Obama: Raise tuition, lose federal aid

College affordability was the theme of President Obama’s speech at the University of Michigan yesterday. He called for spending more on Perkins loans and work-study programs — going from $3 billion now to $10 billion  – but only at colleges and universities that provide “value.” Students at colleges that raise tuition could lose access to loans and work-study jobs.

In addition, the president’s plan (pdf) includes a $1 billion “Race to the Top for college affordability” and a $55 million “First in the World” competition to encourage productivity innovations, reports the Washington Post.

Higher education — including community colleges and lifelong learning for workers — is “an economic imperative,” Obama said. While he proposed increasing tuition tax credits and keeping interest rates low on student loans, he said that’s not enough. “Look, we can’t just keep on subsidizing skyrocketing tuition.”

So from now on, I’m telling Congress we should steer federal campus-based aid to those colleges that keep tuition affordable, provide good value, serve their students well.  (Applause.)  . . . If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.

If “provide good value” and “serve their students well” means anything, it means the federal government will monitor graduation rates and employment outcomes, as well as tuition, for the entire higher education sector. Currently, “gainful employment” rules, which monitor former students’ earnings and ability to pay back loans, cover only for-profit colleges and community college vocational programs.

Following the speech, Molly Corbett Broad, president of the American Council on Education, issued a statement saying there’s concern that the proposal would “move decision-making in higher education from college campuses to Washington, D.C.”

Sen. Lamar Alexander, R-Tenn., a former education secretary, said the autonomy of U.S. higher education is what makes it the best in the world, and he’s questioned whether Obama can enforce any plan that shifts federal aid away from colleges and universities without hurting students.

“It’s hard to do without hurting students, and it’s not appropriate to do,” Alexander said. “The federal government has no business doing this.”

President Obama also touted college “report cards” showing college costs and how well graduates do in the job market.

The U.S. Education Department and the Consumer Financial Protection Bureau are working on Know Before You Owe, a financial aid shopping sheet that will let future students estimate their debt, monthly payment and likely ability to repay loans. Parents and students also have requested a breakdown of college costs and information on repayment rates for graduates at each college.

Repayment study left out blacks

A U.S. Education Department analysis on the relationship between race and repayment of student loans left out black students, skewing results used to justify the gainful employment rule, reports Inside Higher Ed.

For-profit colleges, which enroll many minority, low-income and older students, argue the high-risk demographics explain their students’ higher default rates on student loans. Not so, said the department in June, concluding that only 1 percent of the variance in repayment rates could be explained by the racial composition of enrollment. Sorry, never mind.

But by failing to count black students, the study understated the impact of race: the actual variance at for-profits is 20 percent over all, and 31 percent for four-year institutions, the department said in the December filing.

Eduardo Ochoa, the department’s assistant secretary for postsecondary education, said “accurate figures would have had no impact on the final regulations.”

Interesting.

The Association of Private Sector Colleges and Universities, the for-profit trade group challenging the gainful employment rules, charges the new figures show that “schools that enroll a higher percentage of minority students are more likely to fail the department’s repayment test.”

President Obama talked about defunding colleges that raise tuition in his State of the Union speech, writes Andrew Kelly on the Enterprise Blog.  That means shifting “some Federal aid away from colleges that don’t keep net tuition down and provide good value,”  according to a White House blueprint (pdf). Deciding whether a college is providing value for the money will require collecting gainful employment data on all higher education sectors, writes Kelly.

Obama’s college confusion

President Obama is confused about his college goals, opines Rick Hess. The president wants more Americans to earn college degrees and everyone to get at least a year of postsecondary education. But his administration is trying to shut down for-profit colleges, “the only institutions eager to help fulfill his grand ambitions.”

Obama’s Justice Department is suing Education Management Corp., the nation’s second-largest for-profit college company, charging it violated federal law by paying recruiters based on students enrolled.  Obama’s Department of Education has pushed “gainful employment” regulations that could “stifle for-profit institutions whose graduates don’t earn enough.”

Between 2000 and 2009, for-profit institutions increased enrollment by 300 percent, while public colleges and universities grew by 27 percent. For-profits have rapidly grown capacity and customized services for nontraditional students, even as public colleges and universities have shown little appetite for revamping established routines.

To meet “gainful employment” rules and reduce defaults, for-profit colleges will have to turn away bad risks, Hess writes. For example, blacks and Hispanics are more likely to enroll in for-profit colleges. Overall, 54 percent of students in for-profit two-year colleges are classified as “high-risk,” compared to 36 percent in community colleges.

