Higher Ed Roundup: Week of January 12 – January 16

Big Increases for Higher Ed in House Democrats’ Stimulus Bill

Duncan Provides Few Specifics on Higher Education

Lawsuit Alleges Univ. of Phoenix Improperly Manipulated Default Rate

Tuition Up, But Not All Going to Instruction

Grant Participation Up but Still Below Expectations

Big Increases for Higher Ed in House Democrats’ Stimulus Bill

Democrats in the U.S. House of Representatives released their proposed $825 billion economic stimulus package yesterday, which includes more than $30 billion in increased spending for student aid. The legislation includes $17.1 billion (in both discretionary and mandatory spending) to raise the maximum Pell Grant to $5,350 from its current level of $4,731; an additional $490 million for the Federal Work-Study program, and a $2,000 increase in the amount students can borrow in unsubsidized federal student loans each year for the next two years. In addition to the spending increases, the bill would temporarily replace the Hope higher education tax credit with a partially refundable $2,500 per-year tuition tax credit. In addition to specific programmatic funding, the legislation also includes $79 billion over the next two years for maintaining state elementary, secondary, and postsecondary education funding. Receipt of this money would be conditioned on a maintenance of effort provision that requires states to maintain all of their education spending at or above their fiscal year 2006 level for the next two fiscal years (the idea is similar to one that former Higher Ed Watch editor Michael Dannenberg has floated). Finally, as Higher Ed Watch revealed yesterday, the legislation includes a key change that the student loan industry has been lobbying for – a retroactive change to the index used to determine the quarterly interest rate subsidy paid to lenders on federal student loans.

Duncan Provides Few Specifics on Higher Education

At his Senate confirmation hearing on Tuesday, Education Secretary-Designate Arne Duncan called for expanding college access and affordability but provided few details on how he would propose to do so. Instead, most of the hearing was focused on elementary and secondary education, which is not too surprising given Duncan’s background as the superintendent of the Chicago Public School system. Still, Duncan did promote several of President-elect Obama’s proposals for higher education, including increasing the maximum Pell Grant, creating a $4,000 tuition tax credit to reward community service, and simplifying the process of applying for federal financial aid. In his prepared remarks, he also questioned whether colleges are providing enough “support and guidance” to retain low-income students on their campuses. Duncan received bipartisan support at the hearing and is expected to be easily confirmed.

Lawsuit Alleges Univ. of Phoenix Improperly Manipulated Default Rate

Three former University of Phoenix (UOP) students have filed a federal class-action lawsuit accusing the giant for-profit college chain of acting illegally to attempt to artificially minimize its official federal student loan default rate. According to the lawsuit, which was filed in the U.S. District Court in Little Rock, Ark., the university has been paying off the federal loans taken out by students who dropped out soon after enrolling without the students’ “knowledge or consent.” The institution then demanded immediate repayment from the students of the tuition owed. This practice, the lawsuit states, hurts students by denying them more-generous loan-repayment terms offered by the federal government. It also allows the university to manipulate its official cohort default rate by keeping the percentage of students who failed to repay their loans below the threshold at which the institutions would face sanctions, including the potential loss of federal financial aid funds, the lawsuit alleges. The University of Phoenix is not the first for-profit college or trade school to be criticized for such a practice. In May, the Department of Education’s Inspector General recommended punitive action against proprietary institution, Technical Career Institute in New York, for engaging in similar activity. The UOP suit seeks to bar the school from continuing the practice, as well as to pay punitive damages for the thousands of students who were allegedly affected by the practice over the past four years.

Tuition Up, But Not All Going to Instruction

Declining state appropriations for higher education fueled sharp increases in tuition at public colleges and universities from 2002 to 2006, but the increased student burden did not translate into greater investments in students, according to a new report released Thursday by the Delta Project on Postsecondary Education Costs, Productivity, and Accountability. The report “Trends in College Spending,” found that net tuition revenue at public research universities increased by an average of $383 per student in 2002-06, and increased by $124 per student community colleges. At public research universities, 92 percent of tuition increases were used to offset revenue decreases from other sources, while only 8 percent went to actual increases in spending. Tuition continued to rise, albeit by a lesser degree, even after state appropriations for higher education picked up again in 2005. Despite the tuition increases, the percentage of university revenues devoted to direct instruction consistently declined from 2002-05, with the greatest cuts found at community colleges. The report, which also included data on enrollment and degree completion, found students at public research universities covered close to half of the cost of their own education in 2006, up 39 percent from 2002.

Grant Participation Up but Still Below Expectations

The number of students receiving Academic Competitiveness and SMART Grants grew significantly in the 2007-08 academic year, but still fell far short of the Bush administration’s goal of adding 120,000 new participants to the two programs that year. According to a report this week in The Chronicle of Higher Education, which obtained data from the U.S. Department of Education through a Freedom of Information Act request, a total of 465,000 students received grants from the programs last year, 95,000 more than in 2006-07, the programs’ first year. The two-year old programs, which are designed to encourage low-income students pursue rigorous academic programs, have been plagued by underutilization amid reports that high-school students are unaware of the advanced curriculum required to get the grants and that colleges have refused to offer the grants even when required to do so. Congress rescinded $525 million from the programs in FY 2008, and President Bush’s FY 2009 budget proposed cancelling a further $652 of program funding.