Thursday, August 1, 2013

President Obama Vows to Help the Middle Class: He Should Tackle the For-Profit Trade Schools

President Obama would like to help the middle class.
 
In a recent interview for the New York Times, President Obama promised to direct his energies to helping the middle class. "I will seize any opportunity I can find to work with Congress to strengthen the middle class, to improve their prospects, to improve their security," the President vowed.

That's great news.  And I have a suggestion for how President Obama and Congress can work together to clean up the federal student loan program by stopping unscrupulous for-profit trade schools from injuring middle-class and working-class Americans.

Emily Rueb recently wrote an article for the Times about some of the victims of New York City's for-profit beauty schools. Three of these schools were shut down in the 1990s "after accusations and indictments that they misused federal student loan money." These schools targeted lower-class women, including immigrants, promising them lucrative careers in the beauty and hair-care industry. Students recruited by the schools took out federal student loans to pay their tuition. The Times reported that at least  35,000 people borrowed money to attend these for-profit schools at just 10 locations.

Unfortunately, many of the women who attended these schools received little or no value for their tuition money. For example, Maria Machado, an immigrant from El Salvador, who spoke no English and had only a sixth-grade education, took out a federal student loan to attend a beauty-school program at Wilfred Academy, a for-profit trade school. According to Ms. Machado, the school did not prepare her to take New York City's licensing exam, which she needed to practice her new profession; and she never passed it.

Eventually, Ms. Machado abandoned her plans to pursue a career in the beauty business. She did not discover that she was several thousand dollars in debt on her student loans until she applied for citizenship and started having her federal income-tax refunds seized by the federal government.

According to the New York Times article, Wilfred Academy went out of business after it was found guilty of falsifying student-loan applications and misusing federal student loan money. But Wilfred Academy's closure had no impact on Ms. Machado's loan obligations.

Fortunately, Ms. Machado and several other victims of for-profit trade schools were able to get their student loans forgiven under the Department of Education's so-called "false-certification discharge" provision, which allows the government to forgive student loans taken out by people who attended a school that falsely certified that people who had not graduated from high school or obtained GED  certificates could benefit from the school's training program.

But get this. Ms. Machado remained liable on student loans taken out to attend a defunct trade school that provided her with little or no benefits for 23 years before she finally managed to get her loans forgiven. During that period, the government seized several of her federal income tax refund checks, and of course her credit was severely damaged.

Ms. Machado was fortunate to have gotten legal assistance from the New York Legal Assistance Group, a public-interest legal assistance organization. Otherwise, she would probably still be liable for her student loans

Obviously, Maria Machado had been treated unfairly by the Department of Education. DOE obviously knew that Wilfred Academy had been found guilty of misusing federal student loan money and falsifying student loan applications.  And DOE had the names of all the schools' students who had taken out federal student loans.

But DOE used the information it had on Wilfred Academy's former students to unleash debt collectors on these hapless  women and seize their income tax refunds rather than inform them they had a right to seek a discharge of their loans under the government' own "false-certification discharge" program. As Ms. Conner put it, "They [DOE] have this information, which they use for collection, but when it comes time to educate debtors, they don't."

This brings me to President Obama's recent promise to work with Congress to help the middle class. Helping people like Maria Machado is an obvious way to fulfill that promise. President Obama should actively work for passage of legislation that would kick the for-profit colleges and trade schools out of the federal student loan program.  Working class and middle class people should not even have the opportunity to go into debt to attend a for-profit post-secondary institution or trade school when there are so many public educational institutions and nonprofit colleges that are capable of meeting their educational needs at a lower cost.

Of course the for-profit institutions are politically powerful. They employ lobbyists and make strategic campaign contributions to powerful members of Congress.  President Obama and Congress may not have the political courage to shut down the for-profit education industry.

But President Obama and Congress should at least act to make sure that students who were victims of unscrupulous for-profit trade schools are relieved of their student-loan obligations just as soon as DOE knows that they have been victimized. Victims of worthless for-profit training programs should not be hounded by government-sponsored debt collectors for 20 years.

Surely, President Obama agrees with me about this, and surely he has the power to correct the injustices that were outlined in Ms. Rueb's recent New York Times article.

