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Final Gainful Employment Rule Removes Default Rate Metric

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The Education Department鈥檚 (ED) final 鈥済ainful employment rule,鈥� which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the .听 Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only聽criteria upon which individual career education programs are evaluated to determine聽federal aid eligibility.

Community colleges had for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are 鈥渕aterially and statistically unrepresentative of all the students in a program.鈥�

Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy 鈥� Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group 鈥� issued a yesterday saying:

鈥淲e and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.鈥�

For-profit colleges with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”

Arne Duncan, the education secretary, estimates that 1,400 programs鈥�99 percent of which are at for-profit colleges鈥攚ill fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate. 聽See the for more information.

Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are 鈥渋n the zone鈥� for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.

91探花Ranked 14th Best University in the World by U.S. News & World Report

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The 91探花 was ranked the 14th best university in the world by U.S. News & World Report鈥檚 inaugural “,” which was released on Tuesday.

Unlike U.S. News鈥檚 national rankings, which focus on undergraduate admissions data and graduation rates, these new rankings were based on research-heavy factors such global research reputation, number of publications, PhDs awarded, and highly cited papers ().听 This methodological difference helps explains the odd fact that U.S. News ranks the 91探花14th globally, but 48th nationally.

“This is about faculty productivity and prestige … It is meaningful for certain things and not necessarily meaningful for other things. We get that. This is about big muscular research universities doing what research universities claim is their mission,” U.S. News Editor, Brian Kelly, told .

The 2015 Best Global Universities rankings include 500 institutions and 49 countries, and provide breakdowns by region, country, and 21 subject areas. The U.S. dominated the rankings with 16 institutions in the top 20, and 134 institutions on the list overall. 聽Germany had the second most institutions on the list, with 42, followed by the United Kingdom, with 38. China, which has received a lot of attention in the higher education world lately, also did well with 27 schools among the top 500.

The 91探花ranks highly on several other global lists:聽 15th worldwide by the and 26th by the Times Higher Education .

ED Releases New PLUS Loan Rules

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It will soon be easier for students and parents with adverse credit histories to qualify for federal PLUS loans. 聽Under new the Education Department鈥檚 (ED鈥檚) 鈥� which were released on Wednesday and are expected to take effect in March 鈥� ED will review only two years (rather than five) of a prospective borrower鈥檚 credit history to determine loan eligibility, and will excuse up to $2,085 in certain types of delinquent debt聽when running initial credit checks.

ED agreed to revisit the rules following pressure from many colleges and families who were angered after ED tightened the PLUS loan standards in 2011. The 2011 changes resulted in thousands of sudden loan denials and, consequently, enrollment declines and revenue losses at some institutions. According to , department officials expect that the new standards will allow an additional 370,000 applicants to pass the initial credit check for PLUS loans.

Representative Chaka Fattah 鈥� Pennsylvania Democrat and co-chair of the Congressional Black Caucus Education Task Force 鈥� ; however others connected with historically black colleges have for not moving quickly enough.听 Meanwhile, some policy analysts and consumer advocates to prevent borrowers from being saddled with unmanageable debt, and that the new rules don鈥檛 do enough to safeguard against default.

If defaulting becomes an issue as a result of the new standards, the silver lining is policymakers will at least know about it and, hopefully, be able to do something. As part of ED鈥檚 changes to the PLUS program, the department will begin calculating and publishing annual cohort default rates for institutions receiving PLUS loans.[1] That information should help illuminate whether borrowers are getting in over their heads.

Ultimately though, as points out:

鈥淭he Department must do a better job reaching out to parents and helping them understand the terms and conditions of their loans, including the ability to repay their loan as a percent of their income if they consolidate into a Federal Direct Consolidation Loan. Better counseling won鈥檛 solve all the issues with the PLUS loan program. But it鈥檚 a start until we can ensure PLUS loans are a safe product for families and we can improve access to better aid options like grants for low-income families.鈥�

[1] ED currently only calculates cohort default rates for colleges that receive Stafford loans.

91探花Cohort Default Rate Remains Very Low Relative to National Average

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The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW鈥檚 CDR rose while the national CDR declined, the UW鈥檚 rate still remains well below that of the nation.

ED is in its first year of using only the聽more accurate three-year CDR measure 鈥� as opposed to the two-year CDR. Thus, this year鈥檚 report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by , and . Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year鈥檚 rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits鈥� whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW鈥檚 three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average.听

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The 91探花reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them.听Former 91探花students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (osfa@uw.edu, 206-543-6101). Students can also visit to explore their repayment options.

