Reviewing Two Think-Tank Reports

May, 2019

Washington -- What would we do without Washington think-tanks? Their staffs provide scholarly analyses and recommendations on a wide variety of issues. They are important watchdogs of federal agencies.

Two recent think-tank reports on higher education issues are especially noteworthy, both for their insights and their limitations.

One is New America's report, "Closing the Evidence Gap: Doing More of What Works in Higher Education" by Clare McCann. She takes the Department of Education and the Congress to task for failing to evaluate programs like TRIO and GEAR UP. She identifies the lobby group that has successfully opposed evaluation of TRIO for decades. Too often such studies are loath to take on political realities. That is not the case here.

If anything, however, she could have gone further to give more context to these two programs. They are small potatoes when it comes to overall federal spending on higher education access and success. Pell and the Campus-Based programs, much larger, are not evaluated either, due to resistance not only in the higher education community, but also within the statutorily responsible evaluation office itself, the Department's independent Institute of Education Sciences. Although the situation is now improved with the appointment of Mark Schneider as IES director, when Grover Whitehurst was in the post he proposed an IES legislative authorization that omitted post-secondary programs entirely. Fortunately, the IES statute that Congress eventually authorized contains authority for IES to carry out post-secondary research and evaluation, even though there is currently little meaningful activity under the authority.

As Clare McCann correctly notes, the Government Performance and Results Act (GPRA) is applicable and places an obligation on the Department of Education to conduct performance evaluations of all its programs as well. Too bad GPRA has become a dead letter in the Trump Administration.

Although both the current reality and the historical context are working against evaluations of TRIO and other higher education programs, Clare McCann's report should be on every committee member's desk as Congress goes about reauthorization of the Higher Education Act. All HEA programs badly need better evaluation.

The other report of special note is "Ensuring Accountability and Effectiveness at the Office of Federal Student Aid," by Ben Miller of the Center for American Progress and Jason Delisle of the American Enterprise Institute.

The value of this report is that it pulls together the history of the Office of Federal Student Aid as a Performance Based Organization, or PBO. Of particular help is a discussion of the PBO concept and the other federal offices that became PBOs as well, and how they contrast with OSFA.

Again, however, the report could use broader context. It looks at OSFA in terms of its formal creation and organization as a PBO, more or less antiseptically. For a more complete understanding it would be good to look at the informal networks and communication channels that shaped the PBO from its beginning to its current condition. Such a look is beyond the scope and purpose of the CAP/AEI report, but the following observations hint at how this different lens could affect conclusions.

The CAP/AEI report suggests that excessive waste and fraud in student aid programs in "the 1990s" led to the creation of OSFA as a PBO in 1998. Actually, dysfunctional personnel networks were a more proximate tripwire.

To be sure, the early 1990s were plagued with for-profit school fraud and high student loan default rates, but those problems were quickly addressed by Secretary Richard Riley early in his tenure. Thousands of for-profit schools were eliminated from federal student aid eligibility and student loan defaults plummeted quickly as well. Much credit for this should go to Senator Sam Nunn, who held a series of high-profile hearings on these issues and to whom Secretary Riley gave his pledge to clean things up.

But even as Senator Nunn was pleased at the success of the Secretary's attack on fraud and waste, people in the Department's second tier of leadership were often unable to work out their differences as to how OSFA operated as a part of the larger Office of Postsecondary Education. OPE was headed by David Longanecker as Assistant Secretary, with Maureen McLaughlin as Deputy Assistant Secretary. Both had formidable policy and analytical strengths from their years at the Congressional Budget Office. OPE's Deputy Assistant Secretary for its OSFA component was Leo Kornfeld, whose orientation was operational, based on his many years in the student loan industry. The Clinton Administration in its second term saw the creation of a PBO as a way to resolve leadership conflicts by splitting OSFA off from OPE. OPE would still set policy, but a separate, independent OSFA would handle operations and regulatory compliance for student financial aid programs.

Not that the Department under Secretary Riley had resolved all student loan administration problems prior to the creation of the PBO in 1998. Its Direct Loan contractors in mid-decade fell seriously behind in loan consolidations, making applicants wait weeks and even months to consolidation their loans to qualify for lower interest rates and other benefits. The solution, however, was not the creation of the PBO; rather it was to allow FFEL lenders to consolidate Direct Loans into the FFEL program under the so-called Two-Way Loan Consolidation amendment that Congress approved. That created its own set of problems when FFEL entrepreneurs set up boiler-room operations to lure borrowers into FFEL loans not to relieve a consolidation backlog but to win federal FFEL subsidies. It was the Federal Trade Commission that finally took action against some of the worst of the FFEL operators who misused the Department's name and logo.

