The Loan Defaults Are Coming--Here's What to Do

                                        By Jackson Toby

coins for college.jpgNo modern-day Paul Revere is taking a midnight ride to warn about this, but the defaults are coming. Many are already here. They are coming from student loans given to the wrong students for the wrong reasons. The portfolio of federally guaranteed student loans passed the one trillion dollar mark in early 2012, and it continues to grow. The portfolio consists not only of loans for students from low-income families currently in college but also of hundreds of millions of dollars of education loans taken out by students who graduated from college or quit before graduating that have not been fully repaid. Such loans were extended either by the Department of Education directly or by financial institutions like Sallie Mae and banks and guaranteed by the United States Treasury. The total size of this loan portfolio exceeds the total credit card debt of the American population.

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The Tuition Story That Never Dies

                            By Andrew Gillen

student-loan-programs.jpgSome commentaries on higher education appear year after year, almost unchanged. One of these hardy perennials is the story that tuition and fees don't come close to paying for the actual cost of educating college students. In his popular book, The Economic Naturalist, Cornell University economist Robert Frank claims that tuition payments cover only a fraction of the total cost of students' education. The Dartmouth College Fund defends what it refers to as a wacky business model: selling its product at a discount, and then--begging for money. Similar articles are here and here.

Last week The Chronicle of Higher Education ran one of these stories "Hey, Students, Your Education Costs More Than You Might Think," referring to Hamilton College.

First, some background. From the story:

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'The For-Profits Care More for Their Students'

                                         By Richard Vedder

Inside Higher Education has just released its second annual survey of college presidents on their views about major problems and challenges facing higher education. Over 1,000 presidents responded to the survey, from all types of schools, including over 50 for-profit institutions. To me the most interesting finding is that public and private schools have somewhat different top-level issues they ponder, and that the for-profit schools are clearly more student-centered in their concerns than the not-for-profits, a marked contrast to what to some is conventional wisdom.

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A Funny Book about Worthless Degrees

                                By Charlotte Allen

"Here are some [college] degrees that cost you roughly $30,000 in tuition, their much cheaper replacements, and the savings you'd realize:

                  Degree                                  Replacement                                        Savings

                  Foreign Languages                 Language Software                               $29,721

                  Philosophy                             Read Socrates                                     $29,980

                  Women's Studies                   Watch Daytime TV                               $30,000

                  Journalism                             Start a blog                                          $30,000

...Since none of these degrees help increase your employability, you might as well avoid these majors and do it on your own."

The above is an excerpt from one of the funnier paragraphs in "Worthless: The Young Person's Indispensable Guide to Choosing the Right Major" (Paric Publications), Aaron Clarey's hilarious primer for college students who would like to work as something other than nannies and theater interns after graduation.

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Why They Seem to Rise Together:
Federal Aid and College Tuition

It's called "the Bennett Hypothesis," and it explains--or tries to explain--why the cost of college lies so tantalizingly out of reach for so many. In 1987, then Secretary of Education William J. Bennett launched a quarter century of debate by saying, in effect, "Federal aid doesn't help; colleges and universities just cream off the extra money by raising tuition." Now Andrew Gillen, research director of CCAP--the Center for College Affordability and Productivity--has tweaked the data and produced a sophisticated "2.0" version of the hypothesis. It's filled with heavy math, game theory and terms like "inelastic fairly vertical curves." You probably won't read it. We know. But it's important. So here are some smart people who have read it, and have something to say: Peter Wood, Hans Bader, Richard Vedder, George Leef and Herbert London.

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Peter Wood: They Are Insatiable

Long before I knew it was called the "Bennett Hypothesis" I knew that colleges and universities increase tuition to capture increases in federal and state financial aid. I attended numerous meetings of university administrators where the topic of setting next year's tuition was discussed.

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Federal Aid and College Tuition" »

Is Investing in Community Colleges a Good Idea?

                                          By Charlotte Allen

obama-speech.jpgPresident Obama's fiscal 2013 budget contains an $8 billion program called the "Community College to Career Fund." It would encourage community colleges, in partnerships with employers, to train about two million workers for future jobs. Since there are about 1,045 community colleges in America, the program would amount to a grant--over three years--of a little under $8 million per institution. Not all the funds, however, would go directly to the colleges themselves; some would go to state and local governments to recruit participating companies, some to underwrite an online entrepreneurship training program, and some to underwrite paid internships for low-income community-college students.

Using federal grants, the colleges would set up "community career centers where people learn crucial skills that local businesses are looking for right now, ensuring that employers have the skilled workforce they need and workers are gaining industry-recognized credentials to build strong careers," according to a White House statement. The career centers would specifically train students for employment in health care, high technology, and "green" industries--areas expected, at least in the predictions of the Obama administration, to grow substantially over the next few years.

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For Crippling Debt, Why Not Try Grad School?

                                         By Charlotte Allen

student debt.gifThere's something even worse than undergraduate debt. It's graduate-school debt. According to the American Student Assistance website, which uses figures from such sources as the National Center for Education Statistics, the College Board, and the nonprofit Finaid.org, 60 percent of recipients of bachelor's' degrees borrowed to fund their education during the 2000s, with the average debt load per borrower on graduation close to $23,000 by 2007. By 2010 that figure had jumped to more than $25,000 per borrower, according to the Institute for College Access's Project on Student Debt.

Those numbers sound bad, but what if you go on to obtain a master's degree, adding another one or two years' worth of education to your resume? According to American Student Assistance, nearly half of those who obtained master-of-science degrees during the late 2000s borrowed to finance their schooling, and their average cumulative debt load for those two years was $29,975--on top of what they already owed for their bachelor's degrees. Of recipients of master-of-arts degrees, degrees that typically qualify their holders mostly for low-paying teaching jobs at community colleges and private high schools, 61 percent borrowed to finance their two additional years of education, with a per-borrower average debt of $29,975.

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More College Aid for Low-Income Families, Please

                                                By Peter Sacks

college campus.pngWhen individuals seek higher education, why should all of us have to pay? After all, individuals decide whether to seek a college degree based on their own calculations of expected costs and benefits. That taxpayers must bear the burden of financial aid to these individuals seems unfair.

Given the billions of dollars governments pay individuals to help finance their college expenses, taxpayers must be assured that their investment is not wasted.

In short, we would rather not be sucked dry to pay for C students -- whose weak academic preparation makes them unsuited for higher education -- just so they can party hard for four or five years.

In a policy paper released this week, Andrew Gillen, the research director at the Center for College Affordability and Productivity, says he has the solution to creating rationality in our messy and unaccountable financial aid system.

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'Cutthroat Admissions' at Elite Colleges?

                                     By George Leef

The Chronicle Review is notorious for publishing outlandish opinion pieces more in the nature of white-hot rants than well-reasoned essays. A good case in point is Professor John Quiggin's "A Vicious Duo" (September 16 - subscriber site), is one of the most overwrought pieces I've read there.

Quiggin, who teaches economics at the University of Queensland in Australia, contends that America is beset by the twin problems of rising inequality of income and "cutthroat admissions" at our elite colleges and universities. That combination allegedly leads to a "self-sustaining oligarchy." Whatever superficial plausibility his argument might have -- especially for people like himself who live outside the United States -- vanishes when you comprehend the following points.

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Does Student Debt Really Matter?

                            By Peter Sacks

IOU.jpgIn a recent essay in The Atlantic, Andrew Hacker and Claudia Dreifus lament that most students have to take out college loans. They write: "At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors."

While Hacker and Dreifus blame the universities for encouraging students to take on more debt to pay for lavish facilities and other non-educational amenities, others focus on student debt itself as perhaps the key barrier to college facing millions of students from families with low and modest incomes. Indeed, entire organizations have been founded on that very notion, such as the Project On Student Debt.

Analysts who belong to the debt-is-bad school of financial aid policy are correct in noting that student borrowing increased dramatically in the past decade, ballooning 128 percent to more than $96 billion, according to the College Board's annual survey of financial aid trends. On the other hand, federal grants and institutional grants mitigated the rising student debt. From 2000 to 2010, federal financial aid shot up 136 percent to more than $146 billion; and institutional grants rose 69 percent to more than $33 billion.

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For-Profit v. Non-Profit Colleges--Which Use More Federal Cash?

By Peter Sacks


Are for-profit colleges and universities getting a raw deal from the government compared to their more elitist peers in the private non-profit sector of American higher education?

Vance H. Fried, writing in a recent policy analysis brief published by the libertarian think-tank, the Cato Foundation, argues just that.  Fried is a former private-practice attorney, oil company executive, and investment bankernow a professor of Entrepreneurship at Oklahoma State University. He targets private non-profit colleges and universities as the beneficiaries of federal largesse, waste and inefficiency. 

"Undergraduate education is a highly profit­able business for nonprofit colleges and universi­ties," Fried writes. "They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate edu­cation, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry's high profits come at the expense of students and taxpayer."

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Fraud Up and Down Our Educational System

By Herbert London


In Frank Baum's The Wizard of Oz the Wizard says he wants an educated populace, "so by the power vested in me I will grant everyone diplomas." Welcome to the education system of 2011. Much of what we now observe comes right out of the Baum novel.

When Charles Eliot was president of Harvard, he was asked why there is so much intelligence at this college, He replied, "because the freshmen bring so much in and the seniors take so little out." My guess is if a university president were completely honest today, he might say the freshman bring almost nothing in and leave by taking nothing out.

The question is, if the society spends billions on primary, secondary and higher education, why is so little accomplished? There are many answers to this question, of course, but I would argue the overarching reason is fraud, fraud at every level in order to satisfy political demands.

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What's the Point of Academic Conferences?

By Mark Bauerlein

At research universities in the United States, most departments in the humanities have a travel budget that supports professional activities for their faculty members.  Most of it goes to help professors attend academic conferences and deliver a paper to colleagues and attend sessions as an audience member as well.  For a department of 30 people, the amount may run to $50,000 or more, enough to fund at least one trip by every individual who requests support.

From what I've seen of the conferences, though, the amount of genuine research inquiry that is shared and remembered is negligible.  Yes, some papers are strong, but more of them are thin, half-hearted, or hastily-composed.  Those that are strong are often too dense to follow, especially when they have to share time with three other papers at the panel.  This is not to mention, moreover, those sessions that are attended by less than ten people. 

No, the main purpose of the meetings, it seems to me, is to provide academics scattered around the country but in the same general field the chance to gather and re-connect.  The actual research preparation they put in before the meeting and the research effort they expend during it are minimal. They have enough general knowledge of the panel topic to be able to listen with some understanding to the deliveries and formulate a question.  Their own papers may be part of a larger project, and the activity of composing and presenting a conference version of that part is, though helpful, often a last-minute composition to fill 12 minutes at the podium.

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Where's All the Money Going?

By Andrew Gillen, Matthew Denhart, and Jonathan Robe

As they defend tuition increases to irate students and parents, college and university leaders often argue that tuition does not cover their costs and that they are therefore subsidizing their students' educations. Take, for example, what Southwestern College President Dick Merriman said in an October 2010 piece for The Chronicle of Higher Education

"None of you, not even that very rare student who receives no financial aid from the college, will come close to paying what it is going to cost the college to educate you."

However, this is emphatically not the view held by the students, parents, and many taxpayers who are paying the tuition bills. After paying thousands of dollars, students are often taught by adjuncts or stuffed into classrooms with hundreds of other students. This quite reasonably leads them to ask, "Where is all of our money going?"

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How the Feds Plan to Violate Student Privacy

By Charlotte Allen

Though civil liberties groups have been slow to react, there's a disturbing aspect to the Education Department's new "gainful employment" rules pertaining to for-profit colleges: Starting in 2015, the Social Security Administration (SSA) will start turning over its data on the earnings of individual students at career colleges to the Education Department. This is so it can assess whether the students' ratio of federal student loan debt to income complies with other gainful employment regulations issued by the department. Under the new rules, one of the metrics for deciding whether students can use federal aid (grants and loans) to attend a post-secondary vocational program is whether the average debt-to-income ratio of the school's graduates is no higher than 12 percent (or 30 percent of the graduate's "discretionary income" as defined by federal rules).
The idea behind the debt-to-income rule is to assess whether the graduates of vocational programs--including programs offered by community colleges and other nonprofit institutions as well as career colleges--are actually getting the jobs for which their training at tax-subsidized expense is supposed to be preparing them. But the SSA-Education Department arrangement--the result of an unprecedented agreement between the two federal agencies--raises serious problems related to both the privacy of the students involved and the transparency of the process of determining whether a school has failed to meet the debt-to-income threshold.
Most troubling is the involvement of the Social Security Administration--and also, indirectly, the Internal Revenue Service, which supplies earnings information to the SSA based on tax returns. After all, the SSA is supposed to be in the business of calculating Social Security benefits, not monitoring compliance with laws that have nothing to do with Social Security. The IRS, in turn, is supposed to be in the business of collecting taxes, including Social Security taxes, not helping the Education Department decide whether the University of Phoenix is in compliance with new gainful employment rules. Both agencies, the IRS in particular, are bound by strict laws forbidding the sharing of data except as explicitly permitted by federal statute, such as the one that allows the SSA to use IRS-supplied tax-return information along with filings by employers to determine benefits. Taxpayers have historically relied on the nearly complete confidentiality of their tax-return information as an incentive to honesty in reporting. Controversial provisions in the 2010 "Obamacare" health law that turn the IRS into an enforcement agency for compliance with the law's individual insurance mandate have raised serious and justifiable objections. Now, thanks to an SSA-Education Department partnership that has no clear statutory authorization, both the SSA and the IRS will be complicit in an arrangement that has nothing to do with either agency's statutory mandate.

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Gainful Employment: A Detriment to Competition

By Daniel L. Bennett


Today the Obama Administration unveiled its long-anticipated and highly controversial final gainful employment (GE) regulation  that ties program eligibility for federal student aid to new metrics that are based on student loan repayment rates. Under the new GE rule, a vocational program can qualify as leading to gainful employment and remain eligible for federal aid if one of three metrics is met:

1.     At least 35% of former students are repaying their loans;

2.     The estimated annual loan payment of a typical graduate does not exceed 30% of discretionary income;

3.     The estimated annual loan payment of a typical graduate does not exceed 12% of total earnings.

The rule requires that a program fail to meet one of the three metric three times in a four year period before becoming ineligible for federal student aid, with 2015 being the first year that a program can lose eligibility. Education Secretary Arne Duncan defended the metrics as a "perfectly reasonable bar...that every for-profit program should be able to reach. We're also giving poor performing for-profit programs every chance to improve. But if you get three strikes in four years, you're out."

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A Minor Cut at Harvard Is an Amputation at UNLV

By Jonathan B. Imber

In 2008, when all the writing was on the wall but the wall was still believed to be surmountable, the various strategies to rescue the nation were largely about putting more money into the economy.  Now, up against the wall, the strategy is about taking it out.  That counter-movement has begun to reveal a few things that strike us all as very unpleasant, regardless of which political side we may take.  Because public and private universities are beholden to very different kinds of constituencies, it is particularly painful to watch, for example, as Harvard recovers from its losses with cuts that are more akin to losing a little weight than losing a limb, while at the same time such public universities as the University of Las Vegas at Nevada struggle with whether to retain some departments in the liberal arts, including philosophy, anthropology, sociology, and women's studies.

It is easy to see how a triumphal politics on the left or the right can weigh in on all this.  In Harvard's case, it has been more publicly embarrassing than fiscally consequential that some of its more ambitious programs have had to be scaled back or delayed, including a large development project in the sciences in nearby Allston.   But Lawrence Summers, who has returned to Harvard after his stint in the Obama administration, is now feted in the pages of The Boston Globe as a popular and inspiring teacher. This follows his earlier departure as President of Harvard for making remarks confirming that no university administrator should ever risk high position for the sake of personal integrity and candor.

