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Stimulus Plan Would Provide Flood of Aid to Education

Posted by gradefund on January 30, 2009

Stimulus Plan Would Provide Flood of Aid to Education

 

Published: January 27, 2009
WASHINGTON — The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget.

The proposed emergency expenditures on nearly every realm of education, including school renovation, special education, Head Start and grants to needy college students, would amount to the largest increase in federal aid since Washington began to spend significantly on education after World War II.

Critics and supporters alike said that by its sheer scope, the measure could profoundly change the federal government’s role in education, which has traditionally been the responsibility of state and local government.

Responding in part to a plea from Democratic governors earlier this month, Congress allocated $79 billion to help states facing large fiscal shortfalls maintain government services, and especially to avoid cuts to education programs, from pre-kindergarten through higher education.

Obama administration officials, teachers unions and associations representing school boards, colleges and other institutions in American education said the aid would bring crucial financial relief to the nation’s 15,000 school districts and to thousands of campuses otherwise threatened with severe cutbacks.

“This is going to avert literally hundreds of thousands of teacher layoffs,” Education Secretary Arne Duncan said Tuesday.

Representative George Miller, Democrat of California and chairman of the House education committee, said, “We cannot let education collapse; we have to provide this level of support to schools.”

But Republicans strongly criticized some of the proposals as wasteful spending and an ill-considered expansion of the federal government’s role, traditionally centered on aid to needy students, into new realms like local school construction.

And they were joined by some education experts from across the political spectrum in wondering how school districts could spend so many new billions so fast, whether such an outpouring of dollars would lead to higher student achievement, and what might happen in two years when the stimulus money ends.

Analysts were also turning up surprises in the fine print.

One provision, which was sought by the student lending industry and went unmentioned in early Congressional summaries of the stimulus package, would temporarily increase subsidies to banks in the guaranteed student loan program by tying them to a new index, partly because recent federal intervention in the credit markets has invalidated the previous index. A spokesman for Sallie Mae, one of the largest student lenders, said the change was needed to keep student loan markets fluid. Critics said it represented a potential new windfall for lenders.

“This just continues the well-established tradition of welfare for the student loan industry,” said Barmak Nassirian, an expert in student lending.

The formulas by which the stimulus money for public schools would be allocated to states and local districts are complex, but take into consideration numbers of school-age children in poor families. The level received per student would vary considerably by state, according to an analysis by the New America Foundation, a research group that monitors education spending. New York would be among the biggest beneficiaries, at $760 per student, while New Jersey and Connecticut would fall near the bottom, with $427 and $409 per student, respectively. The District of Columbia would get the most per student, $1,289, according to the foundation’s analysis.

The foundation contends, however, that the formula does not effectively allocate the most money to states with the greatest need.

In recent years the federal government has contributed 9 percent of the nation’s total spending on public schools, with states and local districts financing the rest. Washington has contributed 19 percent of spending on higher education. The stimulus package would raise those federal proportions significantly.

The Department of Education’s discretionary budget for the 2008 fiscal year was about $60 billion. The stimulus bill would raise that to about $135 billion this year, and to about $146 billion in 2010. Other federal agencies would administer about $20 billion in additional education-related spending.

“This really marks a new era in federal education spending,” said Edward Kealy, executive director of the Committee for Education Funding, a coalition of 90 education groups.

The bill would increase 2009 fiscal year spending on Title I, a program of specialized classroom efforts to help educate poor children, to $20 billion from about $14.5 billion, and raise spending on education for disabled children to $17 billion from $11 billion.

Those increases respond to longtime demands by teachers unions, school boards and others that Washington fully finance the mandates laid out for states and districts in the Bush-era No Child Left Behind law, and in the main federal law regulating special education.

“We’ve been arguing that the federal government hasn’t been living up to its commitments, but these increases go a substantial way toward meeting them,” said Joel Packer, a lobbyist for the National Education Association, the nation’s largest teachers union.

Frederick Hess, an education policy analyst at the American Enterprise Institute, criticized the bill as failing to include mechanisms to encourage districts to bring school budgets in line with property tax revenues, which have plunged with the bursting of the real estate bubble.

“It’s like an alcoholic at the end of the night when the bars close, and the solution is to open the bar for another hour,” Mr. Hess said.

The bill would, for the first time, involve the federal government in a significant fashion in the building and renovation of schools, which has been the responsibility of states and districts. It includes $20 billion for school renovation and modernization, with $14 billion for elementary and secondary schools and $6 billion for higher education. It also includes tax provisions under which the federal government would pay the interest on construction bonds issued by school districts.

