Heroes and Villains

Washington -- The collapse and bankruptcy of Corinthian Colleges, the SEC's charges of fraud by ITT Tech executives against its investors, and the substantial enrollment drops at for-profit colleges have recently dominated headlines in the higher education trade press.

What has gone under-reported is the irony that most students themselves cannot take bankruptcies for the student loans they took out to attend these institutions, and that fraud perpetrated on students is a far greater problem than fraud against investors.

Nor has proper credit been given to non-profit organizations and individuals whose work over the years has exposed the sordid and corrupt underpinnings of many for-profit colleges. These dedicated people have done heroic service in the national interest by standing up for students, families, and taxpayers. I cannot name them all, but in the forefront are Veterans Education Success, the National Consumer Law Center, The Institute for College Access and Success, New America Foundation, and Republic Report.

The trade press could likewise pay more attention to the culprits who led the country into the for-profit college fiasco, which would include many in Congress who looked the other way while accepting political contributions from for-profit interests, as well as many people in Washington's revolving doors who circulate through congressional staff positions, lobbying shops, federal agencies, and political campaign staffs. Even as I write this, many with a checkered past are once again lining up with political candidates in the 2016 elections to take advantage of unwary students and taxpayers. The trade press would do well in articles on the higher education positions of the candidates to note as well just who is advising them.

How Germany Limits Student Loan Debt

Berlin -- Those who follow student loan debt issues in the United States -- and that's about everyone now that this form of debt is being recognized as a major national problem -- may be interested in how another country limits such debt.

The major need-based student financial aid program in Germany, the Bafög, awards most aid in a fixed ratio: half grant, half loan. The loan portion carries no interest. It is repayable starting five years after the end of the aid eligibility; in other words, there is a five-year grace period, which can be extended under certain conditions such as child care. No borrower pays back more than 10,000 Euros in total, whether or not more was borrowed.

One advantage of the German practice of making aid half grant, half loan, is that the ratio cannot be manipulated by the institutions students attend. In the U.S., the ratio is badly out of balance in favor of loans. This is partly a function of insufficient Pell grant (discretionary) appropriations compared to Stafford loan (entitlement) spending, but it is also because many institutions routinely capture the Pell grants for themselves (often to make so-called "merit" aid to other students), thereby burdening financially needy students with even more loans.

Germany has no student debt crisis. It is worth mentioning that many U.S. institutions of higher education are modeled in their teaching and research missions after the University of Berlin, as created by the Humboldt brothers early in the nineteenth century. With regard to student debt, it is instructive to look once again at German experience.

Of course limiting student loan debt in the U.S. would entail significant cost, but it could be paid for by limiting (or eliminating) U.S. higher education tax credits and deductions, which total nearly $40 billion annually. Germany allows education fees and student loan interest payments to be tax deductible, but because such fees are low or nonexistent, and most loans are no-interest in the first place, the cost is comparatively minimal. One good reason to tap U.S. higher education tax credits and deductions in order to control student loan debt: much research shows the credits and deductions do not provide better higher education access as promised.


Germany Changes Student Financial Aid

Berlin -- The Federal Republic of Germany is making a change in the way it pays for need-based student financial aid. In the past, the cost of the main aid program, the Bundesausbildungs-förderungsgesetz (more commonly known by its nickname Bafög), was shared by the national government and the individual states. From 2015 onward, the national government will pick up the entire cost. The rationale behind the change is to relieve states of the burden so they can increase funding directly for universities and schools.

Perhaps this is a good change, perhaps not. Four decades ago, the USA went down the same path by choosing 100% federally funded student aid programs over those that required state and institutional matching funds, only to see states redirect monies elsewhere and raise tuition. Germany is different and may not see such a result: the national legislature's upper house is made up of the governors of the states, so there is closer coordination between levels of government. And there is no tuition at public universities. Germany experimented with tuition charges for several years but has since done away with them.

The Bafög will also be increased by seven percent for the coming year; the income and asset allowances will be raised the same amount. The program will be opened to more non-Germans as well. German universities are already tuition-free to qualified students from other countries, including the United States. The Bafög aid is to help financially needy students with living and other expenses while attending a university.

