U.S. Attorney General Loretta Lynch announced on Monday that the Department of Justice (DOJ) has reached a settlement in its false claims case against the Education Management Corporation (EDMC), an operator of for-profit colleges and universities. The $95.5 million settlement is the largest ever in a higher education false claims case. EDMC will also forgive a total of $102.8 million in loans to over 80,000 students who attended its schools, which include Argosy University, the Art Institutes, Brown Mackie College, and South University, between 2006 and 2014.
The lawsuit was originally filed in 2007 by whistle-blowers within EDMC, who alleged that the organization was offering extra incentives to their admissions officers based on the number of students they enroll, a violation of the Incentive Compensation Ban in the Higher Education Act. Said Attorney General Lynch in her statement, “EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law.”
Reactions to the settlement have been mixed. While it is encouraging to see the DOJ take action against illegal and unethical practices at for-profit institutions, many student and consumer advocates have criticized the settlement for providing too little relief for students who accrued thousands of dollars of federal student loan debt at EDMC institutions.
Secretary of Education Arne Duncan has indicated that his Department is willing to listen to claims from students who believe that EDMC mislead them when if offered loans, but critics of the deal say listening is not enough. “I am disappointed that the department’s only plan for EDMC students is to hear their complaints,” said Robyn Smith, a lawyer at the National Consumer Law Center, who was quoted in The Chronicle.
Others have criticized the language of the settlement, which did not force EDMC to admit wrongdoing for its actions. Stephen Burd, a senior policy analyst at New America, laments the continued lack of accountability of for-profit institutions.
“Too many of these cases are settled without finding fault,” he said in the same Chronicle article, “and the for-profit industry has been able to say, ‘Oh, nothing is proven.’”
Despite its issues, this settlement is another step in the Federal Government’s continuing efforts to rein in the questionable behavior of for-profit colleges and universities. Last year, the Department of Education formed an interagency task force to more rigorously oversee for-profit institutions of higher learning. The Department of Defense also suspended all tuition assistance to the University of Phoenix, which targets veterans in its recruiting efforts.
A recent story in the LA Times, “UC seeks to boost Californians’ enrollment by 10,000 by 2018,” outlined the University of California’s plan to expand resident undergraduate enrollment at their nine undergraduate campuses. Like many U.S. public universities that have faced significant state divestment during the recession, the UC system has enrolled more nonresident students in recent years to help cover funding cuts and keep resident tuition increases to a minimum. To adjust this trend, the California Legislature recently increased its investment in the UC system by $25 million to partially fund the enrollment of 5,000 additional resident undergraduate students by no later than 2016-17. To pay for an additional 5,000 enrollments proposed by UC, system President Janet Napolitano plans to phase out aid for low-income non-resident students and request additional funding from the California Legislature. Napolitano was quoted as assuming the legislature would “continue to support access for California students.”
According to the article, UC officials are now “working through the logistics of housing, laboratory availability, and classroom sizes.” The increase in undergraduate students will also necessitate enrolling 600 more graduate students for instruction and lab support.
The University of Washington has faced similar financial pressures as a result of the recession, but remains committed to providing Washington students with affordable, quality higher education.
- The UW continues to fully fund Husky Promise, which covers, at minimum, tuition and fees for resident undergraduate students who qualify for the Pell Grant or State Need Grant.
- Since 2009-10, the UW has increased incoming enrollment of resident undergraduates by more than 1000 students at its three campuses.
- During the recession, the UW increased its contribution to institutional financial aid in order to maintain access for students with the most financial need.
- The percentage of Pell-eligible students at the UW rose from less than 20 percent in 2007-08 to 29 percent in 2014-15.
With over 188,000 undergraduate students in the UC system, the plan would increase their undergraduate enrollment by over 5 percent. To achieve a similar overall increase, the UW would need to add approximately 2000 students and would face significant barriers in doing so. Unlike the UC system, UW does not provide need-based aid for non-resident undergraduate students, and thus would not be able to cut that non-resident aid funding to pay for additional resident enrollment. Additionally, all three campuses are nearly at capacity without significant capital investment.
Undergraduates who graduated with student loan debt from four-year colleges in 2014 owed an average of $28,950, according to a recently released report by The Institute for College Access and Success (TICAS). 69 percent of graduates have loan debt, the same figure as last year and slightly higher than it was in 2004 (65 percent). The average amount of debt per borrower is up 56 percent from 2004 – more than double the inflation rate over the same period – but only up 2 percent from 2013.
A number of factors have contributed to the rising student debt load over the past decade. States have decreased their investment in public higher education over the last ten years, causing students at public institutions to bear a higher percentage of the funding burden. Since 2004, the share of public higher education funding provided by states has dropped (from 62 percent to 51 percent) and the share paid by students and their families (in the form of tuition) has increased (from 32 percent to 43 percent).