Graduates of for-profit college programs that last two years or less, report a 50 percent increase in annual income, according to U.S. Education data, Hess notes. Of course, community colleges could provide the same boost — if students could get in and get the classes they need.

Unfortunately, where for-profits are growing like kudzu, community colleges are turning away students. In California, for instance, the community college system turned away 140,000 potential students this year.

Why would financially pressed community colleges turn away students, given that more students bring more dollars? . . . California’s community colleges cost students $1,080 per year, but they also cost the state another $5,000 in subsidies. When those state subsidies aren’t forthcoming, community colleges slam the doors on would-be students.

It’s the for-profits that have a selfish, practical incentive to find ways to add students, even those with families, obligations and unpredictable schedules. Of course, this aggressive competition can result in unseemly, unsavory or outright fraudulent behavior — but you’d think a president championing post-secondary access would be a lot less willing to toss out the baby along with the bathwater.

Obama is trying “to drive a car with one foot on the gas and one foot on the brake,” Hess writes.

We need for-profit colleges, adds New York Times columnist Joe Nocera. State universities are too expensive for poor and working-class students. Community colleges are too crowded.

The for-profits can offer class times that are convenient for students, rather than for professors. They can offer online classes, which many traditional universities have been reluctant — or unable — to dive into. They pay professors to teach, not conduct research. A well-run for-profit college could teach its nonprofit counterparts a thing or two about efficiency and innovation. That’s the part of the profit motive that grades well.

Nocera endorses two ideas floated by Robert Silberman, CEO of Strayer Education. Force the for-profits to share in the losses when students default and set up a national test to screen out students who lack the skills to attend college.

Better measures of success

Community colleges have been judged by the graduation rates of first-time, full-time, degree-seeking students, even though they’re the minority on campus. To evaluate colleges’ performance, the U.S. Education Department named a group of policy experts to develop new measures of success that include the academic and employment outcomes for part-timers, returnees and transfers, reports CollegeBound.

The Committee on Measures of Student Success released its draft report last week.

Changes in reporting student outcomes are needed to take into account the broad mission and multiple role of community colleges, the committee concluded.

For instance, students often see community college as a stepping stone to a four-year institution and transfer before getting a degree. Also, workers come to campus to take a few classes to upgrade their skills. And more than half now attend part time.

The federal Integrated Postsecondary Education Data System (IPEDS) reports graduation rates only for full-time students. Students who transfer to a four-year college or university before completing an associate degree are considered drop-outs.

Among the preliminary recommendations:

-Report graduation rates of part-time, degree-seeking students;
-Distinguish between remedial and nonremedial students in IPEDS graduation rates;
-Create a reporting category that reflects students who transfer to other institutions;
-Voluntarily collect, disclose, and report measures of student learning and employment.

Still deadlocked on employment outcomes, the committee will meet again, reports Inside Higher Ed.  Some members want to require college to report graduates’  employment and salary; others — “especially those representing two-year institutions” — did not.

The federal gainful employment rule issued in June is intended to evaluate whether students in vocational programs actually find work in their field and earn enough to pay off their student loan debt. While it applies to certificate and non-degree programs at community colleges, it has not been applied to liberal arts degrees or other programs that are not strictly vocational in nature.

“I think this is weak,” said Harold Levy, a former New York City schools chancellor and managing director of Palm Ventures, who led the fight for more data collection and disclosure on students’ job prospects. “This is not asking for much. This is not asking for anything terribly useful.” Palm Ventures has invested in for-profit colleges, and many for-profit college advocates are in favor of applying the gainful employment rule to a broader range of institutions.

The gainful employment rules makes sense for students in job training programs, but not for liberal arts students, said Wayne Burton, president of North Shore Community College, in Massachusetts.

The ‘gainful employment’ debate

New York Times’ Room for Debate looks at how to regulate for-profit career colleges.

National Journal’s Education Experts also are debating the “gainful employment” rule.

Where is the WalMart of higher ed?

The “gainful employment” debate has missed a larger issue, writes Matt Miller, a Center for American Progress fellow, in a Washington Post op-ed. College costs too much.

Soaring student loans unintentionally subsidize practices by both for-profit and not-for-profit colleges that drive the cost of college up.

. . . The federal student loan system subsidizes (1) fat and happy faculties and fancy amenities at traditional nonprofit colleges, as well as (2) hefty earnings at for-profit schools which, after lowering the cost of delivering education, find themselves able to pocket the savings instead of passing them on to the student/consumer.