Another difference between Germany and the USA is how the Bafög is structured. It is half-grant, half no-interest loan. Repayment of the loan portion starts when income exceeds a certain level. This is something the U.S. Congress should look at to reform its own Stafford Loan and Pell Grant programs.

Borrower Defense Options

Washington -- Several state attorneys general have demanded that the U.S. Secretary of Education cancel the debts of student borrowers who were defrauded by schools in the Corinthian Colleges, Inc., chain. They point to a "borrower defense" provision in law that gives the Secretary the authority to do so.

Ben Miller provides a good history of the law in "The Strange History of the Student Borrower Defenses Provision." His account comports with my memory of the discussion in the Department of Education two decades ago.

I agree with the attorneys general, but I expect that the Secretary may be reluctant to act as they wish, given that Corinthian students are only the tip of the iceberg when it comes to students who have been misled and defrauded. If I still worked at the Department, I would advise the Secretary to consider the following options, and any others along similar lines that provide relief.

• Invite the state attorneys general to help write the borrower defense regulation that was never written by the Department, and implement it as an emergency regulation without negotiated rulemaking.

• Consider using other powers available to the Secretary to give Corinthian borrowers relief. Under 20 USC 1082, the Secretary has broad authority to modify the terms and conditions of FFEL loans and to release and compromise them as he determines; under section 1087 he has the authority to apply the same terms to Direct Loans. These authorities should cover the types of loans in question.

• Consider writing down the amount of the loans substantially, based on what the borrowers would be paying back had they been, for their personal situation, in the most favorable income based repayment plan from the time they took out the loan, including various loan forgiveness options. In other words, cancel an amount now rather than waiting for a certain number of borrower payments.

• Create a pilot program with the Corporation for National and Community Service (a federal agency) through which Corinthian (and similar) victims would be given loan cancellation in exchange for public service through any of the programs of the CNCS.

• Ask the state attorneys general to look at other misleading and possibly fraudulent practices beyond the for-profit sector of postsecondary education. Twice in the past week I have been advised, by different sources, of questionable practices of public and non-profit schools that are certainly consumer unfriendly if not outright illegal. The state AGs need to look at these practices.

• Reflect on the fact that many if not all of the students victimized by Corinthian also were subsidized by Pell Grants, and many by the GI Bill. Costs associated with cancelling or writing down the loans of these students are only a part of the cost to taxpayers. If this helps get the students back into the economy as taxpaying citizens, it may be the best money spent. Taxpayers should be outraged at the waste of the Pell and GI Bill money, more so than the costs of loan write-downs.

• Thank the state AGs, and resolve to involve the states more in the oversight and financing of postsecondary education opportunity, so this doesn't happen again. This will require reshaping federal programs under the Higher Education Act, the sooner the better.

R and R for Higher Education

Washington -- Those of us who find fault with the current model of higher education finance – above all, too much reliance on student indebtedness – have an obligation not simply to complain but to offer constructive alternatives. I feel the obligation more acutely than other critics, perhaps, because I have worked in the institutions, in the states, in the Congress, in the interest groups, and in the federal agencies. For several years, I was liaison for higher education between the Department of Education and the Congress. Uncomfortable as it is to admit, not only have I been close to the situation, I may have contributed from time to time to its current sorry state.

So let me offer an alternative, what I will call R & R for higher education – in this case, Revival and Rebalance.

The Revival part is a look back over four decades to funding expectations and practices of an earlier time, and to the reasons our efforts worked better back then. In the 1970s, for example, states made greater funding commitments, grant-based student aid made a real difference, and student loan burden was comparatively small.

The Rebalance part is to shift current funding and funding incentives, so as to re-create the same kind of environment that once served the country well. There was a time in the living memory of many of us when college was affordable, access was expanding, and inequities by class and by race were diminishing.

