The Rise and Fall of Federal College Ratings

President Obama’s 2013 announcement that a set of federal college ratings would be created and then tied to federal financial aid dollars caught the higher education world by surprise. Some media coverage at the time even expected what came to be known as the Postsecondary Institution Ratings System (PIRS) to challenge U.S. News & World Report’s dominance in the higher education rankings marketplace. But most researchers and people intimately involved in policy discussions saw a substantial set of hurdles (both methodologically and politically) that college ratings would have to clear before being tied to financial aid. This resulted in a number of delays in the development of PIRS, as evidenced by last fall’s delayed release of a general framework for developing ratings.

The U.S. Department of Education’s March announcement that two college ratings systems would be created, one oriented toward consumers and one for accountability purposes, further complicated the efforts to develop a ratings system. As someone who has written extensively on college ratings, I weighed in with my expectation that any ratings were becoming extremely unlikely (due to both political pressures and other pressing needs for ED to address):

This week’s announcement that the Department of Education is dropping the ratings portion of PIRS (is it PIS now?) comes as little surprise to higher education policy insiders—particularly in the face of bipartisan legislation in Congress that sought to block the development of ratings and fierce opposition from much of the higher education community. I have to chuckle at Education Undersecretary Ted Mitchell’s comments on the changes; he told The Chronicle of Higher Education that dropping ratings “is the exact opposite of a collapse” and “a sprint forward.” But politically, this is a good time for ED to focus on consumer information after its recent court victory against the for-profit sector that allows the gainful employment accountability system to go into effect next week.

It does appear that the PIRS effort will not be in vain, as ED has promised that additional data on colleges’ performance will be made available on consumer-friendly websites. Although I am skeptical that federal websites like the College Scorecard and College Navigator directly reach students and their families, I am a believer in the power of information to help students make at least decent decisions, but I think this information will be more effective when packaged by private organizations such as guidance counselors and college access organizations.

On a historical note, the 2013-2015 effort to rate colleges failed to live up to efforts a century ago, in which ratings were actually created but President Taft blocked their release. As Libby Nelson at Vox noted last summer, President Wilson created a ratings committee in 1914, which then came to the conclusion that publishing ratings was not desirable at the time. 101 years later, some things still haven’t changed. College ratings are likely dead for decades at the federal level, but performance-based funding or “risk-sharing” ideas enjoy some bipartisan support and are the next big accountability policy discussion.

I’d love to be able to write more at this time about the path forward for federal higher education accountability policy, but I’ve got to get back to putting together the annual Washington Monthly college rankings (look for them in late August). Hopefully, future versions of the rankings will be able to include some of the new information that has been promised in this new consumer information system.

It’s Time to Make Accreditation Reports Public

The higher education world is abuzz about this week’s great piece in The Wall Street Journal questioning the effectiveness of higher education accrediting agencies, whose seal of approval is required for a college to receive federal student financial aid dollars. In the front-page article, Andrea Fuller and Douglas Belkin of the WSJ note that at least 11 accredited four-year colleges had federal graduation rates (excluding part-time and transfer students, among others) below 10%, which leads one to question whether accreditors are doing their job in ensuring institutional quality. A 2014 Government Accountability Office report concluded that accreditors are more likely to yank a college’s accreditation over financial concerns than academic concerns, calling for additional oversight from the U.S. Department of Education.

Congress has also been placing pressure on accreditors in recent weeks due to the collapse of the accredited Corinthian chain of for-profit colleges and the Department of Education’s announcement that at least some Corinthian students will qualify for loan forgiveness. The head of the main accreditation body responsible for most Corinthian campuses got grilled by Senate Democrats in a hearing this week for not pulling the campuses’ accreditation before the chain collapsed. As a part of the (hopefully) impending reauthorization of the Higher Education Act, members of Congress on both sides of the aisle are interested in a potential overhaul of the accreditation system.

