For-Profit Colleges in Financial Trouble

story first appeared in The Wall Street Journal

As consumers wise up about education spending, for-profit colleges are getting schooled.

Institutions such as Apollo Group Inc.'s University of Phoenix, DeVry Inc. and Washington Post Co.'s Kaplan—who only a few years ago reported double-digit student gains on a regular basis and posted hundreds of millions in profits—now are hemorrhaging students.

The storm was supposed to have passed for for-profit colleges when proposed regulations restricting access to federal student aid were watered down, and then overturned earlier this year. But some schools are still hurting, and it looks like the pain won't let up any time soon. Successful schools are often invested in new technology fields, offering concentrations in things like Wind Turbine Repair and Solar Panel maintenance.

They are facing increased competition from nonprofit and state schools and growing skepticism about the value of a high-cost education. Just last week, industry bellwether Apollo said it would close nearly half of its brick-and-mortar locations to save on overhead.

It wasn't supposed to be this way. After years of government scrutiny and bad press about recruiting practices and questionable academic quality, schools worked to improve their reputations by tightening admissions standards, beefing up student support services and pouring money into rebranding. They received a slight reprieve this summer when a federal judge struck down a series of regulations that could have restricted schools' access to the federal student aid that supplies most of their revenue.

But the hoped-for recovery has failed to materialize as students rethink college entirely, and nonprofit schools muscle in to compete for market share.

Now, some analysts say pockets of the industry may never recover, with school closures and further losses all but certain.

Under the old model, schools boosted enrollment by getting students—generally working adults seeking a quick career jump-start—in the door, often with little regard for whether they eventually earned a degree.

Kevin Kinser, an associate professor of higher education policy at the State University of New York at Albany said that colleges could be very profitable as a business, even if not as an educational institution.

No longer. Apollo said last week that enrollment fell by nearly 14% to 328,400 in the fiscal quarter ended Aug. 31. Student counts have dropped by nearly a third since their May 2010 peak of 476,500. The school says the money saved from closing classrooms will be rededicated to its online programs.The school blames its dwindling enrollment in part on increased competition from more traditional education providers, as well as the fact that many potential students don't move beyond University of Phoenix's free "orientation," a trial period of instruction before tuition is due, spokesman Mark Brenner says.

The economy has also put pressure on schools, which normally benefit from economic downturns as adults seek to bolster their résumés with new skills and degrees. This time around, the weak job market coupled with rising college costs has made many prospective students leery of investing in school without guaranteed returns.

The U.S. Department of Education recently reported the first drop in college enrollment in more than a decade—albeit one of less than 0.2%—based on data for students enrolled in fall 2011. But for-profit colleges saw enrollment fall by 2.8%.

Meanwhile, as states seek to reduce government spending, legislators see financial aid that ends up at for-profit schools as an easy target for cuts. In California, lawmakers this summer decreed that students at 154 schools—nearly all of them for-profit colleges—will no longer be eligible for the state's need-based Cal Grants, citing the schools' low graduation rates and students' heavy debt burdens.

To boost graduation rates and keep student-loan defaults in check, Apollo and peers are now competing for higher-quality students who have a better shot of graduating. But nonprofit schools are successfully courting the same market segment, with more students turning to online degree programs at schools including University of Maryland University College, Southern New Hampshire University and Liberty University, which don't have the reputational baggage for-profit schools do.

That leaves for-profit colleges fighting for an even smaller sliver of a shrinking pie.

Piper Jaffray analyst Peter Appert says nonprofit institutions have been slow to make a meaningful shift online, but now that they have, students are paying attention and there is a "sea change" in the market.

Enrollment in the online arm of Southern New Hampshire University, which has a ground campus in Manchester, N.H., more than doubled from last October, now hitting 16,700. University of Maryland University College, meanwhile, saw enrollment in its online programs increase by 5% in the last year, to 97,001 students.

Not all for-profit colleges are struggling. Some specialized and niche schools are still posting gains. Grand Canyon Education Inc., a Christian school with a traditional campus in Arizona and online operations, has seen enrollment soar by 60% since 2009, hitting 44,435 as of June 30. And American Public Education Inc.,  which targets people in the military and public safety, increased course registrations by 45% to 92,900 in that time. Michigan child abuse defense attorney programs are holding steady.

But another dark cloud looms: The Education Department says it is considering its legal and regulatory options in the wake of the July court decision striking down parts of the so-called "gainful employment" rule, which aimed to evaluate programs on how well they prepare students for employment, though industry insiders say it is unlikely much will happen in Washington until after the election.

Still, many institutions are under close watch. ITT Educational Services Inc. and Corinthian Colleges Inc. have both notified investors of a broad inquiry by the Consumer Financial Protection Bureau, while Universal Technical Institute Inc.and Bridgepoint Education Inc. have disclosed U.S. Department of Justice investigations into how schools incentivize staffers to land new students.

Robert Danford fits the profile of the typical for-profit customer. When the 24-year-old was looking for a program in graphic design this fall, he considered Career Education Corp.'s Collins College, where he had briefly studied a few years earlier. But he says the sales pitch and high cost—he says he took out $12,000 in loans for his first stint there—soured him on the school.

A Career Education spokesman says the school's admissions officers are trained on integrity and not to promise outcomes or access to financial aid when working with prospective students.

Mr. Danford enrolled instead in the nonprofit Chandler-Gilbert Community College in Chandler, Ariz., where he is paying a few hundred dollars per credit hour and takes courses part-time while working at a nearby Office Max. He says he intends to earn an associate degree and hopes to enroll in a bachelor's degree program down the line

Certification for Working Skills

First appeared in the Detroit News

Could millions of college dropouts get a second chance through a GED-style equivalent of a college diploma? In today's age of blue-collar blues and online education, the idea of college-equivalency exams doesn't sound so outlandish anymore.

The high school diploma is not the gateway to the middle class that it used to be.

Amid new corporate efficiencies and the migration of high-paying low-skilled jobs overseas since the 1950s, growing numbers of college graduates are occupying jobs like postal worker or restaurant manager that used to be filled by high school grads.

The result is new pressures on blue-collar families and the class tensions voiced by presidential candidate Rick Santorum with his recent verbal jab ("What a snob!") at President Barack Obama's push for more college attendance. In fact, Obama, like Santorum, has been a major cheerleader for community colleges and trade schools.

Yet, give Santorum his due. He touched on a reality that deserves more public discussion: College isn't for everyone. Some very bright students thrive better while learning a hands-on trade, for example, than they do in a classroom. Others simply can't afford the time or tuition of college because of personal circumstances.

As a result, the percentage of college graduates who come from households in the bottom fourth of income earners -- as I did -- has declined to only 7.2 percent from 12 percent in 1970, according to Ohio University economics professor Richard Vedder, who also is director of the Washington, D.C.-based Center for College Affordability and Productivity.

Author of the 2004 book "Going Broke by Degree: Why College Costs Too Much," Vedder sees a disconnect between the cost of college and the needs of the job market. He has found as many as 1-in-3 college graduates today to be in jobs that historically were filled by people with lesser education.

"These are jobs that do not require higher-level learning skills, critical thinking skills, or writing skills or anything of that nature," he said in a telephone interview.

At the same time, we see cheaper alternatives to college like online education growing.

Let's go a step further, says Vedder. "As college costs rise," he said, "people are asking: Aren't there cheaper ways of certifying competence and skills to employers?"

People typically believe there are no good substitutes for college. But if a prospective employee can certify to potential employers that he or she is as bright, knowledgeable, good at communicating and eager to learn as a better-than-average college graduate, they can present themselves as a bargain -- willing to accept wages that are higher than normal high-school-graduate standards, but low compared to most college graduate salaries.

Vedder is encouraged by recent agreements between the Education Testing Service (ETS), which operates the famed SAT test for the College Board, and the Council on Aid to Education (CAE) to provide competency test materials to students online through StraighterLine, an online education firm.

The challenge is to persuade college accreditation organizations and the business community that collegiate certification can be as reliable as the 70-year-old GED, which certifies high school equivalencies.

At a time when economic success is increasingly defined by educational achievement beyond high school, future generations need as many alternatives as we can offer.

Are Asian's Discriminated Against When Appling To College?

Story first appeared in The Detroit News.


Lanya Olmstead was born in Florida to a mother who emigrated from Taiwan and an American father of Norwegian ancestry. Ethnically, she considers herself half Taiwanese and half Norwegian. But when applying to Harvard, Olmstead checked only one box for her race: white.


For years, many Asian-Americans have been convinced that it's harder for them to gain admission to the nation's top colleges.

Studies show that Asian-Americans meet these colleges' admissions standards far out of proportion to their 6 percent representation in the U.S. population and that they often need test scores hundreds of points higher than applicants from other ethnic groups to have an equal chance of admission. Critics say these numbers, along with the fact that some top colleges with race-blind admissions have double the Asian percentage of Ivy League schools, prove the existence of discrimination.

The way it works, the critics believe, is that Asian-Americans are evaluated not as individuals, but against the thousands of other ultra-achieving Asians who are stereotyped as boring academic robots.

Now, an unknown number of students are responding to this concern by declining to identify themselves as Asian on their applications.

For those with only one Asian parent, whose names don't give away their heritage, that decision can be relatively easy. Harder are the questions that it raises: What's behind the admissions difficulties? What, exactly, is an Asian-American — and is being one a choice?

Olmstead is a freshman at Harvard and a member of HAPA, the Half-Asian People's Association. In high school she had a perfect 4.0 grade-point average and scored 2150 out of a possible 2400 on the SAT, which she calls pretty low.

College applications ask for parent information, so Olmstead knows that admissions officers could figure out a student's background that way. She did write in the word multiracial on her own application.

Still, she would advise students with one Asian parent to check whatever race is not Asian.

Not to really generalize, but a lot of Asians, they have perfect SATs, perfect GPAs ... so it's hard to let them all in.

Amalia Halikias is a Yale freshman whose mother was born in America to Chinese immigrants; her father is a Greek immigrant. She also checked only the "white" box on her application.

As someone who was applying with relatively strong scores, she didn't want to be grouped into that stereotype. She didn't want to be written off as one of the 1.4 billion Asians that were applying.

Her mother was extremely encouraging of that decision even though she places a high value on preserving their Chinese heritage.


But leaving the Asian box blank felt wrong to Jodi Balfe, a Harvard freshman who was born in South Korea and came here at age 3 with her Korean mother and white American father. She checked the box against the advice of her high school guidance counselor, teachers and friends.


Other students, however, feel no conflict between a strong Asian identity and their response to what they believe is injustice.


Immigration from Asian countries was heavily restricted until laws were changed in 1965. When the gates finally opened, many Asian arrivals were well-educated, endured hardships to secure more opportunities for their families, and were determined to seize the American dream through effort and education.

These immigrants, and their descendants, often demanded that children work as hard as humanly possible to achieve. Parental respect is paramount in Asian culture, so many children have obeyed — and excelled.


Of course, not all Asian-Americans fit this stereotype. They are not always obedient hard workers who get top marks. Some embrace American rather than Asian culture. Their economic status, ancestral countries and customs vary, and their forebears may have been rich or poor.

But compared with American society in general, Asian-Americans have developed a much stronger emphasis on intense academic preparation as a path to a handful of the very best schools.


Does Holmes think children of American parents are generally spoiled and lazy by comparison?

Asian students have higher average SAT scores than any other group, including whites. A study by Princeton sociologist Thomas Espenshade examined applicants to top colleges from 1997, when the maximum SAT score was 1600 (today it's 2400). Espenshade found that Asian-Americans needed a 1550 SAT to have an equal chance of getting into an elite college as white students with a 1410 or black students with an 1100.

Top schools that don't ask about race in admissions process have very high percentages of Asian students. The California Institute of Technology, a private school that chooses not to consider race, is about one-third Asian. (Thirteen percent of California residents have Asian heritage.) The University of California-Berkeley, which is forbidden by state law to consider race in admissions, is more than 40 percent Asian — up from about 20 percent before the law was passed.

Steven Hsu, a physics professor at the University of Oregon and a vocal critic of current admissions policies, says there is a clear statistical case that discrimination exists.


Yale, Harvard, Princeton and the University of Pennsylvania declined to make admissions officers available for interviews for this story.

Kara Miller helped read applications for the Yale admissions office when she was an undergraduate there, and participated in meetings where admissions decisions were made. She says it often felt like Asians were held to a higher standard.


Highly selective colleges do use much more than SAT scores and grades to evaluate applicants. Other important factors include extracurricular activities, community service, leadership, maturity, engagement in learning, and overcoming adversity.

Admissions preferences are sometimes given to the children of alumni, the wealthy and celebrities, which is an overwhelmingly white group. Recruited athletes get breaks. Since the top colleges say diversity is crucial to a world-class education, African-Americans, Latinos, Native Americans, and Hawaiian/Pacific Islanders also may get in despite lower scores than other applicants.

A college like Yale could fill their entire freshman class twice over with qualified Asian students or white students or valedictorians,says Rosita Fernandez-Rojo, a former college admissions officer who is now director of college counseling at Rye Country Day School outside of New York City.

But applicants are not ranked by results of a qualifications test, she says — "it's a selection process."


In the end, elite colleges often don't have room for Asian students with outstanding scores and grades.

That's one reason why Harvard freshman Heather Pickerell, born in Hong Kong to a Taiwanese mother and American father, refused to check any race box on her application.


She considers drawing lines between different ethnic groups a form of racism — and says her ethnic identity depends on where she is.


Holmes, the Yale sophomore with the Chinese-born mother, also has problems fitting herself into the Asian box.

"I feel like an American," she says, "... an Asian person who grew up in America."

Susanna Koetter, a Yale junior with an American father and Korean mother, was adamant about identifying her Asian side on her application. Yet she calls herself "not fully Asian-American. I'm mixed Asian-American. When I go to Korea, I'm like, blatantly white."

And yet, asked whether she would have considered leaving the Asian box blank, she says: That would be messed up. I'm not white.


She didn't check the box, even though her last name is a giveaway and her essay was about Asian-American identity.

Looking back I don't agree with what I did, Zhuang says. It was more like a symbolic action for her to rebel against the higher standard placed on Asian-American applicants.


Hsu, the physics professor, says that if the current admissions policies continue, it will become more common for Asian students to avoid identifying themselves as such, and schools will have to react.


The lines are already blurred at Yale, where almost 26,000 students applied for the current freshman class, according to the school's web site.

About 1,300 students were admitted. Twenty percent of them marked the Asian-American box on their applications; 15 percent of freshmen marked two or more ethnicities.

Ten percent of Yale's freshmen class did not check a single box.

The Boom in For-Profit Colleges may be a Bust for Taxpayers and Students

LA Times

Many drop out or find the programs aren't accredited, a Senate panel reports. Fees, often twice as much as at public universities, are often paid with federal loans, with a high default rate.

For-profit colleges are booming as the unemployed turn to education, but some members of Congress and Obama administration officials say they are growing at the expense of taxpayers and that students are often exploited.

The average profit among such publicly traded higher education companies soared to $229 million in 2009, up from $150 million the year before, with the lion's share of their revenue coming from federal student aid.
For example, federal dollars accounted for 86% of revenue at the University of Phoenix, which has more than 458,000 students.

But according to a recent report issued by the Senate Committee on Health, Education, Labor and Pensions, the public's money is often not well spent on the schools. The colleges cater to low-income and minority students often working online with little supervision, yet they charge on average twice as much as public universities charge in-state students.

Investigators believe a high proportion of students drop out, and those who do graduate find their money wasted because their programs are not accredited. Students at for-profit colleges borrow more and are more likely to default on their loans, furthering taxpayer losses. According to the Chronicle of Higher Education, 30% of students who borrowed from the federal government to attend four-year for-profit institutions have defaulted since 1995. Roughly 15% of students at public four-year colleges and 13.6% at private nonprofit four-year colleges have defaulted since then, the Chronicle reported.

The Department of Education on Friday moved to rein in some for-profit firms with a proposal that would cut off federal student aid to individual programs within colleges that have a high proportion of students who cannot repay their loans after leaving.

"Some proprietary schools have profited and prospered, but their students haven't," Education Secretary Arne Duncan said. "These schools — and their investors — benefit from billions of dollars in subsidies from taxpayers, and in return taxpayers have a right to know that these programs are providing solid preparation for a job."

The proposed regulation, less stringent than originally expected, could put out of business 5% of for-profit programs, a number that critics of the colleges said was not high enough.

"At first glance, the regulation appears to set a low bar," Sen. Tom Harkin (D-Iowa), chairman of the Senate panel that issued the report, said in a statement Friday. "I will be looking closely at this rule to ensure that it goes far enough to protect the $23 billion in federal aid to for-profit schools each year."

Harkin and a chorus of Senate Democrats are leading the call for government to step up regulation of for-profit colleges, saying it must ensure that tax dollars are not wasted and students are not cheated.

But Harris Miller, president of the Career College Assn., which represents for-profit schools, said the schools have a special challenge.

"We have millions of students who are not even in the educational system who have been told, 'You're not college material,' " Miller said. "Somebody has to reach out to those people."

Corinthian Colleges spokesman Kent Jenkins said the disproportionate default rate was a consequence of the large number of low-income students in the programs. Reaching low-income students requires the schools to run high advertising budgets, he added. The Senate panel report noted that the schools devote about a third of their budgets to advertising.

The report acknowledges that President Obama's goal of doubling the number of U.S. college graduates by 2020 may hinge on for-profit colleges, which are able to expand faster than public colleges and universities. After a series of painful cuts to the University of California and California State University systems last summer, enrollment at for-profit colleges in California shot up 20%.

Stephen Burd, an education policy expert at the New America Foundation, said the scrutiny is long overdue, but lawmakers will have to contend with the industry's "Teflon lobby." Many concerns have been raised about for-profit colleges, but nothing has stuck, he said.

