Senate Budget Would Preserve Pell

A Senate panel approved an Education Department budget that would sustain the maximum Pell Grant in part by ending subsidized interest during student loans' grace period.

Fighting the Non-University Master's

WASHINGTON -- A Senate bill that would encourage the growth of alternative training programs for teachers and principals, some of which would not be based at colleges or universities but would have the authority to give certificates considered the equivalent of master’s degrees, has come under fire from higher education organizations that argue Congress should focus on higher education institutions in efforts to improve teacher quality.

For-Profit Debate Redux

Senate roundtable features continued criticism of the sector -- and continued pushback against more regulation.

Going After 'Gainful'

WASHINGTON -- Weeks after the U.S. Education Department issued softened regulations designed to ensure that vocational programs prepare graduates for "gainful employment," House Republicans made abundantly clear Friday that, in their view, the rules had not been eased nearly enough, and that they would continue to oppose them.

The Folly of Federal Policy

Federal policy is a strange bird. Though our representatives in Washington will tell us otherwise, rational problem solving simply has very little to do with it. Log rolling, appeasing special interests, political expediency -- all these things are critical to it. But figuring out the best, most efficient way to solve a problem? Irrelevant.

Case in point: the Academic Competitiveness Grants program. A component of the 2006 budget reconciliation bill, the program will provide $3.75 billion to Pell Grant-qualified students who choose to study science, math, engineering, or high-demand languages in college. It is designed to take on what many believe to be two of the nation’s most pressing challenges: improving access to higher education, and preparing American students to compete in a globalized world.

So what’s the problem? Well, it turns out this program would require students to actually show a modicum of aptitude in math or science to qualify for a grant. To be eligible, students would have to have a minimum grade point average, go to school full-time, and have completed a “rigorous” high school curriculum. Of course, for an initiative intended to fund the training of the next generation of scientists and mathematicians, those do not seem like unreasonable demands – except to people in Washington.

“The small student aid program in the bill will only help a fraction of those needing assistance and abandons the federal commitment to prioritize the neediest students,” complained Senator Edward M. Kennedy (D-Mass.). Similarly, Edward M. Elmendorf, senior vice president for government relations at the American Association of State Colleges and Universities, lamented that the grants are more of a “merit-based program” than one aimed at “bringing people who are have-nots into scientific and other fields in a way that’s meaningful.”

Because to be eligible for a Competitiveness Grant a student would also have to be eligible for a Pell Grant, Elmendorf is wrong that the program would neglect financial “have-nots.” It might bypass students who “have not” the aptitude to succeed in math or science, certainly, but isn’t the main point of the program to help produce good scientists and engineers? Not if you’re a politician or higher education lobbyist.

You see, everyone is driven to maximize his or her happiness, or what economists call “utility.” For politicians, that means holding public office and wielding as much power as possible. For denizens of the ivory tower, it’s getting to conduct ground-breaking research, or maximize the prestige of their departments or schools. (Most probably also wouldn’t turn down a raise.) Finally, for students it means paying as little as possible for college.

Understanding this, it is easy to see why the sensible restrictions in the Competitive Grants program make no sense in the calculus of Washington: Politicians gain power when they make as many voters as possible happy, colleges and their employees are pleased when they have more money to do all the things they want to do, and students are content when someone else is paying their bills. They all maximize their utility through programs that get money to as many people as possible, not through programs that are narrowly tailored to efficiently and effectively address a specific problem.

The animosity toward Competitiveness Grants in Washington is just a small example of the irrational results produced by the greed-fueled federal policy making process. Indeed, the same dynamic that has made a seemingly well-engineered program into political kryptonite has created higher education’s biggest problem: rampant tuition inflation.

Here’s how it works: People who want to go to college complain to their representatives in Washington that higher education is too expensive. Politicians, in turn, boost aid to get the petitioners’ votes. Colleges, because they know students can now pay it, then raise their tuition to get more money to conduct research, pay higher salaries, and build nicer amenities to attract the now better-healed students. But then the people who complained originally are priced out of college again … and the cycle repeats.

