Roundup: Week of June 18 - June 22

Senate Moves to Slash Loan Subsidies

The Senate Health, Education, Labor and Pensions Committee easily passed legislation on Wednesday that would reduce lender subsidies by over $18 billion over five years and use the savings to provide additional grant aid to Pell Grant recipients. The budget reconciliation bill, which was incorporated into broader legislation renewing the Higher Education Act, would create a new grant program -- known as "Promise Grants" -- that would supplement Pell Grants for students with the greatest financial need. In effect, the maximum award a Pell Grant recipient would be able to receive would be $5,100 next year, and $5,400 by 2011. The maximum Pell Grant is currently $4,310. The bill would also cap the payments a borrower would have to make each month -- to 15 percent of the amount by which a borrowers adjusted gross income exceeds 150 percent of the poverty line. In addition, the legislation would create a two-year pilot program in which lenders would bid for the right to make federal PLUS loans to parents and graduate students. The New America Foundation and Higher Ed Watch have advocated for the use of an auction mechanism to set the subsidy levels that the government provides private lenders to make federal student loans. The bill is expected to reach the Senate floor sometime next month.

Loan Scandal Fallout Continues

Further fallout from the student loan scandal continued this week with the resignation of an admission dean; settlements with three other student loan providers; and calls from 32 state attorneys general urging Congress to ban deceptive loan marketing practices. Emerson College last week fired Daniel Pinch, its longtime dean of enrollment, after learning that he had served as a paid consultant for Collegiate Funding Services, a loan consolidation company that the college has recommended to its students. He had also started his own private student loan company, T. Rose Lending, a secret which he had kept from Emerson officials for three years. According to The Boston Globe, it's unclear whether the company has made any loans.

Meanwhile, New York Attorney General Andrew Cuomo continued his campaign against corruption in the student-loan industry, reaching agreements on Thursday with National City Bank, Regions Financial Corporation, and Wachovia Education Finance Inc. As a result, the top six student-loan providers have all agreed to a code of conduct forbidding gifts and payments to get on "preferred lender" lists. Earlier in the week, Cuomo and 31 other state attorneys general sent a letter to Congress asking for the Senate to take action on its version of the Student Loan Sunshine Act, which the House passed last month. The leaders of the Senate education committee incorporated some provisions from that legislation into the bill that the panel approved on Wednesday to reauthorize the Higher Education Act.

Some Liberal Arts Colleges to Leave U.S. Rankings

A large group of liberal arts colleges announced Tuesday that they are no longer going to participate in the annual U.S. News and World Report ranking of colleges and universities. They said that they will opt out of the "reputational" survey that U.S. News uses as a part of its rankings system. U.S. News will still be able to obtain most of the data needed for the rankings because the information is publicly available. The colleges, all of which are members of the Annapolis Group, said they will be working with the National Association of Independent Colleges and Universities (NAICU) to create a new site that provides users with important information about a school -- such as its most popular majors and average class size.

UMich Law School Admit Rate Drops for Minorities Following Legal Change

The acceptance rate for black, Hispanic and Native American applicants to the University of Michigan Law School plummeted following the implementation of a new state law banning the use of affirmative action in admissions. Nearly 40 percent of minority applicants were accepted prior to Dec. 29, when the law went into effect, while just 5.5 percent were granted admission afterward. By contrast, the acceptance rate for white and Asian-American students went from 19.5 percent to 22.8 percent over the same period of time.