"For-profit college lobbyists are accustomed to flexing their muscles on Capitol Hill and getting their way — no matter how much controversy is swirling around their schools," he said.

Although for-profit colleges were once mom-and-pop operations, the 14 publicly traded institutions enroll 1.4 million students, up from fewer than 200,000 in 1998, according to the Senate committee report. Kathleen Tighe, inspector general for the Department of Education, testified at the panel's June 24 hearing that 70% of the department's investigations involve for-profit colleges, many of which have been found guilty of falsifying student information to obtain more federal funds.

Tighe also testified that she is concerned about the rapid expansion of online programs in recent years because students are eligible for the same amount of federal aid but it is more difficult to track their progress — a potential recipe for fraud.

Plan B -- Skip College

NY Times

WHAT’S the key to success in the United States?

Short of becoming a reality TV star, the answer is rote and, some would argue, rather knee-jerk: Earn a college degree.

The idea that four years of higher education will translate into a better job, higher earnings and a happier life — a refrain sure to be repeated this month at graduation ceremonies across the country — has been pounded into the heads of schoolchildren, parents and educators. But there’s an underside to that conventional wisdom. Perhaps no more than half of those who began a four-year bachelor’s degree program in the fall of 2006 will get that degree within six years, according to the latest projections from the Department of Education. (The figures don’t include transfer students, who aren’t tracked.)

For college students who ranked among the bottom quarter of their high school classes, the numbers are even more stark: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree.

That can be a lot of tuition to pay, without a degree to show for it.

A small but influential group of economists and educators is pushing another pathway: for some students, no college at all. It’s time, they say, to develop credible alternatives for students unlikely to be successful pursuing a higher degree, or who may not be ready to do so.

Whether everyone in college needs to be there is not a new question; the subject has been hashed out in books and dissertations for years. But the economic crisis has sharpened that focus, as financially struggling states cut aid to higher education.

Among those calling for such alternatives are the economists Richard K. Vedder of Ohio University and Robert I. Lerman of American University, the political scientist Charles Murray, and James E. Rosenbaum, an education professor at Northwestern. They would steer some students toward intensive, short-term vocational and career training, through expanded high school programs and corporate apprenticeships.

“It is true that we need more nanosurgeons than we did 10 to 15 years ago,” said Professor Vedder, founder of the Center for College Affordability and Productivity, a research nonprofit in Washington. “But the numbers are still relatively small compared to the numbers of nurses’ aides we’re going to need. We will need hundreds of thousands of them over the next decade.”

And much of their training, he added, might be feasible outside the college setting.

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives and store clerks. None of those jobs require a bachelor’s degree.

Professor Vedder likes to ask why 15 percent of mail carriers have bachelor’s degrees, according to a 1999 federal study.

“Some of them could have bought a house for what they spent on their education,” he said.

Professor Lerman, the American University economist, said some high school graduates would be better served by being taught how to behave and communicate in the workplace.

Such skills are ranked among the most desired — even ahead of educational attainment — in many surveys of employers. In one 2008 survey of more than 2,000 businesses in Washington State, employers said entry-level workers appeared to be most deficient in being able to “solve problems and make decisions,” “resolve conflict and negotiate,” “cooperate with others” and “listen actively.”

Yet despite the need, vocational programs, which might teach such skills, have been one casualty in the push for national education standards, which has been focused on preparing students for college.

While some educators propose a radical renovation of the community college system to teach work readiness, Professor Lerman advocates a significant national investment by government and employers in on-the-job apprenticeship training. He spoke with admiration, for example, about a program in the CVS pharmacy chain in which aspiring pharmacists’ assistants work as apprentices in hundreds of stores, with many going on to study to become full-fledged pharmacists themselves.

“The health field is an obvious case where the manpower situation is less than ideal,” he said. “I would try to work with some of the major employers to develop these kinds of programs to yield mastery in jobs that do demand high expertise.”

While no country has a perfect model for such programs, Professor Lerman pointed to a modest study of a German effort done last summer by an intern from that country. She found that of those who passed the Abitur, the exam that allows some Germans to attend college for almost no tuition, 40 percent chose to go into apprenticeships in trades, accounting, sales management, and computers.

“Some of the people coming out of those apprenticeships are in more demand than college graduates,” he said, “because they’ve actually managed things in the workplace.”

Still, by urging that some students be directed away from four-year colleges, academics like Professor Lerman are touching a third rail of the education system. At the very least, they could be accused of lowering expectations for some students. Some critics go further, suggesting that the approach amounts to educational redlining, since many of the students who drop out of college are black or non-white Hispanics.

Peggy Williams, a counselor at a high school in suburban New York City with a student body that is mostly black or Hispanic, understands the argument for erring on the side of pushing more students toward college.

“If we’re telling kids, ‘You can’t cut the mustard, you shouldn’t go to college or university,’ then we’re shortchanging them from experiencing an environment in which they might grow,” she said.

But Ms. Williams said she would be more willing to counsel some students away from the precollege track if her school, Mount Vernon High School, had a better vocational education alternative. Over the last decade, she said, courses in culinary arts, nursing, dentistry and heating and ventilation system repair were eliminated. Perhaps 1 percent of this year’s graduates will complete a concentration in vocational courses, she said, compared with 40 percent a decade ago.

There is another rejoinder to the case against college: People with college and graduate degrees generally earn more than those without them, and face lower risks of unemployment, according to figures from the Bureau of Labor Statistics.

Even those who experience a few years of college earn more money, on average, with less risk of unemployment, than those who merely graduate from high school, said Morton Schapiro, an economist who is the president of Northwestern University.

“You get some return even if you don’t get the sheepskin,” Mr. Schapiro said.

He warned against overlooking the intangible benefits of a college experience — even an incomplete experience — for those who might not apply what they learned directly to their chosen work.

“It’s not just about the economic return,” he said. “Some college, whether you complete it or not, contributes to aesthetic appreciation, better health and better voting behavior.”

Nonetheless, Professor Rosenbaum said, high school counselors and teachers are not doing enough to alert students unlikely to earn a college degree to the perilous road ahead.

“I’m not saying don’t get the B.A,” he said. “I’m saying, let’s get them some intervening credentials, some intervening milestones. Then, if they want to go further in their education, they can.”

More Cities Look to Universities to Share Costs Amid Recession

Boston Globe

Pittsburgh threatened to tax college tuition. Providence sought to tax out-of-state students. And Philadelphia is pressing its colleges and universities to resume voluntary payments in lieu of taxes.

As Boston seeks new revenue, cities around the country are grappling with how to squeeze more money from the colleges and other tax-exempt institutions, as recession and lower property tax revenues prompt municipalities to seek alternate ways to pay their bills.

Efforts to impose greater obligations on nonprofits have increased tension and strained town-gown relations in some college-rich cities.

City officials argue that colleges rely on municipal services and should pay their fair share, especially in difficult financial times.

Colleges defend their tax-exempt status by citing the social and economic benefits they bring to their communities.

“Economic constraints have required cities and towns to look more aggressively for additional funds,’’ said Daniel Egan, president of the Association of Independent Colleges and Universities of Rhode Island.

“But quite frankly, when you put a figure on something, then the tax exemption is gone. If it looks like a tax and sounds like a tax, it’s a tax.’’

With its large number of tax-exempt universities and hospitals, Boston appears to be ahead of most cities in seeking to toughen its voluntary payment program for nonprofits. A city panel is finalizing a plan to ask nonprofits to gradually increase their voluntary annual payments to 25 percent of what they would owe in taxes.

The proposal, which many colleges and universities oppose, would raise the total amount of payments to Boston to $20.9 million a year.

Currently, 13 Boston colleges and universities pay the city $8.4 million a year, ranging from $4.9 million from Boston University to $13,125 from the New England School of Law.

In addition, several of the schools pay $5.7 million in taxes on property that would otherwise be considered tax-exempt. At least nine colleges pay nothing in lieu of taxes.

In Philadelphia, meanwhile, hardly any colleges make payments in lieu of taxes, although that could change.

University presidents there met with city officials last week to begin discussing how to quantify their current contributions to the city. Philadelphia is assembling a task force similar to the one in Boston to assess how a new system might work, whether through in-kind services or voluntary payments.

In 1995, the city received $6.78 million in voluntary payments from nonprofits, with the University of Pennsylvania contributing nearly $2 million.

But the payments slowed to a trickle after a 1997 state law calmed fears that the city might try to strip them of their tax-exempt status if they did not pay up.

Now, the city receives less than $1 million a year from nonprofits, mostly from outside higher education, said Lori Shorr, Philadelphia’s chief education officer.

Many Philadelphia schools, however, donate services and operate community programs, Shorr said.

Penn, for example, contributes $700,000 a year to a public elementary and middle school that it started in 2001 to attract families to a West Philadelphia neighborhood.

In January, a Chronicle of Higher Education survey found that only a third of 30 top research universities with large endowments made regular voluntary payments in lieu of taxes.

The largest single voluntary payment of any university to its host municipality comes from Yale University. Yale recently bumped its contributions to New Haven to $7.5 million a year, up from $5 million, because of the recession’s effects on the city, a university official said.