Students, their families, policymakers, and the general public have a clear and compelling interest in reading the reports from accrediting agencies and knowing whether colleges are facing sanctions for some aspect of academic or fiscal performance. Yet these reports, which are produced by nonprofit accrediting agencies, are rarely available to the public. For the WSJ piece, the reporters were able to use open-records requests to get accreditation reports for 50 colleges with the lowest graduation rates. I was recently at a conference where the GAO presented on their aforementioned accreditation report and asked whether the data they compiled on accreditor sanctions was available to the public. They suggested I file an open records request, something which I’ve (unsuccessfully) done for another paper.

Basic information about a college’s accreditation status and reports –including any sanctions and key recommendations for improvement—should be readily available to the public as a requirement for federal financial aid eligibility. And this should cover all types of colleges, including private nonprofit and for-profit colleges that accept federal funds. The federal government doesn’t necessarily have to get involved in an accreditation process (a key concern of colleges and universities), but it can use its clout to make additional data available to the public. (Students probably won’t go to the college’s website and read the reports, but third-party groups like guidance counselors and college rankings providers would work to get the information out in more usable form.) A little sunshine in the accreditation process has the potential to be a wonderful disinfectant.

Is “Overborrowing” for College an Epidemic?

As the Senate Health, Education, Labor, and Pensions Committee continues to slowly move toward Higher Education Act reauthorization, the committee held a hearing this week on the possibility of institutional risk-sharing with respect to federal student financial aid programs. This idea, which has bipartisan support at least in principle, would require at least some low-performing colleges to be responsible for a portion of loans not repaid to the federal government. (I’ve written about this idea in the past.)

Sen. Lamar Alexander (R-TN), the committee chair, began his opening statement with a discussion of “overborrowing,” which he defines as students borrowing more than they need to in order to attend college. Along with Sen. Michael Bennet (D-CO) and other colleagues, he is sponsoring the FAST Act, which contains a provision that would prorate the amount of funds part-time students can borrow for living expenses. Financial aid administrators are also concerned about overborrowing, as evidenced by their professional association’s push to allow colleges to offer students less than the maximum loan amount. This is also something that Sen. Alexander discussed in his opening statement.

But there is no commonly-accepted definition of “overborrowing,” nor is there empirical research that clearly defines how much borrowing is too much. I can see why policymakers want to limit the amount of money that part-time students can borrow for living expenses while in college, as students may hit their lifetime loan caps before completing their degrees as part-time students. But, as research that I’ve conducted with Sara Goldrick-Rab at Wisconsin and Braden Hosch at Stony Brook shows, about one-third of all colleges set living expenses at least $3,000 below what it likely costs to live. This effectively limits student borrowing, as they cannot have a financial aid package exceeding the cost of attendance.

Some people have said that high student loan default rates are a clear indicator that overborrowing is a common concern. Yet students with a small amount of debt are at a higher risk of default, as many of them dropped out of college without a degree and were unable to find gainful employment. It could be the case that borrowing more money would be a better decision, as that money might help students stay in college and complete degrees. However, a substantial percentage of students from low-income families are loan-averse—either completely unwilling to take on debt or only willing to take on a bare minimum as a last resort. Underborrowing is the concern in higher education funding that few people are talking about, and it deserves additional study.

Finally, it is worth a reminder that the typical student graduating with a bachelor’s degree has about $30,000 in debt, although there are huge differences by race/ethnicity and family income. This is in spite of media reports that focus on borrowers with atypically high debt burdens. While I’m concerned about the substantial percentage of students borrowing large amounts of money for graduate school (and particularly the implications for taxpayers due to the presence of income-based repayment programs), it’s hard to convincingly argue that overborrowing for an undergraduate degree is truly an epidemic.

Comments on President Obama’s State of the Union Higher Education Proposals

As President Obama enters the last two years of his presidency, he has made higher education one of the key points in his policy platform. The announcement of a plan to give students two years of free tuition at community colleges has gotten a great deal of attention, even though a lot of details are still lacking. (See my analysis of the plan here.) In an unusual Saturday night release, the Obama Administration laid out some details of its tax proposals that will be further elaborated in Tuesday’s State of the Union Address.

Many of the tax provisions will either directly affect higher education, or they will impact students and their families who are currently struggling to pay for college. Here is a quick overview of the provisions:

  • Expand the Earned Income Tax Credit, which goes to lower-income families with some wage income. This credit is fully refundable, meaning that families can benefit even if they don’t have a tax liability to offset with a credit (meaning that negative effective tax rates can result).
  • Expand and streamline the Child and Dependent Care Tax Credit, which is designed to offset high costs of child care. This could help the growing number of students who have children.
  • Consolidate the tuition and fees deduction and Lifetime Learning Credit into a streamlined and expanded American Opportunity Tax Credit, and making the AOTC permanent (it is set to expire in 2017). The AOTC would be set at $2,500 per year for five years and would be indexed for inflation. The AOTC would also be expanded to cover part-time students and the refundable portion would increase from $1,000 to $1,500. Finally, Pell Grant funds received would not count toward the AOTC. The AOTC expansion would be partially covered by reducing tax incentives for 529 and Coverdell savings plans.
  • Eliminate any taxes on any student loan balances forgiven after making the full 20 years of payment under income-based repayment plans. Right now, students are scheduled to be taxed on any balances—although few (if any) students have actually faced the tax burden at this point. This would partially be paid for by getting rid of the student loan interest deduction; essentially, students would lose any tax benefits for paying interest during the life of the loan, but they could benefit at the end of the payment period.

Although the exact costs of each of these proposals will not be known until the President releases his budget document later this spring, it appears that much of the revenue needed to pay for these expanded programs will come from higher taxes on higher-income individuals and large financial companies. Those tax increases are extremely unlikely to be passed by a Republican Congress, but some of the individual tax credit proposals may still be considered with funding coming from other sources.

Putting concerns about feasibility and funding aside, there are some things to like about the President’s proposals, while there are other things not to like. I’m generally not a fan of tax credits for higher education, as it is far less efficient to give students and their families money months after enrollment instead of when they actually need it the most. A great new National Bureau of Economic Research working paper by George Bulman and Caroline Hoxby examined the effectiveness of federal higher education tax credits and found essentially no impacts of tax credits on enrollment or persistence rates. It would be far better to give students a smaller grant at enrollment than a larger grant later on, but that is unlikely to ever happen due to the political popularity of tax credits on both sides of the aisle.

But I do like the part of the proposal that cuts the student loan interest deduction and directs the savings toward addressing the ticking time bomb of the loan forgiveness tax. The interest deduction is complicated, making it less likely to be claimed by lower-income households. Additionally, making interest partially tax-deductible could be seen as encouraging students to borrow more, potentially putting upward pressures on tuition. That is a difficult claim to verify empirically, but it is something that is often mentioned in discussions about college prices.

Regardless of whether any of these proposals become law, it is exciting to see so much discussion of higher education finance and policy at this point. Hopefully, there will be additional proposals coming from both sides of the political aisle that will help students access and complete high-quality higher education.

The Ticking Student Loan Time Bomb: The Forgiveness Tax

What to do about the rising amount of student loan debt has recently taken center stage in domestic policy discussions, as the average student who completes a bachelor’s degree and takes out debt now has a student loan burden of around $30,000. Media reports love focusing on those with much larger amounts of debt—who tend to either have graduate degrees or went to colleges with high costs of attendance—but these students are a minority. The past week has seen proposals by members of Congress and President Obama to reduce the burden on those who leave college with debt. Below are summaries of the three main proposals and what they mean for students and taxpayers.

Proposal 1: President Obama’s extension of more generous income-based repayment (IBR) terms. He signed an executive order authorizing the Department of Education to enter the federal rulemaking process in order to extend IBR terms that apply to current Direct Loan borrowers retroactively for those who borrowed before 2007 or those who have not borrowed since 2011. Once approved (no sooner than 2015), borrowers could pay 10% of their discretionary income over 20 years instead of 15%. This proposal has gained support from many in the higher education community, but there are concerns about costs and whether the President has the authority to act without Congressional approval.

