By Donald A. Downs

We now have a long and fascinating report by the campus police review board on last fall's disruptive protests at the University of California, Berkeley.

The 128-page document, entitled "November 20, 2009: Review,
Reflection, and Recommendations," released in mid-June, is the product of months of yeoman work garnering volumes of evidence. It chronicles and evaluates responses to the events sparked by resentment over tuition increases and cutbacks in the wake of California's financial debacle.

Berkeley deserves credit for thoroughly investigating the situation. And the report is worth reading for many reasons, one of which is because it casts light on a dilemma that Berkeley and many other schools have been unable to resolve since the famous Berkeley "Free Speech Movement" of 1964 launched decades of illegal student protest: how to balance students' passions for social justice (and sometimes other motives) with the rule of law.

By Charlotte Allen

New York University will open its vaunted campus in Abu Dhabi this fall, and so far it does seem to be the best campus that money can buy---Gulf oil money, that is. The story of the NYU-Abu Dhabi linkup, the brainchild of John Sexton, NYU's strategically ebullient and relentlessly donor-courting and expansion-minded president, is a story of many paradoxes. The greatest paradox of all is that this first step toward creating what Sexton calls a "global network university" of NYU campuses all over the world is being entirely bankrolled by the government of oil-rich Abu Dhabi, which is a good thing for NYU because the university's $2.2 billion endowment (shrunken by nearly one-third in the recent financial crisis) is by far the smallest of any private U.S. university with the world-class ambitions that Sexton claims for NYU.

In fact, because NYU enrolls more than 50,000 at its various schools, its endowment works out to about a mere $50,000 per student, according to figures calculated in a recent Business Week article. (Harvard's $26 billion endowment, by contrast, amounts to $1.3 million per student, while Yale has $1.4 million per student and Princeton $1.7 million). The Abu Dhabi campus is a feat of Sextonian sleight-of-hand in which other people's petrodollars pay for what NYU hopes will be a boost in academic prestige without spending a cent of its own scarce money. NYU was happy to publicize Abu Dhabi's initial contribution of $50 million to the joint venture---a down payment on which NYU insisted as a condition of lending its name to the new university---but now neither the university nor the Gulf city-state will reveal how many more millions Abu Dhabi has sunk into the venture, but it must be plenty. Abu Dhabi has not only committed itself to a glitzy brand-new campus for NYU on Saadiyat Island about 500 yards offshore, but is bankrolling some of NYU's expansion in New York.

Back home at NYU's flagship campus at Washington Square, students complain about stingy financial aid packages that often leave them heavily in loan debt and more heavily reliant on poorly paid part-time faculty than any of the top-tier universities with which NYU hopes to compete. NYU's efforts to grow its campus in New York---by acquiring Greenwich Village real estate and demolishing what's there---have made enemies out of many of its neighbors, especially when NYU pulled down the historic Provincetown Playhouse, which it owned, in order to construct a new law school building (it did save some of the playhouse's facade and replaced the theater). The Abu Dhabi campus has also sparked protests among NYU professors over government policies in Abu Dhabi and other United Arab Emirates states that discriminate against gays (homosexual acts are crimes in the Emirates), Israelis (none of the Emirates has formal diplomatic relations with Israel and all frequently deny entry to citizens of the Jewish state), and the foreign guest-workers who form 80 percent of the Emirates' 4.5 million population but have little practical recourse against employers who confiscate their passports, house them in squalid camps, charge huge fees for their job, and pay them less than promised.

By Michael C. Macchiarola

Federal subsidies long ago achieved the goal of making higher education more attainable for students from middle- and lower-income families. Yet such programs cloud the fact that good politics often tend to represent bad economics. In this case, government efforts have reflexively ushered a generation of students down a one-size-fits-all conveyor belt that has too often left the federal government as little more than the underwriter of disappointment. Much as it propelled the housing boom, government policy aimed at "access" has fueled a dramatic increase in the cost of education. And, schools have been more than willing to turn abundantly available dollars into lighter teaching loads for professors, luxury dorms for students and state-of-the-art sports arenas, with little regard for whether these improvements are really worth it to student-customers. Ultimately, however, students foot the bill for these flights of fancy: they are required to repay their loans. And, their ability to do so depends, in large measure, on the quality of the education that they received from their chosen school. The fact that so many student borrowers are in distress today only serves to indict the value proposition that the education industrial complex continues to advance.

Aided by the government-encouraged extension of credit, education costs have skyrocketed. In fact, it is fair to describe today's higher education price tag as having been reduced to a formula - where tuition seems to equal all the money a student can pay plus all the money a student can conceivably borrow. And, this same access-for-all government policy has made loan-eligible middle- and lower-income students easy prey for aggressive higher education and student-loan marketing. The end result has been an unprecedented, debt-fueled wealth transfer from students of modest means to the increasingly affluent higher education industry and its student-loan lenders. Unfortunately, as this damage continues to reveal its depth, its consequences are likely to become more evident by the day.

A generation of students has been reduced to the equivalent of the underwater homeowner: resigned to a fate where the amount owed to finance their schooling might be greater than the value of the education they received (and, therefore, beyond their capacity to repay it). All is not lost, however, as there are already machinations within the world of education suggesting that students, governments and institutions are, at long last, awakening to assign considerations of value to a world that for too long has seemed immune to such assessments.

By Andrew Kelly

From the beginning, Frontline's new documentary College, Inc seems tailor-made to scare the living daylights out of the series' presumably progressive audience. Viewers are first introduced to Michael Clifford, an "educational entrepreneur" without a college degree who buys up struggling colleges and resurrects them as for-profit companies. Clifford is not only making a fortune off of low-income minority students. He also happens to be a born-again Christian, and he is looking to turn a bankrupt college in Oakland, CA into "Dream Center College," an offshoot of a Christian mega-church and rehabilitation center in Los Angeles by the same name. Indeed, viewers are introduced to Clifford's born-again faith almost as soon as they learn anything about his profession. And the introduction to Clifford comes right before correspondent Martin Smith interviews legendary profit-seeker and hard-edged capitalist Jack Welch, who talks about his investments in higher education and "widgets" in the same sentence.

Given the variety of companies and individuals involved in the for-profit sector, particularly the number of founders, faculty, and senior administrators who have PhD's and experience at world-class universities, Clifford seems like an odd place to start. Perhaps it's a nod to the idea that the regulation of college acquisitions is too lax, a worthwhile point to make. But to the discerning viewer, using Clifford, and then Welch, as narrative anchors signals a definite perspective on for-profit higher education: it is full of greedy profiteers, is woefully under-regulated, and is run by outsiders who believe that education is a business.

Predictably, College, Inc goes heavy on the "profits," and the methods used to reap them, but this leaves little room for the "education." As a result, viewers are introduced to many of the sector's warts and excesses, which are real and must be acknowledged, but never get a sense of how these innovative institutions are changing the way higher education is designed and delivered in the twenty-first century.

By Jackson Toby

Jackson Toby, professor emeritus of sociology at Rutgers and author of the new book, The Lowering of Higher Education in America, delivered this speech yesterday (April 7) at a luncheon in New York City. The luncheon, at the University Club, was sponsored by the Manhattan Institute's Center for the American University and Minding the Campus.

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"Is College Graduation Enough for a Good Job or Do College Graduates Have to Know Something?" That's the title of one chapter of my new book. And in an effort to illustrate the problems of evaluating what contemporary college graduates know, I began the chapter with the lyrics of "Brush Up Your Shakespeare" from Cole Porter's 1948 hit musical Kiss Me Kate.

Broadway audiences didn't necessarily have to know that the musical was based on Shakespeare's The Taming of the Shrew, but it helped. Porter graduated from Yale nearly a century ago. In that era a Yale graduate---or a graduate of any American university---had to have had some exposure to the plays of Shakespeare, because it was an era during which a college education referred to a corpus of common intellectual experiences. Colleges usually had a core curriculum that all graduates had to take, whatever their major or their interests. "Brush Up Your Shakespeare," contained references to Homer, English poets, the Greek playwrights Aeschylus and Euripides, a mention of the "Bard of Stratford-on-Avon," the town where Shakespeare was born, and puns involving titles to several of Shakespeare's plays: Othello, Anthony and Cleopatra, Much Ado about Nothing, Coriolanus, and A Midsummer Night's Dream. Members of the audience who did not know at least the titles couldn't understand fully Porter's witticisms. Consider a few lines from the lyrics:

By Joe Malchow

I once asked a pilot friend if he didn't tire of the lumbering, leviathan commercial airliner he flew. He surprised me by saying that a 747 can handle like a Lamborghini if ever it needed to.