Mr. Duncan said the bill’s school renovation provisions would create a “huge number of construction jobs,” because so many school buildings need repairs.

But Representative Howard P. McKeon, Republican of California and the ranking minority member of the House education committee, said, “By putting the federal government in the business of building schools, Democrats may be irrevocably changing the federal government’s role in education in this country.”

In higher education, the bill would increase spending on Pell Grants, the most important federal student aid program, to $27 billion from about $19 billion this year.

“It’s a very good idea to increase Pell Grants in the stimulus,” said Terry Hartle, a senior vice president for public affairs at the American Council on Education, which represents colleges and universities.

But Mr. Hartle said that even he was having difficulty tracking all the new spending.

“A lot of things will go through, and only later will we know exactly what happened,” he said.

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Financial Aid Applications Rise by 10 Percent

Posted by gradefund on January 22, 2009

Financial Aid Applications Rise by 10 Percent

Posted January 13, 2009
Like a Midwestern tornado, the economic downturn appears to be touching down and wreaking financial aid havoc for some colleges while leaving others unscathed. Financial aid officers at Boston College, the University of Central Florida, and Washington University in St. Louis all report no dramatic increase in requests for scholarships. But foot traffic and calls to the aid office have spiked 50 percent this January at Prairie View A&M University in Texas. And “the line is out the door” at Quinsigamond Community College in Worcester, Mass., says Iris Godes, assistant vice president of enrollment management. Enrollment is up by about 6 percent, but financial aid applications are up 23 percent so far in 2009. Godes, who has been working in college financial aid offices for 21 years, says people who have lost jobs and savings in the economic downturn are now scrambling for new money to pay for college. “I have never experienced in my life this anxiety level of parents,” she says.

Nationally, 1.4 million more students filled out the Free Application for Federal Student Aid (the most important aid application) in calendar year 2008 than in 2007, a 10.4 percent increase, the Department of Education reports. Likewise, the College Board says its scholarship database experienced a 30 percent jump in visitors in December 2008 compared with 2007.

The biggest federal aid programs guarantee Pell grants and Stafford student loans to all students who qualify, no matter how many people apply. And some colleges have announced that they are pouring more money into scholarships next year. Boston College, for example, has announced it will cut its overall spending by 2.5 percent to free up $3 million extra in financial aid. And the University of Toledo announced it will offer free tuition to low-income B students from many major Ohio cities.

But those increases don’t appear to be making up for the many smaller aid programs—including Federal Supplemental Education Opportunity Grants and Perkins loans, as well as school-based scholarships and charitable grants—that expect to have limited or reduced funding this year. As a result, many aid officials say demand is starting to outstrip supply for some kinds of scholarships, forcing some schools and charities to make cuts.

Arkansas State University-Jonesboro, for example, has been so swamped that it has already cut off applications for merit scholarships for next fall, says financial aid director Terry Finney. The state of Rhode Island is reducing the amount of grants it will hand out to needy students. And many charities have said the declines in their investments are forcing reductions in the size and number of scholarships they’ll award this year.

“Demand has never been greater and money never been lower,” worries Godes.

 

Posted in Economy and School, EducationalSpending, Financial Aid | Leave a Comment »

Colleges cut instruction spending

Posted by gradefund on January 22, 2009

Colleges cut instruction spending

By Mary Beth Marklein, USA TODAY

http://www.usatoday.com/news/education/2009-01-14-college-spending_N.htm

Most of the nation’s colleges are gradually paring back their investments in classroom teaching, an analysis of federal data shows. And all colleges have in recent years been spending a greater share of their revenue on expenses other than instruction, including computing centers, student services, administrative salaries and lawn care.

Those are among findings of a report released today that sheds light on where various types of colleges and universities get their money and how they spend it. While instruction remains the largest share of education and general spending at most colleges, much of the revenue raised by increasing tuition is not going to that core function of higher education, it concludes.

With one notable exception, “Students are paying for more and arguably getting less, particularly in the classroom,” says Jane Wellman, director of the Delta Cost Project, a Washington-based non-profit that released the report. It is based on federally reported data from 2002 to 2006 of nearly 2,000 public and private institutions that enroll about 75% of all college students.

The exception is private research universities, which spend more per student than any other sector, but which enroll fewer students overall than most other institutions.

The report found that total spending on education and related services, including academic and administrative support, remained flat or declined between 2002 and 2006 everywhere but at those institutions, which can draw from more sources, including endowment income.