Proposal 2: Sen. Warren (D-MA)’s proposal to refinance student loans. She has introduced multiple proposals to lower interest rates, including one to lower rates to 0.75% (which I called “a folly”). Her most recent proposal would allow students to refinance federal and some private loans at the current subsidized Stafford loan interest rate (3.86%). President Obama endorsed the plan when he signed his executive order, but the likelihood of the plan passing is fairly low. It is expected to cost about $55 billion (a number highly dependent on how many borrowers actually refinance), and is paid for by a surtax on millionaires. While passing the Democrat-controlled Senate is possible, it is unlikely to pass the GOP-controlled House.

Proposal 3: Sen. Warner (R-VA)’s and Thune (R-SD)’s proposal to allow employers to contribute pre-tax dollars to help repay employees’ loans. This proposal came as a surprise, particularly the provision that borrowers would have to refinance in the private market before participating in the program. No cost information is currently available to the best of my knowledge, and this proposal is unlikely to pass.

While all three of these proposals could help at least some borrowers in the short run, none of them do anything to affect the main reason behind the growth in student loans: the rising cost of college. If anything, making it easier to repay loans has the potential to increase college costs as colleges’ incentives to reduce costs are decreased. This fits in with the “Bennett Hypothesis,” in which increases in federal financial aid are associated with increased costs. (Evidence to support the hypothesis is mixed.)

Making IBR programs more generous could have serious long-run implications for millions of students. Under current law, students in IBR programs (excluding those in the Public Service Loan Forgiveness program) will face a tax bill for any balance forgiven at the end of the loan (typically 10-25 years). President Obama did not mention that when signing the executive order, even though it is likely that many borrowers will face a substantial tax burden when their loan is forgiven. If a remaining balance of $30,000 is forgiven (on the low end of the likely distribution), the borrower can face a tax burden of $10,000.

The issue of the forgiveness tax has not yet reached center stage, but will do so in the next few years as the first wave of IBR borrowers begin to reach the end of the repayment period. Congress needs to clarify whether the forgiveness tax will remain in place in order to give borrowers as much information as possible. Congress can choose to eliminate the tax, but the loss of revenue must be offset elsewhere in the federal budget through spending cuts or tax increases. Or they can keep the tax, but could consider spreading out the burden over multiple years.

Thinking about the long-term implications of loan forgiveness under IBR is not sexy, and it is not a topic that will resonate with many voters at this point in time. But politicians need to consider the ticking time bomb and how to best defuse it before more Americans enroll in IBR.

Will Federal Aid Be Tied to College Ratings? (Poll)

With all of the discussion of what will be included in the proposed Postsecondary Institution Ratings System (PIRS), there has been relatively little discussion about whether federal Title IV financial aid will actually be tied to the ratings by 2018—as the President has specified. I would love to get your thoughts on the feasibility by taking the following poll, and leaving any additional comments below.

 

 

I’ll share my thoughts in a subsequent post, so stay tuned!

Senator Warren’s Interest Rate Follies

First-term Senator Elizabeth Warren (D-MA) is a darling of the progressive Left, and she has been mentioned as a possible Presidential candidate in 2016 (although she has stated she’s not running). One of the ways she has gained support with the Democratic base is through her many public statements about the federal government’s purported profit on student loans, which she cites to be $51 billion in Fiscal Year 2013. Given the huge profit, she has introduced legislation to drop interest rates to the overnight borrowing rate at the Federal Reserve: 0.75%.