By comparison, Harvard voluntarily pays $2 million annually to Boston and $2.2 million to Cambridge, while MIT pays Cambridge $1.8 million. (Both universities also pay millions in taxes on property that is not used for academic purposes and run a wide range of community programs.)

On top of Yale’s contributions, New Haven receives $43 million from the state of Connecticut, which awards cities grants about 77 percent of the amount of taxes that would have been paid if college and hospital properties were not exempt from taxation, a rare model that some private education advocates in Massachusetts would like the state to consider.

While cities have to make do with whatever voluntary payments they manage to get out of local colleges, some mayors have resorted to more drastic measures to help close budget gaps.

The issue has spurred debate and tension in Providence.

Although four private colleges agreed in 2003 to pay the city nearly $50 million over 20 years, Mayor David Cicilline proposed last spring that the colleges also pay a $300-a-year tax on each out-of-state student. He said it would generate about $8 million a year.

But the plan failed amid opposition from students angered by the additional burden at already pricey schools. and Michigan colleges. Universities worried that the tax would hurt recruiting.

“I thought it was important that our large tax-exempt institutions that own a lot of real estate contribute more to the health and well-being of the city,’’ Cicilline said in an interview yesterday.

He said the city is continuing discussions with the colleges on how they can contribute, such as helping Providence create a streetcar system and increasing their involvement in the city’s schools.

Pittsburgh put together a plan last year to establish the nation’s first tax on college tuition to raise revenue for city retirees’ pensions.

But the mayor withdrew the proposal for the 1 percent tax in December after Carnegie Mellon University and the University of Pittsburgh agreed to step up voluntary payments to the city.

Pittsburgh takes in about $784,000 in voluntary payments from its nonprofits. City officials would not disclose how much more the two universities have agreed to pay.

Higher-education representatives hope that the unsuccessful tax proposals in Pittsburgh and Providence send a signal to mayors in other cities.

“That will probably tamp down enthusiasm to go in this direction, but probably only for a year or two,’’ said Don Francis, president of the Association of Independent Colleges and Universities of Pennsylvania.

“We will see more of these kinds of proposals if we don’t find other solutions.’’

Kids Starting to Feel Pinch of Parents' Unemployment

The Wall Street Journal

Bank of Mom and Dad Shuts Amid White-Collar Struggle

FAIRFIELD, Conn.—When Maurice Johnson was laid off a year ago from his six-figure salary as a managing director at GE Capital, it wasn't his future he was worried about.

It was his children's.

The family income of the Johnsons is a fifth of what it used to be. And the children are about to feel the pain. Mr. Johnson's two oldest are attending his alma mater, Johns Hopkins University, at an annual cost of $50,000 apiece. And his youngest daughter, 15 years old, recently began her own college search. Mr. Johnson isn't sure whether he'll be able to help her to go to college, or even to get the older kids to graduation.

Mr. Johnson, who watched his own father struggle as an engineer without a college degree, was determined to do better for his own children.

"We saved like crazy from the minute they were born," he says. "Then, it all fell to pieces."

Many families such as the Johnsons—upper-middle-class professionals—are suddenly downwardly mobile. For years, they used rising family wealth to help foot the bill for college, down payments for houses and start-up cash for children's careers. But pay cuts, layoffs and the decadelong flatlining of the stock market mean many families can no longer help their children.

This comes as young adults could use a financial helping hand more than ever. The unemployment rate for workers ages 16 to 29 was 15.2% in March, the highest rate since 1948, according to the Bureau of Labor Statistics.

"It's almost a double whammy," says Ann Huff Stevens, an economics professor at the University of California at Davis. "If a parent goes through a job loss, they're going to contribute less. And there's a direct effect because kids themselves are earning less, too. A recession like this might have some lasting effects for parents and kids."

In general, highly trained and educated workers are faring better than those without degrees in this labor market. The unemployment rate for college graduates is 5%, compared with 9.7% overall. In general, the employment picture is improving, with employers adding 162,000 jobs in March, the biggest monthly gain in three years.

Even so, the average length of unemployment, 31 weeks, is at its highest level since 1948. There were a total of 2.3 million unemployed college graduates in March 2010, 1.45 million more than in March 2007, with heavy layoffs in white-collar sectors such as finance.

In the long run, the drop in parental aid could make young adults a more financially resilient generation, like children of the Great Depression. But for now, economists worry that without parental cash, young adults may put off entering the housing market, settling into career paths and having families.

"Now, not only do parents no longer have the money to help their children out, but banks will no longer lend to home buyers without the income to support repayment," says Cheryl Russell, a demographer and author of "Americans and Their Homes: Demographics of Homeownership."

The rate of home ownership among people ages 25 to 29 fell to 37.7% last year, from a peak of 42% in 2006, according to the U.S. Census. Home ownership for those under 25 fell to 23.3% from 26% in 2005, the lowest rate for any age group.

Indeed, the bank of Mom and Dad is closing at a time when young people are having trouble borrowing from traditional lenders. Some 22% of young people between the ages of 18 and 34 said they've been turned down for a mortgage, loan or credit card in the past year, according to a February survey from FindLaw.com, a legal marketing and information site. That's double the percentage of any other age group in its survey.

As a result, many young people are now moving home to save on rent. About 21% of young adults say they've either moved in with a friend or relative, or had a friend or relative move in with them because of the economy, according to a study from the Pew Research Center.

In past recessions, women would re-enter the work force to help prop up household income, says Katherine Newman, a Princeton University sociology professor. But now, more women are working and themselves experiencing layoffs. Before the 1990 recession, 57.4% of American women worked, and in the next two years, some 1.1 million more entered the work force. Today, it's the reverse. On the eve of the latest downturn in 2007, 59.3% were working and 2.6 million more women were unemployed. Women's overall participation rate in the work force has remained flat since then.

Many parents who were set to retire are now delaying it to compensate for battered retirement accounts, leaving even fewer openings for younger workers to fill. There are an additional 500,000 workers over the age of 65 in the work force now compared with 2007.

"We may have well given up on the idea that our kids will do better than us," Prof. Newman says. "But the idea that they should do as well, that's something we haven't given up on yet."

Before her December 2008 layoff from Bank of America Corp. as an executive recruiter, Diane Hayes bought a "dream house" for her family, which includes her three teenage daughters with disabilities, two with autism and one with Down syndrome. The 3,600-square-foot house in Orlando, Fla., had a pool in back that could be used for therapy and custom-designed rooms to accommodate five people into adulthood. "The pool was the only place we could all be together and enjoy ourselves," Mrs. Hayes says.

Her husband continues working as a writer, but without her six-figure income, the family was forced to sell the home in November. The Hayes had a $650,000 mortgage and sold the house for $375,000. Their lender forgave the difference as part of the sale, Mrs. Hayes said. But the family still has loans outstanding for $50,000.

They've since moved to a 1,200-square-foot, two-bedroom house nearby that they are renting for $1,200 a month. All three girls share one bedroom with bunk beds. The house is in the same neighborhood, so the family can use the same supermarkets and schools, hoping to ease the anxiety many autistic children face when adjusting to new environments.

The family had to cut the four different specialized summer camps that each child attended, at a cost of $1,600 for all three children per week. And they've been forced to eat into a nest egg designed to support the girls as adults.

 "With kids with disabilities, there's no cheap way out," Mrs. Hayes says. She adds: "Other people can send their kids to community college, have them get part-time jobs, and think 'maybe our son or daughter will support us'…We can't do that."

Last month, Mrs. Hayes found some temporary work as a recruiter. The income is lower than her Bank of America salary, there are no benefits and her brother has helped pitch in with day care. She says she's grateful for the opportunity, but knows it could be precarious. "We're not going to spend on anything," she says.

In other families, the gaps in financial support have become glaring between siblings. Ten years ago, when Patricia Bennett earned more than $100,000 a year selling risk-management software on Wall Street, she paid $30,000 cash for her now 28-year-old son's freshman year at Morehouse College in Atlanta with little hassle.

After being laid off in April 2009, Ms. Bennett now makes $9.75 an hour as a part-time cashier at Williams-Sonoma, in addition to doing volunteer hospice care. In January, she received a foreclosure notice on her home in Monroe, N.Y. Her youngest son is a sophomore at Lafayette College and will have to drop out next year unless he obtains more scholarships and loans.

Last year, Lafayette increased financial aid by 8.5% and cut its operating budget by 5% to keep pace with the increase in financial-aid requests and prevent students from leaving for financial reasons "There's concern about reality today and what's ahead," says Robert Massa, Lafayette's vice president of communications.

Ms. Bennett's husband, William, was unemployed as a salesman for two years before he started selling cars on commission in July of 2009.  Before they became eligible for health insurance with his new job, the family went without it for months at a time so that they could contribute around $1,000 for pocket money and bus tickets for their son to visit home.

The gap between their two sons' experiences is particularly frustrating for her. "It's a bitter pill to swallow," Ms. Bennett says.

