Higher Ed Watch

By Patrick M. Callan

The importance of the recent federal legislation that shifted substantial public subsidies from financial institutions to college students should not be underestimated. But neither should it be thought of as more than a first step towards the restructuring of college financing that will be required if the nation is to significantly strengthen college access and affordability, close equity gaps, and raise national levels of educational attainment.

Because the “system” of public and private finance of higher education that served the G.I.s, the Baby Boomers, and their children is broken. The funding flows are unstable, the responsibilities of the partners are increasingly blurred, equity gaps persist, and students are leaving college with unprecedented levels of debt. The dysfunctional finance system accounts in part for the underperformance of American higher education as reported in the Measuring Up state and national report cards and in international comparisons. In my view, this underperformance is unlikely to be fixed unless the nation, the states, and our institutions of higher education reopen fundamental questions in a quest for a restructured policy and finance framework -- one that is national in scope and designed for the economy and demographics of the 21^st century, not the last one.

As we reported on Tuesday, Washington, DC socialite Catherine Reynolds is seriously considering jumping back into the private student loan market. Her return would be big news because she left the business three years ago embroiled in controversy -- with her non-profit company EduCap, which marketed private loans under the brand name Loan to Learn, facing heavy and deserved scrutiny from the Internal Revenue Service, the Senate Finance Committee, and the news media over its questionable practices.

But this is not a done deal yet. The question of whether or not Reynolds re-enters the private student loan business rests largely in the hands of Congress, which is currently considering legislation that could stop her in her tracks.

We are referring to a proposal that is included in the House of Representatives version of the mammoth financial regulatory overhaul bill that would require colleges to certify a student’s need for private loans before that individual could receive them from companies, like EduCap, that market these high-cost loans directly to students. The plan aims to give college financial aid administrators the opportunity to counsel students about their financial aid options so that they do not unwittingly take on unnecessary private loan debt. This is important because, according to the U.S. Department of Education, nearly two-thirds of undergraduates who borrowed private loans in the 2007-08 academic year did so even though they hadn’t exhausted their eligibility for lower-cost federal student loans first. One quarter of these private loan borrowers did not take out any federal loans at all.

Would the nation’s 1,200 community colleges (and their 11 million students) be better off if the national trade association that represents them severed its ties to One Dupont Circle, the long-time headquarters of most of the national higher education associations?

Wick Sloane, a journalist who teaches writing at Bunker Hill Community College in Boston, thinks so. In a witty and provocative column last week in Inside Higher Ed, Sloane, who regularly writes about inequities in higher education, laid out the agenda he would pursue if he was handed the reins of the American Association of Community Colleges (AACC), which is currently in the midst of a presidential search. Among his top priorities would be to end the group’s membership in the “Big Six,” the major national higher education lobbying groups, which, he argued, primarily represent the interests of four-year public and private colleges and research universities.

“I hereby stipulate the integrity of The Five, whose interests are legitimate too,” Sloane wrote. “But am I the only one to have noticed that since the beginning of time the colleges and universities in the Five have received pretty much all of the federal money? While community colleges have had the most students with the highest need?”

Given the role that some of the associations recently played in helping undermine an ambitious Obama administration proposal to revitalize the country’s community colleges, he certainly has a point. We’re referring to the now-defunct American Graduation Initiative, a ten-year, $12 billion effort that was designed to boost the number of community college graduates by five million over the next decade. The program, which was initially to be included as part of the student loan reform legislation that Congress approved in March, would have also provided funds for community colleges to build stronger links with high schools and the workforce, expand their course offerings, improve their remedial and adult education programs, and upgrade and expand their facilities.

The additional resources would have been like manna from heaven for these cash-strapped schools, which are facing such an extreme funding crisis that many of these generally open-enrollment institutions are being forced to turn away tens of thousands of low-income and working-class students who are in desperate need of their services.