A bit of that seems to be underway in Hanover, New Hampshire, where the new president of Dartmouth College, my alma mater, is responding with alacrity to the slackening economy. Even given the market's nosedive, Dartmouth possesses a substantial multi-billion dollar endowment and employs nearly 2,800 full-time equivalent staff and 450 faculty. That's a rather large organization---one now operating at a loss of $34 million.

But Dartmouth has one big asset: a group of Carl Icahnesque independent trustees who were elected by worried alumni in 2004, 2005, and 2008. These outsiders were vigorously resisted by Dartmouth---whose power establishment didn't want activist directors---but the outsiders' platforms of staunch fiscal conservatism and a leap out of the thicket of professional educrats won the day. After all, who needs a "Sustainability Director" or a "Dean of Pluralism"?

Alumni responded by their levels of giving, and Dartmouth's former president, historian James Wright, responded by resigning his post early. In that position, now, is Jim Kim, the Harvard doctor who has never been the head of a major organization but who has now been thrown into a parlous billet.

By John Ellis

All across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year's. In 1964 there was focus and clarity. This one was brain-dead. The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.

The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of "the struggle," and of "oppression," and---of course---of racism. "We are all students of color now" said Berkeley's Professor Ananya Roy, and a student proclaimed that this crisis represented "structural racism." (Why not global warming too?) Berkeley's Chancellor Birgeneau called the demonstrations "the best of our tradition of effective civil action." Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn't seem to occur to anyone that the old "shut it down" cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.

One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted "Who's got the power? We've got the power." In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

By Daniel Bennett

Thousands of students on more than a hundred college campuses joined together symbolically yesterday to protest sharp tuition hikes. The students pointed the finger at hard-pressed state and local governments. That was a mistake. State and local subsidies to public colleges and universities increased by 44% in real (inflation-adjusted) dollars during the 25-year period between 1982 and 2007. Had colleges managed to hold their cost increases to the level of inflation over this period, real tuition prices would be slightly less today than they were 25 years ago.

Why weren't the colleges able to do this? First, colleges are rewarded for fiscal irresponsibility and punished for not keeping up with Joneses. Because we collect very little information from colleges about student learning and educational outcomes, we know nothing about the actual value of the education taking place. So we are left to rely on arbitrary indicators such as price and prestige to decide which institutions are of the highest quality. College administrators understand this and are known to make decisions based on how it will impact their institution's prestige. The things that boost prestige (fancy dorms, state-of-the-art fitness centers, elaborate student centers, etc.) cost lots of money and do little or nothing to increase the quality of education. The colleges that avoid such elaborate upgrades in lieu of keeping costs down are perceived to be lower -class institutions. Call this the college arms race.

Next, there has been very little, if any, gain in productivity in higher education over the past few decades. Some evidence suggests that there has actually been a drop in productivity, while the information technology age has boosted productivity in nearly every other economic sector. Part of this is explained by the bureaucratic bloat on college campuses. Between 1987 and 2007, the number of senior administrators and professional support staff at public two- and four-year colleges increased by 84 percent, while student enrollment grew by only 37 percent. In this sense, administrative productivity dropped by more than 25 percent during this 20 year period, as the student-to-administrator ratio dropped from 24:1 to 18:1. Meanwhile, faculty teaching loads have diminished by a factor of up to two over the past two decades, while salaries have increased by at least the rate of inflation, not accounting for rising health care costs, retirement contributions and other forms of non-wage compensation. Rather than using technology to cut labor costs and improve employee productivity, colleges have expanded their staffs and seemingly ask less of each employee. Call this diminishing productivity.

By Charlotte Allen

Alan Michael Collinge is back in his gadfly role agitating against the student loan industry. Collinge is the author of last year's The Student Loan Scam: The Most Oppressive Debt in U.S. History---and How We Can Fight Back (Beacon Press) and founder of the website studentloanjustice.org, dedicated to, among other things restoring the bankruptcy protection for student loans that Congress removed for all but the most hardship-hit borrowers in 2005. Writing for the New York Times blog "The Choice," which deals with college admissions and financial aid, Collinge calls the federally guaranteed student-loan system "a predatory lending scheme" and argues that Congress should curb the Education Department's power (also granted in a 2005 law) to "extort not just the original principal and interest from borrowers, but also a massive amount in penalties fees and collection costs."

Collinge wrote his book from his own 20-odd years of disastrous experiences with student loans. He graduated from the University of Southern California in 1988 with three degrees in engineering and $38,000 in loan debt, an amount that ballooned to $100,000---still mostly unpaid two decades later---when he fell behind on monthly repayments after consolidating his loans with Sallie Mae (the nation's leading buyer of student debt) and penalties, back interest, and collection fees began to accrue with lightening speed. Loan consolidation often (although not always) means that graduates can lock in lower interest rates than they might otherwise pay, but it can also entail stretching out the life of the loan to as long as 30 years (the tradeoff is lower monthly payments). Collinge's New York Times blog dovetails with the Obama administration's goal of eliminating private lenders (banks, credit unions, and Sallie Mae) from the federal student-loan system and requiring all student borrowing to come directly from the government itself.

It's difficult to say whether Collinge, who, with his engineering degrees could expect decently paying employment, actually got a bad deal from the federally guaranteed system. For one thing, he took out his loans long before the 2005 law went into effect, although as early as 1976 Congress had placed some limits on using bankruptcy to get rid of student debt. One might also ask whether it was prudent for Collinge, if he was strapped for college money, to choose to attend an expensive private university such as USC rather than a cheaper state school where he would not incur so much debt. Furthermore, students who borrow from private financial institutions under the federally guaranteed system enjoy below-market interest rates (the Department of Education sets annual caps), a nine-month grace period after graduaton during which no payments are due, and an array of forgiveness and deferment arrangements if economic hardship forces borrowers to fall behind. For example, the going interest rate (according to Sallie Mae) on Stafford loans, products of one of the most widely used federal loan programs, is 6.8 percent, and the going rate for PLUS loans (products of another popular program) is 9 percent (the rates are even lower for students whose income qualifies them for a federal interest subsidy). Compare that to the 17.28 percent annual rate on credit-card debt, and the interest rate that Collinge agreed to pay on his consolidated loans (it's currently capped at 8.25 percent) could hardly be considered "predatory." It should be remembered, too, that student loans are unsecured loans (no mortgaged house, no car or other collateral) to unemployed or partially employed people who can be as young as 18. In other words, the loans are ipso facto risky, which is why government guarantees are an integral part of private student lending. A government guarantee means that taxpayers pick up the tab when a loan goes into default---so it is perhaps not surprising that Congress has made it difficult to cancel the loans in bankruptcy court.

By Frank J. Macchiarola and Michael C. Macchiarola

Why do law schools charge higher and higher tuitions that keep outrunning the cost of living? In the two decades ending in 2007, according to the American Bar Association, the cost of attending the average private law school (including tuition and fees) more than tripled--increasing from $8,911 a year to $32,367. Unsurprisingly, the average amount borrowed by law students has risen just as dramatically. Last year's average private law student graduated with more than $87,000 in law school debt.

In trying to understand this phenomenon, many have blamed the American Bar Association's Standards for Law Schools. The ABA accredits 200 American law schools that adhere to the Standards and, by doing so, permit their graduates to sit for the bar examination in every state. These standards govern student's course of study, the law school's administration, the faculty's rights and obligations and the adequacy of the physical plant. Among other things, law schools are reviewed in a comprehensive three-day site visit with several visitors every seven years to maintain their accreditation.

Others, particularly law school deans, who face competitive pressures from other law schools, have blamed the U.S. News and World Report rankings of law schools. These critics believe the rankings spark a tournament of law schools to compete on the magazine's terms, often at great costs and at the expense of more student-centered activities. In a December 2009 report to the Congress, the General Accounting Office dealt, in part, with concerns that have been raised about how some of the accreditation standards of the ABA may affect the cost of law school.

By Charlotte Allen

Shortly after his inauguration in January President Obama announced a proposal to get rid of a 44-year-old program known as the Federal Family Education Loan (FFEL) program. In the FFEL system, the federal government guarantees loans to students from private banks and similar institutions under a variety of programs (the best known is the so-called "Stafford" loan) to help pay for the students' education, whether at the undergraduate or postgraduate level. The idea behind FFEL, part of a massive piece of 1965 legislation designed to make higher education more attainable and affordable to larger numbers of Americans, is to encourage private lenders to extend credit for college to a cohort of society that would otherwise not qualify for loans that these days can total tens of thousands of dollars a year. In return for guaranteeing student loans against their borrowers' default, the U.S. Education Department charges the lenders modest fees and sets maximum allowable interest rates.

Under Obama's plan all students needing higher-education loans would instead obtain them through the William D. Ford Federal Direct Student Loan Program (Direct Loan for short), a Clinton administration creation of 1993 in which the U.S. Education Department itself lends money for post-secondary education. The only role that private banks and other institutions such as Sallie Mae (the formerly government-backed but, since 2004, completely private entity that currently originates about a fourth of all FFEL loans) would continue to play in student lending would be to service some of the loans under contract with the department.