Many parents are less able to help their children after graduation as well. Angelica Hoyos, a 26-year-old living in Los Angeles, has put her photography and sculpture career on hold since her parents pulled the financial plug earlier this year after the family's granite-countertop business suffered. Ms. Hoyos has moved in with her boyfriend, cut spending and earns about $1,000 a month doing free-lance design work and baby-sitting.

"My artistic career is put on the side because I have to make a living," she says.

For Mr. Johnson, the former GE Capital executive, not being able to see his children through college is particularly painful. Both he and his wife attended Johns Hopkins in Baltimore. When he decided to earn his masters in finance there decades ago, he says he had little doubt about it being "a good value proposition."

The Johnson children always had part-time jobs in high school. But in college, they struggled for months to find part-time and summer work over the past two years. Finally, one landed a seasonal job folding clothes at Old Navy. Last year, the Johnsons didn't qualify for work study because the household income was too high. Since resubmitting their aid application, they have qualified. Their son got a work-study gig at a university office.

Johns Hopkins last year added $2 million in financial aid just to accommodate the surge of additional aid requests for its 5,000 undergrads. Some 61% of higher-education institutions reported an increase of 10% or more in financial-aid applications than the previous year, according to a September 2009 survey from the National Association of Student Financial Aid Administrators. More than a million more federal financial-aid applications were filed during the beginning of 2009 than in the beginning of 2008, with a 16.3% increase among dependent students.

"We had folks who never needed aid before and now they have one, two parents unemployed," says Vincent Amoroso, the school's director of student financial services. "And these are folks who used to make $100,000 or $200,000 a year who are coming to see us."

Mr. Johnson made up to $550,000 a year, including bonuses, before losing his job in March 2009. The Johnsons had stashed $250,000 away for college.

If that money isn't tapped sooner for household expenses, it might buy two years of schooling for each of his children, Mr. Johnson calculates.  Further expenses such as first homes and weddings are out of the question. "They're going to have to elope," he says.

In the summer of 2007, the Johnsons paid $1.5 million for their Fairfield home and took out a mortgage of $852,000. Mr. Johnson figures it could realistically sell for $800,000 today. Given the numbers, the family is trying to avoid moving and recently refinanced their house at a lower interest rate.

"It's emasculating," Mr. Johnson says. "I'm supposed to be providing for them, but I can't."

The children haven't talked about transferring to less expensive colleges yet. "I'm going to take it all day by day," says Kristian Johnson, 20, the oldest of the Johnson siblings. Now a sophomore, he says he's prepared to take out loans to finish.

Margot Johnson, 18, says her father's career experience has affected her goal as an economics major. "I want to study economics," she says, "but not something in the corporate world."

Mr. Johnson concedes that Elsa Johnson, the youngest, is "getting the raw end of the deal." By the time the 15-year-old daughter starts looking at colleges, most of the savings set aside for school could be gone.

Already passionate about fashion and design, Elsa says she'll opt for the least-expensive design school she can get into and is looking into paying for school herself. Until then, she's cut back on shopping trips and food and coffee spending with friends. She no longer asks for weekly allowances. "My parents are already stressed out enough," she says.

Meanwhile, Mr. Johnson continues to look for work and crunch numbers of the new household-budget reality. 

"I know, I know—cry me a river and then build a bridge and get over it, right?" Mr. Johnson says. "Still, there was a set of expectations we established, consciously or not, and they are not being met any more."

Pell Grant Increase Proposed

NY Times

The federal government would provide $36 billion in new financing for Pell grants to needy students over the next 10 years under legislation announced Thursday by Congressional Democrats.

The maximum annual Pell grant would rise to $5,975 by 2017, from $5,350 this year. The new Pell initiative includes $13.5 billion to cover a shortfall caused by the sharp increase in the number of Americans enrolling in college during the recession.

Congress would pay for the larger grants by ending subsidies to private banks that make student loans and shifting to direct federal lending.

But the amount going to education spending and aid for college students is far less than the Obama administration had hoped, largely because the savings from the switch to direct federal lending is now estimated to be $61 billion, rather than $87 billion.

In addition, $9 billion of the savings would be used to offset the costs of the health care overhaul proposed by the Democrats — an amount that lets the health care proposal meet requirements for the package to go through the budget-reconciliation process.

On top of that, $10 billion of the savings would go to deficit reduction.

“This legislation offers the most sweeping changes to the federal student loan program in a generation,” said Representative George Miller of California, chairman of the House Education and Labor Committee. “With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.”

The banking community, which has lobbied fiercely against the student-loan legislation, rallied against the use of education savings to pay for health care.

“This is entirely unnecessary — there’s nothing in the reconciliation instructions that requires such a draconian cut in student aid, whatever the cause,” said a statement Thursday from America’s Student Loan Providers. At a news conference Thursday, Senator Tom Harkin of Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, said he was confident that there would be enough votes to pass the legislation, which is likely to be put to a vote Sunday.

Congressional leaders, and Arne Duncan, the secretary of education, hailed the package as a historic opportunity to help working- and middle-class Americans afford a college education.

But it is also true that the student-loan proposal has been cut back sharply from the Student Aid and Fiscal Responsibility Act that the House passed in October, based on a previous Congressional Budget Office estimate of $87 billion in savings.

The House bill provided billions for the construction, modernization and repair of school and community-college buildings, billions more to early childhood education, and further billions to help community colleges improve their graduation rates. All those have been eliminated, although community colleges would still get some new financing under the legislation.

Then, too, the House bill called for increasing Pell grants each year by the consumer price index plus 1 percent starting in 2013, to $6,900 by 2019. But to save money, the extra 1 percent was eliminated.

One of the few areas not cut was $2.55 billion for historically black and minority-service colleges, which remains the same as in the House legislation.

The Obama administration’s effort to end the subsidies and federal guarantees for student loans, known as the Federal Family Education Loan program, and redirect billions of dollars to students, has been strongly opposed by bankers, Republicans and some Democrats from areas with strong student-loan businesses.

They say the conversion to required direct lending is an unwarranted government takeover that will lead to the widespread loss of banking jobs, and poor service for students.

Florida Looks to Overhaul 'Bright Futures' Scholarship Program

Tampa Bay Online

TAMPA - Only the richest and smartest students will get Bright Futures scholarships if lawmakers keep cutting them, says a lawmaker who wants to overhaul the 13-year-old program.

State Rep. John Tobia has filed a bill to create five scholarship levels for students attending Florida public universities, each paying a different tuition percentage for those with SAT scores ranging from 970 to 1400. Bright Futures now has three levels.

Tobia, a Satellite Beach Republican, said his proposal will save the state money and maintain opportunity for the highest achievers while offering help to students from low-income families.

Financial need has never been a factor in awarding Bright Futures scholarships, which are funded by lottery players. Lottery research shows about half the game's players are low to moderate income.

Tobia, who teaches government at Valencia Community College, concedes his bill might not get far this session. House education leaders say they have no plans to change the popular program.

But costs keep rising for a public university education in Florida, even for Bright Futures students. Lawmakers approved a 15 percent tuition increase last year while capping Bright Futures payments at the previous year's level.

In the legislative session now under way, Senate leaders propose keeping the caps in place again though tuition will likely rise.

They're also considering raising the academic requirements. A 3.5 grade average and 1270 SAT score now gets a student a scholarship worth about 87 percent of university tuition. A 3.0 grade average and 970 SAT means two-thirds of tuition is paid.

A typical 15-hour load at the University of South Florida this year costs about $4,500 in tuition.

If this keeps up, Tobia said, lawmakers will be forced to look at an overhaul.

"By the time my daughter goes, it will cost $14,000," to attend a state university, even with Bright Futures, he said. At that rate, the best and brightest students the scholarship was created for will start leaving the state, he said.

Tobia said he wants to keep the top students, but he also wants to offer something to moderate achievers who have financial needs.

So the first of his five levels would pay full tuition at a community college or state college to any student with at least a 3.0 grade point average and 970 SAT score or ACT equivalent.

Here are the other levels he proposes:

25 percent of university tuition for students with a 3.0 grade average and 970 SAT score or ACT equivalent.

50 percent of university tuition for a 3.5 grade average and 1200 SAT.

75 percent for a 3.5 grade average and 1300 SAT.

100 percent for a 4.0 grade average and 1400 SAT.

Tobia said the new configuration would save the state about $20 million a year, but he's waiting for an assessment from the Legislature's policy and accountability office.

The Bright Futures program costs the state about $450 million a year, more than twice as much as seven years ago. That's mostly because more students qualify every year.

Bright Futures is an important program, but it can't continue without limits, said Sen. Evelyn Lynn, an Ormond Beach Republican and chairwoman of the Senate Higher Education Appropriations Committee. The committee discussed Bright Futures changes Tuesday.

But State Rep. Seth McKeel, a Lakeland Republican, said the House is not yet considering any changes to Bright Futures funding or qualifications.

Some education experts have questioned whether scholarships ought to be based upon standarized test scores at all. This has not stopped high-school students from taking SAT prep courses.
 

"We're being cautious," said McKeel, chairman of the House State Universities and Private Colleges Policy Committee.