But most of the other college groups -- “The Five,” as Sloane calls them -- were not persuaded. Officials at the National Association of Independent Colleges and Universities (NAICU), which represents private colleges, were particularly irate about the favoritism being shown to community colleges. In an e-mail to his members, David Warren, the president of NAICU, railed against the proposal before the president had even unveiled it. “There are some disturbing signs,” he warned, “that enthusiasm for expanding their [community colleges’] role may drive policy decisions that are both unfair and unwise.” The plans, he complained, “have the federal government providing funds to one sector of American higher education, to the exclusion of other sectors.”

After NAICU officials learned that the chairman of the House Committee on Education and Labor had included the community college proposal in the panel’s version of the student loan reform bill, they sent out a legislative alert to their members arguing that the proposal “shifts the relationship with the federal government from student-based toward institution-based.”

At Higher Ed Watch, we find the audacity and the pettiness of these arguments difficult to fathom. Was NAICU suggesting that policymakers should not be able to devote the government’s limited resources to institutions that are most in need of the help and where they believe the money would do the most good for the welfare of the country? Or that the government should hold off from providing any new money to higher education unless it can ensure that each sector gets an equal cut, no matter how deserving?

NAICU officials well know that the financial aid programs, largely designed over the last 40 years by New England lawmakers with lots of prestigious private colleges in their home states, as a whole tilt heavily in their institutions’ (and the public flagship universities’) favor. The private college group has successfully fought time and again to defeat efforts by policymakers to rewrite the campus based aid funding formula to ensure that the schools that predominantly serve the most disadvantaged students (i.e. community colleges) get their fair share of the funds. At the same time, private college lobbyists have not hesitated to lobby for generous tuition tax deduction proposals that provide little benefit to community college students but favor their sector's students disproportionately.

To be clear, we recognize that it would be unfair to place the blame for the demise of the American Graduation Initiative entirely on the shoulders of the college groups that opposed it or at least signaled their distaste for it. The program was one of several that Congressional leaders slashed in a last-minute scramble to make sure that the reconciliation measure met its revised and lowered budget targets. If Democratic lawmakers had acted on the legislation sooner -- before March when the Congressional Budget office was due to re-estimate the measure’s savings -- the program probably would have survived intact in the final bill. [To mollify community colleges, lawmakers did include $2 billion over four years for a job training program that had been created in the economic stimulus legislation but never been funded.]

Still, the fact that the administration’s proposal caused such dissension among the college lobbying groups made it an easy target when the bill had to be pared down.

Will the community college association leave One Dupont Circle, as Sloane suggests it should? There’s no chance. But frankly, given the shoddy treatment community colleges received from the higher education associations and NAICU in particular, we’re surprised that more of the group’s members are not demanding that the option at least be considered.

New York Attorney General Andrew Cuomo has been investigating college-sponsored health insurance plans and what he has discovered sounds disturbingly similar to the “pay-for-play” student loan scandal that Higher Ed Watch helped uncover several years ago.

At the heart of the probe is the question of whether colleges, when making lucrative deals with health insurance corporations, are truly acting in the best interests of their students -- or whether they are allowing other considerations, such as their cozy relationships with some of the biggest college health insurance providers, such as United HealthCare and Aetna, to come into play.

In a letter to college presidents last month, Cuomo said that he found that “some health insurance brokers, agents and consultants, as well as some health insurers, have made contributions to the schools or provide items of value to the school or its employees.”

“In some cases, these contributions are seemingly innocuous, such as meals at moderately-priced restaurants,” the attorney general wrote. “In other cases, insurance agents have treated school employees to shows and expensive dinners, and brokers, agents, plan administrators, and insurers have contributed thousands of dollars to school events, such as golf tournaments.”

These contributions, Cuomo wrote, “call into question the schools’ objectivity” in selecting the best providers for their students. This is particularly worrisome because many of these plans are very costly to students and their parents but provide insufficient coverage. For example, Cuomo and others have found that many of these plans: