President's Proposals Reverberate Through Higher Education Community
NACUBO-Commonfund Report Shows Endowments Continue to Rebound
IN BRIEF: House Hearing on Prior User Rights; Network of Universities Respond to Startup America Challenge; Visa Changes for High-Skilled Immigrants
President Obama's State of the Union college affordability proposals continued to dominate the higher education discussion this week, with a hearing in the Senate and considerable debate in the media and on campuses about what exactly the plan means for students and institutions.
All we really know so far about the president's plan are the five major pieces as described in a short document made available last Friday as part of his speech at the University of Michigan: 1) creating a "Race to the Top" for college affordability; 2) establishing a "First in the World" grant program at the Fund for the Improvement of Postsecondary Education; 3) increasing support for campus-based aid; 4) better information for families; and 5) maintaining the interest rate for federal student loan programs at 3.4 percent. We have summarized these five points in a document of our own, which you may want to keep for future reference as this plan plays out. We will know more when the president releases his full budget on Feb. 13.
As you'll see when you review the details, there is much to appreciate in this plan, and it is clear the president believes strongly in the transformative power of higher education. He called on Congress to make permanent the American Opportunity Tax Credit, which provides up to $10,000 for tuition over four years of college, and to stop the interest rate on subsidized Stafford student loans from doubling on July 1 (see this blog post from Ed Money Watch for more information on the interest rate). The grant programs he is proposing have the potential to put into play some potentially groundbreaking ideas.
However, almost all of the media attention has been on one part of the plan: the aspect that has been referred to as "price control." This proposal would revise the eligibility formula for campus-based programs, including Federal Work-Study and Supplemental Educational Opportunity Grants, in order to reward institutions that "keep net tuition down, provide good value, and serve needy students well." It is unclear what these three criteria mean in operational terms, but we assume a maximum permissible tuition increase will be set and institutions that exceed it would be denied campus-based aid. It also is unclear what the rate will be, how it will be set, or how it will be altered by the "good value" and "serve needy students" language. There are many unanswered questions, such as how it would work for public colleges who do not set their own tuition or whose tuition goes up in response to state budget cuts. It is also unclear how the third campus-based program, Perkins Loans, might be affected.
Rep. Howard "Buck" McKeon (R-CA) put forward a more expansive version of this plan a few years ago, and the higher education community opposed it as an effort at price control. Similar comments have already been made about this plan both in the media (see Wednesday's Wall Street Journal) and by policy makers. Rep. Hal Rogers (R- KY), chairman of the powerful House Appropriations Committee, made this connection Wednesday at the National Association of Independent Colleges and Universities' annual meeting. We will be watching closely in the coming weeks and months as details emerge before making a full evaluation.
The Senate Health, Education, Labor and Pensions Committee picked up on the issue of college cost this week, holding a hearing yesterday to discuss "Innovations in College Affordability." This is one aspect of the broader discussion of cost that we deeply appreciate—the fact that both the president and many in Congress recognize the large number of colleges and universities that are already putting innovative initiatives into practice. In addition, the Education Department (ED) published a notice in the Jan. 30 Federal Register, inviting the higher education community to share promising practices and activities that have improved rates of postsecondary progress and graduation, in an effort to "highlight strategies that have had the greatest impact on students' success without saddling them with unnecessary costs or debt." ED will post submitted material on its website.
There are a lot of balls in the air at this point, but this is just the beginning of a very long conversation we expect to continue at least through the presidential election in November. For those of you attending our Annual Meeting in Los Angeles next month, these issues will be the focus of much of the conversation—including during ACE Senior Vice President Terry Hartle's session on Tuesday, for which ED's Assistant Secretary for Postsecondary Education Eduardo Ochoa will offer opening remarks. I'm looking forward to seeing you all there.
The National Association of College and University Business Officers (NACUBO) and Commonfund released their annual report on college and university endowments on Monday, and the findings show strong returns for institutions although most continue to recover from losses incurred during the 2008-09 credit crisis.
Data gathered from more than 800 colleges and universities show an average return of 19.2 percent (net fees) for FY 2011. This is a marked improvement over the average 11.9 percent return for FY 2010 and a continuation of the recovery from the -18.7 percent return for FY 2009. The average three-year return for participating institutions was 3.1 percent, and the average five-year return was 4.7 percent. The average effective spending rate among participants in FY 2011 was 4.6 percent. The most affluent schools ($101 million and above) had payout rates of at least 5 percent.
For more information, see the NACUBO website.
The House Judiciary Subcommittee on Intellectual Property, Competition and the Internet held a hearing Wednesday to discuss a report on prior user rights in patent law and related issues with U.S. Patent and Trademark Office (USPTO) Director David Kappos and representatives from industry and academia. Among those testifying was Association of American Universities Executive Vice President John Vaughn, who has been leading the work of the higher education association coalition on patent reform. As the USPTO works to implement provisions of the patent reform law enacted last September, the law's significant expansion of prior user rights as a defense against patent infringement remains a major issue. For more information and to read testimony from the hearing, see the committee's website.
Jan. 31 was the one-year anniversary of Startup America, the White House initiative to recognize and accelerate high-growth entrepreneurship throughout the nation. In December, the administration launched the Startup America Policy Challenge to identify high-impact ideas to support entrepreneurship in areas of national interest: education, energy and health care. A network of universities led by Arizona State University responded to the challenge, launching a contest to develop the best "policy business plans." Also this week, in conjunction with the anniversary of the initiative, the Department of Homeland Security announced a series of administrative changes in visa rules designed to attract, retain and improve the immigration process for high-skilled workers.
Molly Corbett Broad
President of ACE