Her argument suffers from one main problem: student loans carry risk for the federal government. (She made my 2013 not-top-ten list for this reason.) The Congressional Budget Office, where the $51 billion estimate came from, uses federal borrowing costs as a discount rate. This discount rate is very low, in part because the federal government is viewed as very unlikely to default (even with the possibility of debt ceiling shenanigans). As a result, numerous groups have suggested the use of fair-value accounting, in which the risk of default is considered. Indeed, the Washington Post’s fact-checking blog gave Senator Warren’s statement of a $51 billion profit “two Pinocchios” because it did not consider fair-value accounting.

[On Twitter, the wonderful Libby Nelson notes that my explanation of fair-value accounting vs. federal regulations is unclear. Here is a nice CBO summary of the different methods.]

With the debate over student loan profits and accounting methods as a backdrop, the release of Friday’s Government Accountability Office report on federal student loans was eagerly anticipated in the higher education community. The title of the report succinctly summarizes the rest of the document: “Borrower Interest Rates Cannot Be Set in Advance to Precisely and Consistently Balance Federal Revenues and Costs.” This resulted in a few howlers from policy analysts, including this gem from Matt Chingos at Brookings:

Karen Weise at Bloomberg was a little more diplomatic with her summary of the report:

The report itself is fairly dry, but it does emphasize something that should be kept in mind when considering the costs of student loan programs. Due to the growing prevalence of extended payment plans, increased rates of income-based repayment plan usage, and the continued risk of defaults, the actual amount of the subsidy or cost on student loans will not be known for 40 years after disbursement.  Each of these individual variables could also have a large effect on the long-run subsidy or cost; for example, a higher-than-expected rate of income-based repayment participation could increase program costs.

The following paragraph on pages 18 and 19 sums up a key point of the report:

“As of the end of fiscal year 2013, it is estimated that the government will generate about $66 billion in subsidy income from the 2007 to 2012 loan cohorts as a group. However, current estimates for this group of loan cohorts are based predominantly on forecasted cash flow data derived from assumptions about future loan performance. As more information on actual cash flows for these loans becomes available, subsidy cost estimates will change. As a result, it is unclear whether these loan cohorts will ultimately generate subsidy income, as currently estimated, or whether they will result in subsidy costs to the government. This will not be known with certainty until all cash flows have been recorded after loans have been repaid or discharged—which may be as many as 40 years from when the loans were originally disbursed.”

I read this paragraph as providing possible evidence that interest rates may have been set relatively high compared to the federal cost of borrowing. (Recall that the interest rates for subsidized Stafford loans declined from 6.8% in 2007 to 3.4% in 2011, while Treasury rates were at historic lows.) The spread between the 10-year Treasury yield in May versus the interest rate on subsidized Stafford loans has been the following for the past seven years:

Year Stafford (pct) 10-yr T-note (pct) Spread (pct)
2007 6.8 4.75 2.05
2008 6.0 3.88 2.12
2009 5.6 3.29 2.31
2010 4.5 3.42 1.08
2011 3.4 3.17 0.23
2012 3.4 1.80 1.60
2013 3.86 1.93 1.93

This interest rate spread is statutorily set at 2.05% for subsidized Stafford loans in the future, roughly the long-run average. So while future GAO reports a few years after disbursement may find similar results, what we’ll all be waiting for is longer-term data to see if the estimates hold true. The federal government doesn’t necessarily have a great history of long-run cost projections, so I’m expecting this spread to disappear over time. (And keep in mind this report doesn’t fully account for risk.)

Yet Senator Warren and eight other Democrats released a press release on Friday afternoon with the headline of “Democratic Senators Highlight Obscene Government Profits Off Student Loan Program.” They focused entirely on the initial projection of a $66 billion profit over five years and entirely ignored the long-run uncertainty highlighted by the GAO. This press release is a great example of selecting only the most favored parts of a report, while ignoring other important details along the way. Again, the Twittersphere (myself included) expressed its thoughts:

On a more fundamental note, I think that Senator Warren and colleagues are misguided in their efforts to continue lowering student loan interest rates. Given the reality that higher education funding is a zero-sum game, I would much rather see funds used to support the Pell Grant, work-study, and other upfront sources of aid for students than slightly lower loan payments after students have already left college. (The same argument holds against tax credits.) Senator Warren may not be running for President (yet), but she’s in the running for my 2014 not-top-ten list.

