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Stephen Burd: All Related Content

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Obama Ends Damaging Student Loan Collections Policy – But Needs to Do More

March 27, 2013

Borrowers with defaulted federal student loans received a rare bit of good news last week: the Obama administration put an end to a policy that improperly enticed loan collection companies to demand excessive payments from borrowers to “rehabilitate” their loans.

Starting this month, the U.S. Department of Education is providing a flat rate commission to the nearly two dozen firms with which it contracts to collect on defaulted loans. These companies will now make the same amount of fees regardless of whether they get a borrower to pay back $5, $50, or $250 per month.

Under federal law, borrowers who default can rehabilitate their loans if they make nine “reasonable and affordable” payments on-time over ten months – clearing their credit records and making them once again eligible for federal student aid. The statute bars collection agencies from demanding minimum payments based on the original loan amounts. Instead, they are supposed to take a borrower’s financial circumstances into account when determining how much that individual can handle each month.

The Education Department’s policy, however, encouraged collectors to demand larger payments than borrowers were legally obligated to pay. According to Bloomberg News, which was the first to report on the Department’s changed policy, here’s how it worked:

Colleges Ramp Up Merit Aid to Target Best and Brightest | Cincinnati Enquirer

March 14, 2013

“There’s this incredible competition, and the problem is that colleges don’t seem to be committed to helping low-income students anymore,” said Stephen Burd, a senior policy analyst at the New America Foundation in Washington, D.C. “Everybody’s just going after the same group of students who tend to come from advantaged backgrounds.”

Original article

Five Things to Know about the Students First Act

March 13, 2013

As I wrote on Tuesday at Higher Ed Watch, the recently introduced “Students First Act” would require the U.S. Department of Education to automatically conduct program reviews of colleges that are most at risk of violating federal law. But this is only one way in which the bill, which was sponsored by Democratic Senators Frank Lautenberg of New Jersey and Tom Harkin of Iowa, would strengthen the tools that the Education Department employs to protect the integrity of the federal student aid programs and safeguard students from unscrupulous schools. Here are some key features that would greatly enhance the Department’s oversight and enforcement authority and provide relief to students who have been harmed.

The bill would:

  • Hold School Executives Accountable for Compliance

Under the measure, college presidents, chief executive officers, and chief financial officers would personally sign the student aid program participation agreements that the Education Department enters with their schools. They then would be held liable if their schools “knowingly and willfully” violated the agreements, or engaged in “gross negligence.” In such cases, these officials would be fined an amount equal to their yearly compensation, and they would be barred from working at another college that participates in the federal financial aid programs for at least five years.

A Gut Check for the Education Department

March 12, 2013

Does the U.S. Department of Education have the guts to enforce its own federal student aid program integrity rules? Judging by the Department’s record and legislation recently introduced by Senate Democrats, entitled the “Students First Act,” the answer to that question appears to be “No.”

During President Obama’s first term, administration officials went to great lengths – and spent a substantial amount of political capital – to strengthen the agency’s authority to crack down on schools that deliberately mislead students into enrolling. Yet, the Department has shied away from using these expanded powers, even when evidence of abuse has been delivered to the agency on a silver platter.

Career Education Corporation is a case in point. In the fall of 2011, the publicly-traded for-profit higher education company revealed that a significant number of its schools had been cooking the books on the job placement rates they were disclosing to prospective students. But despite this remarkable admission, the company didn’t receive even a slap on the wrist from the Department.

Preserving Need-Blind Admissions Comes at a Price at Grinnell

February 28, 2013

When it comes to private colleges enrolling and supporting low-income students, Grinnell College has been one of the best. Nearly a quarter of its students receive Pell Grants, and the lowest-income students have to take on only a relatively small amount of debt to receive a top-notch liberal arts education.

That’s why it is so disheartening to hear that Grinnell plans to become more aggressive in using so-called “merit” aid for the explicit purpose of recruiting wealthy students. According to college’s president Raynard Kington, this is the price Grinnell will have to pay for maintaining its need-blind admissions policy for the next two years.

Last year, Grinnell’s board raised alarms on campus when it announced that it was considering abandoning its costly policy of admitting students regardless of their financial need. But after months of heated discussions among students, faculty, administrators, and alumni, the board relented and agreed to allow the practice to continue for another couple of years. In return, however, the school must “find a way to curb growth in its discount rate (the percentage of sticker price provided by the college in aid, on average) and to reduce the share of its operating budget paid by the endowment,” according to Inside Higher Ed. They need to, in other words, bring in more students who can pay full freight.

Why Federal Officials Should Require Some Colleges to Match Pell Grants

February 5, 2013

Yesterday at Higher Ed Watch, I argued that a federal solution is needed to ensure that colleges use their institutional aid resources to keep higher education affordable for low- and moderate-income students. But why should the federal government get involved?

