Endowments

Weekly Roundup: February 25 - February 29

Ed Policy — Fri, 29 Feb 2008 21:22:00 -0500

PHEAA Temporarily Suspends Federal Student Loans

Spellings Takes the Heat for President Bush's Education Budget Request

Public Colleges and Universities Pinched by State Budget Shortfalls

Brown University Increases Financial Aid

PHEAA Temporarily Suspends Federal Student Loans

The Pennsylvania Higher Education Assistance Agency (PHEAA) announced on Wednesday that it will temporarily stop providing federal loans through the Federal Family Education Loan Program (FFELP), blaming increased turmoil in the capital markets. PHEEA stopped making out-of-state loans two weeks ago.

PHEAA executives stressed that the move will have a minimal impact on students, since other lenders, especially commercial banks, are in a position to pick up the loans. The 2.7 million students and parents who already have loans will not be affected. PHEAA will continue to guarantee and service FFELP loans.

These reassurances were intended to calm a panic about loan availability that , incidentally, PHEAA has helped promote. Just last week, PHEAA convened an emergency student loan funding summit at which PHEAA chairman William Adolph, in an effort to secure federal support for lenders, warned that "millions of college students may now face foreclosure on their plans for a higher education." We are grateful that Adolph is sounding a more responsible note now.

Spellings Takes the Heat for President Bush's Education Budget Request

Education Secretary Margaret Spellings came under fire from members of both political parties on Tuesday when she appeared before the House Appropriations subcommittee that sets the Department of Education's budget. In her opening statement, Spellings touted President Bush's request to increase spending on Pell Grants by $2.6-billion in order to raise the maximum grant to $4,800 in the2009 fiscal year. Lawmakers, however, complained that the Administration was robbing Peter to pay Paul, by proposing to eliminate other federal student aid programs, including Supplemental Educational Opportunity Grants and Perkins Loans, to finance the Pell Grant increase. They also complained about proposed reductions in spending on historically-black colleges and universities and other minority-serving institutions. The budget request "doesn't reflect the committee's values," Rep. Tim Ryan (D-OH) told Secretary Spellings.

Public Colleges and Universities Pinched by State Budget Shortfalls

The slowing American economy has prompted several state legislatures and governors to propose cutting higher education spending for the next school year. The Florida public university system, for example, has instituted a hiring freeze, is turning away more applicants, and is considering an 8 percent tuition hike. Public colleges in New Jersey, meanwhile, are bracing themselves for a 4 percent decrease in their state funding, though this is a less severe reduction than many had predicted. In Rhode Island, Gov. Don Carcieri has asked colleges to give back $3.7 million this spring and anticipates a $17.8 million cut next year.

At the same time, data released this week by the State Higher Education Executive Officers (SHEEO) shows that state funding per-pupil increased in 2007, to an average of $6,771, but that is down from an all-time high of $7,621 in 2001. The SHEEO reports that colleges are increasingly relying on tuition for revenue.

Brown University Increases Financial Aid

Brown University became the latest elite institution to join the affordability race, announcing this week that it will eliminate tuition for students from families that make less than $60,000 a year and replace loans with grants for students from families with incomes of $100,000 or less. The university will, however, introduce work-study for first-year students, ending a long-standing "no-work" rule for freshmen. The move represents a 20 percent increase in Brown’s financial aid budget to more than $68 million and an increase in the school’s endowment payout rate for financial aid from 5.5 to 5.89 percent.

Turning up the Heat on Endowments

Ben Miller — Tue, 29 Jan 2008 00:00:00 -0500

As the old adage goes, you reap what you sow. For many years colleges and university endowments, which receive very advantageous government tax breaks, have grown at extraordinary rates. Now, two high-powered senators are starting to ask questions about just what these wealthy institutions have been doing with their funds. While we applaud Congress’ efforts, we are afraid that too much of a focus by the Senators on tuition, rather than low-income student access, could lead to more improperly tilted financial aid policies — and an increasingly bifurcated educational system.

