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Defunding Higher Education Robs Michigan's Future

Defunding Higher Education Robs Michigan's Future

December 16, 2013

According to a [Michigan] State Higher Education Executive officers report, Michigan is outranked only by Rhode Island and New Mexico in cutting higher education budgets. When I first joined the University of Michigan’s Board of Regents in 1987, state support represented around 75 percent of total revenue; tuition and fees accounted for around a quarter. Today, it’s exactly the reverse.
According to a [Michigan] State Higher Education Executive officers report, Michigan is outranked only by Rhode Island and New Mexico in cutting higher education budgets. When I first joined the University of Michigan’s Board of Regents in 1987, state support represented around 75 percent of total revenue; tuition and fees accounted for around a quarter. Today, it’s exactly the reverse.

December 16, 2013

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Statement by the National Association of Independent Colleges and Universities on the U.S. Department of Education’s Financial-Responsibility List

Statement by the National Association of Independent Colleges and U...

June 27, 2012

Note: Below, NAICU comments on what the U.S. Department of Education’s financial responsibility list means for consumers considering private nonprofit colleges, and expresses concern about the underlying test’s accuracy. The test, which was created to evaluate the financial health of colleges participating in the federal Title IV student aid programs, has come under increased scrutiny.

Students who attend, or are considering attending, one of the private nonprofit institutions on the list, should not rule out a college simply because it is listed. As noted by the Education Department:

“The composite financial score is not a reflection of the quality of education at a given school, and a school that does not achieve a passing financial composite score will be monitored more closely by the Department to determine if additional protections are needed.”

Being on the list means the college must agree to additional reporting, financial aid monitoring, or administrative oversight requirements to be in compliance; or post a letter of credit to ensure the safety of federal student aid.

Inclusion on the list does not mean a college is in danger of closing. The overwhelming majority of institutions that have appeared on the list in previous years continue to provide a quality education to their students. Students and parents who are concerned about a college’s inclusion on the list should talk to the school about the reasons for it.

Like many families, businesses, and other organizations, all colleges are addressing the challenges brought by the nation’s financial crisis and ongoing economic uncertainty. Colleges on the list, and others nationwide, are taking proactive steps—including cutting costs and enhancing efficiency—to improve their balance sheets.

The number of private nonprofit colleges listed as failing the Education Department’s “financial responsibility test” increased from FY 2009 to FY 2010. This was unexpected given the rebound in the stock market and growth in university endowments during FY 2010. The increase in the number of private nonprofit colleges listed coincides with an increase in the overall number of private nonprofit colleges assessed by the department in FY 2010. While the number of private nonprofit colleges that failed the department’s test grew by 5.2 percent, the overall number evaluated by the department increased at a higher rate of 7.6 percent.

It must be noted that the list is under increased scrutiny by accounting experts who believe department financial analysts are not always using the right accounting definitions, and are inconsistent in how they interpret and apply standards.

While we support the federal government’s goal of identifying institutions in dire financial straits so that Title IV funds are not lost or misappropriated, we question whether the current responsibility test does that. For example, although the endowments held by hundreds of private colleges and universities are a critically important source of future equity and stability, formulas used by department financial analysts inappropriately penalized institutions that weathered endowment value deflation during the 2008 market collapse.

To address these concerns about the existing procedures, a task force made up of NAICU, the National Association of College and University Business Officers, the Council of Independent Colleges, state independent college associations, college officials, and independent accounting experts is studying the accuracy and reliability of the financial responsibility test. It expects to have recommendations next year, and hopes to engage federal officials in a conversation about how the test might be improved.

It is imperative the department’s test accurately reflect an institution’s financial standing. The special controls and reporting requirements, and possible letter of credit, imposed on these institutions by the department, are only appropriate when necessary to protect students and taxpayers. Otherwise, such restrictive measures divert, if not waste, important institutional resources needed for educational purposes.

NAICU serves as the unified national voice of independent higher education. With more than 1,000 member institutions and associations, NAICU reflects the diversity of private nonprofit higher education in the United States. NAICU members enroll 90 percent of all students attending private institutions. They include traditional liberal arts colleges, major research universities, church- and faith-related institutions, historically black colleges, Hispanic-serving institutions, single-sex colleges, art institutions, two-year colleges, and schools of law, medicine, engineering, business, and other professions.

Note: Below, NAICU comments on what the U.S. Department of Education’s financial responsibility list means for consumers considering private nonprofit colleges, and expresses concern about the underlying test’s accuracy. The test, which was created to evaluate the financial health of colleges participating in the federal Title IV student aid programs, has come under increased scrutiny.

Students who attend, or are considering attending, one of the private nonprofit institutions on the list, should not rule out a college simply because it is listed. As noted by the Education Department:

“The composite financial score is not a reflection of the quality of education at a given school, and a school that does not achieve a passing financial composite score will be monitored more closely by the Department to determine if additional protections are needed.”

Being on the list means the college must agree to additional reporting, financial aid monitoring, or administrative oversight requirements to be in compliance; or post a letter of credit to ensure the safety of federal student aid.

Inclusion on the list does not mean a college is in danger of closing. The overwhelming majority of institutions that have appeared on the list in previous years continue to provide a quality education to their students. Students and parents who are concerned about a college’s inclusion on the list should talk to the school about the reasons for it.

Like many families, businesses, and other organizations, all colleges are addressing the challenges brought by the nation’s financial crisis and ongoing economic uncertainty. Colleges on the list, and others nationwide, are taking proactive steps—including cutting costs and enhancing efficiency—to improve their balance sheets.

The number of private nonprofit colleges listed as failing the Education Department’s “financial responsibility test” increased from FY 2009 to FY 2010. This was unexpected given the rebound in the stock market and growth in university endowments during FY 2010. The increase in the number of private nonprofit colleges listed coincides with an increase in the overall number of private nonprofit colleges assessed by the department in FY 2010. While the number of private nonprofit colleges that failed the department’s test grew by 5.2 percent, the overall number evaluated by the department increased at a higher rate of 7.6 percent.

It must be noted that the list is under increased scrutiny by accounting experts who believe department financial analysts are not always using the right accounting definitions, and are inconsistent in how they interpret and apply standards.

While we support the federal government’s goal of identifying institutions in dire financial straits so that Title IV funds are not lost or misappropriated, we question whether the current responsibility test does that. For example, although the endowments held by hundreds of private colleges and universities are a critically important source of future equity and stability, formulas used by department financial analysts inappropriately penalized institutions that weathered endowment value deflation during the 2008 market collapse.

To address these concerns about the existing procedures, a task force made up of NAICU, the National Association of College and University Business Officers, the Council of Independent Colleges, state independent college associations, college officials, and independent accounting experts is studying the accuracy and reliability of the financial responsibility test. It expects to have recommendations next year, and hopes to engage federal officials in a conversation about how the test might be improved.

It is imperative the department’s test accurately reflect an institution’s financial standing. The special controls and reporting requirements, and possible letter of credit, imposed on these institutions by the department, are only appropriate when necessary to protect students and taxpayers. Otherwise, such restrictive measures divert, if not waste, important institutional resources needed for educational purposes.

NAICU serves as the unified national voice of independent higher education. With more than 1,000 member institutions and associations, NAICU reflects the diversity of private nonprofit higher education in the United States. NAICU members enroll 90 percent of all students attending private institutions. They include traditional liberal arts colleges, major research universities, church- and faith-related institutions, historically black colleges, Hispanic-serving institutions, single-sex colleges, art institutions, two-year colleges, and schools of law, medicine, engineering, business, and other professions.

June 27, 2012

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NAICU Letter to the Washington Post

NAICU Letter to the Washington Post

April 17, 2012

April 17, 2012

Letters to the Editor
Washington Post

Re: "Online comparison-shopping tool makes costs of college clearer," Michelle Singletary column, April 14

To the Editor:

The Consumer Financial Protection Bureau's college cost website can be useful for comparing financial aid award letters and is graphically appealing. However, the site's entry point provides confusing and inaccurate information that muddies the true cost of college.

From the site's estimates of average annual debt, it is clear CFPB is failing to use federal data sources correctly. CFPB grossly overestimates the average annual debt of students at four-year private and public colleges. The reported numbers are actually closer to the average total debt of graduates, according to Project on Student Debt data. CFPB also fails to take into account Federal Work-Study; federal tax benefits; loan forgiveness; money contributed by students from summer jobs; and funds from family savings.

It is unfortunate CFPB launched its site in April, just as students are deciding their college choice. The CFPB needs to pull the site down until it has fixed the confusing terminology and inaccurate data. Until then, students and their families should be wary of it. Instead, turn to the other federal and private-sector resources available, use the net price calculators available on every college website, and talk to college financial aid offices. These steps, not the CFPB site, will make the costs of college clearer.

Sincerely,

David L. Warren
President
National Association of Independent Colleges & Universities

April 17, 2012

Letters to the Editor
Washington Post

Re: "Online comparison-shopping tool makes costs of college clearer," Michelle Singletary column, April 14

To the Editor:

The Consumer Financial Protection Bureau's college cost website can be useful for comparing financial aid award letters and is graphically appealing. However, the site's entry point provides confusing and inaccurate information that muddies the true cost of college.

From the site's estimates of average annual debt, it is clear CFPB is failing to use federal data sources correctly. CFPB grossly overestimates the average annual debt of students at four-year private and public colleges. The reported numbers are actually closer to the average total debt of graduates, according to Project on Student Debt data. CFPB also fails to take into account Federal Work-Study; federal tax benefits; loan forgiveness; money contributed by students from summer jobs; and funds from family savings.

It is unfortunate CFPB launched its site in April, just as students are deciding their college choice. The CFPB needs to pull the site down until it has fixed the confusing terminology and inaccurate data. Until then, students and their families should be wary of it. Instead, turn to the other federal and private-sector resources available, use the net price calculators available on every college website, and talk to college financial aid offices. These steps, not the CFPB site, will make the costs of college clearer.

Sincerely,

David L. Warren
President
National Association of Independent Colleges & Universities

April 17, 2012

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NAICU Letter to the Washington Post

NAICU Letter to the Washington Post

December 02, 2011

Letters to the Editor
Washington Post

To the Editor:

While I agree higher education must continue to find new efficiencies, cut costs, and improve affordability (Editorial, "Some welcome steps toward reducing the cost of college," Dec. 2), I find it deeply disturbing that the Post buys into the urban myth that federal student aid is a college cost driver. Federal studies conducted during the George W. Bush and Bill Clinton administrations*, and most education economists, have found no evidence that federal student aid fuels tuition increases.

The recent actions of private, nonprofit colleges also refute the myth. In the past three years, despite increased funding for Pell Grants, higher education tax benefits, and other federal student aid, our colleges have kept tuition increases to the lowest levels seen in decades (an average annual increase of 4.4 percent since 2009). Just as important, they have increased institutionally provided student aid at a faster rate over the same period, boosting aid an average of 7.6 percent annually. Inflation-adjusted net tuition and fees at private, nonprofit colleges have actually dropped by 4.1 percent in the past five years, according to the College Board.

At a time when billions of dollars in federal student aid funding is at stake, it is counterproductive for the Post to wrongly suggest that student aid is a cause for growing college costs. Without the continued federal investment in student aid, a college degree will be a lost dream for millions of low- and middle-income Americans. It is too important to the nation and these students to abandon them now.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities
Washington, D.C.

* Study of College Costs and Prices, 1988-89 to 1997-98, Vol.1, National Center for Education Statistics, December 2001; Straight Talk about College Costs & Prices, National Commission on the Cost of Higher Education, February 1998

Letters to the Editor
Washington Post

To the Editor:

While I agree higher education must continue to find new efficiencies, cut costs, and improve affordability (Editorial, "Some welcome steps toward reducing the cost of college," Dec. 2), I find it deeply disturbing that the Post buys into the urban myth that federal student aid is a college cost driver. Federal studies conducted during the George W. Bush and Bill Clinton administrations*, and most education economists, have found no evidence that federal student aid fuels tuition increases.

The recent actions of private, nonprofit colleges also refute the myth. In the past three years, despite increased funding for Pell Grants, higher education tax benefits, and other federal student aid, our colleges have kept tuition increases to the lowest levels seen in decades (an average annual increase of 4.4 percent since 2009). Just as important, they have increased institutionally provided student aid at a faster rate over the same period, boosting aid an average of 7.6 percent annually. Inflation-adjusted net tuition and fees at private, nonprofit colleges have actually dropped by 4.1 percent in the past five years, according to the College Board.

At a time when billions of dollars in federal student aid funding is at stake, it is counterproductive for the Post to wrongly suggest that student aid is a cause for growing college costs. Without the continued federal investment in student aid, a college degree will be a lost dream for millions of low- and middle-income Americans. It is too important to the nation and these students to abandon them now.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities
Washington, D.C.

* Study of College Costs and Prices, 1988-89 to 1997-98, Vol.1, National Center for Education Statistics, December 2001; Straight Talk about College Costs & Prices, National Commission on the Cost of Higher Education, February 1998

December 02, 2011

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Valuing A Liberal Arts Education In A Jobs-Focused World

Valuing A Liberal Arts Education In A Jobs-Focused World

August 22, 2011

Trinity College Professor Stefanie Chambers reminded me that in a world overloaded with media and information, students need critical thinking and writing skills more than ever. The problem is that things really have changed dramatically since the high water mark for liberal arts education in the 1960s. We live in a time when college graduates depart campus with an average of $24,000 in loans and the unemployment rate for people in their early 20s is more than 14 percent. Is it fair to pretend that a true liberal arts education should not have anything to do with paying the bills later in life?
Trinity College Professor Stefanie Chambers reminded me that in a world overloaded with media and information, students need critical thinking and writing skills more than ever. The problem is that things really have changed dramatically since the high water mark for liberal arts education in the 1960s. We live in a time when college graduates depart campus with an average of $24,000 in loans and the unemployment rate for people in their early 20s is more than 14 percent. Is it fair to pretend that a true liberal arts education should not have anything to do with paying the bills later in life?

August 22, 2011

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About the items posted on the NAICU site: News items, features, and opinion pieces posted on this site from sources outside NAICU do not necessarily reflect the position of the association or its members. Rather, this content reflects the diversity of issues and views that are shaping American higher education.

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