As June drew to a close, after much wrangling, Congress passed a transportation bill that included extending the current 3.4 percent interest rate on government subsidized student loans for one year.
This was clearly a short term but much-needed victory for students. That's because, based upon two reports that came out in July, it appears that the primary victors over the past decade have been some of the institutions making these loans and the victims have been many of the students who received them.
On July 20, the Consumer Financial Protection Bureau (CFPB) and the Department of Education (DOE) released its report titled Private Student Loans. Its Executive Summary states that "From 2005-2007, lenders increasingly marketed and disbursed loans directly to students...the percentage of loans made to undergraduates without school involvement or certification of need grew from 40% to over 70%." The Summary highlights that there is more than "$150 billion in outstanding private student loan debt" and "cumulative defaults on private student loans exceed more than $8 billion..." In commenting on this situation, in the press release distributed with the report, Arne Duncan, Secretary of Education, said, "Subprime-style lending went to college and now students are paying the price."
On July 30, Senator Tom Harkin (D-IA), chairman of the Senate Health, Education, Labor and Pensions Committee, released a majority report based upon a two year study of For-Profit Higher Education. As Tamar Lewin notes in her July 29 New York Times article, the report asserts that "taxpayers spent $32 billion in the most recent year on companies that operate for profit colleges, but the majority of students they enroll leave without a degree, half of those within four months." She goes on to report, "Students at for-profit college make up 13 percent of the nation's college enrollment, but account for about 47 percent of the default on loans. About 96 percent of students at for-profit schools take out loans, compared with about 13 percent at community colleges." Ms. Lewin quotes Senator Harkin on this matter as follows, "In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation."
In a press release on July 29 responding to the report, The Association of Private Sector College and Universities (APSCU) stated, "The report twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private sector colleges and universities." The Harkin Report Backgrounder that the APSCU distributed with its press release stressed that the private sector colleges and universities "... can open doors to many of the 13 million unemployed and 90 million underemployed by providing a skills-based education" and that these institutions "...offer predominantly non-traditional students a means to improve their financial situation...". The APSCU also challenged some of the claims in the Report such as the default rate on loans (47% in the Harkin Report versus 24% in FY 2009 in the Backgrounder.)
We are not certain whose statistics are correct and are not in the fact-checking business. To us the important overriding fact about both the Harkin Report and the CFPB/DOE report is that they address only facets or symptoms of a much larger problem and that is that the country's higher educational system is in serious need of reform.
That's not just our opinion. It's the opinion of the higher educational establishment as well. On October 17, 2011, six presidential higher education associations announced the convening of a new national Commission on Educational Attainment (Attainment Commission or Commission). The press release on the Attainment Commission stated, "The Commission's goal is to chart a course for greatly improving college retention and attainment, and, in turn, restore the nation's higher education pre-eminence."
The Attainment Commission is expected to complete its report by this Fall. E. Gordon Gee, president of The Ohio State University is chair of the Commission. In a May 12, 2012 New York Times article, Andrew Martin reports, "At a time of diminished state funding for higher education and uncertain federal dollars, Mr. Gee says that public colleges and universities need to devise a new business model to pay for the cost of education, beyond sticking students with higher tuition and greater debt."
We were heartened when the Attainment Commission was formed. We were even more heartened to hear President Gee call for the development of a new business model for higher education. We were dismayed, however, to realize that there had been a similar commission to this new one just a few short years ago in 2005. That commission named the National Commission on Accountability in Higher Education (Accountability Commission or Commission) was formed by the State Higher Education Executive Officers to "stimulate conversations and make recommendations addressing the issue of accountability in higher education."
The Accountability Commission was chaired by former Governor Frank Keating of Oklahoma and former Secretary of Education and former Governor Dick Riley of South Carolina. In remarks made to the American Council of Education on February 15, 2005, in advance of the release of the Accountability Commission's final report on March 10, Paul Lingenfelter, Executive Director of the State Higher Education Officers, stated that "The Commission Report highlights three areas where performance must be improved, student success, research (capacity), and productivity (and cost effectiveness)." Near the opening of his speech, Mr. Lingenfelter observed, "...the word 'accountability' makes us uncomfortable in higher education."
In the relatively plush economic times of 2005, the "accountability" discomfort could be avoided and the Accountability Commission's report could be ignored or put on a shelf some where to gather dust. In these post-recession times -- with much worse economic conditions than then -- that should not be an option.
As Yogi Berra might say it, "This can't be déjà vu all over again. The Attainment Commission must bring forward new "business models" and actionable approaches that enable higher education to do a much better job in creating value for its customers - i.e., its students. At a minimum, we hope that the Commission's report addresses and makes strong and implementable recommendations in the following critical areas that impact the value equation for those students: College costs; graduation and placement rates; return on investment; career education and skill development; teacher preparation; technology and education; and, enhancement of the nation's primary and secondary education system. (We will present our analysis and thoughts in each of these areas in our next post.)
We also hope that the Commission views higher education's students as customers. They are in school to learn. But, the vast majority of them are also there to graduate and to get a job or promotion where they can earn an appropriate return for the investment of their educational dollars.
As we noted at the beginning of this post, the student loan extension was passed as part of the transportation bill. That was most probably purely opportunistic on the part of Congress. We prefer to see it though as a symbolic occurrence. By producing a comprehensive plan for the reform of higher education in a manner that treats students as customers, the Attainment Commission can put them on the road to being victors rather than victims. That's the perfect alignment for development of both our nation's infrastructure and human capital.