The following ideas are offered with an eye toward getting bipartisan agreement in Congress. This is still possible in higher education. What is necessary is for members of the House and Senate to put aside their stale talking points for a few months and look carefully at what might be common ground. For Democrats, adoption of the following ideas would lead to higher grant levels and less reliance on loans; for Republicans, these ideas would use the mechanisms of federalism and achieve savings through cutting back waste, fraud, and abuse. Each side would have to acknowledge that such goals and principles are not the monopoly of either party, but are actually shared within both caucuses and can be touchstones for agreement.

• Move $6 billion from the Pell accounts so as to add $3 billion each to SEOG and SSIG.

• Scrap the old SEOG distribution formula and replace it with incentives for institutions to package student financial aid to reduce loan burdens for Pell-eligible students. In other words, the more institutions move away from loans for this population, the more they are rewarded in the SEOG distribution. I would also put a hold-harmless on SEOG so no institution would get less than the previous year, using the significant expansion of SEOG as the opportunity to revise the oft-criticized, current SEOG formula. I'd also put in an incentive for institutions to get more SEOG if they would cut back on athletic expenditures. At many institutions, this would give the academic leadership needed leverage over its athletic department.

• Reauthorize the state-federal SSIG matching program as it successfully operated in its first years after 1972. A $3 billion level of funding would draw states back in to providing more funds where they are needed, not for flashy facilities and top-heavy administration, but in keeping net prices down for middle and lower income students and families. This would result in more skin-in-the-game for states and engage them more in protecting both their students as consumers and their taxpayers. States would have considerable flexibility under SSIG to do their own incentivizing and prioritizing in matters of higher education access.

• Recognize that the Pell program has an estimated $6 billion of annual abuse in the form of displacement, or crowding out Pell. Many institutions routinely reduce their own institutional aid efforts for Pell recipients as part of enrollment management plans that move their funds to chase non-needy students and superficially higher "rankings." See the work of Lesley J. Turner, Stephen Burd, and Henry J. Riggs, for example. The widespread practice of discounting tuition so as to be able to manipulate student financial aid packages may soon result in the failure of many financially unstable colleges that have followed this strategy, unless other, saner models can be developed. The $6 billion figure does not include the incredible waste of Pell funds spent on fraudulent proprietary schools.

• Give current borrowers the relief they are due but of which they are unaware because of conflicts of interest and low prioritization at the Department of Education. Give borrowers back the bankruptcy protections they formerly had. (Those stories of bankruptcy abuse were largely untrue.) Permit borrower refinancing of current loans. Move loan servicing and collection out of the Department of Education if necessary.

Some of these ideas will run into immediate opposition from those who would rather make the coming higher education debate merely about the level of Pell grants, or student loan interest rates, or excessive regulation, or any other shopworn subject. I would ask those who really care about higher education opportunity not to allow arguments about Pell levels to obscure the more imporant issues of total grant aid, and to whom it goes; or allow arguments about future student loan interest rates to obscure the issues of loan principal and loan refinance; or allow arguments about federal regulation to obscure the potential that states can bring to the effort both in terms of funding and better oversight.

Most of all, there needs to be an admission in the higher education community, and especially on the Hill, that the current model of higher education finance is failing and that now is not the time to trot out old slogans but to roll up sleeves and get to work on restoring higher education opportunity to its rightful place in the American dream.

Water Conservation

Lincoln -- California has recently imposed new, mandatory water conservation restrictions. Colorado has passed legislation promoting graywater as a water conservation measure.

The Council of State Governments is circulating Colorado's graywater statute as model state legislation for other states to consider. Nebraska and other neighboring states should look into it.

We have a working graywater system that uses rainwater as the original water source, so the graywater recycling is actually a second bite at the water conservation apple.

Water may become alarmingly scarce. Local governments should explore these low-cost technologies and builders should become more familiar with them. They work. We are always pleased to share experiences and information about local suppliers who can provide water collection and filtration systems. However, there are no local suppliers who provide the safest graywater equipment or have experience with it. This could change if state and local leaders were to pass model legislation to promote this water conservation technology.



Faculties, Colleges, and Research Ethics

Lincoln -- Two recent happenings in higher education may seem disparate but should be considered together. One is a seminar lecture on the IANR campus at the University of Nebraska by trial lawyer David Domina; another is the closing of Sweet Briar College in Virginia.