The administration argues that eliminating private financial institutions as middlemen (until the administration embarked on its anti-bank stance Sallie Mae and other private entities accounted for 80 percent of the $92 billion federally subsidized loan market, and it continues to issue about 58 percent of those loans), would save the government $87 billion over the next 10 years in default payouts and interest subsidies to institutions that lend to students who demonstrate financial need. (For subsidized loans, the government pays the interest until the student leaves school; for unsubsidized loans, the interest accumulates, but the student is not obliged to make payments before leaving school, and there is also a variety of repayment and forgiveness plans geared to income levels after graduation.) Under Obama's proposal the government would use part of the anticipated savings to put another $40 million into beefing up funding for Pell grants, yet another federal aid program for college students launched in 1973 and named (in 1980) after the recently deceased Democratic Sen. Claiborne Pell of Rhode Island. Under the Pell program, which costs the government $18 billion annually, about 7 million low-income college students (the ceiling family income is $40,000) receive outright grants from the government (the current annual maximum is $5,350), to help pay for their college educations.

By Peter D. Salins

The Obama administration - along with many in the opinion elite - is looking to the nation's two-year community colleges as the primary vehicle to ramp up future Americans' level of post-secondary educational attainment. A down payment in this direction are the billions of dollars of direct and indirect community college aid included in the administration's "stimulus bill." However, before we get carried away with enthusiasm for community colleges as the best place to extend the frontier of higher education, there's a question to consider: how well have these institutions actually succeeded in their mission to provide an inexpensive but effective college education to our millions of academically under-prepared high school graduates?

A cursory look at the data is not encouraging. Although 41 percent of America's college-bound students enter community colleges each year , only 28 percent of this cohort actually complete their studies and earn a degree , an even more dismal outcome than that displayed at the nation's baccalaureate colleges, where 56 percent manage to graduate . These depressing statistics haven't dampened the general consensus favoring support of community colleges because proponents appear to believe that college "access" trumps successful college completion and that "some college is better than none." Refuting the latter point, U.S. community college non-graduates have only marginally higher earnings and lower unemployment rates than high school graduates and do far less well than their counterparts that manage to complete their studies .

The disappointing outcomes at community colleges are to some extent hard-wired into four aspects of their design. These institutions are proudly and aggressively "open admissions" which means that there are no academic criteria to get in except, in most places, a high school diploma. They are indifferent to the extent to which their students are diverted from their studies by work or other outside obligations, convinced that such distractions are an unavoidable and immutable aspect of "nontraditional" student profiles. Their abundant array of courses (including ones for English and math remediation that a majority of their students test into and often fail) are taught primarily by low-paid part-time faculty who have little time for interaction with students beyond classroom hours. Finally, community colleges view their mission in strictly vocational terms. They offer majors geared to every occupation that their "environmental scanning" process identifies as having job openings, while slighting the kind of general education offered by baccalaureate institutions that may contribute more to post-collegiate success than narrow (and quickly obsolete) occupational skill sets. While educators and the media tend to be scornful of the academic pretensions of proprietary, often on-line, "universities" like Phoenix and DeVry, the public community colleges are not operationally very different or in their academic results any more successful.

By Ward Connerly

As a regent of the University of California (UC), I voted against "fee" increases proposed by the administration as often as I voted for them, but with each vote I realized that UC was slowly moving toward the day when basic decisions would have to be made about how the university is financed, who can attend it, and what the public should expect from the institution. Well, that day has come; and the public can either dodge the issues or face them and try to craft a new relationship with UC.

Several days ago, the regents voted to increase fees by a whopping 32% - that's right, 32% - starting in the fall of 2010. Notwithstanding the predictable assertions about "quality" being threatened and the prospect of a "faculty exodus," with a loud voice, I would have voted against this increase. Not because the university isn't justified in raising fees to some extent, but because the economy is in the tank, many students' parents are unemployed and no business in its right mind raises its prices 32% under such a set of circumstances.

The operative word above is "business." The University of California IS a business that likes to operate as if it were merely a public service enterprise. It doing so, it gets to have the best of both worlds. As a business, UC chooses to compete with other businesses for talent - and seeks to compensate them accordingly. As a public service enterprise, the university expects to be subsidized heavily by the taxpayers - when we can afford it - and to have all of the protections and perquisites of a public corporation.

By Charlotte Allen

Cuyahoga Community College expects to see nearly 30,000 students enrolled for credit on its three campuses in Cleveland when it opens for the fall semester late in August, with an additional 30,000 taking non-credit courses for job-training "personal enrichment" (instruction in art, photography, and other hobbies). According to campus officials, the 30,000-strong for-credit student population represents an all-time high: about 20 percent more than the 24,311 for-credit students whom the college reported as enrolled last spring. The projected 6,000-student increase is unprecedented, too; in the spring of 2009, college records show, there were only about 800 more students attending Tri-C, as Clevelanders call their community college, than were on the rolls for the spring of 2008. Chalk up the current surge to the recession, which has suddenly made the $25,000-a-year-tuition typical of U.S. private four-year-colleges look unaffordable to many families (private colleges nationwide have reported lower-than-usual freshman acceptance rates for this fall). Annual tuition at Tri-C is a tenth of that: $2,418. That's a bargain even compared with tuition costs at Ohio's public four-year colleges, which charge $8,583 annually on average to state residents.

So it's perhaps only logical that President Obama, in a July 14 speech at Macomb Community College in Warren, Mich., announced a proposal to invest $12 billion in federal spending in the nation's community college system, all with the aim of helping an additional 5 million Americans earn degrees and certificates from community colleges over the next 10 years. The president called community colleges the under-appreciated "stepchild of the higher education system" and declared that the money would help workers learn "the skills they need to fill the jobs of the future." His message seemed designed as a boost to Warren, a recession-battered suburb of Detroit with a 20 percent unemployment rate, but also to millions of other American young people desperate to cut the cost of attending college.

By Richard Vedder

Of every 100 kids who enter American high schools, only about 20 obtain a bachelor's degree within a decade. That is why the proportion of adult Americans with baccalaureate degrees is rising relatively slowly, and why the U.S. has fallen behind a number of other nations in the proportion of young adults with college degrees.

There are three points of attrition that keep new high school students from becoming college graduates. Some do not make it through high school. Some high school graduates never go to college. But the largest rate of attrition is seldom discussed: 40-50 percent of those who matriculate in colleges and universities do not obtain a degree within six years of entering college. And a majority of new freshman does not get a college degree in the four years that most of them expect to acquire it.

All of this must change, and radically, if President Obama's goal of America regaining its leadership in the world in degree attainment is to be achieved. A lot of attention has gone into the second area of attrition -failure to continue on to college, but less attention has been paid at the college level to the third factor -college drop-outs.

By Ward Connerly

During my twelve-year term as a Regent of the University of California (UC), I served for several of those years as Chairman of the Committee on Finance, which has jurisdiction over the budget of the UC system.

Adopting a budget was among the most complex and painful tasks that confronted the Board. For me, the "teachable moment" from that experience was that fewer things are more complicated and mysterious than a multi-billion dollar budget of a university that has numerous sources of public and private funding - restricted and unrestricted, that respects "shared governance," and which allocates budget authority to its campuses and other operational units. I always doubted that the Central Intelligence Agency could unravel the mystery of a UC budget.

While many in the nation are focusing for the first time on the serious fiscal dilemma of the State of California, UC has had to deal with cycles of financial shortages for much of the past two decades. In fact, belt-tightening has become the norm rather than the exception at UC. It is because of this experience that the current State budget "shortfall" is not hitting UC with the same effects as might otherwise have been the case.

To place matters in context, there are several salient features that must be acknowledged. First, UC is a vast enterprise with multiple sources of funding. This fact serves to cushion the university from the consequences that would be devastating to other universities faced with similar circumstances. Second, instead of just cutting costs to match revenues, the UC Regents and the administration have always sought to have nearly all its constituent parts share the pain during harsh budgetary times. For example, during the current UC budget year, in addition to staff furloughs - which are expected to achieve roughly 25% of the almost $1 billion "hit" on the UC budget from the State, and a 9.3% fee (tuition) increase, the university is looking at fewer course offerings, deferral of salary increases for most UC employees, layoffs, fewer faculty hires, fewer teaching assistants and elimination of a 2.5% increase in freshman enrollment that is a part of the Higher Education Compact between the State of California and the university. This approach will result in all segments of the UC community - students, faculty and staff - experiencing some degree of economic harm.