My State of the Union Wish List

My State of the Union Wish List

I don’t have tremendously high expectations for tonight’s State of the Union address regarding higher education, given the priority placed on other topics such as social mobility and potentially even foreign affairs. However, I would be thrilled if President Obama and/or the small army of Republicans responding touched on any of the three following items:

(1) Don’t make grand claims on fixing the rising burden of student loan debt. While student loan debt has crossed $1 trillion, it’s unclear whether any of the proposals out there would seriously help students after they leave college—let alone encourage students to attend college. Last year’s fight over interest rates was an example of tinkering around the edges. The push for so-called “Pay it Forward” plans might help, but these plans are a long way from enrolling students and may have adverse consequences. I encourage the President and Republicans to bring up these ideas, but don’t overpromise here.

(2) Talk about access to college for more than just high-achieving, low-income students. The recent White House summit on these students is a nice PR push, but will do little to improve college access. Most of these students are going to college somewhere, although some are attending less-selective institutions. As Matt Chingos at Brookings notes, focusing on the problem of “undermatching” won’t move the college completion margin in any substantial way. Focus on trying to increase college access for more than just the small number of very well-prepared students.

(3) Don’t overpromise on college ratings. While the push for federal ratings is moving forward this year, these ratings won’t be released for at least several more months. And once the ratings get released, there is no guarantee that students use the ratings in any meaningful way (although it’s possible). Additionally, tying aid to ratings takes an act of Congress and won’t happen during the current administration. Keep plugging forward on the ratings work, but don’t make them sound like the solution to all of our problems.

I’m looking forward to the speech tonight, and please send along your wish list through either the comments section or via Twitter!

Will Holding Colleges Accountable for Default Rates be Effective?

As student loan debt continues to climb and Congress enters a midterm election year, three Democrats in the United States Senate (Reed, Durbin, and Warren) recently introduced a piece of legislation designed to hold certain types of colleges and universities accountable for their students’ loan default rates. If enacted, the bill would require colleges to pay a fine of a percentage of its students’ total defaulted loans to the Department of Education, part of which would be used to help borrowers avoid future defaults and the other part would go to a fund to help support the Pell Grant in case of any future funding shortfalls.

The proposed fines are the following:

  • 5% fine if the most recent cohort default rate (CDR) over three years is 15-20%
  • 10% if CDR is 20-25%
  • 15% if CDR is 25-30%
  • 20% is CDR is 30%+

As an example of what these fines could mean, consider their potential implications for the University of Phoenix’s online division. Data from the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) show that Phoenix collected roughly $1.4 billion in student loan revenue during the 2011-12 academic year, while 34.4% of students who took out loans defaulted in a three-year period. This default rate would place them in the 20% fine category, resulting in a fine of roughly $100 million per year based on an estimated $500 million per year in defaulted loans. This would represent roughly four percent of their total tuition revenue ($2.7 billion) in the 2011-12 academic year—which is far from a trivial sum.

Daniel Luzer on Washington Monthly’s College Guide blog (where many of my pieces are cross-posted) notes some of the potential positives of this legislation, including encouraging colleges to spend more time and energy counseling students and providing more information about financial aid.

But, in order for this legislation to actually benefit students, three things must happen:

(1) Some colleges must actually be affected by the legislation. The sanctions in the bill would not apply to community colleges, historically black colleges and universities (HBCUs), and likely other colleges designated as minority-serving institutions. This excludes a substantial number of nonprofit institutions, many of which have higher default rates. A provision in the bill excludes colleges at which fewer than 25% of students take out federal loans, which further diminishes the number of nonprofit institutions on the list.

