Guest Post

Reality Check: The Privatization of Public Higher Education

Ed Policy — Thu, 05 Nov 2009 16:45:00 -0500

By Travis Reindl

For the better part of the last decade, the higher education community has debated the question of whether public colleges and universities are on the path to privatization. Will state support for public institutions sag to the point where they are not really public? Should these institutions be given greater autonomy to do things like build buildings and raise tuition? This conversation usually follows the ebb and flow of the state budget cycle, intensifying understandably during downturns.

The current state fiscal meltdown, which has prompted steep funding cuts and tuition hikes for higher education, has breathed new life into the issue of privatization. College presidents, researchers, and even campus newspapers are pondering whether the current fiscal slump is severe enough to force a revisiting of the state-campus relationship. The old joke among college presidents about their institutions moving from state supported to state molested is enjoying a comeback on the conference circuit.

Having watched this conversation for the better part of a decade, I've come to realize that a reality check is in order. To evaluate these claims, I believe that there are several important questions that need to be answered:

Are we really that close to losing the "public" in public higher education?

Is there some threshold below which a public university can or should be relieved of its public mission?

Does it matter if major public universities become quasi-public enterprises? Will they operate any differently than they do now?

The answer to the first question is "Not as close as some might think." Leaders of major public research universities frequently talk about the trend of state disinvestment in higher education and cite statistics showing that the state supplies less than 10 percent of their revenue. True enough; higher education's share of the state budget has declined in recent years, as has the state's share of institutional revenues.

But what they fail to note is that these figures include income colleges earn from hospitals and enterprises such as bookstores, which have little if anything to do with their core teaching and research functions. Subtract those revenue sources from the picture, and the state's contribution doubles. According to the Delta Cost Project , state appropriations are the second-largest source of revenue per full-time student at public research universities, and on average comprise one-third of revenues (net of auxiliary enterprises). The bottom line: there is still a lot of state money in the basic functions of public universities.

The answer to the second question is "No." As noted higher education researchers Dennis Jones and Jane Wellman point out in their recent essay on top myths in higher education finance, shareholders in publicly traded corporations have exerted considerable influence over management performance with as little as three percent of voting stock. Moreover, there is the question of which should count more in determining the degree to which universities' bonds with the state should be loosened -- percentage of total revenue or dollars received. For example, the University of Michigan receives nearly twice as much per full-time student in state appropriations as Eastern Michigan University, so why should it be subject to less regulation? The point is that governors and legislators should be wary of deregulation discussions that are based on the "minority shareholder" argument.

The answer to the third question is "Absolutely yes." The conversation about privatization in public higher education matters because it is really not about autonomy, regulation, or accountability -- it is about revenue maximization. It is about whether some of the nation's wealthiest public universities will be allowed to have their cake and eat it, too, staying public enough to receive annual appropriations from the state and private enough to charge whatever the market will bear in terms of tuition. That scenario works out well for the institutions, but what does that mean for providing an affordable university education for state residents or meeting state needs?

At a time when President Obama has challenged the nation to regain world leadership in college attainment and more Americans than ever believe that qualified students are being denied college opportunity, we need affordable and accessible higher education at all levels. Talking about how much of the public's money is needed to call a university public is simply the wrong conversation at this critical juncture. Instead, we need to be focusing on what the public's investment in higher education is -- and should -- be buying.

Travis Reindl is the state policy and campaigns director at CommunicationWorks, a public affairs firm that specializes in educational improvement. Prior to joining the firm, he had 15 years of experience in higher education policy and advocacy. Most recently, he served as program director at Jobs for the Future, where he led a national initiative focused on increasing productivity in higher education. Before that, he headed the state policy analysis unit at the American Association of State Colleges and Universities. He has written extensively on issues of college affordability, accountability, and governance. His views are his own and do not necessarily reflect those of the New America Foundation.

Guest Post: Another Bold, Radical Proposal for…a Bailout

Ed Policy — Tue, 06 Oct 2009 14:45:00 -0400

By Travis Reindl

We probably should have expected this. Since the Obama Administration declared its intentions to pump nearly $800 billion into the economy and put $12 billion on the table to help regain world leadership in college attainment by 2020, some of our most elite institutions have gone public to plead their case for federal funding. Presidents, chancellors, and board chairs have penned op-eds and signed onto full-page ads in major national newspapers, wrapping themselves in the Morrill Act and the GI Bill to argue that the federal government cannot abandon the world's greatest universities in their hour of need.

The latest entry in this anthology of angst surfaced in The Washington Post a couple of weeks ago. Under the alarming headline "Rescuing Our Public Universities," Robert Birgeneau and Frank Yeary, the chancellor and vice chancellor of the University of California at Berkeley, proposed a "daring scheme" whereby "a limited number of our great public research and teaching universities receive basic operating support from the federal government and their respective state governments." The institutions, selected on the basis of factors such as research achievements, graduation rates, public service, and commitment to diversity, would use the funds to eliminate out-of-state tuition and effectively create a cadre of national universities.

Berkeley would make out quite well under that bold plan, wouldn't it? Why does this sound eerily like what we have heard from the leaders of the Big Three automakers, or the banks that were simply "too big to fail?"

But wait -- there's more. "To ensure stability, the federal government should agree to match, at a rate of 2-to-1, and the state governments, at a rate of 1-to-1, private endowment funds raised by these universities for 10 years." Basically, some of the nation's richest institutions would receive $3 for every $1 they raise from some of the nation's (and world's) wealthiest donors. Not a bad deal, if you already have a cool billion in the bank and annually raise at least $50 million.

Now, of course, it's true that, as in previous recessions, public higher education is being slashed in state budgets, particularly in California. But it is also true that the budget cutter's pen rarely discriminates, which means that there are institutions operating on a much slimmer margin than UC-Berkeley and serving a more diverse student population that are not asking for a federal earmark in The Washington Post and calling it a "daring scheme."

Achieving the President's goal means that the nation will have to do a much better job of educating students who have too often been left behind, including low-income and first-generation students, working adults, and students of color. Reaching that mark is also about more than global bragging rights, as the percentage of jobs requiring education beyond high school and the percentage of Americans believing that college is essential to success in the workforce both continue to climb. The trends are clear -- failing to increase access and success rates for these groups will represent not just a moral failure, but an economic failure as well.

To that end, here's a counterproposal to the one that Berkeley's leaders have offered. Under this plan, which we'll call the Morrill Act for the 21^st Century (MAC21), the federal government would offer assistance to any public institution that:

Improves its performance in enrolling and graduating students from historically underserved populations. Currently, UC-Berkeley has a 90 percent overall six-year graduation rate, but that rate drops to 82 percent for Latino students and 77 percent for African American students. Surely, Berkeley could improve on those numbers.