In addition, the growth of Pell Grants has not kept up with rising costs. The TICAS report shows that between 2004 and 2012—the last year in which data is available—recipients of Pell Grants at public four-year colleges saw average cost of attendance rise by $7,400 and grant aid rise by just $2,900. At private, non-profit colleges the gap is even wider; costs rose by $14,400 and grants increased by $8,700.
Washington state is performing well with regard to student loans: only 58 percent of Washington bachelor’s degree recipients who graduated in 2014 had loans, and those who did had an average of $24,804, more than $4,000 below the national average. The University of Washington also looks good by these metrics: thanks in large part to the University’s commitment to institutional aid through programs such as Husky Promise, less than half of all UW undergraduates who graduated in 2014 had student debt and the average debt burden was $21,558, well below the state and national averages.
While Washington’s performance relative to its peers is laudable, student debt is still a major issue for many students. The TICAS report offers a series of proposals to mitigate the student debt load, among them doubling the size of Pell Grants, simplifying income-driven repayment plans, and improving student loan servicing to make it easier for students to pay back their loans. It is important that policymakers remain focused on reducing the student debt burden and continue working with institutions to make higher education accessible and affordable for all students during and after graduation.
 It’s important to note that borrowing rates and debt levels vary widely by state, college and sector.
 Because the federal government does not require colleges to report debt levels for their graduates, data in the TICAS report is based on voluntary reporting by institutions. Hardly any for-profit colleges voluntarily report their graduates’ average debt, so this year’s debt figures are for public and nonprofit colleges only.
The Department of Education recently released their annual report detailing the 3-year cohort default rate (CDR)—a metric that measures what percentage of postsecondary students default on their loan payments within the first three years of entering repayment—and the data are encouraging: the 3-year CDR for FY 2012 is 11.8 percent, almost two percent lower than the previous year and three percent lower than FY 2010.
While reasons for the drop are uncertain, administration officials have credited the increased enrollment in income-based repayment plans as partially responsible. Secretary of Education Arne Duncan has cheered the lower default rate but cautions that there is more work to do. “There’s no real reason why we can’t significantly reduce default rates even further,” he told reporters in a statement reported by Inside Higher Ed. “We’re going to keep working to hold schools accountable.”
The report also breaks down the CDR by school, state, and institution type. Below is a breakdown of the most salient statistics.
- Public four year institutions saw their 3-year CDR drop to 7.6 percent, down from 8.9 percent last year.
- Private non-profit four year institutions’ default rate also dropped, to 6.3 percent from 7 percent.
- Private for-profit four year institutions’ CDR dropped to 14.7 percent, down from 18.6 percent last year.
- Schools in Washington state have an average 3-year default rate of 10.1 percent, slightly below the national average.
- The University of Washington performed exceptionally well by this measure: the 3-year CDR for UW dropped to 2.7 percent, almost 5 percent lower than the national average for public four year universities and down from 4.3 percent last year.
As previously stated, the declining CDR average nationwide is a hopeful sign for the future of student loan repayment. Nevertheless, loans remain a massive strain on millions of college students and graduates and more must be done to alleviate the student debt burden. The CDR itself has come under fire as a flawed metric; it only measures those students who default on payments and does not take into account the almost one in three borrowers who make payments but cannot make any progress on paying down their debt or the share of students at a given institution who borrow. Some in the education policy world have called for using loan repayment rates, rather than default rates, as the primary metric for gauging an institution’s ability to prepare its students for repayment.
Reuters recently ranked the UW as the fourth most innovative university in the world among public and private institutions, surpassed only by Stanford, MIT and Harvard. When looking at public institutions alone, however, the UW topped the list.
As the Seattle Times noted, “The ranking takes into account academic papers, which indicate basic research performed at a university, and patent filings and successes, which point to an institution’s interest in protecting and commercializing its discoveries.”
In addition to the innovation ranking, Washington Monthly recently ranked UW Seattle as the #1 “Best Bang for the Buck” among Western institutions. Institutions are scored on “’Net’ (not sticker) price, how well they do graduating the students they admit, and whether those students go on to earn at least enough to pay off their loans.” For more information about the “Best Bang for the Buck” rankings, please see the companion article.
State Higher education Executive Officer (SHEEO) announced its annual release of State Higher Education Finance (SHEF) report for FY14, which provides a comprehensive review of state and local funding, tuition revenue, and enrollment trends for public higher education.
National trends and Current status of state funding for higher education
On average, state and local support per full time equivalent (FTE) student was $6,552, a slight increase from $6,215 in 2013. Net tuition collections per FTE student is at $5,777, a 2.7 percent increase from 2013. Two rather interesting findings were highlighted in the report:
- State and local support was 57.3 percent in 2014 as a share of per-student total educational revenue available to public institutions of higher education.
- The explosive enrollment growth at public institutions from 2008 through 2011 tapered off in 2012 and is continuing in the downward trend. In 2014 enrollment fell another 1.3 percent from 2013.
