Office of Planning and Budgeting

Days after the Department of Education released its finalized Gainful Employment rule, Senator Tom Harkin held his fifth Senate hearing investigating the practices of the for-profit higher education industry. Senator Harkin focused the hearing on the high levels of student borrowing and outsized loan default rates for students at for-profit institutions. Previous hearings and reports have revealed that:

  • Less than 10% of postsecondary students are enrolled in for-profits, yet they receive 23% of federal aid, and account for 44% of all loan defaults.
  • 95% of all students at for-profits borrow money to attend, compared to less than a quarter of community college students, 64% of students at public four year institutions, and 72% at private four year institutions.

Additionally, Harkin grilled Department of Education Under Secretary Martha Kanter on whether the softened gainful employment rule released by the Department would do enough to help reign in exploitative practices of the for-profit higher education industry, noting that stock prices in the industry increased significantly upon publication of the revised rule whereas previous iterations had sent prices down. Kanter, who was attending in place of Secretary Arne Duncan, defended the regulation as a step forward.

Harkin concluded that while the Department of Education regulations were ‘better than nothing’, he continues to believe that Congressional action via legislation may be necessary.

No Republican members of the committee were present, and no further hearings on the topic are scheduled at this time.

For previous OPBlog posts on this topic see:

Along with its survey of the general public, the Pew Center recently published a survey of 1,055 two- and four-year, public, private and for-profit college presidents, concerning the quality, accessibility, and affordability of higher education. The two surveys were conducted around the same time and asked similar questions.  However, there were notable differences between the opinions of college presidents and the general public on key issues in higher education. On the whole, college presidents were less concerned about affordability and access, and more concerned with student and academic program quality. Some highlights of the data include:

  • 38 percent of college presidents think higher education is moving in the wrong direction, with only 7 percent believing the US system will be the best in the world in 2021
  • 42 percent of presidents believe college is affordable for most families (compared with 22 percent of the general population)
  • 17 percent of presidents believe students get excellent value for their money (only five percent of the general population agrees)
  • The majority (58 percent) of college presidents believe students come to college less qualified than their counterparts ten years ago, and only seven percent think current students study more than students ten years ago

Interestingly, leaders of for-profit schools were most likely to be pessimistic about the affordability and direction of higher education and student preparation. Conversely, presidents of the most selective schools were most optimistic about those factors. Furthermore, the majority of college presidents think it is unlikely that the nation will meet President Obama’s degree attainment goals by 2020. To find out more, check out the Chronicle’s analysis, our blog post on the general public survey or read the full Pew Center report here.

As of today, House Bill 1795 has passed both the Washington State House and Senate by wide margins and is on its way to the Governor. As outlined in our previous post, this bill gives Washington’s four year public institutions the ability to set resident undergraduate tuition rates, alongside new financial aid and accountability requirements, for a limited time.

Note that due to the ongoing state legislative special session, as well as the need for time to discuss the policy alternatives authorized in HB 1795, the Board of Regents will likely approve the FY 2012 UW operating and capital budgets, including tuition rates for the 2011-12 academic year, at their July 21 meeting instead of in June.

In the meantime, Interim President Phyllis Wise will be holding two community conversations where she will discuss and answer questions about the budget and tuition-setting:

We hope to see you there.

It was speculated that Republican gains in Congress last November could stall the Senate’s aggressive investigation of the for-profit higher education industry and sweeping new Department of Education regulations that are set to go into effect July 1. While bipartisan action in the House did attempt to block some of the regulations, particularly the controversial gainful employment rule, they survived the final 2011 budget deal.

Meanwhile, as federal efforts to better regulate this run-away industry, which enrolls 10 percent of total students, eats up 24 percent of federal aid and accounts for 45 percent of  student loan defaults while making billions of dollars of profit annually, continues, several states, including Florida and Illinois, have launched their own investigations. Today, it has been reported that Attorneys General from at least 10 states will embark on a joint investigation of the industry.

Adding to pressure facing the industry is widespread media coverage, including investigative efforts from the New York Times, ABC News, and Frontline, among others. Even Stephen Colbert has addressed the topic.

While the for profit higher education industry lobbying effort is massive (likely paid for with the federal student aid dollars that, on average, make up over 90 percent of the annual operating budgets for these institutions), mounting scrutiny has already had effect as some of the industry’s largest actors have begun ‘maturing’ some of their practices ahead of anticipated regulations.

For past OPBlog posts on this continuing story see:

CUPA-HR salary survey data, analyzed by Inside Higher Education, shows that, similar to faculty members, median pay for senior and mid-level administrators at public institutions of higher education was flat in 2010.

At private institutions, members of all three categories showed modest gains of between 1 and 2 percent, contributing to a growing gap between pay at public and private institutions.

The New York Review of Books has published a high level review of the recent spate of ‘higher education in crisis’ books. In Our Universities: How Bad? How Good?, Peter Brooks takes a look at common themes contained in four recent publications on the state of higher education in the US.