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Why University Presidents Are Clueless About the Real World

By Richard Vedder


New Pew Research Center data show that a large majority of Americans think U.S. colleges and universities offer only fair or poor value for the financial cost -but college presidents strikingly disagree, with a majority of them thinking college offers at least a good value (though college presidents are overwhelmingly pessimistic about the quality of American higher education compared to the world ten years from now). Similarly, a majority of Americans question whether college is truly affordable any more, a view that most college presidents do not share. More generally, people in the academy have views widely divergent from the mainstream of the American population.

Turning to college presidents, I think a lot of this attitudinal divide relates to the non-market environment in which colleges operate. How do you become a successful college president? You raise lots of money, which you then use to bribe the various constituents in the university community to keep them happy. The faculty you bribe with low teaching loads, good fringe benefits, and perhaps a nearby parking place. Your fellow top administrators whose support is vital you bribe with not only good salaries, but also lots of assistants who do much of the heavy lifting associated with the job. You bribe the students by giving them nice recreational and dorm facilities, and reach an implicit bargain with them to not demand much academically (hence grade inflation) and to largely ignore their hedonistic bouts of alcoholic and sexual excesses. You bribe the alumni with decent football and basketball teams and a nice campus facility where they can hang out. You bribe the trustees with whatever idiosyncratic whim they want. In short, you spend money to keep a narrow group of people associated with the Ivory Tower happy.

Contrast that with business leaders. They are motivated by profits, maximizing the gap between revenue and costs. To increase revenues, they must please vast numbers of persons with new or improved products. They also enhance profits by reducing costs, raising productivity so they can do more with less. They reward subordinates who further these goals with bonuses, stock options, etc.

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Why College Still Matters

By Peter Sacks                    

A growing chorus of critics says a college education is finished as the ticket to economic success and a middle-class life.

The economy of the future, these critics suggest, actually requires far fewer college-educated citizens, because the U.S. economy is generating tens of thousands of jobs that require little or no higher education. 

In essence, the critics of American higher education policy are challenging the long-standing belief that all U.S. citizens should have a decent chance to pursue a college degree, regardless of what kind of neighborhood they grow up in, what kind of schools are available to them, or whether their parents have university degrees.

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The One Trillion Dollar Misunderstanding

By Jackson Toby


At the beginning of 2011 the portfolio of the federal government for education loans was nearly one trillion dollars.  The portfolio consisted of loans for students currently in college extended either directly by the Department of Education or loans from financial institutions like Sallie Mae and banks with repayment guaranteed by the United States Treasury as well the education loans of students who had graduated from college or had quit before graduating but had not been fully repaid.  Its size exceeded the credit card debt of the American population in early 2011 and it continues to grow; whatever part remains unpaid contributes to the national debt.

An optimist views the large portfolio of student debt as "no problem."  After they graduate, nearly all students will pay off their debts gradually, although they may have to live frugally in order to do so.  A pessimist views student debt as likely to be a permanent drain on taxpayers, as upwards of 40 per cent of borrowers will ultimately default on their loans or die before paying them off.  Meanwhile the portfolio of federal student loans will continue to grow. 

This pessimistic prognosis for student loans rests on the assumption that loans were often given to the wrong students for the wrong reasons and still are.   Pessimists believe that the existing student loan program has become unsustainable, as the subprime mortgage lending program was unsustainable, because of imprudent risks.  The risks were imprudent because of two main misunderstandings:

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Should University Flagships Go It Alone?

By Peter D. Salins


Overshadowed by the big political confrontation in Wisconsin is a higher-education story of note: The highly regarded "flagship" Madison campus of the University of Wisconsin seeks permission to secede from the rest of the state public higher education system (yet remain under the state's oversight and subsidization).  While this is being justified now by the state's budgetary problems, it is an aspiration long held by Madison and some of its sister "flagships" in other states. Is flagship independence a good idea?  Probably not, but in each state it depends on how its public higher education institutions are currently managed, and what any new-found autonomy might permit or restrict.

Two quite distinct issues are embroiled in this debate. One --the more important, I think--is the degree of financial and managerial autonomy that any state campus is allowed.  The other is the coherence and consistency with which state campuses are managed and financially supported as a group.  My views are colored by my ten-year experience as the chief academic officer of the State University of New York System, the largest in the nation, and one that manages, under one administrative roof,  64 diverse institutions, from community colleges to research universities.

I learned soon after I began as a SUNY system official how desirable it was to give the state's public campuses enough administrative freedom to effectively meet their local responsibilities and balance their budgets.  After all, there was no way that a small staff in Albany could possibly micro-manage 64 widely dispersed campuses with different missions, thousands of faculty and staff and more than 450,000 students.  Thus, after 1997, every SUNY campus, not Albany, was given the last word on how its budgetary resources were spent, how its faculty and staff were deployed, and how it delivered education in the classroom.  But, giving campuses a greater measure of administrative freedom only worked because we also held campuses accountable to clear-cut, mutually agreed upon, operational academic and financial goals and metrics. 

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The Campus Left's Nostalgia Party - RSVP

By Peter Wood

way we were.bmp

I head an organization, the National Association of Scholars (NAS), that is often accused by its critics on the academic left of nostalgia for days when higher education was an exclusive club for the privileged.  The accusation is false.  NAS focuses on the enduring principles of the university:  rational inquiry, liberal learning, and academic freedom.  True, there have been points in the past when these principles have been better observed than they are today, but our interest is in the future of the university, not its past. 

Thus I was eager to learn more when I heard that a group of professors had come forward to promote an ambitious "Campaign for the Future of Higher Education."  Alas, my excitement proved premature.  It turns out that the Campaign is mostly reactionary.  It was put together by an alliance of groups, mostly unions, fearful of current trends and desperate to halt developments that may well lead away from a recent epoch in which higher education was indeed "an exclusive club for the privileged."  The "Campaign for Higher Education" might be better titled, "The Way We Were."

In January the California Faculty Association (CFA), a faculty union, convened a meeting of seventy faculty members, representing several other unions and other organizations, including the AAUP, the American Federation of Teachers, and the National Education Association.  The Chronicle of Higher Education reported under the headline, "Faculty Groups Gather to Craft a United Stand on Higher-Education Policy," that the attendees agreed to take back to their memberships a document drafted by the CFA that "outlines a set of principles it believes should undergird higher-education policy over the next decade."  AAUP president Cary Nelson indicated that the principles would be presented publicly in April in a series of teach-ins.

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Arne Duncan Succumbs to March Madness

By Robert Weissberg


The cosmology of ideas to fix America's supposedly troubled higher education abound. Some resemble comets--small amounts of rock and frozen toxic gas that periodically appear, light up the sky and then vanish only to reappear decades later. Today's comet-like elixir is directed at the NCAA's Division I men's basketball tournament ("March Madness").

The facts are simple enough. First, basketball players are disproportionately African Americans (60%), especially among teams making it to the final four. Second, graduation rates of blacks are shockingly low, far below that of their white teammates. At Kansas State University, for example, all the white players are on the path to graduation compared to 14% of the black players. To be sure, a few teams (e.g., University of Illinois, Notre Dame, Vanderbilt) graduate all players and some graduate more blacks than whites (e.g., Boston University, Northern Colorado),  but the gap is generally large (91% vs. 59%) and is growing.

The typical inference is that universities are exploiting African Americans. Schools recruit these often underprivileged youngsters while the school profits handsomely from their contribution, their "workers" often leave school without a diploma. That a handful will have a brief professional career (and even then, rarely in the big bucks NBA) cannot justify the exploitation and, in a sense, the exaggerated lure of the NBA only adds to the dishonesty.

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Signs of Campus Dissent in Madison

By Donald A. Downs

Not surprisingly, the University of Wisconsin at Madison has been deeply affected by the important labor dispute that has consumed the state, its capitol, and the nation the last two weeks. Passions are high, especially over the part of Governor Scott Walker's budget proposal that will drastically limit collective bargaining by state employees covered by unions. The budget proposal also requires public employees to contribute substantially more to their healthcare and pensions. But the collective bargaining provision has generated the most heat.

Libertarian thinker Alvaro Vargos Llosa has remarked that Wisconsin's debate over collective bargaining is of "planetary" significance, while Walter Russell Mead of The American Interest claims that the standoff constitutes a "watershed" event in American history, as the nation vies over the size and scope of public finances.

At an overflow law school forum on the issue on February 23, I stated that the conflict is an example of what the great political scientist Samuel Huntington called "creedal passion" in American Politics and the Promise of Disharmony. Creedal passion involves the intense conflict that periodically erupts over which fundamental values will shape public policy and philosophy.  As Huntington wrote, "The history of American politics is the repetition of new beginnings and flawed outcomes, promise and disillusion, reform and reaction. American history is the history of the efforts of groups to promote their interests by realizing American ideals." In the Wisconsin case, the creedal debate concerns the proper balance and arrangement between the private and public sectors in an era of crippling debt.

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Every Professor an Entrepeneur?

By Charlotte Allen

What if all college professors were forced to be higher-education entrepreneurs, with salaries pegged to the number of students they attract to their classes? That's the model recently proposed by a Texas professor who styled himself "Publius Audax" on a Pajamas Media blog. Publius launched his proposal, he wrote, as the solution to a projected $25 billion budget shortfall over the next two years that is likely to hit the Texas higher education hard. Publius' argument is that his "entrepreneurial professor model," when coupled with other reforms would "harness the power and efficiency of the market" to make public higher education cheaper and better. The other reforms include abolishing tenure, eliminating state subsidies to public campuses, getting rid of "core curricula" (which nowadays are nothing more than pointless distribution requirements, and allowing private "charter colleges" (both nonprofit and for-profit) onto public campuses in order to provide more competition.

Hmm, my own undergraduate alma mater was founded by a highly successful entrepreneur, the railroad baron Leland Stanford. What if college professors were more like Leland Stanford and less like the brilliant but economically illiterate head-in-the-clouds types who taught at Stanford when I went there?

Here is how Publius' entrepreneurial professor model would work: All professors and lecturers would receive a base "living wage" of $30,000 plus benefits. Beyond that it would be up to the professors themselves to generate a "tuition-based bonus" for themselves consisting of 50 percent of the tuition income generated by students enrolled in their classes, "up to a maximum of 320 students (960 student hours)." All instructors would be allowed to teach up to eight classes a year. In order to gin up the price competition further, professors, department heads, and even entire colleges could offer tuition rebates to students, the money to come out of the professors' salary bonuses. Professors with ultra-large classes could hire teaching assistants---but the money would again have to come out of their salary bonuses. And to ensure that professors wouldn't game the system by handing out easy A's to all comers, there would be a strict grading curve. No more than 15 percent of students in any given class could receive an A-grade, and another 15 percent would have to either flunk or receive a D. Professors whose grades deviated from the curve would lose their bonus for every student whose grade exceeded the curve. This would not only keep the professors in line, Publius argues, but would "transform the campus culture, replacing partying with studying" as students scrambled to stay out of the bottom of the class.

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What Happens When College Is Oversold

By Richard Vedder

waiters.bmpAs I wrote here last week, newly compiled data shows that a great many college graduates have been settling into jobs that do not require higher education. The data, prepared and released by the Center for College Affordability and Productivity (CCAP), show that a majority of the increased number of college grads since 1992---some 60 percent-- are "underemployed" or "overqualified" for the jobs they hold. Thus we have one-third of a million waiters and waitresses with college degrees. Some 17 percent of the nation's bellhops and porters are college graduates. A new CCAP study From Wall Street to Wal-Mart: Why College Graduates Are Not Getting Good Jobs, released today along with this essay, carries even worse news: the proportion of college-educated Americans in lower-skilled jobs has more than tripled since the 1960s, going from 11 percent in 1967 to 34 percent today.

Why are more and more college graduates not entering the class of professional, technical and managerial workers that has been considered the main avenue of employment? Anyone who has read Charles Murray's great book Real Education (New York: Crown Forum, 2008) has good insights into why this problem has arisen. Truly, Murray argues, only a modest proportion of the population has the cognitive skills (not to mention work discipline, drive, maturity, integrity, etc.) to master truly higher education, an education that goes well beyond the secondary schooling experience in terms of rigor of presentation. Reading and comprehending 200- to 400-year-old literature is useful for advanced leadership -but difficult. Educated persons should read and understand Locke's "On Human Understanding" or Shakespeare's King Lear -they are insightful in many ways, but the typical person of average intelligence typically lacks both the motivation and ability to do so. Mastering complex forms of mathematics is hard -but necessary to function in some areas of science and engineering.

Following up on Murray, the move to get more college degrees creates a huge problem. The number going to college exceeds the number capable of mastering higher levels of intellectual inquiry. This leads colleges to alter their mission, watering down the intellectual content of what they do. Rather than studying advanced mathematics, physics or --as I did-- 18th century French literature in the native language, more students are studying business administration, communication skills, and doing vocational-school type work on the intricacies of health care provision or administration. Instead of five or 10 percent of students getting "A" grades, we give 40 percent or more. We have created a Potemkin Village -a few truly good universities that come close to meeting the former academic standards, but a vaster melange of institutions that are often neither "higher" nor even "education" in the classical sense, particularly since the typical student spends less than 30 hours a week on academics. Bottom line: too many people go to college.

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Why Caltech Is in a Class by Itself

By Russell K. Nieli

Caltech005.jpgOlder readers know how the leading American universities, which had risen to world-class status by the 1930s and 1940s, were upended by the traumatic campus events of the late 1960s and their aftermath. Riots and boycotts by student radicals, the decline in core curriculum requirements, the loss of nerve by university presidents and administrators, galloping grade inflation, together with the influence on research and learning of such radical campus ideological fads as Marxism, deconstructionism, and radical feminism all contributed to the declining quality of America's best institutions from what they had been in the middle years of the 20th century.

Added to these 60s-era trends (some of which have mercifully waned) came two further developments which are still very much with us today and which moved the elite universities further away from the pursuit of excellence and merit which was their greatest achievement after the Second World War: the competitive sports craze and the affirmative action crusade. To these two anti-meritocratic developments, we might add a third: the policy of granting huge admissions boosts to the sons and daughters of alumni -- a practice found almost nowhere else in the world and outside America would be likened to bribery or shady political payoffs.

Minding the Campus readers probably need little instruction on the corrupting effects of the racial balancing game played by almost all our elite universities. The typical African- American and Latino student who gets admitted to the most elite colleges and universities in the U.S. (median admit) has a substantially lower achievement record in terms of high school grades and SAT scores, not only than his white and Asian classmates, but even those white and Asian students at the middle-level of his institution's pool of rejected applicants. The academic achievement gap between the admitted white and Asian students and those designated as "underrepresented minorities" is often huge, in statistical terms often exceeding a full standard deviation (equivalent to a 600 vs. a 700 on each of the sections of the SAT exam).

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What Is Texas A&M up to?

By Peter Sacks

image001.gifSomewhere in America the president of a public university is getting hammered by the chairman of the board of regents. The hammerer---let's say he owns a chain of automobile dealerships - is arguing that the president must get faculty costs under control - or else.

"Admit it, John," the chairman says to the president. "Your faculty are a bunch of lazy, overpaid whiners. You've got six months to figure out a pay-for-performance plan, or start looking for another job."

A former physicist who understands well the hornets nest he's about to fall into, our beleaguered university president is left with little choice but to come up with a quick and dirty plan.

"Give me a spreadsheet," he orders his senior vice president for budget and planning. "I want every faculty member in this system to have a dollar value attached to his or her name, reflecting their net contribution to our bottom line. Then I want a faculty salary schedule to reflect that."

