Time to Act, Mr. Secretary

September, 2013

Washington -- In the previous post, I described new research on how colleges move around billions of dollars in students' financial aid packages, to the great disadvantage of the financially needy. With these practices, colleges thwart the purpose of federal and private charitable grant aid, balloon student debt, exacerbate the growing gap between our society's rich and poor, and drag down our nation's economic recovery.

Many college administrators admit to the practices but are afraid to break away from the pack, fearful of what it might do to their own individual institutions. Likely as not, many of these colleges have strategic plans to increase ranking and prestige, using sophisticated enrollment management models to convert supposedly restricted federal and private grant aid to unrestricted use. With such unrestricted revenues, the institutions embark on merit aid and campus amenity programs that impress those who value rankings and prestige. This is being done on the backs of low income students who must take out loans and at the expense of federal taxpayers, whose elected representatives have exhibited an astonishing lack of oversight.

The Secretary of Education could take two steps immediately to end these abusive (and unethical) practices.

1. Send Department of Education "program reviewers" to a few representative colleges. Upon finding abusive practices, put the colleges on notice that their continued participation in federal Title IV financial aid programs will be handled as appropriate by existing Limitation, Suspension, and Termination (LS&T) powers of the Secretary.

2. Announce that the existing Student Right to Know Act (SRTK) requires Title IV participating institutions to advise students about how all financial aid funds are packaged. Colleges (and their enrollment management contractors) have long maintained that this is proprietary information. Sunshine is a powerful disinfectant and will help enable students, their families, charitable donors, federal taxpayers, and others with an interest in financial aid packaging to make sure that grants given to financial needy students are indeed used to reduce their work and loan burdens, rather than being manipulated by the colleges for their own purposes.

If the Secretary would take these two actions, a shockwave would go through the higher education community immediately. Enrollment managers would have to eliminate abuse of the low income as a tool in strategic planning. Private charities would have a new tool to ensure that the students they want to help will actually benefit (which will also serve to assure prospective donors that their contributions are being put to good use). Colleges themselves will not have so much reason to raise tuition in order to have sufficient institutional aid funds to mingle and manipulate in financial aid packages. Ethical voices in colleges and universities will be heard. Student financial aid administrators, many of whom chose a career in what they hoped would be a helping profession, would potentially be freed from the oppression of admissions directors and enrollment managers whose only goal is an institutional ranking uptick that looks good on their resume.

And federal taxpayers will have a sense that the President and the Secretary actually care about making sure federal programs work as intended.