Access

Speaking at a Congressional roundtable on college endowment spending on Monday, college leaders and lobbyists offered a multitude of reasons why requiring institutions of higher education to spend a minimum amount of their endowments each year is bad policy and fundamentally unworkable. Among their arguments, they claim that a mandatory payout of endowment funds would be overly burdensome on institutions; would harm future generations of students on their campuses by depleting present resources; and would serve no public good.

We respectfully disagree. At Higher Ed Watch, we have offered a proposal for a mandatory payout that renders most of these objections moot. Our plan would require the wealthiest colleges to spend a specific percentage of the market value of their endowment funds each year, with the difference between their current spending rate and the new threshold going to concrete, measurable projects aimed at improving socioeconomic diversity among students and applicants.

Co-hosted by Sen. Charles Grassley (R-Iowa), the ranking member of the Senate Finance Committee, and Rep. Peter Welch (D-Vt.), who moderated the discussion, yesterday's event featured experts on college endowment practices, higher education leaders and lobbyists, and watchdog groups [Disclosure: the author of this post participated in the roundtable.] Ostensibly, the event's three major goals were to (1) provide a better understanding of the link between college costs and tuition, (2) define and classify university endowments, and (3) debate whether institutional endowments should be subject to a mandatory annual payout. Ultimately, the discussion largely focused on reasons that colleges believe requiring a minimum spending rate would be inadvisable.

By Ben Miller, Stephen Burd, and Sara Mead

A decade after its last reauthorization and five years since an updated version was due, a new version of the Higher Education Act is finally ready for Congressional passage. With both chambers set to vote on the bill this week, Higher Ed Watch will take a closer look at various parts of the legislation over the next two days. Today, we praise lawmakers for doing the following:

• Putting Teeth Into Loan Auctions

Last year, Congress created a groundbreaking pilot auction program that uses market forces to set student loan subsidy rates for lenders making federal PLUS loans to parents and graduate students. With about a year left to enact the pilot project, lawmakers have added penalties for lenders who win an auction and then back out. The bill allows the Education Secretary to punish lenders that violate the terms of the auction agreement by one of the following methods: fining the lender for any additional costs needed to find and subsidize a replacement PLUS loan lender; banning the offending lender from future auctions; or, kicking them out of the Federal Family Education Loan (FFEL) program entirely. We particularly like the fact that the Secretary can retrieve the fine by reducing subsidies paid to the lenders on other FFEL loans or having another federal agency garnish other subsidies the lender might receive. While we have some complaints about the language (it doesn't, for example, address the PLUS loan auction bidding cap, which needs to be more flexible to encourage robust bidding in a range of financial market conditions), overall, we believe that this provision is an important step forward in getting this pilot program off the ground.

What do an appendix, plica semilunaris, and student-loan guaranty agency all have in common? They're all vestigial structures whose original purpose is no longer necessary. But unlike the first two examples, guaranty agencies are desperate to show -- despite all evidence to the contrary -- that they are still relevant.

As parts of a system known for its complexity and confusion (the Federal Family Education Loan Program, otherwise known as FFEL), guaranty agencies are the ultimate amorphous entity, branching out into numerous roles that are completely unrelated to their original purposes.

Soon after Congress created the FFEL program in 1965, it authorized the involvement of guaranty agencies (many of which were already in existence in the states), to encourage lenders to offer student loans by providing default insurance. Congress also gave the guarantors important oversight responsibilities, such as ensuring that only eligible students obtain federal loans, and that lenders make a concerted effort to keep delinquent borrowers from defaulting.

While it made sense for guaranty agencies to occupy these roles at a time when technological limitations made it difficult for solely the federal government to oversee FFEL, the program's current setup and recent oversight failures make it clear that guaranty agencies should not be the ones to carry out these functions.

By Art Hauptman

Both Sens. Barack Obama (D-IL) and Hillary Clinton (D-NY) have made achieving greater college affordability a high profile issue in their Presidential campaigns. To reach this goal, the two Democratic candidates have proposed expanding Pell Grants and consolidating the current set of tax breaks for college into a single refundable tuition tax credit. Sen. John McCain (R-AZ) has thus far been strangely silent on the topic, despite its importance to so many millions of Americans.

The reach of the Democratic contenders' proposals does not match their rhetoric, however. To truly make college more affordable, the next President will need to push for a much fuller integration of student aid and tax provisions for higher education, as I suggested in my guest post last week.

Any effort to change the current system (or non-system) of student financial assistance should first recognize that federal higher education policy has two distinct goals. The first is to eliminate the chronic gaps in the rates at which students from low-income and high-income families (and between minority students and white students) enroll in and graduate from college. Call this the accessibility problem. The second big goal is to make college more affordable for millions of students from middle class and upper middle class families who have found the ever growing price of college to be a real strain on their budgets. Call this the affordability problem.

It's all we hear about these days: The U.S. subprime mortgage bubble -- created by poor and at times predatory lending practices and lax banking regulation and creative investment products -- has burst. Of the approximately 7.7 million subprime loans outstanding, over 2 million are at risk of foreclosure and 600,000 borrowers are expected to lose their homes this year. The majority of us are left in shock as we watch the devastation unfold, the bubbles aftermath wreaking havoc on the U.S. (and increasingly global) economy, ensuing fears of recession and economic pain to come, and leaving politicians, economists, and regulators all scrambling to pick up the pieces.
However, in the meantime, the 2006 Nobel Peace Prize winner on Tuesday proudly hailed microfinance -- the innovation of providing small loans to poor, traditionally financial excluded individuals, mainly women -- as "sub sub sub subprime" lending. That means that globally, more than 3300 microfinance institutions provide such "super-subprime" loans to over 100 million clients and growing. Just to be clear: I'm a huge fan of microfinance. However, I'm left perplexed by this dichotomy: How can a lending practice that is almost singlehandedly dragging the whole of the U.S. economy in to a hole simultaneously and sustainably end third world poverty?

Dr. Benjamin Brewer, in his Wall Street Journal column (subscription, or read a summary in the Wall Street Journal health blog) wonders: who will take care of the 47 million uninsured in a system that already undervalues family medicine and primary care?

We would suggest that the uninsured are getting care – not enough care, too- late care, expensive emergency room care instead of more appropriate and cost-effective primary care. But Dr. Brewer’s central point is correct. Our system gives short shrift to primary care and is chockfull of incentives for fragmented specialization. In the health care system we envision for the future, primary care doctors (internists, family doctors, pediatricians, geriatricians, perhaps for some women OB/GYNs) would play an elevated role in coordinating patient care. And they would be paid for doing it well.

With all the attention paid to student loans of late, there is a risk that policy makers will lose track of an issue of even greater importance for college access for low- and moderate-income students: grants for postsecondary education. Research has long shown that grants, not loans, are the most…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

If you've seen an action film this summer, odds are you've also seen a slick advertisement touting the benefits of joining the Army or Marines-including help paying for college. You won't hear the word "Iraq," and as the Washington Post reported last week, it…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Last week, we discussed the paucity of low-income students at the country's wealthiest colleges and universities. We offered a proposal that would require the richest private colleges to devote a portion of their yearly endowment income to help increase the socioeconomic diversity of their students. Some might argue that there aren't enough qualified underprivileged students…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

To encourage students to attend college, an increasing number of states are creating policy initiatives designed to help low-income and minority students solve the college access puzzle. The best plans provide support to overcome all of the barriers that these students face-academic preparation, information and guidance, and affordability.

Maine and…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.