By George Leef

The last time President Obama gave a speech dealing with education (his address to Congress on February 24), he misrepresented government data to make his case that the country needs to put a significantly higher percentage of people through college. (I wrote about his fudging of the figures here)

For that reason, Americans would be wise to look skeptically on his policy pronouncements regarding education. Last week the president gave another speech this time extolling college and especially community college programs as a good path for unemployed people who want to prepare for new and better jobs. He gave a couple of nice anecdotes about people who had greatly improved their lives by taking vocational training courses and he wants to make it easy for unemployed workers to get federal money for education and career training.

In one case, a woman in Maine who had lost her job as a receptionist decided to take courses in nursing, and now makes a good living as a registered nurse. Without question, that's a success story, but it's never a good idea to make government policy on the basis of some individual success stories. That's because policy changes usually have hidden costs. To get a few success stories, we often have a greater number of failure stories.

Before looking at the president's proposed changes, we should examine the broad vision he articulated. Here are his key sentences. "Now is the time to put a new foundation for growth in place - to rebuild our economy, to retrain our workforce, and re-equip the American people. And now is the time to change unemployment from a period of 'wait and see' to a chance for our workers to train and seek the next opportunity..."

That sounds quite uplifting. It sounds obvious and simple. But is it realistic?

By Richard Vedder

Like Caesar's Gaul, President Obama's plan for higher education is divided into three parts:

1) Every American should have postsecondary educational training, and within a few years we should again lead the world in the proportion of young graduates with bachelor's degrees;

2) Federal financial assistance to pay for college should become an entitlement like Social Security or Medicare, available to all in need;

3) The private provision of loans to students should end and the Federal Government should become the provider of student loans.

The American higher education establishment has mostly endorsed this sweeping proposal. As is so often the case, they are wrong. On every count, this proposal is an Obamination - a perverse set of policies that will raise costs to taxpayers and, surprisingly, also to many college students and families.

By Jeremy Carl

In a recent article that received a fair bit of buzz, The New York Times spun a story of the supposed new reality in the recession-plagued U.S.---Students from more well-off families being given admissions preference at increasingly cash-strapped universities. But the Times article misses the larger point. Lawrence University, Colby College and Brandeis (some of the institutions mentioned) are all fine schools that provide good educations, but they are not entry points into the elite post-graduation professional networks in the same way that top Ivy League schools (and a few others of similar prestige) are. For those schools, the real story is the same as it has been---in a time of increasing economic stress, "need blind" admissions will continue for those fortunate enough to be on financial aid---but the uncontrolled escalations of costs for everyone else will continue, putting an increasing financial burden on these students and their families.

When my father entered Harvard University in 1958, fresh from public high school in Ohio, it had just raised it's tuition a staggering 25% from the previous year. . . to $1250. While inflation would make that figure equivalent to about $9,000 now, the fact remains that this less than one-fourth of the cost of Harvard's tuition and fees today.

Through a combination of scholarships, parental savings and a summer job each summer at Republic Steel, my father's family was able to easily afford an supposedly elitist Harvard. Had my father been applying to Harvard today under similar financial circumstances, his parents likely could not have afforded to send him.

By Charlotte Allen

A modified version of this piece appears today in the Washington Examiner

Georgetown University, like many colleges and universities hit by the current economic downturn, is in what look like dismal financial straits. The value of Georgetown's endowment shrank 25.5 percent last year, to $833 million, the annual deficit it has been running is estimated to climb to $37.8 million this fiscal year with little abatement in the near future, and donations are expected to be down--and likely to fall further if President Obama's proposal to reduce tax deductions for charitable gifts takes effect. So Georgetown's president, John DiGioia, like many another college CEO these days, recently announced a plan to cut costs.

The nature of DiGioa's proposed cost-cutting, however---freezes on salaries, delays in filling vacant positions, and a hold on the construction of a planned science center---seem anemic in the face of the university's obvious financial problems. That's probably because Georgetown's desire to trim its budget is running smack into the reality of campus politics, in which every program, silly, overstaffed, or non-essential as it might seem to outsiders, has an aggressive constituency ready to raise the pitchforks in its defense. Harvard, for example, facing a projected 30 percent drop in the value of its massive $38.5 billion endowment, announced in February it would trim the ranks of its contract janitors---not even Harvard employees---by a few dozen, leaving some Harvard buildings a shade less spic and span. The upshot? A series of student protests, denunciations by the Service Employees International Union, and on March 23, a unanimous condemnation of Harvard by the city council of Cambridge, Mass. Georgetown clearly doesn't want to go down that road.

Private businesses might shrug off such negative publicity, but most universities are sensitive to their images as repositories of progressive values. So there is a long list of campus sacred cows that can't be nicked by the budget-cutting knife without an uproar. One is tenured faculty. Tenure means having a job for life, no matter how lackadaisically you perform it or whether the department in which you teach attracts many students. The University of Texas Medical Branch laid off 30 of its 127 faculty members, many of them tenured, after Hurricane Ike devastated its Galveston campus last year and forced the temporary closing of its main teaching hospital. The Texas Faculty Association is now suing the state university system to force the professors' rehiring.

By Frank J. Macchiarola

Dr. Macchiarola, chancellor of St. Francis College in Brooklyn, delivered these remarks on February 5th at a one-day conference in New York on "The Future of the University." The conference was sponsored by the Manhattan Institute's Center for the American University.

If I were making this presentation a year ago, I would not have some of the deep concerns about the future of the university as I do today. Certainly the changes that are occurring within the university today are due, in large part, to some of the real difficulties the university faces in adapting to forces that are internal to it. The presence of the deep economic recession that we face today - and that will be with us for some time to come - significantly adds to the uncertainties that today's university has to confront. It puts solutions to a considerable extent beyond the scope of what some universities can actually manage.

The recession - or perhaps depression- has for private universities hurt their financial condition dramatically. Endowments drop and endowment income which is critical to the university's operations fall as well. In virtually all instances this combination means that universities been tremendously impaired. Endowment income which can provide 5% of market value for operating expenses is less available and this adds to the gap between tuition income and expenses that universities must face. Endowments are affected, especially for the tuition dependant schools which require tuition to fund operations in significant ways. Well endowed universities are the exception, not the rule. Costs also increase, usually by a multiple of the rise in the cost of living. This has been almost the universal rule largely because of factors that have driven universities to give students "more and more." The usual course of action -increasing tuition - is made more difficult by the hard economic times. Fewer students being able to afford college mean a shift to lesser charging private universities and the public ones. The factors that have operated to allow universities to grow are not present in anything like the same way. The decline in the number of high school students exacerbates the problem even further. While students may choose public institutions as an alternative, things are not going well there either. The depression has hit states hard, and while the stimulus plan may be helpful to them in the short term, they will not be able to absorb more students at the subsidized costs that they have traditionally borne. The taxpayer is being hit hard, and the state economies are as well. The public universities will have to charge more and give less. There is tuition relief by the way of increased Pell Grants and tax credits for college tuition, but there is no way that we will be back to conditions ante recession.

By Charlotte Allen

On February 11 art-lovers packed a meeting room at Brandeis University to protest Brandeis's plans to shut down its on-campus art museum and auction off the museum's entire 6,000-piece collection. The list of holdings at Brandeis's Rose Art Museum, most of them donated since the museum's opening in 1961, reads like a Who's Who of prominent twentieth-century American artists - works by Max Ernst, Willem de Kooning, Jasper Johns, Roy Lichtenstein, Robert Rauschenberg, and Andy Warhol, among others - and is valued at $350 million. Museum curators, especially those associated with university - owned art collections, greeted Brandeis's decision with shocked intimations that selling the art might violate ethical obligations to donors. Elsewhere in the art world there was fear that the fire-sale prices that the Rauschenbergs and Warhols might command if dumped onto today's anemic, recession - beset market for luxury goods could depress the value of other art collections less stellar than Brandeis's.

One thing is certain, however: Administrators and trustees at Brandeis, a well-regarded but not overly rich liberal arts-focused research university of about 3,900 students in Waltham, Mass., saw a need to act quickly and decisively to cut costs and raise cash at a time when nearly every university in America, private and public, is being hit by the double whammy of shrunken endowments (thanks to the tanking of Wall Street) and sharp downturns in revenues from both private donors and financially strapped state governments. Brandeis, founded in 1948 and named after the Supreme Court justice Louis Brandeis, had an endowment valued at $712 million as of last June - pocket change compared to its neighbor Harvard's $37 billion endowment - but Brandeis's endowment is now reportedly worth only $530 million because of the market meltdown, Furthermore, many of Brandeis's chief donors had invested heavily with alleged Ponzi schemer Bernard Madoff, a guarantee of financial wipeout. Indeed, Brandeis's very largest donor; the family foundation of the clothing manufacturer and philanthropist Carl Shapiro, who had several campus buildings named after him, reportedly lost $545 million, nearly all its assets, to Madoff's alleged pyramid of fraud. Although Brandeis denies investing any of its endowment with Madoff, it has admitted to serious investment losses, and its chief operating officer, Peter French, told the online magazine The Daily Beast that the university faces an operating deficit of $79 million over the next six years together with "a tapped-out reserve fund," as the Beast's Judith Dobrzynski wrote, and seriously strapped donors. According to French, Brandeis faced three alternatives: sell the art, shut down 40 percent of its campus buildings, or choose between firing 30 percent of its administrative staff or 200 of its 360 faculty members. Since original works of art are inspirational but not exactly germane to a college education (Brandeis had no art museum for its first thirteen years of existence), the university axed its art, not its buildings or employees - "We'd rather use Rose" to cut costs, French said.