The president got his spreadsheet. A former physics colleague who was awarded a Nobel Prize some twenty years ago saw his salary slashed in half. Though he'd become a star teacher since his Nobel, his research grants had been dwindling for years. By contrast, there was the recent hire in the Construction Management program. She was a new Ph.D. who was already bringing in tons of industry money for "research." In contrast to the Nobel Laureate, her salary would shoot up 35 percent. Our university president could think only about what Albert Einstein once said: "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."

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College Is Cheaper Than in the Mid-1990s? No Way

By Andrew Gillen and Robert Martin

The annual release of Trends in Student Aid and Trends in College Pricing are big news in the higher education world, and rightly so. Since Department of Education data often take a year or two to become available, these reports provide the earliest and most comprehensive preliminary look at recent developments in tuition charges and financial aid. This year's two reports supposedly show that net tuition was lower in 2009-2010 than it had been in at least 15 years.

Sandy Baum (the main author of the reports) and Michael McPherson are puzzled by the apparent inconsistency between public perception and reality regarding net tuition increases, and ask "Why is it so hard for people to believe the numbers about declining net prices?"

The answer is quite simple. To begin with, as the College Board report points out, students and parents pay not just net tuition and fees, but room and board as well, and most of them find the price goes up each year. Even at the few institutions that guarantee the same tuition as long as students are continuously enrolled and making normal progress towards their degree, institutions manage to increase the net price students pay by increasing fees, room, and/or board.

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Kaplan University and the Short-Changing of Minority Women

By Robert Cherry

powell.jpgThe education of black and Hispanic women is very much at stake in the on-going controversy over for-profit colleges. A November 9th story in the New York Times by Tamar Lewin, "Scrutiny and Suits Take Toll on For-Profit Company," documented potential abuses found at Kaplan University, one of the schools that disproportionately enrolls black female students. Carlos Urquilla-Diaz a former Kaplan administrator, "recalled a PowerPoint presentation showing African-American women who were raising two children by themselves as the company's primary target. Such women, Mr. Urquilla-Diaz said, were considered most likely to drop out before completing the program, leaving Kaplan with the aid money and no need to provide more services."

The recruiting tactics of some for-profit colleges are not the only problem. There has been too much emphasis on increasing four-year graduation rates rather than offering alternatives, particularly occupational programs that lead to certification or two-year degrees. The strong evidence for this is summarized in an American Educator lead article, "Beyond One-Size-Fits-All College Dreams." Earnings among college graduates have become more dispersed, and earnings from many certificate and occupational two-year degrees have risen. As a result, more than 60 percent of those with two-year degrees make more than the lowest 25 percent of four-year college graduates. In this environment, cajoling weakly-performing high school students into focusing their goals on four-year degrees may not be in their best interest.

Many students are well aware of the hurdles they face in seeking four-year degrees. Some enroll in occupational programs but others seek four-year degrees by enrolling in private and public colleges that give them the best chance of reaching their goals. For black students, most identifiable are the Historically Black Colleges (HBCs) but there are many more colleges that serve this role. Black students graduate disproportionately from these schools. In 2006, 19.29 percent of all black female four-year graduates came from the HBCs. In addition, another 19.25 percent of black female graduates came from colleges where black women comprise at least 25 percent of female graduates. As a result, nearly 40 percent of black female graduates came from a small group of colleges that produce only 7.56 percent of all female graduates.

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Don't Pay Sticker Price, Part 2---the National Universities

By Peter Sacks

Read Part 1 here.

In examining the gulf between sticker price and real cost, let's consider the top 10 national universities as defined by U.S. News & World Report in its most recent rankings. Using U. S. Department of Education data, I compiled the average net prices that students from different family income groups would pay at the top 10 national universities combined.

Despite total sticker prices averaging more than $50,000 a year at these top 10 universities, net prices range from a low of $4,652, paid by students from poorest family income group, to a high of more than $35,000 paid by students from the richest category of family income.

These averages, however, mask the significant differences in net prices paid by poor and rich students at the individual institution. At Harvard, students from families in all income categories fare significantly better in terms of net price than they might at Harvard's competitors. Harvard's poorest students, whose parents earned $30,000 or less, paid net prices averaging just $2,170, significantly less than the average net price charged low-income students at all the Top 10 national universities.

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Don't Pay Sticker Price for College

By Peter Sacks

Jeffrey Selingo, the editor of The Chronicle of Higher Education, should have known better. He told ABC News: "students that maybe 10 or 15 years ago came from families who can easily afford to pay for their son's or daughter's education are now being forced to apply for financial aid." That sounds like an obvious statement on college costs, but it's wrong. The published prices of higher education are virtually meaningless. The far more important number is net price, which is the cost of attendance (tuition sticker price plus expenses) less federal, state and, especially, institutional grants.

Despite the water-cooler lamentations about the skyrocketing cost of college, both public and private universities have lower net prices today than they did in 1994. And the less money your family makes, the larger the discount is likely to be.

If your annual family income is less than $30,000, you can go to Harvard for $2,170 per year, and to Williams for $1,679. If family income is between $48,001 and $75,000 and you have your eye on Dartmouth, you are eligible for a discount there of almost $44,000 and may pay only $6,565 a year. And some discounts diverge wildly. Even with a discount of nearly $34,000 from sticker price, a Washington University of St. Louis student from an under-$30,000 family would pay more than ten times the amount than a similar student attending Williams.

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Who Pays the Hidden Cost of University Research?

By Charles Schwartz

Higher education in America is in financial crisis. In constant dollars, the average cost of tuition and fees at public colleges has risen almost 300 percent since 1980. Our best public research universities, like my own University of California (UC), are wracked with doubt: will they be able to continue their historic role as institutions with a vital public mission, or will they become "privatized," demanding ever higher tuition and therefore inevitably serving a more elite clientele?

Let me note some pointed comments by citizens outside the campus. A letter to the editor in the San Francisco Chronicle last March 9th said: "What the public college students (and their parents) in this state must understand is that the days of the taxpayers subsidizing their higher education are over, sad as that may be. ...The costs at all colleges and universities have risen dramatically over the last few years (much higher than the cost-of-living-index). ... Those of us in California who are taxpayers are having a difficult enough time paying our mortgages and for the education of our own children. It simply is not sustainable to expect that there will be free or substantially below-cost education provided on the backs of the state's increasingly dwindling number of taxpayers. ..."

A similar complaint is voiced in an article published by the Howard Jarvis Taxpayers Association, July 5, 2010: "As California faces an unprecedented budget crisis, students at California colleges have been asked to pay a greater share of the total cost of their education, most of which is still borne by taxpayers. ...[T]axpayers pay 60-70% of the cost of ... UC students' education, without even counting financial aid."

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Those Accountability Rules for Student Loans

By Andrew Kelly

This past Monday, the Department of Education proposed "gainful employment" rules that will regulate postsecondary vocational programs, primarily those offered by for-profit colleges, on the basis of their graduates' ability to pay back their federal student loans. Proponents of higher education reform should welcome this move, but not because it targets unscrupulous actors in the for-profit sector. More importantly, the initiative makes a rhetorically significant shift: it places postsecondary institutions and the economic value of the education that they provide at the center of discussions about student loans and college costs. It also adds a new and necessary dimension to the outcome data that the federal government can link directly to individual institutions of higher education.

The problem is not, as some critics would have it, that the gainful employment regulations overreach, but that they do not reach far enough. The current proposal singles out one set of postsecondary institutions for intense scrutiny and leaves the rest to operate as they have, feeding on federal loan dollars without having to show much in return, other than keeping their two or three-year default rate under a certain threshold. For these institutions, students who carry excessive debt and/or default after a three-year window are mainly the government's problem, not theirs. As a result, prospective students looking to choose a college do not have access to even the most basic facts about how their future income or debt burden may vary depending on the institution that they choose. To change that, federal and state governments should embark on a broader effort to link students' post-graduation success to the institutions that they attend, to make that information public and accessible, and to attach institution-level sanctions and rewards to performance on these indicators.

In short, policymakers should take the pro-accountability ideas underlying "gainful employment" and super-size them. Extending the effort to cover all colleges and universities that receive federal student loans would provide consumers with much-needed information about institutional quality and return on investment. The question is whether the latest foray into "gainful employment" regulations will remain a shortsighted attempt to bring greater accountability to one small sector of the postsecondary world. If the past is a guide, it could prove to be the proverbial camel's nose under the tent flap that accountability proponents have been looking for.

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The Short-Selling of For-Profit Education

By Charlotte Allen

The letter, dated June 17 and addressed to U.S. Education Secretary Arne Duncan, made serious allegations of wrongdoing in the already controversial for-profit education sector: that representatives of career colleges were trolling for students at homeless shelters, loading education debt onto a problem-beset population with poor prospects for academic success in order to funnel federal loan funds into for-profit coffers. Now it turns out that the letter was orchestrated by, and its very language prepared by a Dallas woman, Johnette McConnell Early, who was being paid to investigate for-profit colleges by an investment firm that might be hoping to turn its own profits by short-selling the colleges' securities.

Signed by Neil J. Donovan, president of the National Coalition for the Homeless, and 19 administrators of homeless shelters across the country, many of them church-affiliated, the June 17 letter contained strong language essentially urging Duncan to tighten its regulation of the for-profit sector (the department has been considering severe restrictions on federal loans to career-college students that would peg total debt to the average entry-level earnings in the job for which the students are training). The wording of the letter was ominous: It described recruiting at shelters as "a growing problem." It continued: "For-profit trade schools and career colleges are systematically preying on our clients," the letter continued, accusing the schools of "predatory conduct" in enticing shelter residents to run up un-repayable debt that ruined their credit ratings, turned off potential employers, and rendered the defaulting debtors ineligible for further federal student aid. The 20 signers pledged their "unequivocal support" for heavier government regulation of career colleges. Exactly one week later, on June 24, the Senate Health, Education, Labor, and Pensions Committee held the first of several planned hearings on the for-profit sector, which receives 23 percent of federal student loan funds although it enrolls only 10 percent of the nation's college students, and has been marked by high levels of loan default and relatively low graduation rates.

The letter to Duncan from the shelter administrators, which circulated widely and was posted on the PBS show Frontline's website, seemed yet more red meat for a Democratic Congress and presidential administration that already seems to regard with suspicion the idea of making a profit from higher education.

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What Happened at Berkeley in November

By Donald A. Downs

4123344197_3c3696375a.jpgWe now have a long and fascinating report by the campus police review board on last fall's disruptive protests at the University of California, Berkeley.

The 128-page document, entitled "November 20, 2009: Review,
Reflection, and Recommendations,"
released in mid-June, is the product of months of yeoman work garnering volumes of evidence. It chronicles and evaluates responses to the events sparked by resentment over tuition increases and cutbacks in the wake of California's financial debacle.

Berkeley deserves credit for thoroughly investigating the situation. And the report is worth reading for many reasons, one of which is because it casts light on a dilemma that Berkeley and many other schools have been unable to resolve since the famous Berkeley "Free Speech Movement" of 1964 launched decades of illegal student protest: how to balance students' passions for social justice (and sometimes other motives) with the rule of law.

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NYU's Perilous Adventure in Abu Dhabi

By Charlotte Allen

New York University will open its vaunted campus in Abu Dhabi this fall, and so far it does seem to be the best campus that money can buy---Gulf oil money, that is. The story of the NYU-Abu Dhabi linkup, the brainchild of John Sexton, NYU's strategically ebullient and relentlessly donor-courting and expansion-minded president, is a story of many paradoxes. The greatest paradox of all is that this first step toward creating what Sexton calls a "global network university" of NYU campuses all over the world is being entirely bankrolled by the government of oil-rich Abu Dhabi, which is a good thing for NYU because the university's $2.2 billion endowment (shrunken by nearly one-third in the recent financial crisis) is by far the smallest of any private U.S. university with the world-class ambitions that Sexton claims for NYU.

In fact, because NYU enrolls more than 50,000 at its various schools, its endowment works out to about a mere $50,000 per student, according to figures calculated in a recent Business Week article. (Harvard's $26 billion endowment, by contrast, amounts to $1.3 million per student, while Yale has $1.4 million per student and Princeton $1.7 million). The Abu Dhabi campus is a feat of Sextonian sleight-of-hand in which other people's petrodollars pay for what NYU hopes will be a boost in academic prestige without spending a cent of its own scarce money. NYU was happy to publicize Abu Dhabi's initial contribution of $50 million to the joint venture---a down payment on which NYU insisted as a condition of lending its name to the new university---but now neither the university nor the Gulf city-state will reveal how many more millions Abu Dhabi has sunk into the venture, but it must be plenty. Abu Dhabi has not only committed itself to a glitzy brand-new campus for NYU on Saadiyat Island about 500 yards offshore, but is bankrolling some of NYU's expansion in New York.

Back home at NYU's flagship campus at Washington Square, students complain about stingy financial aid packages that often leave them heavily in loan debt and more heavily reliant on poorly paid part-time faculty than any of the top-tier universities with which NYU hopes to compete. NYU's efforts to grow its campus in New York---by acquiring Greenwich Village real estate and demolishing what's there---have made enemies out of many of its neighbors, especially when NYU pulled down the historic Provincetown Playhouse, which it owned, in order to construct a new law school building (it did save some of the playhouse's facade and replaced the theater). The Abu Dhabi campus has also sparked protests among NYU professors over government policies in Abu Dhabi and other United Arab Emirates states that discriminate against gays (homosexual acts are crimes in the Emirates), Israelis (none of the Emirates has formal diplomatic relations with Israel and all frequently deny entry to citizens of the Jewish state), and the foreign guest-workers who form 80 percent of the Emirates' 4.5 million population but have little practical recourse against employers who confiscate their passports, house them in squalid camps, charge huge fees for their job, and pay them less than promised.

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''Too Big to Fail'' Goes to College

By Michael C. Macchiarola

Federal subsidies long ago achieved the goal of making higher education more attainable for students from middle- and lower-income families. Yet such programs cloud the fact that good politics often tend to represent bad economics. In this case, government efforts have reflexively ushered a generation of students down a one-size-fits-all conveyor belt that has too often left the federal government as little more than the underwriter of disappointment. Much as it propelled the housing boom, government policy aimed at "access" has fueled a dramatic increase in the cost of education. And, schools have been more than willing to turn abundantly available dollars into lighter teaching loads for professors, luxury dorms for students and state-of-the-art sports arenas, with little regard for whether these improvements are really worth it to student-customers. Ultimately, however, students foot the bill for these flights of fancy: they are required to repay their loans. And, their ability to do so depends, in large measure, on the quality of the education that they received from their chosen school. The fact that so many student borrowers are in distress today only serves to indict the value proposition that the education industrial complex continues to advance.

Aided by the government-encouraged extension of credit, education costs have skyrocketed. In fact, it is fair to describe today's higher education price tag as having been reduced to a formula - where tuition seems to equal all the money a student can pay plus all the money a student can conceivably borrow. And, this same access-for-all government policy has made loan-eligible middle- and lower-income students easy prey for aggressive higher education and student-loan marketing. The end result has been an unprecedented, debt-fueled wealth transfer from students of modest means to the increasingly affluent higher education industry and its student-loan lenders. Unfortunately, as this damage continues to reveal its depth, its consequences are likely to become more evident by the day.

A generation of students has been reduced to the equivalent of the underwater homeowner: resigned to a fate where the amount owed to finance their schooling might be greater than the value of the education they received (and, therefore, beyond their capacity to repay it). All is not lost, however, as there are already machinations within the world of education suggesting that students, governments and institutions are, at long last, awakening to assign considerations of value to a world that for too long has seemed immune to such assessments.

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What Is For-Profit Education Really Like?