Reduces average time-to-degree. According to the U.S. Department of Education, just under two-thirds (64 percent) of beginning students in 2002 completed a baccalaureate degree in four years at UC-Berkeley, but 90 percent earned a degree within six years. While there are legitimate reasons (degree requirements, changing majors, unavailable classes) why students take longer than four years to earn a baccalaureate degree, the university should be able to narrow this gap by at least 10 percentage points. And yes, it can be done without diluting quality.

Maintains or increases the share of spending allocated to instruction, academic support, and student services The Delta Cost Project reports that in recent years, there has been a subtle but definite shift away from activities that more directly affect students and toward those that more directly affect institutions (e.g. institutional support, facilities). Universities that wish to be known as outstanding "research and teaching institutions" must demonstrate a serious commitment to teaching to receive dedicated taxpayer funding.

The leaders of some of our most illustrious public colleges and universities are right to point out that we have reached one of those defining moments where we must decide what "the people's universities" will look like moving forward. This is more than an abstract question for thousands of students in California and around the nation who are scrambling just to get a seat in class. What is troubling about the current dialogue, though, is the absence of the student voice. Most of what we have seen and heard recently has been by institutions, about institutions, and for institutions. Despite all the marketing, how "student centered" is our enterprise?

History has shown that this nation is at its best in the face of adversity. The Morrill Act sacrificed treasure to invest in the nation as the future of the nation stood in the balance, and the GI Bill became part of our social contract as our grandparents sacrificed their comforts and their lives to ensure that our democratic ideals would survive. In this moment of adversity, it seems as though the most we have sacrificed is our pride. When we reach the point where the debate focuses on how much each higher education sector gets over what the nation and its students need, we have already lost.

Guest Post: Bolder Steps are Needed to Help Low-Income Students Avoid Debt

Ed Policy — Wed, 30 Sep 2009 16:45:00 -0400

By Mark Kantrowitz

While the Obama Administration's proposal to index the maximum Pell Grant to one percent over the inflation rate is a step in the right direction, it would not do enough to increase the number of low income students enrolling and graduating from college. Congress needs to take much bolder steps to enable and encourage the pursuit of a college education, such as eliminating debt from the financial aid packages of the lowest income students.

Contrary to popular opinion, low income students do not get a free ride. Pell Grant recipients are forced to borrow more for their education than non-recipients even though they have a greater aversion to debt. Moderate and upper-income families don't like debt, but it doesn't prevent them from enrolling in college. Among low-income families, however, the prospect of debt can have a chilling effect on enrollment, retention and graduation rates.

According to the U.S. Department of Education's latest student loan borrowing data, Pell Grant recipients in 2007-08 who obtained a bachelor's degree were 73 percent more likely to graduate with debt than their more-affluent peers, and their average total debt load was $3,405 higher. In fact, only 13.1% of Pell Grant recipients who obtained a bachelor's degree graduated without debt, compared with 49.8% of bachelor's degree recipients who never received a Pell Grant. Middle and upper income students were almost four times more likely to graduate without any debt than Pell Grant recipients.

Let's consider the out-of-pocket cost expressed as a percentage of total income among students graduating with a bachelor's degree. (Out-of-pocket cost is the net cost of attendance after subtracting grants.) The out-of-pocket cost represents 61.3% of total income for low income families earning less than $50,000 a year, compared with 22.9% of total income for middle income families earning $50,000 to $100,000 a year and 13.8% of total income for upper income families earning more than $100,000 a year. Among students from families with exceptional financial need (earning less than $25,000 a year), the out-of-pocket costs represent 78.6% of total income. Imagine spending more than three-quarters of your family's total income paying for college!

The federal student aid system currently expects low income students with exceptional financial need to assume more debt for their education than their parents earn in a year. Nearly 90 percent of bachelor's degree recipients who applied for federal student aid and whose families have total income less than $25,000 graduated with an average of $24,959 in cumulative education debt in 2007-08 ($26,830 if Parent PLUS loans are included). One-third graduated with more than $25,000 in student loans.

A decade ago Princeton University adopted a "no loans" student aid policy, replacing loans with grants in the financial aid packages of low income students in 1998-1999. The rest of the Ivy League followed their lead, along with more than five dozen elite colleges with large endowments (about two-fifths of colleges with endowments in the billion-dollar-plus range). After they implemented no loans policies, many of these colleges have experienced substantial growth in the number of low income students enrolling and graduating.

To eliminate loans from the financial aid packages of Pell Grant recipients nationwide would require doubling the maximum Pell Grant to $10,600 in 2009-10. Increasing the maximum Pell Grant by $5,000 would cost an additional $35 billion a year. Congress appears to lack the political will to pursue such a change. But perhaps there's a less expensive approach that will increase bachelor's degree attainment by the most financially needy of Pell Grant recipients, namely students with a zero Expected Family Contribution (EFC). These are students whose parents earn so little money that the federal government doesn't expect them to contribute any money to their children's education.

Congress could establish a supplemental annual $2,500 grant for zero-EFC Pell Grant recipients that would be contingent on the college agreeing to replace all loans with grants in the financial aid packages of students who received this grant. Such a policy would challenge colleges to increase the amount of need-based institutional aid they provide to students with exceptional financial need. The availability of these funds would encourage zero-EFC students to enroll at colleges that adopted no loans policies, putting pressure on colleges with less generous financial aid policies. It would also encourage elite colleges that already have no loan policies to increase the number of Pell Grant recipients they enroll.

This proposal is similar to the idea of providing colleges with a bounty for graduating Pell Grant recipients (as Robert Shireman, the Deputy Undersecretary of Education, proposed in The Chronicle of Higher Education in 2004, and officials at the California State University System are currently championing), but would provide an intermediate and up-front reward for colleges that improve their retention of Pell Grant recipients, would focus aid on the neediest of the needy, and would leverage increases in institutional need-based grants. Depending on the number of colleges that adopted such no loans policies, this would cost between $1.8 billion and $7.0 billion per year.

How would Congress pay for the new program? Part of the cost could be obtained by eliminating the subsidized interest on federal student loans. Subsidized interest does not increase access to higher education because the benefit is mostly realized after the student graduates and enters repayment. Providing supplemental aid to Pell Grant recipients would be a much more effective means of encouraging low-income students to pursue a college education since it would provide the financial aid up front when students need the money to pay their college bills.