After the PBO was created legislatively, Greg Woods became its COO. Unfortunately -- Greg was a talented administrator without conflicts of interest -- he passed away soon after he took the reins at OSFA. His major accomplishment was to move OSFA physically to a better workplace, well distant from the rest of the Department of Education. We are left to wonder how the Woods PBO would have asserted its new independence in combating fraud and waste through statutory and regulatory compliance measures, which were now its primary bailiwick. Appointment of his successor was left to President Bush's Secretary of Education, Rod Paige, who chose Theresa Shaw, a former student loan industry executive, as the COO.

In the Shaw era, OSFA took not only its policy signals but also its compliance approach from Bush Administration political appointees. For example, in 2002 compliance questions appropriately raised of OSFA by FFEL lenders were passed on by OSFA personnel, inappropriately, to political officials, most notably to the office of Deputy Secretary William Hansen, who was officially recused from such decisions because he had been a leading industry lobbyist. In 2003, an OFSA unfavorable compliance review of a different lender was incorrectly reversed after the lender discussed the review with political appointees. (The original finding took four years to be restored.) In 2006, the Inspector General wrote a report condemning OSFA for its failure to exercise its compliance function properly. That same year, Assistant Secretary Sally Stroup at OPE gave inside advice to a lender's lobbyist as to how to deal with an upcoming IG audit.

These examples are merely illustrative of the many informal and extra-legal relationship networks that transcended the formal organizational boxes establishing the PBO legislatively.

Secretary Paige's successor, Margaret Spellings, did not extend Theresa Shaw's appointment as COO for another term. Among the reasons had to be OSFA's failure to police itself: one OSFA executive, Matteo Fontana, accepted stock from a company he was regulating. This was also a time when compliance efforts were so weak at OSFA that student financial aid officials at UT-Austin, Columbia, USC, and Johns Hopkins routinely accepted favors from student loan companies in exchange for recommending them to students as preferred lenders. At a loan servicer, compliance measures of the time coming from the Department were characterized as "pathetic" and "weak-minded."

In other words, looking at the PBO from the standpoint of lobbying and political networks leaves an even less flattering view than the CAP/AEI report, which itself was equivocal about the success of the PBO.

I cannot conclude, based on close personal observation over many years, that the PBO in its first decade of existence improved operations or compliance in any way compared to the former organizational arrangement. Of course we don't know what would have happened had OSFA not been re-created as a PBO, but it's hard to imagine a worse outcome. This is not to discredit some fine work within the PBO done by talented and dedicated employees, but I would also note that too many of the bonuses given out in the Shaw era were based on allowing the PBO to be undermined by political and industry revolving-door networks.

One bright spot for OSFA was the conversion of schools from FFEL to Direct Loans in 2010 and 2011. This accomplishment, however, was greatly aided from the outside by volunteers from Direct Loan schools who undertook the training of their counterparts at FFEL schools.

Regrettably, the second decade of the PBO's existence did not give its reputation an overall reprieve. If anything, the situation grew worse. The aftermath of the Great Recession saw a recurrence of for-profit school fraud that dwarfed what the Nunn Hearings uncovered in the late 1980s and early 1990s. The Public Service Loan Forgiveness program, contracted to servicer FedLoan by the PBO, never got on track and is now a national scandal. The Ombudsman's office, housed in the PBO, never became effective as an advocate for borrowers. Only with the creation of the Consumer Financial Protection Bureau did borrowers gain a real voice in the halls of the federal bureaucracy. The CFPB sued a leading student loan servicer, Navient, for compliance failures that should have been corrected by the PBO. The list goes on and on, the failures escalating.

The CAP/AEI report is valuable as far as it goes. It deserves to be in the information binders of HEA reauthorizers as they look at OSFA as a PBO, but it should not be read as the last word until a more complete history of the PBO is fully told. While I endorse the report's recommendations for the HEA reauthorization, it is clear to me that another series of congressional oversight hearings, like those conducted by Senator Nunn's Permanent Subcommittee on Investigations, will be necessary if Congress and the public want real change. The sooner the better.

