Weekly Roundup

Higher Ed Roundup: Week of March 23 - March 27

Ed Policy — Fri, 27 Mar 2009 18:24:00 -0400

Budget Fight Ahead Over Obama's Plan to End FFEL

Default Rates are Up, Particularly in FFEL

New America to Host Event on "Future of Federal Student Loans"

Briefly Noted...

Budget Fight Ahead Over Obama's Plan to End FFEL

The budget committees in the U.S. House of Representatives and Senate are headed for a showdown over President Obama's proposal to eliminate the Federal Family Education Loan (FFEL) program next year and use the savings to turn the Pell Grant program into a true entitlement for low-income students by financing it entirely through mandatory funding. Both panels approved separate versions of the fiscal year 2010 budget resolutions on party-line votes this week that would allow Congress to significantly increase spending on Pell Grants. However, the two chambers parted ways on the question of whether to include budget reconciliation instructions that would make it significantly easier for Democratic Congressional leaders to move forward with the President's plan to end FFEL. The House committee's spending plan includes the instructions, while the Senate panel's version does not. The Obama administration has been pushing Congress to include the instructions because reconciliation bills, unlike regular legislation, cannot be filibustered in the Senate and need only a simple majority to pass. The fight is expected to come to a head next month when House and Senate negotiators meet to work out differences between the two different versions of the resolution.

Default Rates are Up, Particularly in FFEL

Preliminary data released by the U.S. Department of Education on Thursday shows that the student loan default rate is climbing, but that the rate is growing faster in the Federal Family Education Loan (FFEL) program than in Direct Lending. Department officials said that the data shows that the downturn in the economy is taking a toll on recent college graduates and others who have entered repayment over the last two years. Overall, 6.9 percent of federal student loan borrowers who entered repayment in the 2007 fiscal year have defaulted on their loans, compared to 5.2 percent who started paying back their loans a year earlier. According to the department, the rate increased by less than one percentage point in the Direct Loan program from the 2006 fiscal year rate but by 2 percent points in FFEL.

The department's release of the data particularly caused a stir because it showed that, contrary to claims by the student loan industry, borrowers in FFEL default on their loans at higher rates than those in the Direct Loan program. In 2007, for example, the default rate for borrowers with FFEL loans was 7.3 percent - two percentage points higher than that of borrowers with direct loans. The data appears to contradict claims made by student loan industry officials about the alleged superiority of default prevention efforts in the bank-based program. FFEL advocates, however, claimed that the Department's data was flawed, and accused the Obama administration of releasing it now to score political points in its efforts to eliminate the FFEL program.

New America to Host Event on "Future of Federal Student Loans"

The New America Foundation is hosting an event on Tuesday on "The Future of Federal Student Loans." Representatives from the Obama administration, the student loan community, and New America's Education Policy Program will discuss the pros and cons of the President's proposal to stop guaranteeing federal student loans and to instead make the loans directly. Featured speakers at the event will be Robert Shireman, a senior advisor at the U.S. Department of Education; Scott Fleming, director of the lobbying firm Chartwell Education Group; Jason Delisle, research director of NAF's Education Policy Program; and Paul Combe, the president and chief executive officer of student loan guaranty agency American Student Assistance. The event will start at 9:30 a.m. on Tuesday at New America's offices at 1899 L St, NW, Suite 400.

Briefly Noted...

Senate passes bill to reauthorize and expand national service programs.
The Government Accountability Office predicts increased usage of the federal Academic Competitiveness and SMART Grant programs as a result of changes in eligibility requirements.

Editor's Note:

Beginning next week, the weekly news roundup will be shifting over to our sister blog Ed Money Watch. Check it out every Friday.

Higher Ed Roundup: Week of March 16 - March 20

Ed Policy — Thu, 19 Mar 2009 18:08:00 -0400

More Students Attending Community Colleges...

...As A Survey Discusses How to Keep Them Enrolled

Turmoil in Connecticut over Nonprofit Lender/Guaranty Agency

Briefly Noted...

More Students Attending Community Colleges...

Community college enrollment is up by every measure, according to a recent survey of 120 community college leaders. Conducted by the Campus Computing Project and the League for Innovation in the Community College, the survey found that 71 percent of respondents reported at least a 5 percent increase in head count enrollment over the past year. Around 60 percent of schools also reported that they saw at least a 5 percent increase in full-time students, while 56 percent of schools reported at least a 5 percent increase in part-time enrollment. These enrollment increases have not, however, been met with similar funding boosts. The survey found that 57 percent of respondents saw their funding decrease for this year.

