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?

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?"

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.

(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.

[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.

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.

[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.

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.

 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.

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: