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Final Gainful Employment Rule Removes Default Rate Metric

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The Education Department’s (ED) final “gainful employment rule,” which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the March draft rule.  Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only criteria upon which individual career education programs are evaluated to determine federal aid eligibility.

Community colleges had advocated for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are “materially and statistically unrepresentative of all the students in a program.”

Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy – Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group – issued a written statement yesterday saying:

“We and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.”

For-profit colleges weren’t pleased with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”

Arne Duncan, the education secretary, estimates that 1,400 programs—99 percent of which are at for-profit colleges—will fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate.  See the article by TICAS for more information.

Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are “in the zone” for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.

UW Ranked 14th Best University in the World by U.S. News & World Report

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The University of Washington was ranked the 14th best university in the world by U.S. News & World Report’s inaugural “Best Global Universities Ranking,” which was released on Tuesday.

Unlike U.S. News’s national rankings, which focus on undergraduate admissions data and graduation rates, these new rankings were based on research-heavy factors such global research reputation, number of publications, PhDs awarded, and highly cited papers (learn more about how the rankings were calculated).  This methodological difference helps explains the odd fact that U.S. News ranks the UW 14th globally, but 48th nationally.

“This is about faculty productivity and prestige … It is meaningful for certain things and not necessarily meaningful for other things. We get that. This is about big muscular research universities doing what research universities claim is their mission,” U.S. News Editor, Brian Kelly, told The Washington Post.

The 2015 Best Global Universities rankings include 500 institutions and 49 countries, and provide breakdowns by region, country, and 21 subject areas. The U.S. dominated the rankings with 16 institutions in the top 20, and 134 institutions on the list overall.  Germany had the second most institutions on the list, with 42, followed by the United Kingdom, with 38. China, which has received a lot of attention in the higher education world lately, also did well with 27 schools among the top 500.

The UW ranks highly on several other global lists:  15th worldwide by the Academic Ranking of World Universities and 26th by the Times Higher Education World University Rankings.

ED Releases New PLUS Loan Rules

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It will soon be easier for students and parents with adverse credit histories to qualify for federal PLUS loans.  Under new the Education Department’s (ED’s) new rules – which were released on Wednesday and are expected to take effect in March – ED will review only two years (rather than five) of a prospective borrower’s credit history to determine loan eligibility, and will excuse up to $2,085 in certain types of delinquent debt when running initial credit checks.

ED agreed to revisit the rules following pressure from many colleges and families who were angered after ED tightened the PLUS loan standards in 2011. The 2011 changes resulted in thousands of sudden loan denials and, consequently, enrollment declines and revenue losses at some institutions. According to Inside Higher Ed, department officials expect that the new standards will allow an additional 370,000 applicants to pass the initial credit check for PLUS loans.

Representative Chaka Fattah – Pennsylvania Democrat and co-chair of the Congressional Black Caucus Education Task Force – lauded the new standards; however others connected with historically black colleges have criticized ED for not moving quickly enough.  Meanwhile, some policy analysts and consumer advocates argue that ability-to-pay criteria are necessary to prevent borrowers from being saddled with unmanageable debt, and that the new rules don’t do enough to safeguard against default.

If defaulting becomes an issue as a result of the new standards, the silver lining is policymakers will at least know about it and, hopefully, be able to do something. As part of ED’s changes to the PLUS program, the department will begin calculating and publishing annual cohort default rates for institutions receiving PLUS loans.[1] That information should help illuminate whether borrowers are getting in over their heads.

Ultimately though, as EdCentral points out:

“The Department must do a better job reaching out to parents and helping them understand the terms and conditions of their loans, including the ability to repay their loan as a percent of their income if they consolidate into a Federal Direct Consolidation Loan. Better counseling won’t solve all the issues with the PLUS loan program. But it’s a start until we can ensure PLUS loans are a safe product for families and we can improve access to better aid options like grants for low-income families.”

[1] ED currently only calculates cohort default rates for colleges that receive Stafford loans.

UW Cohort Default Rate Remains Very Low Relative to National Average

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The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW’s CDR rose while the national CDR declined, the UW’s rate still remains well below that of the nation.

ED is in its first year of using only the more accurate three-year CDR measure – as opposed to the two-year CDR. Thus, this year’s report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by institution type, state and school. Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year’s rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits’ whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW’s three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average. 

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The UW reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them. Former UW students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (osfa@uw.edu, 206-543-6101). Students can also visit studentloans.gov to explore their repayment options.

Kaplan’s New “Open College” May Not Be a Bargain for All Students

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On Monday, Kaplan University launched “Open College” which is intended to help adult students earn a Bachelor of Science degree in Professional Studies by offering credit for a combination of competency-based course assessments, experiential learning, and external exams (AP, IB, CLEP, DSSTs, etc.). Open College will include free online courses and mentoring to help prospective students identify and organize prior experience that could qualify for college credit. Once students enroll and have their prior skills assessed for credit, they will pay a subscription fee of $195 per month, an assessment fee of $100 per each of the remaining 35 “course equivalents” needed to earn a degree, and a $371-per-credit fee for a final six-credit capstone course.

