Archive for: University Highlights

In response to federal investigations into several prominent college basketball programs last fall, the NCAA has announced new rules regarding men’s basketball and student athletes. Two of the most significant changes include allowing student athletes to participate in the NBA draft and return to college if undrafted, and requiring Division I schools to pay for tuition, fees and books for both men and women’s basketball players who left school and returned later to attain their degree.

Other noteworthy rule changes include:

• Elite college players may be represented by an agent, who is certified by the NCAA, to help them make more informed decisions about turning pro.
• High school basketball student-athletes can make more college campus visits, paid for by colleges, beginning as soon as the summer before their junior school year.
• As a term of employment, school presidents and athletics staff will be personally accountable for their sports programs following the rules, including full cooperation in the investigations and infractions process.
• Those schools who break rules face stronger penalties, including longer suspensions, playoff bans, and recruiting restrictions.

The new rules come on the heels of a Condoleezza Rice-led commission aimed at cleaning up college basketball. The NCAA notes the changes are intended “to promote integrity in the game, strengthen accountability and prioritize the interests of student-athletes over every other factor.” The changes will have to be approved by the NBA Players Union and be drafted into the league’s collective bargaining agreement. Officials for the NCAA acknowledge that this week’s announcement is only the start.

 

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According to the United States Federal Reserve, outstanding student loan debt has reached an all-time high of $1.52 trillion—up in the last ten years from $619 billion—an increase of over 145%. The new number surpasses all auto and credit card debts held by Americans and sees no signs of slowing.

A few reasons for increased student debt rates:

• Slower repayment when compared to credit card and car loans
• Constant cycle of new borrowers
• Stagnant wages
• Federal and State funding decreases causing higher tuition rates/fees

Currently, over half of student loan borrowers leaving school owe at least $20,000. That’s double, up from 25 percent in the last decade. The Consumer Financial Protection Bureau released a study that analyzed borrowers who began repaying loans from 2002 to 2014 and looked at their repayment status through 2016. The data suggests that:

• At least 40 percent of borrowers owe over $30,000.
• Thirty percent of student loan borrowers are behind their loan balances after five years in repayment.
• 50 percent of student loan borrowers are over 34 when they start repaying their loans.
• 60 percent of those who cannot reduce their balances are delinquent.

The CFPB’s report also indicated growth in awareness among private companies who offer incentives to employees with student debt. Employers are increasingly helping their employees who borrowed by offering repayment assistance and other programs designed to help those in debt. Additionally, programs like the Public Service Loan Forgiveness plan allow borrowers employed in government and non-profit sectors to cancel debts after 10 years of non-delinquent payments. However, with student debts increasingly exceeding incomes, it’s a wonder if many repayments are even feasible.

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Last March we wrote on how a growing number of small liberal arts colleges were facing major financial challenges with the risk of shuttering operations. Since last spring, the number of small private school closures has grown to include: St. Gregory’s University, Grace University, Concordia College, Marygrove College, Atlantic Union College, and Moody Bible Institute.

These small schools share specific traits: high tuition, minimal endowments, religious affiliations and locations in rural or suburban areas.  Roughly one-third of the small private colleges rated by Moody’s Investors Service generated operating deficits in 2017, an increase from 20 percent in 2013.

Today’s students continue to shy away from expensive liberal arts schools that leave them in debt and are considering larger, public universities.  Moody’s recently released a report about college closures and said the amount of colleges closing in 2017-18 is expected to triple with small colleges the most at risk.

Increased tuition has forced many students to think more about value.  In recent years, larger schools have been able to offer better rates of financial aid and lower tuition.  With fewer students choosing smaller, more expensive universities, revenue from tuition has fallen.  Bigger schools have bigger endowments, allowing for flexibility.  Smaller, private schools don’t always have the assurance of large endowments to fall back on.  When budgets are stretched, the first thing to go are specialized programs and facilities.  Eventually smaller schools may be forced to lay off faculty and staff, thus decreasing overall value in the eyes of potential students.

Last year, due to ‘financial challenges’ St. Joseph’s College announced that it would cease operations at the end of its spring semester.  The school lost $4 to $5 million each year in revenue since 2012.  Board Chairman Benedict Sponseller said the school took out a large mortgage in hopes of increasing enrollment. When enrollment did not increase, St. Joseph’s began to spend its endowment, around $24 million in 2015, to stop the bleeding. It did not work.

St. Joseph’s is not alone as St. Gregory’s University hoped a $12.5 million loan from the Citizen Potawatomi Nation – through the US Department of Agriculture – would keep it from closing. Despite de-annexing from the city of Shawnee to qualify, the loan was denied. Board Chairman of St. Josephs, Rev. Don Wolf said, “”Without this component in the financial plan, the ability to sustain the university at this point is not possible.” The university suspended operations in the fall.

