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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.

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.

National 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.

State statistics:

  • 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.


Overall student debt levels of recent bachelor’s degree recipients continue to rise according to Student Debt and the Class of 2013, a new report from the Project on Student Debt at The Institute for College Access & Success (TICAS).  The report includes 2013 state- and college-level debt data for graduates from colleges that opt to disclose their graduates’ debt. However, since very few for-profit colleges choose to disclose debt data, the report’s figures represent only public and nonprofit colleges.

  • At the national level, 69 percent of graduating seniors had student loans and those that borrowed had an average debt of $28,400 – a 2 percent increase over 2012. For comparison, in 2013, 50 percent of UW undergraduates graduated with debt, and those that borrowed graduated with an average debt load of $21,471.
  • At the state level, borrowers’ average debt at graduation ranged from $18,656 to $32,795, and the likelihood of graduating with debt ranged from 43 to 76 percent. In six states, average debt was greater than $30,000; in one state, it was under $20,000. Nearly all the highest debt states were in the Northeast and Midwest, with the lowest debt states in the West and South. In Washington, 58 percent of graduates had debt, and those that borrowed had an average of $24,418 in loans. Debbie Cochrane, research director at TICAS and coauthor of the report, says, “The importance of state policy and investment cannot be overstated when it comes to student debt levels.”
  • At the college level, borrowers’ average debt at graduation varied widely – ranging from less than $2,500 to more than $71,000 – and the likelihood of graduating with debt also varied – running from 10 percent to 100 percent. At nearly one in five (18%) colleges, average debt rose at least 10 percent, while at 7 percent of colleges, average debt decreased by at least 10 percent. In general, colleges with higher costs had higher average debt at graduation, although that wasn’t always the case.

The authors note that the report’s data have significant limitations, primarily because colleges are not required to report debt levels for their graduates. Only 57 percent of public and nonprofit bachelor’s degree-granting colleges provided data, representing 83 percent of graduates in those sectors. And for-profits, as mentioned, were excluded because hardly any chose to disclose their graduates’ debt.[1] Even colleges that do provide data may understate graduates’ debt loads because they do not include transfer students and are often not aware of all private loans.

Thus, the report’s main recommendation is to get better debt data via federal collection of cumulative student debt data for all schools. The report also makes recommendations about reducing students’ need to borrow, helping students make better-informed college decisions, and simplifying income-driven repayment plans.

See the report or TICAS’ interactive map for more information.

[1] Federal data for 2012 graduates of for-profit. four-year colleges show that the vast majority (88%) took out student loans and that borrowers graduated with an average of $39,950 in debt—43 percent more than bachelor’s recipients in the other sectors. In addition, students at for-profits tend to default on their loans much more frequently than students in other sectors.

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.

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.[1] 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.”

[1] ED currently only calculates cohort default rates for colleges that receive Stafford loans.

The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW’s CDR rose while the national CDR declined, the UW’s rate still remains well below that of the nation.

ED is in its first year of using only the more accurate three-year CDR measure – as opposed to the two-year CDR. Thus, this year’s report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by institution type, state and school. Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year’s rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits’ whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW’s three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The UW reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them. Former UW students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (, 206-543-6101). Students can also visit to explore their repayment options.

As the UW’s Office of Federal Relations reported on their blog, yesterday Senate Democrats released plans to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:

  • Increasing affordability and reducing college costs for students,
  • Tackling the student loan crisis by helping borrowers better manage debt,
  • Holding schools accountable to students and taxpayers, and
  • Helping students and families make informed choices.

In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:

For more information, check out the Federal Relations blog and a recent article by EdCentral.  We’ll post more information on OPBlog over the coming weeks.

On Monday, The Equity Line posted the following piece about how the U.S. compares to the other World Cup countries in terms of degree attainment.

More Than Just a Game: Degree Attainment Around the World (Cup)

Posted on June 16, 2014 by Kaylé Barnes and Joseph Yeado

“Defying commentators, critics, and prognosticators, the U.S. has already performed quite well against the other nations competing for the 2014 World Cup. Yes, the competition on the field only started last Thursday and the Yanks have yet to kick things off today, but the U.S. is beating most of the competition in another competition: college attainment.