The Domina lecture, available here, includes at minute 31:45 this statement:

When you want a grant to do research at your university, you get the grant from one of the companies that produces that kind of a [seed corn] bag and you are expected to produce a result for them or you don't get it back the next time. And everyone in this room knows that's true. It hurts to admit it and we seldom say it out loud.

So this is what research in the 21st Century has come to. I am in no position to disagree. As a former higher education researcher and research administrator, I find the statement rings true. Some researchers themselves have pointed this out by showing strong associations between funding sources and findings.

One remedy against for-sale research has been peer review, but even this process is doubtful when the whole research endeavor is being corrupted. Are faculty at one land-grant college going to undermine faculty at another when they are all dependent on the same grant sources? No. Will faculty in a college of the same university critique another faculty at the same institution? No; there will be hell to pay from university PR offices. Will governors and state legislatures come up with tax dollars to keep research independent from outside funding interests? No; this is not on anyone's agenda.

Which brings the discussion to Sweet Briar. One of the historical strengths of higher education in America has been that not all faculties are funded by the same sources. Some are funded by sources beyond the control of business interests; some are even beyond the control of government appropriations. The country needs colleges where faculties are free to pursue truth without pressures by funding sources, private or public. Anytime a college, especially an independent one like Sweet Briar, goes down, it is a loss for the entire higher education endeavor.

Does the Commonwealth of Virginia know what it is losing? Sweet Briar is an independent, not-for-profit college operating as a public trust. It has benefitted over generations by benevolent policies making it tax-exempt, in recognition of its value to the public interest. Does the Sweet Briar board of directors itself know what it is closing down? From the account in The Chronicle of Higher Education, the board felt badly about what it would be doing to its own faculty, but only in a personal sense. The board gave up without a fight, without letting the public know what it was about to do.

At the least, the board should have involved commonwealth officials. The attorney general will necessarily be involved anyway, sorting out the messy legal details. Pollyannas will say all is well, not to worry: Sweet Briar and its kind are dispensable. But the funding model for American higher education is broken; Sweet Briar is getting so much attention nationally because it may be only the first of many colleges that will see no alternative to closing.

Even if the Sweet Briar faculty is not a research faculty in the sense it could or would critique the methods and findings of seed corn research, its faculty and many like it across the country are in a position to teach research ethics. I was on a university panel last week with a fellow panelist who attended Indiana Wesleyan. It was the faculty there, he said, who instilled in him the perspective to know how and when he should act when he witnessed wrongdoing. What kind of lessons are we teaching students when our faculties at too many institutions are selling out to who is paying for their research?

Congress is getting on on the act and may try to force disclosure of research funding sources. Which may be a necessary step, but disclosure alone is no substitute for faculty integrity in the first place.

Unnecessary Divisiveness

Lincoln -- There's enough divisiveness in the world as it is, so why acquiesce, without protest, to more? Recently I ran into two divisive practices, one private, one public, that should be done away with.

Usually I travel by air individually, but on occasion I fly accompanied. Not long ago my son and I had airline tickets for seats together, we thought. We had purchased both seats at the same time on the same credit card, long in advance of the flight. Our last names are the same. But when we checked our seat assignments on our boarding passes the day of the flight, we had been placed in different rows, far distant. There was no last-minute changing of seats, so we flew apart, as assigned.

Once burned, twice shy, so the next time I flew accompanied, I tried to make certain the seat assignments were together. I was informed there would be an extra $40 fee for sitting together, per seat. This practice is apparently sweeping the airline industry. What if you have a young child? What if you merely want to be crushed up against someone you know rather than against a stranger in the tightly packed seats? Airlines: it's hard enough to keep friends and families together as it is; please don't break us apart further with these exorbitant fees, just to appear to have low ticket prices.

