Ordinary Scandalous Student Debt

A Personal Finance column in today's Los Angeles Times has one of the clearer sagas I've read of how a college student can get caught in a debt trap. The key line: " some students who think they are getting a federal loan find out later that they hold a private loan." They end up paying credit-card style interest on what they had assumed would be federal loans.

President-elect Obama has shown an interest in the dubious role of private banks in the college loan industry. It is going to take real concentration to pave over this quagmire.

HOOKED ON DEBT

Student loans turn into crushing burden for unwary borrowers
Some who think they are getting a federal loan find out later that they hold a private loan. The difference can be costly.
Kathy M. Kristof
Personal Finance

December 27, 2008

One in a series of occasional stories

Natalie Hickey left her small hometown in Ohio six years ago and aimed her beat-up Dodge Intrepid for the West Coast. Four years later, she realized a long-held dream and graduated with a bachelor's degree in photography from Brooks Institute in Santa Barbara.

She also picked up $140,000 in student debt, some of it at interest rates as high as 18%. Her monthly payments are roughly $1,700, more than her rent and car payment combined.

"I don't have all this debt because I was buying stuff," said Hickey, who now lives in Texas. "I was just trying to pay tuition, living on ramen noodles and doing everything as cheaply as I could."

Hickey got caught in an increasingly common trap in the nation's $85-billion student loan market. She borrowed heavily, presuming that all her debt was part of the federal student loan program.

But most of the money she borrowed was actually in private loans, the fastest-growing segment of the student loan market. Private loans have no relation to the federal loan program, with one exception: In many cases, they are offered by the same for-profit companies that provide federally funded student loans.

As a result, some students who think they are getting a federal loan find out later that they hold a private loan. The difference can be costly.

Whereas federally guaranteed loans have fixed interest rates, currently either 6% or 6.8%, private loans are more like credit card debt. Interest rates aren't fixed and often run 15% or more, not counting fees.

Most students have little experience in taking out loans, yet the federal government doesn't require lenders to disclose the total cost of a student loan and other terms upfront -- before signing -- as it does for car loans and mortgages.

"Students are in the cross hairs, being bombarded by very sophisticated and, to some extent, ethically marginal lenders," said Rep. George Miller (D-Martinez), who sponsored legislation passed this year that will require lenders to provide more disclosures on fees. "My fear is that we are developing a predatory market, just like we have had in mortgages."

About $15 billion in private student loans are expected to be funded this year, a 900% increase from a decade ago, according to the nonprofit College Board. Private loans are growing faster than federally guaranteed loans, which rose 59% over the same period, in part because of limits on how much students can borrow with the government's backing.

Four years at a public university, including room and board, costs an average of $57,332, according to the College Board. The average tab for a private university is $136,528. Yet the maximum that can be borrowed under the federal loan program is $31,000.

High-cost private loans fill that gap. One result is that students now average nearly $20,000 in debt by the time they graduate, twice as much as a decade ago.

"There is an alignment of interests that lead students to take out larger and larger amounts of debt," said Luke Swarthout, a former higher education advocate at the U.S. Public Interest Research Group in Washington.

"The students think it's an investment in their future, and the colleges are willing to let them borrow heavily because it helps them fill in their enrollment."

In the dark

Hickey knew she would need loans to complete her degree, so she went to the campus financial aid office as a freshman. After she filled out paperwork, Brooks Institute set her up in a loan program administered by Sallie Mae, the nation's biggest student lender.

Sallie Mae was chartered by the federal government in 1972, and most of its business is in issuing federally insured student loans. But while it may appear to be a quasi-government agency, it is in fact a for-profit company whose stock trades on the New York Stock Exchange.

Hickey ended up with $20,000 in low-interest federally guaranteed loans issued by Sallie Mae, and $120,000 in higher-interest private loans issued by Sallie Mae.

Hickey said no one explained the difference to her.

"The financial aid officer just said that my federal loans weren't enough to pay the tuition, but that was OK because they had these great alternative loans," Hickey said. "They made it sound so good that I didn't ask that many questions."

Tim Halsey, vice president of finance for Brooks Institute, declined to discuss Hickey's case directly, citing federal privacy laws. But he said the school's financial aid officers take great pains to explain the differences between loans and to guide students to the best deals.

"It is really to our advantage to get the loans and interest rates as low as possible," Halsey said.

"My motivation is to get that person to come to the school, if that's what they want to do. If I can get those costs as low as possible, it benefits us both."

Spotty disclosure

But some lenders market directly to students, and consumer advocates say they often fail to clearly detail loan costs and may even seek to present themselves as part of a school's financial aid office.

For a glimpse into how lenders operate, The Times filled out online loan applications with JPMorgan Chase & Co., Sallie Mae and MyRichUncle. An 18-year-old student who began college this fall agreed to provide personal information, including her Social Security number, so that lenders would provide detailed loan terms.

JPMorgan Chase, the giant New York bank, did not disclose its interest rates or fees in the online application.

Sallie Mae, which is based in Reston, Va., disclosed an interest rate and fee, but an attached disclaimer in capital letters said the numbers were preliminary "and may change."

The third, MyRichUncle, a New York-based student loan firm formed in 2005, disclosed a variable rate that starts at 9.6% and said there would be an unspecified origination fee.

The loan companies provided a bit more information over the phone. A MyRichUncle representative said its origination fee would be 2%. A Chase agent said the variable rate would start at 7.5% with no origination fee, and Sallie Mae said its variable rate would be 8%, also with no fee.

After initially resisting, agents for Sallie Mae and Chase both agreed to provide summaries of the loan costs in writing. But the one-page letters they mailed did not include the total cost of the loan over time.

The Times then called all three lenders to discuss their practices. MyRichUncle co-founder Raza Khan said that the failure to state the amount of the origination fee in the online application was a mistake and that the information was now included.

Sallie Mae spokeswoman Martha Holler maintained that the company's disclosures were adequate.

JPMorgan Chase spokeswoman Mary Kay Bean said the loan terms would be sent after the loan had been approved, pointing out that the company was not required to do so beforehand.

"We send borrowers a letter with the rate," Bean said. "We comply with the law. That's it."

Lenders in disguise

When Shianily Torres took out $38,000 in student loans at Florida's International Academy of Design and Technology, she thought she was dealing with the college financial aid office.

She now thinks it may actually have been a representative of Sallie Mae -- in part because that was the only company that offered her a loan.

"My father asked if there was somewhere else we could get the loan and they said no. The school didn't accept money from just any bank," Torres said.

Torres said she didn't learn the rate on her loan until after graduation, when she got the bill. The variable rate rose as high as 18.5%, which requires a monthly payment of $650 -- more than twice what she makes in her part-time job.

She said that she couldn't make the payments, and that Sallie Mae had not responded to her efforts to renegotiate terms.

An investigation last year by New York Atty. Gen. Andrew Cuomo found an "unholy alliance" between lenders and hundreds of schools across the country.

Charging more than a dozen lenders with wrongdoing, Cuomo cited a pattern of bribes to financial aid officers making decisions about which lenders would appear on school-preferred lender lists and "revenue-sharing" kickbacks -- in cash or products -- to schools that led their students to specific companies.

Hundreds of colleges agreed to abide by new ethics rules and not to accept gifts, and half a dozen even refunded money to students. The U.S. Department of Education tightened its guidelines to discourage quid pro quo arrangements.

More than a dozen student lenders, including Sallie Mae, Bank of America, Citibank and JPMorganChase, paid a combined $13.7 million to settle Cuomo's charges, without admitting or denying the allegations.

Private litigation continues, however. Torres is one of dozens of students who are suing Sallie Mae, alleging deception and discriminatory practices that left low-income and minority students saddled with the highest-cost loans.

Andrew Meyer, the Tampa, Fla., attorney handling the case, said his law firm gained insight into Sallie Mae's practices from people who formerly worked there as loan officers.