According to The Chronicle:

“A student entering with no credits who pursued the program for 48 straight months could earn a bachelor’s degree for about $15,000. Students who earned credits based on their prior experience would end up paying less than that. Officials expect that such students would typically enroll with about 60 credits, take 24 to 30 months to complete a degree, and pay about $9,500.”

Kaplan’s administration sees Open College as the newest candidate in the hunt to create a $10,000 bachelor’s degree and as a new, flexible way for adults to advance their career.  While Open College’s structure and pricing may work well for some students, a few things should be considered before rushing to enroll in Open College.

First, students at Open College will receive little, if any, financial aid.  Open College’s website says it will not participate in federal student aid programs; it also gives no indication that students will be eligible for state financial aid or that it will offer any form of institutional aid. Therefore, although comparisons are difficult and potentially problematic, it’s worth noting that in 2013-14, resident students at public four-year institutions paid an average of $3,120 in annual net tuition and fees (published tuition and fees less grant and aid scholarship from federal, state or institutional sources).[1] If we assume, as Kaplan did, that a student entering with no credits would take 48 months to earn a degree and that tuition and fees would not increase during those four years, then a resident student who enters a public four-year with no previous credits would pay roughly $12,480 in tuition and fees to earn a four-year degree, compared to a similar student at Open College who would pay $15,000. Of course, this total does not consider the cost of rent or room and board, which can be very expensive; but neither does Open College’s estimate, even though a student earning a degree through their program would presumably still be spending money to eat and live while earning a degree.

Second, employer doubts about the quality of an online degree may impact graduates’ employability. According to the results of two surveys released last fall, only 41 percent of hiring managers believe that online programs are of the same quality as traditional, in-person programs.

Rankings Abound

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The Equity Line, among others, highlights how the recent NYT rankings of colleges by enrollment of Pell Grant recipients is a nice gesture, but lacking in many ways. The University of Washington (and most public institutions!) was not evaluated as part of the effort, though one-quarter of its undergraduate population received Pell Grant funding last year.

Equity Line contributor Jose Luis Santos notes that, “…the rankings only capture a tiny number of undergraduates enrolled in four-year colleges who receive Pell Grants (just 1.6 percent!), leaving out more than 4.2 million students. This distorts the picture of low-income enrollment, and it distracts the public and policymakers from the real problems with higher education access and success.”

US News & World Report released its much anticipated set of annual rankings this week; the UW fared better this year. Additional analysis about the UW’s position in US News will be posted to the blog as it becomes available.

Four Year Degrees and Tuition Freeze

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Posted by Corrin Sullivan, Intern at the Office of Planning & Budget and Educational Policy student through the month of July 2014. My focus is on higher education access and policy. I look forward to sharing newsworthy events in the higher ed world with you.

Let’s start with a quick summary of two articles from this past week in higher ed news.

Selected California Community Colleges May Soon Offer a Baccalaureate Degree

The California State Assembly Committee on Higher Education approved Senate Bill 850 (SB850) this past week, which launches a pilot program offering fifteen community colleges the opportunity to offer a four-year degree program as soon as January 1, 2015. The Community College Board of Governors and chancellor, in consultation with the California State University (CSU) and University of California (UC) systems, will consider a variety of colleges and select fifteen districts based on four-year degree proposals that meet a variety of criteria; most notably, degrees not available at any of California’s four-year schools and that address the state’s unmet workforce needs. Although the UC system has yet to comment on SB850, California’s Community College Chancellor, Brice Harris, commends the Assembly Committee’s approval of legislation stating that it has the potential to broaden higher educational access and offer more job training opportunities for Californians.

North Dakota Board of Higher Education Unanimously Approves Budget Requesting System-Wide Tuition Freeze

The North Dakota Board of Higher Education recently approved its biennium budget request, which asks for an approximate 14 percent increase in funding in exchange for freezing tuition rates among its eleven colleges and universities for the coming biennium (2015-17). Based on a new funding formula instituted in the 2013 legislative session that relies largely on credit-hour completion, the budget’s $774 base request reflects a $94 million dollar increase from the previous year’s request. The $94 million dollar increase includes a $49 million dollar request to cover operating costs associated with additional credits taken at the state’s colleges and universities. In addition to the $94 million base increase, the board has also requested $9.5 million dollars to cover sums “students would have to cover without a freeze,” compounded with several smaller requests to meet institutional equipment and staffing needs. The Board states that they will freeze tuition rates at all colleges and universities from 2015 through 2017 if and only if, the legislature agrees to fully fund the base budget and increase employee salaries and benefits. Noting affordability as an issue in declining student enrollment numbers, the freeze aims to decrease tuition so that rates are competitive with the state’s regional counterparts.