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Author's note: Much of the above OSFA/PBO history is public information and available from news accounts of the time. I also know it well because I was often literally in the room, as a civil servant working in the Office of Legislation and Congressional Affairs, from the time of Senator Nunn's conversations with Secretary Riley to the arrival of Secretary Paige. From there onward I pick up the thread of OSFA/PBO decision-making networks as a litigant against student loan fraud, based on discovery and depositions from 2001 onward. Much of that is also public information although little of it has been published.







Assessing Warren's Higher Education Plan

May, 2019

Washington -- Give Elizabeth Warren credit. She is the only presidential candidate in either party who is addressing the nation's student loan crisis realistically. I have differences with the details of her approach, but that must not overshadow her leadership. Warren deserves praise for three huge policy initiatives:

• She proposes help for millions of borrowers currently in inextricable student loan trouble (often not of their own making), in a way that would also help the nation's economy. Debt relief, through a means-tested approach, needs immediate action. In 2016, candidates Bernie Sanders and Hillary Clinton wrongly neglected the distress of borrowers in favor of vague promises for future generations. Warren's loan cancellation plan for current borrowers, conversely, has now demanded even the attention of those who for years touted student loans as "good debt." The Urban Institute, for example, has begun seriously to analyze cancellation effects and has had to withdraw mistakes in its earlier papers. Economists are now looking more seriously about the positive, life-changing effects of current debt cancellation, as explained in a new paper from the National Bureau of Economic Research.

• She proposes restoration of bankruptcy protections for both federal and private student loan borrowers. Warren is a co-sponsor of Senator Dick Durbin's new restoration bill, the case for which has been spelled out well by Mark Huelsman of Demos. This is not a partisan issue; the companion bill in the House is led by Republican John Katko. Arguments against providing student loan borrowers the same bankruptcy rights as other borrowers have collapsed with the failure of programs that were said to preclude the need for student loan bankruptcy.

• She addresses demographic disparities in student loan burdens. The student loan crisis falls disproportionately on minorities and women. Warren's plan exposes this by showing the distribution of cancellation relief, a heretofore much-neglected topic. Also, by proposing that cancellation be paid for by an annual 2% wealth tax on those with net worth of over $50 million, Warren highlights the huge disparities between the few who are in the stratospheric reaches of wealth compared to millions of borrowers who are not, and knocks back arguments that her overall plan is regressive.

I must also note that Elizabeth Warren is without peer among the presidential candidates for her efforts to oversee the U.S. Department of Education more vigorously. Part of the student loan crisis is a result of ineptitude and corruption at the department. Warren is the founder of the Consumer Financial Protection Bureau.

That said, I have some differences with the Warren plan as announced last month, which suffers from two inequities, individual and institutional.

Previously, I suggested that a means-tested, refundable federal tax credit would be more equitable for all students who went to college in the high-tuition era of the last two decades. It would avoid such problems as unfairness between those in similar economic circumstances who struggled mightily to pay off their loans and those who did not; between those who chose lower priced community colleges or less selective schools and those who did not; and between those who worked to try to pay for college over many years and those who did not. The tax credit could be called the "Tuition Premium Tax Credit," the benefits of which could be used to pay off student debt, or simply used by recipients to recover economically from the high price of college, however it affected them wherever they attended. Such a tax credit would also help remedy generational inequities. The boomer generation benefitted enormously from the long, low tuition era that made paying for college relatively easy. The 2017 tax cut piled more wealth on the boomer generation; it could be trimmed back with savings applied to generational and income-class equity.

I would also limit Warren's free college plan to two-year community colleges (actually first proposed by President Harry Truman). For public four-year colleges, a return to the Carnegie Commission's funding model would strike a reasonable balance between who pays and who should pay, so as not to make the free college aspect of the Warren plan regressive, as some have alleged. The Carnegie model also recognized the importance of private, non-profit institutions, a national resource that could be threatened under Warren's plan.

As to Warren's plan to increase Pell Grants, I'd put the funds instead toward a matching program, like SEOG, that would be more efficient and draw in much-needed state and institutional effort to help students avoid excessive debt. Historically, Pell Grants have not been effective in reducing borrowing. Requiring match would also eliminate many unscrupulous for-profit institutions from federal programs, a workable alternative to Warren's plan simply to make all for-profit institutions ineligible, although that aspect of her plan is also attractive. For-profit higher education is nothing less than a national scandal and one of the primary causes of the student loan crisis.