A key strategy was to make students believe the loan officers worked directly for the college, he said. Meyer said Sallie Mae purposely sent disclosure forms a month or more after classes had begun so that students would be less likely to protest onerous terms.

Sallie Mae's Holler said she could not comment on litigation, but she defended the company's lending practices.

"It's risk-based pricing," she said. "Students can take advantage of an interest rate decline, like we've seen in the past several months, but the loan rates also have the potential to rise when there is a rising rate environment."

Direct marketing

In addition to working with schools, lenders try to reach students directly. Although some companies have failed in the credit crunch, dozens remain in business, sending e-mails to students and advertising on sites such as YouTube.

Loan-shopping websites also lure young people into private loans, said Nancy Coolidge, a financial aid executive with the UC Board of Regents.

She noted that one site -- TuitionBids.com -- encouraged students to seek federal loans first but also had a "let the bidding begin" button that directed users to an application for a private loan.

"The way the site is set up encourages misunderstanding," Coolidge said. "They do what we ask by saying that private loans should be a last resort, but then ask, 'Are you interested?' When the kid clicks yes, they're catapulted to a private loan."

Keith Alliotts, chief executive of TuitionBids.com, counters that customers are able to choose either a private or a federally guaranteed loan.

"We don't advocate just private loans, we tell borrowers to get federal money first," he said. "But a lot of people need private loans."

But Alliotts acknowledged that TuitionBids.com receives a loan fee when a customer secures a private loan. The website makes nothing when consumers get a federally guaranteed loan.

Federal loan limits

Marja Lopees of Burbank is a few years out of school and makes about $70,000 a year as a lawyer. But she racked up $196,253 in debt and says her student loan payments swallow 40% of her earnings.

Lopees turned to private loans when she hit borrowing limits imposed by the federal student loan program. Now she has $88,303 in private loans that charge an interest rate of 8.84%. The payment on that loan is her second-largest monthly expense, after rent.

"I'm making interest-only payments on one of the loans, and still the payments keep going up," she said. "It's just overwhelming."

When she just makes minimum payments, her debt and rent consume 60% of her after-tax income. That's before she pays for food, clothing, utilities, and gasoline or saves for long-term goals.

"No one tells you to be careful of taking on too much debt when you're in school," she said. "It's just the opposite. They just keep giving you loans and saying, 'Don't worry about it. You're going to be a lawyer. It's no big deal.' "

Kristof is a freelance writer.
http://www.latimes.com/business/la-fi-collegedebt27-2008dec27,0,4636992.column

Different Version of the Same Duncan Story

Also from the Chronicle, but a very different tone

http://chronicle.com/daily/2008/12/8770n.htm

Wednesday, December 17, 2008

Obama Praises His Education-Secretary Choice for Relying on Data to Improve Schools

By PAUL BASKEN

Washington

President-elect Barack Obama said on Tuesday he values his choice for education secretary, Arne Duncan, for his dogged determination to use data to drive his decisions about how he sought to improve the Chicago Public Schools.

“When faced with tough decisions, Arne doesn’t blink,” Mr. Obama said as he presented Mr. Duncan, the chief executive of Chicago's public-school system, as his choice to run the Education Department. “He’s not beholden to any one ideology, and he doesn’t hesitate for one minute to do what needs to be done.”

The choice met with virtually unanimous acclaim, even among Republicans and teachers'-union leaders who chafed at some of Mr. Duncan’s plans to overhaul Chicago's schools but have said they appreciated the respect he showed them in the process of finding compromise.

National higher-education leaders joined in the praise, saying they hoped Mr. Duncan’s record in Chicago of emphasizing cooperation over confrontation will also characterize his relations with colleges when he gets to Washington.

“He demonstrated effective leadership at the K-through-12 level and has a clear appreciation for, and connection to, higher education,” said William E. Kirwan, chancellor of the University System of Maryland. “So it just seems to me that it’s a great choice.”

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New Secretary of Education

The Chronicle of Higher Ed reported President-Elect Obama's pick for Education as neutral at best for higher ed. Critics cited in the piece I post below call the nominee, Arne Duncan, a kind of corporate choice. It is true that higher ed's managers are pretty much out of ideas, and cling to myths I've described elsewhere. Here's the not-so-encouraging report, pasted below.

Optimism about the Obama science picks runs much higher. Many folks are missing the crucial point that you can't have a boom in basic scientific research without a boom in higher education support. The latter is nowhere in the cards. I'll say more about this soon.

http://chronicle.com/daily/2008/12/8730n.htm

Tuesday, December 16, 2008

Obama to Pick Arne Duncan, Leader of Chicago's Public Schools, as Education Secretary

By PAUL BASKEN

President-elect Barack Obama will pick Arne Duncan, a longtime friend who leads Chicago’s public-school system, as his education secretary, Democratic party sources said.

Mr. Obama’s choice of Mr. Duncan may signal the president-elect’s support for approaches to education policy pressed by advocates of deep structural change in elementary and secondary education. It is less clear what the selection might mean for higher education.

Mr. Duncan’s seven-year record as chief executive of Chicago Public Schools, a system with more than 408,000 students and an operating budget of more than $4.6-billion, has been marked by battles with teacher unions over salary structures and a record of increases in student test scores.

Mr. Duncan, however, has little policy-making experience at the federal level or in postsecondary education generally, leaving college officials still wondering what to expect from the Obama administration.

Mr. Duncan isn’t completely without higher-education experience. He serves on the Board of Overseers at Harvard University, where he earned a bachelor's degree in sociology. He also serves on the Visiting Committees for Harvard’s Graduate School of Education and the University of Chicago’s School of Social Service Administration, according to his Chicago-school-system biography.

Indications of Approach

Other clues about Mr. Duncan's approach and authority as education secretary may lie in his being a friend, neighbor, and basketball-playing partner of the incoming president, rather than one of the political rivals being named by Mr. Obama to some other Cabinet positions. Mr. Duncan cultivated a reputation in Chicago as a leader who is willing to make unpopular decisions and carry out controversial plans.

That could suggest that Mr. Duncan would be a forceful advocate of changes Mr. Obama decides to make on higher-education policy, regardless of what at times could be ardent opposition from lawmakers on Capitol Hill or from college lobbyists.

College leaders wouldn’t have expected Mr. Obama to choose a higher-education specialist, given the federal government’s need to keep its focus on promoting improvements at the elementary and secondary level, said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education.

“He obviously has some knowledge of higher education, being on the Harvard Board of Overseers,” Mr. Hartle said of Mr. Duncan. The unique nature of Harvard hopefully won’t lead Mr. Duncan to “generalize too much from that experience” in formulating higher-education policy, Mr. Hartle said.

That aside, Mr. Duncan is “a terrific choice,” given his demonstrated ability to find middle ground between competing factions, Mr. Hartle said. And a personal friendship between a president and an education secretary is good for all involved in education, he said.

“One suspects that the Oval Office door, or at least the gym, will always be open to him,” Mr. Hartle said of Mr. Duncan.

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Good News Bad News

The bad news in higher ed is always the same: some person with great power showing they understand nothing about higher education funding.

At a conference sponsored by the Higher Education Government Relations Conference called "Making the Case," the chancellor of Ohio's Board of Regents said that colleges can do more with less today because the Wright Brothers "created their flying machine without government grants, a subsidized research laboratory, or even college degrees."

This is like saying that Mr and Mrs Smith conceived Johnny late one night with the help of Mood Candles and red wine, so candles and wine are all the parental support Johnny will ever need.

Forget the rest of the history of aviation, from the patent pools created by the federal government after World War I to the massive government research and procurement money ladeled on the industry annually for the past seventy years. Without government money, we'd still be making airplanes in bicycle shops.

The good news is that there were hints that higher ed leaders aren't going to take cuts lying down, as they often have in the past. UC President Mark Yudof

said it was time for students, faculty members, and administrators to “go over the heads of legislators” and do more to clearly explain to members of the public that “if we don’t do well, they won’t do well.”
Mr. Yudof also said that he and the other higher-education leaders nationally are looking for help from the federal government. They have drafted an economic-stimulus plan for higher education that they will pitch to Congressional leaders and President-elect Barack Obama.