That could change as more private research universities, including Cornell, Harvard and Yale, see precipitous drops in their endowments.

At public colleges and universities, much of the decline in instruction spending — which is primarily faculty salaries and benefits — can be linked to a decline in state appropriations.

“I don’t think institutions have decided to disinvest in instruction,” Wellman says, but their spending patterns do show “a lack of a strategic approach.”

“The quickest place to cut costs is in instructional programs. When the primary focus is on balancing the budget from year to year, you grab what you can and spend where you must,” Wellman says.

Existing data can’t speak to the quality of education, nor is it detailed enough to determine whether specific spending is justified. A key goal of the report is to encourage institutions and policymakers to be more transparent about their finances.

“Policymakers and the public are showing increasing skepticism about spending in higher education, questioning whether tuition increases are helping to expand access and improve quality,” it says. “The data in this report show that this is a valid question.”

Other findings:

•More students, particularly low-income and minority students, are attending the colleges and universities with the least to invest in students. “Basically what we’re asking is (for) a set of folks who don’t have resources to pay more, even as we disinvest in their instruction,” says Kati Haycock, president of the Education Trust, a non-profit that works to increase access to college.

•If tuition increases were tied to increased spending on education-related expenses, tuition at most public institutions would have dropped between 2002 and 2006. At public research universities, about 8% of tuition increases can be linked to increased spending on education-related expenses.

•At some point between 2002 and 2004, most private four-colleges began spending a larger share of their budget on administrative and academic support than on instruction. The exception: private research universities.

Posted in Economy and School, EducationalSpending, School Reform | Leave a Comment »

Stimulus gives schools $142B — with strings

Posted by gradefund on January 22, 2009

Stimulus gives schools $142B — with strings

By Greg Toppo, USA TODAY

http://www.usatoday.com/news/education/2009-01-19-school-stimulus_N.htm

The USA’s public schools stand to be the biggest winners in Congress’ $825 billion economic stimulus plan unveiled last week. Schools are scheduled to receive nearly $142 billion over the next two years — more than health care, energy or infrastructure projects — and the stimulus could bring school advocates closer than ever to a long-sought dream: full funding of the No Child Left Behind law and other huge federal programs.

But tucked into the text of the proposal’s 328 pages are a few surprises: If they want the money — and they certainly do — schools must spend at least a portion of it on a few of education advocates’ long-sought dreams. In particular, they must develop:

• High-quality educational tests.

• Ways to recruit and retain top teachers in hard-to-staff schools.

• Longitudinal data systems that let schools track long-term progress.

“The new administration does not want to lose a year on the progress because of the downturn in the economy,” says Rep. George Miller, D-Calif., who chairs the House Education Committee. “So I think these are all things that are clearly doable.”

Testing, a key part of the No Child law, has gotten short shrift from most states, says Thomas Toch of Education Sector, a Washington, D.C., think tank.

“Existing state tests are not as good as they could be,” he says. “Putting new money into building stronger state assessments is what’s needed.”

But he and others say a big challenge will be to ensure that states don’t simply cut their own education budgets in anticipation of massive federal increases. “That’s going to be a challenge because the states are all hurting,” Toch says.

The plan also will help schools modernize and fix buildings. Kati Haycock, president of The Education Trust, an advocacy group, says she’s “pretty excited” about the requirement that states spend a portion of the stimulus cash attracting their best teachers to schools that serve low-income and minority students. “There’s nothing they could do with it that would be more important for high-poverty kids.”

But Charles Barone, a former congressional staffer who helped design the education reform law, says the plan doesn’t go far enough. He predicts states won’t do much to change how they hire teachers — and they’ll still get their money. “All they’re going to have to do is copy and paste what’s in their current plan to get this money,” says Barone, who now consults about education and writes a popular blog.

“This is a once-in-a-lifetime opportunity,” he says. “It seems to me you’d ask more from states and districts in terms of the kind of changes you’ve been talking about for years.”

