Higher Ed Act Reauthorization

Obama plan on college costs coming this week

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This week President Obama will unveil plan to make college affordable, promising tough love for some in higher education "business." But will his proposals go anywhere?

For-profit fights resume with new twists on old debates

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Washington is gearing up for the next round of fights over for-profit colleges, with student veterans and gainful employment getting top billing.

House holds hearing on student loan interest rates

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With the interest rate for subsidized loans set to double July 1, House hearing focuses on the broader future of the federal loan program.

New America paper on financial aid calls for changes to loans, Pell Grant, tax credits

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The latest white paper in Gates-funded effort to rethink financial aid calls for a shored-up Pell Grant, streamlined student loans and the end of higher education tax credits.

Departures and a reorganization at federal data division stir fears

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Departures and a reorganization at the National Center for Education Statistics stir fears the feds are less focused on higher ed data. Not so, says the center's commissioner.

Committee on higher ed accreditation composing its final report

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Federal panel appears to have rejected idea of decoupling accreditation and financial aid eligibility, favoring less-dramatic changes to quality assurance system.

Why States Shouldn't Accredit

In my work as Oregon’s college evaluator, I am often asked why state approval is not "as good as accreditation" or "equivalent to accreditation."

We may be about to find out, to our sorrow: One version of the Higher Education Act reauthorization legislation moving through Congress quietly allows states to become federally recognized accreditors. A senior official in the U.S. Department of Education has confirmed that one part of the legislation would eliminate an existing provision that says state agencies can be recognized as federally approved accreditors only if they were recognized by the education secretary before October 1, 1991. Only one, the New York State Board of Regents, met the grandfather provision. By striking the grandfather provision, any state agency would be eligible to seek recognition.

If such a provision becomes law, we will see exactly why some states refuse to recognize degrees issued under the authority of other states: It is quite possible to be state-approved and a low-quality degree provider.Which states allow poor institutions to be approved to issue degrees?

Here are the Seven Sorry Sisters: Alabama (split authority for assessing and recognizing degrees), Hawaii (poor standards, excellent enforcement of what little there is), Idaho (poor standards, split authority), Mississippi (poor standards, political interference), Missouri (poor standards, political interference), New Mexico (grandfathered some mystery degree suppliers) and of course the now infamous Wyoming (poor standards, political indifference or active support of poor schools).

Wyoming considers degree mills and other bottom-feeders to be a source of economic development. You’d think that oil prices would relieve their need to support degree mills. Even the Japanese television network NHK sent a crew to Wyoming to warn Japanese citizens about the cluster of supposed colleges there: Does the state care so little for foreign trade it does not care that 10 percent of the households in Japan saw that program? You’d think that Vice President Dick Cheney and U.S. Senator Mike Enzi, who now chairs the committee responsible for education, would care more about the appalling reputation of their home state. Where is Alan Simpson when we need him?  

In the world of college evaluation, these seven state names ring out like George Carlin’s “Seven Words You Can’t Say On Television,” and those of us responsible for safeguarding the quality of degrees in other states often apply some of those words to so-called “colleges” approved to operate in these states -- so-called “colleges” like Breyer State University in Alabama and Idaho (which “State” does this for-profit represent, anyway?).

There are some dishonorable mentions, too, such as California, where the standards are not bad but enforcement has been lax and the process awash in well-heeled lobbyists.  The new director of California’s approval agency, Barbara Ward, seems much tougher than recent placeholders -- trust someone trained as a nurse to carry a big needle and be prepared to use it.

The obverse of this coin is that in some states, regulatory standards are higher than the standards of national accreditors, as Oregon discovered when we came across an accredited college with two senior officials sporting fake degrees.  The national accreditors, the Accrediting Commission of Career Schools and Colleges of Technology and the Accrediting Bureau of Health Education Schools, had not noticed this until we mentioned it to them. What exactly do they review, if they completely ignore people’s qualifications?