They need to push hard on this, starting with the heads of their own Boards of Regents

National Disaster

The best summary of the very serious results of the report, Measuring Up 2008 is in Inside Higher Ed. More on this report soon:

The states performed best on preparation and completion, worst on affordability (49 F’s) and learning (all incompletes). Highlights are below:

Preparation: 6 A’s (Colorado, Connecticut, Maryland, Massachusetts, New Jersey, Vermont), 18 B’s, 21 C’s, 5 D’s, and no F’s. Thirty-four states showed improvement or stayed the same on the number of 18- to 24-year-olds with a high school credential, but the high school graduation rates of black and Hispanic students in many states lagged badly (82 percent of black young adults in Illinois had a high school credential compared to 95 percent of their white peers; 56 percent of Hispanic 18-24-year olds in North Carolina had a high school degree, compared to 92 percent of whites.)
Participation: 2 A’s (Arizona and Iowa), 8 B’s, 22 C’s, 15 D’s, and three F’s (Alaska, Louisiana, and Nevada). Forty-three states improved or stayed the same on the number of 18- to 24-year-olds enrolled in college, but a majority of states showed decreases in the number of 25- to 49-year-olds in college-level education or training.

On this and other measures, the gaps by racial and socioeconomic status are significant.

Affordability: 49 F’s and one C grade, for California. “The whole country has gone south on affordability,” said Callan. He called the picture a “national disaster” as tuition continues to outpace family income, increasing the burden of paying for college particularly for low- and middle-income families. The states are graded on families’ ability to pay (percentage of income needed to cover the students’ costs minus financial aid) at different types of institutions, the states’ emphasis on need-based aid (their own investment in such aid as a percentage of the federal investment in their states’ students) and lower-cost colleges, and students’ reliance on loans. Two states improved or stayed the same on the percentage of family income needed to pay for a four-year public college, while 48 states fell on that measure.
Completion: 11 A’s ( Iowa, Massachusetts, Minnesota, New Hampshire, North Dakota, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, Wyoming), 20 B’s, 16 C’s, one D and two F’s (Alaska and Nevada). All but those two states improved in the number of college degree completions per 100 students, but the caveats here, in the eyes of the Measuring Up crew, are that the rates remain low, especially as measured against those in other countries. “The United States’ world leadership in college access has eroded steadily,” he wrote in an analysis of the report. “In college completion, which has never been a strength of American higher education, the U.S. ranks 15th among 29 countries compared.” While older Americans still fare well in international comparisons of degree holders, “the U.S. population has slipped to 10th in the percentage [of 25- to 34-year-olds] who have an associate degree or higher. This relative erosion of our national ‘educational capital’ reflects the lack of significant improvement in the rates of college participation and completion in recent years.”

Learning: Here’s what the report had to say on this front: “All states receive an ‘incomplete’ in learning because there are not sufficient data to allow meaningful state-by-state comparisons,” a point made in by Ewell in an Inside Higher Ed essay last month.

An undercurrent of the report is the significant gap that exists between the haves and the have-nots on college access and affordability. “It has always been an ethical and moral problem that we undereducate minorities and low-income students,” Callan said in an interview. “But for the first time, we are going to pay an economic price as well” if more of those Americans are not made ready to enter the work force and contribute to society.

But let me repeat the ticking time bomb, as expressed by the Chronicle story:

Other countries are surpassing the United States, whose educational strength lies in its older residents, on measures of participation and degree completion, the report says. The United States ranks second, behind Canada, in the proportion of its adults ages 35 to 64 who hold at least an associate degree, according to the report. . . . But among adults ages 25 to 34, the United States ranks 10th.

10th is based on averages. If you look at the high-growth sectors of the younger US population, particularly Latinos, we are doing even worse.

Higher ed should get to the top of the infrastructure priority list, basically right now.

Burn the Funding Model

Harvard's endowment losses joined other endowment losses in the New York Times today. The endowment lost 22% of its value in the last 4 months, or $8 billion. It could be quite a bit more than that, the article suggests. The breakdown of holdings is incomplete, and it would be amazing if only 11 percent of the endowment has been in private equity, as the article states. Their huge past returns (up 21.3% in 2007) meant huge risk even if they didn't really know the risk at the time.

This is the end of an era, since Harvard's endless endowment growth had a revolutionary impact on the funding of all of higher education. Reports constantly marveled at its enormous size. This was in turn taken to be a tribute to the triumph of private investment, of privatization, of private equity, of philanthropy and wealth as the root of enlightenment itself as embodied in a great research university like Harvard University. Articles were filled with tributes to size majesty:

If you took just the gain in Harvard’s endowment in 2007 ($5.7 billion), that sum alone would be larger than the endowments of all but 15 universities.

Or

Harvard’s gains alone are more than the combined endowments of every historically black college in the country (and plenty of other categories of college, too)

Or

If you added the endowments of Johns Hopkins University, Cornell University, Duke University and the University of Chicago, you wouldn’t equal the total of either Harvard or Yale University, which is in second at $22.5 billion.

There was obviously a gigantic disporportion and educational injustice in the comparison with historically black colleges. And yet in the general discourse intellectual greatness coincided with financial greatness: there was no contradiction, there was only mutual support. Bigger was better, bigger was institutional goal one, staff, resources, talent, thinking within the university poured increasingly into the project of raising endlessly more money.

The huge stupidity of American (non) thinking about the meaning of life was incarnated in Harvard's endowment.

The sickening corollary was that all over the country public university leaders quietly consented to decades of state funding cuts in the arithmetically absurd belief that private money like endowments could make up the lost public funds. The private money they that could coerce they did coerce from thee - tuition and fees, going up year after year at 2-3 x inflation, except for years when some big politicians were looking for votes.

Last week's prize in the Thinking Nothing Has Changed department went to Chancellor Bob Birgeneau at UC Berkeley, who wants to charge higher tuition at Berkeley than at other UC campuses - that is, charge a status premium. See the same idea for Buffalo coming from its current President, aka UC Santa Cruz's former Executive Vice Chancellor John Simpson.

Simpson does have a good point about the way New York subsidizes private and church schools while cutting its publics. But the obvious solution is to shift public money towards the publics, not raise tuition at the publics. These guys have been making the same mistake for decades: increasing tuition decreases public support for publics. If Simpson raises Buffalo tuition, it means more cover for the state to subsidize privates. Um, duh.

These guys really bug me. This is the generation that was created by the boom in low-cost / no-cost higher ed and that is now, in its upper reaches, abandoning the institutions that made them. Leaving aside the strategic folly, the sheer disloyalty of it amazes me.

Organizations keep trying to rebuild the public base (another very good report is here). These folks have done the actual math. They are undermined by the shortsighted heads of their own university members.

the Era of Harvard's Endowment correlates with, and, as we continue the research, will be shown to have caused, 2 things:

- unaffordability going up up up (see the story about the report in which 49 of 50 states flunk)
- educational attainment going down down down

As Patrick Callan put it, "Already, we’re one of the few countries where 25- to 34-year-olds are less educated than older workers.”

Big endowments and big tuition have hurt higher education. It's time for something completely different.

Costs of Privatization

Here's a nice compilation of some recent studies that show that privatized medical care adds costs rather than reduces them. It stands to reason if you think about the costs of marketing (as much as 25% of for-profit university budgets) and the cost of profits, which go in varying but usually high degrees to investors and not to operations. But reason hasn't been a big part of the rush to private funding. The analogies between education and health care are interesting.

Endowment Toxins

I've been writing to my budget pals for a few months about when the toxic waste is going to surface in university endowments. It's only just beginning - in the form of the shadow of the holes in the crap investments thrown by operating cuts and now hiring freezes. Cornell announced a couple of weeks ago, the Chronicle of Higher Ed is starting to keep a list, which includes at least partial freezes at other Ivies like Brown and Dartmouth and a full hiring freeze of that greatest of all beneficiaries of the high-tech booms, Stanford University.