The only people involved in this self-perpetuating system who do not get direct benefits from it are taxpayers, the folks stuck paying the bills. Indeed, in just the past 10ten years the amount of inflation-adjusted money taxpayers have had to shell out to finance federal student aid ballooned from $16.0 billion to $28.4 billion, a 78 percent increase.

So why don’t taxpayers put a halt to the spiral? After all, don’t they get to vote just like everyone else?
Unfortunately, it’s almost impossible for them to target a specific use of their money and say “that’s the problem – eliminate it!” After all, in addition to forking out dough for student aid, taxpayers are footing the bill for the war in Iraq, space shuttles, bridges to nowhere, federal highways, expensive Department of Defense wrenches, and so on. In contrast, higher education advocates lobby only for their specific desires, as do all other special interests, rendering the taxpaying public like a lion trying to guard a meal from jackals and buzzards – it might be able to scare a few off, but it can’t stop them all.

While this system gives many universities, students, and politicians what they want, it produces a ton of waste and irrationality, including granting diplomas to hundreds of thousands of people whose skills and abilities aren’t even close to college level. A December report from the National Center for Education Statistics bears bares this out, finding that in 2003 less than a third of college graduates (not including those with advanced degrees) were sufficiently literate to understand complex prose, and only a quarter could analyze complex documents. Data from Jeremy Rifkin, president of the Foundation on Economic Trends, also illustrates the wages of the system’s irrationality. In 2004 he reported that more than 35 percent of recent college graduates took jobs that did not require a college degree.

As troubling as these educational outcomes are, however, the most perverse result of all of higher education’s federal free-riding will likely be visited on the ivory tower itself: Motivated by increasing frustration with skyrocketing tuition, as well as ever-growing federal expenditures on higher education, in September U.S. Secretary of Education Margaret Spellings announced the formation of a commission charged with designing a “national strategy for higher education.” Such a strategy will almost certainly translate into the federal government asserting a lot more control over American higher education than it does now. Indeed, the commission’s chairman, Charles Miller, helped craft the Texas predecessor to the No Child Left Behind Act and is already pushing a national test for college students. But a national strategy that even approximates NCLB will ensure the demise of American higher education.

By imposing a single “standard” on colleges and universities, rather than letting students decide for themselves what they want from their schools, the free market attributes that have made American higher education the envy of the world will be eradicated. It is only when schools compete for students by offering widely varying curricula and programs that they innovate and excel, just as competing for customers drives the success of car manufacturers, computer companies, pharmaceutical corporations, and all the other industries whose progress we benefit from every day. Take the competition out of higher education by standardizing what they must teach, however, and you can kiss innovation and excellence goodbye.

And therein lies the irony. By using the coercive power of the federal government to enrich itself and its students, American higher education has set itself up to lose the freedom that made it great in the first place, sowing the seeds of its own destruction. But, in the end, it seems that’s just how things go in the mad, mad world of federal policymaking.

Neal McCluskey
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Neal McCluskey is an education policy analyst at the Cato Institute’s Center for Educational Freedom.

The Politics of Disappointment

Recent headlines have been full of disappointment for Americans, particularly regarding institutions that affect their daily lives. First it was the banks who argued that they were “too big to fail” in asking for a federal bailout and then proceeded to award obscene bonuses to their executives. Then it was the automakers, who made a mockery of the maxim “what’s good for General Motors is good for the country” when CEOs of the “big three” took corporate jets to Washington to plead for their own rescue package.