[slideshow]What prompted this latest attention to school wealth was the release of the 2007 Endowment Study by the National Association of College and University Business Officers. Going beyond the massive returns already disclosed by individual colleges, the study found that schools with endowments over $1 billion earned an incredible 21.3 percent rate of return for the 2007 fiscal year, only slightly more than the 19.3 percent return for colleges with endowments between $500 million and $1 billion. Even in aggregate, the 785 schools surveyed reported an average return of 17.2 percent.

Despite the massive gains, the study also found that spending from endowments did not keep pace — schools with endowments over $500 million had a spending rate of just 4.4 percent, while the sample as a whole averaged just 4.6 percent. Both numbers are beneath the previous year’s figure and fall well beneath the 5 percent spending rate standard required of other private tax-exempt foundations.Not to mention the 6 percent figure that used to be required of other private tax-exempt foundations prior to 1979.

The study’s findings did not take long to spur Congressional action. That same week, Senators Max Baucus (D-MT) and Chuck Grassley (R-IA), the Chair and Ranking member, respectively, of the Senate Finance Committee, sent a letter to the 136 colleges with endowments over $500 million. Among a litany of requests, the Senators asked the colleges to provide data on stated versus actual tuition rates, how endowment resources are used for financial aid, what kind of low-income recruitment efforts are taking place at the university, and how much of endowments are restricted. Most telling, though, was the Senators’ request on the endowment spending rate, which included the line, "If either the actual and/or targeted payout is below 5%, please explain how this meets the needs of the current student body."

As strong supporters of a 5 percent spending requirement, we at Higher Ed Watch are heartened by the Baucus/Grassley letter. We are also glad to see the Finance Committee pushing forward on the issue after bringing it up in September. That being said, we are concerned that the Senators may use the right means for the wrong ends.

In the press release accompanying their letter, Baucus and Grassley couch their requests in terms of rising tuition and how endowments need to be used to help ease the cost of college. This is certainly an important goal, but it suggest an imbalanced focus on affordability over access. Both are important.

Solely requiring endowment spending for the sake of spending opens the door to policies mimicking the recent aid expansions to well-off families by Harvard and Yale. As we noted two weeks ago, these policies benefit not only a small group of applicants, and generally not the neediest. Even more troubling is the fact that Yale’s plan, albeit flawed, appears to have satisfied Grassley. He called the upper-income aid expansion "an example for well-funded schools to do the same." A willingness to be sated by policies that use spending on wealthy students could set an unwelcome precedent. Instead, it would be better if other colleges with large-endowments followed older policies that eliminated contributions for families below a certain income.

The Senators, meanwhile, should note a recent study in the Journal of Blacks in Higher Education. Looking at Pell Grants, an imperfect but useful measure of low-income students, the study found that the number of Pell recipients actually dropped at many prestigious institutions from 2004 to 2006 — a disconcerting trend given their already low numbers. Stanford, for example, saw a decline in its percentage of students receiving Pell Grants from 14.2 percent to 12.6 percent, while Yale dropped from 10.5 percent to 9.4 percent. As Tom Mortenson, a scholar who conducted his own study of low-income access told the Hartford Courant, "Yale seems to think its mission is to create Presidents of the United States."

The best solution for Grassley and Baucus would be to shift their focus away from the generic catch-all phrase "tuition reduction," and instead emphasize the need for schools to take more pro-active, demonstrable measures to "prepare, recruit, enroll, and retain low-income students." This is a more clear-cut goal that builds and expands on existing aid policies that are targeted to the population most sensitive to the price of higher education. It also would discourage schools from simply opening up their coffers to the richest students.

Society forgoes revenue to give colleges the tax breaks that helped boost their endowments to massive sizes. It's time that those funds be put toward those students that will benefit from them the most.

Minority Recruitment: Athletics Success, Admissions Failure

Lindsey Luebchow — Wed, 23 Jan 2008 15:00:00 -0500

Diversity and minority recruitment are hot button words in most four year college admissions offices. There's congratulations when enrollment demographics show greater racial diversity and consternation when minority numbers drop.

But are college admissions office recruitment efforts working? Colleges will, in a knee-jerk fashion, say: yes, look at our racial and ethnic percentages! College access for minorities is a reality here! But how much is minority recruitment in admissions offices really contributing to the diversity of college campuses?