The notion that membership in an accrediting association is voluntary is, of course, one of the polite fictions that higher education officials sometimes say out loud when they are too far from most listeners to inspire a round of laughter. In fact, losing accreditation is not far removed from a death sentence for almost any college, because without accreditation, students are not eligible for federal financial aid, and without such aid, most of them can’t go to school – at least to that school.  

For this reason, if Congress ever decoupled aid eligibility from accreditation by one of the existing accreditors -- for example, by allowing state governments to become accreditors -- the “national” accreditors of schools would dry up and blow away by dawn the next day: They serve no purpose except as trade associations and milking machines for federal aid dollars.

The Libertarian View of Degrees

One view of the purpose and function of college degrees suggests that the government need not concern itself with whether a degree is issued by an accredited college or even a real college. This might be considered the classic libertarian view: that employers, clients and other people should come to their own conclusions, based on their own research, regarding whether a credential called a “degree” by the entity that issued (or printed) it is appropriate for a particular job or need.  This view is universally propounded by the owners of degree mills, who become wealthy by selling degrees to people who think they can get away with using them this way.

The libertarian view is tempting, but presupposes a capacity and inclination to evaluate that most employers have always lacked and always will, while of course an average private citizen is even more removed from that ability and inclination.   Who will actually do the research that the hypothetical perfect employer should do?

Consider the complexities of the U.S. accreditation system, the proliferation of fake accreditors complete with names nearly identical to real ones (there were at least two fake DETCs, imitating the real Distance Education Training Council, in 2005), phone numbers, carefully falsified lists of approved schools, Web sites showing buildings far from where the owners had ever been and other accoutrements.

To the morass of bogus accreditors in the U.S., add the world. Hundreds of jurisdictions, mostly not English-speaking, issuing a bewildering array of credentials under regimens not quite like American postsecondary education. Add a layer of corruption in some states and countries, a genial indifference in others, a nearly universal lack of enforcement capacity and you have a recipe for academic goulash that even governments are hard-pressed to render into proper compartments.  In the past 10 days my office has worked with national officials in England, Sweden, The Netherlands, Canada and Australia to sort out suspicious degree validations. Very few businesses and almost no private citizens are capable of doing this without an exhausting allocation of time and resources. It does not and will not happen.

Should state governments accredit colleges?

State governments, not accreditors or the federal government, are the best potential guarantors of degree program quality at all but the major research universities, but only if they take their duty seriously, set and maintain high standards and keep politicians from yanking on the strings of approval as happens routinely in some states. Today, fewer than a dozen states have truly solid standards, most are mediocre and several, including the Seven Sorry Sisters, are quite poor.

If Congress is serious about allowing states to become accreditors, there must be a reason.  I can think of at least two reasons. First, such an action would kill off many existing accreditors without having their work added to the U.S. Department of Education (which no one in their right mind, Democrat, Republican or Martian, wants to enlarge). This would count as devolutionary federalism (acceptable to both parties under the right conditions).

The second reason is the one that is never spoken aloud. There will be enormous, irresistible pressure on many state governments to accredit small religious schools that could never get accredited even by specialized religious accreditors today. The potential bounty in financial aid dollars for all of those church-basement colleges is incalculable.

Remember that another provision of the same proposed statute would prohibit even regionally accredited universities from screening out transfer course work based on the nature of the accreditor.  Follow the bread crumbs and the net result will be a huge bubble of low-end courses being hosed through the academic pipeline, with the current Congressional leadership cranking the nozzle.

The possibility of such an outcome should provide impetus to the discussions that have gone on for many years regarding the need for some uniformity (presumably at a level higher than that of the Seven Sorry Sister states) in standards for state approval of colleges. We need a “model code” for state college approvals, something that leading states can agree to (with interstate recognition of degrees) and that states with poor standards can aspire to.

The universe of 50 state laws, some excellent and some abysmal, allows poor schools to venue-shop and then claim that their state approval makes them good schools when they are little better than diploma mills. We must do better.

Should states accredit colleges? Only if they can do it well. Today’s record is mixed, and Congress should not give states the power to accredit (or allow the Department of Education to give states the power) until they have proven that their own houses are in order. That day has not yet come.