Posted in Economy and School, EducationalSpending, School Reform | Leave a Comment »

Obama, McCain Spar Over GI Bill’s Education Incentives

Posted by gradefund on December 12, 2008

http://www.foxnews.com/politics/elections/2008/05/22/obama-mccain-spar-over-gi-bills-education-incentives/

Obama, McCain Spar Over GI Bill’s Education Incentives

FOXNews.com

Thursday, May 22, 2008

John McCain hit back against Barack Obama on Thursday, after the Illinois Democratic senator accused the presumptive Republican nominee of neglecting U.S. soldiers by opposing a Democratic-sponsored GI bill that would increase education funding for U.S. troops.The bill, proposed by Virginia Sen. Jim Webb, a frequently named potential vice presidential running mate for Obama, was approved by the Senate Thursday on a 75-22 vote. However, its fate is uncertain as it is part of a larger emergency Iraq war spending bill that President Bush has threatened to veto over additional spending in it.During debate on the GI bill, Obama said McCain, who is a Vietnam War veteran and comes from a long military family history, is parroting Bush for partisan purposes that only injure the troops. “Senator Webb and the leaders of both parties have introduced a 21st century GI bill that would give this generation of returning heroes the same chance at an affordable college education that we gave the greatest generation,” Obama said.  “I respect Senator John McCain’s service to our country. … but I can’t understand why he would line up behind the president in opposition to this GI bill. I can’t believe he believes it is too generous to our veterans. I could not disagree with him and the president more on this issue. There are many issues that lend themselves to partisan posturing but giving our veterans the chance to go to college should not be one of them,” he continued.  McCain, who was not in town for the vote, took issue with Obama’s assertions about his commitment to the troops.  “I will not accept from Senator Obama, who did not feel it was his responsibility to serve our country in uniform, any lectures on my regard for those who did,” McCain said in a written statement.  The Arizona senator has never said that he does not support the bill because it is “too generous.” He has stated concerns that offering education benefits as early as the Webb bill allows would discourage people from re-enlisting. That contention was supported in a Congressional Budget Office report released a couple weeks ago that stated Webb’s bill could cut retention rates by 16 percent.  “It would be easier politically for me to have joined Senator Webb in offering his legislation. More importantly, I feel just as he does, that we owe veterans the respect and generosity of a great nation because no matter how generously we show our gratitude it will never compensate them fully for all the sacrifices they have borne on our behalf,” McCain said in his statement.  “Perhaps, if Senator Obama would take the time and trouble to understand this issue he would learn to debate an honest disagreement respectfully. But, as he always does, he prefers impugning the motives of his opponent, and exploiting a thoughtful difference of opinion to advance his own ambitions. If that is how he would behave as president, the country would regret his election,” he said.  Webb’s bill costs an estimated $52 billion, a number that can grow in out years as more take advantage of the benefits. It would provide to service members returning from Iraq or Afghanistan up to 36 months of benefits — equivalent to four academic years — to pay for tuition, books and fees as well as a $1,000 per month living stipend for qualified veterans.  Twenty-five Republicans voted for the bill, including every member up for re-election and a few fiscal conservatives.  McCain’s version of the GI bill, co-sponsored with Republican Sens. Lindsey Graham and Richard Burr, offers a “sliding scale” of payment for educational benefits that increases in relationship to length of service. McCain’s bill would increase monthly education benefits to $1,500, eliminate $1,200 enrollment fees and offer $1,000 annually for books and supplies.  After the vote, Democratic National Committee Chairman Howard Dean accused McCain of preferring to keep the troops in Iraq for 100 years over taking care of them when they come home.  “While Senator McCain talks about supporting our troops and veterans on the campaign trail, his real record tells a much different story. While we honor his service to our country, Senator McCain’s double talk on veterans’ benefits is one more reason he is the wrong choice for America’s future,” Dean said.  Obama added that he does not believe the Webb bill will have an impact on retention rates and argued that “in the long term this will strengthen our military and improve the number of people who are interested in volunteering to serve.”  Senate Democratic Leader Harry Reid said that even if the president vetoes the Iraq war emergency supplemental, the GI bill will be re-introduced in any future supplemental.  And despite McCain’s opposition to the Webb legislation, retiring Republican Sen. John Warner of Virginia told FOX News: “This GI bill, one way or another, will be the law of the land.”

FOX News’ Trish Turner and Mosheh Oinounou contributed to this report.

Posted in Education Incentives, EducationalSpending, Financial Aid, Rising Tuition | Leave a Comment »

State higher education incentives should be based on market principles, says Michigan Sen. Wayne Kuipers

Posted by gradefund on December 12, 2008

http://www.mlive.com/flintjournal/voices/index.ssf/2008/08/state_higher_education_incenti.html

State higher education incentives should be based on market principles, says Michigan Sen. Wayne Kuipers

by Wayne Kuipers | Flint Journal guest writer

Monday August 04, 2008, 4:29 AM


Wayne Kuipers

Editor’s note: This is a guest column by State Sen. Wayne Kuipers, R-Holland. Under the name “If You Ask Me,” each week The Flint Journal runs a guest column on a topic of interest. Read more by guest columnists.

The Kalamazoo Promise launched a nationwide discussion of private funding for public higher education. And while the program helps many students pursue degrees, efforts to adopt a statewide program still don’t address larger problems.

The legislation in the state Senate to create “Promise Zones” would provide both state and local dollars for many disadvantaged students.

The problem is funds don’t go directly to students, but to the state higher education system.

This limits students’ opportunities to use funds as they see fit. The “Promise Zone” legislation also provides no incentive for students to stay in school beyond their freshmen year.

Given the condition of Michigan’s economy, we need a bold plan making higher education affordable and rewarding students who attain degrees.

Funds should go directly to students. This lets them use our tax dollars to attend the university that best meets their needs. Each school would be compensated based on how many students it attracts and graduates. This puts the onus on universities to provide programs that help students find careers matching today’s marketplace. Ultimately, schools meeting the needs of more students will get higher funding.

The Plan also addresses “brain drain” — students leaving the state upon graduation. Employers often complain of too few qualified employees in Michigan to fill positions.

Under the proposed plan, students who work in Michigan after graduation could get low or interest-free loans to help with college costs. The plan’s primary goal, obviously, is to encourage more Michigan students to go to college by making it more affordable.

I recently presented this plan to Lou Glazier, President of Michigan Future, and members of his board of directors. They, too, share my belief that getting more kids in our universities is tantamount to the state’s economic recovery.

“The most prosperous places in the country are those with the highest proportion of adults with a four-year degree or more. Unfortunately, Michigan ranks 34th in college attainment. So finding better ways of encouraging far more of our kids to graduate from college and stay here after college is economic growth priority No. 1,” said Glazier, whose nonprofit focuses on generating ideas to help the state succeed in the Internet Age.

Of course there are many details left to hash out; including the possibility of providing tax incentives for Michigan companies to hire Michigan graduates. But embarking now on a market-based system that gives high school graduates more options in higher education is good for our educational system and the Michigan economy.

Wayne Kuipers, R-Holland, is a state senator.

Posted in Cheaper Tuition, Education Incentives, EducationalSpending | Leave a Comment »

Lessons From 40 Years of Education ‘Reform’

Posted by gradefund on December 12, 2008

http://online.wsj.com/article_email/SB122809533452168067-lMyQjAxMDI4MjA4MTAwOTE1Wj.html

Lessons From 40 Years of Education ‘Reform’

Let’s abolish local school districts and finally adopt national standards.

While the economic news has most Americans in a state of near depression, hope abounds today that the country may use the current economic crisis as leverage to address some longstanding problems. Nowhere is that prospect for progress more worthy than the crisis in our public education system.

[Commentary] Martin Kozlowski

So, from someone who realized rather glumly last week that he has been working at school reform for 40 years, here is a prescription for leadership from the Obama administration.

We must start with the recognition that, despite decade after decade of reform efforts, our public K-12 schools have not improved. We can point to individual schools and some entire districts that have advanced, but the system as a whole is still failing. High school and college graduation rates, test scores, the number of graduates majoring in science and engineering all are flat or down over the past two decades. Disappointingly, the relative performance of our students has suffered compared to those of other nations. As a former CEO, I am worried about what this will mean for our future workforce.

It is most crucial for our political leaders to ask why we are at this point — why after millions of pages, in thousands of reports, from hundreds of commissions and task forces, financed by billions of dollars, have we failed to achieve any significant progress?

Answering this question correctly is the key to finally remaking our public schools.

This is a complex problem, but countless experiments and analyses have clearly indicated we need to do four straightforward things to bring fundamental changes to K-12 education:

1) Set high academic standards for all of our kids, supported by a rigorous curriculum.

2) Greatly improve the quality of teaching in our classrooms, supported by substantially higher compensation for our best teachers.

3) Measure student and teacher performance on a systematic basis, supported by tests and assessments.

4) Increase “time on task” for all students; this means more time in school each day, and a longer school year.

Everything else either does not matter (e.g., smaller class sizes) or is supportive of these four steps (e.g., vastly improve schools of education).

Lack of effort is not the cause of our 30-year inability to solve our education problem. Not only have we had all those thousands of studies and task forces, but we have seen many courageous and talented individuals pushing hard to move the system. Leaders such as Joel Klein (New York City), Michelle Rhee (Washington, D.C.) and Paul Vallas (New Orleans) have challenged the system, and elected officials from both sides of the political spectrum have also fought valiantly for change.

So where does that leave us? If the problem isn’t “what to do,” nor is it a failure of commitment, what is stopping us?