Finally, as to Warren's wealth tax, it is a good talking point to illustrate how inequitable our society has become in terms of wealth maldistribution, but as a practical matter there is a good case to be made that an effort to relieve student loan debt for those who most need it would go a long way toward paying for itself. Getting millions of borrowers back fully into the economy makes good economic sense.

I don't have a favorite 2020 presidential candidate, but Elizabeth Warren's higher education plan is a formidable offering. The cancellation proposal is getting much favorable attention in polls, even from those without loans. Other candidates should be taking note.













Healthy Foods, Healthy Markets: Part Two

April, 2019

Lincoln -- Part One of this blog encouraged state and local elected officials to get behind a "Healthy Foods, Healthy Markets" movement, to scale up what is happening in Lincoln, Nebraska.

That means you, Nebraska Governor Rickets, and you, Nebraska Board of Regents. Nebraska agriculture is in a tailspin and needs new thinking based on what is good for healthy Nebraska minds and bodies, and good for new markets for agricultural products.

Nebraska, incredibly, imports most of its food, as do other corn-belt states. Why? Because former Secretary of Agriculture Earl Butz said "Get big or get out" and proclaimed that foreign markets for processed foods were the future.

That's now demonstrably wrong. After five decades of such policies, Nebraska rural areas are rapidly depopulating; foreign markets are in a shambles; processed foods are ruining the health of people at home and abroad. See "Planet Fat" in the New York Times.

Part Two invites national candidates for president and for Congress to get behind a "Healthy Foods, Healthy Markets" movement. In 2016, candidate Hillary Clinton had no rural policy and failed to campaign adequately in Wisconsin and Michigan, two important agricultural states. No wonder she lost. Current president Donald Trump has been a market-wrecker nonpareil. His Ag Secretary Sonny Perdue is a warmed-over Earl Butz, (presumably) without the dirty, racist jokes and the tax cheating that landed Butz in prison.

Some Democrats are focusing for 2020 on what they are against: agricultural monopolies. Elizabeth Warren summons William Jennings Bryan; Amy Klobuchar recalls the Granger Movement; they are wise to do so, if only to shame the current generation of meek farmers and ranchers who are preparing themselves to become serfs contracted to Chinese-owned corporations. Most Democrats seeking the presidency in 2020 have no identifiable rural policies at all.

What candidates for national office need is something to be for, as well as against. That's what "Healthy Foods, Healthy Markets" provides. It's hopeful, workable, scalable. It's capitalism* put to work for jobs, for health. That's what rural America needs and what candidates would do well to work into their policy platforms.

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* Many market concepts are spelled out in detail in a 2017 collection of works published by the St. Louis Federal Reserve and USDA. The authors of "Harvesting Opportunity" include agricultural policy experts, economists, businessmen, and bankers.

Healthy Foods, Healthy Markets: Part One

April, 2019

Lincoln -- Heartening news from Lincoln: the Healthy Food Access Kitchen is about to open.

Funded by the local Community Health Endowment, it will prepare nutritious food for the city's most vulnerable children and distribute it through the caterer Kinder Bites. And it will prepare healthy food for those of all ages in Lincoln's neediest neighborhoods through Lincoln Fresh, operated by the Lincoln Food Bank.

According to the Lincoln JournalStar, a local and regional healthy food marketer will soon be sharing space with the new Food Access Kitchen:

"A second business, Lone Tree Foods, will also utilize the space to wash, prep and package locally produced foods (including produce, dairy and meats) for distribution to customers such as schools, hospitals and other retail locations. This partnership will not only result in greater circulation of locally sourced produce, but also support business growth opportunities for local farmers and decrease food waste."

This is great news. Schools, hospitals, and retail locations will start getting more locally sourced produce. (Hospitals especially need it.) Nebraska farmers will have new markets for their produce, dairy, and meat. All this will stimulate market business opportunities and jobs.

Question: Could this scale up and spread to other cities? Answer: Yes, with seed money.

An appropriate source for scaling up would be within the USDA budget, at little or no additional cost to taxpayers. The current federal SNAP (food stamp) program is incredibly wasteful and counterproductive to its own mission, in that billions in SNAP dollars are spent annually by recipients on processed junk foods, especially sugared soft drinks. Ironically, SNAP is partly responsible for the nation's obesity and diabetes epidemics. Other USDA programs, like WIC, do not permit use of federal dollars for the purchase of self-destructive products, so such a limitation would bring consistency to federal policy.