In fact Brandeis is actually lucky to have valuable hard assets on hand to liquidate for a desperately needed cash infusion, and even luckier to have had generous donors in the past whose gifts constitute those assets. The university does not have to decide - at least not right now - whether to shrink its faculty, trim its administrative staff, reduce undersubscribed academic offerings, or deal with the costly results of an overhead-hiking campus construction spree when times looked flush earlier in the decade. Mark Williams, a senior lecturer at Boston University specializing in risk-management told the Bloomberg news organization that one of Brandeis's problems was that it "overbuilt at the peak of the market." In fact, according to Inside Higher Education, the Brandeis faculty recently formed a committee to review the curriculum and review such revenue-boosting or cost-cutting options as adding business and engineering programs to the university's traditional liberal-arts offerings and replacing its existing majors and minors with (apparently cheaper in terms of faculty deployment) interdisciplinary "meta-majors" whose vague parameters have alarmed some professors, not so much because they might dilute standards or jettison, say, Brandeis's longstanding but low-attendance courses in ancient Greek, but because they might result in eliminating entire departments and professorial jobs.

By James Piereson

In the area of higher education especially, but in most other areas too, the Stimulus bill looks more like an emergency measure designed to maintain current programs than a strategic package aimed to stimulate growth. Among others, college and university presidents are likely to be among those sorely disappointed.

Last November, shortly after the election, a group of college presidents took out a full page advertisement in the New York Times to make the case that the proposed stimulus package to be considered by the new administration should include some $50 billion for the construction of new buildings on college campuses across the country. The academic leaders argued that such expenditures were an investment in the future of the country and would, in addition, create new jobs in the short run. They estimated that this allocation would represent but 5 per cent or thereabouts of the total stimulus package, which by their reckoning would add up to something like $1 trillion. Like governors, mayors, and representatives of other interest groups, they were eager to get in line for a piece of this once-in- a-lifetime jackpot of federal largesse.

By Ward Connerly

Hardly a sector of the American economy is unaffected by the current recession; however, no matter how painful this period is, it provides an opportunity for many institutions to do the kind of restructuring that should have been done before now. And, fewer segments of our society are in greater need of financial restructuring than American higher education. Unfortunately, public colleges and universities have been the beneficiaries of public "bailouts" from the taxpayers for so long that the message of restructuring may fall on deaf ears, but in case any college administrators are interested, I have a few suggestions.

First, let us begin with the cultural mindset that every high school graduate should go to college. This fact alone creates an inflated and artificial demand for higher education and causes many young people to pursue career paths that are not reflective of their talents, aptitudes or interests, but it does serve to create escalating application numbers that help when it is time to lobby legislators and the Congress for financial assistance.

Because of this artificial and inflated demand for a college education, politicians, educators and others often promote the view that going to college is a "right" and not a commodity to be purchased like any other goods and services in our society. As a "right," everyone is therefore entitled to have the government underwrite the attainment of that "right." It is at this point that the cost of higher education begins its inflationary spiral, because as long as the taxpayers are there to bailout public colleges, there is no need to keep costs at a level that the consumer (college students) can afford.

By George Leef

On December 16, the higher education establishment put out its tin cup, asking Congress to give it a 5 percent cut of any "stimulus" spending package---around $40 to $50 billion for new university construction projects.

In the interest of full disclosure, I should say that I'm opposed to the concept of "economic stimulus" spending. The federal government can't make the country more prosperous by shifting money and resources around at the whims of federal politicians. But the idea of spending billions on higher education strikes me as particularly unjustifiable. The trouble with higher education isn't a shortage of funds, but that so much of what it has is spent to little effect.

The Carnegie Corporation's open letter signed by more than 40 higher education leaders contends that the nation faces a serious problem: "For the first time in our history, the cohort of Americans ages 25 to 34 is less well educated than the older cohorts that preceded it." Supposedly, this is an ominous sign that "our future prosperity and security will be weaker than in the past."

By Richard Vedder

Former Commissioner of Education Statistics Mark Schneider has caused a bit of a stir with a paper in which he argues that colleges are getting a free pass on a huge problem - a very high drop-out rate. Our colleges are failure factories for literally millions of students, Schneider says, and I agree.

To be sure, our statistics on college dropouts are imperfect. Students move from full to part-time status, or change schools, and sometimes get measured as drop-outs when in fact they succeed. The reality is, however, that over half of students entering four year colleges and universities do not graduate within the advertised four year curriculum, and roughly one-third do not graduate within eight years even using better measures of dropping out.

I think there are four major reasons for this. First, of course, there is a small proportion that drop out because of adverse family circumstances that force them into the full-time work force or into caring for relatives. While some claim this is an enormous problem, the vast amount of student loans available has reduced the number of students who drop out for strictly financial reasons. Second, there is more than a grain of truth to the collegiate lament that high school graduates are often ill-prepared, with mediocre qualifications in such basic areas as writing, civic knowledge and math skills. Anyone who has looked at results of the NAEP or TIMSS tests knows that Americans on average graduate from high school with at best a shoddy intellectual base.

By Donald Downs

The stage is now set for wide debate over mandatory student fees These are the fees that educational institutions or student governments assess students above and beyond the monies that pertain to tuition, housing, dining, and similar goods. Some of these additional fees typically fund extracurricular activities or needs such as medical services, crime victim services, transportation services, and the like. The more controversial fees cover students' expressive and associational activities.

At my school, the University of Wisconsin at Madison---a hotbed of such activity that is a model for other schools---mandatory fees currently amount to about $750 per semester. After an activist group abolished student government here in the early 1990s, students organized to establish a new form of student government in 1994-5, primarily to enable activist groups to gain access to student fees.

Objections to fees that support student expressive groups take three tracks.

By Peter Wood

The student loan crisis - or near crisis; narrowly-averted crisis ; or postponed crisis - no one is sure - comes co-incidentally at a moment when many colleges and universities are once again repackaging their basic programs. The new buzzword, as John Leo has pointed out is "sustainability." I also recently tried my hand at unpacking this polyvalent idea. "Sustainability" sounds to the uninitiated as though it is about environmentalism, but it is much more. As I wrote in Inside Higher Education, many of the advocates of "sustainability" see it as an encompassing concept. It includes science, economics, and the social structure. And for many in the movement, the focus on social order is the basis for far-reaching attempts to advance "social justice" policies.

I doubt this development has come into focus for many parents or people outside the campus. The campus left learned with its promotion of the concept of "diversity" the advantages of packaging hard-core ideology in bland, feel-good terminology. Sustainability is another venture in this direction. No one can really be against sustainability (definition 1) - prudent use of resources with the needs of future generations in mind. But while most of us hear the word in that sense, campus ideologues are busy rearranging the curriculum and student life around "sustainability" (definition 2) - a condition that arises when capitalism and hierarchy are abolished; individuals are made to see themselves as "citizens of the world;" and a new order materializes on the basis of eco-friendliness, social justice, and new forms of economic distribution.

Sustainability (2) is an amalgam of environmental extremism, shards of Marxism, romantic utopianism, and identity group politics. It doesn't have a significant political following in America outside college campuses, and in that sense it is a fringe movement. But on campus it's everywhere. Hundreds of campuses now have sustainability officers, courses that promote the ideology, and most ominously, "co-curricular" programs run through student life and residence halls that attempt to "educate" students about their mistaken "worldviews" and bring them aboard this new ideological ark.

By Richard D. Kahlenberg

Despite a great flurry of activity to expand financial aid at selective colleges over the past several years, a new study by the Chronicle of Higher Education reported this gloomy bottom line: "Top Colleges Admit Fewer Low-Income Students." As someone who has worked for more than a decade to push colleges to enroll more economically disadvantaged kids of all races, the news was disappointing, though not altogether surprising. For years, elite colleges have assembled freshmen classes that include upper-middle class and wealthy students of all races and declared themselves to be diverse. New financial aid policies alone were unlikely to change that pattern.