Mark Kantrowitz is the founder and publisher of FinAid.org, a leading source for financial aid information, advice and tools; and publisher of FastWeb.com, a free scholarship matching site. He has written extensively on issues surrounding financial aid and student debt. His most recent book, FastWeb College Gold, is a step-by-step guide for students and their families to pay for college. His views are his own and do not necessarily reflect those of the New America Foundation.

The Perverse Consequences of a Bankrupt Policy

Ed Policy — Wed, 23 Sep 2009 17:45:00 -0400

(Editors Note: Today we are running an abridged version of testimony that three major higher education associations have submitted to the U.S. House Judiciary Committee's Subcommittee on Commercial and Administrative Law, which is holding a hearing this afternoon on the treatment of private student loans in bankruptcy. The three groups -- the American Association of Collegiate Registrars and Admissions Officers (AACRAO), the American Association of State Colleges and Universities (AASCU), and the National Association for College Admission Counseling (NACAC) -- argue for a reversal of a federal law that makes it exceedingly difficult for financially distressed borrowers to discharge private student loans in bankruptcy. At Higher Ed Watch, we have long argued that Congress should end this cruel policy, which treats private student loans (those without any government backing) much more harshly than nearly any other form of consumer debt, including credit cards.)

By AACRAO, AASCU, and NACAC

Bankruptcy law has restricted the ability of borrowers to discharge their federal student loans since the mid-1970s. For more than a decade, federal student loans have been non-dischargeable altogether, except for cases of undue hardship. While this exceptional treatment of federal student loans under bankruptcy law is harsh, federal student loans do provide basic consumer protections, their own specific discharge provisions, and flexible repayment options that serve as meaningful alternatives to bankruptcy discharge for borrowers. We therefore do not seek any change to the treatment of federal student loans in bankruptcy.

Our concerns focus on the treatment of private educational loans in bankruptcy. Beginning in the early 1990s, for reasons that were never articulated or debated, Congress began to extend the bankruptcy code's exceptionally harsh treatment of federal loans to private educational loans. Until the 2005 bankruptcy reform act, this identical treatment was limited to private loans that were funded or guaranteed by states or nonprofits. This ill-advised expansion rendered a large number of non-federal loans non-dischargeable in bankruptcy, even if they had none of the important attributes that justified that treatment for federal loans.

In making this change, Congress appears to have assumed that states and non-profits would voluntarily configure their educational loan offerings in a manner that would eliminate the need for bankruptcy discharge for their borrowers. It should come as no surprise to any observer of the student lending industry that the exact opposite occurred. Nondischargeability of educational loans provided eligible lenders with a carte blanche to impose ever harsher conditions on borrowers. Many of these borrowers were unaware that unlike with federal loans, the promissory notes they were signing would obligate them to repay the loans even in cases of school fraud, school closure, or total and permanent disability.

The primary benefit to eligible issuers of these loans was that the bankruptcy code's unorthodox treatment of their loans insulated them from the economic consequences of otherwise untenable lending practices. Predictably, these lenders were at the forefront of predatory educational lending practices, and began to provide high-dollar private-label loans to borrowers without much concern about their ability to repay the loans. Low-income students, particularly those attending expensive for-profit career schools, were targeted through collaborative marketing and origination relationships between schools and lenders, who in some cases jointly forecasted future default rates of more than 50 percent on the subprime loans that they aggressively promoted.

The comparative advantage that the "non-profit" issuers of such private-label loans enjoyed was quickly seized upon by other predatory providers, who sought a similar advantage for their products. In 2005, again without hearings or debate, Congress extended the exceptional bankruptcy treatment initially afforded only to federal loans to all educational loans. That unfortunate change, in turn, led to an explosion in subprime educational lending practices, which this ill-thought-through federal incentive unwittingly facilitated. Predatory lending targeting low-income and minority communities expanded, while an entire new line of "direct-to-consumer" programs targeted middle- and upper-middle-income families with easy, but punitively harsh educational credit offerings. The most salient feature of these programs is that their issuers were substantially shielded from the consequences of their high-risk products by the fact that borrowers could not discharge these predictably unaffordable loans even in bankruptcy, and that the promissory notes were really a modern indenture instrument.

In addition to its fundamentally negative consequences of promoting irresponsible lending practices, the vagueness and imprecision of the actual language of the 2005 amendment has created loopholes for additional fraudulent and abusive practices. For example, the statutory language fails to define the "educational loans" that it excludes from eligibility for ordinary bankruptcy discharge. This lack of precision allows virtually any credit transaction with families with students in school to be arguably nondischargeable. This same imprecision makes it impossible to track and analyze the scale and scope of the private-label educational loan market, since colleges may well be entirely unaware of credit that might be marketed to their students and their families. This same lack of institutional awareness makes it quite likely that families and students may be induced to borrow more than their actual unmet need.

Mr. Chairman, the subcommittee's hearings today are a very important first step in documenting and addressing the problems associated with the highly unorthodox special treatment that Congress opted to extend to private educational loans. As stated above, the unconditional extension of non-dischargeability to private loans has created a perverse incentive for risky lending practices that victimize borrowers and reward the most irresponsible lenders at the expense of other creditors. This fundamental distortion of the bankruptcy code also rewards shoddy schools by enabling them to arrange for inappropriately large private-label loans for their students through collusion with subprime lenders. We find it particularly offensive that entities profiting from these predatory practices justify their special treatment in the bankruptcy code by claiming that non-dischargeability lowers the cost of all private educational loans. There is no evidence that the enactment of the 2005 changes lowered the cost of loans, and therefore, no reason to believe that its repeal would increase the cost.

Legitimate private educational loan programs are subject to underwriting criteria to ensure reasonable prospect of repayment. Bankruptcy, let alone dischargeability in bankruptcy, is not even remotely probable factors for such programs. As previously stated, we believe that non-dischargeability of loans has facilitated the marketing of subprime loans to more vulnerable populations, and that their unorthodox treatment has served as a powerful incentive to promote over-borrowing. We urge the subcommittee to examine a complete exclusion of private educational loans from the special bankruptcy treatment previously reserved only for federal loans.

Mr. Chairman, we thank you for your leadership on this important issue, and stand ready to work with you and your colleagues as you act on the findings of today's hearing.

The American Association of Collegiate Registrars and Admissions Officers is a nonprofit, professional association of more than 10,000 higher education admissions and registration professionals who represent approximately 2,500 institutions in more than 30 countries. The American Association of State Colleges and Universities represents more than 400 state colleges, universities, and systems of higher education throughout the United States. The National Association for College Admission Counseling represents more than 11,000 college admissions officers, high-school guidance counselors, and financial-aid administrators. The groups' views are there's alone and do not necessarily reflect those of the New America Foundation.

