Department of Education

A Call to Arms?

Early in his presidential campaign, Barack Obama called for eliminating the Federal Family Education Loan (FFEL) program and providing government-backed student loans entirely through Direct Lending. Obama's leading rivals made similar pledges during the primary campaign.

But ever since Obama locked up his party's nomination in June, we've heard little about this issue. In fact, the proposal was not included in the Democratic National Platform. And it did not receive any mention in press releases that the president-elect's transition team put out on his education agenda late last year.

At Higher Ed Watch, we assumed that, in the wake of the credit crunch, Obama's campaign staff had decided to put the proposal on the back burner. After all, colleges have been flooding into the Direct Loan program on their own. And with so many other daunting challenges facing Obama, we wondered whether this was a fight he would want to pick early in his presidency.

So imagine our surprise this week when we discovered -- after being tipped off by a loyal reader -- that the new administration has broken its silence.

A Closer Look at Title I Stimulus Spending

Yesterday we took a look at total stimulus funding per student as estimated by the House Education and Labor Committee's stimulus allocation data.  Today, we will take a closer look at the estimated 2009 Title I funding distributions per poor student in each state and the District of Columbia (Puerto Rico is not included in Census estimates).  Title I stimulus distribution is expected to be the same in 2009 and 2010.  To the untrained eye, Title I stimulus funding appears to be allocated randomly, with little connection to student poverty levels.

According to the House stimulus bill, distribution of stimulus Title I funds will be channeled through two Title I funding formulas: 50 percent through Targeted Grants and 50 percent through Education Finance Incentive Grants (EFIGs).  Both of these formulas target funds based on the number of poor students in a state or district as measured by the census.  We used 2007 census data for our analysis.

A First Look At Stimulus Spending

Since the release of the House Stimulus bill more than a week ago, education stakeholders have come alive with speculation about the distribution of funds.  Today, the Education and Labor Committee released Congressional Research Service (CRS) estimated stimulus allocations to local education agencies (LEAs).  The estimates include 2009 and 2010 allocations for Title I, IDEA, school construction, and total stimulus spending, all of which are based on FY 2008 Title I allocations.  In an effort to make this information as accessible as possible, we turned the CRS data into an excel spreadsheet and performed a few analyses using our Federal Education Budget Project (FEBP) data.

The average stimulus allocation per district can be found in the table below.

Our first analysis examined the stimulus allocation by state including the District of Columbia and Puerto Rico.  We summed all of the district allocations at the state level for both 2009 and 2010 and merged in select data from the FEBP database including total students, free and reduced priced lunch participation, special education participation, and Title I and IDEA allocations for FY 2008. 

Higher Ed Roundup: Week of January 19 - January 23

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...


Examining Fund Distribution for Title I

Here at Ed Money Watch and the Federal Education Budget Project (FEBP) we are always working to better understand the distribution of federal education dollars to schools and districts.  The Department of Education recently released a report that seeks to do just that for six federal education programs: Title I, Title II, Title III, Reading First, Perkins Vocational Education Grants, and Comprehensive School Reform (CSR).[1]

In general, the report gives a frank assessment of the degree to which federal programs effectively or ineffectively distribute funds to the schools and districts that most need them - those with large low-income populations.  The most interesting findings pertain to Title I, the largest source of K-12 federal funding created to provide low-income, high need students with supplementary academic services. 

Memo to Duncan: Investigate the University of Phoenix

Soon after Arne Duncan is officially sworn in as the new U.S. Secretary of Education, he should make a real and immediate break with the past by opening an investigation into allegations that the University of Phoenix (UOP), the country's largest chain of for-profit colleges, has deliberately and improperly attempted to manipulate its cohort default rate and, by doing so, put students in harm's way.

The allegations came to light last week when the details of a federal class action lawsuit brought in December by three former University of Phoenix students became public. 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 of students who drop out soon after enrolling without their "knowledge or consent." The institution then allegedly turned around and demanded immediate repayment from these former students of tuition owed.

These practices, which appear to violate the Higher Education Act, harm students by denying them more-generous loan repayment terms offered by the federal government.  The University of Phoenix "deprives students of the benefits of the terms on which they borrowed money (i.e. low interest and six month grace period in which to start paying) and saddles them with an immediate debt and payment terms which were never acceded to by the student by contract or otherwise," the lawsuit states. "Unsuspecting students are routinely bombarded with calls, letters and e-mails from UOP to collect tuition along with threats that refusal to pay will result in referral to collection agencies and negative reports on their credit."

A Last Look at Higher Education in the Bush Years

Today, Barack Obama will become the 44th president of the United States. But before turning the page, Higher Ed Watch takes a look back at the Bush administration's higher education record by the numbers. 


Higher Ed Roundup: Week of January 12 - January 16

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


Hidden in the Stimulus Bill

Last December Higher Ed Watch caught wind of back-room maneuvering on Capitol Hill to retroactively change the way the federal government sets lender subsidies in the guaranteed student loan program. Education Secretary Margaret Spellings sent a letter to key members of Congress asking them to quickly enact legislation to change the index used to determine the quarterly interest rate subsidy paid to lenders. The change would calculate the subsidy based on LIBOR instead of commercial paper

No action was taken...until now. The stimulus bill released today by the U.S House of Representatives Appropriations Committee would make the change. Specifically, it would recalculate the subsidy for last financial quarter (October through December 2008) owed to private lenders. And the change would also apply to all loans issued since 2000.

According to our estimates, the change would retroactively increase the subsidy paid to lenders by about 0.50 percentage points. Multiply that across hundreds of billions of dollars in outstanding loans and the extra payments could reach into hundreds of millions. Strangely, the Appropriations Committee reports that the cost will be only $10 million.

In our earlier post, we did not oppose the change, especially given the break down in the commercial paper markets. However, we expressed concern that the change sought by the Secretary (and the student loan industry) was being debated out of the public eye. For example,  while the Department of Education regularly publishes on its website important policy letters the Secretary sends to lawmakers, this particular letter is suspiciously absent from the site. We also noted that the proposed changes would be unprecedented, as loan subsidy changes have always applied to new loans, not previously issued loans. We argued that such a proposed change should be thoroughly and publicly debated by Congress, not buried in a huge omnibus, must-pass bill.

Education in the Stimulus

After weeks of speculation about education's place in the stimulus bill, details are finally emerging.  Today, the House Committee on Appropriations released a summary of the "American Recovery and Reinvestment Act of 2009." As expected, it includes funding for school modernization, aid to states for K-12 education, and a number of other programs from early childhood to higher education. It also includes an increase in the maximum Pell Grant.

Overall the proposed stimulus bill includes $550 billion for targeted programs and $275 billion in tax cuts.  We calculate that of the total $825 billion in the stimulus bill, at least $68 billion is dedicated to education-related programs. While this is a small proportion of the overall total, it is a massive amount of new funding for education.

Here are some of the proposals included in the bill that distribute funds to education over two years.[i]  Appropriations for FY 2008, where available, are provided in parentheses:

21st Century Classrooms