Author/s: 
Alan L. Contreras
Author's email: 
info@insidehighered.com

Alan L. Contreras has been administrator of the Oregon Office of Degree Authorization, a unit of the Oregon Student Assistance Commission, since 1999. His views do not necessarily represent those of the commission.

Deaf and Dizzy Lawmakers

Accountability, not access, has been the central concern of this Congress in its fitful efforts to reauthorize the Higher Education Act. The House of Representatives has especially shown itself deaf to constructive arguments for improving access to higher education for the next generation of young Americans, and dizzy about what sensible accountability measures should look like. The version of the legislation approved last week by House members has merit only because it lacks some of the strange and ugly accountability provisions proposed during the past three years, though a few vestiges of these bad ideas remain.

Why should colleges and universities be subject to any scheme of accountability? Because the Higher Education Act authorizes billions of dollars in grants and loans for lower-income students as it aims to make college accessible for all. This aid goes directly to students selecting from among a very broad array of institutions: private, public and proprietary; small and large; residential, commuter and on-line. Not unreasonably, the federal government wants to ensure that the resources being provided are used only at credible institutions. Hence, its insistence on accountability.  

The financial limits on student aid were largely set in February when Congress hacked $12 billion from loan funds available to many of those same low-income students. With that action, the federal government shifted even more of the burden of access onto families and institutions of higher education, despite knowing that the next generation of college aspirants will be both significantly more numerous and significantly less affluent.

Now the Congress is at work on the legislation’s accountability provisions, and regardless of allocating far fewer dollars members of both chambers are considering still more intrusive forms of accountability. They appear to have been guided by no defensible conception of what is appropriate accountability.

Colleges and universities serve an especially important role for the nation -- a public purpose -- and they do so whether they are public or private or proprietary in status. The nation has a keen interest in their success. And in an era of heightened economic competition from the European Union, China, India and elsewhere, never has that interest been stronger.

In parallel with other kinds of institutions that serve the public interest, colleges and universities should make themselves publicly accountable for their performance in four dimensions: Are they honest, safe, fair, and effective? These are legitimate questions we ask about a wide variety of businesses: food and drug companies, banks, insurance and investment firms, nursing homes and hospitals, and many more.

Are they honest? Is it possible to read the financial accounts of colleges and universities to see that they conduct their business affairs honestly and transparently? Do they use the funds they receive from the federal government for the intended purposes?

Are they safe? Colleges and universities can be intense environments. Especially with regard to residential colleges and universities, do students face unacceptable risks due to fire, crime, sexual harassment or other preventable hazards?  

Are they fair? Do colleges and universities make their programs genuinely available to all, without discrimination on grounds irrelevant to their missions? Given this nation’s checkered history with regard to race, sex, and disability, this is a kind of scrutiny that should be faced by any public-serving institution.

Existing federal laws quite appropriately govern measures dealing with all of these issues already. For the most part, accountability in each area can best be accomplished by asking colleges and universities to disclose information about their performance in a common and, hopefully, simple manner. No doubt measures for dealing with this required disclosure could be improved. But these three questions have not been the focus of debate during this reauthorization.

On the other hand, Congress has devoted considerable attention to a question that, while completely legitimate, has been poorly understood:

Are they effective? Do students who enroll really learn what colleges and universities claim to teach? This question should certainly be front and center in the debate over accountability.    

Institutions of higher education deserve sharp criticism for past failure to design and carry out measures of effectiveness. Broadly speaking, the accreditation process has been our approach to asking and answering this question. For too long, accreditation focused on whether a college or university had adequate resources to accomplish its mission. This was later supplanted by a focus on whether an institution had appropriate processes. But over the past decade, accreditation has finally come to focus on what it should -- assessment of learning.  

An appropriate approach to the question of effectiveness must be multiple, independent and professionally grounded. We need multiple measures of whether students are learning because of the wide variety of kinds of missions in American higher education; institutions do not all have identical purposes. Whichever standards a college or university chooses to demonstrate effectiveness, they should not be a creation of the institution itself -- nor of government officials -- but rather the independent development of professional educators joined in widely recognized and accepted associations.   