While the Board has frozen tuition rates at the state’s two-year schools for four of the past six years, this request to freeze tuition for all North Dakota higher education institutions is unprecedented. The budget is before Governor Jack Dalrymple, pending recommendations, prior to advancing to the state’s legislature.

Congress Introduces Bills to Reauthorize Higher Education Act

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As the UW’s Office of Federal Relations reported on their blog, yesterday Senate Democrats released plans to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:

  • Increasing affordability and reducing college costs for students,
  • Tackling the student loan crisis by helping borrowers better manage debt,
  • Holding schools accountable to students and taxpayers, and
  • Helping students and families make informed choices.

In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:

For more information, check out the Federal Relations blog and a recent article by EdCentral.  We’ll post more information on OPBlog over the coming weeks.

“Degree Attainment Around the World (Cup)”

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On Monday, The Equity Line posted the following piece about how the U.S. compares to the other World Cup countries in terms of degree attainment.

More Than Just a Game: Degree Attainment Around the World (Cup)

Posted on June 16, 2014 by Kaylé Barnes and Joseph Yeado

“Defying commentators, critics, and prognosticators, the U.S. has already performed quite well against the other nations competing for the 2014 World Cup. Yes, the competition on the field only started last Thursday and the Yanks have yet to kick things off today, but the U.S. is beating most of the competition in another competition: college attainment.

Among the 32 teams competing in Brazil, the United States ranks third for the percentage of adults with a 2-year or 4-year college degree.

It may look like America has trounced the competition, but there are two important facts that put these figures into perspective.

In 1990 the United States soccer team qualified for its first World Cup after a 40-year drought. Though it failed to win a game and was sent home, the U.S. was ranked first in the world in four-year degree attainment among young adults. Since that time, our men’s national soccer team has steadily improved, but our college attainment rates have not. The United States now ranks 11th among developed nations for young adults with college degrees.

The U.S. may compare favorably to other World Cup countries, but the data still mean that only 2 in 5 adults have some kind of a college degree. In fact, just 59 percent of students at a 4-year college will earn a bachelor’s degree in six years – not to mention that black and Latino students complete at even lower rates (40 percent and 52 percent, respectively). Ranking well relative to other countries doesn’t mean much when we are leaving so many of our students behind.

Third place is not good enough. More important to our country’s well-being than winning the World Cup is whether we have an educated population prepared to face the challenges of the new global economy. Higher education leaders and policymakers should look to the example of the colleges and universities across the country that are leading the way to improve student success and proving that low graduation rates are not inevitable.

The expectations of American soccer supporters have risen steadily since 1990, and millions are tuning in to watch our boys play in Brazil. It’s time that we raise our expectations about college attainment and the equity in attainment levels.

Only then can the United States realize its gooooooaaaaals of being first in the world on the fútbol pitch and in degrees.”

Higher Ed News Roundup

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Here’s a quick roundup of some of this week’s headlines in higher ed news.

Report Argues Gainful Employment Rules Could Hurt For-Profits’ Students 

According to a study commissioned by the Association of Private Sector Colleges and Universities, up to 44 percent of students at for-profit colleges could lose access to federal financial aid under the latest “gainful employment” proposal. The authors of the report—Jonathan Guryan, an economist at Northwestern University, and Matthew Thompson of Charles River Associates, a consulting firm—argue that since for-profits tend to serve students who have fewer financial resources and less academic preparation, the proposed rules would leave students without other options. Additionally, the report asserts that the rules should not be based on short-term measures of earnings and student debt, as such metrics tell an incomplete story. The Department of Education released the proposed rules in March. The window for public commenting closed on Tuesday.  This report was part of a final lobbying campaign by both sides.

Startups Playing Matchmaker with Students and Employers

Several startups have begun serving as matchmakers between community college students and employers. One of the startups, called WorkAmerica, states that it will provide students with a legally binding job offer before they enroll at one of the startup’s partner colleges. WorkAmerica has already started placing students into trucking programs, and plans to expand to other “high churn” employers, such as those that hire welders, IT technicians, and medical assistants.  Another similar startup, called Workforce IO, connects employers with “trainers”—which can include community colleges, in addition to nonprofits and other mentoring agencies. The company uses a library of 275 job-skills “badges” to vouch for its workers’ skills. In an era when students are increasingly concerned with their post-graduation employment opportunities, it’s possible that such a model could be applied to some programs at four-year institutions.

Data Say College is Worth More Than Ever

Research shows that not only is a college degree is worth the time and money it takes to earn one; it’s worth more than ever.  According to analysis of Labor Department statistics by the Economic Policy Institute, the pay gap between college graduates and those who either never went to college or never graduated from college, reached a record high last year. The NY Times article summarizes, “Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree. That’s up from 89 percent five years earlier, 85 percent a decade earlier and 64 percent in the early 1980s.”