Now, it seems, higher education is joining the list. As colleges and universities hike tuition and cap enrollments while pleading for billions of federal dollars, we have new evidence that public disappointment and disillusionment with higher education are building rapidly. Through new opinion research conducted by our organization, the National Center for Public Policy and Higher Education, and Public Agenda, the American public is sending messages that colleges and universities and state and federal policymakers cannot afford to ignore. These messages include:

Alma mater has become Higher Ed, Inc. While most academics bristle at the admonition for higher education to run more like a business, that is exactly what’s happening in the public’s view, and they’re not sure they like it. We were surprised enough when more than half of Americans voiced the belief three years ago that colleges and universities are more interested in their bottom lines than in providing a good education for students. We have been even more surprised -- and dismayed -- to see that figure jump almost 10 percentage points in just three years.

Let’s be clear. The public is not saying that they do not want higher education institutions to focus on efficiency and effectiveness. In fact, they believe colleges and universities could educate more students with the resources they have. When they see tuition rates outpacing the average family’s paycheck even in times of economic distress, or read stories about excessive compensation of college presidents or about universities bailing out athletic programs while furloughing faculty, it isn’t hard to see how people might be just a bit skeptical about higher education’s priorities.

We can walk and chew gum when it comes to balancing access, quality and cost. In some of our earlier research, we uncovered a pervasive belief among college presidents that cost, access, and quality are locked in a zero-sum game, one that we dubbed “the iron triangle.” Expanding access means either increasing costs or sacrificing quality, containing costs requires limited access or skimping on quality, and so on. As in previous recessions, we are seeing this belief in action in the states, as some of our largest public college and university systems are freezing or rolling back enrollment and/or hiking tuition in the name of preserving quality.

The problem is that a growing majority of Americans just don’t buy that line of argument. More than half of those surveyed agree with the statements that colleges could spend less and still provide a quality education and that colleges could serve more students without hiking prices or damaging quality. These numbers have held steady over the past three years, which is not surprising, given that most people are experiencing significant changes in the workplace due to the recession, international competition, and technological change. They have not seen evidence of parallel innovations in higher education, and they’re wondering why.

We can’t live without higher education, but can we live with it? Simply put, people are feeling trapped. The “squeeze play” -- the combination of beliefs that higher education is essential but that many qualified students are being shut out -- continues and the majority agreeing with both of these statements has reached record highs. This trend is likely to continue as the economy continues to punish the undereducated most severely, and the fiscal slump prompts more tuition hikes and enrollment caps in the face of severe national economic distress. As the squeeze on students and families intensifies and confidence in the altruistic mission of colleges erodes, higher education’s position in the competition for public resources when the economy recovers may be seriously undermined.

So what does this mean?

For colleges and universities and their advocates in Washington, the message being sent by the public is clear. Spending time and money explaining why higher education is essential to the nation’s future is not the answer. Our data show very plainly that the American people get it when it comes to the need for higher education. But those same data also depict a public that is quickly becoming increasingly skeptical of the leadership and management of colleges and universities.

Rather than acknowledging the public’s concerns, some higher education lobbyists and advocates instead criticize the public as uninformed. While the average American may not understand the details of the higher education enterprise, the point is that the American people are anxious, frustrated, and not convinced that colleges and universities are being managed in ways that are consistent with their values. A PR campaign will not fix that. In this case, actions truly will speak louder than words.

For policy makers at the state and federal levels, these numbers represent a signal that voters are increasingly interested in what they are doing and will do to keep higher education affordable and accessible. The answers will not be easy in this campaign season, with the federal stimulus tapering off and many states facing severe budget shortfalls.

The inconvenient but unavoidable truth is that the time has come to talk about real changes in how higher education is funded and delivered.

Patrick M. Callan
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Patrick M. Callan is president of the nonprofit, non-partisan National Center for Public Policy and Higher Education.

Sweating Bullets at the GAO

The authors of the Government Accountability Office’s for-profit secret shopper investigation pulled off a statistically impressive feat in August. Let’s set aside for the moment that on Nov. 30, the government watchdog quietly revealed that its influential testimony on for-profit colleges was riddled with errors, with 16 of the 28 findings requiring revisions. More interesting is the fact that all 16 of the errors run in the same direction -- casting for-profits in the worst possible light. The odds of all 16 pointing in the same direction by chance? A cool 1 in 65,536.