Earlham College has used the National Survey of Student Engagement since its inception. We have made significant use of its findings both for re-accreditation and for improvement of what we do. We are also now using the Collegiate Learning Assessment.  I believe these are the best new measures of effectiveness, but we need many more such instruments so that colleges and universities and choose the ones most appropriate to assessing fulfillment of learning in the scope of their particular missions.  

Until the 11th hour, the House version of the Higher Education Act contained a provision that would have allowed states to become accreditors, a role they are ill equipped to play. Happily, that provision now has been eliminated.  Meanwhile, however, the Commission on the Future of Higher Education, appointed by U.S. Secretary of Education Margaret Spellings, is flirting with the idea of proposing a mandatory one-size-fits-all national test.  

Much of the drama of the accountability debate has focused on a fifth and inappropriate issue: affordability. Again until the 11th hour, the House version of the bill contained price control provisions. While these largely have been removed, the bill still requires some institutions that increase their price more rapidly than inflation to appoint a special committee that must include outsiders to review their finances. This is an inappropriate intrusion on autonomy, especially for private institutions.  

Why is affordability an inappropriate aspect of accountability? Because in the United States we look to the market to “get the prices right,” not heavy-handed regulation or accountability provisions. Any student looking to attend a college or university has thousands of choices available to him or her at a range of tuition rates. Most have dozens of choices within close commuting distance. There is plenty of competition among higher education institutions.  

Let’s keep the accountability debate focused on these four key issues: honesty, safety, fairness, and effectiveness. With regard to the last and most important of these, let’s put our best efforts into developing multiple, independent, professionally grounded measures. And let’s get back to the other key issue, which is: How do we provide access to higher education for the next generation of Americans?     

Author/s: 
Doug Bennett
Author's email: 
info@insidehighered.com

Douglas C. Bennett is president and professor of politics at Earlham College, in Indiana.

Time for a Wartime Higher Ed Tax Policy

 

Memorandum to:
The Honorable Max Baucus (D-Mont.), Chair
The Honorable Charles Grassley (R-Iowa), Ranking Member
U.S. Senate Committee on Finance

Subject:
Wartime Higher Ed Tax Policy:
Make Increased Student Aid Revenue Neutral

*****

Perhaps it’s time for the nation to admit we are at war and to act accordingly. The immense Iraq war spending is the answer, not the obstacle, to helping millions of low-income students attend and finish college now. Via tax policy for donations and endowments alone, our nation allocates $18 billion in benefits to higher education. In a commendable bipartisan spirit, the Senate, this year and last, has moved to reallocate billions in federal funds for student-loan subsidies from banks to students. The Tax Code offers the same opportunity.

Executive Summary:

