More Money for Academia?

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As reported by Accuracy in Academia, thirty prominent academic associations have lobbied Congress to request six percent, or approximately $60 billion, of the upcoming economic stimulus bill be allocated for higher education.

The December 15 letter drafted by Molly Corbett Broad, President of the American Council on Education requests that Congress:

• Immediately increase the Pell Grant maximum award by $700 (15 percent) and retire the shortfall the program has accumulated,”

• “Double the funding for the Supplemental Education Opportunity Grant (SEOG) Program” to $1.87 billion,

• “Create a Higher Education Infrastructure Block Grant (HEIBG) initiative” for two and four-year institutions’ “ready-to-go” construction projects,

• “Pay campuses the outstanding funds for cancellations in the Perkins Loan Program,” and

• Pass measures which will make it easier for families to access and repay student loans.

The College Cost Reduction and Access Act (CCRAA) of 2007 will increase Pell Grant funding on an annual basis with “annual additions, rising from $490 for award year 2008-2009 to $1,090 in 2012-2013, to the maximum Pell Grant award set in each year’s discretionary appropriation act,” according to the Department of Education. The ACE request would speed up the initial increases in the Pell Grant program.

“These proposals are designed to ensure that colleges and universities are fully and effectively deployed in the effort to restart our economy and put our nation on the path to economic prosperity and renewed growth,” states the letter. “These ideas should be regarded as a capital investment in America’s future and with an immediate and measurable impact.”

As Accuracy in Academia has reported, higher education is an industry uniquely-placed to ride out the recession, although a series of hiring and construction freezes have been put in place at many schools.

Construction grants allocated to public and private schools under the HEIBG would “consider the quality and readiness of projects” and be allocated by state governors within 90 days of receiving federal funds, states the letter.

It would also take the “needs of minority-serving institutions” into consideration and “give priority to (a) sustainability projects, energy efficient buildings or other ‘green building’ initiatives, and (b) projects reflecting state or regional economic priorities.”

This September the Organization for Economic Co-Operation and Development (OECD) recommended that its industrialized member countries reduce federal contributions to the higher education system given the rising costs of ever-increasing enrollment.

ACE’s letter requests that Congress ease the availability of student loans and let “families and students tap unused federal loan borrowing authority” by treating “current federal borrowing limits as a ‘line of credit’ without increasing the total (aggregate) amount that students are able to borrow.”

According to one banking source, when a financial institution converts a loan into a “line of credit,” the business will close the loan account, consider the circumstances of the applicant, and then approve a line of credit based on the financial viability of the applicant at the time of application. The customer can then draw on the line of credit at will without reapplying for new loans.

If, as suggested, the economic stimulus bill were to convert student loans into “lines of credit,” new sources of income, a student or family’s financial viability, and other circumstances could change over the two years since the credit was granted—but the ability to draw on such credit would likely remain untouched regardless of these changes.

The letter also urges Congress to “pay campuses the outstanding funds for cancellations in the Perkins Loan Program.”

According to Sallie Mae, Perkins Loans are for students with “exceptional need.”

“Borrowers who undertake certain public, military, or teaching service employment are eligible to have all or part of their loans canceled,” states the Department of Education (DoE). They continue,

“In general, schools are reimbursed for 100 percent of the principal amount of the loan canceled, and the reimbursement must be reinvested in the school’s revolving loan fund. These institutional reimbursements for loan cancellations are an entitlement” (emphasis added).

The DoE, at the behest of the Bush Adminstration, included the Federal Perkins Loans Cancellations (FPLC) program as a “program proposed for elimination” in the FY 2009 budget. Currently, all federal agencies are operating under a continuing resolution, since Congress failed to pass a budget this year.

According to DoE, this program “reimburses institutional revolving funds for borrowers whose loan repayments are canceled in exchange for undertaking public service employment, such as teaching in Head Start programs, full-time law enforcement, or nursing. These reimbursements are no longer needed as the Administration will work with Congress to phase out the Perkins Loan program, which is inefficient and duplicative of other, larger, Federal student loan programs.”

The DoE states that not reimbursing these funds would clear up $64.5 million for other “priority education programs that have a demonstrated record of success or that hold significant promise for increasing accountability and improving student achievement.”

Association of American Universities (AAU) President Robert M. Berdahl drafted a similar letter to Barack Obama on December 12, recommending that Congress “provide $100 million for Perkins Loan cancellations for students who pursue public service careers,” a move which would increase funding for the program.

However, expanding the availability of student loans and grants at this time might just ensure that students can still get their degrees without actually causing schools to charge less for college.

The College Board (CB) reported in October 2008 that tuition increases nearly matched inflation this year, amidst a growing lack of available private student loans. Annual college cost increases regularly exceed inflation rates.

Statistics released by CB show that for the average four-year private college, tuition has increased each year between 3.6% and 13.7% in inflation-indexed 2008 dollars since the 1971-72 academic year. The average tuition at these institutions did not decrease even for a single year.

At public four-year colleges, where tuition in 2008 dollars has increased steadily between 0.2% and 42.5% annually, only one academic year—1974-75—had a reduction in average tuition costs.

Christopher T. Warden, the author of a new textbook that AIA is publishing, argued in July that “If you look at the trend line of federal assistance to higher education—grants, loans, and so forth—and track that number, [which] has been fairly steadily increasing since the ‘70’s, you go and time lag it a year and the tuition numbers follow the same path.”

“Right now, the government subsidizes your loans, what, 3-4%, and at most everybody can get them, so what does that do? [It] drives up tuition, creating the need for more loans. It’s almost like the solution is part of the problem,” asserted the Troy University professor.

“By February, the [Federal Reserve] is also going to begin buying credit card debt and student loans,” reports Gregg Robb for MarketWatch.

Bethany Stotts is a staff writer at Accuracy in Academia.