I believe the problem lies with the structure and corporate governance of our public schools. We have over 15,000 school districts in America; each of them, in its own way, is involved in standards, curriculum, teacher selection, classroom rules and so on. This unbelievably unwieldy structure is incapable of executing a program of fundamental change. While we have islands of excellence as a result of great reform programs, we continually fail to scale up systemic change.

Therefore, I recommend that President-elect Barack Obama convene a meeting of our nation’s governors and seek agreement to the following:

Abolish all local school districts, save 70 (50 states; 20 largest cities). Some states may choose to leave some of the rest as community service organizations, but they would have no direct involvement in the critical task of establishing standards, selecting teachers, and developing curricula.

Establish a set of national standards for a core curriculum. I would suggest we start with four subjects: reading, math, science and social studies.

Establish a National Skills Day on which every third, sixth, ninth and 12th-grader would be tested against the national standards. Results would be published nationwide for every school in America.

Establish national standards for teacher certification and require regular re-evaluations of teacher skills. Increase teacher compensation to permit the best teachers (as measured by advances in student learning) to earn well in excess of $100,000 per year, and allow school leaders to remove underperforming teachers.

Extend the school day and the school year to effectively add 20 more days of schooling for all K-12 students.

I can predict that three questions will be raised about these measures:

First, how can we set national standards when we have a strong tradition of local school autonomy? The answer is that the American people are way ahead of our politicians here: Poll after poll shows they support national standards.

Second, won’t this take many years to implement? No, if we follow a focused, pragmatic approach. While ideally we want all 50 states to participate, we can get started with 30. The rest will be driven to abandon their “see no evil” blinders by their citizens as the original group achieves momentum and success. Moreover, we do not have to start from scratch on the national standards. Experts can quickly develop an initial set just by drawing on existing domestic and foreign programs.

Third, how do we pay for all of this? In three ways: We will save billions by consolidating the operations of 15,000 school districts. The U.S. Department of Education can direct all of its discretionary funds to this effort. And we need to drive into the consciousness of every American politician that education is not an expense. It is, rather, the most important investment we can make as a country.

H.G. Wells remarked that “history is a race between education and catastrophe.” For the first time in America’s history, we may be losing that race. We can win, but we have to act quickly and decisively.

Mr. Gerstner, a former CEO of IBM, was chairman of the Teaching Commission (2003-2006), which reported on ways to improve the quality of public school teaching.

Posted in Economy and School, EducationalSpending, School Reform | Leave a Comment »

Colleges Getting Hit by the Credit Crunch

Posted by gradefund on December 12, 2008

http://www.time.com/time/nation/article/0,8599,1847478,00.html

Colleges Getting Hit by the Credit Crunch

college credit crunch financial crisis
David Wink / Images.com / Corbis

American universities have long been the envy of the world, with seemingly bottomless purses to bankroll cutting-edge research, top-notch faculty and construction projects galore. And fiscally speaking, these schools have it better than most businesses in the U.S.: multiple sources of revenue, including parents willing to pay tuition through the nose amid all kinds of money trouble, have often kept these institutions insulated from economic downturns. But in a financial crisis of this magnitude, even the ivory towers are getting hit — and in more ways than one. Not only have Bank of America, Citigroup and some two dozen other lenders cut back on or stopped issuing student loans, but the market meltdown has left many colleges scrambling to come up enough cash to cover payroll and other near-term necessities.

Last week, nearly 1,000 colleges were told they couldn’t access most of the $9.3 billion sitting in a short-term fund that had been offering slightly higher returns than U.S. treasuries. To prevent a run on the fund —12% of which was invested in mortgage-backed securities — the fund’s trustee resigned and froze withdrawals so it could liquidate the assets and distribute the proceeds in an orderly manner. The same thing happened to another 200 schools with $1 billion in an intermediate-term fund. Given that the schools will get about half of their money by the end of this year and the rest by 2011, there’s a severe cash crunch for many small schools, some of which had up to half their liquid assets in the short-term fund.

Because these funds were terminated a few days before Congress passed the mega-bailout bill, Minnesota’s independent-college association sent a letter to its Congressional delegates warning that without government help, some schools would be unable to fulfill their payroll responsibilities this week. “Any further delay by Congress or the administration,” they wrote, “will have immediate devastating effects on these institutions and the families they serve.” The American Council on Education sent a similar plea to every member of the House of Representatives.

But even though the bailout has been approved, the financial future remains murky, and some schools are already reporting cutbacks: Boston University has called for a hiring freeze, while Grinnell College in Grinnell, Iowa, plans to delay any further plans for new buildings or other capital projects.