That is the private example; the public example of unnecessary divisiveness involves Nebraska inheritance taxes. Recently two of my relatives died. They had no children, so their wills passed their farm on to their first cousins, their closest family. But this was news to the cousins, who were notified only after the farm and household possessions had been sold in order to collect inheritance taxes, which in Nebraska are 18% for cousins, for any amount over $10,000. What if one or more of the cousins wanted the farm, or some of the household possessions, to keep the connection with the family?

The Nebraska inheritance tax is an important revenue source for counties, which oppose its repeal or even raising its exemption levels. Unless, of course, the Nebraska legislature would replace the revenue with state aid to counties from its larger sales and income tax base. Only then would the counties acknowledge the family-unfriendliness of the inheritance tax, even as it continues to be one obvious factor in de-populating many of them. But apparently a revenue-neutral solution is beyond the ken in the legislature, so committed are the senators to their anti-tax sloganeering.

I write this blog to make it clear that I would gladly pay a somewhat higher airline ticket price so as to avoid the gimmick of charging for seat assignments, and pay higher state sales and income taxes if necessary to raise inheritance tax exemptions to keep family properties together. Enough with this unnecessary divisiveness.

I May Be Wrong

Lincoln/Washington/Berlin -- Trying to keep up on events and ideas in three very different capitals runs the risk of being shallow about each locale and occasionally outright wrong in my observations of any of them. This post is a look-back at my previous writings to see where a dose of humility may be in order.

As a kid growing up in Nebraska, every school night I was tasked to polish my shoes with brown Jet-Oil to be ready for the next day at school. The liquid's dauber being prone to splattering, I would always do the job over the previous day's newspaper to catch the splashes. Inadvertently, I became quite an expert on such subjects as the demise of Bulgarin in favor of Khrushchev. I also couldn't help reading many of the newspaper's columnists, like Drew Pearson and Walter Lippmann. One local columnist always used the caption "I May Be Wrong," which I thought was a good reason not to read his column, but it was catchy and makes for a good title for this post.

A few years ago I wrote a column on the new GI Bill; the New America Foundation posted it. I warned veterans that the benefits weren't quite what they seemed, predicted that colleges would find ways to exploit the new legislation, and that many veterans would find themselves saddled with student loan debt. But I neglected to mention which colleges were most likely to do this -- the for-profit schools, which soon made veterans a mark for exploitation. This was a big error of omission. I should also have warned that leaving the administration of the higher education benefits to the Veteran's Administration was a big mistake. It has taken years for the VA to get the program underway correctly, and much still remains to be done. This was totally foreseeable. My column on the matter was far too shallow.

More recently I wrote a post on the slow start of the Nebraska Innovation Campus on the site of the old State Fair, noting that it had only one private partner after years of searches. The next day, the NIC announced three more. I should have waited. Time will tell, however, if this announcement was to try to prime the pump to make it seem as if interest is picking up. These are modest new partners, by any measure, the kind that could be created for the sake of appearances. Either way, I hope the NIC soon takes off successfully with a wide variety of innovative businesses.

Six months ago I offered an opinion on the scandal in Nebraska's correctional system. Most people were too eager to blame corrections' employees and to accept the explanation of bureaucratic bumbling. My own view was clouded by examples of ineptitude too, but I did point out one thread for further investigation: a corrections attorney claimed that the state attorney general's office had told the corrections department, more than once, not to follow a Nebraska Supreme Court decision, apparently for political reasons. At last, in recent days, a Lincoln digital reporter (with no connection to a newspaper) has uncovered the internal communications that bears this out.

As more and more information about this scandal has come to light, it's clear that the former governor bears much responsibility. It is also becoming clear that the former attorney general, who was quick to call others incompetent, now has a great deal of explaining to do himself. For political reasons, both the ex-governor and the ex-attorney general put corrections officials into no-win situations, and then blamed them for the outcomes. I tried to defend state employees to some extent, but I did not get to the heart of the matter. We all should have been more cautious about jumping to conclusions.

These are three posts I wish I had back, to get them right in the first place.







Reauthorizing the HEA and the Need to Rebalance Funding

Washington -- Another Congressional reauthorization of the Higher Education Act is upon us and I find myself in rare agreement with Senator Lamar Alexander, chairman of the Senate committee of jurisdiction, on two issues. One is the overdue simplification of the form that students use to apply for financial aid; the other is the need to reduce federal higher education regulations.