The New York Times has a good overview that begins, "Some of the nation’s universities are trying to sell chunks of their portfolios privately as their endowments swoon with the markets."

The crucial point in the piece is that university "endowments with more than $1 billion in assets reported 35 percent of their holdings" to be in "alternative investments" - i.e. the stuff that has been locking up or blowing up for six months now. This is a much higher proportion than can be found in pension plans, which means that the big endowments can be expected to fall more than say the 15% that the University of California's pension plan has fallen so far in this calendar year. Should we look for losses at Stanford, Yale, and Duke of 30% in one year?

Hence the logic behind this otherwise surprising announcement, reported in the CHE by Charles Huckabee, from the richest university on earth:

November 25, 2008

Harvard Freezes Staff Hiring and May Call Off Faculty Searches

In further signs that university endowments — even the wealthiest ones — are taking a hit in the nation’s economic crisis, The Boston Globe reports that Harvard University’s largest faculty division is freezing staff hiring and rethinking faculty searches, and The New York Times reports that Harvard and other institutions are exploring opportunities to sell some of the more volatile chunks of their endowment portfolios.

Michael D. Smith, dean of Harvard’s Faculty of Arts and Sciences, wrote in an e-mail message to department heads on Monday that Harvard’s endowment losses would have “a major and long-lasting impact” and would “require significant reductions in our annual expenses,” according to the Globe.

Harvard’s endowment, which was reported last year to be worth more than $34-billion, pays for more than one-third of the university’s operating budget. Two weeks ago, Harvard’s president, Drew Gilpin Faust, wrote in a letter to the campus that the university anticipated a loss of revenue because of the economic crisis. Neither Ms. Faust’s letter nor Mr. Smith’s message gave specific figures for the endowment’s performance in recent weeks.

According to the Times, Harvard, the University of Virginia, Columbia and Duke Universities, and other institutions that hold “alternative investments” are now trying to sell or considering sales of some of those investments. But finding buyers is proving difficult because such investments — which include hedge funds, private-equity holdings, and real-estate partnerships — are not traded publicly.

Other Ivy League institutions that are taking a hard look at expenses these days include Brown and Cornell Universities, which have also announced hiring freezes, and Dartmouth College, which is contemplating a 10-percent budget cut that it says may require a staff reduction. Dozens of other institutions around the country are taking similar cost-cutting measures.

Numbers: Majority Vs. Top

We're starting to get the negative numbers for pension and endowment funds that pay for faculty and staff retirement and also support education. The University of California's pension fund fell from $6.7 billion to $5.7 billion in the first three quarters of 2008. Cornell University reported a hiring freeze in response to endowment drops and state funding cuts.

Meanwhile, the salaries of university presidents rose an average of nearly 8 percent last year, and many presidents are making more than a million dollars a year. Some have refused raises, but most have not.

Media coverage so far has not been kind. Stories of big salaries reduce public willingness to pay tax dollars to support public universities that since they can pay these fat salaries, the thinking goes, must be flush to the gills.

My suggestion: public universities should send the opposite message by cutting their salaries by the same proportion by which their operating budgets are cut.

Since most people assume that executives cut their own pay only as a desperate last resort, when they have already fired thousands and tried to sell off the company, they will finally listen to our budgetary cries of pain

Colleges Told to Get In Line

The Obama campaign never bar0cked the higher ed agenda: its programs for increasing student aid and research funding have been modest. Even the apparent big ticket item -- doubling scientific research in 10 years -- is if you do the math pretty much what we had under Clinton and Bush Junior. (Money doubles every 10 years at a little over 7% annual compounded increases, which means maybe 3.5% real annual increases after inflation.)

Now expectations are being lowered even further, according to this story in today's Chronicle of Higher Education.

It would be nice to be sure that the Obama Administration's tacit motto were NOT "first money to the banks, then we'll see what's left over."

Adjunct Exploitation Hurts Students!!

It may seem like common sense that when you cut teaching staff, you hurt students. The cuts can take various forms. You can reduce the number of teachers and increase class size. Most public colleges and universities have done this, and learning has occurred in more large lectures and become more passive - or so you'd think we could all agree.

Another strategy is to change the ratio between full- and part-time instructors. This is even more popular as a cost-cutting strategy in higher ed than shrinking the teaching staff. Most schools can't shrink because enrollments keep growing. But they can and do replace full-time with part-time teachers, with lower salaries, fewer or no benefits, and more difficult working conditions. All of these reduce quality time with students. Or so you'd think we could assume.

In my excessively long experience with administrative discussions, however, the link between funding cuts and quality cuts is denied. "We can say quality is at risk," one top UC official told a group of UC Chancellors on one occasion. "But we cannot say that quality has declined. He was rebuffed by the faculty in the room, but the convenient and economical illusion continues.

This is background as to why these new studies of the impact of adjunct labor on educational outcomes are so important. IHE and CHE coverage is a good start on the effects on the student masses, not the 2% at the elite privates, of the fact that higher ed has doubled its proportion of adjuncts in the past 30 years.

Debate on Higher Ed Failure Rates

Inside Higher Ed has a good piece on Mark Schneider's critique of the American university's graduation rates, especially in the context of our higher spending as a percentage of gross domestic product. The core claim:

Even though the U.S. spends more of its gross domestic product on higher education than do other countries, and contains many of the world’s best universities, the country’s performance on measures of postsecondary attainment for its citizens, particularly young ones, is declining compared to other countries. Graduation rates provide further proof that “American higher education as a whole is failing to live up to its reputation as the world’s best,” he writes.

Schneider compares the median four-year graduation rates of American high schools (which, he acknowledges, have mandatory attendance policies that do not apply to colleges) with the six-year graduation rates at four-year colleges, and shows that across the board — at selected percentiles, by races, and across differing types of institutions (public, private, for-profit) — postsecondary institutions lag high schools.

There's good coverage here too of Cliff Adelman's critique of these numbers.

What needs more coverage is the causal link between weakening educational attainment and budget cuts. This point would cut against both Schneider and Adelman: higher ed's share of GDP is a number bloated by all sorts of activities that don't involve undergraduate education (most lab research, professional school education - its really expensive to create so many hedge-fund managers and M&A attorneys, etc). The "undergraduate education" share would be smaller. The share would also be split between a small number of wealthy schools who spend more and more and more and a large number of public universities whose expenditures in real dollars per student are flat or in decline. Since national attainment is about the mass population, you need to have high-quality mass higher education. That's what we used to be good at, and what we're less good at now.

Culture Wars Continue

The McCain/Palin campaign is a constant reminder that the culture wars live on. They are running against the Weather Underground circa 1969 - The Sixties remains the Right's primal scene, ground zero, bete noir, take your pick. To set themselves up as warriors against the terrorist 1960s they attacked Obama's occasional paths-crossing with Bill Ayers, a Weather leader back in the day andnow an academic.

Another academic came in for a symbolic McCain thrashing - the Middle East specialist Rashid Khalidi of Columbia University. He was actually friends with Obama when they both lived in Chicago and Khalidi taught at the University of Chicago. The Washington Post has a good editorial on the topic, denouncing what Khalidi calls the "idiot wind" emerging from the McCain campaign's last desperate days.

My favorite lines are those that imagine a life after the culture wars that, as I argue in Unmaking the Public University, has inflicted the social and culture equivalent of brain damage on the country as a whole. The lines:

• "Perhaps unsurprising for a member of academia, Mr. Khalidi holds complex views."
• "Our sense is that Mr. Obama is a man of considerable intellectual curiosity who can hear out a smart, if militant, advocate for the Palestinians without compromising his own position."

Wow. Let me read those lines again in a daily newspaper.

If curiosity and complexity circulated freely, with militance as their regular companion, and unsplattered with culture wars attacks, progress would be both intelligent and possible again.