But even if a college is not exempt from the legislation, it is still possible to avoid fines if default rates are over 15%. The legislation grants the Secretary of Education the authority to grant waivers, which would be the first time the Secretary has ever been granted that authority. (Kidding!) Colleges can submit remediation plans in order to avoid or reduce fines. It will be interesting to see the reaction to the first waiver request, as colleges’ lobbying efforts tend to be well-organized.

A more interesting case will involve the for-profit sector. Given the three Senators’ general distrust of for-profit institutions, it would not surprise me if nearly all of the colleges facing fines are proprietary in nature. But the way the bill is targeted seems to be similar to previous attempts at gainful employment legislation, which have been the subject of massive amounts of litigation. Expect this proposal to face litigation if it ever became law.

(2) Colleges must be able to improve their financial aid offices without restricting students’ access to financial aid. One of the underlying premises of this legislation is that financial aid offices are not helping students make sound financial decisions that help them complete college. Aid administrators would likely disagree with that statement, although additional resources targeted toward financial counseling may be beneficial.

Another concern is that in order to reduce default rates, aid offices will not offer students loans if they perceive the student as having a higher risk of default. While there is a prohibition written into the legislation against denying loans based on the perceived risk of default, this would be extremely difficult to prove and enforce. Colleges are not required to offer students the full amount of loans available in the initial aid package, and indeed some community colleges decline to offer any federal loans to their students. Some colleges would like more authority to limit loan offers to students, and this legislation could reduce access to credit for needy students.

(3) The legislation must adequately address students who transfer. If a student takes out loans while attending multiple institutions, would each college be held responsible for a student’s default—even if most of the debt was at one institution? Consider a student who attends a regional public university for one year and takes out the maximum in subsidized Stafford loans ($3,500). She then transfers to an expensive private college and accrues an additional $30,000 in debt before graduating. If she defaults on her principal of $33,500, should both colleges be held responsible? That is unclear at this point.

So would holding colleges accountable for default rates (in the method of this legislation) help students? I’m skeptical because I don’t see many colleges actually facing sanctions, nor do I see the fines being particularly effective. This is one of those ideas that is great in theory, but may not work as well in practice.

I don’t think this legislation is likely to become law in its current form, but it’s worth keeping an eye on as the Department of Education works to develop the Postsecondary Institution Rating System (PIRS). Many of the potential discussions this legislation raises will certainly come up again once the draft ratings are released.

The 2013 Higher Education Not Top Ten List

Yesterday, I put out my top-ten list of higher education policy and finance issues from 2013. And today, I’m back with a list of not-top-ten events from the year (big thanks to Justin Chase Brown for inspiring me to write this post). These are events that left me shaking my head in disbelief or wondering how someone could fail so dramatically.

(Did I miss anything? Start the discussion below!)

10. Monsters University isn’t real. The higher education community was abuzz this summer with the premiere of Pixar’s newest movie about one of the few universities outside Fear Tech specializing in scaring studies. The Monsters University website is quite good, and as Jens Larson at U of Admissions Marketing notes, it’s hard to distinguish from many Title IV-participating institutions. I’ll use this blog post to announce my willingness to give a lecture or two at Monsters University. (As an aside, since the two main characters didn’t graduate, their post-college success may not help MU’s scores in a college rating system.)

9. Brent Musburger set men back at least five decades in the course of 30 seconds. His public ogling of the girlfriend of Alabama quarterback A.J. McCarron during January’s BCS championship game instantly became a YouTube sensation. Musburger shouldn’t have listened to his partner in The Waterboy, Dan Fouts, who urged him to not hold anything back in the last game of the season. McCarron, on the other hand, is preparing to play Oklahoma in the Sugar Bowl on January 2.

8. Rankings and ratings are not the same thing. While college leaders tend not to like the Obama Administration’s proposed Postsecondary Institution Rating System, it is important to emphasize the difference between rankings and ratings. Rankings assign unique values to each institution (like the college football or basketball polls), while ratings lump colleges into broad categories (think A-F grades). Maybe since I work on college rankings, I’m particularly annoyed by the confusion. In any case, it’s enough to make my list.

