Ed Money Watch

At which colleges are the largest share of students taking out non-federal private student loans? That’s a question that we at Ed Money Watch set out to determine using Department of Education data now available on the Federal Education Budget Project (FEBP) website (www.EdBudgetProject.org). The FEBP website now includes a host of higher education data on every state and institution including information on federal financing, demographics, outcomes, and financial aid use, making it easy to compare the proportion of students taking out private loans at different colleges and universities.

Understanding the extent to which students at individual schools are taking out private loans is important because of concerns that some institutions might be steering students to take out private loans before exhausting their lower cost federal student aid options. Private loans are almost always more costly for students than federal loans, and they offer fewer consumer protections.

For our analysis, we used the FEBP database to examine the top 100 colleges in terms of non-federal loan borrowing in 2009. At each of these schools, more than half of first-year students received such a loan. We found that 82 of the institutions were in the for-profit college sector. Of the remaining 18 non-profit colleges, 17 were private colleges, and one was a historically black public university.

Some of the for-profit colleges were relatively small trade schools, like the Diesel Driving Academy in Shreveport, LA, at which 99 percent of its first-time students received non-federal loans. But the majority of the institutions are part of larger for-profit higher education companies that have dozens of campuses.

In fact, nearly a third of the top 100 schools belonged to Corinthian Colleges, one of the largest for-profit higher education companies in the country. Thirty of the publicly-traded company’s 91 Everest and Wyotech schools in the U.S. showed up on the list. At five of those schools, more than three-quarters of first-time students had non-federal private loans. At the Everest College branch in Chesapeake, VA, for instance, nine out of 10 of these students received a private loan. Overall, the median rate for these institutions was 66 percent.

Also showing up prominently on the list were the Westwood College campuses of the for-profit school chain Alta Colleges. At 11 of the company’s 17 campuses, more than half of first-time students took out non-federal private loans. The median rate for these institutions was 58 percent.

Other large for-profit college companies, like Career Education Corporation, Education Management Corporation, and ITT Educational Services, each had one or two campuses with similarly high rates. Notably absent from the list was the Apollo Group’s University of Phoenix, which for the most part does not encourage its students to borrow private loans.

Of the 18 non-profit colleges in the top 100, seven were so small that they had fewer than 15 freshmen borrowing non-federal loans. The other private colleges tended to be career specific schools such as the Massachusetts College of Pharmacy & Health Sciences, at which 69 percent of freshmen took out non-federal loans, or small liberal arts colleges with relatively meager endowments. At Austin College in Texas, for example, 53 percent of freshmen took out non-federal loans. According to National Association of College and University Business Officers data available on the Chronicle of Higher Education website, the small Presbyterian school had an endowment of $109 million in 2009, which is a pittance compared to the University of Texas system, for example, whose endowment totaled more than $12 billion. Of course, there are many colleges with smaller endowments that don’t exhibit this level of non-federal loan borrowing.

Perhaps the most surprising school on this list was Delaware State University, a historically black public university. According to data that the university provided, 82 percent of the school’s freshmen took out non-federal loans. Public colleges and universities tend to have much lower private loan borrowing rates because they are heavily subsidized by state governments. In 2008, the school reported that only 19 percent of its first-year students took out non-federal loans, so it is very possible the school has shown up on the list as the result of a data reporting error. Ed Money Watch contacted the university to find out, but did not receive a response to our inquiry.

The non-federal borrowing data is not perfect, as it doesn’t give a complete picture of the level of private loan borrowing occurring at individual schools. It looks, for example, only at full-time, first year students and therefore doesn’t fully capture the level of borrowing going on at these institutions. It also doesn’t distinguish private loans from state and lower-cost institutional loans. In addition, colleges can only report on private student loans they know about. Many students bypass the financial aid office and obtain loans directly from lenders, making it difficult for schools to keep track of this borrowing.

Despite these flaws, this data should be helpful in identifying colleges that could potentially be pushing their students to borrow private loans before they exhaust all of their federal aid options first. Check back with Ed Money Watch as we continue to explore the higher education data now available on the Federal Education Budget Project (FEBP) website.

Click here to download data on the 100 institutions with the highest non-federal loan borrowing rates in 2009.

Rarely do tight budgets and funding cuts—like the ones states across the country are experiencing—lead to proclamations of opportunity. But a recent report from Education Resource Strategies (ERS) takes that tack. In Restructuring Resources for High-Performing Schools: A Primer for State Policymakers, the authors envision the adoption of serious school reforms in K-12 education, forced by state budgetary constraints and a sluggish national economy.

Using education funds efficiently is an imperative for school districts given state budget cuts and stagnant property tax revenues, not to mention federal stimulus measures that are starting to run dry. To this end, the Education Resource Strategies report outlines four main areas for reform: teacher and structural issues; special education funding; district funding allocation schemes; and data collection requirements. Within each category, the authors suggest policy changes that could increase efficiency and productivity for schools and districts, making each dollar count more.

Many of the report’s recommended reforms closely resemble guidance issued earlier this year by the U.S. Department of Education (ED) that highlighted initiatives for productivity in practice by schools around the country. Both the ED and the ERS report authors urge schools facing budget cuts to avoid the kinds of money-savers that could negatively impact student performance in the long run. And both advocate for flexibility in long-held policies, like those governing maximum class sizes and teacher compensation rules.

Beyond those changes, the report emphasizes rethinking the funding structures of programs like special education. Special education funding, usually off-limits in budget-cutting season thanks to federal spending requirements, could offer opportunities to improve efficiency. The authors say that early intervention programs can limit the number of students diverted to special education, while strategic reform of funding structures can cut the total amount of spending required for special education. Many of these ideas in the document would offer little relief in the short term to numbers-crunchers working to balance annual state budgets; but the report promotes, in some cases, more drastic measures that could have immediate impact.

Federal law requires that states sustain special education spending levels from year to year to remain eligible for federal IDEA Part B funds, but as the authors point out, states can use an exemption process through ED—the maintenance-of-effort waiver—if they are experiencing “exceptional or uncontrollable circumstances” that prevent them from reaching the full funding levels. Alabama, Iowa, Kansas, New Jersey, and West Virginia all received waivers for the IDEA maintenance of effort rules in fiscal year 2010. To be sure, this recommendation could imperil the quality of special education by permitting states to cut programs and reduce services for the neediest students in a district. As a result, it should be left as a last resort strategy.

Resource allocation, another area touched on in the report, offers some room to save money as well. Rigid funding schemes force school spending practices to align with the programs dispersing funds, rather than to meet the needs of students. The authors note that many program requirements disregard school size and can drive up the costs for smaller schools unnecessarily. Local flexibility that allows schools to tailor spending to their needs is both a cost-saving mechanism and enables schools to be more responsive and use student-focused educational strategies.

Finally, the authors suggest that states comb through data reporting requirements for schools and districts to ensure that the information collected is worth knowing. In particular, they promote reporting at the school, rather than the district, level. As we’ve written at Ed Money Watch, this is a major factor in enforcing the spirit of the comparability requirement for federal Title I grant eligibility; when states are permitted to report at the district level, inequitable funding between schools within a district is hidden in the district average. To overcome disparate and unjust funding amounts, reporting requirements should be refined to the school level.

The ERS report makes a number of recommendations that could help states push through the slow and anemic economic recovery. More importantly, the authors acknowledge that changes to education spending frequently harm the neediest students most, and therefore their recommendations aim to ensure transparency and equitability in funding that supports students of different income levels and backgrounds.

Despite the federal government’s substantial investment in federal student aid, low-income students still face extraordinarily high financial barriers in their efforts to obtain a higher education, the Education Trust, a research and advocacy group, states in a new report. The organization puts much of the blame on colleges for increasingly devoting their institutional aid dollars to attract the students they desire, rather than for meeting the financial need of the low-income students they enroll.

The report, “Priced Out: How the Wrong Financial Aid Policies Hurt Low-Income Students,” comes at a critical time, as both the Obama administration and Republican lawmakers are looking to cut spending on the federal Pell Grant program, which is the government’s primary source of aid for low-income students. The report does not suggest that the Pell Grant program is failing, but rather that policymakers need to find ways to ensure that colleges are not undermining the government’s mission of making college accessible and affordable for low-income students.

Ed Trust analyzed data that the Department of Education’s National Center for Education Statistics released earlier this year on institutional net price, which represents the average price students must pay to attend a college after all sources of grant and scholarship aid are taken into account. A 2008 law requires colleges to report to the Department of Education the average net price paid for all of its first-time, full-time students for the academic years 2006-07, 2007-08, and 2008-09. In addition, starting with the 2008-09 academic year, Congress mandated that colleges break down these data by income for students who received federal financial aid. (You can see these data by institution at http://febp.newamerica.net/higher-ed.)

Ed Trust found that of the 1,186 colleges that have reported comparable net-price data, students from families making $30,000 or less (with an average income of $17,000) paid, on average, an amount equivalent to 72 percent of their annual family income to attend a four-year college in the 2008-09 academic year, after all grant aid was taken into account. In comparison, students from families making between about $54,000 and $80,000 paid, on average, 27 percent of their annual family income.

In total, low-income students at more than two-thirds of the colleges that reported data contributed at least 50 percent of their family’s income that year to pay for college. At about a quarter of the schools, these students contributed more than 100 percent of their family’s annual income.

How does this translate to net prices for students at individual schools? Students from families making $30,000 or less at Pennsylvania State University, for example, were on the hook for nearly $14,500 in the 2008-09 academic year, and at the University of South Carolina at Columbia, nearly $15,600. Financially needy students, on the other hand, were best off at public universities in low-tuition states, such as at the University of North Carolina at Chapel Hill, where they only paid about $2,400, and at the most elite private colleges and universities, which can afford to offer generous need-based financial aid packages to the relatively small proportion of low-income students they serve. Meanwhile, low-income students attending for-profit colleges faced especially high net prices, the report says, because these schools  receive no direct support from state governments and provide little to no institutional aid, resulting in high prices overall.

Because low-income students at the vast majority of colleges have high levels of unmet need, many of them go deeply into debt to pay their college bills, including taking on high-cost private student loans, the report states. Others engage in activities that lessen their likelihood of completing their degrees, such as working full time while attending college or dropping out until they can afford to return.

Ed Trust puts the brunt of the blame on colleges, which finance more than a third of all grant funds available to students. While four-year public and private colleges provided nearly $15 billion of grant aid in 2007, “these institutions chose to distribute this aid in a highly regressive manner,” by devoting significant sums to merit aid, the report states. “Private nonprofit colleges and universities spent almost twice as much on students from families in the top quintile of family income as they did on those in the bottom quartile,” the organization writes. “Even public institutions spent roughly the same amount on students from the wealthiest families as they did on those from low-income backgrounds.” (Italics in original)

As the Ed Trust report shows, the relatively new net-price information broken down by income provides policymakers with a clearer picture of the financial hurdles that low-incomes students are facing at individual colleges, and at least a limited view of how campuses are spending their institutional aid dollars. The data is far from complete, as it looks only at first-time full-time students who receive federal financial aid, rather than for the student body overall. But it’s a start and should help inform policymakers as they consider options for revamping the Pell Grant program.

Texas Senate panel OKs school bill over objections

New Jersey Senate Democrats debate next moves on state budget

Iowa Republican lawmakers make new budget proposal

Wealthy Ohio schools get most budget relief under Senate plan

Texas Senate panel OKs school bill over objections
Texas lawmakers are considering cuts to K-12 public education this week in a special session called by Governor Rick Perry after Democrats killed a school funding bill with a filibuster. The measure, which would cut approximately $4 billion – 6 percent per district – in K-12 funding in fiscal year 2012 that is currently provided under the existing budget law, passed the Senate Finance Committee and will be voted on by the full Senate before being sent to the House Appropriations Committee and then the House floor. More here…

New Jersey Senate Democrats debate next moves on state budget
Following a New Jersey Supreme Court decision that ordered the state to provide an additional $500 million to low-income schools, state lawmakers are discussing how that funding should be distributed. A budget proposal issued by Republican Governor Chris Christie before the court’s decision does not include the additional funding for schools. Senate Democrats are now debating whether to introduce their own budget or simply to insert the new funding into Christie’s budget. The deadline for passage of a balanced budget is this month.More here…

Iowa Republican lawmakers make new budget proposal
Iowa Republicans are making overtures to Democrats with a new two-year budget proposal. The plan would provide a two percent increase in state aid to K-12 schools in the second year of the budget, and preschool programs would continue to operate at current funding levels. The proposal comes after a heated debate in which Republicans pressed for preschool reforms that would include charging tuition for participants based on parents’ incomes. The Republican-controlled House will debate the plan next Tuesday before sending it to the Democratic-controlled Senate. More here…

Wealthy Ohio schools get most budget relief under Senate plan
The Ohio state legislature’s fiscal year 2012 budget proposal will restore K-12 education funding that would have been cut under Republican Governor Kasich’s two-year plan.  The budget proposal has already passed the House; it is now in the Senate, where lawmakers are adding money back to education programs to ensure that all districts receive funding equivalent to fiscal year 2011 levels. Wealthy districts, which faced the deepest cuts under the governor’s plan, are receiving the bulk of the newly-inserted funds. Legislators have not yet determined whether school reforms, including a teacher merit-pay proposal, will be included in the final language. More here…