The reason is simple: the government is already involved, way involved. It spends nearly $40 billion on the Pell Grant program each year to try to remove the financial barriers that prevent low-income students from enrolling in and completing college through the Pell Grant program. Yet colleges are increasingly undercutting the government’s mission by using their institutional aid dollars to try to attract the students they desire rather than to meet the financial need of the low income students they enroll. Worse yet, there is compelling evidence to suggest that schools are capturing a significant share of the Pell Grant funds they receive and using them for other purposes, such as providing non-need-based aid to recruit high achieving and wealthier students. This is one reason why even after historic increases in funding, the program’s impact is so limited: students and families are not receiving the full benefits as intended.

The enormous growth in non-need-based, or “merit” aid, at four-year colleges over the last two decades has come lately at the expense of the neediest students. Low-income students who attend these institutions often face high levels of “unmet need,” defined as the difference between the cost of attendance and the amount of financial aid they receive. Unmet need forces students to take on significant amounts of debt, including risky private student loans. Financially strapped students also frequently engage in activities that lessen their likelihood of completing their degrees, such as working full-time while attending college or dropping out until they can afford to return.

Making Sure Colleges Remain Engines of Opportunity Not Inequality

February 4, 2013

Do colleges still provide a gateway to opportunity for low-income and working class students? Or are they perpetuating inequality in this country by limiting opportunity to only those who are rich enough to be able to afford it?

That question, which came up during a podcast conversation between my colleague Kevin Carey and New York Times journalist and New America Foundation Schwartz fellow Jason DeParle [author of this riveting article on the subject] last week, is central to proposals we have offered that aim to ensure that colleges use their institutional aid resources to keep higher education affordable for low- and moderate-income students.

Unfortunately this is often not the case. Colleges are, in fact, increasingly raising the barriers to higher education for low income students by redirecting their institutional financial aid dollars to wealthier students.

Rebalancing Resources and Incentives in Federal Student Aid

  • By
  • Stephen Burd,
  • Kevin Carey,
  • Jason Delisle,
  • Rachel Fishman,
  • Alex Holt,
  • Amy Laitinen,
  • Clare McCann,
  • New America Foundation
January 29, 2013


The federal financial aid system is no longer up to today’s demands. Built in a different era, its haphazard evolution over the decades has made it inefficient, poorly targeted, and overly complicated. With the need for higher education never greater and college growing increasingly unaffordable, students deserve a streamlined aid system that is more understandable, effective, and fair.

Ending the Merit Aid Merry-Go-Round

January 16, 2013
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A group of private college leaders are calling for a cease fire in the institutional financial aid arms war. S. Georgia Nugent, the president of Kenyon College, is spearheading a movement to try to get her fellow college presidents to agree to recommit themselves to providing need-based financial aid, rather than merit scholarships and tuition discounts. This is an extremely admirable effort but unfortunately -- as Kenyon College’s own experience shows -- it’s unlikely to have much of an impact.

As Higher Ed Watch has previously reported, public and private four-year colleges are increasingly spending their institutional aid dollars on trying to attract the students they desire than on meeting the financial need of the low- and moderate-income students they enroll. A 2011 report from the U.S. Department of Education’s National Center for Education Statistics shows just how dramatically colleges have changed the way that they spend their institutional aid dollars over the past two decades.

The report found that in the 1995-96 school year, both public and private four-year colleges and universities primarily used institutional aid to try and meet the financial need of their students:

  • At public colleges, 8 percent of first-time, full-time students received merit aid, while 11 percent received need-based aid
  • At private colleges, 24 percent received merit aid, while 43 percent obtained need-based aid

But by 2007-08, merit aid trumped need-based aid at both types of institutions:

  • At public colleges, 18 percent of first-time, full-time students received merit aid, while 16 percent received need-based aid
  • At private colleges, 44 percent received merit aid, while 42 percent obtained need-based aid.

Clearly many of these schools are leveraging their financial aid budgets to buy students who could already afford to attend without the help. In many cases, these institutions are trying to lure in top students who will help them improve their standing in the U.S. News & World Report’s college rankings so that they can enhance their reputations and marketability.

Higher Ed Watch’s Top Ten Posts of 2012

December 19, 2012

Before we take our two-week winter publishing break, we thought we’d revive an old tradition and highlight our most popular posts from the past year.

Nearly half of our best read posts from 2012 deal with students’ lack of understanding of their financial aid options and policymakers’ efforts to try to make the system more transparent for students. Others focus on issues that HEW has long covered: student loan default rates, for profit colleges, Sallie Mae, the horrors of our student loan collection system, and President Obama’s higher education record. And of course, topping the list is a perennial reader favorite, our annual Academic Bowl Championship Series rankings, which we published just last week.

So without further ado, here are our 10 most-read posts of 2012:

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