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Higher Ed Watch

A Blog from New America's Higher Education Initiative

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Higher Ed Roundup: Week of December 15 - December 19

December 19, 2008

Obama Nominates Arne Duncan for Secretary of Education

Lump of Coal from Sallie Mae

Education Finance Partners May Not Pay Cuomo After All

Report Calls for Better Higher Ed Performance Data

Naughty and Nice

December 18, 2008

It's undeniably been a busy year for higher education with financial crises, continued student loan controversies, and the Higher Education Act finally renewed after more than five years of deliberations. With Santa coming to town at the end of next week and Higher Ed Watch taking off for the holidays, it's time for us to take a look at who was naughty and who was nice in calendar year 2008.


  • The State of New York. In January, the Empire State unveiled an ambitious plan to boost its public colleges and universities by creating an endowment and hiring more faculty members -- that was nice. But now facing revenue shortfalls and a sagging economy, the state is considering taking the budget axe to its public college and university systems. With the governor proposing over $350 million in cuts in spending on these colleges, students are expected to face significant tuition increases, including one early next year. Sadly, New York isn't alone in this inglorious honor -- California, Virginia, Pennsylvania, and others are all looking to slash spending on higher education.

KeyBank's "One-Two Punch"

December 17, 2008

Last week, we described how KeyBank has partnered with dozens of unlicensed and unaccredited trade schools to help thousands of students take on high-cost private student loans, and then refused to cancel them when the institutions shut down. KeyBank has apparently been able to avoid forgiving borrower debt at these defunct schools by engaging in a coordinated strategy that legally knocks out existing federal regulations and consumer protections for borrowers.

As we noted last week, a large part of KeyBank's strategy to avoid discharging borrowers' debt has been to intentionally disregard the U.S. Federal Trade Commission's Preservation of Claims and Defense Rule. Otherwise known as the FTC Holder Rule, this regulation requires schools and lenders that have "a referring relationship" to notify students that they have the right to discharge their private loans if the schools close unexpectedly.

KeyBank has refused to include the required notice in the private loan master promissory notes it provides students. The lender argues that it is not subject to the rule because it is not regulated by the FTC but by the Treasury Department's Office of the Comptroller of the Currency (OCC), which oversees national banks and does not have a similar requirement in place. Despite pleas from consumer advocates, FTC and other federal officials have so far failed to challenge the bank's interpretation of the law.

Guest Post: A Textbook Proposal for Obama

December 16, 2008

[Editor's Note: Throughout his presidential campaign, President-elect Barack Obama often talked about the need to make college more affordable for low- and middle-income students. In today's post, longtime student advocate Luke Swarthout offers a proposal for overhauling the college textbook industry that he believes will result in significant savings for students. Luke's views are his own and do not necessarily reflect those of the New America Foundation.]

By Luke Swarthout

As the incoming Obama administration prepares its policy agenda and searches for ways to help middle class Americans within the constraints of the current budget deficit, it should consider championing efforts to bring down the costs of college textbooks. This goal could be accomplished in a relatively inexpensive manner: not by more generously subsidizing the current system but by sparking reform in the way textbooks are created and sold.

The high cost of textbooks is a significant but often overlooked part of the college cost equation for millions of students from low- and middle-income families. The average student pays nearly $1,000 for books each year -- a significant sum. For students at low-cost public colleges, books can cost as much as 40 percent of tuition and fees. And to add insult to injury, students and their families are often frustrated to learn that they cannot resell their textbooks at the end of the semester because new, but substantively unchanged editions are at the printers.

Local politicians from both blue states and red states (and those in between) recognize the saliency of the issue. Legislators in states as politically diverse as California, Georgia, and Ohio have introduced bills designed to make college textbooks more affordable at their public colleges and universities.

Higher Ed Roundup: Week of December 8 - December 12

December 12, 2008

College and Student Groups Push to Include Higher Ed in Stimulus Bill

Report Outlines Student Aversion to Borrowing

College Board Settles with NY Attorney General

College Board Presents Higher Ed Reform Proposals


A "Key" Tactic to Undermine Consumer Protections

December 11, 2008

Yesterday at Higher Ed Watch, we wrote about how KeyBank has partnered with dozens of unlicensed and unaccredited trade schools to provide expensive private loans to the high-risk students these institutions tend to attract. Many of these schools then shut down before delivering on the education that was promised.

Ordinarily, students who attended these fly-by-night institutions would be held harmless, due to an existing federal consumer protection that gives students the right to discharge their loans if a school closes. However, KeyBank's intentional disregard for this protection has left these students in a precarious position -- heavily indebted with expensive private loans and no practical training.

At issue is a federal law Congress enacted in the late 1970s that was designed, in part, to protect students from sham trade schools. Lawmakers created the Federal Trade Commission Preservation of Claims and Defenses Rule, otherwise known as the FTC Holder Rule, to regulate private, nongovernment loans. The rule essentially requires schools and lenders that have "a referring relationship" to notify students that they have the right to have their private loans canceled if a school closes down without warning, or engages in fraud.

A “Key” Reason Not to Bail Out Private Student Loan Providers

December 10, 2008

Readers of this blog will know that we think it would be a major mistake for the U.S. Treasury and Congress to provide bailout funds for private student loan providers -- especially without giving the borrowers of these high-cost loans better consumer protections. To better understand why we think that way, consider the case of KeyBank -- which arguably has engaged in some of the most questionable private student loan practices of any company. Is it really in the best interest of the government and taxpayers to help companies whose lending practices have put students in such harm's way?

As we have reported previously, there has been in recent years a proliferation of unlicensed and unaccredited trade schools that do not participate in the federal student aid programs and therefore go largely unregulated. Their growth has been fueled by lenders that have "partnered" with these institutions to provide expensive private loans to the at-risk students these schools tend to attract. The lenders have then turned around and, like subprime mortgage providers, securitized the loans, shifting these high-risk loans onto unsuspecting investors.

One of the most aggressive players in this arena has been KeyBank. Over the last decade, KeyBank has formed exclusive arrangements with dozens of unlicensed trade schools -- particularly ones that focus on computer training and flight training. These unregulated schools have required their students to pay for the full cost of their training up front, with tens of thousands of dollars of private loans from KeyBank. Unfortunately, many of these schools, like the Nevada-based Silver State Helicopters (SSH), failed to deliver the education promised and then shut down without warning, leaving their students in the lurch -- heavily indebted with expensive private loans and no practical training.

Second Annual Academic Bowl Championship Series Rankings

December 9, 2008

In a few weeks, the Florida Gators and Oklahoma Sooners will face off on college football's biggest stage in the Bowl Championship Series (BCS) National Championship game. Unfortunately, many of the college seniors playing in this game will not be walking across the graduation stage next May. Instead, their schools will revel in the short-term glory of gridiron success, while the players will have to face the long-term consequences of joining the workforce without a college degree.

Higher Ed Watch's second annual Academic BCS rankings show that Florida and Oklahoma are not the only elite football schools doing a dismal job of graduating their players. Only 55 percent of Division I-A football players leave college in six years with a degree -- and that number drops precipitously at most big-time programs that solely focus on counting Ws and Ls instead of As and Bs. It also doesn't take into account the poor quality of the education many are receiving to begin with. Jock majors don't provide job-ready skills.

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