...As A Survey Discusses How to Keep Them Enrolled

While more students are attending community colleges, these enrollment gains will be for naught if institutions do not do a better job retaining their students. The Survey of Entering Student Engagement, released recently by the Center for Community College Student Engagement (CCCSE) found that 14 percent of entering community college students never earn a college credit in their first term, and just 15 percent of those students re-enroll in the next term. The report suggests six principles community colleges should employ to encourage more entering students to attain credits in their first term and stay enrolled for subsequent terms: (1) Create personal connections; (2) Encourage high expectations and aspirations; (3) Develop plans and pathways for success; (4) Create a clear track to become college-ready academically; (5) Engage students in active learning; and (6) Provide an integrated network of academic, financial aid, and social support.

Turmoil in Connecticut over Nonprofit Lender/Guaranty Agency

Reports of inappropriate spending at the troubled Connecticut Student Loan Foundation (CSLF) led the state's governor to make substantial changes at the nonprofit student loan company/guaranty agency. Gov. M. Jodi Rell announced last week that she would be replacing all six of her appointees to the agency's 14 member board (the other eight are appointed by the state legislature and other education agencies) effective immediately. Rell's decision came shortly after reports emerged about a recent audit of the agency that showed it engaged in "disgraceful" spending on salary compensation and perks such as sports tickets and fancy meals. The spending practices uncovered by the audit were especially shocking because the agency had lost a total of $35.5 million over the last five years. The agency's future is unclear, though the General Assembly is considering a bill that would end CSLF's ability to both guarantee and originate student loans. Such action may not be necessary, however, if CSLF is eliminated with all other guaranty agencies as part of President Obama's plan to end the Federal Family Education Loan Program.

Briefly Noted...

House of Representatives passes bill to reauthorize and expand national service programs.
Nelnet announces that it will not participate in the PLUS loan auction.
Department of Education releases its annual digest of information on spending, enrollment, revenue, and several other factors related to all levels of education.

Weekly Roundup: Week of March 9 - March 13

Ed Policy — Fri, 13 Mar 2009 19:00:00 -0400

Republican Lawmakers Spar with Education Secretary Over Pell Grants

Sallie Mae Says No to Plus Loan Auction

Nevada AG Warns Students to Avoid Unlicensed Trade Schools

Republican Lawmakers Spar with Education Secretary Over Pell Grants

At a U.S. House of Representatives Budget Committee hearing on Thursday, Republican lawmakers took aim at President Obama's proposal to make the Pell Grant program into a true entitlement for low-income students by financing it entirely through mandatory spending. Rep. Paul Ryan of Wisconsin, the budget committee's top Republican, said he was disappointed with the President's plan "to move this program to the mandatory side of the ledger" at a time when the costs of other federal entitlement programs, like Medicare and Social Security, are spiraling out of control. "We should be reforming existing entitlements, not adding new ones to the mix," he stated. Education Secretary Arne Duncan, who testified at the hearing, defended the plan, saying that it would turn the program into "a more reliable" source of funding for low-income students wishing to pursue a higher education. "For the first time ever, Pell Grants will not be subject to the politics of the moment or the whims of the market," Duncan said. "They will be a commitment that Congress is required to uphold each and every year."

Sallie Mae Says No to Plus Loan Auction

Sallie Mae, the country's largest student loan provider, announced in a letter to colleges this week that it will not participate in the U.S. Department of Education's upcoming PLUS Loan Auction, which would use market forces to set student loan subsidy rates for lenders making federal PLUS loans to parents. The loan company's decision comes a week after the U.S. Department of Education signaled its intention to move forward with the auction, despite the continued downturn in the economy and the student loan industry's opposition to the program. Sallie Mae said that taking part in the auction would not be profitable for the company, which currently controls about 40 percent of the PLUS Loan market. The loan giant appears to be confident that other lenders will sit out the auction as well -- noting in its letter that if the auction collapses, the current system would stay in place.