The Chronicle study found that the percentage of students receiving Pell Grants declined at the wealthiest 75 private and 39 public colleges and universities between the 2004-05 and 2006-07 academic years. In the 75 private institutions with the largest endowments, 13.1% of undergraduates in 2006-07 received Pell Grants, which typically go to students from families earning less than $40,000 a year, down from 14.3% two years earlier. In 39 public institutions with endowments of $500 million or more, 18% were Pell Grant recipients in 2006-07compared with 19.6% two years earlier.

The news is particularly troubling given the high profile efforts announced in recent years by some 40 top colleges and universities to provide more generous financial aid to struggling families. Why did less, rather than more, economic diversity follow? The primary reason is that aid policies are only part of what drives enrollment. In order to receive aid, low-income and working class students must first be admitted. Because such students often attend lousy schools, even highly talented and hard working students - who have tremendous potential - don't look as good on paper as their more privileged colleagues. Research finds that while colleges and universities give substantial preferences to under-represented minorities (blacks, Latinos and Native Americans) and other groups, they give basically no preference to economically disadvantaged students, despite claims to the contrary.

By Charlotte Allen

You've just started your freshman year in college, so one of your first stops is the campus bookstore to pick up your textbooks. You signed up for Econ 101, where your professor has assigned one of the top-selling basic textbooks in the field: Harvard professor N. Gregory Mankiw's 936-page Principles of Economics (South-Western/Thomson), now in its fourth edition. The price: $175.95, or if you want to throw in a study guide to help you ace the course, $209.90.

Wow, that's steep for just one book - but you've only just started. Next class: the first semester of your college's world history survey course, spanning the period from 1 million B.C. to 1500 A.D. In that class the prof is having you read the first volume of Traditions & Encounters: A Global Perspective on the Past (McGraw-Hill), the ever-so-politically correct overview by Jerry H. Bentley and Herbert F. Ziegler that devotes only 28 of its 600 pages to ancient Greece. The sticker price for Traditions and Encounters, now in its second edition: $89.69. Next, chemistry class, where the assigned textbook is Karen C. Timberlake's Chemistry: An Introduction to General, Organic, and Biological Chemistry (Prentice-Hall), now in its ninth edition. The price here is $148.80 for 736 pages plus a CD-ROM, and another $64.90 if you want a study guide. The bargain on your textbook list, if you can call it that, is Lynn Bloom's The Essay Connection (Houghton-Mifflin), the required anthology for your freshman English class, and "only" $61.16 for 656 pages. The Essay Connection is in its eighth edition, an improvement over the seventh edition, its blurb promises, because the book now includes essays by David Sedaris (can't you read him at home in your parents' New Yorker?), a photo collection on the horrors of war (guess what non-English-related political point that's trying to make), and cartoons and other illustrations for students who learn better by looking at pictures.

Your textbook-bill total for the semester is now $475.60 for just four books, more than a fourth of the average $2,315 in tuition and fees for a semester at a U.S. state college, according to figures for 2004 from the U.S. Education Department) - and that doesn't include optional study guides, the lab manual you might need for chem class, or the photocopied handout packet your English teacher says she'll be passing out at your expense. Why the sky-high prices for basic textbooks? After all, the brand-new, critically acclaimed translation of Tolstoy's War and Peace by Richard Pevear and Larissa Volokhonsky (Knopf) lists at only $37 for 1,273 pages in handsomely designed hardback. If Knopf, a trade publisher, can bring in a lengthy volume with a scholarly apparatus of notes and bibliography for less than $40, why can't textbook publishers, serving a market of generally cash-strapped young people, do something similar?

By Anthony Paletta

(This article originally appeared at Inside Higher Ed)

Dartmouth College is now the latest institution to announce considerable changes to its tuition and financial aid structure, eliminating any charges for students from families making less than $75,000 a year. Dartmouth's arrangement is not nearly so generous as Harvard's or Yale's, yet it's markedly superior in one regard. Dartmouth proposes to offer a scholarship "to allow financial aid recipients to take advantage of research or internship opportunities in their junior year."

Dartmouth's is the most concrete step towards expanding access to internships, in a cycle of financial aid changes where colleges have begun to take explicit note of the fundamental inequities in their accessibility. Several colleges eliminated summer earning expectations for students on financial aid, asserting that the demand that students contribute money toward tuition in summers posed a stark obstacle to the pursuit of less-remunerative internships and volunteer work. All that is undoubtedly true, but the colleges' efforts go nowhere near establishing equality of access to internships.

Why worry? Increasingly, internships are perceived as essential steps to post-college employment, as definitive legs up for job applicants. "Internships are no longer optional, they're required," The New York Times quoted Peter Vogt, author of Career Wisdom for College Students and an adviser to MonsterTrak.com, as saying last month. A 2006 study by the National Association of Colleges and Employers indicated that 62.5 percent of new college hires performed undergraduate internships. Employers responding to association's 2007 Recruiting Benchmarks Survey reported that they offered full-time jobs to almost two-thirds of their interns. Over 30 percent of new hires came from such internal internship programs. Internships undoubtedly enhance employment prospects, but the question is - for whom? The answer, almost invariably, is for students already well-off.

By Peter Wood

A few weeks ago, I alerted readers to the threat of a tightening of the student loan market . Banks have been bundling student loans, like home mortgages, and selling them as securities. First Marblehead Corporation in Boston has been the nation's biggest player in "securitizing" student loans, and just like home mortgage-backed securities, the student loan-backed bonds issued by First Marblehead contain a lot of loans of doubtful value.

These aren't the loans that are guaranteed by the Federal government's Title IV Student Loan program. When students have borrowed all they can in Title IV loans, they frequently need to borrow still more to meet the extravagant costs of college. They often borrow at relatively high interest rates from banks and other private lenders. These banks and lenders, in turn, act just like the sub-prime mortgage lenders did: they sell the risk to someone else. First Marblehead takes loans from many banks and bundle them together to create its bond issues.

As I reported, First Marblehead appears to have hit a major snag in October, when investors declined to buy the company's new $1 billion student loan-backed bond offering. First Marblehead's stock plummeted and a chill went through the whole student loan industry.

By Peter Wood

Last week, First Marblehead Corporation, a Boston-based company, saw its stock plummet after cutting its dividend. The problem? First Marblehead is in the business of "securitizing" student loans. A year ago, this would have required some explanation, but the sub-prime mortgage mess has taught Americans - and people all over the world - the meaning of "securitizing." It is one of those words that means the opposite of what it sounds like. A company bundles together some high-grade debt, some middle-grade debt, and some really doubtful debt and sells it to investors, who only think they are making a secure investment. As we learned with the securitized mortgages, no one really knows what these chimeras are worth. And a little bit of bad debt, like a little bit of ptomaine, goes a long way to making the whole meal undigestible.

First Marblehead isn't saying exactly what happened, but Matt Snowling, analyst with Friedman Billings Ramsey, told AP report Dan Seymour, that he believes First Marblehead "was trying to sell about $1 billion in bonds." As Seymour explains, First Marblehead bundles student loans from numerous banks to put together its bond offerings. The deal usually specifies that First Marblehead has 180 days to sell the bonds, and failing that, has to buy the student loans itself.

Apparently, First Marblehead has been trying since October to sell $1.1 billion in these student loan-backed bonds - and found few takers. Meanwhile, banks keep issuing more student loans.

Many people think the colleges and universities are overreacting to the sharp drop in their endowments. Lynne Munson, former deputy chairman of the National Endowment for the Humanities, is one of these critics. In a letter (subscription only) to the Chronicle of Higher Education, she argues that higher ed endowments haven't lost much value if you put the recent drop in context of the astonishing gains of the last few years.

She writes: "College and university endowments increased, on average, 17.2 percent in the 2007 fiscal year and 10.7 percent in 2006. Taking compounded gains into account, these funds went up more than 26 percent just in the two years preceding their recent decline. And endowment increases at wealthy schools soared far past those averages. Harvard and Yale Universities increased the size of their endowments 45 percent from 2005 to 2007.

"So how concerned should we be that higher-education endowments have suffered a dramatic loss? The answer is: not very. Today college and university endowments are basically worth what they were in 2005. In other words, they're massive....Being concerned about the value of college and university endowments today is a little like worrying about whether Warren Buffett still has enough inheritance to share among his children."

The real problem, Munson argues, is that colleges will cite their recent losses to justify cutting endowment spending. Before the market drop, the colleges had come under heavy pressure from Congress and the public to spend at least the minimum payout required of private foundations--five percent.

In a recent survey, 27 percent of colleges and universities said they would decrease endowment spending while only 1 percent planned an increase. Munson writes: "This is the absolute reverse of the reaction they should be having at a time when students and families need help --- particularly since colleges still have plenty to share."

Munson currently studies college and university endowments for the Institute for Jewish and Community Research.

Harvard University, trying to trim its operating budget in the face of a projected 30 percent decline in the value of its endowment stemming from the current financial meltdown, announced its intention to cut 13 of the 27 janitors who service its medical school and an unspecified number of custodial workers elsewhere at Harvard residential facilities. The result: two student protest rallies on March 5, including a march to the office of university president Drew Gilpin Faust during which Harvard students joined union organizers and labor activists in chanting such slogans as "Hey, Harvard, you've got cash, why do you treat your workers like trash?" The affected employees don't even work for Harvard; they collect their paychecks from a pair of independent firms to which Harvard subcontracts some of its custodial work. Nonetheless, Harvard undergraduate, law, and medical students turned out to support the protest, declaring (as one medical student told the Harvard Crimson) that they had the "power" to force the university to reconsider the planned personnel reductions.

The Harvard protests---in the name of protecting the jobs of perhaps a few dozen people who aren't even on the Harvard payroll---exemplified the thorny political problems that college and university administrators face as they try to cut costs during this economic turndown without feeding bad publicity-garnering campus showdowns. Their job isn't enviable. The University of California's Berkeley campus, for example, decided that one way to cope with a projected reduction of $65 to $75 million in subsidies from the nearly insolvent state of California would be to halve the size of its physical education program, which offers academic credit to students who enroll in such courses as team sports, aquatics, and dance. Since educating minds, not bodies, is presumably the primary mission of a university, UC-Berkeley's effort to save $250,000 nest fall semester by trimming a peripheral department and putting some of its full-time faculty on part-time status ought to be non-controversial. Not so. Students and phys-ed faculty at Berkeley have launched a letter-writing campaign and Facebook protest to preserve the department at full strength.

The Boston Globe reports that Harvard alumni have written to President Faust asking that, given the recent drop in endowment value from $36.8 billion to $28.7 billion, the latest bonuses paid to the fund's managers be returned. The five highest-paid executives earned between $3.4 and $6.9 million during the last fiscal year. Those aren't especially high figures compared to private sector earnings, but, as the alumni aver, the endowment's recent direction doesn't exactly suggest management worth rewarding.

For more on the backstory to these glittering endowment falls, look to our own "Ivy-Covered Hedge Funds" by Joe Malchow from December.

One thing to be said for the $42.5 billion or so in supposed stimulus dollars that publicly funded institutions of higher learning are trying to squeeze out of the incoming Obama administration's economic package is that the amount isn't too much larger than Harvard's $28 billion endowment. Oh, and it's also not too much larger than the $34 billion that U.S. automakers have been promised by the Bush administration in their own recent trip to Washington with hands extended. Since billions and billions of dollars are to the rhetoric of transition spokesmen and members of Congress what billions and billions of stars were to the rhetoric of the astronomer Carl Sagan, it's not surprising that colleges and universities want a little piece of an amount that, according to the latest Obama proposal, could be as high as $850 billion.

The other thing to be said is that the language used by college presidents and trustees is nothing short of astounding as they try to make a case that their institutions are goldmines of economic productivity rather than ultra-large line items in state expenditure budgets. A plea to Congress and the Obama administration to direct 5 percent of all stimulus funds directly to public colleges and universities, published last week in the form of an "open letter" occupying two full pages in the New York Times and Washington Post, paid for by the Carnegie Corp. of New York, and signed by 31 presidents and chancellors of state university systems, along with five higher-education bureaucrats, was grandiosely titled the Higher Education Investment Act, even though no such "act" either exists or is currently pending as a bill in Congress. The "act" contains some statements astonishing in their grandiosity as the academic CEOs self-servingly argue that a federal handout to their institutions today would be an "investment" in the America of tomorrow:

Here's a sample of the top academics' over-the-top assertions:

An article in Governing explores the increasing centrality of Universities and medical centers to regional economic health. It notes a 1999 Brookings Institute study that found multiple cities in which more than half of the jobs among the top 10 private sector employees were provided by universities or hospitals. Baltimore, for one:

One of the most compelling illustrations is taking place in Baltimore, where Johns Hopkins is far and away the largest private employer. In an effort that joins the university, the city and the mega-developer Forest City Enterprises, the John Hopkins medical system is building an immense new life sciences park aimed at spinning off business opportunities from its research, and is placing the park in the deeply struggling East Baltimore neighborhood the school inhabits. In conjunction with the Annie E. Casey Foundation and the city, it has created a public-private enterprise, East Baltimore Development Inc., whose job is to oversee an ambitious effort to rehabilitate the neighborhood by building new housing for its residents, helping them with family and health counseling, creating a new elementary and middle school, and perhaps most important, crafting workforce development programs to place East Baltimore residents in the construction, health care and bioscience jobs generated by the project..."

Today's new factory? Increasingly, it seems so.

Harvard's Endowment has suffered a staggering eight billion dollar loss, or a loss of at least 22% in the last four months. That's the worst endowment drop for Harvard in 40 years, and dwarfs most comparable recent plunges in University endowments. Read on.

Given uniformly dolorous news in the financial sector, it's encouraging to see that the Stanford Provost and President have taken a 10% salary reduction, and each Stanford dean has pledged additional salary cuts, reports the Stanford Daily.

Amidst a climate of financial worry for many American students, the tide of amply-compensated Presidents refusing or returning portions of their salaries appears to be growing. The Daily Princetonian reports that Amy Guttman, the President of the University of the University of Pennsylvania, and her husband have made two gifts totaling $250,000 to support undergraduate research and financial aid. She has also refused a base salary increase.

That news follows soon after announcements two weeks ago that Richard McCormick, the President of Rutgers, returned a $100,000 bonus, and Michael Hogen, the President of the University of Connecticut in Storrs, gave back a similar amount. Encouraging, although a minor development in a climate of still-escalating university executive salaries. If you hadn't heard, read here.

Gordon Gee, president of Ohio State University since October 2007, holds the record for heading the most universities in America. Here's Gee's history at the helms of U.S. institutions of higher learning: West Virginia University (1981-1985), University of Colorado-Boulder (1985-1990), a first round at Ohio State (1990-1997), Brown University (1997-2000), Vanderbilt University (2000-2007), and now, Ohio State for a second stint as as academic CEO.

Gee is famous for his belief that universities should be run more like private corporations, which has sometimes translated into securing private-corporation level salaries for himself as chief executive as well as lavish remodeling jobs on the on-campus mansion that is a typical perk of a college president's job. At Brown, for example, Gee had the president's house redecorated to the tune of a reported $3 million, according to an article in the Village Voice, while disbanding the school's popular string quartet for no apparent reason and launching, without prior consultation, ambitious programs and expensive building projects for the sciences that were undoubtedly worthy ventures but miffed the faculty onto which they were sprung. After three years at Brown, Gee decamped for Vanderbilt, which offered him a reported $1.3 million annual compensation package (the second-highest in the country for a college president at the time) plus a tenured faculty position for his wife, and for the 2005-06 academic year, the university's board raised his compensation package to $1.8 million. At Vanderbilt, Gee gained praise for completing a $1.75 billion fund-raising drive two years ahead of schedule, boosting the Nashville-based school's endowment by nearly 50 percent, doubling funding for academic research, and aggressively marketing Vanderbilt, which saw a 50 percent rise in undergraduate applications during his tenure as well as dramatic rises in the SAT scores of its incoming freshmen. Gee also drew criticism for lavish spending and---again--high-priced renovations to the president's house.

When Gee moved to Ohio State for his second round as president last year, he became the nation's highest paid president of a public university, with a base compensation package of more than $1 million. One of his first official acts was...to hire yet more lavishly compensated high-level administrators for Ohio State. As the Columbus Dispatch reported, he increased the size of his governing cabinet from the nine executives employed by his predecessor, Karen Holbrook, to fourteen, eleven of whom will be making at least $300,000 a year (only three members of Holbrook's cabinet made that much). That figure doesn't include performance bonuses for senior executives, often 30 percent of salary, or deferred compensation (click here for a breakdown of total payouts under the new system). An outraged Richard Vedder of the Center for College Affordability and Productivity estimates that at least three of Gee's top-level hirees will make over $1 million this year, with Gee himself likely to take in twice that amount. Gee has defended the huge salaries as "competitive" and the only way to attract the "best people" to help achieve his goal of moving Ohio State, now ranked by U.S. News as 19th among public universities, to the next level.

The public furor over textbook prices shows no sign of halting, as students part with ever-larger sums for books. Before petitioning congress, all should take a look at the burgeoning number of private options for used and cheaper textbooks. Charlotte Allen pointed out several here this summer. Additional options continue to spring up.

- The Brown Daily Herald reports that Mocha, a private site offering class listings for the school now lists the prices of its required textbooks online. They link to Amazon book listings, enabling easy comparison.

- The Michigan Daily reports on another new school-specific service, mtextbooks.com

- Other options continue to emerge, as the Michigan Daily continues:

Another new site, Uloop.com, which was launched in 2007, provides various search features that allow users to locate a book, contact the seller and meet in person on campus to purchase the book.

According to Uloop co-founder Ryan MacCarthy, more than 4,500 University of Michigan students are registered on the site. Nationwide, more than 70,000 books have been bought and sold through the site. MacCarthy said the average used textbook on Uloop costs $37, a paltry price compared to the national average of $102 for a new textbook.

Sure, you could wait for Congressional hearings on Un-American textbook pricing. Or you could just spend that $37 somewhere other than the campus bookstore.

Read about it here.

And remember why they're expensive in the first place...

Today's Chicago Sun-Times offers tips for college saving, from "experts" and from students.

The Wall Street Journal reports on a new survey of 1.2 million bachelor's degree holders, which reveals significant variations in average salaries of different graduates. Ivy League graduates earned a median starting salary 32% higher than average liberal arts college graduates, and, at ten year's distance, earned salaries 34% higher than average liberal arts college graduates.

Experts observe that Ivy League graduates tend to gravitate towards management or advice-based careers, not to mention jobs in finance, explaining some portion of the spread. Not to mention relatively inflated northeastern pay scales.

Otherwise, though, the figure doesn't seem much of a surprise. Obviously, in a list of some 300, involving many state schools, from Black Hills State to Eastern Washington, the eight Ivy League colleges are going to fare well.

When looking into the individual comparisons, however, the differences aren't so vast. Sure there's a difference between Dartmouth ($58,000 median starting salary) and, say, an average state school such as the University of Connecticut ($48,000) but that's not especially large, and the gap between it and numerous other sate schools is even smaller: Penn State gradutes earn a median starting salary of $49,900 and grads at the University of Illinois at Urbana-Champaign earn $52,900. Hope for us all. Take a look at the rankings yourself.

Now that the Senate finance committee has requested - the New York Times said "demanded" - that the nation's wealthiest colleges and universities supply detailed information about their endowments and financial practices, it seems clear that college cost is emerging as a long-running, popular and bipartisan issue. The request/demand came in a stern but polite letter from committee chairman Max Baucus and ranking Republican Chuck Grassley. It asked 136 colleges and universities to supply answers in 30 days to a long laundry list of questions about tuition rises, spending and the handling of endowments.

The euphoria over Harvard's plan to grant financial relief to students from families earning up to $180,000 a year, since followed by similar announcements from Yale and Dartmouth, is long gone. Criticism of the three rich Ivies is increasingly caustic. Lynne Munson of the Center for College Affordability and Productivity, calls Harvard's reform plan "miserly," and Richard Vedder, head of the Center, wrote a Washington Post op-ed headlined, "It's a Start, Yale. Now do Something Serious." Several critics have labeled the announced reform plans "chump change" and denounced the wealthiest schools for decades of hoarding of endowment monies.

Munson points out that the new financial relief offered by Harvard amounts to a mere day and a half of earnings on the university's $34.9 billion endowment. Even so, other universities are even more addicted to penny-pinching. The University of Michigan, one of two richest public schools (along with the University of Texas) gives its 40,000 undergraduates only $61 million in aid, half of what Harvard spends on its 6,600 undergraduates.

Many critics argue that aid for students is small in relation to spending on compensation for university presidents, new stadiums, and dubious expansions of administrative officers, including the new and mostly pointless "diversity deans." Luxury housing on campuses is becoming an issue as well. Vedder calls attention to Princeton's new Whitman College (named for a donor, eBay executive Meg Whitman) that cost $388,571 per room. Vedder wrote for the Washington Post: "Taxpayers may ask why should Whitman get a multimillion dollar tax break building a luxury hotel for children of mostly wealthy Americans?"

The Senate finance committee letter launches the project of generating reliable information on the historically shrouded financial practices of colleges and universities. Grassley said that answers "will help Congress make informed decisions about a potential pay-out requirement." In other words, cooperate or else.

Harvard's announcement, on December 10, that it was eliminating student loans, and otherwise increasing grant support for lower and middle income students, has set off a torrent of welcome news in the last nine days. Two days following, Yale declared that revisions to its student aid program were forthcoming. Soon, Swarthmore announced the elimination of student loans. Duke and The California Institute of Technology declared revisions for the benefit of lower and middle-income students. On Monday, the University of Pennsylvania announced the end of student loans for students from families with incomes under $100,000, and a ten percent reduction in all other loans. Today, Haverford announced the replacement of all loans with grants beginning with the class of 2012. All great news for aspiring students and for their parents.

The profoundly encouraging truth about this development is that it's been highly voluntary. In the past, affluent institutions have made significant revisions to their aid policies, and no one followed suit. Other colleges, with fewer resources and little hope of altering their competitive posture, did nothing. Princeton eliminated student loans in 2001, but few colleges did the same - Princeton was already drawing the cream of the student crop, and less-selective colleges didn't seem to feel that comparable revisions would change that situation. Elite colleges didn't make adjustments either - and had no trouble drawing applicants, even with less attractive financial aid packages. This time, however, there's been a real shake-up. It's understandable why, say, Yale has announced revisions in response, as it is competing for much the same applicant pool as Harvard, but the waves of change have extended to institutions that are considerably less affluent - and compete with Universities such as Harvard and Yale much less directly for students.

Compare two large research universities to see the significance of the trend - Harvard, with an endowment of nearly $26 billion dollars, and an undergraduate acceptance rate of 9 percent, can easily handle aid increases - but Duke, with an endowment only about a tenth of Harvard's, and an acceptance rate over twice as high, is also clearly committing funds to reducing student debt. This is an excellent sign. As these changes show every sign of filtering across the top tier of Higher Education, they may create ideal pressure on colleges beneath them. As Peter Wood observed last week:

If other elite colleges give similar price breaks, it will mean that the top tier of American higher education will be even more irresistibly attractive to the best students. And that, in turn, will mean that other colleges will face some hard choices.

We may see much more sweeping revisions to come. Or at least hope for them.

The New York Times reports that "College Costs Outpace Inflation Rate." Of course they have. The Chronicle offers a more telling headline: "Student Aid Has Gained, but College Costs Have Risen Faster."

The Times reports "in recent years, consumer prices have risen less than 3 percent a year, while net tuition at public colleges has risen by 8.8 percent and at private ones, 6.7 percent." This was the largest increase in six years.

What is to be done? Senator Clinton has proposed a $3,500 tax credit for students, and an increased Pell grant. Bill Richardson proposes two years of free schooling at public universities in return for a year's pledge of public service. Mitt Romney has offered a similar plan, tying student aid to the type of jobs students intend to take after college. All of these plans would necessarily involve a significant increase in direct government spending on higher education. Most frankly acknowledge that government aid will never catch up to tuition increases. Few are willing to consider whether government aid might underpin the rise of tuition. Whatever the case, it's impossible to trace any consistent benefit from mere aid increases.

Richard Vedder has, as to be expected, proposed a plan of far greater substance:

Business Week reports on many colleges' increasingly cozy relations with banks. In the most common formulation, the colleges permit their ID cards to double as debit and ATM cards for particular banks, in return, typically, for some portion of the profits.

Parhaps it does work, but as Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars & Admissions Officers comments in the article: "It's unfortunate that there are colleges that have begun to view every point of contact with students as a potential profit center."

Peter Wood has been active at the NAS site, issuing additional comment on the latest permutation of the ongoing student loan scandal (if you haven't, do catch his initial summing-up of the case Those Scandlous Student Loans). This week, George Miller, Chair of the House Education and Labor Committee, introduced a bill to reduce federal subsidies of private loan providers and shift the related funds to direct federal loans. Democrats such as Miller have had considerable fun railing against fat-cat student loan companies in recent days (with good reason), but student-loans hardly ever qualified as a "private" enterprise in any traditional sense of the term. As Wood observes:

For decades, Republicans have been stalwart supporters of "private" lending for higher education, as opposed to direct federal spending. Of course, an industry addicted to federal subsidies and guarantees is private in a highly qualified sense. It has socialized its risks and privatized its profits. It would take rather advanced financial modeling to figure out whether the residual benefits of the private sector save the taxpayer more money than the industry managed to scam from the program.

In any case, the political balance has decidedly shifted in favor of a renewed effort to use direct federal loans to students. The opportunities for malfeasance, corruption, and inefficiency in this program are not to be underestimated either. But at least it will be a different malfeasance, corruption, and inefficiency -- and that will feel good. Of course, the private student loan industry won't be shutting down. The price of Sallie Mae has fallen, but the business will continue at a slightly less robust profit margin.

In other words, a sunny future. Read all of his thoughts at NAS.