By Andrew Kelly

From the beginning, Frontline's new documentary College, Inc seems tailor-made to scare the living daylights out of the series' presumably progressive audience. Viewers are first introduced to Michael Clifford, an "educational entrepreneur" without a college degree who buys up struggling colleges and resurrects them as for-profit companies. Clifford is not only making a fortune off of low-income minority students. He also happens to be a born-again Christian, and he is looking to turn a bankrupt college in Oakland, CA into "Dream Center College," an offshoot of a Christian mega-church and rehabilitation center in Los Angeles by the same name. Indeed, viewers are introduced to Clifford's born-again faith almost as soon as they learn anything about his profession. And the introduction to Clifford comes right before correspondent Martin Smith interviews legendary profit-seeker and hard-edged capitalist Jack Welch, who talks about his investments in higher education and "widgets" in the same sentence.

Given the variety of companies and individuals involved in the for-profit sector, particularly the number of founders, faculty, and senior administrators who have PhD's and experience at world-class universities, Clifford seems like an odd place to start. Perhaps it's a nod to the idea that the regulation of college acquisitions is too lax, a worthwhile point to make. But to the discerning viewer, using Clifford, and then Welch, as narrative anchors signals a definite perspective on for-profit higher education: it is full of greedy profiteers, is woefully under-regulated, and is run by outsiders who believe that education is a business.

Predictably, College, Inc goes heavy on the "profits," and the methods used to reap them, but this leaves little room for the "education." As a result, viewers are introduced to many of the sector's warts and excesses, which are real and must be acknowledged, but never get a sense of how these innovative institutions are changing the way higher education is designed and delivered in the twenty-first century.

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On Pigeons, Pells and Student Incentives

By Jackson Toby


Jackson Toby, professor emeritus of sociology at Rutgers and author of the new book, The Lowering of Higher Education in America, delivered this speech yesterday (April 7) at a luncheon in New York City. The luncheon, at the University Club, was sponsored by the Manhattan Institute's Center for the American University and Minding the Campus.


"Is College Graduation Enough for a Good Job or Do College Graduates Have to Know Something?" That's the title of one chapter of my new book. And in an effort to illustrate the problems of evaluating what contemporary college graduates know, I began the chapter with the lyrics of "Brush Up Your Shakespeare" from Cole Porter's 1948 hit musical Kiss Me Kate.

Broadway audiences didn't necessarily have to know that the musical was based on Shakespeare's The Taming of the Shrew, but it helped. Porter graduated from Yale nearly a century ago. In that era a Yale graduate---or a graduate of any American university---had to have had some exposure to the plays of Shakespeare, because it was an era during which a college education referred to a corpus of common intellectual experiences. Colleges usually had a core curriculum that all graduates had to take, whatever their major or their interests. "Brush Up Your Shakespeare," contained references to Homer, English poets, the Greek playwrights Aeschylus and Euripides, a mention of the "Bard of Stratford-on-Avon," the town where Shakespeare was born, and puns involving titles to several of Shakespeare's plays: Othello, Anthony and Cleopatra, Much Ado about Nothing, Coriolanus, and A Midsummer Night's Dream. Members of the audience who did not know at least the titles couldn't understand fully Porter's witticisms. Consider a few lines from the lyrics:

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Dartmouth Turns on a Dime

By Joe Malchow

I once asked a pilot friend if he didn't tire of the lumbering, leviathan commercial airliner he flew. He surprised me by saying that a 747 can handle like a Lamborghini if ever it needed to.

A bit of that seems to be underway in Hanover, New Hampshire, where the new president of Dartmouth College, my alma mater, is responding with alacrity to the slackening economy. Even given the market's nosedive, Dartmouth possesses a substantial multi-billion dollar endowment and employs nearly 2,800 full-time equivalent staff and 450 faculty. That's a rather large organization---one now operating at a loss of $34 million.

But Dartmouth has one big asset: a group of Carl Icahnesque independent trustees who were elected by worried alumni in 2004, 2005, and 2008. These outsiders were vigorously resisted by Dartmouth---whose power establishment didn't want activist directors---but the outsiders' platforms of staunch fiscal conservatism and a leap out of the thicket of professional educrats won the day. After all, who needs a "Sustainability Director" or a "Dean of Pluralism"?

Alumni responded by their levels of giving, and Dartmouth's former president, historian James Wright, responded by resigning his post early. In that position, now, is Jim Kim, the Harvard doctor who has never been the head of a major organization but who has now been thrown into a parlous billet.

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How the Campuses Helped Ruin California's Economy

By John Ellis

4409800624_179a583cf6.jpgAll across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year's. In 1964 there was focus and clarity. This one was brain-dead. The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.

The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of "the struggle," and of "oppression," and---of course---of racism. "We are all students of color now" said Berkeley's Professor Ananya Roy, and a student proclaimed that this crisis represented "structural racism." (Why not global warming too?) Berkeley's Chancellor Birgeneau called the demonstrations "the best of our tradition of effective civil action." Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn't seem to occur to anyone that the old "shut it down" cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.

One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted "Who's got the power? We've got the power." In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

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Why The Student Protesters Are Wrong

By Daniel Bennett

Thousands of students on more than a hundred college campuses joined together symbolically yesterday to protest sharp tuition hikes. The students pointed the finger at hard-pressed state and local governments. That was a mistake. State and local subsidies to public colleges and universities increased by 44% in real (inflation-adjusted) dollars during the 25-year period between 1982 and 2007. Had colleges managed to hold their cost increases to the level of inflation over this period, real tuition prices would be slightly less today than they were 25 years ago.

Why weren't the colleges able to do this? First, colleges are rewarded for fiscal irresponsibility and punished for not keeping up with Joneses. Because we collect very little information from colleges about student learning and educational outcomes, we know nothing about the actual value of the education taking place. So we are left to rely on arbitrary indicators such as price and prestige to decide which institutions are of the highest quality. College administrators understand this and are known to make decisions based on how it will impact their institution's prestige. The things that boost prestige (fancy dorms, state-of-the-art fitness centers, elaborate student centers, etc.) cost lots of money and do little or nothing to increase the quality of education. The colleges that avoid such elaborate upgrades in lieu of keeping costs down are perceived to be lower -class institutions. Call this the college arms race.

Next, there has been very little, if any, gain in productivity in higher education over the past few decades. Some evidence suggests that there has actually been a drop in productivity, while the information technology age has boosted productivity in nearly every other economic sector. Part of this is explained by the bureaucratic bloat on college campuses. Between 1987 and 2007, the number of senior administrators and professional support staff at public two- and four-year colleges increased by 84 percent, while student enrollment grew by only 37 percent. In this sense, administrative productivity dropped by more than 25 percent during this 20 year period, as the student-to-administrator ratio dropped from 24:1 to 18:1. Meanwhile, faculty teaching loads have diminished by a factor of up to two over the past two decades, while salaries have increased by at least the rate of inflation, not accounting for rising health care costs, retirement contributions and other forms of non-wage compensation. Rather than using technology to cut labor costs and improve employee productivity, colleges have expanded their staffs and seemingly ask less of each employee. Call this diminishing productivity.

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Those Disastrous Student Loans

By Charlotte Allen

Alan Michael Collinge is back in his gadfly role agitating against the student loan industry. Collinge is the author of last year's The Student Loan Scam: The Most Oppressive Debt in U.S. History---and How We Can Fight Back (Beacon Press) and founder of the website studentloanjustice.org, dedicated to, among other things restoring the bankruptcy protection for student loans that Congress removed for all but the most hardship-hit borrowers in 2005. Writing for the New York Times blog "The Choice," which deals with college admissions and financial aid, Collinge calls the federally guaranteed student-loan system "a predatory lending scheme" and argues that Congress should curb the Education Department's power (also granted in a 2005 law) to "extort not just the original principal and interest from borrowers, but also a massive amount in penalties fees and collection costs."

Collinge wrote his book from his own 20-odd years of disastrous experiences with student loans. He graduated from the University of Southern California in 1988 with three degrees in engineering and $38,000 in loan debt, an amount that ballooned to $100,000---still mostly unpaid two decades later---when he fell behind on monthly repayments after consolidating his loans with Sallie Mae (the nation's leading buyer of student debt) and penalties, back interest, and collection fees began to accrue with lightening speed. Loan consolidation often (although not always) means that graduates can lock in lower interest rates than they might otherwise pay, but it can also entail stretching out the life of the loan to as long as 30 years (the tradeoff is lower monthly payments). Collinge's New York Times blog dovetails with the Obama administration's goal of eliminating private lenders (banks, credit unions, and Sallie Mae) from the federal student-loan system and requiring all student borrowing to come directly from the government itself.

It's difficult to say whether Collinge, who, with his engineering degrees could expect decently paying employment, actually got a bad deal from the federally guaranteed system. For one thing, he took out his loans long before the 2005 law went into effect, although as early as 1976 Congress had placed some limits on using bankruptcy to get rid of student debt. One might also ask whether it was prudent for Collinge, if he was strapped for college money, to choose to attend an expensive private university such as USC rather than a cheaper state school where he would not incur so much debt. Furthermore, students who borrow from private financial institutions under the federally guaranteed system enjoy below-market interest rates (the Department of Education sets annual caps), a nine-month grace period after graduaton during which no payments are due, and an array of forgiveness and deferment arrangements if economic hardship forces borrowers to fall behind. For example, the going interest rate (according to Sallie Mae) on Stafford loans, products of one of the most widely used federal loan programs, is 6.8 percent, and the going rate for PLUS loans (products of another popular program) is 9 percent (the rates are even lower for students whose income qualifies them for a federal interest subsidy). Compare that to the 17.28 percent annual rate on credit-card debt, and the interest rate that Collinge agreed to pay on his consolidated loans (it's currently capped at 8.25 percent) could hardly be considered "predatory." It should be remembered, too, that student loans are unsecured loans (no mortgaged house, no car or other collateral) to unemployed or partially employed people who can be as young as 18. In other words, the loans are ipso facto risky, which is why government guarantees are an integral part of private student lending. A government guarantee means that taxpayers pick up the tab when a loan goes into default---so it is perhaps not surprising that Congress has made it difficult to cancel the loans in bankruptcy court.

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Does U.S. News Make Law Schools More Expensive?

By Frank J. Macchiarola and Michael C. Macchiarola


Why do law schools charge higher and higher tuitions that keep outrunning the cost of living? In the two decades ending in 2007, according to the American Bar Association, the cost of attending the average private law school (including tuition and fees) more than tripled--increasing from $8,911 a year to $32,367. Unsurprisingly, the average amount borrowed by law students has risen just as dramatically. Last year's average private law student graduated with more than $87,000 in law school debt.

In trying to understand this phenomenon, many have blamed the American Bar Association's Standards for Law Schools. The ABA accredits 200 American law schools that adhere to the Standards and, by doing so, permit their graduates to sit for the bar examination in every state. These standards govern student's course of study, the law school's administration, the faculty's rights and obligations and the adequacy of the physical plant. Among other things, law schools are reviewed in a comprehensive three-day site visit with several visitors every seven years to maintain their accreditation.

Others, particularly law school deans, who face competitive pressures from other law schools, have blamed the U.S. News and World Report rankings of law schools. These critics believe the rankings spark a tournament of law schools to compete on the magazine's terms, often at great costs and at the expense of more student-centered activities. In a December 2009 report to the Congress, the General Accounting Office dealt, in part, with concerns that have been raised about how some of the accreditation standards of the ABA may affect the cost of law school.

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Waste And Folly In Student Loans

By Charlotte Allen

Shortly after his inauguration in January President Obama announced a proposal to get rid of a 44-year-old program known as the Federal Family Education Loan (FFEL) program. In the FFEL system, the federal government guarantees loans to students from private banks and similar institutions under a variety of programs (the best known is the so-called "Stafford" loan) to help pay for the students' education, whether at the undergraduate or postgraduate level. The idea behind FFEL, part of a massive piece of 1965 legislation designed to make higher education more attainable and affordable to larger numbers of Americans, is to encourage private lenders to extend credit for college to a cohort of society that would otherwise not qualify for loans that these days can total tens of thousands of dollars a year. In return for guaranteeing student loans against their borrowers' default, the U.S. Education Department charges the lenders modest fees and sets maximum allowable interest rates.

Under Obama's plan all students needing higher-education loans would instead obtain them through the William D. Ford Federal Direct Student Loan Program (Direct Loan for short), a Clinton administration creation of 1993 in which the U.S. Education Department itself lends money for post-secondary education. The only role that private banks and other institutions such as Sallie Mae (the formerly government-backed but, since 2004, completely private entity that currently originates about a fourth of all FFEL loans) would continue to play in student lending would be to service some of the loans under contract with the department.

The administration argues that eliminating private financial institutions as middlemen (until the administration embarked on its anti-bank stance Sallie Mae and other private entities accounted for 80 percent of the $92 billion federally subsidized loan market, and it continues to issue about 58 percent of those loans), would save the government $87 billion over the next 10 years in default payouts and interest subsidies to institutions that lend to students who demonstrate financial need. (For subsidized loans, the government pays the interest until the student leaves school; for unsubsidized loans, the interest accumulates, but the student is not obliged to make payments before leaving school, and there is also a variety of repayment and forgiveness plans geared to income levels after graduation.) Under Obama's proposal the government would use part of the anticipated savings to put another $40 million into beefing up funding for Pell grants, yet another federal aid program for college students launched in 1973 and named (in 1980) after the recently deceased Democratic Sen. Claiborne Pell of Rhode Island. Under the Pell program, which costs the government $18 billion annually, about 7 million low-income college students (the ceiling family income is $40,000) receive outright grants from the government (the current annual maximum is $5,350), to help pay for their college educations.

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A New Kind of Community College

By Peter D. Salins

The Obama administration - along with many in the opinion elite - is looking to the nation's two-year community colleges as the primary vehicle to ramp up future Americans' level of post-secondary educational attainment. A down payment in this direction are the billions of dollars of direct and indirect community college aid included in the administration's "stimulus bill." However, before we get carried away with enthusiasm for community colleges as the best place to extend the frontier of higher education, there's a question to consider: how well have these institutions actually succeeded in their mission to provide an inexpensive but effective college education to our millions of academically under-prepared high school graduates?

A cursory look at the data is not encouraging. Although 41 percent of America's college-bound students enter community colleges each year , only 28 percent of this cohort actually complete their studies and earn a degree , an even more dismal outcome than that displayed at the nation's baccalaureate colleges, where 56 percent manage to graduate . These depressing statistics haven't dampened the general consensus favoring support of community colleges because proponents appear to believe that college "access" trumps successful college completion and that "some college is better than none." Refuting the latter point, U.S. community college non-graduates have only marginally higher earnings and lower unemployment rates than high school graduates and do far less well than their counterparts that manage to complete their studies .

The disappointing outcomes at community colleges are to some extent hard-wired into four aspects of their design. These institutions are proudly and aggressively "open admissions" which means that there are no academic criteria to get in except, in most places, a high school diploma. They are indifferent to the extent to which their students are diverted from their studies by work or other outside obligations, convinced that such distractions are an unavoidable and immutable aspect of "nontraditional" student profiles. Their abundant array of courses (including ones for English and math remediation that a majority of their students test into and often fail) are taught primarily by low-paid part-time faculty who have little time for interaction with students beyond classroom hours. Finally, community colleges view their mission in strictly vocational terms. They offer majors geared to every occupation that their "environmental scanning" process identifies as having job openings, while slighting the kind of general education offered by baccalaureate institutions that may contribute more to post-collegiate success than narrow (and quickly obsolete) occupational skill sets. While educators and the media tend to be scornful of the academic pretensions of proprietary, often on-line, "universities" like Phoenix and DeVry, the public community colleges are not operationally very different or in their academic results any more successful.