For-profit educators should use “innovative learning technologies” to lower costs while boosting quality, Miller writes. They can create the “WalMart of higher education,” which will be good for shareholders. Or they can remain in the political doghouse.

Judging colleges by outcomes

Yes, gainful employment rules were watered down in response to the for-profits’ huge lobbying campaign, writes Ed Sector’s Kevin Carey on Brainstorm.  But this is a huge step toward accountability for all colleges.

For half a century, the federal government has been handing out untold billions of dollars to colleges with no real quality-control mechanism other than “if you’re accredited by someone, somehow, we trust you.” Now, for the first time, it has decided to judge colleges not by their inputs and processes but by what actually happens to their students after graduation. And if student outcomes aren’t good enough—if they can’t pay back their loans on time or can’t get a good job that provides a decent salary—then colleges won’t have access to massive amounts of taxpayer support.

. . . Once the Department of Education settles into this new role and establishes procedures for collecting data about employment outcomes, it will be hard to un-settle. Parameters can be adjusted and new methods of asking important questions about student outcomes can be developed.

This is bound to affect all colleges, Carey writes.

I agree. If the feds are providing loans and grants to college students who can’t repay the money, what it does it matter whether they enrolled in a for-profit, private nonprofit or state institution?

A compromise on ‘gainful employment’

Compromises tend to please nobody:  Critics of for-profit higher education say the Education Department’s “gainful employment” rule, announced yesterday,  is too weak, while the industry complains it unfairly cuts off access to student loans.

Under the new regulation (pdf), career training programs will have to show that  at least 35 percent of former students are repaying their loans (reducing the loan balance by at least $1 a year) or that the typical graduate’s annual loan payment does not exceed 30 percent of discretionary income or that the typical grad’s payment does not exceed 12 percent of total earnings.

“We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective,” Education Secretary Arne Duncan said.

Career colleges will get more time to comply: Those that miss the targets in the first year must report the data and write an improvement plan. After two years, they must warn students of high debt to earnings ratios. Only after three years would a program lose access to student aid.

For-profit education companies’ stock prices soared when the regulations were announced. That suggests the career colleges will be able to adapt without much pain. Some already are requiring new students to go through an orientation designed to screen out the unprepared and unmotivated. Others may lower tuition to improve students’ ability to repay loans.

Industry spokesmen still claim only Congress has the authority to limit access to student loans. In February, a bipartisan group in Congress voted to block the regulation, but the compromise may persuade legislators to let the Education Department set loan rules.

The original version of the rule called for a 45 percent repayment rate, “a debt-to-discretionary-income ratio of 20 percent or a debt-to-income ratio of 8 percent,” notes Inside Higher Ed.  Colleges faced an immediate eligibility cut-off.  The regulation included an intermediate “restricted” status that would have required colleges to cap enrollment and warn students of high debt levels.

In the final regulations, the restricted status has been eliminated and replaced with the “three strikes” rule, which department officials say is closer to its policies in other areas, such as on student loan default rates. Colleges would have to fail to meet each of the criteria for three years out of four. In the meantime, they would not face enrollment caps, though they would still have to tell students the first year that they missed the target and warn them about the program’s status after the second.

. . . Students have been allotted a longer time to pay off loans, so that the annual debt burden is lower: a 10-year term remains in place for certificate or associate degree programs, but bachelor’s and master’s degree candidates would have 15 years to pay off their loans, and other graduates would have 20.

Students’ default rates will be measured three and four years out of college, instead of starting in the first year, and those in government repayment programs won’t be counted as defaulters, even if they’re only repaying the interest on the loan.

Only 5 percent of the for-profit programs covered by the rules, and 1 percent of the public and nonprofit career programs would lose eligibility for  student aid, Education Department officials estimated.

Only the worst 1 percent will be cut off by 2015, predicts the Center for American Progress.

The final rule also gives the poorest-performing education programs significant time to comply with the rule in addition to eliminating the restrictions on dubious-but-not-ineligible programs. Colleges that fail to meet the metrics can continue to operate for three years without losing federal funds and without any cap on enrollment growth.

Education Trust called the compromise a “disappointment.”

Sen. Tom Harkin, the Iowa Democrat who’s lambasted the industry in a series of Health, Education, Labor and Pensions Committee hearings, called the regulations a “modest and important first step.”

Republicans John Kline of Minnesota, House Education and the Workforce chair, and Virginia Foxx of North Carolina, who chairs the subcommittee on Higher Education and Workforce Training, said the rule is a step in the wrong direction. “This punitive regulation piles more burdensome red tape” on career colleges, Foxx said. “The increasingly fragile economic recovery simply cannot afford another job-destroying federal regulation.”