Unfortunately, at some Division I schools, not much. The black-white diversity on many campuses is not always the result of better minority recruitment. It’s often the result of athletics, and in particular, football.

Inside Higher Ed analyzed data from the NCAA and found that at 46 colleges (of the almost 330 colleges that participate in Division I athletics) athletes comprise at least a third of the black male student population. At 96 schools, athletes comprise at least 20 percent. Compare that to the percentage of all male students who are athletes: 3 percent.

The concentration of athletes in the black male population at public universities in predominantly white states and at smaller elite institutions with high admission standards is particularly striking. For example, at Oregon State University, 46 (35 football) of 122 black male undergraduates, or 38 percent, were athletes. At Wake Forest University, 69 (53 football) of 128 black male undergraduates, or 54 percent, were athletes.

What’s troubling about these statistics isn’t the large number of black student-athletes; it’s the low number of black non-athletes. Minority athletic recruitment is a well-oiled machine, and coaches do a great job recognizing potential in black athletes and providing them with a path to access higher education. (Of course, the issue then becomes, are these schools actually treating these players like students and supporting their academic development, or are they using them as professional money-makers?)

The problem arises when athletic recruitment is used as a substitution for minority recruitment in the non-athlete student population. An admissions office can tout the racial diversity of its student body as a sign of minority recruitment success when in reality it is simply masking its own failures with the athletic department’s success.

This "masking" could become a strategy at schools with large endowments who—in response to criticism from Higher Ed Watch and Congress that they are hoarding their wealth—have been promising to spend more of their money on efforts to increase both socioeconomic and racial diversity. When these schools report their diversity numbers without mentioning how many of their minority students were recruited for athletics, we don’t get a true picture of whether their academic minority recruitment strategies are producing results.

Unfortunately, the NCAA does not collect data from the Ivy League because they don’t give athletic scholarships, so we don’t know the percentage of black males who are athletes at some of the wealthiest schools. But it’s likely that their student populations are similar to other top-tier, wealthy schools like Stanford, Duke, Northwestern, and Notre Dame.

It’s important that schools are held accountable for their recruitment of non-athlete minorities. Many young black males believe that their only path to success is through athletics. If colleges don’t actively recruit them for academic achievement and potential, that perception becomes a reality in many high schools throughout the country.

And admissions offices should take note—there are lessons to be learned about recruitment from athletic departments. Coaches and their staffs are highly successful at finding athletic talent (and the potential for talent) in all types of places. They scour the country looking for students in communities across the socioeconomic spectrum, including in many places not normally paid attention to by the traditional higher education community. Admissions offices should communicate with athletic staff and consider how they can replicate successful recruitment models.

Minority recruitment takes money, time, and new ideas. Many wealthy schools are promising to revamp their recruitment efforts—we just need to make sure those efforts are coming from both the admissions office and the athletic department.

Roundup: Week of January 14 - January 18

Ed Policy — Fri, 18 Jan 2008 00:00:00 -0500

University of Phoenix Found Guilty of Securities Fraud, Must Pay $280 Million

A federal jury handed shareholders a major victory on Wednesday over the University of Phoenix, the largest for-profit university in the country. After only two days of deliberations, the jury found that the Apollo Group, the university's parent company, was guilty of securities fraud for withholding crucial information from investors and ordered it to pay approximately $280-million to the shareholders who had sued. In 2004, the company repeatedly failed to disclose in its Security and Exchange Commission filings and in its conference calls with financial analysts the existence of a U.S. Department of Education review that had blasted its student recruiting practices. That report, which found that the university had violated a federal law that bans colleges from compensating admissions officers on the basis of enrollments, became public only after the university reluctantly agreed to a $9.8-million settlement with the Department in which it denied any wrongdoing. The report's findings are also at the center of a separate False Claims Act lawsuit that has been brought against the university by two former admissions officers.