Higher Ed’s Bermuda Triangle

Ed Policy — Thu, 03 Sep 2009 14:30:00 -0400

[Editor’s Note: In this month’s edition of the Washington Monthly, New America’s California Education Program Director Camille Esch looks at the struggles that community colleges are experiencing providing remediation to the waves of financially needy students who arrive on their campuses each year unprepared for college-level work. In her article, she argues that fixing remediation in community colleges is essential if we want these institutions to fulfill the role we’ve assigned them: providing a gateway to higher education for millions of low-income students. It’s a task, she writes, that can’t be done on the cheap and can’t be done without a fundamental rethinking of accountability in higher education. We’ve included an excerpt from the piece below. To read the full article, click here.]

By Camille Esch

America is losing its lead in higher ed: while other countries are turning out ever-increasing numbers of college graduates, the U.S. has stalled. But the problem isn't just getting high school graduates into college -- about 70 percent of them already enroll. It's getting them to finish it. Only about half of American enrollees leave college with a degree, putting us behind at least ten other developed nations in educational attainment, according to a recent report by the Brookings Institution.

Where exactly we're losing all these students is unclear. But the best place to start looking is community college, and specifically those schools' remediation programs. Nearly half of all students seeking college degrees start at community colleges, and of those, a large percentage - estimates put it around 60 percent - must take remedial classes. Remedial students run a high risk of dropping out and not graduating; one robust study found that only 30 percent complete all of their remedial math coursework, and fewer than one in four remedial students makes it all the way to completing a completing a college degree. Students who need remediation drop out at worse rates than community college students who don't, and the more remedial classes they need to take, the less likely they are to stay in school.

There's a chicken-and-the-egg element to this, of course. Getting through two years of college is extremely hard for a student with fifth-grade skills - it may be too much to expect from many of them, even with the best help. So it's difficult to tell what exactly the grim remedial statistics say: Is the gulf between the students' abilities and the most basic requirements of college simply too wide? Or are the programs failing?

We don't know, and therein lies the problem. Community college remediation is the Bermuda triangle of the higher education system - vast numbers of students enter, and for all intents and purposes disappear. We have almost no hard evidence about what works and what doesn't in remediation and almost no one - policymakers, researchers, or administrators - has tried to figure it out in any systematic way. The reason for this is a combination of unjustly scant resources, huge gaps in data, and sometimes a sense of fatalism - or worse, denial - that keeps state and school leaders from making it a priority. Meanwhile, the situation is likely to get worse before it gets better. Jobs requiring a college education are on the rise, and the labor market continues to pay a premium for college-educated workers. Students who wouldn't have gone past high school a few decades ago are now heading to college - especially community college - but they're not remotely prepared.

But this trend also offers real opportunities. Even if community college remediation programs can simply go from terrible outcomes to mediocre ones - if, for instance, the programs were able to meet the needs of even just the top half of remedial students - the aggregate nationwide impact could be an additional 150,000 college graduates per year. The Obama administration is aware of this potential, and is looking to community colleges to help the U.S. out of the economic crisis, and meet our longer-term needs for more college graduates. In July, President Obama announced a new America Graduation Initiative that calls for an additional five million community college graduates by 2020.

Meeting this goal is a tall order. But too few policymakers are willing to take the first steps: stop trying to education the most academically challenged students on the cheap, and insist on community colleges having a stake in whether or not their students succeed. The colleges that have already started to take this kind of responsibility show that such an investment can pay off. If we don't fix the pipeline where it's leaking most, even the best-laid plans for revitalizing the workforce with college graduates will amount to little.

Guest Post: California Dreamin’ Becoming Proprietary Students’ Nightmare

Ed Policy — Thu, 13 Aug 2009 22:15:00 -0400

By Betsy Imholz

For the past three years, there has been absolutely no state oversight over the for-profit colleges and trade schools that operate in California -- leaving nearly half a million proprietary school students in the state without any protection against unscrupulous institutions. The lack of regulation is testament to the for-profit higher education industry's political ties in Sacramento and Washington, which it has used to eviscerate what was once the toughest proprietary school regulatory regime in the country.

Now, with a new Administration in Washington, and hundreds of millions of federal stimulus dollars for job training at stake, the proprietary sector appears to have had a change of heart and is championing a bill (AB 48) in the California Legislature that would re-instate regulation. But don't be fooled. As written, this legislation would do more harm than good, allowing financial aid dollars to flow to the schools without meaningful state oversight, while their students become ever-more burdened with student loan debt.

The history of for-profit higher education in California is replete with scandal -- so much so that the state, for years, was known as "the diploma mill capital of the nation." When the U.S. Senate Permanent Subcommittee on Investigations (aka the Nunn Committee, named after its chairman, Sen. Sam Nunn of Georgia) investigated abuses in federal student aid programs in the early 1990s, proprietary schools in California stood out as being among the most unscrupulous in the country. Many of these proprietary institutions were found to be feeding on federal financial aid by recruiting homeless people straight off soup kitchen lines and out of welfare offices and signing them up for federal grants and loans.

Outraged by these types of abuses, state legislators cracked down on these schools. In 1989, the California legislature unanimously approved a bill that contained bright lines for state approval, requiring career programs to graduate 60% of students enrolled and place 70% of the graduates in the jobs for which they trained. The legislation also allowed for a "private right of action" so students could sue to enforce the law; established a Student Tuition Recovery Fund (STRF) to compensate students if their schools went out of business unexpectedly; and lodged regulatory and enforcement responsibility in a new, independent "Council for Private Postsecondary and Vocational Education."

The Industry Fights Back

Unsurprisingly, California's proprietary schools were unhappy with the new regulatory scheme. As the political winds began to shift in the state, the schools found powerful allies in Sacramento to help them upend the reform structure.

In 1997, Gov. Pete Wilson convinced the state legislature to disband the independent council and transfer its oversight authority to a bureau in the Department of Consumer Affairs (DCA), which was under gubernatorial control. That was the end of meaningful enforcement in California. [Nearly a decade later, a state-appointed monitor examining the bureau's performance found that the DCA had failed to promulgate meaningful regulations to protect students' interests.]

When the law came up for renewal again in 2006, the legislature approved a bill that would have extended the law's "sunset" date for one year and established a working group of stakeholders to explore any changes that were needed. However, Gov. Arnold Schwarzenegger, under pressure from proprietary school lobbyists, vetoed the bill, promising that he would provide his own draft bill early in the next session. That did not happen.

