Higher Ed Roundup: Week of April 21 – April 25

No Federal Borrowing for Lenders, Administration Says

Elite Colleges Enrolling Fewer Low-Income Students

Substantial Black-White Graduation Gaps in College Too

Iowa Law To Rein in Questionable Lending Activity

No Federal Borrowing for Lenders, Administration Says

The Bush administration disappointed the student loan industry on Wednesday when it rejected a plan that would have allowed lenders to borrow funds directly from the U.S. Treasury to make new student loans. The proposal, put forward by the student loan giant Sallie Mae among others, would have allowed lenders to gain access to desired liquidity by borrowing funds from the Federal Financing Bank (FFB), an arm of the Treasury, at a subsidized rate. However, In a letter to Sen. Christopher Dodd (D-CT), who had backed the plan, the Secretaries of Education and the Treasury and the Director of the White House Office of Management and Budget wrote that “after a thorough analysis, it is clear that the FFB does not have the authority under the Federal Credit Reform Act to purchase, or otherwise participate in, loans to non-Federal borrowers in these circumstances.” Instead, the letter said the administration would be supporting policies already contained in legislation passed last week by the House of Representatives, including one that would allow the Department of Education to purchase outstanding loans from lenders.

Elite Colleges Enrolling Fewer Low-Income Students

The proportion of low-income students enrolled at the nation’s most elite colleges has declined in recent years, according to an analysis published yesterday in The Chronicle of Higher Education. On average, only 13.1 percent of the students at the nation’s 75 wealthiest colleges received Pell Grants in 2006-07, down from 14.3 percent two years prior. While most schools lost ground in enrolling students with Pell Grants in this period, some made significant gains, including Amherst College and the University of Texas – Austin. Princeton University reported that enrollment of low income students increased from 6.9 percent in 2001, when the school decided to replace its loans with grants, to 10 percent in the current academic year. Many of the nation’s elite colleges, which announced similiar financial aid plans this year for low-income students, hope for similiar improvement in socio-economic diversity.

Substantial Black-White Graduation Gaps in College Too

Low high-school graduation rates, especially among minority students, have garnered significant attention in the press, but the rates at which minority students are graduating from college are just as sobering, according to a new report from Education Sector’s Kevin Carey. Less than half of black students who enroll at a four-year institution graduate in six years. At many schools, black students graduate at a rate 20 percentage points lower than their white peers. Graduation rates at the nation’s Historically Black Colleges and Universities, though varied, average about 38 percent. The report points to some successful models to improve minority retention, and recommends that state accountability officers, college accreditors, and the U.S News & World Report’s annual college rankings pay greater attention to these gaps in the hopes of narrowing them.

Iowa Law To Rein in Questionable Lending Activity

State lawmakers in Iowa have agreed on compromise legislation that would prohibit colleges in the state from accepting gifts from student loan providers and from entering into revenue sharing agreements with them. In addition, the bill, which is similar to a law passed last year in the State of New York, would require lenders to provide more information to students at Iowa colleges about the range of interest rates charged on private loan products. The legislation comes as the state’s attorney general nears completion of an investigation he has been conducting into well-publicized allegations that the Iowa Student Loan Liquidity Corporation, the state affiliated lender, pushed students into taking on high-cost private loans and paid kickbacks to colleges, including $500,000 in reimbursement payments to Iowa State University. The problem of student debt is especially acute in Iowa, where 74 percent of students graduate with debt over $24,000, while more than half of students nationwide have less than $19,000 in debt. The bill is expected to pass, and lawmakers may add more regulations in October, when the AG is expected to submit the findings from his investigation.