Washington State compared to U.S Average
As a reminder, the SHEEO SHEF report combines community and technical college and college/university enrollment, state appropriations and tuition revenue for purposes of this report. In it, they found that enrollment (FTE) increased by 3.5 percent from 2009 to 2014, which is close to U.S. average (3.9 percent). They also found that public higher education in Washington improved in a number of other dimensions; including:
- 15.3 percent increase in educational appropriations per FTE since 2013, higher than the U.S. average of 5.4 percent;
- 3.7 percent increase in net tuition revenue per FTE from total educational revenue, higher than the U.S. average of 2.7 percent; and,
- Total educational revenue per FTE increased by 9.4 percent, which was higher than the U.S. average of 4.1 percent.
However, two years of per-student funding increases might have meant that national average was on the path to exceeding pre-recession funding levels, which was not the case. Educational appropriations per student in FY14 remained 18.9 percent below 2008 pre-recession levels.
Read the full report for more data, analysis and methodological details.
Washington State’s Education Research & Data Center (ERDC) recently published the Earnings for Graduates Report, which provides earnings information for graduates from the state’s public institutions. OPB’s latest brief describes where the data for the report came from, discusses some of its limitations, and warns against relying on the report in choosing a program of study.
The Education Department’s (ED) final “gainful employment rule,” which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the March draft rule. Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only criteria upon which individual career education programs are evaluated to determine federal aid eligibility.
Community colleges had advocated for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are “materially and statistically unrepresentative of all the students in a program.”
Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy – Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group – issued a written statement yesterday saying:
“We and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.”
For-profit colleges weren’t pleased with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”
Arne Duncan, the education secretary, estimates that 1,400 programs—99 percent of which are at for-profit colleges—will fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate. See the article by TICAS for more information.
Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are “in the zone” for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.
The University of Washington was ranked the 14th best university in the world by U.S. News & World Report’s inaugural “Best Global Universities Ranking,” which was released on Tuesday.
Unlike U.S. News’s national rankings, which focus on undergraduate admissions data and graduation rates, these new rankings were based on research-heavy factors such global research reputation, number of publications, PhDs awarded, and highly cited papers (learn more about how the rankings were calculated). This methodological difference helps explains the odd fact that U.S. News ranks the UW 14th globally, but 48th nationally.
“This is about faculty productivity and prestige … It is meaningful for certain things and not necessarily meaningful for other things. We get that. This is about big muscular research universities doing what research universities claim is their mission,” U.S. News Editor, Brian Kelly, told The Washington Post.
The 2015 Best Global Universities rankings include 500 institutions and 49 countries, and provide breakdowns by region, country, and 21 subject areas. The U.S. dominated the rankings with 16 institutions in the top 20, and 134 institutions on the list overall. Germany had the second most institutions on the list, with 42, followed by the United Kingdom, with 38. China, which has received a lot of attention in the higher education world lately, also did well with 27 schools among the top 500.
The UW ranks highly on several other global lists: 15th worldwide by the Academic Ranking of World Universities and 26th by the Times Higher Education World University Rankings.
It will soon be easier for students and parents with adverse credit histories to qualify for federal PLUS loans. Under new the Education Department’s (ED’s) new rules – which were released on Wednesday and are expected to take effect in March – ED will review only two years (rather than five) of a prospective borrower’s credit history to determine loan eligibility, and will excuse up to $2,085 in certain types of delinquent debt when running initial credit checks.
ED agreed to revisit the rules following pressure from many colleges and families who were angered after ED tightened the PLUS loan standards in 2011. The 2011 changes resulted in thousands of sudden loan denials and, consequently, enrollment declines and revenue losses at some institutions. According to Inside Higher Ed, department officials expect that the new standards will allow an additional 370,000 applicants to pass the initial credit check for PLUS loans.
Representative Chaka Fattah – Pennsylvania Democrat and co-chair of the Congressional Black Caucus Education Task Force – lauded the new standards; however others connected with historically black colleges have criticized ED for not moving quickly enough. Meanwhile, some policy analysts and consumer advocates argue that ability-to-pay criteria are necessary to prevent borrowers from being saddled with unmanageable debt, and that the new rules don’t do enough to safeguard against default.
If defaulting becomes an issue as a result of the new standards, the silver lining is policymakers will at least know about it and, hopefully, be able to do something. As part of ED’s changes to the PLUS program, the department will begin calculating and publishing annual cohort default rates for institutions receiving PLUS loans. That information should help illuminate whether borrowers are getting in over their heads.
Ultimately though, as EdCentral points out:
“The Department must do a better job reaching out to parents and helping them understand the terms and conditions of their loans, including the ability to repay their loan as a percent of their income if they consolidate into a Federal Direct Consolidation Loan. Better counseling won’t solve all the issues with the PLUS loan program. But it’s a start until we can ensure PLUS loans are a safe product for families and we can improve access to better aid options like grants for low-income families.”
 ED currently only calculates cohort default rates for colleges that receive Stafford loans.
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