $48,001 and $75,000 and you have your eye on Dartmouth, you are eligible for a discount there of almost $44,000 and may pay only $6,565 a year. And some discounts diverge wildly. Even with a discount of nearly $34,000 from sticker price, a Washington University of St. Louis student from an under-$30,000 family would pay more than ten times the amount than a similar student attending Williams.

Continue reading Don’t Pay Sticker Price for College

The Amazing College Debt Bubble
Teaching One Student Costs Only $1,456 A Year?

News that student loan debt, at $830 billion, exceeded credit card debt for the first time has sparked renewed interest in the financing of college and its implications for students. Largely ignored in the discussion, however, is the shadow debt, which consists of unorthodox methods of borrowing for college, including home equity loans and lines of credit, retirement account loans, credit card debt, and run-of-the-mill bank loans. Because these borrowing instruments often have many alternative uses, we have to rely on surveys to determine how much of the total amount borrowed in each category is devoted to paying for college. The most comprehensive such survey is conducted by Sallie Mae and Gallup. Their findings indicate that shadow debt adds just under $30 billion to the annual borrowing for higher education (see this link for more details on the calculation). As shown in the table below, when this is added to the $96 billion in college specific loans, we can conclude that Americans borrow roughly $126 billion a year to pay for college.

CAU_table.gifOf course, there are a number of caveats to this number. To begin with, this is at best a back of the envelope calculation, and better data would allow for a more accurate picture to be painted. In addition, some of this may not be borrowing in the normal sense of the term. For instance, some well off families may pay for tuition on a credit card to receive the rewards associated with their card, and then pay off the balance immediately. There is also the fact that some of the education borrowing is not used solely for education. I knew people who used student loan money to purchase a car, or a big screen TV, and even breast implants. At the same time, not counted are informal loans from family and friends. Thus, $126 billion is the best estimate we have for the amount of money that Americans borrow for college.

Enough Blame to Go Around?

This heavy debt load is causing much suffering, and whenever there is suffering, it is tempting to blame it on some easily vilified scapegoat. The for-profits seem to be serving that function these days, and while they are by no means blameless, there is plenty of blame to spread around.

First up are students and parents. While earlier generations that paid only a few hundred dollars a semester can perhaps be forgiven for continuing to believe that college is a nearly risk-free decision financially, today’s students do not have that luxury. Exploding tuition and the related horror stories about crushing debt loads appear regularly in the media. Yet students and parents largely ignore these warnings. The views that more (formal) education is almost always a good thing and that the loans needed to finance it are “good debt” since it is an investment are both widespread and contribute to the problem. While true to an extent, these views can be and are being carried too far by some, blinding some individuals to the dangers of debt.

Continue reading The Amazing College Debt Bubble
Teaching One Student Costs Only $1,456 A Year?

Those Accountability Rules for Student Loans

This past Monday, the Department of Education proposed “gainful employment” rules that will regulate postsecondary vocational programs, primarily those offered by for-profit colleges, on the basis of their graduates’ ability to pay back their federal student loans. Proponents of higher education reform should welcome this move, but not because it targets unscrupulous actors in the for-profit sector. More importantly, the initiative makes a rhetorically significant shift: it places postsecondary institutions and the economic value of the education that they provide at the center of discussions about student loans and college costs. It also adds a new and necessary dimension to the outcome data that the federal government can link directly to individual institutions of higher education.
The problem is not, as some critics would have it, that the gainful employment regulations overreach, but that they do not reach far enough. The current proposal singles out one set of postsecondary institutions for intense scrutiny and leaves the rest to operate as they have, feeding on federal loan dollars without having to show much in return, other than keeping their two or three-year default rate under a certain threshold. For these institutions, students who carry excessive debt and/or default after a three-year window are mainly the government’s problem, not theirs. As a result, prospective students looking to choose a college do not have access to even the most basic facts about how their future income or debt burden may vary depending on the institution that they choose. To change that, federal and state governments should embark on a broader effort to link students’ post-graduation success to the institutions that they attend, to make that information public and accessible, and to attach institution-level sanctions and rewards to performance on these indicators.
In short, policymakers should take the pro-accountability ideas underlying “gainful employment” and super-size them. Extending the effort to cover all colleges and universities that receive federal student loans would provide consumers with much-needed information about institutional quality and return on investment. The question is whether the latest foray into “gainful employment” regulations will remain a shortsighted attempt to bring greater accountability to one small sector of the postsecondary world. If the past is a guide, it could prove to be the proverbial camel’s nose under the tent flap that accountability proponents have been looking for.