The resulting SNAP savings could be moved within the USDA budget to programs that promote the development of local and regional healthy food markets.

State and local elected officials in states like Nebraska, where the rural economy badly needs new markets and where nutrition-related diseases are epidemic, should be getting behind efforts like those now being set in motion by Lincoln's Community Health Endowment. And elected officials should be demanding changes to USDA budget priorities so as to help fund a movement toward "Healthy Foods, Healthy Markets."

The Scandal is The Scandal

April, 2019

Washington -- It's supposedly a national scandal, how the rich and famous cheat to get their children into elite colleges. The real scandal is that we pay so much attention to it, while ignoring the plight of thousands of students and families who followed the law and have been cheated out of student benefits actually due them. The scandal is the scandal.

To be sure, the rich cheaters in the so-called Varsity Blues scandal deserve what's coming to them, including jail time if that's in store. If there's any doubt, Caitlin Flanagan, writing in The Atlantic, erases it. She is especially hard on the lawyers and high-flying investment professionals who knew the rules but violated them anyway. Heaven knows what else they do in professional life to cheat.

Meanwhile, The Chronicle of Higher Education, in a welcome departure from their usual beats, let reporters Michael Vasquez and Donald Bauman tell the under-covered stories of upwards of half a million student victims of closed colleges:

"All across the United States..., the lives of students and their families have been plunged into unexpected crisis. A Chronicle analysis of federal data shows that, in the last five years, about half a million students have been displaced by college closures, which together shuttered more than 1,200 campuses. That’s an average of 20 campus closures per month. Many of those affected are working adults living paycheck to paycheck, who carried hopes that college would be their path to the middle class.

"When a college fully goes out of business, there is no easy fix for the people caught in the crossfire. Closures can be both traumatic and financially ruinous for students — many of whom are single parents...."

Most of the colleges going out of business are for-profit schools that should never have been allowed to participate in federal programs in the first place. Millions of federal dollars intended for these students are missing. The U.S. Department of Education, staffed at the top levels by former executives of these colleges, is dragging its feet in cancelling the student-loans of their victims, although required by law to do so.

So half a million lives have been disrupted, but there's no major media scandal because no celebrities or elite schools are involved in what is prosaically called, in higher education circles, the Borrower Defense matter.

There is an equally troubling scandal in the federal Public Service Loan Forgiveness Program, under which borrowers are entitled to have the balance of their student loans cancelled after ten years of work in public service jobs. This one is at least getting a catchy headline in the New York Times:
Your Student Loan Servicer Will Call You Back in a Year. Sorry.
This program, with tens of thousands of victims, is foundering because the same officials at the Department of Education who are unwilling to help closed-school victims are also in no hurry to see anyone get benefits under PSLF. Credit NYT reporter Ron Lieber for staying on top of this.

Congress, unfortunately, is not up to holding the Department of Education's feet to the fire on either of these administrative calamities. Congressional hearings, with rare exception, have been almost genteel, focusing on what curative might be found legislatively for the upcoming reauthorization of the Higher Education Act, rather than what should be done right now to investigate corruption and racketeering at the Department of Education. There's much to investigate if there's a will to do it.

Here is a suggestion for both justice and proportionality in the Varsity Blues, Borrower Defense, and PSLF scandals. The Department of Justice should, as a condition of settlement with the rich and famous Varsity Blues perpetrators, require that they pay substantial fines to the non-profit charities representing the Borrower Defense and PSLF victims. That way, lawbreakers who tried to rig the college admission system would be aiding those who only tried to get ahead by following the rules.

That would be a satisfying measure of justice, maybe even better than jail. It would give the Varsity Blues perpetrators an opportunity for redemption as part of contrition. It would be good for the country.

This is not without precedent. For example, as part of a settlement with DOJ, Bank of America made contributions to charities in 2016 as part of a larger settlement.

Which charities would be appropriate beneficiaries of Varsity Blues fines, to help Borrower Defense, PSLF, and similar victims of higher education predators? Here's a start: National Consumer Law Center; Veterans Education Success; Project on Predatory Student Lending; Public Citizen; National Student Legal Defense Network; and the Student Borrower Protection Center.

Short of moral leadership from a Secretary of Education who could repair the damage from all three scandals – it won't happen under the current one – this might be the next best alternative.

Time to Re-think the NU Presidency?

