KCTCS' MCCALL HONORED

Key republican lawmaker opposes Bush's proposals to cut subsidies to lenders

Members of Congress criticize plan to kill vocational and technical funds for community colleges

Public mission of state colleges is endangered by increasing competition and privatization, report says

Lexington Herald-Leader; Courier-Journal
February 16, 2005

KCTCS' MCCALL HONORED

Michael B. McCall, president of the Kentucky Community and Technical College System, was selected the 2004 Kentuckian of the Year by Kentucky Monthly magazine. The announcement was made in the January issue, devoted to the magazine's annual award winner. The feature highlighted McCall's success in unifying the state's community and technical colleges, increasing access to postsecondary education, and establishing KCTCS as a nationally recognized two-year college system. As the founding president of KCTCS, McCall oversaw the creation of a new comprehensive community and technical college system that has evolved into 16 colleges with more than 81,000 students and an annual budget of approximately $569 million. KCTCS is the No. 1 provider of postsecondary education and work-force training in Kentucky.

The Chronicle of Higher Education
February 16, 2005

Key republican lawmaker opposes Bush's proposals to cut subsidies to lenders

The top policy maker on higher education in the U.S. House of Representatives expressed support on Tuesday for President Bush's plan to raise the maximum Pell Grant by $500 over the next five years, but he questioned some of the ways in which the president proposes to pay for the increases.

In a speech to college leaders at the annual meeting here of the American Council on Education, Rep. John A. Boehner of Ohio, the Republican chairman of the House Committee on Education and the Workforce, said that paying for Pell Grants by reducing the subsidies the government provides to lenders for making low-interest loans available to students, as the president has proposed, could destabilize the government's largest loan program.

He also raised concerns about the president's plan to eliminate the Perkins Loan Program and require colleges to return the federal share of the money they use to make new Perkins Loans to students from low- and middle-income families. He said that it was unlikely that Congress would agree to these changes (The Chronicle, February 4).

"There's quite a bit of support for the Perkins Loan Program in this room and others," Representative Boehner told the gathering of college leaders. "And politically, I can tell you, I'm not sure how viable it is to expect that the Perkins program is going to be eliminated and that those federal dollars are going to be brought back to Washington."

In his speech, Mr. Boehner also expressed concern about the president's proposal to end several popular programs that help motivate and prepare low-income students for college. And he warned college leaders to expect a fight in Congress this year over the merits of the government's two main student-loan programs -- the guaranteed and direct-loan programs.

President Bush, in his budget request for the 2006 fiscal year that was released this month, called on Congress to raise the maximum Pell Grant to $4,550 by 2010 and to eliminate a $4.3-billion shortfall that has plagued the program (The Chronicle, February 18).

Mr. Bush's proposal does not provide any additional money to pay for his plan, which would cost an estimated $19-billion over the next 10 years. He would pay for it, in part, by terminating the Perkins Loan Program and requiring colleges to return the federal share of the money they use to make new Perkins Loans. The funds, which amount to $6-billion, are made up of federal "capital contributions," institutional matches, and repayments on existing Perkins loans. The recall would be phased in over 10 years.

Mr. Bush has also asked Congress to generate savings for his plan by "reforming" the federal guaranteed-student-loan program, which relies on banks and other types of lenders to deliver money to students. Under his plan, lenders and guarantee agencies, which insure federal student loans, would assume a higher share of the default risk on the loans. In addition, lenders would be charged a fee on the outstanding balance of the federal loans they've disbursed, and guarantors would see a significant reduction in the amount of money they could keep from the funds they recover from borrowers who have defaulted.

If enacted, Mr. Boehner said, those proposals could force lenders out of the student-loan business. "If you're trying to run a business, and you're going to increase my risk and take away my opportunity of profit, I'm not sure how long I'm going to be around," he stated.

Mr. Boehner's opposition to these changes is not too surprising, as he has been a long-time supporter of the bank-based guaranteed-loan program and a top recipient of campaign contributions from the student-loan industry (The Chronicle, July 30, 2004).