One of the few who unreservedly likes the compromise (pdf) is Mark Kantrowitz of FinAid.org, who calls the final rule “a reasonable, thoughtful and responsive approach.”

If this rule is a first step, as many critics of career colleges called it, then what’s the next step?  Once the Education Department starts analyzing student outcomes, it could take a close look at community colleges, which have very low completion rates compared to for-profits’ two-year career programs. The three-year graduation rate is 58 percent at for-profit two-year programs compared to 21 percent at community colleges, according to the new Condition of Education report.

Of course, community colleges don’t have a significant loan default problem because tuition is heavily subsidized by local and state taxpayers: Few community college students need to take out student loans, though many more get Pell Grants. But community colleges are raising tuition to balance budgets, making it more likely students will need loans. And Pell Grants are under close scrutiny by budget cutters, who see costs exploding while graduation rates remain low.

For-profits accused of ‘astroturf’ campaign

For-profit college trade groups are running ads trumpeting black and Hispanic opposition to rules that would cut student loans and grants for career programs with high debt-to-earnings ratios and default rates. But other minorities strongly support the “gainful employment” rule, saying it will protect students from going into debt for degrees of dubious value, reports Bloomberg.

Most minority House members voted to let the rules go forward in February’s budget negotiations.

“The way the for-profits and their lobbyists point to their supposed care for and support of low-income students and people of color is, to me, offensive,” said California Representative Maxine Waters, a Democrat and member of the Congressional Black Caucus.

The Leadership Conference on Civil and Human Rights, a coalition of more than 200 U.S. advocacy groups for minorities and the poor, and the National Association for the Advancement of Colored People support the proposal, called the gainful employment rule.

The for-profit sector has lobbied strenuously against the regulation, generating a flood of comments that have delayed publication of the rule, notes Higher Ed Watch. “Mad Libs’ Career College Edition,” quotes a form letter signed by a student named Farnaz:

I am a career college student at [INSTITUTION] studying [PROGRAM]. [INSTITUTION] is providing me with the education and training necessary to obtain the job I`ve always wanted as a [CAREER]. The Department of Education`s proposed gainful employment rule could take this dream away from me and thousands of other students by denying us the federal financial aid to which we are entitled [EXPLAIN ANY OTHER CONCERNS YOU HAVE ABOUT LOSING ACCESS TO THE PROGRAM OF YOUR CHOICE AT YOUR INSTITUTION.]

Farnaz didn’t bother to fill in the blanks.

For-profits colleges find bipartisan allies

The Obama administration’s crackdown on for-profit career colleges faces bipartisan resistance, reports Fox News.

“Can you think of any other issue that former Speaker Nancy Pelosi and the current Speaker John Boehner agree on?” asked Lanny Davis, a former legal counsel to President Clinton (and a for-profit industry lobbyist). “The policy is so wrongheaded that it brings liberals and conservatives together.”

The Education Department is expected to release “gainful employment” rules this week that would deny federal student loans to career-training programs whose students run up high debts relative to earnings and high default rates.

“There seems to be a big urgency here to go after for-profit colleges who educate a high number of African-American and Hispanic people in our communities,” Harry Alford, the head of the National Black Chamber of Commerce, told Fox News. “And for some reason, it’s full speed ahead.”

For-profit colleges disproportionately enroll black and Hispanic adults who use federal grants and loans to pay tuition.

That’s why the regulation is opposed by members of the Congressional Black Caucus, among others, who were among 113 lawmakers who wrote Obama a month ago and urged him to back off, saying “the implementation of these new rules will be so burdensome and the projected impact so broad that many reputable schools, particularly those serving the most at-risk students, will be adversely impacted.”

The Education Department responds that the rule will “curb abuses by for-profit colleges. Far too many of these schools are saddling students with unmanageable debts, in exchange for largely worthless degrees.”

Kevin Chavous, an Obama supporter and former District of Columbia council member, calls for assessing the impact on low-income and minority students before restricting their access to for-profit career training.

Any proposal that would severely curtail the enrollment of minority, working class and low-income college students is shortsighted and must be stopped.

While for-profit colleges charge much more than community colleges, the graduation rate for two-year for-profit career programs is much higher. (Graduation rates are lower for for-profit bachelor’s programs.) Students who face community college wait lists may prefer to spend more on a for-profit program with immediate openings.