Universities with deep pockets, however, could stand to reap some benefits from the downturn. Schools with enough financial security — from a solid endowment or good planning or both — could attract more top students by offering more aid to families that find their budgets stretched thin. Last year, Grinnell expanded its financial aid program, which covers about 90% of its students, to offer mostly grants instead of loans. That could give the school a competitive edge — as long as it can convince parents to get past the sticker shock and learn about the financial aid options that sometimes make elite private colleges even cheaper than state schools. Ditto for Hamilton College in Clinton, N.Y., where a $700 million endowment and a budget designed ahead of time to accommodate a growing number of college students (this year marks the demographic peak) will allow the university to maintain its full financial aid program.

Still, Monica Inzer, Hamilton’s dean of admission and financial aid, fears recruiting top candidates may prove more difficult this year, in part because of an increasing sense that college is just too expensive. Admissions inquiries at Hamilton are down 2% so far this year, Inzer says, (though part of the dip could come from students preferring to read online brochures) and noticeably fewer students have been visiting campus. Where students in past years might have applied to dozens of schools, this year’s prospective students may be targeting their inquiries more carefully; and Inzer says parents are consulting financial aid counselors earlier in the college-search season than ever before. “I think now people are saying, ‘This is what we can afford, so before you get your hopes set on X College, let’s talk to them,'” she says. “We need to remind them how important education is as an investment.”

Some reforms are already underway to help parents understand that college may be more affordable than they think. Education Secretary Margaret Spellings recently unveiled a proposal to simplify the federal financial aid process by shrinking the application form from 100 questions to 26 and allowing students to find out before their senior year of high school how much federal aid they would qualify for. Private universities are also stepping up to the plate, increasingly offering such user-friendly options as online aid calculators to give each student a personalized estimate. Molly Corbett Broad, president of the American Council on Education, says the down economy could accelerate such reforms, which could ultimately “go a long way to demystify the cost of colleges.”

Despite optimism in some corners, however, universities are cautious as they survey the economic horizon. “In a huge downturn, everybody suffers immensely,” says Grinnell President Russell Osgood. “Those that are a little bit better off will just be cushioned a little bit better at the front end.”

Posted in Economy and School, EducationalSpending | Leave a Comment »

Under Financial Stress, More Colleges Cap Enrollments

Posted by gradefund on December 12, 2008

Under Financial Stress, More Colleges Cap Enrollments

http://www.time.com/time/nation/article/0,8599,1861861,00.html

Bria Reiniger, left, and Taylor Zompolis help each other move in to a dormitory at California State University Monterey Bay in Marina, Calif.
Bria Reiniger, left, and Taylor Zompolis help each other move in to a dormitory at California State University Monterey Bay in Marina, Calif.
Orville Myers / Monterey County Herald / AP

California State University has long prided itself on being open to all qualified students, but that’s about to change.

As record numbers of applications collide head-on with deep budget cuts, on Nov. 20 the nation’s largest university system announced plans to decrease its student body by at least 10,000 students and to cap enrollment at all 23 of its campuses. Says Terry Hartle of the American Council on Education, a lobbying firm that represents 1,800 colleges and universities: “What you’re seeing in California is a double witching hour.” Cal State, which experienced a 20% increase in first-year applications this fall, is the first public university to cap enrollment since the market meltdown in September, a move other schools may follow as 21 states grapple with midyear budget cuts to public colleges and universities in the wake of financial Armageddon. (See pictures of the college dorm’s evolution.)

With 77% of CSU’s operating budget coming from the state, shrinking tax revenue had already left the school in a $200 million ditch at the start of this academic year. Things got worse on Nov. 6 when California Governor Arnold Schwarzenegger announced an additional $66 million cut. Now university officials say they simply don’t have enough resources to serve all the students who want in. “It’s not fair to students to admit them to a university and not be able to offer classes, sections and student services that they need and academic advising and help that students deserve,” says CSU chancellor Charles Reed. Cal State tried to cope with the economic downturn in the early 1990s by increasing overall class size, but many students could not enroll in the courses they needed and ultimately dropped out. The school is trying to avoid a repeat of those mistakes.