Even the most fastidious make the occasional mistake. But the GAO, the $570 million-a- year organization responsible for ensuring that Congress gets clean audits, unbiased accounting, and avowedly objective policy analysis, is expected to adhere to a more scrupulous standard. This makes such a string of errors particularly disconcerting.

In fact, the GAO is constituted precisely to avoid such miscues. Its report-vetting process entails GAO employees who are not involved with the project conducting a sentence-by-sentence review of the draft report, checking the factual foundation for each claim against the appropriate primary source. While the research is compiled and proofed, legislators who requested the investigation may keep in routine contact with the GAO to stay apprised of the inquiry.

The GAO issues hundreds of reports a year, and by most accounts revisions of the kind released two weeks ago are almost unheard of. As a former GAO assistant director who worked at GAO for a decade on issues including higher education explained to us Wednesday, the organization’s rigorous review process leaves little or no room for error.

He said, “[It is] extremely rare for the GAO to issue corrected testimony or reports. In fact, in my 10 years that I was there, I never once saw that happen.” He went on to say, “It is stunning to me, given [the GAO] process, how this many errors could have happened. It raises a lot of questions as to the pressure the GAO was under. . . . They must be sweating bullets over at GAO.”

What kinds of mistakes are we talking about here? The corrections were generally changes in emphasis or wording that altered the complexion of the finding. For instance, the original report claimed that a financial aid officer purposely ignored an undercover applicant’s supposed $250,000 in savings when calculating eligibility for financial aid. What the report neglected to reveal was that the financial aid representative did so “upon request by applicant.” This does not necessarily exonerate the financial aid officer, but it does raise questions about the impetus for the inappropriate behavior.

In another instance, an applicant went from being informed that he or she “could take out the maximum in student loans” despite not actually needing that much (revised) to being told that he or she “should” (original) do so. And in a different scenario, a for-profit official supposedly told an applicant that massage therapists could earn up to $100 an hour -- when the review showed that the official actually said that the applicant could expect to earn up to $30 an hour, a figure that is below the Bureau of Labor Statistics’ estimate of $34 for therapists in California.

The list goes on and on. Each of the GAO’s 16 corrections indicates that the recorded evidence was presented in an inaccurate or incomplete fashion, in every case portraying for-profits in a negative light.

What happened? Our source speculated that the pressure of issuing the report in time for Sen. Tom Harkin’s Aug. 4 committee hearing and in time to support the issuance of the Department of Education “gainful employment” regulations led GAO investigators to be less careful than normal.

The problem is that the “we were in a hurry” defense doesn’t explain why the errors all point in the same direction — one that happens to reflect the policy preferences of the chairman of the Senate HELP committee and of administration appointees at the Department of Education. Lanny Davis, the veteran Clinton hand who has now taken to the barricades for the for-profit providers, told us Wednesday that he thinks there is an obvious distinction between “gross incompetence” and “setting out to deceive” — and that the original GAO report crosses the line. “Given that all 16 of the so-called mistakes portrayed career colleges in a negative light, I believe there is no sliver of possibility that this was not an intentional distortion of the truth by somebody with an agenda or somebody who was pushed into doing it,” Davis argued.

The issue goes beyond incompetence or politically motivated misinformation in a government report; the message of the GAO’s initial publication has been “baked in” to the Harkin hearings and the Department of Education’s rulemaking on gainful employment.

Our GAO source observed that the original report’s finding that all of the investigated providers were up to no good was “woven into the overarching narrative that there are a lot of bad actors out there that have to be dealt with.” Even though the GAO’s revisions were substantial enough to merit a public correction, the narrative has crystallized and been wielded by Harkin and Department officials to press the case for their agendas as recently as this week (see Harkin’s December 14 speech on the Senate floor). Even more troubling, despite finally acknowledging the litany of errors that permeate the report, GAO spokespeople have asserted that “nothing changed with the overall message of the report, and nothing changed with any of our findings."

