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.
Leadership in the House Appropriations Committee released a third operating budget proposal today in the form of 2P2SHB 1106 and PSHB 2269. This proposal still differs from the Senate budget proposal SB 6050 and varies from the previous House operating budget P2SHB 1106.
All of higher education (including financial aid) would receive nearly $3.348 billion (8.8 percent of near general fund appropriations). Under this proposal, the UW receives a total appropriation of $650.5 million, of which $598.19 million is from Near General Fund account.
Here are some of the key points from the House Budget (2P2SHB 1106) released today :
- Tuition – This budget assumes tuition rates remain at the levels charged in 2012-2013. Funding is provided to freeze resident undergrad tuition in the first year; however, funding in the second year is provided in HB 2269 (see below).
- Compensation Increase – This budget proposal is similar to prior proposals, authorizing a 3% and 1.8% for FY16 and 17 respectively; in addition, this budget provides limited funds for the UW’s contracts with SEIU and WFSE.
- WWAMI – This budget contains a proviso to transfer $4.68 million a year from WSU to the UW to maintain WWAMI and support expansion of this program to 60 students.
- O&M Funding – $1.762 million over the biennium to cover the Operating and maintenance cost of UW Bothell Discovery Hall which is the same as the House budget, but slightly higher than the Governors funding.
HB 2269 was introduced alongside the primary appropriations bill and would fund the following activities:
- Medical Residencies – HB 2269 appropriates $8 million over the biennium for medical residencies.
- Computer Science – This budget provides $8 million over the biennium to increase bachelor’s degrees awarded in computer science.
- Computer Science Building – This budget appropriates $32 million over the biennium from State building construction account.
We anticipate significant activity this week and will post additional updates to the blog.
Leadership in the House Committee released a new Operating budget proposal in the form of P2SHB 1106 as a counter offer to the Senate budget released last week. This proposal still differs from the Senate budget and varies slightly from the engrossed House operating budget, ESHB 1106.
All of higher education (including financial aid) would receive nearly $3.49 billion or 9 percent. UW receives a total appropriation of $612.3 million of which $591.39 million is from Near General Fund account.
Here are some of the key points from the House “Offer “Budget proposal:
- Tuition – This budget freezes tuition to all higher education institutions at the levels charged in 2012-2013. Funding is provided to freeze resident undergrad tuition.
- Compensation Increase – This budget proposal is similar to prior proposals in authorizing a 3% and 1.8% for FY16 and 17, however this budget would only partially fund the cost of increase. This budget provides limited funds for the UW’s contracts with SEIU and WFSE.
- WWAMI – This budget contains a proviso to transfer $4.68 million a year from WSU to the UW to maintain WWAMI and also a contains a requirement to support 60 first year medical students and 60 second medical students through WWAMI program in Spokane.
- O&M Funding – $1.762 million over the biennium to cover the Operating and maintenance cost of UW Bothell Discovery Hall which is the same as the House budget, but slightly higher than the Governors funding.
- Computer Science – This budget provides $4.25 million over the biennium to increase bachelor’s degrees awarded in computer science.
Please refer to our OPB Brief for more information about the special session House “Offer” budget.
Leadership in the House Appropriations Committee released their 2015-17 operating budget proposal on Friday – Proposed Substitute House Bill 1106 . The proposal provides $3.48 billion of Near General Fund State for higher education which is a slight increase over the total higher education appropriations in the Governor’s budget.
On the operating side, the UW would receive $595.6 million of Near General Fund State across the biennium – $95 million more than we received in 2013-15.
Here are some of the key points from the House operating budget proposal:
- Tuition freeze for resident undergraduate students over the biennium.
- $50 million in biennial funding to offset tuition freeze and fund compensation increases.
- $8 million in FY17 to support Computer Science engineering enrollment.
- $3 million in FY17 for additional medical residencies in Washington State.
- $4.68 million transfer from WSU to the UW in both FY16 and FY17 to support the WWAMI program.
- $1.7 million over the biennium to cover operation and maintenance costs for UW Bothell Discovery Hall.
- $1 million for an ungulate predation study — $600,000 of which would pass through to another state agency.
- No funding for Climates Impacts Group, although the Governor’s funding had provided$1 million provided for this purpose.
Overall, the UW fared well in the House operating budget compared to the Governor budget.
On the capital side, the UW would receive $41.156 million in new funding from the State Building Construction Account. This is significantly less than the Governor’s proposed budget of $86.2 million, with less funding for the CSE Expansion ($6.033 million of the $40 million requested) and no funding to support the completion of the phased renovation of Lewis Hall. It does however propose a greater amount of funding for the Burke Museum ($26 million), but is still less than the Burke’s requested $46 million.
The Senate will release its proposed operating and capital budgets in the coming weeks. For an analysis and summary of the operating and capital budgets, please review the OPB Brief.
A new report from the Brookings Institution concludes that student loan borrowers may not be in such a dire situation as media reports commonly suggest. The report, Is a Student Loan Crisis on the Horizon?, finds that while student debt levels have risen along with college tuition over the past two decades, college graduates’ incomes have kept pace. The authors analyze data on student borrowers over the period 1989-2010. They conclude that education debt has not become a greater burden on borrowing households.
- Education debt increased most among households with higher levels of educational attainment. Roughly one-quarter of the increase in student debt can be explained by an increase in the number of households with college degrees, especially graduate degrees. Since 1989, student borrowers with graduate degrees saw their average debt level increase from about $10,000 to about $40,000. Over the same time, the debt level for borrowers with bachelor’s degrees increased by a smaller margin, from $6,000 to $16,000.
- On average, student borrowers’ incomes more than kept pace with increases in student debt. While average household debt increased by about $18,000 between 1992 and 2010, average annual household income for borrowers increased by about $7,400 over that same period. The average increase in earnings would pay for the increase in debt incurred in just 2.4 years.
- The ratio of monthly debt payments to monthly income has held steady. Between 1992 and 2010, the median borrowing household consistently paid between three and four percent of monthly income toward student debt. The mean monthly payment decreased from 15 percent to 7 percent of income over that period.
Student debt levels have increased over the past two decades. The authors conclude that this is largely driven by tuition increases over that time. However, higher levels of student borrowing also partly reflect an investment in higher levels of education. For the average borrower, that investment pays off in higher incomes.
The Governor released operating and capital budgets yesterday morning. Though the UW fared well in the capital budget, we believe the operating budget, as currently proposed, presents challenges. Please note that the Governor’s budgets will be taken up by the Legislature in January; we are many months away from a final legislative compromise. As usual, we will be sending out budget briefing documents throughout legislative session to keep you updated.
For an analysis and summary of the operating and capital budgets, please review the OPB brief.
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. 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.
 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.
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