Elite Football Players Spend 45 Hours a Week on Sport, Study Finds

Between their sport and their studies, high-level college football players are working essentially two full-time jobs, according to a study released this week by the NCAA. The study found that student-athletes in the Football Bowl Subdivision, previously known as Division I-A, spent an average of 44.8 hours a week on their sport. While NCAA rules limit coaches to taking up 20 hours a week, players reported spending significant amounts of time watching game film, lifting weights, or engaging in other activities for their sport. In addition, players reported spending roughly 40 hours a week on academics, meaning that over 50 percent of their week was filled with either sports or coursework. Other sports, such as men’s golf and baseball, also exceeded the 40 hour mark, while women’s basketball and softball reported spending over 35 hours weekly. Not surprisingly, a majority of the athletes from those men’s sports indicated that they felt more like athletes than students. NCAA President Myles Brand both decried and defended the trend, noting "once you get past 40 hours, you’re really pushing it," but also saying that students studying music would be more likely to refer to themselves as musicians first.

College Endowments Earned Average Return of 16.9% in 2007

We’ve already reported on the strong endowment gains posted last year by Yale, Harvard and Stanford universities, but colleges overall earned a healthy 16.9 percent average return on their invested funds for the 2007 fiscal year, according to a survey released this week. A driving factor behind the solid growth, the highest average return in eight years, was international stocks, which earned a 28.3 percent return. The growth was most pronounced among the wealthiest schools, as institutions with $1 billion or more in their endowments earned a 21 percent return compared with 19.4 percent for endowments between $500 million and $1 billion. More troubling, however, is that the survey found that institutions spent only 4.4 percent of endowment assets on average, well below the 5 percent spending mark advocated for by Higher Ed Watch.

Ed Dept. Begins Holding Hearings on Regulations for Subsidy Cuts

Just as it did last week with TEACH Grants, the Department of Education began holding meetings this week to set the regulations governing the lender subsidy cuts and aid expansion passed by Congress last September. Among the biggest concerns addressed by the department was how to prevent for-profit loan companies from receiving benefits intended for non-profit lenders. The panel also addressed the question of whether the new regulations should pre-empt existing state laws governing college-lender interactions — a position supported by student-loan industry and some college lobbyists but opposed by Higher Ed Watch and other advocates for students.

Roundup: Week of December 10 - December 14

Ed Policy — Fri, 14 Dec 2007 00:00:00 -0500

Boehner Paid $110k in Legal Fees as Part of Insider Trading Investigation

The office of House Minority Leader John Boehner (R-Ohio) appears to be a target in an ongoing investigation by the Securities and Exchange Commission into allegations that Al Lord, the executive…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Flawed Reasoning on Endowments

Ed Policy — Wed, 24 Oct 2007 01:00:00 -0400

Sen. Hillary Rodham Clinton (D-NY) has followed the lead of Sen. Charles Grassley (R-IA) in pushing colleges and universities to make greater use of their endowments - echoing a proposal of the New America Foundation. Needless to say, associations representing wealthy colleges have not reacted favorably. Several…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Roundup: Week of October 1 - October 5

Ed Policy — Fri, 05 Oct 2007 01:00:00 -0400

Wealthy College Endowments Keep Increasing

The endowments of the nation's wealthiest universities continue to soar. Stanford University reported this week that its endowment grew by 23 percent to a staggering $17.2 billion in the 2007 fiscal…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Roundup: Week of September 24 - September 28

Ed Policy — Fri, 28 Sep 2007 01:00:00 -0400

Skirmishing Over Sallie Mae Deal Intensifies

Fighting intensified last week over the proposed buyout of the student loan giant Sallie Mae. A group of investors that had agreed to buy the company are now saying…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

A Way to Increase Socioeconomic Diversity at Elite Colleges

Ed Policy — Wed, 19 Sep 2007 01:00:00 -0400

The Senate Finance Committee appears to be moving forward with a proposal that would require wealthy colleges and universities to spend a minimum percentage of their endowments each year - a move which we at Higher Ed Watch strongly support. Private foundations, like the Bill & Melinda…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Roundup: Week of August 20 - August 24

Ed Policy — Fri, 24 Aug 2007 01:00:00 -0400

9.5% Program Cost Taxpayers $3.5 Billion Since 2001

From 2001 to 2006 the Department of Education paid out $3.5 billion under a subsidy program designed to guarantee nonprofit student loan providers a 9.5 percent rate of return, the

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.