Bright Futures is expensive, he said, but "it's certainly been very beneficial to a lot of students and lots of families."

"You don't make changes to programs like that without real study and contemplation."

Ranking the Returns On Executive M.B.A.s

As posted by: Wall Street Journal

Scott Thomas had completed nearly half of his executive M.B.A. program when he decided he wasn't satisfied. The price tag of the Cleveland school was modest, but Mr. Thomas wondered if he would get a solid return on his investment.

So the 31-year-old dropped out and enrolled in Ohio State University's Fisher School of Business E.M.B.A. program. Though his tuition costs have more than doubled -- to $72,500 for the 18-month degree -- Mr. Thomas says he believes Ohio State does more for him in the way of career development and education. "The alumni network is unbelievably large, and they're unbelievably loyal," he says.

Ohio State comes in at No. 3 on The Wall Street Journal's first rating of the five-year return on investment of executive M.B.A. programs. The program yields a 170% return on investment. Only Texas A&M's Mays School of Business and University of Florida's Warrington School of Business did better among U.S. schools, with five-year returns of 243% and 212%, respectively.

Applications for most executive M.B.A. programs are due early next year, and many working executives are weighing whether to make such a hefty investment in an uncertain economy. As companies pull back on education spending, students are increasingly paying their own way -- making cost-benefit calculations even more important. "When someone else was paying for it, that wasn't the big factor," says Michael Desiderio, executive director of the Executive MBA Council in Orange, Calif. Only 32% of executives are fully sponsored by their companies, he adds.

To determine which schools provide the best return on investment, we dived deeper into the data we collected for The Wall Street Journal's Sept. 30 ranking of executive M.B.A. programs. Working with Management Research Group of Portland, Maine, we scoured the responses from our summer 2008 survey of E.M.B.A. graduates for data about salary, raises received after graduation, company-sponsorship figures, tuition and out-of-pocket costs.

We used that information to calculate the return on investment for 27 U.S. programs and nine international programs. Costs were calculated by combining tuition payouts and the out-of-pocket expenses reported by graduates. To calculate the benefit, or return, we used the graduate-reported median raise after completion of the program as the first-year salary increase. We added a 5% annual increase over the following four years, based on the average annual increase expected by compensation specialists and executive recruiters we polled.

Most of the schools that topped the list weren't big brand names -- or the highest-ranked in our September E.M.B.A. ranking. The No. 1 school in September, Northwestern University's Kellogg School of Management, was No. 12 in returns. Texas A&M and University of Florida, despite high returns, weren't among the top 25 in September.

At Texas A&M, low tuition and a no-frills focus are at the heart of the program. (The Class of 2008 paid just $53,000 for a 21-month program.)
'Focus on the Basics'

"We focus on the basics," says David Blackwell, associate dean of the school's graduate programs. "What they're not getting for their money is a lot of marble and gold-plated fixtures." As a state institution, the school is under less pressure to raise revenue by accepting underqualified candidates, he says.

Texas A&M's tuition is less than half than that of New York University's Stern School of Business, the school with the lowest return on investment -- 51%. Graduates of Texas A&M's program reported receiving a median 11% raise upon completion of the program and five years after graduation were projected to earn a median $181,718 (not including bonuses). "There's more opportunity for them to advance as a result of the program, and a salary goes along with that," says Mr. Blackwell.

Not all of the earlier survey's top-rated schools delivered lower returns. The returns at University of Southern California Marshall School of Business (No. 4 in the overall ranking), University of California-Los Angeles Anderson School of Business (No. 17 in the overall ranking) and Kellogg were significantly better than those of many of their competitors. At UCLA, the five-year return was fourth-best, at 158%. At USC, the five-year return was 134%, and 2008 graduates can expect a median salary of $218,062.

With a five-year salary projection of $257,687 and a 127% return, Kellogg graduates reap significant benefits, despite its programs' average tuition of nearly $105,000. "Going back and getting your M.B.A. is an expense not only in financial terms, but in blood, sweat and tears," says Julie Cisek Jones, director of executive M.B.A. programs at Kellogg.

Even with lower returns on investment, top-tier programs had some of the highest projected five-year salaries. Columbia University's E.M.B.A. Global, a joint program with London Business School, caters to slightly older executives, and clocked in at No. 23 for return on investment, with a 69% return in five years. And 2008 graduates of the school can expect the highest salary after those five years -- with a median of $272,577.

Indeed, some schools had lower returns partly because their graduates' salaries were higher to begin with. Jaki Sitterle, managing director of executive programs at NYU, which posted the smallest return, notes that the school caters to older executives, half of whom already have advanced degrees and many who already earn high salaries.

For many graduates, the value of the E.M.B.A. is not based on salary alone. In our graduate survey, 63.3% of graduates said they received or expected a promotion upon completion of their programs, even as 31.8% did not receive or expect to receive a raise. "Increasing compensation is not always their prime motivating factor," says Ms. Sitterle.
Beyond the Dollar Amount

Alex Gorsky, company group chairman for Ethicon, a unit of Johnson & Johnson, credits the E.M.B.A. degree he earned from Wharton 12 years ago with helping him achieve a top executive position. He in turn has since sponsored 12 people to attend executive M.B.A. programs, even though he says it's difficult to put a dollar amount on the return. "They have a lot of great ideas and I've always found that you get more committed employees," says Mr. Gorsky.

Some school administrators say a school's brand cachet is as important as a calculated return on investment. "We have the most selective admissions processes anywhere," says Howard Kaufold, director of the M.B.A. program for executives at the University of Pennsylvania's Wharton School. "You know when you're coming here that you are going to rub shoulders with people who are very bright and already have an excellent career trajectory." Wharton's E.M.B.A. program, which ranked No. 2 in our September overall ranking, came in at No. 24 for return on investment, with a 65% five-year return.

A school's location and access to executives also can make a difference. "We got speakers from the best companies because they were a subway ride away," says Izzet Bensusan, 32, who completed the Columbia's New York program earlier this year. The program was 26th out of 27 schools for return on investment. Mr. Bensusan, an entrepreneur who recently started a carbon-regulating company, says he paid approximately $130,000 out-of-pocket to attend the program. He says it was worth every penny. "I only paid $130,000, and I got to sit with the best people in the world," says Mr. Bensusan.

College Presidents' Pay Climbs

The latest survey on college presidents' pay showed most of their salaries continue to climb, as families struggle to cover tuition bills and congressional leaders scrutinize higher-education finances.

Some of the largest increases lately have been at public universities, according to the annual pay survey by the Chronicle of Higher Education, a trade magazine.

For the 2007-2008 academic year, the most recent covered by the survey, median compensation for public-university presidents was $427,400, up 7.6% from $397,349 during the previous academic year. That was about 2.6 percentage points above the inflation rate for the period.

Fifty-nine public-university presidents were paid $500,000 or more, up from 43 the previous academic year.

During 2006-07, the latest academic year for which private-school data were available, median compensation at liberal-arts colleges hit $293,967, up 6.5% from the previous academic year. That exceeded the consumer-inflation rate for the period by 3.8 percentage points.

Compensation at large private research universities -- a category that includes Ivy League and other selective schools -- was flat in 2006-07 compared with the previous year at $527,172, representing an inflation-adjusted decline. Overall, the number of private-school presidents earning $500,000 or more rose 10% to 89.

College officials said the pay increases are necessary to attract and keep leaders capable of overseeing their complex and often large institutions. With all these presidents getting raises students are going to need student loans, private student loans and federal student loans to pay for college.

Terry Hartle, senior vice president of the American Council on Education, a trade group, said the pay data included in the survey were gathered months before the current economic crisis began. He added that, given all the scrutiny the pay issue has received, if university trustees decide to increase a president's compensation, "they have probably acted in very good faith and in a way that is totally justified."

But Patrick Callan, president of the National Center for Public Policy and Higher Education, a think tank based in San Jose, Calif., said that over the longer term, college presidents have been "disproportionately rewarded" compared with faculty and other employees. "I think these people should be fairly compensated," he said, "but I think we have gone a little bit overboard."

Sen. Charles Grassley of Iowa, ranking Republican on the Senate Finance committee, said pay raises for college presidents, like tuition increases, regularly outpace inflation.

The Chronicle survey found that David J. Sargent, president of Suffolk University, an 8,900-student private institution in Boston, was the highest-paid president, earning $2,800,461. In addition to a base salary of $436,000, Mr. Sargent's compensation package included a $1.2 million "deferred sabbatical bonus" and $556,000 in certain deferred compensation.

Suffolk spokesman Greg Gatlin said Mr. Sargent has never taken a sabbatical in 52 years at the university, 19 as president, and that the pay package was meant to make up for "woefully inadequate" past compensation. Nicholas Macaronis, chairman of Suffolk's board of trustees, said the compensation was appropriate because Mr. Sargent's leadership is "critical" to Suffolk and its future.

Among current presidents of public universities, E. Gordon Gee of Ohio State University was the highest paid. He received $1,346,225, which included $775,000 in salary, $225,000 in deferred compensation and a $310,000 bonus.