In the vacuum that followed, the schools received crucial help from the Bush Administration's U.S. Department of Education. Under the federal Higher Education Act, colleges must be "legally authorized" by states in order to award federal financial aid. As a result, the closing of the bureau appeared to endanger the schools' access to the aid programs. However, the Education Department issued an opinion saying that the schools could continue to participate in the programs as long as they were accredited by agencies recognized by the Education Secretary. In other words, the schools were allowed to operate as usual, giving them little incentive to come back to the negotiating table.

Without any state oversight of these schools, the problems of misrepresentation and abusive recruiting practices have continued. In 2007, for example, the California Attorney General settled a deceptive practices case against Corinthian Colleges, a large national chain headquartered in California, requiring the company to pay a $6.5 million fine, and provide some restitution to students. The suit charged Corinthian with misleading prospective students about its schools' job placement rates and the starting salaries of their graduates, running 11 sub-standard programs, and falsifying records provided to the government. [As part of the settlement, Corinthian did not have to admit to any wrongdoing.]

Creating the Illusion of Oversight

Now, with a new Administration in Washington, $488 million in federal stimulus dollars in the wings for job training in California, and financial analysts expressing concern about whether the Education Department's new leadership will continue to support the agency's controversial opinion, proprietary schools have a strong incentive to address the regulatory void in California. They have championed AB 48 by Assemblymembers Anthony Portantino and Roger Niello, with support of the Schwarzenegger Administration. It's pallid by comparison to the 1989 reform Act, and far from what's needed.

AB 48's flaws fall into 5 categories. First, the bill would create a framework that provides no state review in determining eligibility for state approval. The bill would exempt all regionally accredited schools, including University of Phoenix, which paid a $9.8 million fine to the U.S. Dept. of Education in 2004 after the agency found that it had engaged in deceptive recruiting practices. [The University never admitted to any wrongdoing.] All other schools would also be automatically approved, as long as they were accredited by an Education-Department-approved agency.

At first glance, this may sound reasonable. But accreditation is a self-regulatory process with schools funding review by their peers. Accreditation has been shown over and over again to be wholly inadequate as an indicator of minimal quality in the proprietary sector. Also, accredited institutions are those that receive federal financial aid, i.e. those are the schools with the most revenue and the largest number of students. Thus, when they mislead students or engage in other deceptive practices, the impact in dollars and consumers affected is huge. And once state approval is granted it is very difficult to revoke.

Second, the bill would delegate authority to the DCA, an agency that has proven itself incapable of carrying out its duties. Besides California, no other state, to my knowledge, lodges regulation of trade schools and vocational programs in a consumer/business agency rather than an education one. Placing it in DCA was a trade-off made ten years that has proven, as multiple reports and audits have shown, to be a serious error.

Third, the bill would provide inadequate resources to carry out effective oversight. AB 48 would eliminate fees for the large swathe of exempted schools, caps annual fees at low levels for schools requiring approval, and prohibits the bureau from raising needed fees without additional legislation. A cynic might say that bureau is being set up to fail.

Fourth, the school disclosures the bill would require are inadequate to protect students. It is all too common for proprietary schools to engage in high pressure sales tactics --including misrepresenting their success in graduating students and placing them into jobs. To prevent these types of deceptions, schools need to be required to disclose clearly understandable, uniformly defined, and accurate graduation, job placement and exam pass rates, and credit transfer information that would allow students to make apples-to-apples comparisons before investing tens of thousands of dollars to enroll at these institutions.

When it comes to consumer disclosures, the devil is in the details. The job placement definition in the bill, for example, would allow schools to count "graduates employed in the field" rather than requiring them to count only those "employed in the job trained for," as was the case under prior law. Real life examples abound of schools playing fast and loose with such definitions -- for example, counting students sweeping floors at a fast food restaurant as a "culinary program job placement." Also, the bill would allow schools to count as a job placement a graduate who stays on a job for just an hour.

Finally, the legislation would provide the bureau with weak enforcement authority. The sanctions in the bill -- notices to comply" and "citations"-- will not discourage unscrupulous school operators from violating the law.

Real Consumer Protections Needed

The unprecedented economic crisis facing California means more laid off workers desperate for re-training are likely to be susceptible to high-pressure sales pitches that prey on their hopes and dreams. The stakes for consumers are high, with short-term programs running in the tens of thousands of dollars. Sadly, as a result of this crisis, the state has had to cut $680 million out of the budgets of community colleges, while billions of dollars continue to flow to proprietary schools that are operating without any oversight.

After years of neglect, California needs a system that will again ensure fundamental consumer protections for California's half-million proprietary school students; safeguard the public dollars invested in these schools; and secure the integrity of California degrees, diplomas and certificates in the job market. Unfortunately, AB 48 will create only the illusion of oversight, leaving students as vulnerable to fraud and abuse as they were two decades ago.

Betsy Imholz is Special Projects Director for Consumers Union, nonprofit publisher of Consumer Reports. She is located in CU's San Francisco office, and has worked in the California Legislature on consumer protection for proprietary school regulation since 1997. Prior to her work at Consumers Union, Ms. Imholz was the Consumer Law Coordinator for Legal Services of New York City where she worked extensively in Albany, NY and Washington DC on proprietary school and financial aid issues on behalf of low-income students. Her views are her own and do not necessarily reflect those of the New America Foundation.

Guest Post: Should We Give Up the In-School Subsidy on Student Loans?

Ed Policy — Tue, 11 Aug 2009 13:30:00 -0400

[Editor's Note: Last month, George Miller, the Democratic chairman of the House of Representatives Committee on Education and Labor, created a furor when he included a provision in a student loan reform bill that would have eliminated the in-school interest subsidy on federal Stafford loans for graduate and professional students. Warning that the provision was a "deal breaker," lobbyists for colleges and advocates for graduate students forced Miller to reverse course and remove the offending provision from the bill. In this guest post, student-aid expert Sandy Baum explains why eliminating the in-school interest subsidy for both undergraduate and graduate students -- and redirecting the savings to help financially distressed borrowers repay their debt -- is a worthwhile public policy endeavor.]

By Sandy Baum

In these difficult economic times, the struggles of many students both to pay for college and to repay their student loans are all too visible. It is no surprise that suggestions to eliminate the in-school subsidy on Stafford Loans elicit strong objections from many people concerned with these struggles. But particularly in these difficult economic times it is vital that we find the best ways to help students -- ways that are equitable and that use limited funds as efficiently as we can to make college affordable for as many students as possible.