Among the 32 teams competing in Brazil, the United States ranks third for the percentage of adults with a 2-year or 4-year college degree.

It may look like America has trounced the competition, but there are two important facts that put these figures into perspective.

In 1990 the United States soccer team qualified for its first World Cup after a 40-year drought. Though it failed to win a game and was sent home, the U.S. was ranked first in the world in four-year degree attainment among young adults. Since that time, our men’s national soccer team has steadily improved, but our college attainment rates have not. The United States now ranks 11th among developed nations for young adults with college degrees.

The U.S. may compare favorably to other World Cup countries, but the data still mean that only 2 in 5 adults have some kind of a college degree. In fact, just 59 percent of students at a 4-year college will earn a bachelor’s degree in six years – not to mention that black and Latino students complete at even lower rates (40 percent and 52 percent, respectively). Ranking well relative to other countries doesn’t mean much when we are leaving so many of our students behind.

Third place is not good enough. More important to our country’s well-being than winning the World Cup is whether we have an educated population prepared to face the challenges of the new global economy. Higher education leaders and policymakers should look to the example of the colleges and universities across the country that are leading the way to improve student success and proving that low graduation rates are not inevitable.

The expectations of American soccer supporters have risen steadily since 1990, and millions are tuning in to watch our boys play in Brazil. It’s time that we raise our expectations about college attainment and the equity in attainment levels.

Only then can the United States realize its gooooooaaaaals of being first in the world on the fútbol pitch and in degrees.”

Here’s a quick roundup of some of this week’s headlines in higher ed news.

Report Argues Gainful Employment Rules Could Hurt For-Profits’ Students 

According to a study commissioned by the Association of Private Sector Colleges and Universities, up to 44 percent of students at for-profit colleges could lose access to federal financial aid under the latest “gainful employment” proposal. The authors of the report—Jonathan Guryan, an economist at Northwestern University, and Matthew Thompson of Charles River Associates, a consulting firm—argue that since for-profits tend to serve students who have fewer financial resources and less academic preparation, the proposed rules would leave students without other options. Additionally, the report asserts that the rules should not be based on short-term measures of earnings and student debt, as such metrics tell an incomplete story. The Department of Education released the proposed rules in March. The window for public commenting closed on Tuesday.  This report was part of a final lobbying campaign by both sides.

Startups Playing Matchmaker with Students and Employers

Several startups have begun serving as matchmakers between community college students and employers. One of the startups, called WorkAmerica, states that it will provide students with a legally binding job offer before they enroll at one of the startup’s partner colleges. WorkAmerica has already started placing students into trucking programs, and plans to expand to other “high churn” employers, such as those that hire welders, IT technicians, and medical assistants.  Another similar startup, called Workforce IO, connects employers with “trainers”—which can include community colleges, in addition to nonprofits and other mentoring agencies. The company uses a library of 275 job-skills “badges” to vouch for its workers’ skills. In an era when students are increasingly concerned with their post-graduation employment opportunities, it’s possible that such a model could be applied to some programs at four-year institutions.

Data Say College is Worth More Than Ever

Research shows that not only is a college degree is worth the time and money it takes to earn one; it’s worth more than ever.  According to analysis of Labor Department statistics by the Economic Policy Institute, the pay gap between college graduates and those who either never went to college or never graduated from college, reached a record high last year. The NY Times article summarizes, “Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree. That’s up from 89 percent five years earlier, 85 percent a decade earlier and 64 percent in the early 1980s.”

Representative Paul Ryan, the House Budget Chairman, released his FY15 budget proposal on Tuesday. The proposal would remove the in-school interest subsidy for all subsidized undergraduate student loans, eliminate mandatory funding for Pell Grants, and freeze the maximum Pell Grant award at $5,730 for the next 10 years.

As Office of Federal Relations put it in their blog post, “That essentially means that $870 in the maximum grant would have to be funded by increased discretionary funds or the maximum be cut from $5,730 to $4,860.”

Please see the Federal Relations website for more information, and check out articles by Equity Line, Inside Higher Ed, and The Chronicle.

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