According to a transcript, at a recent meeting of the Ohio State board of trustees where Mr. Gee's bonus was approved, Chairman Gil Gloyd told fellow trustees that Mr. Gee is the "best and most experienced university president in the nation" and that his accomplishments justified the board's faith in him.

Colleges Scramble as Fund Is Frozen

Some 1,000 Schools Find It May Take Years To Recover Money Placed With Wachovia

A fund that invests cash for about 1,000 colleges and private schools suddenly froze withdrawals this week, leaving school finance managers scrambling to make sure they have enough money for payroll and other bills.

For 34 years, colleges and schools parked cash in the now $9.3 billion fund, which offered returns slightly above U.S. Treasury bills. That it now might take years for the institutions to get all of their money back shows how widely credit-market woes are reverberating beyond Wall Street.

Monday, Wachovia Corp., the fund's trustee, said it was terminating the fund, liquidating its assets, distributing the proceeds and resigning as trustee, "to ensure that all investors would get equal treatment and that there would be orderly and equal distributions," says Laura Fay, a Wachovia spokeswoman. That stunned some of the colleges, which had believed they could get immediate access to the money if needed.

Wachovia became concerned that there might be the equivalent of a run on the fund, given recent woes with other short-term debt funds, Ms. Fay says.

The Short Term Fund is offered by Commonfund, a Wilton, Conn., nonprofit that advises colleges and schools on money management. Verne O. Sedlacek, Commonfund's chief executive, says 85% of the fund was in "high-quality" commercial paper from blue-chip issuers. The rest is largely in securities backed by assets like mortgages -- the kind of investments that are being especially shunned in the credit crisis. He estimates those are selling for about 89 cents on the dollar.

The shutdown of the fund came just as the government facilitated a sale of the bulk of Wachovia to Citigroup Inc. Ms. Fay said that the decision on the fund didn't have any connection to the Citi deal and that the part of Wachovia that handled the fund isn't moving to Citigroup.

The fund's fate shows how investors who stretched for a modestly better return by taking on what they thought was almost no additional risk have been burned. At first, colleges Monday were told they could redeem only 10% of their holdings, but the figure has since risen to 33%. Schools will be able to withdraw at least 57% of their money by year end and the rest in installments through 2011, Commonfund says.

In central Kansas, Bethany College, a Lutheran school with 600 students and a $12.5 million budget, has $700,000 parked in the fund. "Wall Street has hit Swensson Street," says Edward F. Leonard III, Bethany's president, referring to a street that runs through the campus.

Dr. Leonard says the school has four to six weeks to figure out whether it has enough cash for coming bills and, if not, to identify alternatives, such as securing bank lines of credit or tapping into the school's $25 million endowment, which he says could amount to a "long-term hit" on the school's finances.

Commonfund says none of the securities have defaulted, and the fund should be able to return the money to shareholders as the securities mature. The firm says it is working with clients to try to find them lines of credit.

Several Minnesota schools and some Michigan colleges had money in the fund, including Macalester College. Spokeswoman Barbara Laskin said the school had a modest amount invested with the fund and the developments won't affect day-to-day operations.

Grinnell College in Iowa had about $5 million in the fund, but the school also has a $1.5 billion endowment. Russell K. Osgood, Grinnell's president, says the school established a variety of new accounts over the summer to make sure it was diversified and that no one fund could lead to a cash crunch.

Amy Falls, chief investment officer for the endowment of private high school Phillips Academy in Andover, Mass., pulled money out of the fund a year ago and put it in Treasurys, she says. "In times like this, you want cash."

By: John Hechinger and Craig Karmin
Wall Street Journal; October 2, 2008

College Presidents Stand Up for Common Sense? I'll Drink to That

Anytime more than 100 college presidents sign their names to a document, one naturally expects to find a well-meaning but wrong-headed exercise in political correctness. How mildly intoxicating, then, to discover the Amethyst Initiative, a case of ivory-tower interventionism that is actually sensible and even a bit brave: a proposal from 128 university leaders that legislators reconsider the national drinking age.

Led by former Middlebury College President John McCardell, the signers hail from schools as far-flung as Pomona, Tufts, Dartmouth, Duke and Ohio State, as well as from dozens of smaller regional schools. Their argument is a tactful recognition of the law of unintended consequences. Their bottom line: The current national drinking age of 21, raised from age 18 in some states in 1984, "isn't working."

They say that legally restricting alcohol consumption among most college-age students hasn't stopped such drinking -- it has only driven it underground. Binge drinking on campus now claims 1,700 lives a year, and university efforts to crack down are largely ineffective. Banning kegs just means that kids make use of more easily concealed and trafficked cans and bottles. Hard-partying fraternities don't stop their activities; they are just chased away from campus and set up shop nearby, or move off-campus on their own.

Re-legalizing the consumption of alcohol for those between 18 and 21, the college presidents say, would lead not to more drinking but to safer drinking. Because parties wouldn't be illegal, schools and parents could have more control over them. Kids would drink in campus pubs rather than in the woods or in unsupervised dorms and apartments, where no responsible parent or business owner or campus authority is standing by to make sure that they don't drive or to call them a cab or, in case of emergency, an ambulance.

On the Amethyst Initiative's Web site, some college presidents post the reasons they signed the petition. David C. Joyce of Ripon College writes: "It is ludicrous that we can send young men and women to war, but they can't legally drink a beer." Donald Eastman of Eckerd College calls the current law "hypocritical, ineffective, guilt-inducing and counterproductive." David Oxtoby of Pomona notes that "treating college students as adults will help them to make more responsible decisions."

Naturally, opponents have lambasted the proposal as irresponsible and dangerous. Mothers Against Drunk Driving says that the higher drinking age has reduced drunken-driving deaths -- a position that is regularly cited as the strongest argument for the status quo. But letting kids drink at 18 doesn't extend to them the right to drive while drunk. Lawbreaking is lawbreaking. Still, MADD's Laura Dean-Mooney insists: "Parents should think twice before sending their teens to these colleges or any others that have waved the white flag on underage and binge drinking policies." Alas, that wouldn't leave students with many options for higher education. Even Brigham Young and Bob Jones may not be totally dry.

The initiative that the university presidents propose is called "Amethyst" to echo a Greek word for sobriety. But undoubtedly their lawyers have also been whispering some Latin words in their ears, like in loco parentis. In September 2000, MIT settled a lawsuit for $6 million with the family of a freshman who died in a case of alcohol poisoning. There have been other cases, but MIT's gained national attention and promised to open the plaintiff-bar floodgates.

Since then, schools have adopted various policies aimed at demonstrating both their lack of responsibility for teenage drinking and their disapproval of it. But the policies haven't gotten them off the hook. Last year, a Yale undergrad filed a $20 million lawsuit against the university after a young man was charged with sexually assaulting her after a school-sponsored party. The school was liable, she argued, because its supervision of underage drinking was inadequate. Yale "encourages some of these activities," her lawyer said, because "they have no real rules or control on campus."

Incidents of drunken idiocy, of course, will always be one of the banes of a university president's life. These days even candidates for the White House are comfortable fessing up to "young and irresponsible" behavior with alcohol and drugs. But to suggest that a university administration is solely responsible for its students' drinking habits is a little unrealistic -- especially when the drinking goes on in secret, behind locked doors or off-campus. And it's refreshing that a few people in positions of authority have finally noticed the absurdity of the situation.

Alas, a MADD counteroffensive, which calls on the public to urge the signers to withdraw their names from the list, has had some success. Last week, heat from the press and potentially from alumni got to Kendall Blanchard, president of Georgia Southwestern State University, who noted that critics missed all the subtlety and instead "saw this as some kind of effort on our part to turn our schools into party schools." Robert Franklin of Atlanta's Morehouse College also withdrew his name, while others have continued to sign on.

Whatever its initial good intentions, a national drinking age of 21 has proved to be a failure. Teen drinking is still going on, but now no one is supervising it. Even if the college presidents, with their bold initiative, are just trying to save themselves some legal hassles and money they deserve a toast for stumbling upon this truth.

By: Collin Levy
Wall Street Journal; August 29, 2008

Avoiding College's Plastic Hangover

The immediate gratification of using plastic to buy an iMac, tickets to a Coldplay concert and nights of bar hopping has a way of coming back to haunt college students after graduation.

Despite their lack of a credit history and sizable federal student loans, most college students can get their hands on credit cards with as much ease as a swipe. And they're often lured into doing so with awards like free T-shirts. Along with the freebies, however, come some not-so-pleasant surprises: high interest rates and a range of fees and penalties.

One reckless night of spending or one late payment can leave students with overwhelming debt and a damaged credit score -- which could hurt their chances of landing a job or an apartment after college.

Many graduates know this all too well. More than three-quarters of undergraduates hold credit cards, according to student-loan provider Nellie Mae. Their average debt load: $2,169. That amount is nothing compared to the 10% of students who graduate with more than $10,000 in credit-card debt, according to a 2008 survey commissioned by credit bureau TransUnion's credit-management Web site TrueCredit.com and conducted by market-research company Zogby International.