April, 2019

Lincoln -- The resignation of University of Nebraska president Hank Bounds has set off discussion as to what led him to resign and speculation as to who might be next to fill the office. Bounds said he was overworked and wanted to spend more time with his family. That's a good reason.

Sometime soon, however, we should all ask whether this might be a good time for structural or job-description reforms, in view of evidence that the NU president's job is too much for any one person.

There is no doubt that the current university governance structure, which dates from the early 1970s, has had unfortunate, unintended consequences.

The University of Nebraska was once among the nation's prestigious research universities with membership in the Association of American Universities (AAU). Such membership helped attract top faculty, among other benefits. But when the Omaha-based College of Medicine was broken off from the Lincoln-based colleges, AAU eventually forced "UNL" out of the exclusive association. Other universities that kept their medical centers administratively attached to their main campuses did not suffer such a fate.

The existing NU structure also did not save UNL from getting in trouble with the American Association of University Professors (AAUP), creating yet more faculty problems. Although it was UNL Chancellor Ronnie Green who violated (according to AAUP) a graduate student's due process, NU president Hank Bounds was of little help and essentially a bystander in the controversy, which drew unwanted national headlines.

Durward "Woody" Varner, creator of the current structure and the first NU president, was the model of a strong leader who, I believe, would have either charmed or bulled his way out of both the AAU and AAUP controversies. He likely would have persuaded Wisconsin's Biddy Martin and Michigan's Mary Sue Coleman to drop their effort to remove UNL from the AAU, something then-UNL Chancellor Harvey Perlman could not do. And Woody Varner would not have been a bystander to the state legislative interference that got UNL into trouble with the AAUP. When legislative interference threatened NU in the 1970s, Varner persuaded the Board of Regents to sue to retain University independence, and he won.

But even for Woody Varner, the NU presidency may have been too demanding. He resigned unexpectedly to take a job with the NU Foundation. Which raises the question of whether the current structure expects too much of any individual.

On top of that, NU faces difficult times ahead because Nebraska's agricultural economy is failing. Hank Bounds recently put together an impressive attempt to show how the University can help the state's economy, but it has no urgent or visionary emphasis on agriculture, where it is most needed. And even his limited vision is hardly shared at the statehouse, where the executive branch is in one-party control and still looking to the farm-policy philosophy of Earl ("Get Big or Get Out") Butz* as a lodestar, which has long since lost its luster.

Rick Ruggles of the Omaha-World Herald has summarized some of the issues facing the next president. But the failing farm economy is not listed, nor is the fact that whoever the NU president is, he or she will face intense pressure from the agribusiness lobby to acquiesce in, if not outright assist in, the further monopolization and consolidation of Nebraska agriculture, which is a part of the problem.

My recommendation to the Regents is to look at the NU governance structure at least to note how it has not been a ringing success, then write a job description for the next NU president that is attuned to the times. Relieve the president of administrative duties that wore out Hank Bounds. Instruct the presidential search organization to look for a leader who can stand up for the University on the big, national reputation issues, and who has a vision to fulfill the land-grant university's mission to create a robust rural economy. That means people like Tom Vilsack and Mark Dayton, Wes Jackson and Anna Johnson, should be consulted in the search. As agriculture goes, so goes the University.

Woody Varner created an office of the presidency at Varner Hall with big shoes. The Board of Regents should try to fill them.
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*Earl Butz was U.S. Secretary of Agriculture under Presidents Nixon and Ford until he resigned over telling one too many inappropriate jokes. He later went to prison for tax-evasion. He was an agricultural economist from Purdue University who championed large agribusiness, corporate farming, and consolidation of farms.

Eyes on the Storm Lake Forum

March, 2019

Lincoln -- This Saturday's Heartland Forum in Storm Lake, Iowa, is a chance for Democratic presidential candidates to show their Rural Policy bona fides.

Most are dodging the forum, showing they have none. Elizabeth Warren will show up and, if anyone is paying attention, lay out an impressive platform. Iowa Democrats might just take notice and move her to the top of the polls. National Democrats who understand that winning in rural states is the key to regaining the Senate and the Presidency might also take notice.

Warren so far is the only candidate in either party who demonstrates a sufficient appreciation of the real problems facing farmers and rural economies. And rather than wringing her hands about it, as do Bill Galston (at Brookings) and Paul Krugman (in the NYT), she knows what she would do about it.