7. Mooooove over: The College Board has another rough year. This follows a rough 2012 for the publishers of the SAT, as more students took the ACT than the SAT for the first time last year. But in 2013, the redesign of the SAT got pushed back from 2015 to 2016, giving the ACT more time to gain market share. The College Board followed that up with a head-scratching example of “brand-ing,” passing out millions of cow stickers to students taking the PSAT. If these weren’t enough, the College Board also runs the CSS Profile, a supplemental (and not free) application for financial aid required by many expensive institutions. Rachel Fishman at New America has written extensively about the concerns of the Profile.

6. Gordon Gee is the most interesting man in higher education. The well-traveled university president began 2013 leading Ohio State University, but left the post this summer after his 2012 comments disparaging Notre Dame, Catholic priests, and the ability of the Southeastern Conference to read came to light. Yet, he and his large bowtie collection will be heading to West Virginia University this spring as he assumes the role of interim president. There is still no word if the Little Sisters of the Poor will show up on WVU’s 2014 football schedule.

5. Rate My Professor is a lousy measure of institutional teaching quality. I’m not going to fully dismiss Rate My Professor, as I do believe it can be correlated with an individual professor’s teaching quality. But a Yahoo! Finance piece claiming to have knowledge of the 25 colleges with the worst professors cross the boundaries of absurd. I quickly wrote a response to that piece, noting that controlling for a student’s grade and the difficulty of the course are essential in order to try to isolate teaching quality. This was by far my most-viewed blog of 2013.

4. Elizabeth Warren’s interest rate follies. The Democratic Senator from Massachusetts became even more of a progressive darling this spring when she announced a plan to tie student loan interest rates to the Federal Reserve’s overnight borrowing rate—0.75%. Unfortunately, this plan made no sense on several dimensions. While overnight borrowing has nearly no risk, student loans (over a ten-year period) have considerable risk. Additionally, if interest rates were set this low, money would have to come from somewhere else. I would much rather see the subsidy go upfront to students through larger Pell Grants than through lower interest payments after leaving college. Fortunately, Congress listened to smart people like Jason Delisle at New America and her plan went nowhere.

3. The Common Application fails early applicants. The Common Application, used by a substantial number of elite colleges, did not work for some students applying in October and November. The reason was that the Common App’s new software didn’t work and they failed to leave the previous version available in case of problems. Although this didn’t affect the vast majority of students who aspire to attend less-selective institutions, it certainly got the chattering classes talking.

2. The federal government shut down and budget games ensued all year long. The constant partisan battle culminated with a sixteen-day shutdown in October, bringing much of the Department of Education to a screeching halt. While the research community used Twitter to trade downloaded copies of IPEDS data and government reports, other disruptions were more substantial. 2013 also featured sequestration of some education spending, although it looks like the budget process might return to regular order for the next two years.

1. Georgetown Law finds a way to stick taxpayers with the entire cost of law school. It is no secret that law school is an expensive proposition, with six-figure debt burdens becoming the norm at many institutions. But some of the loans can be forgiven if students pursue public service careers for a decade, a program that was designed to help underpaid and overworked folks like public defenders or prosecuting attorneys.

Georgetown’s Loan Repayment Assistance Program advertises that “public interest borrowers might now pay a single penny on their loans—ever!” To do this, the law school increased tuition to cover the cost of 10 years’ worth of loan payments under income-based repayment for students making under $75,000 per year. Students take out Grad PLUS loans to fund this upfront, but never have to pay a dime of those loans back as Georgetown makes the payments. Jason Delisle and Alex Holt, who busted this scheme wide open this summer, estimate that students will have over $150,000 in loans forgiven—and put on the backs of taxpayers.  Although Georgetown tries to defend the practice as being good for society, it is extremely hard to make that argument.

Honorable mentions: #Karma, lousy attacks on performance-based funding research, financial stability of athletics at Rutgers and Maryland, and parking at 98% of campuses.