Students with documented financial need are eligible for subsidized Stafford Loans, for which the government pays the interest while the student is in school, for six months after the student leaves school, and during qualifying periods of deferment. Students without documented financial need and those who have borrowed the maximum amount of subsidized loans for which they are eligible can borrow unsubsidized Stafford Loans, on which the interest accrues while they are in school and during other periods of non-payment. The interest rate on subsidized loans is now lower for the life of the loan than the interest rate on unsubsidized loans.

Not Well Targeted

This policy might be a good one if subsidized loans consistently went to financially distressed students who will have the most difficulty repaying their student loans, and if this group of students could count on getting all the subsidized loans they need so interest would not accrue on any of their federal loans while they are in school. However, neither of these conditions holds. The almost $8 billion per year spent on the in-school subsidy could do much more to help make education affordable if the loan programs were re-designed to focus on diminishing the repayment burdens of those who are struggling the most to pay back their loans.

In 2007-08, 25% of dependent students from families with incomes below $30,000 took only subsidized Stafford loans, but 13% (over 800,000) relied on unsubsidized Stafford Loans as well, according to the most recent student aid data from the Department of Education. At the same time, 39% of the subsidized Stafford Loans going to dependent students went to those from families with incomes above $60,000. In other words, even if pre-college circumstances were the only relevant measure, the Stafford Loan system would not be doing a good job of targeting its subsidies.

The lack of targeting results partly from allowing cost of attendance to enter into the eligibility criteria, so that students who qualify for the subsidy at high-priced institutions may have significantly higher incomes than many who do not qualify because they attend lower-priced colleges. Also, students who are in school for the longest time -- those who go to graduate school -- benefit most and they rarely either come from the lowest-income families or end up with low earnings. In addition, under the current system, with all students allowed to borrow more Stafford Loans than the amount of subsidized loans to which they have access, the proportion relying on both types will increase, contributing to complexity and confusion.

But most important, financial circumstances before college are not the primary determinant of borrowers' ability to repay their loans. It is certainly true that borrowers from low-income families are most likely to struggle with their loans because their parents are unlikely to be able to help them either with their payments or with other expenses. But this reality does not mean that borrowers from middle- and upper-income families are protected from repayment difficulties. In the current economy, examples of students from relatively affluent backgrounds with strong academic credentials who find themselves unemployed or employed in low-wage jobs are easy to find. And many of those students will find that their parents are now in no position to help.

A Better Solution for Borrowers

The new Income-Based Repayment Plan is a great step in the right direction, protecting students whose incomes do not support their federal loan payments. But it is not a complete solution to the problem. Those with unsubsidized loans -- and those with subsidized loans whose incomes are low for long periods of time -- will see interest accruing on their debt. Even if they are protected from default, they will face growing balances that could negatively affect their financial futures. As a result, it will take significantly more funding for the IBR program to provide the necessary safety net for student borrowers. The almost $8 billion dollars a year that could be saved by abandoning the in-school subsidies could, in addition to providing more funds for Pell Grants and other student aid programs, make a big difference in our ability to protect student borrowers from financial distress during repayment.

If we shifted these subsidies to the repayment period, we would be able to make a meaningful promise to students and potential students that they could borrow the funds they need to make college accessible without being worried about overly burdensome debt payments in the future. Needed improvements include having the government cover the interest payments for all borrowers whose IBR payments are lower than interest due for some period of time -- say one year -- and then capping the total amount of debt that can accrue at, for example, 150% of the amount borrowed. In addition, remaining debt should be forgiven after 20 years instead of 25 years and when this occurs, it should not be a taxable event, as it is under the program's current design.

Necessary Trade-Offs

The purpose of the in-school subsidy is to reduce the payments borrowers will have to make after they graduate, but the current system does not provide the safety-net its supporters claim. Students have little understanding of the difference between subsidized and unsubsidized loans (or unfortunately, of the difference between federal and private loans). What they do understand is their payments once they leave school. A student who borrows $5,000 a year for four years at 3.4% interest would owe $20,000 with in-school subsidies and face monthly payments of about $197. The same borrowing without the in-school subsidy would lead to a debt of about $21,800 and monthly payments of about $214. At a 6.8% interest rate, the debt would be about $23,600 unsubsidized and the monthly payments would be about $272. But the real issue, whether the debt results directly from borrowing or from accrued interest, is whether the borrower can afford the monthly payments. And only a better-subsidized IBR repayment program can address this issue.

The subsidized Stafford Loan program also introduces unneeded complexity into the student aid system. Students cannot predict their eligibility for subsidized loans, which depends on a combination of the complex federal need analysis formula and the cost of attendance at the institution at which they are enrolled. Steps to simplify the aid application process and the need analysis formula are currently being implemented by the Department of Education and considered by Congress. But because of their more complex financial situations, a simple methodology that would be effective for allocating Pell Grants would not be appropriate for the more affluent families with children eligible for subsidized loans at expensive institutions. Removing the in-school subsidy and moving the subsidies to the repayment period would eliminate the need to evaluate family financial circumstances in allocating Stafford loans and would allow students to know their loan eligibility in advance.

We need to simplify and strengthen the student aid system and make it more generous. But it will work best for students if we are flexible enough in our use of federal resources to trade some of the existing subsidies for funding that will be better targeted, easier to understand, and more effective in solving student financing problems. Students need the money that is now going to in-school subsidies -- but they need it in better designed, more effective programs.

Sandy Baum is a senior policy analyst at the College Board and an independent consultant. She has written extensively on issues relating to college access, college pricing, student aid policy, student debt, affordability and other aspects of higher education finance. She was also one of the founders of the College Board's Rethinking Student Aid Study Group, which released in 2008 an ambitious plan for overhauling the federal financial aid programs. Her views are her own and do not necessarily reflect those of the New America Foundation.

Guest Post: The More Things Change...

Ed Policy — Tue, 04 Aug 2009 19:00:00 -0400

By Travis Reindl

For those of us who work in or follow higher education policy, the past six months have been eventful. A new administration came into office, naming education as one of its top policy priorities and setting a goal for reclaiming world leadership in college attainment by 2020. Congress is now debating whether to end the bank-based student loan program and pump $40 billion into the Pell Grant program. That's a decent amount of movement, even for the biggest cynic.

But lest you fear that the higher education policy agenda will move too far, too fast, rest assured -- the guardians of the status quo in the higher education lobbying world are alive and well in the era of "change we can believe in."