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The Money Problem at U Cal

By Ward Connerly

As a regent of the University of California (UC), I voted against "fee" increases proposed by the administration as often as I voted for them, but with each vote I realized that UC was slowly moving toward the day when basic decisions would have to be made about how the university is financed, who can attend it, and what the public should expect from the institution. Well, that day has come; and the public can either dodge the issues or face them and try to craft a new relationship with UC.

Several days ago, the regents voted to increase fees by a whopping 32% - that's right, 32% - starting in the fall of 2010. Notwithstanding the predictable assertions about "quality" being threatened and the prospect of a "faculty exodus," with a loud voice, I would have voted against this increase. Not because the university isn't justified in raising fees to some extent, but because the economy is in the tank, many students' parents are unemployed and no business in its right mind raises its prices 32% under such a set of circumstances.

The operative word above is "business." The University of California IS a business that likes to operate as if it were merely a public service enterprise. It doing so, it gets to have the best of both worlds. As a business, UC chooses to compete with other businesses for talent - and seeks to compensate them accordingly. As a public service enterprise, the university expects to be subsidized heavily by the taxpayers - when we can afford it - and to have all of the protections and perquisites of a public corporation.

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Community Colleges Are Bulging, But...

By Charlotte Allen

Cuyahoga Community College expects to see nearly 30,000 students enrolled for credit on its three campuses in Cleveland when it opens for the fall semester late in August, with an additional 30,000 taking non-credit courses for job-training "personal enrichment" (instruction in art, photography, and other hobbies). According to campus officials, the 30,000-strong for-credit student population represents an all-time high: about 20 percent more than the 24,311 for-credit students whom the college reported as enrolled last spring. The projected 6,000-student increase is unprecedented, too; in the spring of 2009, college records show, there were only about 800 more students attending Tri-C, as Clevelanders call their community college, than were on the rolls for the spring of 2008. Chalk up the current surge to the recession, which has suddenly made the $25,000-a-year-tuition typical of U.S. private four-year-colleges look unaffordable to many families (private colleges nationwide have reported lower-than-usual freshman acceptance rates for this fall). Annual tuition at Tri-C is a tenth of that: $2,418. That's a bargain even compared with tuition costs at Ohio's public four-year colleges, which charge $8,583 annually on average to state residents.

So it's perhaps only logical that President Obama, in a July 14 speech at Macomb Community College in Warren, Mich., announced a proposal to invest $12 billion in federal spending in the nation's community college system, all with the aim of helping an additional 5 million Americans earn degrees and certificates from community colleges over the next 10 years. The president called community colleges the under-appreciated "stepchild of the higher education system" and declared that the money would help workers learn "the skills they need to fill the jobs of the future." His message seemed designed as a boost to Warren, a recession-battered suburb of Detroit with a 20 percent unemployment rate, but also to millions of other American young people desperate to cut the cost of attending college.

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Why Are Graduation Rates So Low?

By Richard Vedder

Of every 100 kids who enter American high schools, only about 20 obtain a bachelor's degree within a decade. That is why the proportion of adult Americans with baccalaureate degrees is rising relatively slowly, and why the U.S. has fallen behind a number of other nations in the proportion of young adults with college degrees.

There are three points of attrition that keep new high school students from becoming college graduates. Some do not make it through high school. Some high school graduates never go to college. But the largest rate of attrition is seldom discussed: 40-50 percent of those who matriculate in colleges and universities do not obtain a degree within six years of entering college. And a majority of new freshman does not get a college degree in the four years that most of them expect to acquire it.

All of this must change, and radically, if President Obama's goal of America regaining its leadership in the world in degree attainment is to be achieved. A lot of attention has gone into the second area of attrition -failure to continue on to college, but less attention has been paid at the college level to the third factor -college drop-outs.

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No Recession For Bonuses Or "Diversity"

By Ward Connerly

During my twelve-year term as a Regent of the University of California (UC), I served for several of those years as Chairman of the Committee on Finance, which has jurisdiction over the budget of the UC system.

Adopting a budget was among the most complex and painful tasks that confronted the Board. For me, the "teachable moment" from that experience was that fewer things are more complicated and mysterious than a multi-billion dollar budget of a university that has numerous sources of public and private funding - restricted and unrestricted, that respects "shared governance," and which allocates budget authority to its campuses and other operational units. I always doubted that the Central Intelligence Agency could unravel the mystery of a UC budget.

While many in the nation are focusing for the first time on the serious fiscal dilemma of the State of California, UC has had to deal with cycles of financial shortages for much of the past two decades. In fact, belt-tightening has become the norm rather than the exception at UC. It is because of this experience that the current State budget "shortfall" is not hitting UC with the same effects as might otherwise have been the case.

To place matters in context, there are several salient features that must be acknowledged. First, UC is a vast enterprise with multiple sources of funding. This fact serves to cushion the university from the consequences that would be devastating to other universities faced with similar circumstances. Second, instead of just cutting costs to match revenues, the UC Regents and the administration have always sought to have nearly all its constituent parts share the pain during harsh budgetary times. For example, during the current UC budget year, in addition to staff furloughs - which are expected to achieve roughly 25% of the almost $1 billion "hit" on the UC budget from the State, and a 9.3% fee (tuition) increase, the university is looking at fewer course offerings, deferral of salary increases for most UC employees, layoffs, fewer faculty hires, fewer teaching assistants and elimination of a 2.5% increase in freshman enrollment that is a part of the Higher Education Compact between the State of California and the university. This approach will result in all segments of the UC community - students, faculty and staff - experiencing some degree of economic harm.

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Should The Unemployed Go Back To School?

By George Leef

The last time President Obama gave a speech dealing with education (his address to Congress on February 24), he misrepresented government data to make his case that the country needs to put a significantly higher percentage of people through college. (I wrote about his fudging of the figures here)

For that reason, Americans would be wise to look skeptically on his policy pronouncements regarding education. Last week the president gave another speech this time extolling college and especially community college programs as a good path for unemployed people who want to prepare for new and better jobs. He gave a couple of nice anecdotes about people who had greatly improved their lives by taking vocational training courses and he wants to make it easy for unemployed workers to get federal money for education and career training.

In one case, a woman in Maine who had lost her job as a receptionist decided to take courses in nursing, and now makes a good living as a registered nurse. Without question, that's a success story, but it's never a good idea to make government policy on the basis of some individual success stories. That's because policy changes usually have hidden costs. To get a few success stories, we often have a greater number of failure stories.

Before looking at the president's proposed changes, we should examine the broad vision he articulated. Here are his key sentences. "Now is the time to put a new foundation for growth in place - to rebuild our economy, to retrain our workforce, and re-equip the American people. And now is the time to change unemployment from a period of 'wait and see' to a chance for our workers to train and seek the next opportunity..."

That sounds quite uplifting. It sounds obvious and simple. But is it realistic?

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Obama's Loan Plan - Scary Stuff

By Richard Vedder

Like Caesar's Gaul, President Obama's plan for higher education is divided into three parts:

1) Every American should have postsecondary educational training, and within a few years we should again lead the world in the proportion of young graduates with bachelor's degrees;

2) Federal financial assistance to pay for college should become an entitlement like Social Security or Medicare, available to all in need;

3) The private provision of loans to students should end and the Federal Government should become the provider of student loans.

The American higher education establishment has mostly endorsed this sweeping proposal. As is so often the case, they are wrong. On every count, this proposal is an Obamination - a perverse set of policies that will raise costs to taxpayers and, surprisingly, also to many college students and families.

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Why Not Eliminate Tuition?

By Jeremy Carl

In a recent article that received a fair bit of buzz, The New York Times spun a story of the supposed new reality in the recession-plagued U.S.---Students from more well-off families being given admissions preference at increasingly cash-strapped universities. But the Times article misses the larger point. Lawrence University, Colby College and Brandeis (some of the institutions mentioned) are all fine schools that provide good educations, but they are not entry points into the elite post-graduation professional networks in the same way that top Ivy League schools (and a few others of similar prestige) are. For those schools, the real story is the same as it has been---in a time of increasing economic stress, "need blind" admissions will continue for those fortunate enough to be on financial aid---but the uncontrolled escalations of costs for everyone else will continue, putting an increasing financial burden on these students and their families.

When my father entered Harvard University in 1958, fresh from public high school in Ohio, it had just raised it's tuition a staggering 25% from the previous year. . . to $1250. While inflation would make that figure equivalent to about $9,000 now, the fact remains that this less than one-fourth of the cost of Harvard's tuition and fees today.

Through a combination of scholarships, parental savings and a summer job each summer at Republic Steel, my father's family was able to easily afford an supposedly elitist Harvard. Had my father been applying to Harvard today under similar financial circumstances, his parents likely could not have afforded to send him.

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Don't Cut The Sacred Cows

By Charlotte Allen

A modified version of this piece appears today in the Washington Examiner

Georgetown University, like many colleges and universities hit by the current economic downturn, is in what look like dismal financial straits. The value of Georgetown's endowment shrank 25.5 percent last year, to $833 million, the annual deficit it has been running is estimated to climb to $37.8 million this fiscal year with little abatement in the near future, and donations are expected to be down--and likely to fall further if President Obama's proposal to reduce tax deductions for charitable gifts takes effect. So Georgetown's president, John DiGioia, like many another college CEO these days, recently announced a plan to cut costs.

The nature of DiGioa's proposed cost-cutting, however---freezes on salaries, delays in filling vacant positions, and a hold on the construction of a planned science center---seem anemic in the face of the university's obvious financial problems. That's probably because Georgetown's desire to trim its budget is running smack into the reality of campus politics, in which every program, silly, overstaffed, or non-essential as it might seem to outsiders, has an aggressive constituency ready to raise the pitchforks in its defense. Harvard, for example, facing a projected 30 percent drop in the value of its massive $38.5 billion endowment, announced in February it would trim the ranks of its contract janitors---not even Harvard employees---by a few dozen, leaving some Harvard buildings a shade less spic and span. The upshot? A series of student protests, denunciations by the Service Employees International Union, and on March 23, a unanimous condemnation of Harvard by the city council of Cambridge, Mass. Georgetown clearly doesn't want to go down that road.

Private businesses might shrug off such negative publicity, but most universities are sensitive to their images as repositories of progressive values. So there is a long list of campus sacred cows that can't be nicked by the budget-cutting knife without an uproar. One is tenured faculty. Tenure means having a job for life, no matter how lackadaisically you perform it or whether the department in which you teach attracts many students. The University of Texas Medical Branch laid off 30 of its 127 faculty members, many of them tenured, after Hurricane Ike devastated its Galveston campus last year and forced the temporary closing of its main teaching hospital. The Texas Faculty Association is now suing the state university system to force the professors' rehiring.

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How Will The Colleges Cope?

By Frank J. Macchiarola

Dr. Macchiarola, chancellor of St. Francis College in Brooklyn, delivered these remarks on February 5th at a one-day conference in New York on "The Future of the University." The conference was sponsored by the Manhattan Institute's Center for the American University.

If I were making this presentation a year ago, I would not have some of the deep concerns about the future of the university as I do today. Certainly the changes that are occurring within the university today are due, in large part, to some of the real difficulties the university faces in adapting to forces that are internal to it. The presence of the deep economic recession that we face today - and that will be with us for some time to come - significantly adds to the uncertainties that today's university has to confront. It puts solutions to a considerable extent beyond the scope of what some universities can actually manage.

The recession - or perhaps depression- has for private universities hurt their financial condition dramatically. Endowments drop and endowment income which is critical to the university's operations fall as well. In virtually all instances this combination means that universities been tremendously impaired. Endowment income which can provide 5% of market value for operating expenses is less available and this adds to the gap between tuition income and expenses that universities must face. Endowments are affected, especially for the tuition dependant schools which require tuition to fund operations in significant ways. Well endowed universities are the exception, not the rule. Costs also increase, usually by a multiple of the rise in the cost of living. This has been almost the universal rule largely because of factors that have driven universities to give students "more and more." The usual course of action -increasing tuition - is made more difficult by the hard economic times. Fewer students being able to afford college mean a shift to lesser charging private universities and the public ones. The factors that have operated to allow universities to grow are not present in anything like the same way. The decline in the number of high school students exacerbates the problem even further. While students may choose public institutions as an alternative, things are not going well there either. The depression has hit states hard, and while the stimulus plan may be helpful to them in the short term, they will not be able to absorb more students at the subsidized costs that they have traditionally borne. The taxpayer is being hit hard, and the state economies are as well. The public universities will have to charge more and give less. There is tuition relief by the way of increased Pell Grants and tax credits for college tuition, but there is no way that we will be back to conditions ante recession.

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Financial Pain on the Campuses

By Charlotte Allen

On February 11 art-lovers packed a meeting room at Brandeis University to protest Brandeis's plans to shut down its on-campus art museum and auction off the museum's entire 6,000-piece collection. The list of holdings at Brandeis's Rose Art Museum, most of them donated since the museum's opening in 1961, reads like a Who's Who of prominent twentieth-century American artists - works by Max Ernst, Willem de Kooning, Jasper Johns, Roy Lichtenstein, Robert Rauschenberg, and Andy Warhol, among others - and is valued at $350 million. Museum curators, especially those associated with university - owned art collections, greeted Brandeis's decision with shocked intimations that selling the art might violate ethical obligations to donors. Elsewhere in the art world there was fear that the fire-sale prices that the Rauschenbergs and Warhols might command if dumped onto today's anemic, recession - beset market for luxury goods could depress the value of other art collections less stellar than Brandeis's.

One thing is certain, however: Administrators and trustees at Brandeis, a well-regarded but not overly rich liberal arts-focused research university of about 3,900 students in Waltham, Mass., saw a need to act quickly and decisively to cut costs and raise cash at a time when nearly every university in America, private and public, is being hit by the double whammy of shrunken endowments (thanks to the tanking of Wall Street) and sharp downturns in revenues from both private donors and financially strapped state governments. Brandeis, founded in 1948 and named after the Supreme Court justice Louis Brandeis, had an endowment valued at $712 million as of last June - pocket change compared to its neighbor Harvard's $37 billion endowment - but Brandeis's endowment is now reportedly worth only $530 million because of the market meltdown, Furthermore, many of Brandeis's chief donors had invested heavily with alleged Ponzi schemer Bernard Madoff, a guarantee of financial wipeout. Indeed, Brandeis's very largest donor; the family foundation of the clothing manufacturer and philanthropist Carl Shapiro, who had several campus buildings named after him, reportedly lost $545 million, nearly all its assets, to Madoff's alleged pyramid of fraud. Although Brandeis denies investing any of its endowment with Madoff, it has admitted to serious investment losses, and its chief operating officer, Peter French, told the online magazine The Daily Beast that the university faces an operating deficit of $79 million over the next six years together with "a tapped-out reserve fund," as the Beast's Judith Dobrzynski wrote, and seriously strapped donors. According to French, Brandeis faced three alternatives: sell the art, shut down 40 percent of its campus buildings, or choose between firing 30 percent of its administrative staff or 200 of its 360 faculty members. Since original works of art are inspirational but not exactly germane to a college education (Brandeis had no art museum for its first thirteen years of existence), the university axed its art, not its buildings or employees - "We'd rather use Rose" to cut costs, French said.

In fact Brandeis is actually lucky to have valuable hard assets on hand to liquidate for a desperately needed cash infusion, and even luckier to have had generous donors in the past whose gifts constitute those assets. The university does not have to decide - at least not right now - whether to shrink its faculty, trim its administrative staff, reduce undersubscribed academic offerings, or deal with the costly results of an overhead-hiking campus construction spree when times looked flush earlier in the decade. Mark Williams, a senior lecturer at Boston University specializing in risk-management told the Bloomberg news organization that one of Brandeis's problems was that it "overbuilt at the peak of the market." In fact, according to Inside Higher Education, the Brandeis faculty recently formed a committee to review the curriculum and review such revenue-boosting or cost-cutting options as adding business and engineering programs to the university's traditional liberal-arts offerings and replacing its existing majors and minors with (apparently cheaper in terms of faculty deployment) interdisciplinary "meta-majors" whose vague parameters have alarmed some professors, not so much because they might dilute standards or jettison, say, Brandeis's longstanding but low-attendance courses in ancient Greek, but because they might result in eliminating entire departments and professorial jobs.