Continue reading Those Accountability Rules for Student Loans

The Short-Selling of For-Profit Education

The letter, dated June 17 and addressed to U.S. Education Secretary Arne Duncan, made serious allegations of wrongdoing in the already controversial for-profit education sector: that representatives of career colleges were trolling for students at homeless shelters, loading education debt onto a problem-beset population with poor prospects for academic success in order to funnel federal loan funds into for-profit coffers. Now it turns out that the letter was orchestrated by, and its very language prepared by a Dallas woman, Johnette McConnell Early, who was being paid to investigate for-profit colleges by an investment firm that might be hoping to turn its own profits by short-selling the colleges’ securities.
Signed by Neil J. Donovan, president of the National Coalition for the Homeless, and 19 administrators of homeless shelters across the country, many of them church-affiliated, the June 17 letter contained strong language essentially urging Duncan to tighten its regulation of the for-profit sector (the department has been considering severe restrictions on federal loans to career-college students that would peg total debt to the average entry-level earnings in the job for which the students are training). The wording of the letter was ominous: It described recruiting at shelters as “a growing problem.” It continued: “For-profit trade schools and career colleges are systematically preying on our clients,” the letter continued, accusing the schools of “predatory conduct” in enticing shelter residents to run up un-repayable debt that ruined their credit ratings, turned off potential employers, and rendered the defaulting debtors ineligible for further federal student aid. The 20 signers pledged their “unequivocal support” for heavier government regulation of career colleges. Exactly one week later, on June 24, the Senate Health, Education, Labor, and Pensions Committee held the first of several planned hearings on the for-profit sector, which receives 23 percent of federal student loan funds although it enrolls only 10 percent of the nation’s college students, and has been marked by high levels of loan default and relatively low graduation rates.
The letter to Duncan from the shelter administrators, which circulated widely and was posted on the PBS show Frontline’s website, seemed yet more red meat for a Democratic Congress and presidential administration that already seems to regard with suspicion the idea of making a profit from higher education.

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”Too Big to Fail” Goes to College

Federal subsidies long ago achieved the goal of making higher education more attainable for students from middle- and lower-income families. Yet such programs cloud the fact that good politics often tend to represent bad economics. In this case, government efforts have reflexively ushered a generation of students down a one-size-fits-all conveyor belt that has too often left the federal government as little more than the underwriter of disappointment. Much as it propelled the housing boom, government policy aimed at “access” has fueled a dramatic increase in the cost of education. And, schools have been more than willing to turn abundantly available dollars into lighter teaching loads for professors, luxury dorms for students and state-of-the-art sports arenas, with little regard for whether these improvements are really worth it to student-customers. Ultimately, however, students foot the bill for these flights of fancy: they are required to repay their loans. And, their ability to do so depends, in large measure, on the quality of the education that they received from their chosen school. The fact that so many student borrowers are in distress today only serves to indict the value proposition that the education industrial complex continues to advance.
Aided by the government-encouraged extension of credit, education costs have skyrocketed. In fact, it is fair to describe today’s higher education price tag as having been reduced to a formula – where tuition seems to equal all the money a student can pay plus all the money a student can conceivably borrow. And, this same access-for-all government policy has made loan-eligible middle- and lower-income students easy prey for aggressive higher education and student-loan marketing. The end result has been an unprecedented, debt-fueled wealth transfer from students of modest means to the increasingly affluent higher education industry and its student-loan lenders. Unfortunately, as this damage continues to reveal its depth, its consequences are likely to become more evident by the day.
A generation of students has been reduced to the equivalent of the underwater homeowner: resigned to a fate where the amount owed to finance their schooling might be greater than the value of the education they received (and, therefore, beyond their capacity to repay it). All is not lost, however, as there are already machinations within the world of education suggesting that students, governments and institutions are, at long last, awakening to assign considerations of value to a world that for too long has seemed immune to such assessments.