Here are the closing passages in Warren's otherwise wonderfully policy-wonkish platform that especially got my attention:

More than a century ago, during the Gilded Age, prairie populists joined together to fight for farmers during a time of massive economic transformation. They understood that working on the farm was honorable work that deserved to be recognized just as much as other occupations.

In his famous “Cross of Gold” speech, William Jennings Bryan said: “The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscles to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain.”

Like Bryan, I will fight for farmers — “for this broader class of businessman.” I want Washington to work for family farmers again, not just for the agribusiness executives pocketing multi-million dollar bonuses or the Wall Street traders sitting at their desks speculating on the price of commodities. I want family farmers to be fairly rewarded for their hard work. That is how we build an economy that works for everyone.


Nebraskans: Are you paying attention? Are there any prairie populists left in the home state of William Jennings Bryan? From what I hear, not many. Some – surely not all – Nebraska and Iowa farmers are saying that they are not concerned about low ag prices; that this is a sacrifice necessary to stop unfair Chinese trade practices in high-tech computing.* Or something. Never mind that most farmers had never heard of the esoteric technology issue before. Anything, even losing the farm, is apparently not too much to rationalize years and years of voting with the "Wall Sreet traders" and the monopolists. William Jennings Who?

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* An Iowa farmer told the Washington Post: “As the farmer sees it, we’ve had times a lot worse for grain prices as we’ve got right now. We know China’s been screwing us for years, not only on farm products but on technology. We know we can duck our heads and pull our boots on and get through this, and, in the long run, the whole country is going to be better off."

Re-framing Issues and Approaches to the HEA

March, 2019

Washington -- The newly introduced Hassan-Durbin PROTECT Act deserves passage as soon as possible. It contains many long overdue reforms in programs under the Higher Education Act.

It has an impressive list of supporters who are trying to watch out for the interests of students, families, and taxpayers. Those who need financial aid – especially the veterans among them – are being exploited unconscionably by predatory colleges and predatory loan servicers. Federal money in higher education is often doing more harm than good, setting up new victims to join countless others whose lives have already been damaged by huge debts and worthless degrees.

Unfortunately, the bill has virtually no chance of passage this year. It will never make it out of committee.

It's possible some parts of the bill could be incorporated into a Higher Education Act reauthorization, but that looks unlikely because of the way issues are being framed. Politically, the rhetoric falls into the same partisan dichotomy that ties up the Senate on almost all legislation.

There are two ways around the impasse. One is for the Democratic sponsors to wait until the 2020 elections and hope for a Senate majority. Another is to approach the issues with different means to the same ends, approaches Republicans should welcome unless they are hopelessly craven instruments of the exploiters.

Those means are federalism and market forces.

The original HEA of 1965 was based on "cooperative federalism." Federal dollars were to be matched by states and institutions three to one (75-25). Up front, others besides federal taxpayers had "skin in the game." Restoring matching fund requirements would create the "skin" that Republicans (and many Democrats) profess to want.

Republicans also want uniform treatment of all higher education institutions, with no special legislation to control the excessive dependence of the for-profits on federal funding. Returning to cooperative federalism at 75-25 for every HEA Title IV participant would accomplish uniformity.

Republicans want fewer federal regulations and more reliance on market forces. Returning to cooperative federalism would require all institutions to respond to markets. This is not a problem for public and non-profit institutions, where there is tuition income. In the case of tuition-poor for-profit institutions, the practical effect of this would mean that once again they would have to work with industries and employers that would find value in the training and education the schools offer, and not rely almost solely on federal largess (and exploitation of veterans' GI Bill benefits).

Republicans presumably want more state and local control over higher education rather than concentration of authority at the U.S. Department of Education. That could be achieved by preventing the Secretary from "preemption" of traditional state consumer protection laws, and by accepting many provisions of the PROTECT Act that strengthen states.

If Republicans would be willing to approach HEA issues on these terms, expressed as tenets of conservative ideology, then Democrats should work with them. Otherwise, PROTECT must wait for the 2020 elections.

“It shouldn’t be this easy..."

March, 2019

Washington -- “It shouldn’t be this easy to defraud the Department of Education.”

That was the last line of a New York Times article about how some $13 million of federal taxpayer money is missing in the collapse of Argosy University. The money was intended for students but used for other purposes by the for-profit college.

Oh, but it is easy to defraud. I've worked at the Department and can attest to how easy it is. I've also sued those who defrauded the Department and won settlements getting some of the money back. My files are full of information, most* of it public, as to how fraud happens and who has been doing it, by name.