College students "don't realize that anything they do now will stay on their credit report for the next seven to 10 years," says Thomas Fox, community outreach director at Cambridge Credit Counseling Corporation, a debt-management agency.

To graduate with honors in credit-card management, here's what students need to know:

Don't be lured in by free T-shirts.

TrueCredit.com's survey found that four out of 10 consumers sign up for a credit card to receive a free gift or special offer, such as a T-shirt or baseball cap featuring the school's logo. That's a huge mistake, as these credit cards may not serve a student's best interest. Some universities even receive money from credit-card companies for allowing them to pitch their cards on campus, says Daniel Ray, editor-in-chief of CreditCards.com.

Make sure to compare a credit card's terms to other offers by going to Web sites like CreditCards.com and LowerMyBills.com.

Piggyback on a parent's card.

Another option is to accept (yet another) helping hand from Mom and Dad. Signing onto a parent's credit card allows a student to take advantage of the more-established credit history (assuming they have good credit) -- and lower rates, says Mr. Ray. This is especially helpful to students who have a hard time controlling their finances.

Once a student signs onto their parents' account, the parents are held responsible for their purchases and payments, and will also be able to monitor their spending habits, hopefully preventing them from racking up sizable debt, says Martha Doran, associate professor of accounting at San Diego State University.

Know your (credit) limits.

With rare exceptions, all credit cards have limits. And because students lack established credit histories, they often receive fairly low ones -- typically no more than $3,000, says Tom Dailey, a credit-card industry consultant and former senior vice president at Discover. (Limits are often as low as $500 or $1,000 per credit card, says Mr. Ray.)

It goes without saying that exceeding a card's limit can carry dire consequences, but there's also a way to make those limits work in one's favor.

By carrying a balance of, say, less than half of the available credit, a student can maintain a solid credit score, says Steven Katz, director of consumer education at TrueCredit.com.

Remember, promotional rates are temporary.

That 0% introductory rate is about as tempting as they come, but that temptation won't last.

Introductory annual percentage rates, or APRs, expire, and when they do they give way to high rates -- especially for college students.

So make sure to find out how long the introductory rate lasts and what the APR will be afterward. (For most college students, the average APR is 15%, says Mr. Ray.)

Watch out for penalties and unnecessary fees.

No matter how boring it may be, read the fine print of your credit-card agreement. That way, if you make a late payment, it should come as no surprise when you're hit with a late fee or when the interest rate skyrockets.

Another thing to look out for: "universal default," a clause that allows a creditor to penalize a cardholder for making a late payment on another lender's card, says Mr. Fox.

While many credit-card fees are unavoidable, others are entirely unnecessary. If a credit card carries an activation or annual-membership fee, pass on it, says Mr. Ray.

"These days few people pay annual fees," he says. "They've become a thing of the past."

By: AnnaMaria Androitis
Wall Street Journal; August 21, 2008

Student Scores Improve But Not Across the Board

Students are doing better in elementary and middle school, but key indicators show little progress among high school and college students, Education Secretary Margaret Spellings said.

"We've got a long way to go," Ms. Spellings said in an interview with the Associated Press.

She cited a few of what she called leading indicators to make her point. Ms. Spellings is expected to present the figures at an education conference sponsored by the Aspen Institute, a think tank.

Children in elementary and middle school have made progress because that has been the focurs, Ms. Spellings said.

Ms. Spellings called for the same types of accountability, like more help services for students trying to obtain a bachelor degree, and student loan aid, whose numbers have largely stayed flat.

Wall Street Journal; September 12, 2008

The New Card On Campus: Prepaid Debit

As Colleges Limit Marketing Of Credit Cards, Issuers Push High-Fee Alternatives

Many colleges have tightened rules on credit-card marketing on campus in order to discourage students from racking up huge amounts of debt. Now another kind of card is being pushed on campus -- with its own set of issues.

This fall, financial-services companies are focusing more of their campus marketing on "prepaid debit cards," which work like standard debit cards except that they aren't linked to a traditional checking account. Among the issuers aggressively marketing their cards this year: U.S. Bancorp and Wal-Mart Stores Inc.

The cards typically carry hefty fees and offer fewer consumer protections than credit cards. Fees are often charged when the card is activated, when it is used at an ATM and even when there's a lack of transaction activity.

They also offer less protection than credit cards do when a card is lost or stolen. If a missing prepaid debit card is reported within 48 hours, cardholders are not responsible for more than $50 in unauthorized charges. Yet if reported two to 60 days afterward, cardholders could be held accountable for up to $500 dollars in unauthorized charges. After 60 days, users face losing their entire balance. With a lost credit card, users face a maximum $50 liability, regardless of when the loss is reported.

Another drawback: The cards don't help users establish a credit history, as they are not considered a line of credit. That may hurt students when they look for an apartment or shop for private student loans down the road.

On the plus side, it's virtually impossible to incur an overdraft with prepaid debit cards. And students can't get into thousands of dollars of debt, as they can with credit cards. The average college graduate carries $2,748 in credit-card debt, according to a 2007 survey by student lender Nellie Mae. And nearly one in four graduates leaves school with more than $5,000 in credit-card debt, according to a recent survey by Zogby International that was commissioned by credit reporting agency TransUnion Corp.

Prepaid cards are making inroads as a growing number of colleges limit how credit cards can be marketed on campus, in order to protect students from runaway debt. Tulane University, Georgia Institute of Technology and the University of South Carolina, for example, forbid credit-card companies from soliciting on campus. The University of Arizona allows only merchants that are sponsored by a university group.

But financial institutions are still permitted to promote student checking accounts and prepaid debit cards on most campuses. In addition to fliers and T-shirt and cupholder giveaways, banks and other card issuers are increasingly using technology to reach the student population.

Facecard, a prepaid debit card offered by Iowa-based MetaBank, a unit of Meta Financial Group, promotes its MasterCard prepaid debit card through the social-networking site Facebook, as well as its own Web site, Facecard.com. The card allows users to swap money between friends online and monitor spending over the Internet and via their cellphones. An average of 5,000 cardholders are added every month, according to Ed Braswell, chairman and CEO of edo Interactive, which developed the card.

Although there's no fee for using it for retail purchases, the card imposes other costs. There's a $1.50 fee for ATM withdrawals, in addition to whatever fees are charged by the dispensing bank. There's also a $4.95 monthly inactive-account fee if the card goes unused for more than 90 days. Additionally, cash and checks cannot be uploaded to the card, only money through bank accounts or other credit and debit cards.

Facecard is being promoted at orientations, merchant fairs and other high-traffic events for freshmen at 50 colleges this semester. Among the enticements: "prewards," coupons that offer incentives to shop at marketing partners. For example, a student would receive a text message notifying her that a local restaurant has loaded a $2 preward onto her Facecard, redeemable only at that restaurant. The student would then head to the restaurant and presumably spend more than $2.

Retail giant Wal-Mart Stores is also making a bid to court campus consumers. Its new Student Money Card, backed by GE MoneyBank, a unit of General Electric Co., is actually two cards -- one issued to a parent and another to a student. Parents can then monitor how much money is spent and where it goes from another location. They can also add money to the card.

There's a one-time charge of $7.46 to activate the two cards, along with a $4.94 monthly fee that is waived if the account balance exceeds $1,000. Cardholders pay a $2 ATM withdrawal fee, plus whatever the host bank charges. They can, however, withdraw up to $100 per transaction when making a purchase at a Wal-Mart store without incurring any fees.

For parents with accounts at banks like U.S. Bancorp and National City Corp., the Visa Buxx prepaid debit card may offer a way around some of the fees. Like Wal-Mart's Student Money Card, both the parent and the student receive a card and can track spending online. Students cannot spend more than what's in the account, but there are several charges: a $10 enrollment fee ($15 for non-customers), a $2.50 bank teller fee, a $2 inactive-account fee and a $10 overdraft fee, which can occur if a charge isn't processed immediately. Transactions at bank-owned ATMs are free, but there's a $1.50 fee for non-bank ATMs.

So far, the Buxx card has been marketed to parents, according to Brian Triplett, global head of prepaid products for Visa. Since it was designed primarily for high-schoolers, there hasn't yet been a major push to sign up cardholders on college campuses.

Students who opt for debit cards should investigate their bank's overdraft policies and fees, say experts. "It's unlikely that the first offer that shows up in the mail is the best out there," says Ben Woolsey, director of marketing and research for Creditcards.com, an online credit-card marketplace. "The same goes for cards that are marketed on campus at events. Like all consumer goods, comparing before buying is a good idea."

When Laura Palazzolo, of New Hyde Park, N.Y., entered New York University this fall, she says she was bombarded with offers for debit cards from area banks handing out fliers on campus.

She hopes to avoid using plastic too much. "I'm really trying to be careful," says Ms. Palazzolo, 18. "It's a little overwhelming when [companies] target you because you're a freshman." For now, she's using a student checking account she set up through her parents' bank that comes with a debit card.

By: Mary Pilon
Wall Street Journal; September 11, 2008