Higher Ed Roundup: Week of October 13 – October 17

Small Private Colleges Could Suffer in Credit Crunch

Baylor Pays Students to Retake SAT

Colleges Worried About IRS Questionnaire

NCAA Reports Higher Graduation Rates Among Student Athletes

Small Private Colleges Could Suffer in Credit Crunch

The credit crunch may be starting to hit small private colleges hard — particularly ones that have miniscule endowments and rely predominantly on tuition payments to finance their operations, according to a report released on Thursday by bond rating agency Moody’s. Many of these private colleges rely on variable rate bonds with interest rates that could spike if the credit market continues to dry up. With the deteriorating financial situation, banks are also more likely to ask for early repayment on these bonds, the report warns. While banks haven’t started demanding accelerated payments yet, Moody’ states, they will likely do so if the credit markets remain as tight as they have been. These higher-priced colleges could also suffer, the report states, if students shift in large numbers “to lower cost alternatives,” such as state universities and community colleges. “We are not worried about the vast majority of colleges,” John Nelson, the managing director of Moody’s told Inside Higher Ed. “That message can’t be lost. The vast majority of colleges are going to be fine. But for any of them to be in financial stress is kind of news.”

Baylor Pays Students to Retake SAT

Baylor University came under fire this week after its student newpaper revealed that the institution had been providing financial incentives to incoming freshmen to retake the SAT. This fall, the institution began offering admitted freshmen a $300 campus bookstore voucher to retake the exam. Those students who raised their score by 50 points could receive a $1,000 discount on tuition. Nearly one-third of the incoming class took the university up on its offer. At first, campus officials defended the practice, saying that the financial incentives amounted to “merit aid.” But admissions experts and other higher education officials and commentators criticized the university, saying it was trying to game its U.S. News & World Report college rankings, which take into account the average SAT scores of a college’s incoming students. On Tuesday, the Baylor Faculty Senate condemned the practice as “academically dishonest.” Yesterday, the university announced that it would curtail it.

Colleges Worried About IRS Questionnaire

More than 400 colleges are expecting a 42-page questionnaire from the IRS to arrive in their mailboxes soon, and many worry that the “compliance check questionnaire” signals more extensive regulation of their institutions. Two higher education associations — the National Association of College and University Business Officers (NACUBO) and the Association of Governing Boards of Universities and Colleges (AGB) — recently sent a letter to their members warning that the effort by the IRS “portends a significant shift in the way colleges and universities are regulated and governed.” Responses by colleges to the questionnaire “will be used by the IRS to determine where tighter regulation is necessary and, in some instances, to initiate audits,” the groups wrote. In addition, the IRS is expected to use the responses it receives to “serve as a foundation” for a new 990 tax form for colleges.

With those concerns in mind, the groups said that they planned to conduct their own analysis of their members’ answers “in order to promote clarity and understanding in the higher education community, the general public, and for policymakers, regarding what these responses say about the college and university sector.” According to The Chronicle of Higher Education, Sen. Charles Grassley (R-IA), who has been demanding greater scrutiny of higher education, said that if colleges were going to share the responses, he’d like to see them too. Policymakers and the public should not be asked to just accept the findings of a “higher education group funded study,” he stated.

NCAA Reports Higher Graduation Rates Among Student Athletes

More college athletes are making it to graduation day, according to new data released on Tuesday by the National Collegiate Athletic Association (NCAA). The NCAA reported that 78 percent of Division I athletes who entered college between 1998 and 2001 graduated within six years. That’s one percentage point higher than last year’s data. The NCAA’s “Graduation Success Rate” is higher than the federal graduation rates during the same period (64 percent for college athletes) because unlike the government figure, the association’s doesn’t penalize colleges for students who transfer out of school who are in good standing and rewards schools for students who transfer in to the institutions and graduate. Still, graduation rates for the most high profile college sports, such as men’s basketball, continue to lag, with some schools graduating less than one-third of their players.