Dowling College, St. Catharine College, and Marian Court College are among others who have shut their doors in recent years.  David Warren, head of the National Association of Independent Colleges and Universities, says small schools must understand their own value and cut costs to survive.  With larger schools offering what today’s students want- generous financial aid, access to urban areas, and numerous school programs backed by large endowments – small liberal arts schools have a lot of value to make up.

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Education Secretary Betsy Devos has signed an official order retaining the status of the Accrediting Council for Independent Colleges and Schools (ACICS) as a federally recognized accrediting agency.  Citing a “flawed” decision-making process, Devos’ order comes on the heels of a federal district judge’s ruling that previous secretary, John King, failed to consider key evidence and used a flawed process before removing the recognition of ACICS in 2016.

ACICS, a historically for-profit accreditor, has fought for its accreditation reinstatement since the Obama administration eliminated its recognition in 2016.  King removed ACICS’s recognition after citing “pervasive compliance” problems with schools that had attained accreditation under the council. Shuttered schools such as ITT Tech, The Corinthian Colleges, and other for-profit institutions “routinely failed to adequately police schools under its oversight,” according the Education Department. However, in March a federal court found that ACICS’s 36,000 pages petitioning for recognition had not been entirely examined by Education Department officials in leu of revoking ACICS’s status.

While temporary, with restored recognition more than 100 colleges under ACICS will again be eligible to receive federal student aid. The department’s announcement does not entirely reverse the Obama era ban but allows ACICS continued recognition for an additional 12 months while the department “conducts a further review of ACICS’s 2016 petition for recognition.” Devos also said she would review the 2016 documents and allow ACICS to submit further information to prove its future compliance. According to the order, ACICS must file written submission and “provided additional evidence that is relevant to these issues” by May 30^th.  The Education Department will respond to said submission by July 30^th.

 

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Education Secretary Betsy DeVos is being sued by several civil rights organizations about how her agency is investigating sexual assaults on college campuses. This past fall, the Education Department dropped Obama-era policies and issued new rules on how colleges deal with sexual assault and harassment claims. The new instructions now require that universities use higher standards of evidence to proceed with campus judicial action in the case of an allegation.

Civil rights advocacy groups argue that previous Obama-era guidelines offered critical protections for survivors of sexual assault and that the new rules, under DeVos, create a system which discourages sexual violence and assault victims from using the campus process to come forward “leading to further reductions in reports of sexual violence and assault.” According to Stacy Malone, the executive director of the Victim Rights Law Center, “They (survivors) fear they are no longer able to get a fair shake.” The actual lawsuit alleges a “Myriad of statements and actions by the Department’s leadership reveal a discriminatory viewpoint. Thus, not only does the Department’s 2017 Title IX policy fail to meet the reasoned decision and other requirements of the Administrative Procedure Act, it also violates the Fifth Amendment’s equal protection guarantee. Plaintiffs therefore respectfully request that the 2017 Title IX policy be vacated.”

Secretary DeVos announced the changes to Title IX in September, saying the previous system “lacked basic elements of due process and failed to ensure fundamental fairness.” She continued with, “There’ve been too many students wronged in a well-intentioned attempt to ensure that this issue is not swept under the rug and not in back rooms of schools any longer.” The Department of Education said it plans to enact the new guidelines after a public comment period.

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On December 20, 2017, Congress passed a tax reform bill that revised the nation’s tax code and will ultimately result in significant changes to higher education. Most notably will be a new tax imposed on excess compensation and investment income of the highest endowed private institutions. The legislation also modifies certain rules in relation to charitable deductions while excluding many of the highly publicized proposed provisions, such as taxing graduate school waivers.

New tax on large university endowments

• A 1.4 percent excise tax will be added to private universities with endowments greater than $500,000 per student.
• Will affect around 35 higher education institutions.

Excise tax imposed on executive compensation

• Non-profits will be taxed 21% on compensations over $1 million paid to employees.
• According to The Chronicle of Higher Education, the tax would be imposed on 158 private, nonprofit college employees (based of tax filings from the 2015 calendar year).

Eliminates the exemption for “advance refunding bonds”

• Previously allowed non-profits to refinance old bonds earlier to take advantage of lower interest rates and postpone upcoming debt payments.

Doubles the standard deduction for tax filers

• Will likely cut the number of people who itemize charitable contributions to colleges and universities by providing less incentive to donate.

Eliminates the charitable deduction for college seating event rights

• Donations made to universities will no longer be deductible federally if the donations are made in exchange for an opportunity to buy tickets.
• Tickets prices are likely to increase at colleges and universities with larger, more competitive athletic programs.

Tuition waivers for Graduate students will remain tax-free

• The original House bill would have taxed graduate students’ tuition waivers as income.

Johnson Amendment will not be repealed

• The Johnson Amendment prohibits tax-exempt organizations—churches, nonprofits, charities, foundations—from endorsing candidates running for political office.