Nevada AG Warns Students to Avoid Unlicensed Trade Schools

The State Attorney General's Office in Nevada issued a press release this week warning students to avoid unlicensed and unaccredited trade schools that do not participate in the federal student aid programs. "History often repeats itself, and this decade is no different when it comes to student loan scams facilitated by private student lenders willing to partner with largely unregulated vocational, trade, and technical schools," the news release states. "Unfortunately the end result often leaves the student borrower on the hook for costly student loans and, too frequently, with little or no education or training to show for it." The AG's office likened these scams to "a Ponzi scheme" with the schools' survival depending entirely on their ability to lure in students, often predicated on false premises. The Nevada AG has been investigating the collapse of Silver State Helicopters, a for-profit chain that shut down unexpectedly on Super Bowl Sunday last year. As we reported this week, the FBI and a group of state attorneys general are investigating the exclusive lending arrangements that KeyBank had with Silver State and TAB Express, a defunct flight school in northern Florida.

Briefly Noted...

Congress completes action on omnibus spending bill for the 2009 fiscal year that increases spending on Pell Grants, GEAR UP, and the TRIO programs for disadvantaged students.
Federal Reserve issues proposals to improve consumer disclosures on private student loans, as required under last year's Higher Education Act reauthorization legislation.
Connecticut nonprofit student loan agency under fire for "questionable expenses."

Higher Ed Roundup: Week of March 2 - March 6

Ed Policy — Fri, 06 Mar 2009 18:15:00 -0500

Senate Omnibus Spending Bill Stalls

Ed Dept. Announces Finalists for ECASLA Servicer Contract

Higher Ed Watch Wins National Education Reporting Award

Senate Omnibus Spending Bill Stalls

Progress on a $410 billion omnibus spending bill that would finance federal government operations for the rest of the current fiscal year stalled on Thursday in part because of growing concerns over thousands of Congressional earmarks included in the legislation, many of which would go to colleges. The legislation is to cover appropriations for the 2009 federal fiscal year, which began back in October. All told, the bill includes $66.5 billion for the Department of Education, $5.3 billion more than last year's appropriation. Included in that figure is $134 million in earmarks (starts here on page 161) for higher education under the Fund for the Improvement of Postsecondary Education (FIPSE)--$14 million more than last year's bill. The measure includes a $3.1 billion increase in spending on Pell Grants over the 2008 fiscal year, as well as an additional $30 million for the federal GEAR UP and TRIO programs, which help prepare low-income middle-school and high-school students for college. (Our sister blog Ed Money Watch has more on the omnibus bill here.) Senate leaders are expected to try and bring the bill up for a final vote again next week.

Ed Dept. Announces Finalists for ECASLA Servicer Contract

The U.S. Department of Education announced on Thursday six finalists for the contract to service loans sold to the government under the Ensuring Continued Access to Student Loans Act (click here for a description of the programs). Those making the cut include the current direct loan servicer (ACS Education Solutions), three for-profit loan companies (Sallie Mae, Nelnet and Wells Fargo), and two nonprofit lenders/guaranty agencies (the Pennsylvania Higher Education Assistance Agency and Great Lakes Educational Loan Services). The Department has not said when or how many servicing winners it will choose, but the contract could be quite large if as many lenders end up selling their loans to the Department as is expected.

Higher Ed Watch Wins National Education Reporting Award

For second year in a row, Higher Ed Watch has won a national reporting award from the Education Writer's Association. This year, the blog won a special citation in the education blog category for a series of posts we ran last year on the subprime private student loan scandal. The following are links to the prize-winning posts: Subprime Mess Reaches Higher Ed (1/30/08); Blind-Sided at Sallie Mae? (3/25/08); Missing Those Sweetheart Deals (4/10/08); Helicopter School's Crash Leaves Students Grounded (4/16/08); Fueling Sham Trade Schools (5/1/08); A "Key" Development in the Case of Silver State Helicopters (6/17/08); Mailbag: Private Loan Borrowers Speak Out (9/25/08); A "Key" Reason Not to Bail Out Private Student Loan Providers (12/10/08); A "Key" Tactic to Undermine Consumer Protections" (12/11/08); Key Bank's One-Two Punch (12/17/08).

Higher Ed Roundup: Week of February 16 - February 20

Ed Policy — Fri, 20 Feb 2009 14:34:00 -0500

Aid Administrators Ask Ed. Dept. to Stave Off Experimental Program Termination

Penn. Turning to Poker to Increase College Aid

Briefly Noted...