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What Is For-Profit Education Really Like?

From the beginning, Frontline’s new documentary College, Inc seems tailor-made to scare the living daylights out of the series’ presumably progressive audience. Viewers are first introduced to Michael Clifford, an “educational entrepreneur” without a college degree who buys up struggling colleges and resurrects them as for-profit companies. Clifford is not only making a fortune off of low-income minority students. He also happens to be a born-again Christian, and he is looking to turn a bankrupt college in Oakland, CA into “Dream Center College,” an offshoot of a Christian mega-church and rehabilitation center in Los Angeles by the same name. Indeed, viewers are introduced to Clifford’s born-again faith almost as soon as they learn anything about his profession. And the introduction to Clifford comes right before correspondent Martin Smith interviews legendary profit-seeker and hard-edged capitalist Jack Welch, who talks about his investments in higher education and “widgets” in the same sentence.
Given the variety of companies and individuals involved in the for-profit sector, particularly the number of founders, faculty, and senior administrators who have PhD’s and experience at world-class universities, Clifford seems like an odd place to start. Perhaps it’s a nod to the idea that the regulation of college acquisitions is too lax, a worthwhile point to make. But to the discerning viewer, using Clifford, and then Welch, as narrative anchors signals a definite perspective on for-profit higher education: it is full of greedy profiteers, is woefully under-regulated, and is run by outsiders who believe that education is a business.
Predictably, College, Inc goes heavy on the “profits,” and the methods used to reap them, but this leaves little room for the “education.” As a result, viewers are introduced to many of the sector’s warts and excesses, which are real and must be acknowledged, but never get a sense of how these innovative institutions are changing the way higher education is designed and delivered in the twenty-first century.

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Why The Student Protesters Are Wrong

By Daniel Bennett
Thousands of students on more than a hundred college campuses joined together symbolically yesterday to protest sharp tuition hikes. The students pointed the finger at hard-pressed state and local governments. That was a mistake. State and local subsidies to public colleges and universities increased by 44% in real (inflation-adjusted) dollars during the 25-year period between 1982 and 2007. Had colleges managed to hold their cost increases to the level of inflation over this period, real tuition prices would be slightly less today than they were 25 years ago.
Why weren’t the colleges able to do this? First, colleges are rewarded for fiscal irresponsibility and punished for not keeping up with Joneses. Because we collect very little information from colleges about student learning and educational outcomes, we know nothing about the actual value of the education taking place. So we are left to rely on arbitrary indicators such as price and prestige to decide which institutions are of the highest quality. College administrators understand this and are known to make decisions based on how it will impact their institution’s prestige. The things that boost prestige (fancy dorms, state-of-the-art fitness centers, elaborate student centers, etc.) cost lots of money and do little or nothing to increase the quality of education. The colleges that avoid such elaborate upgrades in lieu of keeping costs down are perceived to be lower -class institutions. Call this the college arms race.
Next, there has been very little, if any, gain in productivity in higher education over the past few decades. Some evidence suggests that there has actually been a drop in productivity, while the information technology age has boosted productivity in nearly every other economic sector. Part of this is explained by the bureaucratic bloat on college campuses. Between 1987 and 2007, the number of senior administrators and professional support staff at public two- and four-year colleges increased by 84 percent, while student enrollment grew by only 37 percent. In this sense, administrative productivity dropped by more than 25 percent during this 20 year period, as the student-to-administrator ratio dropped from 24:1 to 18:1. Meanwhile, faculty teaching loads have diminished by a factor of up to two over the past two decades, while salaries have increased by at least the rate of inflation, not accounting for rising health care costs, retirement contributions and other forms of non-wage compensation. Rather than using technology to cut labor costs and improve employee productivity, colleges have expanded their staffs and seemingly ask less of each employee. Call this diminishing productivity.

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