  1. Until the end of the Iraq war, eliminate tax deductions for new campus construction. Institutions are free to raise money and build away. I am only shifting the tax policy. How can we reconcile tax-deducted student centers with U.S. troops, the same age as college students, in Afghanistan and Iraq sleeping outdoors and eating meals out of plastic MRE bags? And being shot at.
  2. As evidence that I am for education, make donations to endow need-based scholarships for families with income under $50,000 tax deductible at a rate of 115 percent. Allow those endowing whole scholarships to write off the gift as fast as their income permits. Now, the write-off is at least three years. Donations to endow scholarships create funding in perpetuity. Buildings only create ever-increasing operating expenses in perpetuity.
  3. No tax deductions for any donations to institutions spending less than 5 percent of endowment income for student aid, not capital costs. The National Association of College and University Business Officers, NACUBO, reports an average endowment return of 10.7 percent. Note: I am not proposing federal mandates on endowment spending. My point is wartime tax policy. Yale had a 22.9 percent endowment increase, to $18 billion, for 2006; for this fiscal year Yale will spend 3.8 percent of the endowment; Yale has launched a $3 billion fund raising campaign; and Yale raised tuition and fees 4.5 percent to $43,050. Why the tax breaks in wartime?
  4. No tax deductions to institutions with endowments greater than $250,000 per student that raise tuition or fees. My own Williams College, for example, has an endowment of $750,000 per student, just raised $400 million more, raised tuition by 5.9 percent, all while using tax-deducted dollars to tear down a sound student center and build a new one. I don’t propose seizing funds, only shifting future federal focus to low-income students for as long as Iraq War spending constrains funds for social programs.
  5. Ask the federal Office of Management and Budget (OMB) to fast track proposals for formulas that would determine institutional tax status as a function of enrollment, endowment per student, percentage of full Pells, application of Work Study funds, and need-based scholarship aid. National tax policies for individuals and corporations derive from wealth and income. Why not for colleges and universities? Too complicated? Well, consider higher education and federal sponsored research. I have heard no complaints about the 35,000-word, 123-page Federal Office of Management and Budget Circular A-21, which governs formulas for research funding. Higher education wades through this play book without complaint each year for the $27 billion in federal research dollars.
  6. Save time in the public hearings and invite to testify only the chairs of the trustees of colleges and universities. The trade groups protect the presidents, and the presidents, many my heroes for what they must endure, take the public hits for their trustees. Lobbyists and presidents can’t give you straight answers. What’s the fun of subpoena power if you are just going to talk with lobbyists?
  7. Reclaim your Constitutional responsibilities over federal spending. Columbia University, Cornell, Yale and other colleges and universities have multi-billion-dollar fund raising campaigns under way. These, in turn, cause billions in forgone federal tax revenues. College and university trustees, elected by no one, then, are making decisions about billions in federal spending. Why is your Finance Committee ceding this responsibility to college and university trustees?

Discussion, Exhibits and Photographs

No, I do not propose wholesale plunder of higher education. My lunatic premise is that this $18-billion subsidy is a public good, a public trust. The $18 billion are not funds owned by colleges and universities. The $18 billion are resources that we, the people, allocated to higher education. If national circumstances change, we can review the allocation. What higher national priority can our nation have than helping students through college?

Dining at Harvard.

 

The Finance Committee must revise higher education tax policy to recognize wartime spending without further denying access to millions of low-income students. Reallocation of even $1 billion could create 240,000 new Pell Grants for students deciding today between groceries and books.

Your inquiry to Treasury Secretary Paulson to review college and university tax status in light of high institutional salaries and increasing student need is way too narrow. The Finance Committee can create wartime tax policies that free up funds and narrow the nation’s focus to educating low-income students.

Dining in Iraq. For more images, click here (YouTube video) or here (PowerPoint).

 

Higher education federal tax policy discriminates against low-income students. Our one-size-fits-all policy treats the poorest colleges the same as mighty Harvard with its $30-billion endowment. Is this fair?

In your Iowa, Senator Grassley, Grinnell College has an endowment of more than $1 million per student and revenues totaling 181 percent of expenses. Senator Baucus, for your alma mater, Stanford University, recent reported revenues were $4.5 billion with expenses of $2.6 billion, for a surplus of $1.9 billion. Stanford undergraduate tuition and fees this fall are $45,608, up 5.17 percent, and Stanford is boasting about another surplus. Grinnell -- $1 million endowment per student remember – will charge $42,422 this fall. Shifting tax policies is not seizing assets from colleges and universities. It’s deferring gratification until the troops are home. During wartime, do these institutions, however well managed, need tax benefits for gyms and student lounges and golf nets at the expense of single mothers who can’t qualify for any Pell Grant at all?

The duchies of Dupont Circle trade associations and the higher education lobbies will howl. Invite those who disagree to make their case on television in your stately Dirksen 215 committee room. Let them make their complaints eyeball to eyeball to a panel of wounded Iraq soldiers and veterans, and a few community-college students holding two or three jobs just to go to school part time.

Every year in a special section on executive compensation, The Chronicle of Higher Education also includes institutional revenues and expenses. See for yourselves below. Ask your staff to run the numbers on the federal Integrated Postsecondary Education Data System (IPEDS). This list goes on. Let these institutions raise and spend money as they wish. In wartime, why the tax breaks at the expense of low-income students?