• One way is to get someone from your organization or industry appointed to a high position in the department, then count on her or him to deliver on key decisions. There are laws against conflicts of interest, under which such appointees are to recuse themselves from decisions that help their former employers or industries, but they are often unenforced.

• Another way is to get inside information from friends in the Department who will give you advice on upcoming audit schedules and how to adjust your books to thwart the auditors.

• If there is a legal question, don't ask the Department if you are afraid of the answer. Hire your Washington lobbyist to give you a legal opinion and act on that. Before doing so, ask a friend in the Department "off the record" as to what the answer would be, so you can act accordingly.

• If necessary, just lie and count on the fact that perjury will not get you into trouble.

• Develop and execute a plan to take advantage of Department employees who might be fooled into approving something big by making it appear small, or by thanking them for a decision never made to see if the Department catches it.

All of the above examples are taken from actual incidents, for which there are written records. The sum of these frauds is in the hundreds of millions of dollars.

Recently, House committees and subcommittees have been looking into problems in programs under the Higher Education Act. In the hearings, the focus is on policy changes to avert future problems, not catching the miscreants who have committed the fraud. Often it is observed at such hearings that at the Department "the foxes are guarding the henhouse" but no effort is made by Congress to insist on catching the foxes.

It shouldn't be this easy to defraud the Department of Education, but it is.

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*Some is confidential and cannot be disclosed.

Two Hearings, Two Suggestions

March, 2019

Washington -- The House and Senate both held hearings this week on troubled programs of the Higher Education Act.

The Senate Health, Education, Labor, and Pensions Committee heard testimony on simplifying the onerous student financial aid application, the FAFSA. Some interests don't want it simplified too much.

Before the Committee gives up or makes too many concessions to those who favor retaining many of the questions as they currently exist, it should review how the answers to those questions are used to undermine the purpose of federal grant programs. When states and institutions say they need FAFSA information to distribute their own financial aid, it may be to countervail rather than to complement the federal aid. (That is, to put greater rather than lesser loan amounts in students' aid packages.) The FAFSA is the sine qua non of the enrollment management industry, which thrives on showing institutions how to manipulate financial aid packaging.

Stephen Burd of New America has illuminated how this works and who does it in his series "Undermining Pell." Research by Leslie Turner and others has shown that several billion dollars of Pell Grants are annually subjected to "displacement" through packaging practices that burden low income students with loans.

Suggestion: simplify the FAFSA but also require the Department of Education to have its program review teams look at how institutions package state and institutional aid, and require the Secretary to limit, suspend, or terminate (LS&T) institutions that undermine federal programs. Require the Secretary to make such evaluations a part of accreditation as well.

The House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies heard testimony on predatory for-profit colleges. These colleges exploit low income students and set their tuition rates at the sum of federal grant and loan aid. They often provide an inferior education; excessive numbers of their student borrowers default on their loans. The cost to federal taxpayers is enormous, not to mention the ruined credit and financial burdens on the borrowers themselves.

One member of the subcommittee, incredibly, tried to change the subject by suggesting that the real scandal in higher education involves highly paid coaches at public and non-profit institutions. Two members said they would be amenable to more oversight of for-profit colleges if the same standards were also applied to all higher education sectors.

Much attention was given to the 90-10 rule, under which for-profit colleges must generate at least 10% of their revenue from other than Department of Education sources in order to qualify for participation in the Department's programs. Panelist Robert Shireman provided a good history lesson about 90-10. There was a time when for-profit colleges like the University of Phoenix generated much revenue from employers who paid the institution for training workers. Educational quality was upheld by the marketplace. When it became easier to tap federal programs, however, through federal relaxation of standards in 2002 and 2006, UoP changed its financial strategy to go after the easy federal money, as did most of the rest of the for-profit sector as well.

Suggestion: Go back to the original HEA of 1965 and make federal programs matching at $3 dollars federal for ever $1 non-federal (in cash or in-kind), as they were then. Apply the requirement to all sectors equally. For-profit institutions would then have to prove their worth in the marketplace to come up with match from employers, full-paying students, and profits plowed back into endowments, rather than making well-placed political contributions to ensure inadequate (even corrupt) federal oversight.

You want uniform standards, based on the marketplace, and fewer complicated federal regulations? There you go. Not to mention "skin in the game" and a precursor to the inevitably necessary matching programs at the heart of even more significant efforts to deal with the cost of college.