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.