Until now, only six of CSU’s campuses had competitive admissions standards over and above the systemwide requirements of a 3.0 high school GPA or high enough scores on the SAT or ACT to compensate for lower grades. Under the new rules, all campuses will still have to admit all eligible freshmen in their immediate vicinity, but many of the schools will up the academic bar for students from farther away. Rejecting paying students might seem counterintuitive in a time of need, but tuition accounts for just 23% of Cal State’s funding (even after a 10% hike last year). That’s on par with Harvard, where tuition accounts for about 20% of the school’s revenue — but there, a multibillion-dollar endowment makes up the difference. On average, tuition covers about half of total educational costs at public universities. (Read about colleges getting hit by the credit crunch.)

With CSU set to stop accepting applications at several campuses on Nov. 30, administrators expect that many students will turn to community colleges with the goal of transferring to Cal State two years down the line. According to a survey released by the American Association of Community Colleges in July, 66% of statewide community-college directors expect that enrollment caps at the state level will boost demand at their institutions. The problem, however, is that community-college directors in 16 states already report that they can’t meet the demand from high school grads as is. That means if they get an influx of applicants who would normally have gone to four-year state schools, some students may have to delay their college plans or get pushed out of the system altogether.

Administrators fear that students of color will take the hardest hit. Many of these students tend to live in underserved communities, have limited knowledge about how and when to apply for financial aid, and tmake up their minds about college later in the school year. “Those are the students that America needs to reach out to, because they are going to be the workforce of the 21st century,” says Reed. “And they will probably be the group that will be the most at risk” of getting squeezed out by an enrollment cap. (See TIME’s special report on paying for college.)

Still, for students already enrolled at Cal State — or for those lucky enough to gain admission under the tougher standards — the crackdown could ensure the quality of their education. The cap should prevent classes from getting so big that there’s not enough, say, lab equipment or academic advising. It will also increase the likelihood that students will be able to get a spot in each of the classes they need to take in order to graduate, thereby saving many students from a costly fifth (or sixth) year.

How long CSU’s enrollment cap lasts — and whether more universities adopt them — will depend on how quickly the economy recovers. In the meantime, public universities face tough choices. When state schools get hit with major budget shortfalls, “the only question is how the losses are distributed,” says Hartle. “Nobody wins.”

Posted in Economy and School, EducationalSpending | Leave a Comment »

Tuition Jump in Florida Wins Backing of Governor

Posted by gradefund on December 12, 2008

http://www.nytimes.com/2008/11/21/education/21florida.html?fta=y

Tuition Jump in Florida Wins Backing of Governor

 

 

Published: November 20, 2008

TALLAHASSEE, Fla. — Gov. Charlie Crist urged the Legislature on Thursday to allow double-digit tuition increases at all of Florida’s 11 public universities as a way of blunting the impact of state-ordered budget cuts imposed over the last two years.

The proposal from Mr. Crist, who in the past has opposed raising tuition, would give individual universities the power to increase it up to 15 percent annually until Florida’s in-state tuition rate reached the national average, now about $6,500 a year.

Florida’s current tuition for residents is among the lowest in the nation, averaging less than $4,000 a year, according to a new report by the College Board.

Unlike many other states, Florida has a university system whose tuition rates have been set annually by the Legislature. In the last two years, some of the state’s larger research universities have won the power to set a rate above what lawmakers approved, but even that has been subject to a cap.

At a news conference where he was flanked by higher-education officials, Mr. Crist described his proposal as a way of instilling financial stability at the state’s universities.

His turnabout was warmly received by university presidents, who have complained about the effect of almost $200 million in budget cuts over two years. To cope with those cuts, the universities have had to pare classes, eliminate some majors and lay off instructors.

“Tuition for a full year of college education in Florida is cheaper than sending a 4-year-old to day care for a few hours a day,” said John A. Delaney, president of the University of North Florida. “It’s just too cheap.”

The proposal by Mr. Crist, a first-term Republican, could raise as much as $1.5 billion over seven years. Thirty percent would go to financial aid, but the rest could be used for retaining and recruiting faculty members.

While leaders of the Legislature’s Republican majority appeared receptive to the proposal, the Democratic leader of the State Senate, Al Lawson, said students were “squeezed enough.” Mr. Lawson called on the governor to “rethink” his idea.

At Florida State University, Mr. Crist’s alma mater, Stuart Tapley, a sophomore from Orlando who attends free of charge, on a baseball scholarship, was nonetheless critical of the plan.

“In times like these, it’s hard enough,” Mr. Tapley said. “To spike it up will make it that much harder for people to get an education.”

But Jennifer Davis, a junior, said she was willing to accept a tuition increase if it helped students. Ms. Davis said budget cuts had already pushed her graduation back a semester, because classes she had needed were canceled.

Posted in EducationalSpending, Rising Tuition | Leave a Comment »