Republican Senator Alexander is right in joining with Democratic Senator Michael Bennett in a bipartisan effort to trim down the number of questions asked of aid applicants. The so-called FAFSA form is so complicated it scares many students and families away from postsecondary education. The main opponents of this needed change are states and institutions, which have successfully lobbied the federal goverment over the years to include their own questions in the federal form. They now threaten that if the federal form is simplified, they will separately start collecting much more data about applicants themselves with their own forms, making a bad situation even worse.

What has been left out of this discussion is why states and institutions need so much information. If the assumption is that states and institutions simply want to target their own aid to the truly financially needy, someone hasn't been paying attention. One of the reasons states and institutions desire detailed information is to know more about students and families than the students and families know about them. Students and families must reveal much about themselves while institutions are free to manipulate the information behind closed doors, often to the disadvantage of the financially needy. The irony is that the federal form, as it currently exists, gives states and institutions information on how to undermine the very federal programs that are supposed to be helping the students.

It is high time for Senators Alexander and Bennett to understand more fully why their simplification proposal (or something like it) is fundamentally sound, and to challenge those who would keep on collecting information that in practice is used too often for dubious ends.

The other issue on which I agree with Senator Alexander (and Democratic Senator Barbara Mikulski, among others), is the need to rein in the regulation-happy U.S. Department of Education. There are altogether too many higher education regulations and there are too many Department officials who think the answer to every problem is a new regulation.

But what once again has been left out of the discussion is why there are so many regulations to start with. It is partly because Congress itself has used program structures in higher education legislation which invite abuse, which then invites regulation. Because Congress itself has also loaded up its already vulnerable programs with issue-of-the-moment hobby horses, even more regulation ensues.

In 1965 and 1972, Congress set up the framework for federal higher education assistance with a variety of institutional and student aid programs. Soon thereafter, Congress chose to prefer student aid over institutional aid (making higher education access for the financially needy the top priority), and to prefer student aid programs such as the 100% federally funded Pell Grants and Stafford Loans, which had few strings, over programs that required buy-in from states and institutions in the form of matching funds and maintenance of effort. Congress thereby chose "redivision federalism" as the basic approach to higher education assistance, as it redivided what had been concurrent powers with states and institutions. In so doing, Congress moved away from the opposite concept, "cooperative federalism," in which federal, state, and institutional resources are combined so that all parties have skin in the game and fewer regulations are necessary to prevent abuses. The result has been that despite the federal government's hubris of attempting to fund the effort itself, it soon discovered it could not do so and, moreover, eventually found its former partners diminishing their own efforts.

Think for a moment about the scandals of the past few years involving the for-profit schools. If states had had substantial money at stake through the old SSIG student aid matching program, based on the cooperative federalism model, would they have tolerated and funded their share of the abuses at these schools? Likely not. Sadly, under the redivision model, the schools have been able to concentrate their lobbying and political contributions on the few key members of Congress necessary to exploit the federal programs. Seeing the bad outcomes resulting from billions of dollars of Pell and Stafford spending through these schools, the Department has tried to issue regulations, only to find itself the target of Congressional disapproval.

One solution to all the bickering about regulations is to rebalance funding of programs. Revitalize cooperative federalism models; back off the idea that the federal government can go it alone. Think through the interaction of program models and the need for regulation simultaneously rather than thinking only of regulations. Same for the FAFSA. Make the states and institutions partners again with the federal government.

Back when the Higher Education Act was shaped in 1965 and 1972, another issue occupied much Congressional attention: the need to clean up the nation's waterways. But Congress chose, in the Clean Water Act, cooperative federalism to do the job rather than redivision federalism. It must be noted that it is not the household water bill that has skyrocketed above all else, or that a generation is saddled with a trillion dollars of economy-strangling debt to pay for clean water, or that the nation has spent billions on water with little to show for it. It is past time to put the principles of cooperative federalism to work in higher education.