Read the whole piece if you get a chance, but we have pulled out a couple of passages that especially struck us:

  • “On the whole, one has to say that the relative autonomy of the American university has been far more beneficial than the contrary. American higher education is a nonsystem that is messy, reduplicative, unfair—just like American society as a whole—but it has made genuine commitments to quality and to a greater degree of social justice, to the extent that is within its control, than most other institutions of the society.”
  • “Research and teaching have always cohabited: anyone who teaches a subject well wants to know more about it, and when she knows more, to impart that knowledge. Universities when true to themselves have always been places that harbor recondite subjects of little immediate utility—places where you can study hieroglyphics and Coptic as well as string theory and the habits of lemmings—places half in and half out of the world. No country needs that more than the US, where the pragmatic has always dominated.”
  • “[Universities] often fail, they need reform and course correction, but they are not, at their best, merely venal and self-serving. They deserve better critics than they have got at present.”

Two higher education news stories leapt out at us this morning as emblematic:

  • Pennsylvania Governor Tom Corbett announced 50 percent state funding cuts for four-year public institutions. The largest institution, Penn State, would see its state subsidy reduced from $465 million per year to $233 million. The University describes the proposed cuts as devastating:  “A reduction of this magnitude would necessitate massive budget cuts, layoffs and tuition increases, with a devastating effect on many students, employees and their families,” said Al Horvath, senior vice president for Finance and Business. “While we have for many months been planning for a potential state funding cut, we could not have envisioned one so damaging to the future of the University and the Commonwealth.”
  • Meanwhile, in Los Angeles, the University of Southern California kicked off the day with an announcement of a new, record high, unrestricted $200 million gift to the College of Letters, Arts and Sciences. The College will be named after the alumni donors, David and Dana Dornsife, who told the Los Angeles Times that they “had confidence in USC faculty and administrators to spend it wisely.” USC intends to use the money primarily to enhance the humanities and social sciences through faculty hiring, graduate fellowships and research funding.

As mentioned in yesterday’s post about faculty salaries, the growing resource gap between public and private institutions predates the Great Recession, which appears to be dramatically accelerating the existing trend. Read the 2009 Association of Public and Land-Grant Universities (APLU) report, Competitiveness of Public Research Universities & Consequences for the Country, to learn more about this concern: “from 1987 through 2006 revenue per student in private research universities in every revenue category except state funding has grown to be multiples of that available to the publics.”

The Government Accountability Office (GAO) released a report and recommendations, DOD Education Benefits: Increased Oversight of Tuition Assistance Program is Needed, ahead of another Senate hearing focused on the conduct of for-profit colleges, this time held by Senator Tom Carper.

The GAO report focused on the DOD Military Tuition Assistance Program, which provides tuition benefits for active duty soldiers. In 2009, the program provided $517 million in tuition assistance to over 375,000 service members of which for-profit institutions received a disproportionate amount. The report addressed two primary points:

  • DOD oversight of schools receiving Tuition Assistance Program funds
  • The extent to which DOD coordinates with accrediting agencies and the U.S. Department of Education in its oversight activities

The Senators discussed the gaps in oversight exposed by the report, and also discussed the fact that Tuition Assistance Program revenue is not included in the calculation to determine whether at least 10 percent of annual revenue comes from non-federal sources, which is required for an institution to be eligible to receive federal student aid. This is a rule that Senator Tom Harkin has specifically mentioned as a target for reform in earlier hearings he has held on for-profit institutions.

Meanwhile, the association that represents for-profit colleges is suing the US Department of Education in an attempt to block new federal regulations, and House Republicans included an amendment to block the controversial gainful employment rule from moving forward in their recently passed budget.

For past OPBlog posts on this continuing story see:

The economic outlook for state budgets remains bleak and additional steep cuts to public higher education inevitable, making it imperative to re-imagine how institutions can become more efficient and self-sufficient while remaining effective and accountable to the public. For many institutions greater autonomy from the practices and requirements of state government seems attractive, and this topic is explored in OPB’s latest brief on variations in institutional autonomy among the UW and its peers.

Last summer, Governor Gregoire created a Higher Education Task force, comprising both public and private leaders, and charged them with proposing a new funding strategy for public higher education, as well as new ideas for increasing institutional accountability. The Task Force released its report yesterday, January 3rd, recommending three major reforms to higher education policy in Washington State.

First, the group suggested that tuition setting authority be given to the universities to help make up for budget cuts from the legislature. Based on their proposal, the institutions would use a formula to determine appropriate tuition rates, taking into account state appropriations, tuition at peer institutions, and enrollment levels.

Second, the Task Force proposed the creation of a Washington Pledge Scholarship Program, which would be funded by private donors. They hope the fund would reach $ 1 billion by the end of the decade. Corporations would receive a tax credit for donating, although that benefit would not kick in until overall tax revenue returned to 2008 levels.

Third, they recommended that the state give cash incentives to universities that meet certain degree production targets. In addition, they encourage universities to make plans to reach retention goals set forth by the state.

Finally, the Task Force listed other money-saving strategies, such as including more online introductory-level classes, developing three-year degrees, giving more credit for college-level work done in high school and at other institutions, and eliminating underused degree programs.

Make sure to check the State Relations blog for a round-up of some of the local press coverage relating to this report.

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