Higher Education Positive Cash Flow Numbers      
  Revenue (000s) Expenses (000s) Profit (000s) Profit as %
of revenues
Ratio of revenues to expenses
Grinnell $165,000 $91,000 $74,000 44.8% 181%
Stanford $4,500,000 $2,600,000 1,900,000 42.2% 173%
Yale $3,400,000 $1,900,000 1,500,000 44.1% 179%
Harvard $5,000,000 $2,800,000 2,200,000 44.0% 179%
Princeton $1,900,000 $1,000,000 900,000 47.4% 190%
Williams $242,000 $160,000 82,000 33.9% 151%
Amherst $257,000 $133,000 124,000 48.2% 193%
Cornell $2,500,000 $2,100,000 400,000 16.0% 119%
Brown $776,000 $621,000 155,000 20.0% 125%

Source: Revenue and expense totals from IRS tax forms, via The Chronicle of Higher Education, November 2006

***

I calculate my $18 billion per year by the forgone revenue to the U.S. Treasury at a 30 percent tax rate for the $28 billion in tax-deductible donations and the tax-free income on $300 billion in endowments. Reasonable analysts may derive different numbers. None can dispute that even at the scale of federal budgeting, real money is at stake.

Your Finance Committee colleague, Sen. John Kerry, when he visited our class at Bunker Hill Community College, noted that proposed tax breaks for students and families are expensive, given the funding needed to finance the Iraq war. I have considered how to address the concern. Aren’t the proposed breaks expensive if they are in addition to the current tax policy? Modest, reasonable tax-policy adjustments, for the duration of the Iraq War, can increase desperately needed federal aid to low-income students facing soaring tuitions without breaking the Iraq-strapped Treasury.

On spending, remember, Senators, that Article 1, Section 8 of the U.S. Constitution provides to Congress, not university trustees, the “Power To lay and collect Taxes, Duties, Imports and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” My Constitutional reading, constructionist or liberal, finds no spending power granted to college and university trustees.

For the hearings, when higher education piles in to tell you the U.S. economy will crumble with any shift in tax policy, do swear in the witnesses, for form if not for necessity. The trustees set the fiscal decisions. Invite, for example, Burton McMurtry, the chair at Stanford, Nordahl Bruce from Grinnell, James Houghton from Harvard, Jide Zeitlin from Amherst, Robert Lipp from Williams, Stephen Oxman from Princeton, Thomas Tisch from Brown, and Stanley Gold from University of Southern California. Your ambrosial lagniappe for this hearing, Senators, is the Senior Fellow of the Yale Corporation, Roland Betts, lifelong friend of President Bush. The Michael Brown or the Socrates of education? Trustees are the people to explain to Iraq and Afghanistan veterans and to community college students why a tax deduction for a fitness center is more important than more Pell Grants. Let these chairs explain why all the tax policies should stand when the total G.I. Bill benefits of $50,000 wouldn’t pay for a single year, including books, pocket money, and travel, at their colleges, let alone four years.

This column began gathering in my mind on Sunday of Memorial Day Weekend. That afternoon my friend Rich Morales telephoned from Dulles Airport. Rich, a U.S. Army Colonel, and his wife were leaving for Germany. From there, Rich would leave for his fifth combat tour in the Mideast since Gulf I. Rich, a graduate of West Point and Yale and a White House Fellow, has a three-year tour commanding a 600-soldier tank battalion.

U.S. higher education leaders will scoff at any policies that curtail their ability to spend money. These leaders believe the U.S. has the finest higher education system in the world. We end-users of this great education, though, are not doing well by the world -- pollution, poverty, and war thrive. What does that say about the work of U.S. colleges and universities? Why, for example, is Rich returning to Iraq?

Author/s: 
Wick Sloane
Author's email: 
wsloane@well.com

Wick Sloane’s column, The Devil’s Workshop, appears as needed. He was recently awarded a fellowship from the Hechinger Institute on Education and the Media to write about community college finance and equity issues.

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