Last month, President Obama announced the American Graduation Initiative, a ten-year, $12 billion effort designed to boost the number of community college graduates by five million over the next decade. The program includes a competitive grant program for states to build stronger community college linkages to K-12 education and the workforce; funding for efforts to increase college completion at these institutions and others; and capital for updating or expanding facilities. Reaction to the proposal has been largely positive, though some, including the American Council on Education, have expressed the entirely legitimate concern that states could use the new federal funds to supplant, rather than supplement, their support for postsecondary education.

But the proposal ran into resistance from some higher education lobbying groups, particularly the National Association of Independent Colleges and Universities (NAICU), which represents the nation's private colleges. Even before the President's announcement, NAICU President David Warren privately e-mailed members, warning that "there are some disturbing signs that enthusiasm for expanding their [community colleges'] role may drive policy decisions that are both unfair and unwise." The proposal, he complained, has "the federal government providing funds directly to one sector of American higher education, to the exclusion of other sectors."

Several days later, another NAICU official voiced concern to Inside Higher Ed about "the precedent of deferring national higher ed policy to state bureaucrats who may or may not have the national interest in mind." NAICU then issued a legislative alert arguing that the proposal "shifts the relationship with the federal government from student-based toward institution-based."

Some facts are in order at this point. Community colleges serve 40 percent of the nation's students and receive 32 percent of total Pell Grant dollars, so for private colleges to claim that community colleges are receiving something out of turn is questionable. Moreover, helping community colleges, which are experiencing double-digit enrollment increases and double-digit funding cuts from their state legislatures, seems to be more in "the national interest" than aiding institutions that are barely growing and many of whom have sizable endowments. Finally, the idea that spending just over $1 billion per year on community colleges represents a fateful step toward government control of higher education when the federal government spends tens of billions of dollars on student aid each year is pretty melodramatic.

A FAMILIAR STRATEGY

In the end, this all comes down to money. Ending the Federal Family Education Loan Program (FFELP) would be fine with NAICU and many of the other higher education associations as long as all of the estimated savings (up to $90 billion) would go to student financial aid. Why? There are relatively few "strings" (i.e. institutional accountability measures) attached to federal student aid, and the higher the maximum Pell Grant, the more private institutions stand to gain because of their prices. So when the House passed a bill that redirected nearly $20 billion of the "new" money away from Pell Grants to community colleges and K-12 construction, private colleges and their advocates immediately geared up for battle.

We've seen this strategy before. In 2003, Rep. Howard "Buck" McKeon (R-CA) proposed stronger congressional monitoring of and institutional accountability for skyrocketing tuition increases (which averaged $683 that year at private universities, compared with $332 at public universities). NAICU led the opposition, declaring that:

"The concept behind this proposal is federal price controls, pure and simple. This nation tried that approach to wages and gasoline prices in the 1970s, with disastrous results. We can anticipate similar results if the concept is applied to higher education."

In 2006, the issue was the proposal for a federal data system that could account for student movement across institutions and state lines, so that policymakers and researchers would be able to more accurately assess how well the nation's higher education system was serving students. The creation of a "unit record" data system would have been especially useful in gauging the performance of community colleges and public comprehensive colleges because they deal with a significant number of transfer students, who are not counted in graduation rate data currently collected by the federal government.

NAICU officials decried the proposal as "Orwellian" and commissioned a poll that, not surprisingly, showed that 60 percent of Americans opposed "requiring colleges and universities to report individual student information to the federal government" (implying that institutions would be sending course grades and a host of other personal data to Washington, a major overstatement of the proposal). At a news conference releasing the poll, David Warren said the proposal "is so egregious and ill-conceived that it is necessary to express the views of the public."

A CLEAR PATTERN

There is a clear pattern here. Just about any proposal that questions or threatens the status quo-one in which the federal government is expected to continue pumping billions of dollars into the existing student aid system, no matter the cost, no matter the result-is met with doomsday rhetoric that appeals to Americans' (and politicians') basest fears. Big Brother is watching you. Bureaucrats waste your money and screw up everything. Colleges' autonomy and academic freedom are in peril. This strategy has been quite effective, but at a time when more Americans than ever believe that college is essential but increasingly out of reach, these arguments are becoming a little tired and tone-deaf.

As they plow ahead through the dog days of summer on higher education reform, and hear from higher education associations such as NAICU, Congress and the White House should remember just how much many of these groups have at stake in keeping things just as they are.

Guest Post: A Closer Look at Income-Based Repayment

Ed Policy — Mon, 20 Jul 2009 16:15:00 -0400

By Deanne Loonin

The new Income-Based Repayment program (IBR), which went into effect this month, is a very positive development for borrowers with low incomes who have taken on too much federal student loan debt. IBR is more broadly available than the existing (and still alive) Income Contingent Repayment option (ICR) in the Direct Student Loan program. The formula for determining eligibility for IBR is simpler than that for ICR and in most cases will result in lower payments for struggling borrowers.

Under IBR, borrowers who have a pre-tax income below 150 percent of the poverty line will not have to make any payments until their incomes rise over those levels. Those with higher pay will not be asked to devote more than 15 percent of the portion of their income above that threshold to student-loan repayment until they are earning enough to make regular payments. Any debt remaining after 25 years of payment through the IBR program will be forgiven by the federal government.

Still, as beneficial as this new program will be, we need to be careful not to oversell it. After all, there are some flaws with the program's design that will limit the amount of help it can provide the most financially distressed student loan borrowers. Fortunately for borrowers, the Department has already agreed to fix a few key problems that were included in the original regulations -- such as one that would have required married borrowers to make much higher monthly loan payments than unmarried ones in identical circumstances. But more needs to be done.

In addition, the availability of IBR should not distract us from our efforts to expand the safety net. The most vulnerable borrowers and those harmed by unscrupulous schools should be able to get immediate relief through bankruptcy and targeted administrative discharges rather than having to wait 25 years or more to get some relief. [In fact, there is a dangerous trend in bankruptcy courts where judges who may have previously granted discharges based on financial hardship are now holding back because they believe borrowers should instead go through 25 years in the IBR or ICR plans.]

Here are some of the program's main limitations:

It doesn't provide any help to borrowers with low incomes who have taken on unmanageable levels of high cost private student loan debt. Although the Department of Education considers private student loan regulation outside of its jurisdiction, these borrowers are desperately in need of the type of flexibility that IBR provides because their lenders have failed to step it up and offer them any meaningful, long-term repayment assistance.
The program's 25 year forgiveness component is not as generous as it initially appears. As is the case with ICR, the amount the government eventually writes off is potentially taxable. If Congress does not address this problem, federal student loan borrowers who have been making payments through the program faithfully for a quarter century will be in for a rude awakening. The path to forgiveness is also unclear at this point but given that not all payments or deferments count toward the 25 year period, it is unlikely that forgiveness will be automatic.
The repayment program is not immediately available to borrowers in default. Like ICR, borrowers must either rehabilitate their loans or consolidate them in order to make use of IBR. There are some very serious problems with these programs, including Congress' recent decision to limit rehabilitation to a one-time deal -- which will effectively prevent many borrowers from accessing IBR. At the Student Loan Borrower Assistance Project, we believe that the government should allow borrowers in default to move directly into IBR to help them get their debt back into good standing. To make the program even more accessible, we believe that all borrowers in late stage delinquencies should be offered the option of selecting IBR to help prevent them from defaulting.

These limitations should not take away from the importance of IBR. The key is to make sure that borrowers know about the program and understand its pros and cons. This is where quality borrower services come in, hardly a strong point of the student loan industry and the government.

The Department and loan holders must ensure that their staffs are giving accurate information about these programs. We are already hearing from borrowers who are getting misinformation. We need to keep a particularly careful eye on private lenders since they do not have the previous experience of administering the Income Contingent Repayment program. Will they be forthcoming in explaining the IBR option even if it means negative amortization or otherwise very low payments? They are required by law to do this, but who will keep them in line?

At this point, the most important thing is for borrower advocates, financial aid staff, loan holders and collectors, as well as Department of Education employees and contractors to study up on the intricacies of IBR and pass this information on to borrowers. The program will only start to live up to its promise if those who can benefit from it are made fully aware of all of the option.

Deanne Loonin is a staff attorney with the National Consumer Law Center and the director of the center's Student Loan Borrower Assistance Project. She focuses on consumer credit issues generally and more specifically on student loans, credit counseling, and credit discrimination. She is the principal author of numerous publications, including "Too Small to Help: The Plight of Financially Distressed Private Student Loan Borrowers," and "Income-Based Repayment: Making it Work for Student Loan Borrowers." Her views are her own and do not necessarily reflect those of the New America Foundation.

Guest Post: Five Questions for Colleges

Ed Policy — Tue, 23 Jun 2009 18:45:00 -0400

By Travis Reindl

Every year, colleges and universities send reams of data to the federal government, on subjects ranging from campus crime to research by foreign nationals. Yet, there's still a lot we don't know about our system of higher education. Congress and the executive branch bear some responsibility for this state of affairs, continually adding to an already massive and uncoordinated regulatory structure. But some higher education leaders are also on the hook here, having fought efforts over the years to bring more transparency to colleges' admissions and financial aid practices, as well as their performance in educating and graduating students.

This is no longer acceptable. Higher education is a major enterprise in the U.S., representing three percent of the total Gross Domestic Product (GDP) and employing more than 3.5 million Americans. Taxpayers also play a big part in this enterprise, contributing $21 billion toward federal student grants and billions more for research grants and contracts. Given that, it is troubling that we can't get better answers about who's getting into college, what happens to these students, and how much it costs to educate them.

As Congress and the Obama administration prepare to invest billions more in our colleges and universities, they should require colleges to provide better answers to the following five questions:

1. Who's getting in? At a time when major public universities are capping or cutting enrollment, high-achieving, low-income students are less likely to go to college than lower achieving, high-income students, and nearly three-quarters of Americans believe that qualified students are being shut out of college, we need greater transparency about who is making the cut. Colleges that receive federal student aid and have a selective admissions policy (i.e. anything other than open admissions) should be required to annually disclose the number and percentage of students admitted under special provisions, such as those who get a leg up because of their legacy status, or because of their athletic talent. The recent debacle at the University of Illinois, where admissions slots were traded as political favors, underscores why this is a timely question.

2. Who's getting institutional aid, and how much? As tuition rises and federal and state grants lose purchasing power, it is important to know how colleges are using their institutional aid dollars. Are they devoting their resources to expanding access by providing need-based aid? Or are they engaging in financial aid leveraging tactics to try to win the competition for the best and brightest, and in many cases, wealthiest students? We have some information about this from the U.S. Department of Education's National Postsecondary Student Aid Study (NPSAS), but a survey can't tell us what is happening at individual institutions. What NPSAS data do tell us, though, is that nearly one-third of students from families making $100,000 or more per year receive institutional aid, and the average award they receive is significantly larger than the average award for students from families making less than $20,000 per year. More comprehensive research is needed in this area.

3. How many students successfully transfer and/or graduate-on time or at all? Meeting President Obama's goal of regaining world leadership on the percentage of students who earn college degrees will require a major improvement in completion rates. But to figure out where and by how much we need to improve, we must have better data about what happens to our students. The information the government currently collects from colleges provides an incomplete picture of student success because it tracks only first-time, full-time students and fails to take into account transfer students. The administration has committed a quarter of a billion dollars of stimulus finding to improve postsecondary data, and hopefully some of that money will be used to either link state data systems or develop a federal unit record system so we have a better idea how students are progressing through our higher education system.

4. How much does it cost to produce a college degree? The dramatic price increases of the past decade beg the question of what is going on with respect to college costs. In other words, where is the money colleges are getting going? The Delta Cost Project, a non-profit research organization, is making progress on this front by conducting the first comprehensive analysis of higher education revenues and spending in more than a decade and by developing models for calculating cost per degree. Given the President's call for colleges to contain their costs as part of his push to improve attainment rates, the federal government should invest in more regular tracking of cost trends and in research on strategies for containing costs. Additionally, Congress needs to include cost, not just price, in its efforts to hold institutions accountable.

5. What are our graduates learning? In our knowledge-driven economy, not knowing our graduates' abilities in basic areas such as communications and problem solving leaves us ill-equipped to answer questions about the strength of our human capital and identify ways to improve it. Rather than restarting the debate about measuring student learning spawned several years ago by the Secretary of Education's Commission on the Future of Higher Education (otherwise known as the Spellings Commission), we can take a smaller but still significant step. The National Assessment of Adult Literacy (NAAL), administered by the Department of Education, provides valuable data about the reasoning and comprehension skills of our adult population. Unfortunately, the most recent data available are from 2002-2003, and not enough information is being gathered to do state-level analyses. Again, if the administration is going to make substantial new investments geared toward improving results, then spending a bit more to measure those results seems like a wise use of money.

In these difficult economic times, it is heartening to see the Obama administration putting its money where its mouth is with respect to investing in higher education. But without some better answers to questions such as the ones raised above, major new investments could be misdirected -- leaving the nation well short of the president's goal and the public more frustrated than ever with their colleges and universities.