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A Small Stimulus for Colleges

By James Piereson

In the area of higher education especially, but in most other areas too, the Stimulus bill looks more like an emergency measure designed to maintain current programs than a strategic package aimed to stimulate growth. Among others, college and university presidents are likely to be among those sorely disappointed.

Last November, shortly after the election, a group of college presidents took out a full page advertisement in the New York Times to make the case that the proposed stimulus package to be considered by the new administration should include some $50 billion for the construction of new buildings on college campuses across the country. The academic leaders argued that such expenditures were an investment in the future of the country and would, in addition, create new jobs in the short run. They estimated that this allocation would represent but 5 per cent or thereabouts of the total stimulus package, which by their reckoning would add up to something like $1 trillion. Like governors, mayors, and representatives of other interest groups, they were eager to get in line for a piece of this once-in- a-lifetime jackpot of federal largesse.

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Toward Market-Based Universities

By Ward Connerly

Hardly a sector of the American economy is unaffected by the current recession; however, no matter how painful this period is, it provides an opportunity for many institutions to do the kind of restructuring that should have been done before now. And, fewer segments of our society are in greater need of financial restructuring than American higher education. Unfortunately, public colleges and universities have been the beneficiaries of public "bailouts" from the taxpayers for so long that the message of restructuring may fall on deaf ears, but in case any college administrators are interested, I have a few suggestions.

First, let us begin with the cultural mindset that every high school graduate should go to college. This fact alone creates an inflated and artificial demand for higher education and causes many young people to pursue career paths that are not reflective of their talents, aptitudes or interests, but it does serve to create escalating application numbers that help when it is time to lobby legislators and the Congress for financial assistance.

Because of this artificial and inflated demand for a college education, politicians, educators and others often promote the view that going to college is a "right" and not a commodity to be purchased like any other goods and services in our society. As a "right," everyone is therefore entitled to have the government underwrite the attainment of that "right." It is at this point that the cost of higher education begins its inflationary spiral, because as long as the taxpayers are there to bailout public colleges, there is no need to keep costs at a level that the consumer (college students) can afford.

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No Stimulus Money For Colleges

By George Leef

On December 16, the higher education establishment put out its tin cup, asking Congress to give it a 5 percent cut of any "stimulus" spending package---around $40 to $50 billion for new university construction projects.

In the interest of full disclosure, I should say that I'm opposed to the concept of "economic stimulus" spending. The federal government can't make the country more prosperous by shifting money and resources around at the whims of federal politicians. But the idea of spending billions on higher education strikes me as particularly unjustifiable. The trouble with higher education isn't a shortage of funds, but that so much of what it has is spent to little effect.

The Carnegie Corporation's open letter signed by more than 40 higher education leaders contends that the nation faces a serious problem: "For the first time in our history, the cohort of Americans ages 25 to 34 is less well educated than the older cohorts that preceded it." Supposedly, this is an ominous sign that "our future prosperity and security will be weaker than in the past."

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Are Colleges "Failure Factories"?

By Richard Vedder

Former Commissioner of Education Statistics Mark Schneider has caused a bit of a stir with a paper in which he argues that colleges are getting a free pass on a huge problem - a very high drop-out rate. Our colleges are failure factories for literally millions of students, Schneider says, and I agree.

To be sure, our statistics on college dropouts are imperfect. Students move from full to part-time status, or change schools, and sometimes get measured as drop-outs when in fact they succeed. The reality is, however, that over half of students entering four year colleges and universities do not graduate within the advertised four year curriculum, and roughly one-third do not graduate within eight years even using better measures of dropping out.

I think there are four major reasons for this. First, of course, there is a small proportion that drop out because of adverse family circumstances that force them into the full-time work force or into caring for relatives. While some claim this is an enormous problem, the vast amount of student loans available has reduced the number of students who drop out for strictly financial reasons. Second, there is more than a grain of truth to the collegiate lament that high school graduates are often ill-prepared, with mediocre qualifications in such basic areas as writing, civic knowledge and math skills. Anyone who has looked at results of the NAEP or TIMSS tests knows that Americans on average graduate from high school with at best a shoddy intellectual base.

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The Battle Over Student Fees

By Donald Downs

The stage is now set for wide debate over mandatory student fees These are the fees that educational institutions or student governments assess students above and beyond the monies that pertain to tuition, housing, dining, and similar goods. Some of these additional fees typically fund extracurricular activities or needs such as medical services, crime victim services, transportation services, and the like. The more controversial fees cover students' expressive and associational activities.

At my school, the University of Wisconsin at Madison---a hotbed of such activity that is a model for other schools---mandatory fees currently amount to about $750 per semester. After an activist group abolished student government here in the early 1990s, students organized to establish a new form of student government in 1994-5, primarily to enable activist groups to gain access to student fees.

Objections to fees that support student expressive groups take three tracks.

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What Does 'Sustainability' Have to Do With Student Loans?

By Peter Wood

The student loan crisis - or near crisis; narrowly-averted crisis ; or postponed crisis - no one is sure - comes co-incidentally at a moment when many colleges and universities are once again repackaging their basic programs. The new buzzword, as John Leo has pointed out is "sustainability." I also recently tried my hand at unpacking this polyvalent idea. "Sustainability" sounds to the uninitiated as though it is about environmentalism, but it is much more. As I wrote in Inside Higher Education, many of the advocates of "sustainability" see it as an encompassing concept. It includes science, economics, and the social structure. And for many in the movement, the focus on social order is the basis for far-reaching attempts to advance "social justice" policies.

I doubt this development has come into focus for many parents or people outside the campus. The campus left learned with its promotion of the concept of "diversity" the advantages of packaging hard-core ideology in bland, feel-good terminology. Sustainability is another venture in this direction. No one can really be against sustainability (definition 1) - prudent use of resources with the needs of future generations in mind. But while most of us hear the word in that sense, campus ideologues are busy rearranging the curriculum and student life around "sustainability" (definition 2) - a condition that arises when capitalism and hierarchy are abolished; individuals are made to see themselves as "citizens of the world;" and a new order materializes on the basis of eco-friendliness, social justice, and new forms of economic distribution.

Sustainability (2) is an amalgam of environmental extremism, shards of Marxism, romantic utopianism, and identity group politics. It doesn't have a significant political following in America outside college campuses, and in that sense it is a fringe movement. But on campus it's everywhere. Hundreds of campuses now have sustainability officers, courses that promote the ideology, and most ominously, "co-curricular" programs run through student life and residence halls that attempt to "educate" students about their mistaken "worldviews" and bring them aboard this new ideological ark.

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Still Forgotten: Low Income Students At Selective Colleges

By Richard D. Kahlenberg

Despite a great flurry of activity to expand financial aid at selective colleges over the past several years, a new study by the Chronicle of Higher Education reported this gloomy bottom line: "Top Colleges Admit Fewer Low-Income Students." As someone who has worked for more than a decade to push colleges to enroll more economically disadvantaged kids of all races, the news was disappointing, though not altogether surprising. For years, elite colleges have assembled freshmen classes that include upper-middle class and wealthy students of all races and declared themselves to be diverse. New financial aid policies alone were unlikely to change that pattern.

The Chronicle study found that the percentage of students receiving Pell Grants declined at the wealthiest 75 private and 39 public colleges and universities between the 2004-05 and 2006-07 academic years. In the 75 private institutions with the largest endowments, 13.1% of undergraduates in 2006-07 received Pell Grants, which typically go to students from families earning less than $40,000 a year, down from 14.3% two years earlier. In 39 public institutions with endowments of $500 million or more, 18% were Pell Grant recipients in 2006-07compared with 19.6% two years earlier.

The news is particularly troubling given the high profile efforts announced in recent years by some 40 top colleges and universities to provide more generous financial aid to struggling families. Why did less, rather than more, economic diversity follow? The primary reason is that aid policies are only part of what drives enrollment. In order to receive aid, low-income and working class students must first be admitted. Because such students often attend lousy schools, even highly talented and hard working students - who have tremendous potential - don't look as good on paper as their more privileged colleagues. Research finds that while colleges and universities give substantial preferences to under-represented minorities (blacks, Latinos and Native Americans) and other groups, they give basically no preference to economically disadvantaged students, despite claims to the contrary.

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Why Do Textbooks Cost So Much?

                       By Charlotte Allen

textbooks.jpgYou've just started your freshman year in college, so one of your first stops is the campus bookstore to pick up your textbooks. You signed up for Econ 101, where your professor has assigned one of the top-selling basic textbooks in the field: Harvard professor N. Gregory Mankiw's 936-page Principles of Economics (South-Western/Thomson), now in its fourth edition. The price: $175.95, or if you want to throw in a study guide to help you ace the course, $209.90.

Wow, that's steep for just one book - but you've only just started. Next class: the first semester of your college's world history survey course, spanning the period from 1 million B.C. to 1500 A.D. In that class the prof is having you read the first volume of Traditions & Encounters: A Global Perspective on the Past (McGraw-Hill), the ever-so-politically correct overview by Jerry H. Bentley and Herbert F. Ziegler that devotes only 28 of its 600 pages to ancient Greece. The sticker price for Traditions and Encounters, now in its second edition: $89.69. Next, chemistry class, where the assigned textbook is Karen C. Timberlake's Chemistry: An Introduction to General, Organic, and Biological Chemistry (Prentice-Hall), now in its ninth edition. The price here is $148.80 for 736 pages plus a CD-ROM, and another $64.90 if you want a study guide. The bargain on your textbook list, if you can call it that, is Lynn Bloom's The Essay Connection (Houghton-Mifflin), the required anthology for your freshman English class, and "only" $61.16 for 656 pages. The Essay Connection is in its eighth edition, an improvement over the seventh edition, its blurb promises, because the book now includes essays by David Sedaris (can't you read him at home in your parents' New Yorker?), a photo collection on the horrors of war (guess what non-English-related political point that's trying to make), and cartoons and other illustrations for students who learn better by looking at pictures.

Your textbook-bill total for the semester is now $475.60 for just four books, more than a fourth of the average $2,315 in tuition and fees for a semester at a U.S. state college, according to figures for 2004 from the U.S. Education Department) - and that doesn't include optional study guides, the lab manual you might need for chem class, or the photocopied handout packet your English teacher says she'll be passing out at your expense. Why the sky-high prices for basic textbooks? After all, the brand-new, critically acclaimed translation of Tolstoy's War and Peace by Richard Pevear and Larissa Volokhonsky (Knopf) lists at only $37 for 1,273 pages in handsomely designed hardback. If Knopf, a trade publisher, can bring in a lengthy volume with a scholarly apparatus of notes and bibliography for less than $40, why can't textbook publishers, serving a market of generally cash-strapped young people, do something similar?

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The Internship Racket

By Anthony Paletta

(This article originally appeared at Inside Higher Ed)

Dartmouth College is now the latest institution to announce considerable changes to its tuition and financial aid structure, eliminating any charges for students from families making less than $75,000 a year. Dartmouth's arrangement is not nearly so generous as Harvard's or Yale's, yet it's markedly superior in one regard. Dartmouth proposes to offer a scholarship "to allow financial aid recipients to take advantage of research or internship opportunities in their junior year."

Dartmouth's is the most concrete step towards expanding access to internships, in a cycle of financial aid changes where colleges have begun to take explicit note of the fundamental inequities in their accessibility. Several colleges eliminated summer earning expectations for students on financial aid, asserting that the demand that students contribute money toward tuition in summers posed a stark obstacle to the pursuit of less-remunerative internships and volunteer work. All that is undoubtedly true, but the colleges' efforts go nowhere near establishing equality of access to internships.

Why worry? Increasingly, internships are perceived as essential steps to post-college employment, as definitive legs up for job applicants. "Internships are no longer optional, they're required," The New York Times quoted Peter Vogt, author of Career Wisdom for College Students and an adviser to MonsterTrak.com, as saying last month. A 2006 study by the National Association of Colleges and Employers indicated that 62.5 percent of new college hires performed undergraduate internships. Employers responding to association's 2007 Recruiting Benchmarks Survey reported that they offered full-time jobs to almost two-thirds of their interns. Over 30 percent of new hires came from such internal internship programs. Internships undoubtedly enhance employment prospects, but the question is - for whom? The answer, almost invariably, is for students already well-off.

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Student Loans - Sequel To The Mortgage Mess?

By Peter Wood

A few weeks ago, I alerted readers to the threat of a tightening of the student loan market . Banks have been bundling student loans, like home mortgages, and selling them as securities. First Marblehead Corporation in Boston has been the nation's biggest player in "securitizing" student loans, and just like home mortgage-backed securities, the student loan-backed bonds issued by First Marblehead contain a lot of loans of doubtful value.

These aren't the loans that are guaranteed by the Federal government's Title IV Student Loan program. When students have borrowed all they can in Title IV loans, they frequently need to borrow still more to meet the extravagant costs of college. They often borrow at relatively high interest rates from banks and other private lenders. These banks and lenders, in turn, act just like the sub-prime mortgage lenders did: they sell the risk to someone else. First Marblehead takes loans from many banks and bundle them together to create its bond issues.

As I reported, First Marblehead appears to have hit a major snag in October, when investors declined to buy the company's new $1 billion student loan-backed bond offering. First Marblehead's stock plummeted and a chill went through the whole student loan industry.

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First Mortgages, Now Student Loans?

By Peter Wood

Last week, First Marblehead Corporation, a Boston-based company, saw its stock plummet after cutting its dividend. The problem? First Marblehead is in the business of "securitizing" student loans. A year ago, this would have required some explanation, but the sub-prime mortgage mess has taught Americans - and people all over the world - the meaning of "securitizing." It is one of those words that means the opposite of what it sounds like. A company bundles together some high-grade debt, some middle-grade debt, and some really doubtful debt and sells it to investors, who only think they are making a secure investment. As we learned with the securitized mortgages, no one really knows what these chimeras are worth. And a little bit of bad debt, like a little bit of ptomaine, goes a long way to making the whole meal undigestible.

First Marblehead isn't saying exactly what happened, but Matt Snowling, analyst with Friedman Billings Ramsey, told AP report Dan Seymour, that he believes First Marblehead "was trying to sell about $1 billion in bonds." As Seymour explains, First Marblehead bundles student loans from numerous banks to put together its bond offerings. The deal usually specifies that First Marblehead has 180 days to sell the bonds, and failing that, has to buy the student loans itself.

Apparently, First Marblehead has been trying since October to sell $1.1 billion in these student loan-backed bonds - and found few takers. Meanwhile, banks keep issuing more student loans.

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Stop the Presses: Colleges Give Heavily to Democrats

Posted by Minding the Campus

It's no shock to learn that employees of colleges and universities donate more heavily to Democrats than to Republicans. In the University of California system, 10 times as much money went to Democrats than to Republicans, according to reports to the Federal Election Commission through May 21. At Harvard, it was 7X Democratic, Northwestern 6X Democratic, and both Duke and the University of North Carolina system were 17X Democratic. Yale, apparently in the most desperate need of politically balanced staff, weighed in at 42X Democratic. Georgetown, a notable outlier among well-known universities, gave 50 percent more to Republicans that to Democrats. Source: Center for Responsive Politics.