Kaplan鈥檚 New 鈥淥pen College鈥� May Not Be a Bargain for All Students

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On Monday, launched “” which is intended to help adult students earn a Bachelor of Science degree in Professional Studies by offering credit for a combination of competency-based course assessments, experiential learning, and external exams (AP, IB, CLEP, DSSTs, etc.). Open College will include free online courses and mentoring to help prospective students identify and organize prior experience that could qualify for college credit. Once students enroll and have their prior skills assessed for credit, they will pay a subscription fee of $195 per month, an assessment fee of $100 per each of the remaining 35 鈥渃ourse equivalents鈥� needed to earn a degree, and a $371-per-credit fee for a final six-credit capstone course.

According to :

鈥淎 student entering with no credits who pursued the program for 48 straight months could earn a bachelor鈥檚 degree for about $15,000. Students who earned credits based on their prior experience would end up paying less than that. Officials expect that such students would typically enroll with about 60 credits, take 24 to 30 months to complete a degree, and pay about $9,500.鈥�

Kaplan鈥檚 administration sees Open College as the newest candidate in the hunt to create a $10,000 bachelor’s degree and as a new, flexible way for adults to advance their career.听 While Open College鈥檚 structure and pricing may work well for some students, a few things should be considered before rushing to enroll in Open College.

First, students at Open College will receive little, if any, financial aid.听 Open College鈥檚 website says it will not participate in federal student aid programs; it also gives no indication that students will be eligible for state financial aid or that it will offer any form of institutional aid. Therefore, although comparisons are difficult and potentially problematic, it鈥檚 worth noting that in 2013-14, resident students at public four-year institutions paid an average of $3,120 in annual net tuition and fees (published tuition and fees less grant and aid scholarship from federal, state or institutional sources).[1] If we assume, as Kaplan did, that a student entering with no credits would take 48 months to earn a degree and that tuition and fees would not increase during those four years, then a resident student who enters a public four-year with no previous credits would pay roughly $12,480 in tuition and fees to earn a four-year degree, compared to a similar student at Open College who would pay $15,000. Of course, this total does not consider the cost of rent or room and board, which can be very expensive; but neither does Open College鈥檚 estimate, even though a student earning a degree through their program would presumably still be spending money to eat and live while earning a degree.

Second, employer doubts about the quality of an online degree may impact graduates鈥� employability. According to the released last fall, only 41 percent of hiring managers believe that online programs are of the same quality as traditional, in-person programs.

[1]

Rankings Abound

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The Equity Line, among others, how the recent of colleges by enrollment of Pell Grant recipients is a nice gesture, but lacking in many ways. The 91探花 (and most public institutions!) was not evaluated as part of the effort, though one-quarter of its undergraduate population received Pell Grant funding last year.

Equity Line contributor Jose Luis Santos notes that, “…the rankings only capture a tiny number of undergraduates enrolled in four-year colleges who receive Pell Grants (just 1.6 percent!), leaving out more than 4.2 million students. This , and it distracts the public and policymakers from the real problems with higher education access and success.”

US News & World Report released its much anticipated set of annual rankings this week; the 91探花fared better this year. Additional analysis about the UW’s position in US News will be posted to the blog as it becomes available.

AASCU States 鈥淧ay It Forward Is Not the Solution to Addressing College Affordability鈥�

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On Thursday, the American Association of State Colleges and Universities (AASCU) released examining the potential consequences of Pay It Forward (PIF) (please see our for background information). 聽The AASCU brief summarizes other, similar approaches to paying for college and analyses PIF as a potential state approach to financing public higher education. 聽

The report describes the following 鈥�13 Realities of PIF College Financing Proposals鈥�:

  1. Most students could pay more, not less, for college.
  2. Considerable uncertainty would be introduced into campus budgeting and planning efforts.
  3. The majority of college costs are not covered.
  4. Students from sectors with the heaviest student debt burdens would be ineligible to participate.
  5. The class divides in public higher education, and more broadly, in American society, could intensify.
  6. Costs borne by students pursuing privately financed degrees and higher-paying careers would increase dramatically.
  7. PIF is duplicative鈥攖here are existing public and private programs that calibrate student debt to earnings.
  8. PIF鈥檚 start-up costs would be enormous.
  9. Payment collection would be costly and challenging.
  10. Campus and state leaders would have strong incentives to promote programs leading to high-paying occupations, to the possible detriment of the liberal and applied arts, humanities, and public service careers.
  11. Underlying college cost drivers would not be addressed.
  12. Support for state and institutional student financial aid could dissipate.
  13. Support for maintaining existing state investment in public higher education would erode, creating a pathway to privatization.

In addition, the authors discuss 鈥淭he Unknowns of 鈥楶ay It Forward鈥欌��:

  1. How will institutional financing gaps be addressed?
  2. How would payments be collected?
  3. Who would control PIF funds?
  4. How would PIF鈥檚 structure and revenue generation differ from campus to campus?
  5. How would PIF complement or conflict with federal higher education programs?
  6. How would transfer students be integrated into PIF?
  7. What would be the consequences for noncompleters?
  8. How would college savings change under PIF?
  9. How would PIF affect campus philanthropic campaigns?