Aid Administrators Ask Ed. Dept. to Stave Off Experimental Program Termination

Financial aid administrators are pushing back against a Bush administration decision to end an initiative that aimed to find ways to improve efficiency and reduce administrative burdens in the federal student aid programs. This experimental sites program, which relaxed federal student aid regulations at roughly 100 colleges, will cease at the end of June following a December decision by the Department of Education that none of the experiments tried were successful enough to be replicated on a wide scale. In response, the National Association of Student Financial Aid Administrators (NASFAA) wrote a letter to the Department last week, calling the termination decision "ill-conceived," and asking it to reinstate the program. The letter defended the experimental sites program, saying it has "proven that alternative approaches do not result in higher default rates and students benefit by having timely access to loan funds to pay their expenses. Resources, both financial and human, are freed to better serve student aid recipients and their parents." There was no word as to whether the new Department leadership planned to reverse the decision.

Penn. Turning to Poker to Increase College Aid

Pennsylvania is taking a gamble on video poker to make college more affordable for low- and middle-income state residents under Democratic Governor Ed Rendell's Pennsylvania Tuition Relief Act. According to Rendell's plan, students from families making less than $32,000 a year will have to pay only $1,000 a year for tuition at 28 public universities, colleges, and community colleges. (Penn State University and the University of Pittsburgh, both large public institutions, are not included.) Students with familial incomes greater than $32,000 but below $100,000 could receive anywhere from $2,700 to $7,600 in additional tuition relief. The plan will be funded by increasing allocations for grants to community college students and the Pennsylvania Higher Education Assistance Agency (PHEAA), which administers a state grant program for students. Rendell plans to obtain money for the funding increases by getting the state General Assembly to legalize video poker machines and then tax a portion of the proceeds.

Briefly Noted...

National Law Journal reports that the federal government is filing more lawsuits against delinquent student loan borrowers.
Former deputy education secretary says too many students are not college ready.
Historically Black Colleges and Universities particularly hard-hit by economic woes

Higher Ed Roundup: Week of February 9 - February 13

Ed Policy — Fri, 13 Feb 2009 17:29:00 -0500

Stimulus Agreement Reached That Will Benefit Students and Colleges

More Help on the Way for Private Loan Providers

MyRichUncle Declares Bankruptcy

Stimulus Agreement Reached That Will Benefit Students and Colleges

Lawmakers in the U.S. House of Representatives and the Senate reached an agreement on a $789 billion stimulus bill that would boost spending on student aid for the next two years and provide help to states maintain spending on higher education despite the fiscal crisis. Final votes on the bill in both the House and the Senate could occur as early as today.

The legislation includes more than $17 billion in additional spending on Pell Grants, with increases in both discretionary appropriations and a separate mandatory funding stream created by the College Cost Reduction and Access Act of 2007. Democratic Congressional leaders said these increases would raise the maximum Pell Grant to $5,350, from $4,731, for the 2009-10 academic year.

The measure would also spend about $13 billion to temporarily replace the Hope higher education tax credit with a partially refundable $2,500 per-year tuition tax break. Like the original House bill, students who come from families that do not earn enough to pay taxes would be eligible for 40 percent, or $1,000, of the credit for each of the next two years. For the first time, students would be able to count the amount they spend on textbooks toward the benefit. Currently, the Hope credit can't be used for higher education expenses beyond tuition and fees. In addition, the measure would boost spending on the Federal Work Study program by $200 million, as the House initially proposed.

To the disappointment of high-priced private colleges, for-profit trade schools, and lenders, the legislation would not increase federal student loan limits, as the original House bill did. It also doesn't appear to include a key change that the student loan industry has been lobbying for - a retroactive shift to the index used to determine the quarterly interest rate subsidy paid to lenders on federal student loans.

The measure would also provide $54 billion for a State Fiscal Stabilization Fund, more than 80 percent of which would be used to maintain state elementary, secondary, and postsecondary education funding over the next three years (although the Secretary of Education can waive this requirement for states facing severe financial difficulties). Most of the rest of the money for states would be used for "critical services," which can include education. Money from this part could be used for higher education renovations, including at private colleges. The measure specifically forbids state officials from discriminating against any type of higher education institution when allotting these funds.

More Help on the Way for Private Loan Providers

U.S. Treasury Secretary Timothy Geithner announced on Tuesday that he planned to expand to up to $1 trillion, from $200 billion, the amount that the federal government will lend to investors holding securities backed by private student loans and other forms of consumer credit, such as auto loans and credit card debt. The plan, originally proposed by former Treasury Secretary Henry Paulson, is aimed at reviving the credit markets to help provide capital and liquidity to lenders so that they will continue offering consumer loans, including high-cost private student loans.