Fast Food Wages for Fast Food Education

Posted by Mary Grabar

The reduction in pay by Argosy University for its online instructors, from a reported $2,200 per course to $1,600 per course, is creating a stir. Disciplinary associations, the New Faculty Majority, and the Coalition on the Academic Workforce, see such dismal pay as "exploitation."

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Still For Obama, But Disenchanted

Posted by Mark Bauerlein

For the Obama campaign, the college campus poses a whole different challenge in 2012 than it did in 2008. Earlier, the campus was one of the most solid and energized pro-Obama zones in the country. The group Students4Obama, which operated on more than 700 campuses, was just one program in the conversion of the campaign into a youth-oriented, cool-emanating social movement among the students. Among young voters in general, 18-29-year-olds, the preference for Obama over McCain ended up reaching an unprecedented 27 points.

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The Student Loan Debacle--What a Mess

Posted by Andrew Gillen

Until recently, much talk about student loans was fact-free: There simply weren't publicly available figures worth paying attention to.

The official balance of student loans from the NY Fed were unreliable:

There was a bucket of random obligations called "Miscellaneous", which included things like utility bills, child support, and alimony. And it turns out that if you went burrowing in that miscellaneous debt, there was actually a pile of weirdly-categorized student loans in there. [AG: And these mis-categorized student loans were not included.]

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On "The Birth of Critical University Studies"

Posted by Mark Bauerlein

The first sentences of Jeffrey Williams' essay in the Chronicle of Higher Education, "Deconstructing Academe: The Birth of Critical University Studies", sounds like an introduction to the many conservative and libertarian critiques of higher education that have appeared in recent decades, starting with Allan Bloom's The Closing of the American Mind, Martin Anderson's Imposters in the Temple, Roger Kimball's Tenured Radicals, Dinesh D'Souza's Illiberal Education, and Richard Bernstein's Dictatorship of Virtue.  The sentence reads:

"Over the past two decades in the United States, there has been a new wave of criticism of higher education. " 

But the second sentence dispels them all.

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Our Dysfunctional Campuses Will Have to Change

Posted by John Leo

Victor Davis Hanson has a brilliant essay here on how dysfunctional our colleges and universities have become.  Here are two excerpts:

 "I noticed about 1990 that some students in my classes at CSU were both clearly illiterate and yet beneficiaries of lots of federal cash, loans, and university support to ensure their graduation.  And when one had to flunk them, an entire apparatus was in place at the university to see that they in fact did not flunk.  Just as coaches steered jocks to the right courses, so too counselors did the same with those poorly prepared but on fat federal grants and loans.  By the millennium, faculty were conscious that the university was a sort of farm and the students the paying crop that had to be cultivated if it were to make it all the way to harvest and sale -- and thus pay for the farmers' livelihood."

 Later Hanson explains why change is coming, however slowly:

"... what cannot go on will not go on -- at least for most universities without the billion-dollar plus endowments.  The present reckoning is brought on not by introspection, self-critique, or concern for our increasingly poorly educated students, but by money, or rather the lack of it.  Higher education is desperately searching for...

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The Next Corporate Tax Target: The University?

Posted by Mark Bauerlein

Here is a story in The Fiscal Times that may sound a distant warning to wealthy universities.  It raises a question that might sound repeatedly in the coming years: Since some private universities are so wealthy, why don't they pay taxes?

As the article notes, last year was a good year for endowments.  Harvard's climbed $4.4 billion (!) last year to reach a total of $35 billion.  Stanford's went up 22 percent, Yale's 21.9 percent, Penn's 19 percent, and MIT's 17.9 percent.  Because they are non-profit institutions, they aren't taxed on those increases, leading some to wonder, in these tough times and in light of Federal debt, why?

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Too-Large Subsidies for Too-Selective Colleges

Posted by John Leo

A new report on higher education from the American Enterprise Institute, out today, contains an eye-catching finding likely to generate a lot of headlines: the more selective a school is, and the fewer low-income students it serves, the larger its taxpayer subsidy.  Calling this system of funding "perverse," the report says: "Average taxpayers provide more in subsidies to elite public and private schools than to less competitive schools where their own children are likely to be educated."

Basing college selectivity on Barron's Profiles of American Colleges, the authors of the report, Mark Schneider and Jorge Klor de Alva, write that for public institutions, there is a consistent increase in subsidies across the first four levels of selectivity, with substantially more in the most competitive schools. Among not-for-profits, subsidies per student are between $1000 and $2000, but for the most selective (and already well-endowed) schools, taxpayer subsidies jump to more than $13,00 per student.

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Yes, $16 per Muffin

Posted by John Leo

In 2009, reeling from the shrinkage in its $32 billion endowment, Harvard moved to slash costs by cutting back on the cookies served at faculty meetings. Eliminating the cookies, we were told, saved $500 per meeting, thus raising the obvious question of whether the Harvard faculty was obtaining its pastries from the wholesaler who supplied the $600 Pentagon toilet seats and the $434 Pentagon hammers.

But now Harvard and the Pentagon are off the hook: the New York Times reports that snacks at a Justice Department conference to train immigration lawyers in August 2009 cost taxpayers more than $16 per muffin, nearly $10 per cookie or brownie, plus $5.57 each for 1,334 cans of soda. The $500 cookie spreads are back at Harvard, by the way. Harvard investments are doing so well that the faculty can afford them once again.

The Incredible Shrinking Tenure

Posted by Mark Bauerlein

For a variety of reasons, but mainly because of cost, tenure has become a focus of debate in recent months. Given the trends in hiring and working conditions, though, one wonders why, for the fact is that tenure has been squeezed into an ever-smaller portion of the instructional employee population for years.

Two charts in the Chronicle of Higher Education's almanac this month display stark numbers against it.  In 2009, the rate of teachers in four-year colleges who were "full-time tenure" stood at 25 percent.  The rate of those on the tenure-track stood at 11 percent.  That means that nearly two-thirds of instructional personnel didn't have tenure and didn't expect to win it, either.  The breakdown was:

  • Non-tenure-track, full time                        15 percent
  • Part-time                                                 25 percent
  • Graduate assistants                                 25 percent

The other chart details what happened in the previous decade.  It shows the growth in numbers of teachers by tenure status.  Every category went up, including the number of tenured professors, as one would expect at a time when the full-time undergraduate population swelled by an extraordinary 45 percent.

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The New Divide over Productivity

Posted by Mark Bauerlein

A rift is building between, on one side, university professors and, on the other side, university administrators (including finance officers), politicians, and parents.  The rift doesn't fall into one of the usual conflicts over ideology (for example, leftist faculty vs. moderate or conservative others) or educational mission (for example, social justice vs. workforce training).  It opens over the meaning of faculty productivity.  With education funding threatened, efficiency measures evolving, administrative and extra-curricular costs rising, and tuition a point of bad publicity, officials on and off campus are increasingly posing questions about what academic work counts and what academic work doesn't.

See, for instance, these two reports on productivity, one by Richard  O'Donnell, former-adviser to the University of Texas, and  one by Richard Vedder et  al, whose Center for College Affordability and Productivity has become a leading voice on the issue. Both documents focus on faculty activity in Texas, where the productivity debate is heated. It was heated here, too, when I posted on the issue at the Chronicle of Higher Education. See here, too, for more description of faculty-administration tensions in the state. If Gov. Perry makes it through the primaries to become the Republican nominee in 2012, you can be sure that the education establishment will make his higher education policies a central point of criticism (and, I predict, an effective one).

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Sometimes Tuition Increases Are Good News

Posted by Peter D. Salins

Almost lost in the welter of legislation to make it through the New York State government policy mill in its closing minutes was some help for New York's two public universities - CUNY and SUNY.  Having endured hundreds of millions of dollars of cuts in state support over the last three years, they are finally getting some relief (but not from state taxpayers); they will be permitted to raise tuition by $300 per year for the next five years.  This may not appear to be a big deal unless one puts the new revenue opportunity into context. 

The two university systems, with over 650,000 students between them, are among the most important linchpins of New York State's long term economic prospects and frankly, they have been budgetarily starved for years.  Over the last three years, SUNY, for example, has lost $500  million in state support, amounting to 20 percent of its operating budget.  Even with the new tuition revenue, only $50 million of that loss will be restored in the coming year, and $250 million by 2017.  Both university systems' officials are gleeful about the ostensible windfall but, at best, it only gets them half way to where they were before the state's recent economic and fiscal meltdown.  Further, it remains to be seen how much of the new tuition revenue really translates into more generous budgets for SUNY and CUNY.  Although the new agreement - in soft and essentially unenforceable language - promises "maintenance of effort" with respect to the state's tax levy contribution, in the past any tuition increases were invariably offset by corresponding - or sometimes larger - reductions in state support.  One can only hope that this time will be different.

For years the state assembly has held up tuition increases proposed by university officials, alleging that this would be financially devastating for prospective students and make college attendance unaffordable.  First off, the charge is hypocritical because the assembly has been raising tuition for years, but rather than authorizing the kind of gradual and predictable annual increases just adopted, it favored huge hikes in the middle of recessions.  In any case SUNY and CUNY have always been bargains, and will continue to be, even with the projected tuition increases.  Even at the end of the five year run of increases, all CUNY and SUNY campuses will be cheaper than any university - public or private - along the Eastern seaboard or New England.  Under the state authorized increases, SUNY's tuition and fees in 2012 will average $7,200, and by 2017, $8,400 (CUNY's will be slightly lower).  In contrast, New Jersey's Rutgers today costs $10,000; the University of Virginia: $11,600 and Penn State: $14,400.  Even the lesser colleges of surrounding states cost more today than any SUNY or CUNY campus will in five years. 

Compounding the bargain for those students opting for - and getting into - the most prestigious SUNY or CUNY campuses, the legislature continues to insist that all undergraduate public college tuition be the same, regardless of campus or program.  Every other state public higher education system in the United States, without exception, has tuition schedules that vary by campus, and usually program, charging more to attend the more rigorous and prestigious "flagships" and charging more for engineering or nursing than say English or history.  For example, the University of Massachusetts in Amherst costs $12,600 while a typical Massachusetts state college charges $7,550.  But students attending SUNY's highly ranked Binghamton or Buffalo campuses pay the same - even with the new tuition schedule - as those going to Alfred State or Plattsburgh, and those enrolled in City College's architecture program pay no more than those studying Spanish at Medgar Evers College in Brooklyn.  Finally, none of this makes any difference for New York's poorer students because the higher SUNY and CUNY tuition rates are still well within the combined value of New York's tuition assistance program (TAP) grants and federal student aid such as PELL. 

As a SUNY faculty member, and former administrator of the SUNY system, I am grateful for any crumbs that the New York legislature throws our way.  And, given the unreasonable intransigence of the assembly (Assembly Speaker Silver and Assemblywoman Glick have been the most vociferous opponents of tuition hikes) in the face of pleas from SUNY and CUNY chancellors over several decades for a "rational tuition policy," maybe this is indeed a signal moment.  For my part, I will uncork my champagne bottle when the state legislature some day leaves tuition-setting - and budgeting in general - entirely to the two systems' trustees. 

Continue reading "Sometimes Tuition Increases Are Good News" »

Endowments Are Still Massive--So Spend

Posted by John Leo

Many people think the colleges and universities are overreacting to the sharp drop in their endowments. Lynne Munson, former deputy chairman of the National Endowment for the Humanities, is one of these critics. In a letter (subscription only) to the Chronicle of Higher Education, she argues that higher ed endowments haven't lost much value if you put the recent drop in context of the astonishing gains of the last few years.

She writes: "College and university endowments increased, on average, 17.2 percent in the 2007 fiscal year and 10.7 percent in 2006. Taking compounded gains into account, these funds went up more than 26 percent just in the two years preceding their recent decline. And endowment increases at wealthy schools soared far past those averages. Harvard and Yale Universities increased the size of their endowments 45 percent from 2005 to 2007.

"So how concerned should we be that higher-education endowments have suffered a dramatic loss? The answer is: not very. Today college and university endowments are basically worth what they were in 2005. In other words, they're massive....Being concerned about the value of college and university endowments today is a little like worrying about whether Warren Buffett still has enough inheritance to share among his children."

The real problem, Munson argues, is that colleges will cite their recent losses to justify cutting endowment spending. Before the market drop, the colleges had come under heavy pressure from Congress and the public to spend at least the minimum payout required of private foundations--five percent.

In a recent survey, 27 percent of colleges and universities said they would decrease endowment spending while only 1 percent planned an increase. Munson writes: "This is the absolute reverse of the reaction they should be having at a time when students and families need help --- particularly since colleges still have plenty to share."

Munson currently studies college and university endowments for the Institute for Jewish and Community Research.

The Trouble With Cutting College Costs

Posted by Charlotte Allen

Harvard University, trying to trim its operating budget in the face of a projected 30 percent decline in the value of its endowment stemming from the current financial meltdown, announced its intention to cut 13 of the 27 janitors who service its medical school and an unspecified number of custodial workers elsewhere at Harvard residential facilities. The result: two student protest rallies on March 5, including a march to the office of university president Drew Gilpin Faust during which Harvard students joined union organizers and labor activists in chanting such slogans as "Hey, Harvard, you've got cash, why do you treat your workers like trash?" The affected employees don't even work for Harvard; they collect their paychecks from a pair of independent firms to which Harvard subcontracts some of its custodial work. Nonetheless, Harvard undergraduate, law, and medical students turned out to support the protest, declaring (as one medical student told the Harvard Crimson) that they had the "power" to force the university to reconsider the planned personnel reductions.

The Harvard protests---in the name of protecting the jobs of perhaps a few dozen people who aren't even on the Harvard payroll---exemplified the thorny political problems that college and university administrators face as they try to cut costs during this economic turndown without feeding bad publicity-garnering campus showdowns. Their job isn't enviable. The University of California's Berkeley campus, for example, decided that one way to cope with a projected reduction of $65 to $75 million in subsidies from the nearly insolvent state of California would be to halve the size of its physical education program, which offers academic credit to students who enroll in such courses as team sports, aquatics, and dance. Since educating minds, not bodies, is presumably the primary mission of a university, UC-Berkeley's effort to save $250,000 nest fall semester by trimming a peripheral department and putting some of its full-time faculty on part-time status ought to be non-controversial. Not so. Students and phys-ed faculty at Berkeley have launched a letter-writing campaign and Facebook protest to preserve the department at full strength.

Continue reading "The Trouble With Cutting College Costs" »

Harvard Endowment Plummets, Bonuses Continue

Posted by Anthony Paletta

The Boston Globe reports that Harvard alumni have written to President Faust asking that, given the recent drop in endowment value from $36.8 billion to $28.7 billion, the latest bonuses paid to the fund's managers be returned. The five highest-paid executives earned between $3.4 and $6.9 million during the last fiscal year. Those aren't especially high figures compared to private sector earnings, but, as the alumni aver, the endowment's recent direction doesn't exactly suggest management worth rewarding.

For more on the backstory to these glittering endowment falls, look to our own "Ivy-Covered Hedge Funds" by Joe Malchow from December.

And A Bailout For Higher Education?

Posted by Charlotte Allen

One thing to be said for the $42.5 billion or so in supposed stimulus dollars that publicly funded institutions of higher learning are trying to squeeze out of the incoming Obama administration's economic package is that the amount isn't too much larger than Harvard's $28 billion endowment. Oh, and it's also not too much larger than the $34 billion that U.S. automakers have been promised by the Bush administration in their own recent trip to Washington with hands extended. Since billions and billions of dollars are to the rhetoric of transition spokesmen and members of Congress what billions and billions of stars were to the rhetoric of the astronomer Carl Sagan, it's not surprising that colleges and universities want a little piece of an amount that, according to the latest Obama proposal, could be as high as $850 billion.