Preventing this was the point of the culture wars in the first place. But the warriors' positions are now weaker than at any time in the last 25 years.

More on the Public-Private Difference

Today the Chronicle of Higher Education published the results of a job satisfaction study. It shows a sag in satisfaction in mid-career, but overall very positive reviews for jobs in academia.

71 percent of faculty members give high marks to collaborative governance on their campuses; 68 percent of tenured professors agree their colleges support a strong teaching environment; a nearly equal percentage of male employees (82 percent) and female employees (83 percent) say their institutions provide resources for work-life balance; and both groups are similarly satisfied with their jobs as a whole (86 percent for men and 88 percent for women).

These numbers are much higher than what I'd expect talking to friends and colleagues. There are two reasons for this.

First, the article notes, "The percentages of positive responses were fairly high because the study was not a random national sample but instead was conducted only at institutions that felt confident enough in the quality of their workplaces to participate in the Great Colleges to Work For survey."

Second, public universities do significantly worse than the privates:

Faculty members at public colleges have less confidence in their senior leadership than do professors at private colleges (65 percent to 56 percent). Among the more-senior faculty members — full and associate professors — the news is even worse for public-university leaders. Just under half of public-college professors in the top two ranks have confidence in their senior leadership, compared with 66 percent and 60 percent, respectively, at private colleges. . . .

In several other key categories as well, private colleges outperformed public institutions. Professors at nearly every rank gave their private institutions higher marks for research and scholarship opportunities. At private colleges, 79 percent of faculty members ranked their teaching environment positively, compared with 71 percent at public institutions.

Employees over all at private institutions ranked their compensation and benefits better than those at public institutions did (66 percent to 63 percent), as well as their work-life balance (84 percent to 78 percent). One area where publics performed better than privates: health-care benefits (75 percent to 68 percent).

I have written a whole book on this topic and am bleakly satisfied to get some confirmation that there is fairly widespread awareness of the deterioration of working conditions in public higher ed.

Stagnation in professorial careers is an equally interesting issue, and this study is one of the first I've seen to take this on so directly:

For faculty members especially, the midcareer point is fraught with anxiety about what's next. After receiving tenure, they are no long-er protected from a heavy load of committee work. Some remain stuck as associate professors for years without a promotion. And unless they are superstars in their fields, it's not easy to get a job elsewhere.

"Faculty careers are flat unless you go into administration," says Saranna Thornton, a professor of economics at Hampden-Sydney College. "Even if you become a full professor, you essentially do what you did as an associate professor."

The flat career can poison the individual and the institution: associate professors feel themselves to be dead-enders long before they get labeled as deadwood by their peers, chairs, and deans. And decades of flat or declining funding means long series of ideas that are never actually implemented, which makes the stuck feeling worse.

Selling Admissions on the Open Market

I've caught up with a truly shocking story that was broken last fall by UCLA's student paper the Daily Bruin. Since the university is one of my main areas of research I like to assume I'm not naive, but this piece took my breath away. It has the elements of deep corruption, and not just of aberration - large donations followed by admissions to super-competitive programs for OK-to-good relatives of the donors; open boasting by beneficiaries, suggesting there's no climate of prohibition around seats-for-sale; a leak; an inside investigation that finds no abuses and holds no one accountable; scattered outcries, resignations, and protests; a wall of administrative silence.

For a long time the for-sale sign on academia was seen as an isolated problem. It went with mediocrity, desperation, or individual corruption. As recently as 2003, Harvard's president emertius Derek Bok could write a book called The University in the Marketplace, express muffled rage at medical faculty for their arrogant obliviousness to the conflicts of interests they eagerly pursued, and still insist knowledge was not being corrupted. But the continuous pursuit of major and minor donors - as a central academic activity - is starting to change the focus, goals, metrics, etc of the institution.

Actually there's lots of evidence that this has already happened. Slaughter and Leslie's 1997 classic Academic Capitalism clearly explained the iron logic of income substitution. Jennifer Washburn's University Inc. was a well-documented cry for help that still needs to be addressed. Longtime science reporter Daniel S. Greenberg has a new book called Science for Sale that tells a nuanced story about mixed motives. All of it calls for better connections between the new dominance of fundraising culture and changes in both the directions of research and their results.

What we have to avoid is this: a new hybrid in which ultra-selective admissions generate small numbers of brilliant and economically diverse students that offer a front for lucrative academic influence-peddling. But this is what happens when fundraising gets woven into the research and teaching life of departments. It's the business version of Potomac Fever in Harvard's Kennedy School of Government, where every new project seems pitched to presidential candidates and the conclusions are written for their leading aides. We have enough knowledge for hire already - aka the major media. The university has to sound different from CNN or why not cut its public revenues to zero?

We Senate types are all out here pumping for public higher ed and yet we look more and more like the folks who run the plumbing-supplies store for Tony Soprano. That is, our corruption is looking less and less like an occasional accident and more and more systematic.

In May, the resident who went on the record for the November Daily Bruin story resigned from the department.

In his resignation letter, Kent Ochiai blamed the program’s chair for making his residency unbearable after the Daily Bruin published an article last November exposing preferential admissions within the orthodontics program for donors and their relatives.

Ochiai’s refusal as an applicant to donate a large sum in order to secure his own admission prompted The Bruin’s investigation.

Adjunct World

One of the most moving and graphic tales of adjunct life appeared in today's Inside Higher Ed. By graphic I mean a mixture of descriptions of impossible teaching loads, terrible hours, unpayable debt, non-healthcare, and summer unemployment pay. But in the midst of it he says this:

Some have asked why I continued to teach as a part-timer if things were so tough, and to be honest, every spring I begin asking myself that same question. In fact, I have left teaching twice. The first time I was offered a position as a business manager for a corporation that owns travel stops throughout the Southwest. The money was good, the hours were close to what I would put in as a part-time instructor (counting prep time and time grading papers), and I had benefits.

I hated it.

There is something about teaching that keeps pulling me in. I love writing, and I love sharing my passion for it with my students. I love feeling that I might be making a positive difference in people’s lives. I love feeling like I’m contributing something to my community.

The first time I left teaching, I stayed away for one year. The second time, I resisted the call for two years. Twelve years ago I moved to the Seattle area, landed teaching jobs at three different schools, and have been performing the juggling act of a freeway flyer ever since.

Then there's a semi-happy ending - for him.

The temping of a whole higher ed teaching profession is a crazy, thoughtless, destructive thing whose passage means we are sleepwalking about money and all means for all the Jacks who teach and teach and teach and don't write these articles.

The whole point of the humanities for me is to rescue our obscure selves from oblivion, which is where temping puts all the brilliant Jacks. So how screwed up is it that we teach the humanities with adjuncts? They teach, get back in their car, drive away, disappear.

This trend has to end.

Student Loan Problems in Community Colleges

The New York Times has had good coverage of problems in the student loan industry - to put it politely. They have a good new piece on how some major banks are cutting back on loans to community college students, who are generally the least-well-off economically and who amount to 40% of the country's college students. The banks seem to be segmenting the student loan market, with loans to students at expensive private universities remaining fairly easy to get. "The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more." Some community colleges are getting redlined.

Michelle McClain, 40, who is studying to become a teacher, learned on Friday that she would have to find a new lender after Citibank dropped William Jessup University. The news angered her.

“The loan is between me and the lender,” Ms. McClain said. “I’m the one that’s taking out the loan, I’m the one whose credit is in jeopardy if I don’t pay it, I am the one totally responsible for the loan, and as long as I’m going to an accredited college, I don’t understand why it would make one iota of difference where I am going to college.”

A View From Missouri

In a speech last week, University of Missouri President Gary Forsee cited some all-too-familiar stats about the decline of public funding for Missouri higher ed. Missouri is 47th out of 50 in per-capita spending on higher education, in part because the share of the U of M budget that comes from the state has fallen from over 60% to 30% in the last eight years.

Missouri's growth in student enrollments was also weak (39th of 50), so its increase in approporiations between 2001 and 2006 was actually above average (SHEEO's State Higher Education Finance FY 2006, Figures 12 and 13). That's a sad commentary on the rest of the country. Missouri is a little sadder though - its tax effort per capita is 0.71, where the US average is 1.0.

Forsee asks how Missouri can prepare itself for the economy of the future with that kind of higher ed spending. The same question goes for states that think they are the economy of the future, like California. California is still above the US averge, but not by much. A super-competitive economy supposedly means you need to be much more special to do well, not be somewhat above average.

We also need to explain how universities help broader social goals, like supporting "minority-majority" states that work because they are equitable. But even in mainstream economic terms, higher ed investment looks poor.

Alternative Giving

Harvard alum Carroll Bogert has an excellent op-ed in the New York Times about what to do with Harvard's big endowment besides make it even bigger. She notes that T

he university’s endowment stands at $35 billion and is likely to hit $100 billion in a decade. At an annual growth rate of 13.3 percent — the average since inception, and regularly exceeded in recent years — Harvard can cover next year’s entire undergraduate financial aid budget with what it earns in the market in eight and a half days.

Deciding that swelling this flood of money was pointless,

A few hundred alumni have formed Harvard Alumni for Social Action, to try to channel 25th-reunion giving to destitute universities in Africa. In three years, we’ve raised $425,000 — a lot for the University of Dar es Salaam but hardly a match for our annual class “gift.” And evidently not enough to win the respect of President Faust, who has begged off meeting the group. Harvard clearly doesn’t like any effort that might divert a dollar away from its Cambridge coffers.

Bogert offers some decent explanations for why college grads - or at least Harvard grads - love to make the rich richer, but more to the point, you can find the Harvard Alumni for Social Action here.

Slow, Silent Impoverishment

Some of the best recent defenses of public higher education have come from the business press, in the form of attacks on the huge and growing resource gap between even the strongest publics and the top privates. The powerful 2007 essay, "The Dangerous Wealth of the Ivy League," was published by Business Week, and begins with a wicked dig at vanity dorms at Princeton and goes on to say what few education leaders will say: the privates are cherry-picking faculty at the publics, paying much higher salaries, spending far more per student that their former peer "flagship" publics, and pulling away in lab facilities, publications, and other measures of knowledge production.

A year before that, the NY Times business columnist Joe Nocera criticized top-end fundraising in "The University of Raising Big Money." The movement for increased payouts at the fattest endowments kicked in later, and Nocera may have helped it along.

Public universities have over 4/5ths of total enrollments. Their quiet impoverishment affects everything - general skills, social integration, upward mobility, new technology, useful research, the general development of people and their society. Pulling top-quality resources back to the elite privates that educate 1 -2 percent of the college public is a perfect recipe for steady decline. Many more people need to start noticing this.

Talking Points

About a month ago I went to Sacramento with a group of University of California faculty to try to offer legislators a faculty perspective on the need to spare California higher education from another round of cuts. We had messages developed by two reports that I had co-authored with other members of the Academic Senate's systemwide University Committee for Planning and Budget (UCPB).

Message 1: UC's state funding isn't too high, in spite of what the Governor alleged of all state agencies when he proposed across-the-board cuts, since it still hasn't gotten back to its 2001 levels.

Message 2: private money can't replace public money (even if we wanted it to), since there isn't enough of it.

Message 3: the Governor's proposed cuts can be filled in only with massive student fee hikes. (If all of the cuts were replaced only with student fees, the latter would need to increase 45% in one year.)

Since such an increase is unethical, counterproductive, and politically impossible, the UC Regents will increase the main student fee 7% percent this week and let the cuts come out of operations. This leads to . . .

Message 4: Students will pay more, and get less.

We were met by Democrats with a combination of agreement and fatalism. One said, "of course you're right, these cuts hurt the university and it hurts students. But there's no money this year. And there won't be any money next year either."

This is of course a political statement, not a financial one. There's plenty of money: even the state budget, perpetually hamstrung by Prop 13 requirements, controlled by the 1/3 Republican minority, riddled with constitutional budget guarantees for huge sectors like K-12 ($50 billion a year right there), and pitting higher ed against our incredibly expensive and yet still always federally-sanctioned prisons, receipts are down only 1 percent this year. The big structural deficit could be solved some other way - like the Governor reversing the cuts in vehicle licensing fees that account for about half of it. Whatever: our state poverty is political, and it's a politics that suits a governor who is already running for some other office.

Since politics is leverage, not logic, we asked about that. The Dims leadership won't do anything for higher ed this year - what's the payoff in that? The Chair of the Board of Regents, Richard Blum, investment banker and husband of Sen. Diane Feinstein (D-Calif.), seems already to have agreed not to embarrass the Governor with large fee hikes or enrollment freezes. And enrollment freeze was our only leverage in Sacramento. The UC administration gave that up, though threatened it politely for next year. No wonder even the Dems were promising nothing.

One of us went back to Sacramento last week and visited a Republican leader of one of the leg's higher education committees. This state Senator said he wanted UC to thrive and remain admired, but wasn't sure we were doing enough to fundraise in all categories. In fact, UC faculty have doubled their sponsored research (as measured in real dollars) since 1990. UC fundraisers have tripled their fundraising income in the same period. Licensing income is up but remains small (always under 1% of UC's overall budget). None of these numbers come close to addressing the budget cuts on the gigantic scale on which UC operates.

The key fact about public higher education is its sheer size. Better fundraising might close some gaps at a school with 1000 or 10000 students, but not at one with over 200,000. People say well, Princeton does great fundraising and look how rich it is - what's wrong with UC Berkeley?

What's "wrong" with Berkeley and UC is in fact what's right with it. Total enrollment in the Ivies in 2006-07 was 112,839. That means that the entire Ivy League's enrollment was 90,000- 100,000 less than the UC system alone - to say nothing of Cal State. The Ivy League's endowment was about $81 billion in 2006 (vs. UC's $6 billion or so), or say 20 x per student of UCs.

It just doesn't make sense to compare UC to an Ivy League university - it's a different kind of institution. UC makes enormous efforts in both research and fundraising, but on behalf of the population of a state that is bigger than most countries, and not just for a few thousand students at at time. This leads to . . .

Message 5: The only way to combine wide public access with the highest quality is with great public funding for public higher ed.

The real question is this: do we as a society really want to educate everyone to the highest possible level? That is, are we really trying to minimize the waste of the whole society's talents or not?

If we don't support great public funding for public universities, then our real answers are no. And for the case that society's major players didn't support this, see my new book!

Nice Moment of State Gov Insight

Here's a good example of a state governor - Ohio's - facing down a budget deficit and maintaining state funding for higher ed next year, along with his long-term plans. Here in California we should be so lucky.

The key quotation:

[Gov. Strickland] did not recommend any cuts in the nearly $2.38-billion that colleges are receiving from the state this year, an amount that represents a 7.7-percent increase over the previous fiscal year. The governor also proposed continuing to finance a statewide freeze on tuition that has been in effect for two years.

"In my judgment, higher education had been the budget whipping boy for far too long," he says. "It was time to keep faith with higher education."

Amazing! Higher ed is obviously a crucial long-term investment. It's also economically countercyclical in the short term. In the early 1930s, Hoover, Mellon and the other laissez-faire folks running the federal government watched consumption drop, profits decline, workforces shrink (in response to falling profits), and consumption drop even further as people lost their jobs. We're again learning a lot of New Deal lessons about the stabilizing (and constructive) effects of government action and investment. I hope in California we can follow Ohio's lead and learn them before another 2-3 year cycle of cuts (potentially our second 15-25% drop just in this decade), damages UC and CSU all over again.

Hard Times for the Evil Twin

Who is our evil twin here in academia? The media?

They too are in the business of putting together and distributing information, so they are our twin. They lack our analytical standards and put out all sorts of nonsense, plus are rich and drive out real knowledge with their fake kind, so they are evil.

Or so it often seems when a member of the university community watches ten minutes of silly cable news or Bill O'Reilly saying the most absurd, falsifiable things without fear of challenge. The media seems to specialize in ad hominem argument - Bill can prove the falsehood of any statement in the New York Times by saying "the VERY LIBERAL New York Times" six times a minute. They are also pathetic copy-cats, recycling the same stuff from one source that wasn't correct in the first place. I saw this when three articles in major papers covered the Mark Yudof nomination to be UC's president with identical paragraphs on how his high Texass salary might be a problem. It's really pre-medieval, or plagaristic, or subcivilized, or well, just not very academic.

But I digress. My point here is that we should love our evil twin better and try to help it. Not Fox News, exactly, but print journalism, which is getting shafted by ad revenue declines and the unoriginal revenue thinking of its new owners. David Carr had a piece on the problem yesterday. He stirs the usual stuff around into a big ambiguity pie so we can conclude there is no solution to the end of the independent information train that is essential to democracy. So don't read the piece for that.

There was this interesting passage, based on a good quotation:

John Morton, a longtime newspaper analyst, is more pessimistic. “The industry is meeting these challenges by cutting, by reducing the news hole and the people who fill it,” he said.

“Newspapers have lived through recessions before and come back strong,” he added. “My worry is that when things do turn around, they will be coming back in an environment that is more competitive than ever because of the Internet, and that after all these cuts, they will have less stature, less product quality and less talent — all of the things that they need to compete.”

While I was on the line with Mr. Morton, I mentioned that we had been talking about newspapers on and off for over a decade. That makes us almost friends, I said. But we are fast becoming the kind of friends who see each other only at funerals and wakes.

Ha ha ha. My point here is that the same thing is happening to public higher ed. Capacity has been hollowed out for twenty years. Quality is still OK in core areas. But we regularly "start and starve" new initiatives, and can't throw whole teams at any research problems, and can't rapidly upgrade when we need to. This chronic underfunding needs to be seen for what it is, a recipe for stagnation and decline.

How can we describe it so that folks will see college funding as the social crisis it really is?

US High School Grad Rate More Like 70%

The New York Times had a good piece about states cooking their graduation books. See the sample stats at left. California, self-described world headquarters of the knowledge society, had an actual high school graduation rate of 67%.

When UC President Clark Kerr defined the university at the heart of a new knowledge society nearly fifty years ago, he no doubt thought 67% would by now be the percentage of college grads in California. One scholar cited in the piece pointed out that at this rate California will reach its graduate rate target in 500 years.

"In California, we're patient," an official replied.

Actually, no we're not.

One of my colleagues on the nano and society project who teaches at Berkeley's business school said the signs of the Brazilianization of California are everywhere. I mentioned this to another guest who has been working abroad for years. She said no, the theory of California leaders is now closer to that of Ghana's.

OK we're getting far from home. But still, how many more decades are these crappy, falsified, HS grad rates going to be allowed to contradict what we say we stand for?

Columns by UC's New President

Mark Yudof has been nominated to move from being the head of the University of Texas system to the presidency of the University of California system. I'm completely relieved that we found someone who has been running a big public university system and who has a record of fighting state governments for more public funding. Basic arithmetic shows that public universities are great only when they receive serious public funding: here's my Planning and Budget committee report on the UC case.

Here are two pieces by Yudof, both originally published in the Chronicle of Higher Education. The first is on the decline of public funding for public higher ed, and the second on the value of university systems to their states.

There are things to debate, but I'm also relieved that we may get a president who's given public funding this much lucid thought, and started writing about it in the early 1990s.

Knowledge and Hackwork

Inside Higher Ed has a good overview of the Bush II Presidential Library controversy. The facility at Southern Methodist will have three parts, including a policy center that aims to "celebrate" the president and his record.

The obvious problems include:

• knowledge being produced on a university campus without the normal safeguards of peer review
• knowledge that will be received by the media and the public as valid because it comes from a university campus.

This arrangement is another sign of the difficulty universities have staying independent in the midst of desperate struggles for either adequate funding or big-league competitiveness (SMU's issue). But we shouldn't pick on SMU. The Hoover Institute at Stanford has for decades openly pushed conservative positions and systematically built conservative networks of scholars and top officials without feedback from Stanford's overall faculty. UC Berkeley recently signed a deal with BP that will allow BP scientists to conduct proprietary work in facilities built with public money and housed on campus.

The appointment of Donald Rumsfeld to a Hoover Institute position raised the issue at Stanford. An on-line petition against the hire raised over 4300 signatures. Some faculty proposed a motion last fall to investigate the process that led to the Rumsfeld hire. The Stanford Daily reported Philosophy Prof and motion advocate Debra Satz explaining, “I find it hard to understand the reasoning in appointing Rumsfeldnot because of his views, but because of his competence.”

The SMU Bush connection is a little more fawning towards a figure who is, like Rumsfeld, a little more disgraced than the normal donor or beneficiary. It's easy to assume that university resources would go into the partisan defense of weak records rather than into history and policy analysis. It's hard to image Chalmers Johnson being invited to Hoover or SMU to speak. The SMU case may help raise awareness of the fragility of academic freedom when it comes up against powerful interests, especially ones that haven't done too well and feel that they have something to prove.

Meanwhile, Stanford faculty are using Hoover's hiring of Donald Rumsfeld as a visiting fellow to try to established a new review process for affiliated institutes that trade on Stanford's name.

Private Giving 2007

The Council for Aid to Education has released its figures for higher education philanthropy in 2007. Overall donations were up 6.3 percent, which is close to the annual average for the last ten years. The Chronicle of Higher Education story also offered what have become standard comments about the skew in private giving towards the very top.

Large donations to the nation's wealthiest colleges accounted for much of the increase. The top 20 recipients (see table), which represent just 2 percent of the survey's respondents, raised more than a quarter of all the contributions.

"The top 20 historically have controlled a lot, and they're controlling a bigger and bigger share of private donations," said Ann E. Kaplan, the survey's director. "It's large gifts to large institutions that drive national trends."

The top 2 percent of institutions also accounted for 30 percent of the year-over-year growth in these donations. And "megagifts" remain a major factor in the shaping of higher ed.

Everyone is worried about the impact of the economic downturn that has already started. Ironically, it may only increase the influence of the megagifts. As one CHE consultant noted, "If the market falls and people's wealth shrinks, then you start seeing a slowdown, or people postponing capital contributions. . . . But the big donors, who drive these numbers anyway, tend to be stable."

There's another issue that is never mentioned. Little of this giving is unrestricted, so at public universities it cannot be applied to general operating costs to make up for public funding cuts. When our UC Planning and Budget committee heard officials from the Treasurer's Office talk about this, they estimated that unrestricted gifts are 2 percent of the total. Even in scholarship giving, only 20 percent are unrestricted. Over a period of years, the effect is not a happy substitution of public with private funding, but a campus divided by an iron curtain. The stem-cell research facility may be state-of-the-art, while the math department, dependent on public money, can't pay for phones in faculty offices or for TAs to give actual feedback on homework in calculus lectures with 500 students.

There is no evidence at all that private money is willing to pay for mass quality higher education - broad access at a top level. It pays for special projects for the best and the most famous. We are getting plenty of that, but losing the mass quality that underwrote both post-war prosperity and general quality of intellectual life.

Problems with Private Partnerships

Student loans produced a lot of stories about conflicts of interest last year, and some mild clean-up activity. One pattern there was kickbacks - gifts from private loan companies in exchange for favors from university counsellors. Another was a revolving door between universities and private loan companies that increased collusion between the two. Sallie Mae sought a buy-out that would have given its CEO over $225 million personally (the sale did not go through; I don't know CEO Albert L. Lord's final cut, but he continued to seek a $900 million breakup fee after the deal collapsed). The Department of Education admitted to having overpaid private student loan companies.

The obvious theme here is that the activities of these private agencies increased the cost of obtaining a college degree. There were good stories about just how broke students are in part because of high-tuition coupled with high-priced loans. The most famous response was that some of the country's wealthiest private universities - led by Harvard - switced from loans to grants for lower-income students.

Whatever the response, a core principle remains: increasing the number of steps between the buyer and the seller - the student and the university - increases the costs to the buyer. We used to know that "middlemen" like railroads were bad for people like farmers. We seem to need to learn this all over again with higher ed.

Martin Amis Vs. Professors Everywhere

The Times of London - of all papers - had a good piece by Alexi Mostrous on Martin Amis's 80,000 pounds a year from the U of Manchester, in exchange for which he performs a "distinctly achievable" 28 hours of work - per year. What was good was that Mostrous did not make Amis's featherbedding into a metaphor for all UK professors. "His salary is more than 240 times that of an average full-time academic, who earns £38,933 a year for 59 hours a week." There it is - the real story for college teachers everywhere in the known world - paid not much for doing a lot.

The piece also explains why they'd pay this big salary for almost no effort: Amis isn't getting paid to work, but paid to endorse the Manchester university brand. His celebrity endorsement sends the brand value up, which sends applications up, which improves fee revenues, while also raising the university's status, which increases its power to hire high-powered professors, who will in turn contribute more publications to the university's list for the Research Assessment Exercise that apportions future funding - just as Amis's many publications will too. Their world rank might eventually go up. Then will then be able to hire more lecturers for 38k pounds (or 2500 pounds per course) to do the actual work.

In buying the Amis name, Manchester's administrators were behaving like completely rational businesspeople running a market-oriented business. Unfortunately, they're actually running a university. Once you go down this path, it's almost impossible to get off it. It's not obvious that anyone thinks there's a reason to have a university that isn't divided between stars and labor.

The Endowment Boom: A sign of Illness?

Inside Higher Ed has a report on university endowment growth last year. If you follow this topic the data won't surprise you. The rich got richer faster - Harvard and Yale, the two biggest, grew 23 percent and 28 percent respectively. The report includes a table showing that the smaller you are, the slower you grow, which of course is a familiar rule to those of us living in eagerly Darwinist America. It's worth noting that the lowest average growth figure is 13.6 percent, which is very high.

The report does not note three other important things.

First, endowment growth has been decoupled from the growth of the overall economy, of state budgets, and of general educational support for public universities. 13.6 percent is 2-4 times higher than average state increases, faculty salary increases, and the like. As I've noted before, the universities that educate 90 percent of higher ed students have little or no endowment income and are barely keeping ahead of inflation - and only in the last couple of years. Endowments index higher ed health about as well as Brad Pitt's income indexes the health of yours and mine.

Secondly, coverage of "creativity" in finding "alternative" investment strategies for university endowments lags behind coverage of the financial sector in general. There, creativity has become a facetious proxy word for blind faith in structured investment vehicles whose risk "beta" is obscure and which have been starting to blow up. Universities will not be getting these kinds of endowment returns this year or the next or the next. Some may lose money just like the pros at Merrill Lynch and Citigroup have managed to do.

Third, this is a good time to think about restoring stable, broad-based funding for majoritarian higher ed. This means taxes seen as a public investment, and not the transient miracles of the financial loaves and fishes that in any case are lavished not on the general followers but on the few.

Cost Problems

Everybody hates the incessantly rising costs of medical care. Commenting on the latest inflation numbers, the economist Dean Baker puts the cost of higher education in the same category.

The major forces pushing the rate of inflation higher continue to be medical care and education. Medical care costs rose by 0.3 percent in December. They have risen at a 5.1 percent annual rate over the last quarter and 5.2 percent for the last year. Education costs rose 0.5 percent in December, bringing the rate of increase over the last quarter to 7.7 percent, up from the 5.6 percent rate over the last year.

The fact that higher ed costs constantly rise faster than the rest of the consumer price index never gets a decent public explanation. It has hurt higher ed with the public even more than have the culture wars and TV coverage of the everyday beer binges and drug orgies on campuses everywhere. It also helps explain the fact that when states cut public higher ed, most people really don't care.

Education for the Few

Business Week has published a piece with an excellent array of accessible statistics on the inequality boom in higher ed. It has a good first line too: "It's only fitting that Whitman College, Princeton's new student residence, is named for eBay (EBAY) CEO Meg Whitman, because it's a billionaire's mansion in the form of a dorm."

The "Ivy League plus" educates 1 percent of university students and now lives on a different financial planet from the rest of us. The implication is that higher ed no longer spreads prosperity, but simply reflects the widening class gaps in the United States, with Ivy-league college being just another luxury good solidifying and symbolizing elite status.

In the three decades after World War II, higher ed spread prosperity because it massively increased college enrollments at a fairly decent level of quality. Academic ambitions soared as enrollments did, and quality steadily improved for the broad middle classes. The BW piece points out that in contrast, the Ivies Plus have actually reduced their undergrad enrollments by about six percent over the last ten years.

At one point, the article asks, will the "benefits to society outweigh the damage to the public universities [the Ivies] are stripping of star professors, who tend to take their outside research money with them when they go?" The obvious answer is no: public benefits are mass benefits, not benefits to the top 1 percent.

The heads of some huge public research universities replied with a good description of their lives with continuous public funding cuts, and an eloquent appeal for proper public funding.

Let's hope this kind of letter starts to work better now than it has over the last twenty-five yers. If the public research universities don't get the public funding they need, most will become regional schools for students tracked into 2nd, 3rd, and 4th-rung salaries, while both economic and research productivity decline for the country as a whole.

Family Income in Medical School

The American Association of Medical Colleges has published a study on "Diversity of U.S. Medical Students by Family Income" which shows that the majority of med students come from the top fifth of the population by family income. In addition, this number is actually growing, in spite of much official concern. The report concludes this way:

A real concern is a possible increase in
the systemic skewing toward children
of upper-income families. From 2000,
when 50.8 percent of matriculants
came from the top quintile, to 2005,
when 55.2 percent came from that
quintile, there may be the beginning
of an undesirable trend. As reported
elsewhere,6 the debt incurred by
medical students continues to increase
with every passing year; 2007 graduates
reported a median educational
debt of $140,000. With debt
increasing much more rapidly than
physician incomes, a continued
increase in the fifth quintile
percentage would be a warning that
medical education is becoming
increasingly out of reach for applicants
of modest means.

This is not good. But medical schools are in fact doing better than very selective colleges, which is not good either.

Ditching the Majority

No group helps itself by always favoring its fortunate few - or by using them as the index of its condition.

College language and literature departments are a case in point. The Modern Languages Association devoted some discussion at its convention this year to the plight of the adjunct faculty member. When the plight of adjuncts initially surfaced ten or fifteen years ago, they were considered an unfortunately minority - "freeway flyers" on their way to something better later on. By the middle of this decade, faculty began to realize that adjuncts had become a majority. Inside Higher Ed covers some of the statistics the MLA panel presented. Overall, well over half, and perhaps as many as two-third of higher education instructors are temporary and/or untenurable.

Education hasn't abolished tenure: it's just downsized it and hollowed it out. This degrades tenure into a minority privilege. It makes it easier for society to ignore the knowledge that comes from those who have it, and to discredit their ideas as the fruit of a pampered elite.

In fact, there is a direct correlation between reducing faculty security and reducing quality of instruction. One measure is graduation rates: According to a Chronicle of Higher Education summary (October 27, 2006) of a study by Daniel Jacoby, "colleges where nearly 80 percent of the instructors worked part time had graduation rates of only about 20 percent. As the proportion of instructors who worked part time declined, graduate rates rose."

There are two crises here. The first is that literary and cultural study is being slowly and steadily unravelled. It can no longer reproduce itself. It is losing the working conditions that allow the research that would help a world riven by cultural crises of every possible kind.

The second is the quality of the education received by the vast majority of the public. We are reducing it in the period when higher ed is supposed to be the foundation of prosperity and even survival. Why?

The MLA should declare a professional emergency and start creating concrete programs for reversing this 35-year-old decline.