The bigger question is whether we can be confident that the GAO has caught all of the errors or is being honest with the report’s critics. The former GAO official speculated that the recent corrections could be just the "tip of the iceberg in terms of the mistakes made in the report. It calls into question the entire report because it shows that there were not sufficient quality controls in place for whatever reason.” Complicating things is that the GAO is not subject to Freedom of Information Act Requests, which makes getting to the bottom of things just a bit difficult. (Of course, the Department of Education is subject to FOIA requests, and the advocates for the career college sector have filed suit to obtain the primary source materials.)

Regardless of how this gets sorted out, this affair has crippled efforts to talk honestly about problems that need to be addressed. It is hardly shocking that there are unscrupulous for-profit providers trafficking in misinformation and misusing federal student aid dollars. Every sector, public and private, faces such problems. And the practices of all providers that collect public funds deserve to be scrutinized and monitored. The government has every right to police how its student aid dollars are being spent.

But trampling public confidence in an esteemed federal watchdog helps no one — not the individual students that are being taken advantage of by fly-by-night providers, not the colleges that are acting in good faith, not the bureaucrats charged with regulating the sector, and not the taxpayers who wish to root out corruption in student lending.

Frederick M. Hess and Andrew P. Kelly
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Frederick M. Hess and Andrew P. Kelly are director of education policy studies and a research fellow in education policy studies, respectively, at the American Enterprise Institute.

Misrepresenting the GAO

Friday's op-ed in these pages, “Sweating Bullets at the GAO,” by representatives of the American Enterprise Institute, offers a lopsided, inaccurate depiction of the Government Accountability Office's recent update to its Aug. 4 report on the recruiting practices at for-profit colleges.

First and foremost, the authors ignore the fact that these updates did not alter the very troubling findings or conclusion of the report. While the GAO made some revisions and clarifications of the long list of misleading practices it documented, the finding stands -- every single school its investigators visited engaged in misrepresentation, deception or outright fraud.

In an attempt to paint the GAO’s update as a dramatic development, the authors cite an anonymous source who claims that the GAO rarely issues this sort of revision.

That’s just not true. According to the GAO’s spokesman, GAO has issued 12 such revisions in the last year alone, including a similar one in September. Additionally, their assertion that all of the edits were made to correct “errors” that cast “for-profits in the worst possible light” is misinformed. Many are simple clarifications, and some bolster the GAO’s findings.

And let’s not forget -- the GAO’s discovery of fraudulent or deceptive recruiting tactics was just the tip of the iceberg. My Committee has issued three reports based on data we collected from 30 for-profit education companies that raise several more serious concerns about whether many for-profit colleges have the best interests of their students at heart.

We’ve found that 95 percent of for-profit students end up saddled with debt (as compared with 16 percent of community college students), and that 57 percent of students at 16 for-profit schools withdrew without a diploma in a single year. Most recently, we documented a startling increase in the amount of military education benefits flowing into this sector in the last year.

Given the findings of this investigation, it’s no surprise that the for-profit education industry has turned the full force of its multimillion dollar lobbying operation on the GAO in an attempt to muddy the waters and distract from the growing consensus that their industry needs greater regulatory oversight.

Far from “sweating bullets,” the GAO is helping to illuminate a growing problem.

Tom Harkin
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Senator Tom Harkin, a Democrat from Iowa, is chairman of the Senate Committee on Health, Education, Labor and Pensions.

Possible Setback for Program Integrity Rules

A bipartisan group of legislators votes to advance a bill that would block rules governing state authorization and the definition of a credit hour.

Congress Sends a Signal

In the prevailing climate of recent Congresses, dominated by the push for belt tightening and the shift of power to the states, college officials and other beneficiaries of federal funds tend to shudder when lawmakers use the words "streamline" or "consolidate" to refer to key programs. Too often, the officials fear, the words "eliminate" or "reduce" will follow at some later date.


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