The other thing to be said is that the language used by college presidents and trustees is nothing short of astounding as they try to make a case that their institutions are goldmines of economic productivity rather than ultra-large line items in state expenditure budgets. A plea to Congress and the Obama administration to direct 5 percent of all stimulus funds directly to public colleges and universities, published last week in the form of an "open letter" occupying two full pages in the New York Times and Washington Post, paid for by the Carnegie Corp. of New York, and signed by 31 presidents and chancellors of state university systems, along with five higher-education bureaucrats, was grandiosely titled the Higher Education Investment Act, even though no such "act" either exists or is currently pending as a bill in Congress. The "act" contains some statements astonishing in their grandiosity as the academic CEOs self-servingly argue that a federal handout to their institutions today would be an "investment" in the America of tomorrow:

Here's a sample of the top academics' over-the-top assertions:

Continue reading "And A Bailout For Higher Education?" »

Universities As The New Corporations?

Posted by Anthony Paletta

An article in Governing explores the increasing centrality of Universities and medical centers to regional economic health. It notes a 1999 Brookings Institute study that found multiple cities in which more than half of the jobs among the top 10 private sector employees were provided by universities or hospitals. Baltimore, for one:

One of the most compelling illustrations is taking place in Baltimore, where Johns Hopkins is far and away the largest private employer. In an effort that joins the university, the city and the mega-developer Forest City Enterprises, the John Hopkins medical system is building an immense new life sciences park aimed at spinning off business opportunities from its research, and is placing the park in the deeply struggling East Baltimore neighborhood the school inhabits. In conjunction with the Annie E. Casey Foundation and the city, it has created a public-private enterprise, East Baltimore Development Inc., whose job is to oversee an ambitious effort to rehabilitate the neighborhood by building new housing for its residents, helping them with family and health counseling, creating a new elementary and middle school, and perhaps most important, crafting workforce development programs to place East Baltimore residents in the construction, health care and bioscience jobs generated by the project..."

Today's new factory? Increasingly, it seems so.

Endowments Plummet, Salaries Cut

Posted by Anthony Paletta

Harvard's Endowment has suffered a staggering eight billion dollar loss, or a loss of at least 22% in the last four months. That's the worst endowment drop for Harvard in 40 years, and dwarfs most comparable recent plunges in University endowments. Read on.

Given uniformly dolorous news in the financial sector, it's encouraging to see that the Stanford Provost and President have taken a 10% salary reduction, and each Stanford dean has pledged additional salary cuts, reports the Stanford Daily.

College Presidents Give Back

Posted by Anthony Paletta

Amidst a climate of financial worry for many American students, the tide of amply-compensated Presidents refusing or returning portions of their salaries appears to be growing. The Daily Princetonian reports that Amy Guttman, the President of the University of the University of Pennsylvania, and her husband have made two gifts totaling $250,000 to support undergraduate research and financial aid. She has also refused a base salary increase.

That news follows soon after announcements two weeks ago that Richard McCormick, the President of Rutgers, returned a $100,000 bonus, and Michael Hogen, the President of the University of Connecticut in Storrs, gave back a similar amount. Encouraging, although a minor development in a climate of still-escalating university executive salaries. If you hadn't heard, read here.

How To Make Millions In Academic Administration.

Posted by Charlotte Allen

Gordon Gee, president of Ohio State University since October 2007, holds the record for heading the most universities in America. Here's Gee's history at the helms of U.S. institutions of higher learning: West Virginia University (1981-1985), University of Colorado-Boulder (1985-1990), a first round at Ohio State (1990-1997), Brown University (1997-2000), Vanderbilt University (2000-2007), and now, Ohio State for a second stint as as academic CEO.

Gee is famous for his belief that universities should be run more like private corporations, which has sometimes translated into securing private-corporation level salaries for himself as chief executive as well as lavish remodeling jobs on the on-campus mansion that is a typical perk of a college president's job. At Brown, for example, Gee had the president's house redecorated to the tune of a reported $3 million, according to an article in the Village Voice, while disbanding the school's popular string quartet for no apparent reason and launching, without prior consultation, ambitious programs and expensive building projects for the sciences that were undoubtedly worthy ventures but miffed the faculty onto which they were sprung. After three years at Brown, Gee decamped for Vanderbilt, which offered him a reported $1.3 million annual compensation package (the second-highest in the country for a college president at the time) plus a tenured faculty position for his wife, and for the 2005-06 academic year, the university's board raised his compensation package to $1.8 million. At Vanderbilt, Gee gained praise for completing a $1.75 billion fund-raising drive two years ahead of schedule, boosting the Nashville-based school's endowment by nearly 50 percent, doubling funding for academic research, and aggressively marketing Vanderbilt, which saw a 50 percent rise in undergraduate applications during his tenure as well as dramatic rises in the SAT scores of its incoming freshmen. Gee also drew criticism for lavish spending and---again--high-priced renovations to the president's house.

When Gee moved to Ohio State for his second round as president last year, he became the nation's highest paid president of a public university, with a base compensation package of more than $1 million. One of his first official acts was...to hire yet more lavishly compensated high-level administrators for Ohio State. As the Columbus Dispatch reported, he increased the size of his governing cabinet from the nine executives employed by his predecessor, Karen Holbrook, to fourteen, eleven of whom will be making at least $300,000 a year (only three members of Holbrook's cabinet made that much). That figure doesn't include performance bonuses for senior executives, often 30 percent of salary, or deferred compensation (click here for a breakdown of total payouts under the new system). An outraged Richard Vedder of the Center for College Affordability and Productivity estimates that at least three of Gee's top-level hirees will make over $1 million this year, with Gee himself likely to take in twice that amount. Gee has defended the huge salaries as "competitive" and the only way to attract the "best people" to help achieve his goal of moving Ohio State, now ranked by U.S. News as 19th among public universities, to the next level.

Continue reading "How To Make Millions In Academic Administration." »

Textbooks Expensive? Buy Them Elsewhere

Posted by Anthony Paletta

The public furor over textbook prices shows no sign of halting, as students part with ever-larger sums for books. Before petitioning congress, all should take a look at the burgeoning number of private options for used and cheaper textbooks. Charlotte Allen pointed out several here this summer. Additional options continue to spring up.

- The Brown Daily Herald reports that Mocha, a private site offering class listings for the school now lists the prices of its required textbooks online. They link to Amazon book listings, enabling easy comparison.

- The Michigan Daily reports on another new school-specific service, mtextbooks.com

- Other options continue to emerge, as the Michigan Daily continues:

Another new site, Uloop.com, which was launched in 2007, provides various search features that allow users to locate a book, contact the seller and meet in person on campus to purchase the book.

According to Uloop co-founder Ryan MacCarthy, more than 4,500 University of Michigan students are registered on the site. Nationwide, more than 70,000 books have been bought and sold through the site. MacCarthy said the average used textbook on Uloop costs $37, a paltry price compared to the national average of $102 for a new textbook.

Sure, you could wait for Congressional hearings on Un-American textbook pricing. Or you could just spend that $37 somewhere other than the campus bookstore.

10 Ways To Save On College Textbooks

Posted by Anthony Paletta

Read about it here.

And remember why they're expensive in the first place...

College Savings?

Posted by Anthony Paletta

Today's Chicago Sun-Times offers tips for college saving, from "experts" and from students.

How Much More Do The Ivy Leaguers Earn?

Posted by Anthony Paletta

The Wall Street Journal reports on a new survey of 1.2 million bachelor's degree holders, which reveals significant variations in average salaries of different graduates. Ivy League graduates earned a median starting salary 32% higher than average liberal arts college graduates, and, at ten year's distance, earned salaries 34% higher than average liberal arts college graduates.

Experts observe that Ivy League graduates tend to gravitate towards management or advice-based careers, not to mention jobs in finance, explaining some portion of the spread. Not to mention relatively inflated northeastern pay scales.

Otherwise, though, the figure doesn't seem much of a surprise. Obviously, in a list of some 300, involving many state schools, from Black Hills State to Eastern Washington, the eight Ivy League colleges are going to fare well.

When looking into the individual comparisons, however, the differences aren't so vast. Sure there's a difference between Dartmouth ($58,000 median starting salary) and, say, an average state school such as the University of Connecticut ($48,000) but that's not especially large, and the gap between it and numerous other sate schools is even smaller: Penn State gradutes earn a median starting salary of $49,900 and grads at the University of Illinois at Urbana-Champaign earn $52,900. Hope for us all. Take a look at the rankings yourself.

Show And Tell For Rich Universities

Posted by John Leo

Now that the Senate finance committee has requested - the New York Times said "demanded" - that the nation's wealthiest colleges and universities supply detailed information about their endowments and financial practices, it seems clear that college cost is emerging as a long-running, popular and bipartisan issue. The request/demand came in a stern but polite letter from committee chairman Max Baucus and ranking Republican Chuck Grassley. It asked 136 colleges and universities to supply answers in 30 days to a long laundry list of questions about tuition rises, spending and the handling of endowments.

The euphoria over Harvard's plan to grant financial relief to students from families earning up to $180,000 a year, since followed by similar announcements from Yale and Dartmouth, is long gone. Criticism of the three rich Ivies is increasingly caustic. Lynne Munson of the Center for College Affordability and Productivity, calls Harvard's reform plan "miserly," and Richard Vedder, head of the Center, wrote a Washington Post op-ed headlined, "It's a Start, Yale. Now do Something Serious." Several critics have labeled the announced reform plans "chump change" and denounced the wealthiest schools for decades of hoarding of endowment monies.

Munson points out that the new financial relief offered by Harvard amounts to a mere day and a half of earnings on the university's $34.9 billion endowment. Even so, other universities are even more addicted to penny-pinching. The University of Michigan, one of two richest public schools (along with the University of Texas) gives its 40,000 undergraduates only $61 million in aid, half of what Harvard spends on its 6,600 undergraduates.

Many critics argue that aid for students is small in relation to spending on compensation for university presidents, new stadiums, and dubious expansions of administrative officers, including the new and mostly pointless "diversity deans." Luxury housing on campuses is becoming an issue as well. Vedder calls attention to Princeton's new Whitman College (named for a donor, eBay executive Meg Whitman) that cost $388,571 per room. Vedder wrote for the Washington Post: "Taxpayers may ask why should Whitman get a multimillion dollar tax break building a luxury hotel for children of mostly wealthy Americans?"

The Senate finance committee letter launches the project of generating reliable information on the historically shrouded financial practices of colleges and universities. Grassley said that answers "will help Congress make informed decisions about a potential pay-out requirement." In other words, cooperate or else.

A Surprisingly Welcome Financial Aid Shake Up

Posted by Anthony Paletta

Harvard's announcement, on December 10, that it was eliminating student loans, and otherwise increasing grant support for lower and middle income students, has set off a torrent of welcome news in the last nine days. Two days following, Yale declared that revisions to its student aid program were forthcoming. Soon, Swarthmore announced the elimination of student loans. Duke and The California Institute of Technology declared revisions for the benefit of lower and middle-income students. On Monday, the University of Pennsylvania announced the end of student loans for students from families with incomes under $100,000, and a ten percent reduction in all other loans. Today, Haverford announced the replacement of all loans with grants beginning with the class of 2012. All great news for aspiring students and for their parents.

The profoundly encouraging truth about this development is that it's been highly voluntary. In the past, affluent institutions have made significant revisions to their aid policies, and no one followed suit. Other colleges, with fewer resources and little hope of altering their competitive posture, did nothing. Princeton eliminated student loans in 2001, but few colleges did the same - Princeton was already drawing the cream of the student crop, and less-selective colleges didn't seem to feel that comparable revisions would change that situation. Elite colleges didn't make adjustments either - and had no trouble drawing applicants, even with less attractive financial aid packages. This time, however, there's been a real shake-up. It's understandable why, say, Yale has announced revisions in response, as it is competing for much the same applicant pool as Harvard, but the waves of change have extended to institutions that are considerably less affluent - and compete with Universities such as Harvard and Yale much less directly for students.

Compare two large research universities to see the significance of the trend - Harvard, with an endowment of nearly $26 billion dollars, and an undergraduate acceptance rate of 9 percent, can easily handle aid increases - but Duke, with an endowment only about a tenth of Harvard's, and an acceptance rate over twice as high, is also clearly committing funds to reducing student debt. This is an excellent sign. As these changes show every sign of filtering across the top tier of Higher Education, they may create ideal pressure on colleges beneath them. As Peter Wood observed last week:

If other elite colleges give similar price breaks, it will mean that the top tier of American higher education will be even more irresistibly attractive to the best students. And that, in turn, will mean that other colleges will face some hard choices.

We may see much more sweeping revisions to come. Or at least hope for them.

The Tuition Spiral

Posted by Anthony Paletta

The New York Times reports that "College Costs Outpace Inflation Rate." Of course they have. The Chronicle offers a more telling headline: "Student Aid Has Gained, but College Costs Have Risen Faster."

The Times reports "in recent years, consumer prices have risen less than 3 percent a year, while net tuition at public colleges has risen by 8.8 percent and at private ones, 6.7 percent." This was the largest increase in six years.

What is to be done? Senator Clinton has proposed a $3,500 tax credit for students, and an increased Pell grant. Bill Richardson proposes two years of free schooling at public universities in return for a year's pledge of public service. Mitt Romney has offered a similar plan, tying student aid to the type of jobs students intend to take after college. All of these plans would necessarily involve a significant increase in direct government spending on higher education. Most frankly acknowledge that government aid will never catch up to tuition increases. Few are willing to consider whether government aid might underpin the rise of tuition. Whatever the case, it's impossible to trace any consistent benefit from mere aid increases.

Richard Vedder has, as to be expected, proposed a plan of far greater substance:

Continue reading "The Tuition Spiral" »

Colleges Bilking Students Again?

Posted by Anthony Paletta

Business Week reports on many colleges' increasingly cozy relations with banks. In the most common formulation, the colleges permit their ID cards to double as debit and ATM cards for particular banks, in return, typically, for some portion of the profits.

Parhaps it does work, but as Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars & Admissions Officers comments in the article: "It's unfortunate that there are colleges that have begun to view every point of contact with students as a potential profit center."

Student Loans: All Better Now

Posted by Anthony Paletta

Peter Wood has been active at the NAS site, issuing additional comment on the latest permutation of the ongoing student loan scandal (if you haven't, do catch his initial summing-up of the case Those Scandlous Student Loans). This week, George Miller, Chair of the House Education and Labor Committee, introduced a bill to reduce federal subsidies of private loan providers and shift the related funds to direct federal loans. Democrats such as Miller have had considerable fun railing against fat-cat student loan companies in recent days (with good reason), but student-loans hardly ever qualified as a "private" enterprise in any traditional sense of the term. As Wood observes:

For decades, Republicans have been stalwart supporters of "private" lending for higher education, as opposed to direct federal spending. Of course, an industry addicted to federal subsidies and guarantees is private in a highly qualified sense. It has socialized its risks and privatized its profits. It would take rather advanced financial modeling to figure out whether the residual benefits of the private sector save the taxpayer more money than the industry managed to scam from the program.

In any case, the political balance has decidedly shifted in favor of a renewed effort to use direct federal loans to students. The opportunities for malfeasance, corruption, and inefficiency in this program are not to be underestimated either. But at least it will be a different malfeasance, corruption, and inefficiency -- and that will feel good. Of course, the private student loan industry won't be shutting down. The price of Sallie Mae has fallen, but the business will continue at a slightly less robust profit margin.

In other words, a sunny future. Read all of his thoughts at NAS.








Declining by Degrees: Higher Education at Risk

Privilege: Harvard and the Education of the Ruling Class

Going Broke By Degree: Why College Costs Too Much

Tuition Rising: Why College Costs So Much


The Nonprofit Industrial Complex

A Different Future for Higher Education


Published by the Manhattan Institute
The Manhattan Insitute's Center for the American University.