In his speech, he noted that the bill he has introduced to renew the Higher Education Act (HR 507) includes a couple of provisions that go after "excess earnings" that lenders make on student loans.

For example, the legislation would require lenders to return the money they make when students pay a higher interest rate than the ones lenders are guaranteed to receive. Each July the government resets the interest rates that borrowers will be charged in a given year. However, the rate that the government guarantees lenders is adjusted quarterly, according to market conditions. If the Federal Reserve lowers interest rates after the government has set the yearly rates for students, then lenders receive the higher rate, potentially a windfall.

But going much further than that would be unwise, Mr. Boehner said, as Congress "over the last dozen years," has "nicked the lenders and nicked the lenders to the point where there's very few lenders left in the business."

"For the long term health of the guaranteed-loan program, we need to tread in this area very carefully," he said.

The programs for low-income students that would be eliminated under the president's spending plan are Upward Bound and Talent Search, which are part of the federal TRIO programs for disadvantaged students, and Gear Up, which concentrates on helping financially needy middle-school students. Mr. Boehner expressed his support for those programs.

In the administration's opinion, "those programs aren't producing as much for low-income students as they could," Mr. Boehner said. "Now, that's their opinion and they're entitled to it. But we'll have a great big debate about the veracity of that" as the House education committee begins discussing the proposed legislation to renew, or reauthorize, the Higher Education Act, which governs most of the government's student-aid programs.

Mr. Boehner also used the speech to prepare college leaders for what is expected to be a nasty fight over the future of the direct-lending program, which provides loans directly to students through their colleges, eliminating the role that banks and guarantee agencies play in the guaranteed-loan program.

The congressman said that he and Rep. Howard P. (Buck) McKeon, a Republican from California who is chairman of the education panel's subcommittee on higher-education policy, had hoped to avoid such a battle. "It's been our intention to go through this reauthorization with neutrality in regard to both programs," Mr. Boehner said. "I think it serves all of our institutions and our systems well by having competition in terms of two competing loan programs. But it appears to me that that's not good enough for some, and it appears that we could have a bigger fight over this issue than what I would have expected several years."

While he didn't mention it specifically, Mr. Boehner alluded to bills that have been introduced in the House by Reps. Tom Petri, a Wisconsin Republican, and George Miller, a California Democrat, and in the Senate by Sen. Edward M. Kennedy, Democrat of Massachusetts, that would reward colleges that participate in the direct-loan program with extra financial aid to provide to low-income students. Funds to pay for this new program would come from the amount of money the government saves when colleges switch out of the bank-based program and into direct lending, supporters of the bills say.

Last month, the Congressional Budget Office estimated that the government would save $12.3-billion over five years if the total loan volume in direct lending increased from 25 to 40 percent. Federal budget officials consider direct lending to be a moneymaker for the government because borrowers pay interest to the Department of Education on their loans.

Mr. Boehner made clear at the meeting that he believes that the methods the government uses to compare the costs of the two loan programs are flawed. He and Mr. McKeon, as well as several other Republican lawmakers, have asked the Government Accountability Office, the investigative arm of Congress, to examine "the hidden costs" of direct lending.

"You continue to read that the direct-lending program saves the government oodles and oodles of money," Mr. Boehner said. "It's just not true."

Members of Congress criticize plan to kill vocational and technical funds for community colleges

President Bush's plan to eliminate vocational- and technical-education funds for community colleges got a cool reception on Tuesday by Democrats and a key Republican at a Congressional hearing on extending the federal law that governs the programs.

In his 2006 budget proposal, released last week, the president called for abolishing the $1.33-billion programs set up under the Carl D. Perkins Vocational and Technical Education Act. The programs provide about 40 percent of their dollars annually to community colleges.

The education committees in both chambers of Congress approved legislation last year to renew the Perkins Act, but could not reach an agreement on a final bill before the 108th Congress adjourned in the fall. Now, with a new Congress, the bills must go through the legislative process again.