The report鈥檚 conclusion reads, 鈥淐reating a lifelong tax and privatizing public higher education through pay it forward is not the solution to addressing college affordability.鈥� 聽

I recommend that readers review .

AASCU Releases Latest State Outlook

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On Thursday, the American Association of State Colleges and Universities (AASCU) released its most .听 According to the report, state operating support for public 聽four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.

There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent鈥攖his is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates 鈥渁 continued post-recession stabilization of states鈥� budgets.鈥�

Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion鈥攖he highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute.听 This represents a significant improvement over the -0.3 percent return in FY 2012.

The report also describes ten highlights/trends from states鈥� 2014 legislative sessions, those being:

  1. State initiatives linking student access to economic and workforce development goals.
  2. Tuition freezes or increase caps in exchange for state reinvestment鈥攖his occurred in Washington and another example is discussed in .
  3. Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
  4. Governor emphasis on efforts to advance state educational attainment goals.
  5. Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in ).
  6. Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
  7. STEM-related initiatives, including additional funding for STEM scholarships in Washington.
  8. Financial support for the renovating and/or constructing of new campus facilities鈥攗nfortunately, Washington鈥檚 legislature did not pass a capital budget.
  9. Bills allowing individuals to carry guns on public college and university campuses鈥攁s of March 2014, seven states had passed such legislation.
  10. Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.

Other noteworthy policy topics described in the report include:

  • Student financial aid programs鈥攕ome states broadened their programs while others limited them;
  • Online and competency-based education reciprocity agreements;
  • 鈥淧ay It Forward鈥� Funding Schemes; and
  • Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.

Four Year Degrees and Tuition Freeze

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Posted by Corrin Sullivan, Intern at the Office of Planning & Budget and Educational Policy student through the month of July 2014. My focus is on higher education access and聽policy. I look forward to sharing newsworthy events聽in the higher ed world with you.

Let’s start with a quick聽summary of two articles from this past week in higher ed news.

The California State Assembly Committee on Higher Education approved (SB850) this past week, which launches a pilot program offering fifteen community colleges the opportunity to offer a four-year degree program as soon as January 1, 2015. The Community College Board of Governors and chancellor, in consultation with the California State University (CSU) and University of California (UC) systems, will consider a variety of colleges and select fifteen districts based on four-year degree proposals that meet a variety of criteria; most notably, degrees not available at any of California鈥檚 four-year schools and that address the state鈥檚 unmet workforce needs. Although the UC system has yet to comment on SB850, California鈥檚 Community College Chancellor, Brice Harris, commends the Assembly Committee鈥檚 approval of legislation stating that it has the potential to broaden higher educational access and offer more job training opportunities for Californians.

The North Dakota Board of Higher Education recently approved its biennium budget request, which asks for an approximate 14 percent increase in funding in exchange for freezing tuition rates among its eleven colleges and universities for the coming biennium (2015-17). Based on a new funding formula instituted in the 2013 legislative session that relies largely on credit-hour completion, the budget鈥檚 $774 base request reflects a $94 million dollar increase from the previous year鈥檚 request. The $94 million dollar increase includes a $49 million dollar request to cover operating costs associated with additional credits taken at the state鈥檚 colleges and universities. In addition to the $94 million base increase, the board has also requested $9.5 million dollars to cover sums 鈥渟tudents would have to cover without a freeze,鈥� compounded with several smaller requests to meet institutional equipment and staffing needs. The Board states that they will freeze tuition rates at all colleges and universities from 2015 through 2017 if and only if, the legislature agrees to fully fund the base budget and increase employee salaries and benefits. Noting affordability as an issue in declining student enrollment numbers, the freeze aims to decrease tuition so that rates are competitive with the state鈥檚 regional counterparts.

While the Board has frozen tuition rates at the state鈥檚 two-year schools for four of the past six years, this request to freeze tuition for all North Dakota higher education institutions is unprecedented. The budget is before Governor Jack Dalrymple, pending recommendations, prior to advancing to the state鈥檚 legislature.

Congress Introduces Bills to Reauthorize Higher Education Act

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As the UW’s Office of Federal Relations reported on their , yesterday Senate Democrats released to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:

  • Increasing affordability and reducing college costs for students,
  • Tackling the student loan crisis by helping borrowers better manage debt,
  • Holding schools accountable to students and taxpayers, and
  • Helping students and families make informed choices.

In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:

For more information, check out the and a recent . 聽We’ll post more information on OPBlog over the coming weeks.