Few details of the plan were available, so it remains unclear how much help this would private loan providers. It's also unclear whether the Obama administration is considering offering any relief to financially distressed private loan borrowers. To that end, 19 groups representing students, consumers, and some colleges sent a letter to Geithner this week asking him to offer aid to only those private loan companies that agree to improve the terms and conditions of the loans they offer. Lenders would also have to offer loan modifications and work outs to financially strapped borrowers with unmanageable debt loads. In addition, loan providers would be required to discharge the loans of borrowers who die or become permanently disabled.

"A bailout for the providers of usurious private student loans will not solve the college affordability crisis caused by the failing economy," the letter, which was spearheaded by the Project on Student Debt, stated. "However, if a form of rescue is provided for private student loans, it would be unconscionable to do so without also providing better consumer protections." [Disclosure: Higher Ed Watch is supported in part by Institute for College Access and Success, the sponsor of the Project on Student Debt.]

MyRichUncle Declares Bankruptcy

MyRichUncle (MRU), the direct-to-consumer student loan provider that played a pivotal role in exposing conflicts of interest between college financial aid administrators and lenders, is the latest victim of the credit crunch. The company announced on Monday that it had "suspended all business operations" and filed Chapter 7 bankruptcy. According to Student Lending Analytics, a blog that provides in-depth coverage of the private student loan industry, MRU disbursed about $230 million in private loans in 2007, representing about 1.3 percent of the entire market. In a recent SEC filing, the company revealed that delinquencies on its private loan portfolio were higher than had been anticipated.

In the summer of 2006, MRU ignited a firestorm of controversy when it began running two-page advertisements in national newspapers, including USA Today and The New York Times, accusing college aid administrators of taking "kickbacks" and "payola" from the loan companies they were recommending to their students. These allegations helped spur New York Attorney General Andrew Cuomo's investigation into the "pay-for-play" student loan scandal.

Higher Ed Roundup: Week of February 2 - February 6

Ed Policy — Fri, 06 Feb 2009 15:23:00 -0500

AP Passage Rate Rises, but Geographic and Racial Gaps Persist

More Americans Think College Necessary, But Harder to Obtain

Briefly Noted...

AP Passage Rate Rises, but Geographic and Racial Gaps Persist

The number of students passing at least one advanced placement (AP) exam continues to grow, but substantial racial and geographic gaps remain among test takers. According to data released this week by the College Board, which administers AP exams, 15.2 percent of the roughly 3 million test takers passed at least one of the subject tests, a success rate that is three percentage points higher than it was five years ago. But, this achievement growth is not evenly distributed geographically or racially. Nearly a 20 percentage point gap exists between the state with the highest passage rate (Maryland at 23.4 percent) and the lowest (Mississippi, 3.9 percent). Black students, meanwhile, were underrepresented test takers relative to their proportion of the student body as a whole. Black students made up over 14 percent of the class of 2008, but were only 7.8 percent of AP test takers, and just 3.5 percent of those who passed an exam. The underrepresentation of black students among successful test takers, also referred to as equity and excellence gaps, does not appear to be lessening. Not a single state eliminated such gaps for black students in 2008, compared to 18 that did so for Hispanic students.

More Americans Think College Necessary, But Harder to Obtain

More Americans think postsecondary education is necessary to attain a middle class lifestyle, yet an even larger percentage think getting access to one is a problem, according to a recent public opinion survey. "Squeeze Play 2009: The Public's Views on College Costs Today," released this week by the Public Agenda and the National Center for Public Policy and Higher Education, found that 55 percent of people surveyed think a college education is a necessity for success in America. That is five percentage points higher than 2007, the last time the survey was conducted, and 24 percentage points higher than in 2000. At the same time, a smaller percentage of those surveyed think that qualified students have the opportunity to go to college. The 2008 survey found that only 29 percent of qualified students have access to postsecondary education, compared with 45 percent in 2000. Two-thirds of survey respondents felt that the lack of access is a problem--the highest level since the survey began in 1993. There was also growth in the percentage of people who think students borrow too much to pay for college, and who believe those who need financial help can get the assistance they need.

Briefly Noted...

Former Senate staffer Carmel Martin, Education Trust Vice President Russlyn Ali, and Peter Cunningham, the founder and president of Cunningham Communications, named assistant secretaries at the Department of Education.
California tries to make it easier for students to transfer from 2-year to 4-year institutions.

Higher Ed Roundup: Week of January 26 - January 30

Ed Policy — Fri, 30 Jan 2009 17:20:00 -0500

House Passes Stimulus Bill ...

... While Senate Details Own Stimulus Proposal

Report Recommends Reforms to Pk-16 Pipeline to Improve College Readiness

Briefly Noted ...

House Passes Stimulus Bill ...

The U.S. House of Representatives on Wednesday approved on a party-line vote an $825-billion economic stimulus package, which includes nearly $30-billion in increased spending on student aid. The legislation, which passed by a vote of 244 to 188, would increase the maximum Pell Grant to $5,350 from its current level of $4,731, provide an additional $490 million for the Federal Work-Study Program, and increase by $2,000 the amount students can borrow in unsubsidized federal student loans each year for the next two years. In addition to the spending increases, the bill would temporarily replace the Hope higher education tax credit with a partially refundable $2,500 per-year tuition tax break. The legislation also includes a key change that the student loan industry has been lobbying for - a retroactive shift to the index used to determine the quarterly interest rate subsidy paid to lenders on federal student loans. Apart from student aid, the bill also includes $79 billion for states to help them maintain all of their education spending at or above their 2006 fiscal year levels over the next two years.

... While Senate Details Own Stimulus Proposal

Meanwhile, Senate Democratic leaders this week released details of their proposed stimulus package, which is largely similar to the House version, though it comes with a slightly smaller price tag for higher education. Like the House bill, the Senate measure would replace the HOPE tax credit with a $2,500 per-year credit, but limits refundability to only 30 percent (compared to 40 percent in the House bill), at a total cost of $12.9 billion over 10 years. The Senate draft would increase the maximum Pell Grant by $681 over two years, compared to the $500 increase proposed by the House. Unlike the House bill, the Senate version does not include additional spending for Federal Work-Study, increased unsubsidized federal student loan limits, or the proposed subsidy shift for lenders . It does, however, include an additional $160 million for the AmeriCorps National Service program. Senators expect to vote on the bill next week.

Report Recommends Reforms to Pk-16 Pipeline to Improve College Readiness

The federal government must make a much more concerted and coordinated effort to address the college readiness crisis confronting this country, according to a new report released on Thursday by the Education Policy Program here at the New America Foundation. According to report, "Bridging the Gap: How to Strengthen the Pk-16 Pipeline to Improve College Readiness," low college readiness rates are "a massive failure" of the pre-kindergarten through college system as a whole. High schools, colleges, and universities have not worked together to establish expectations or common standards as to what students should know and be able to do. College admissions policies vary widely from institution to institution, and key admissions criteria, like standardized tests, are not anchored in high school academic goals. Similarly, high schools have not aligned their graduation requirements with college readiness standards. As a result, far too many students leave high school unprepared for the rigors of college and the workplace. The report calls on the federal government to provide states with incentives to adopt national college and work-readiness standards; leverage its dollars more effectively to strengthen early intervention and college remediation programs; mandate high school graduation plans for all students no later than ninth grade; and require K-12 and higher education to provide better data on students' progress through the PK-16 system.

Briefly Noted ...

The stimulus bills under consideration by the House and Senate would make nearly four million low- and moderate-income students newly eligible for tuition tax relief, according to a report released Tuesday by the Center on Budget and Policy Priorities. Unlike the HOPE higher education tax credit, the proposed American Opportunity Tax Credit is partially refundable, allowing students whose families do not earn enough to pay federal income taxes to benefit from it.
The City University of New York (CUNY) outlined a blueprint for a new 5,000 student community college in Manhattan that would be designed to foster more student engagement, enhanced support services and a streamlined curriculum. According to a report in the New York Times, this redesigned model of a community college, which has already shown promising results as a pilot program, would require students to enroll full-time for their first year and to take rigorous remedial math and literacy courses, while the school would offer more one-on-one support and financial support for tuition and books. CUNY has not secured funding for the school yet, but they hope to break ground in the coming years.

Higher Ed Roundup: Week of January 19 - January 23

Ed Policy — Fri, 23 Jan 2009 16:30:00 -0500

Ed. Dept. Institutes Its Own Lender Subsidy Change

Many Students Don't Enroll in Recommended Remedial Classes, Report Finds

NCAA Considering "Academic Progress Rate" for Coaches

Briefly Noted...

Ed. Dept. Institutes Its Own Lender Subsidy Change

The U.S. Department of Education announced last Friday that it is taking special action to calculate the interest rate subsidy owed to private lenders making Federal Family Education Loans for the last quarter of 2008. The subsidy rate (called a Special Allowance Payment) is calculated each quarter using 3-month commercial paper interest rates. Due to credit market disruptions, however, commercial paper markets broke down completely for 33 of the 62 business days in the fourth quarter of 2008 -- meaning there were no interest rates available to calculate the subsidy for those days. In response, the Department opted to use interest rates on commercial paper financed under the Federal Reserve's Commercial Paper Funding Facility, which was instituted on Oct. 27 to prop up faltering markets. The Department will carry forward the previous day's commercial paper rate for any day between Oct. 1-27 that is missing those interest rates. The rates under the Fed's funding facility are also generally 1.50 percentage points higher than those reported in the regular commercial paper market. It should be noted that the Department's change is different from a proposal in the House of Representatives' stimulus bill that would use the LIBOR index instead of commercial paper in the 2008 fourth quarter subsidy calculation (see Higher Ed Watch for more on this topic). It's unclear at this time if the Department's action will stop Congress and the student loan industry from pushing for the LIBOR substitution.

Many Students Don't Enroll in Recommended Remedial Classes, Report Finds

Nearly two-thirds of all community college students are referred to remedial courses, but many students never enroll in the suggested classes, thus failing to complete all their developmental coursework. That is the finding from "Referral, Enrollment, and Completion in Developmental Education Sequences in Community Colleges," a study released last month by researchers at Columbia University. The report posits that as few as three out of every 10 students who are referred to remedial courses ever finish all their developmental coursework. But this is largely because many community college students -- 36 percent referred to remedial math classes and 27 percent referred to remedial English classes -- never actually enroll in the suggested courses. Black students, part-time students, and students in vocational programs were least likely to complete recommended developmental coursework. The researchers suggests that students' developmental coursework completion rate could be increased by putting more students into college-level classes; combining different levels of remediation into a single, intensive course; and using saved resources to provide more tutoring and support for students enrolled in credit-bearing courses.

NCAA Considering "Academic Progress Rate" for Coaches

The NCAA's Board of Directors will vote this spring on a plan that for the first time would publicly measure and report the academic performance of athletes under specific coaches. This metric would be modeled on the existing Academic Progress Rate (APR), which tracks the enrollment and academic eligibility of student-athletes on teams and at individual institutions. The proposed APR for coaches, however, would follow a head coach as he or she moves from school to school. The coach metric would also carry no penalties for bad scores, unlike current APRs, which have scholarship penalties for low marks. If approved, the NCAA could begin calculating the APR for coaches late next year.

Briefly Noted ...

As expected, Arne Duncan was quickly confirmed by a voice vote in the Senate on Tuesday and was sworn in as secretary of education on Wednesday afternoon.
Also on Tuesday, the Department of Education issued a report to Congress on simplifying the federal financial aid application. In it, the Department said it could use data from the Internal Revenue Service to simplify the Free Application for Federal Student Aid without hurting the eligibility of low-income students, though it noted that substantial reform would also require changing the federal needs analysis formula.
Postsecondary credentials, even certificates from two-year colleges, can lead to higher earnings for students of all incomes was the unsurprising conclusion reached by a study of 144,000 Florida high school graduates released this week by the Hudson Institute and funded by the Bill and Melinda Gates Foundation. More interestingly, the study found that students with a certificate from a two-year college received a larger earnings boost than those who had an associate's degree -- suggesting that even completing some postsecondary education could be beneficial for students. [Disclosure: the Bill and Melinda Gates Foundation funds other work done by New America's Education Policy Program.]

Higher Ed Roundup: Week of January 12 - January 16

Ed Policy — Fri, 16 Jan 2009 16:45:00 -0500

Big Increases for Higher Ed in House Democrats' Stimulus Bill

Duncan Provides Few Specifics on Higher Education

Lawsuit Alleges Univ. of Phoenix Improperly Manipulated Default Rate

Tuition Up, But Not All Going to Instruction

Grant Participation Up but Still Below Expectations

Big Increases for Higher Ed in House Democrats' Stimulus Bill

Democrats in the U.S. House of Representatives released their proposed $825 billion economic stimulus package yesterday, which includes more than $30 billion in increased spending for student aid. The legislation includes $17.1 billion (in both discretionary and mandatory spending) to raise the maximum Pell Grant to $5,350 from its current level of $4,731; an additional $490 million for the Federal Work-Study program, and a $2,000 increase in the amount students can borrow in unsubsidized federal student loans each year for the next two years. In addition to the spending increases, the bill would temporarily replace the Hope higher education tax credit with a partially refundable $2,500 per-year tuition tax credit. In addition to specific programmatic funding, the legislation also includes $79 billion over the next two years for maintaining state elementary, secondary, and postsecondary education funding. Receipt of this money would be conditioned on a maintenance of effort provision that requires states to maintain all of their education spending at or above their fiscal year 2006 level for the next two fiscal years (the idea is similar to one that former Higher Ed Watch editor Michael Dannenberg has floated). Finally, as Higher Ed Watch revealed yesterday, the legislation includes a key change that the student loan industry has been lobbying for - a retroactive change to the index used to determine the quarterly interest rate subsidy paid to lenders on federal student loans.

Duncan Provides Few Specifics on Higher Education

At his Senate confirmation hearing on Tuesday, Education Secretary-Designate Arne Duncan called for expanding college access and affordability but provided few details on how he would propose to do so. Instead, most of the hearing was focused on elementary and secondary education, which is not too surprising given Duncan's background as the superintendent of the Chicago Public School system. Still, Duncan did promote several of President-elect Obama's proposals for higher education, including increasing the maximum Pell Grant, creating a $4,000 tuition tax credit to reward community service, and simplifying the process of applying for federal financial aid. In his prepared remarks, he also questioned whether colleges are providing enough "support and guidance" to retain low-income students on their campuses. Duncan received bipartisan support at the hearing and is expected to be easily confirmed.

Lawsuit Alleges Univ. of Phoenix Improperly Manipulated Default Rate

Three former University of Phoenix (UOP) students have filed a federal class-action lawsuit accusing the giant for-profit college chain of acting illegally to attempt to artificially minimize its official federal student loan default rate. According to the lawsuit, which was filed in the U.S. District Court in Little Rock, Ark., the university has been paying off the federal loans taken out by students who dropped out soon after enrolling without the students' "knowledge or consent." The institution then demanded immediate repayment from the students of the tuition owed. This practice, the lawsuit states, hurts students by denying them more-generous loan-repayment terms offered by the federal government. It also allows the university to manipulate its official cohort default rate by keeping the percentage of students who failed to repay their loans below the threshold at which the institutions would face sanctions, including the potential loss of federal financial aid funds, the lawsuit alleges. The University of Phoenix is not the first for-profit college or trade school to be criticized for such a practice. In May, the Department of Education's Inspector General recommended punitive action against proprietary institution, Technical Career Institute in New York, for engaging in similar activity. The UOP suit seeks to bar the school from continuing the practice, as well as to pay punitive damages for the thousands of students who were allegedly affected by the practice over the past four years.

Tuition Up, But Not All Going to Instruction

Declining state appropriations for higher education fueled sharp increases in tuition at public colleges and universities from 2002 to 2006, but the increased student burden did not translate into greater investments in students, according to a new report released Thursday by the Delta Project on Postsecondary Education Costs, Productivity, and Accountability. The report "Trends in College Spending," found that net tuition revenue at public research universities increased by an average of $383 per student in 2002-06, and increased by $124 per student community colleges. At public research universities, 92 percent of tuition increases were used to offset revenue decreases from other sources, while only 8 percent went to actual increases in spending. Tuition continued to rise, albeit by a lesser degree, even after state appropriations for higher education picked up again in 2005. Despite the tuition increases, the percentage of university revenues devoted to direct instruction consistently declined from 2002-05, with the greatest cuts found at community colleges. The report, which also included data on enrollment and degree completion, found students at public research universities covered close to half of the cost of their own education in 2006, up 39 percent from 2002.

Grant Participation Up but Still Below Expectations

The number of students receiving Academic Competitiveness and SMART Grants grew significantly in the 2007-08 academic year, but still fell far short of the Bush administration's goal of adding 120,000 new participants to the two programs that year. According to a report this week in The Chronicle of Higher Education, which obtained data from the U.S. Department of Education through a Freedom of Information Act request, a total of 465,000 students received grants from the programs last year, 95,000 more than in 2006-07, the programs' first year. The two-year old programs, which are designed to encourage low-income students pursue rigorous academic programs, have been plagued by underutilization amid reports that high-school students are unaware of the advanced curriculum required to get the grants and that colleges have refused to offer the grants even when required to do so. Congress rescinded $525 million from the programs in FY 2008, and President Bush's FY 2009 budget proposed cancelling a further $652 of program funding.