But given Mr. Bush's budget proposal, some members of the education-reform subcommittee of the U.S. House of Representatives wondered at the hearing on Tuesday whether their work on the bill would eventually be a wasted effort. "We have to step up," said Rep. Lynn C. Woolsey, a Democrat from California, "or else the budget will make what we do here moot."

While acknowledging that the panel's hearing was meant to discuss the reauthorization of the Perkins Act, Rep. Tom Osborne, a Republican from Nebraska, said the president's spending plan had put "the issue of funding on the front burner." He asked state officials who testified at the hearing what effect eliminating the Perkins programs would have on their institutions and job-training efforts.

Lewis L. Atkinson III, Delaware's associate secretary of education, said the Perkins funds allow high schools and community colleges "to provide context" for technical-education students enrolled in academic courses. "If we eliminate Perkins," Mr. Atkinson said, "we lose a balance" between career education and academic skills.

Mr. Bush wants to use the Perkins funds to pay for his plan to extend the No Child Left Behind Act to high schools. In documents released with the budget, the U.S. Department of Education called the Perkins program ineffective, writing that "it has produced little or no evidence of improved outcomes for students despite decades of federal investment."

At the hearing, Rep. Robert E. Andrews, a Democrat from New Jersey, took the administration to task, arguing that it is impossible to measure the success of such broad-based programs. "I don't believe it," he said. "It's our burden to dispute that assertion."

The bill discussed by the subcommittee on Tuesday (HR 366) mirrors the legislation that the full education committee approved last year. Community-college officials largely supported that legislation, except for a provision that would have lumped federal support for Tech-Prep programs into large block grants for states.

The Tech-Prep programs, which give students a technical education over two years of high school and two years of community college, would not have been given priority if states were not required to spend money on it, the officials said.

The version of the Perkins bill approved by the Senate's education committee last year kept the Tech-Prep grants separate. A new bill has been introduced in the Senate (S 250), but that chamber's education committee has not yet taken any action on it.

The Chronicle of Higher Education
February 16, 2005

Public mission of state colleges is endangered by increasing competition and privatization, report says

Increased competition among universities and trends toward privatization are threatening the public mission of state universities and colleges, according to a report scheduled for release today.

The report, "Correcting Course: How We Can Restore the Ideals of Public Higher Education in a Market-Driven Era," was produced by the Futures Project, a five-year effort to examine the impact of market forces in higher education, and is derived in part from the project's final report.

The new report identifies four areas of weakness in public higher education: rising costs and unaffordable tuition, limited need-based financial aid, the lack of a sufficient way to measure success, and an increase in the proportion of research funds coming from corporate rather than government sources.

Lara Couturier, one of the authors of the report, said in an interview that several trends -- including increasing competiton from for-profit and online institutions -- have led to increasing autonomy for state universities and a market-based education system.

The changes mean that universities are competing for two types of students: those who will increase an institution's ranking in U.S. News & World Report and those who can pay the full cost of their education.

In the process, Ms. Couturier said, state universities are sacrificing their public purposes, like providing need-based aid and conducting research free from corporate influence.

"We need to help states stop and have this conversation about what we want from higher education," she said.

To get that dialogue started, the report includes recommendations for state lawmakers, colleges and universities, and the public. Lawmakers, for example, should define the benefits of higher education and focus on accountability, it says, while colleges and universities should focus on learning. The public, it says, must play an active role by staying informed and requesting information about institutions' performance.

Kevin P. Reilly, president of the University of Wisconsin System, said administrators are ready to have a conversation like that. Moreover, he said, organizations like the American Council on Education, whose annual conference Mr. Reilly just attended, are actively working on the issue.

"It always seems really easy to turn to higher education and cut because we have tuition," he said, referring to a budgeting approach taken by state lawmakers. "But what has happened as a result is this pricing out of lower-income students, and that's not something we can do long-term. I think we need to realize that education is good for the public good."

The full text of the report is available on the Futures Project's Web site (requires Adobe Reader, available free).