If President Obama doesn't agree or if he is powerless to help people like Maria Machado, then he should stop talking about helping the middle class.  Because if President Obama  can't fix this obvious problem with the federal student loan program, he can't fix anything.

 References

Jackie Calmes and Michael D. Shear. Obama Says Income Gap is Fraying U.S. Social Fabric. New York Times, July 27, 2013.

Emily S. Rueb. Promised Better Life By Beauty Schools, Graduates Have Little Training and Lasting Debt. New York Times, July 29, 2013, p. A12.


Wednesday, July 24, 2013

Memo to Senator Elizabeth Warrren: The Student Loan Program Doesn't Have the Sniffles; It Has Cancer

Don't get me wrong. Senator Elizabeth Warren has been a faithful and sincere advocate for indebted college students.  Likewise, the New York Time has repeatedly editorialized against abuses in the student loan program, and its reporters have done a great job documenting some of those abuses.

Just a little case of the sniffles?
photo credit: politico.com
But for Senator Warren and the New York Times to state that the federal government is making a profit on the federal student loan program shows how ignorant they are about the true state of that program.
Senator Warren, advocating for lower student-loan interest rates, stated emphatically that the government is making a profit on the new interest rate that went in effect on July 1. “Instead of helping our students, the government is making a profit on student loans,” Warren told a group of young people.  That is wrong, Warren declared. “That’s more than wrong. It’s obscene.”
And the New York Times is also under the mistaken impression that the government is turning a profit on student loans.  In an editorial entitled "The Student Loan Debacle," the Times cited a report from the Congressional Budget Office that concluded the government will make $184 billion on loans issued over the next ten years if it continues charging the current student-loan interest rate.
Of course, the CBO report is a complete fantasy. You can go on the web and read many excellent critiques of the CBO's accounting practices with regard to that report.  But you don't have to do that to know that all the talk about the government making a profit on student loans--obscene or otherwise--is pure baloney.
Let's look at some simple facts. Less than two weeks ago, the Ombudsman for the Consumer Financial Protection Bureau--a federal agency--said that total outstanding student-loan indebtedness had grown 20 percent in just 18 months!  The Ombudsman estimates the total student loan debt at 1.01 trillion.
We know that the amount of money students borrow from the federal student loan program has gone up every year for a long time now, and that the average amount students borrow has gone up as well.
Finally, and most importantly, we know the student-loan default rate is going up.  The government puts the default rate at 13 percent based on the number of borrowers who default during the first three years of the repayment period. But everyone knows the real default rate is much higher.  (I have written about this many times.)

Do you see any profit for the government in any of this? Of course not.If Senator Warren and the New York Times really believe the federal government is making a profit from the program, then they've failed to grasp the fact that the government is losing billions of dollars due to student-loan defaults.
The current Congressional debate about the proper interest rate for student loans is a side show. Obviously, it would be a good thing for students if interest rates are kept low. But keeping interest rates low for future students does nothing for the millions of people who have already defaulted on their student loans.
Frankly, it disturbs me to hear Senator Warren demonstrate such a shocking lack of understanding about the federal student loan crisis.  Or perhaps she understands the crisis but is afraid to speak out more forthrightly because a big part of her constituency base is in Boston, with its large number of colleges and universities. Many of those colleges could not survive without the federal student loan program.

But Senator Warren came to the U.S. Senate with a reputation for being a courageous and vigorous advocate for the poor and middle class families. If she wants to keep that reputation, she needs to push legislation far more radical than simply keeping interest rates low for student loans. 

What should she do?
  • Senator Warren should support passage of  a law that will allow insolvent student-loan debtors to discharge their student loans in bankruptcy.
  • She needs to push for repeal of the 2005 law that makes it almost impossible for people to discharge student loans from private lenders like Wells Fargo and Bank of America.
  • Senator Warren should propose legislation to protect elderly insolvent student-loan debtors from having their Social Security checks garnished.
  • Finally, she needs to introduce legislation that will give student-loan debtors the right to sue colleges that have engaged in misrepresentation and fraud regarding their student aid practices.
Advocating for lower student-loan interest rates is simply tinkering around the edge of the student loan crisis.  We must remember that the student loan program is not a healthy entity with a little case of the sniffles. It is a cancer that is destroying the lives of millions of Americans.
 
 References
Editorial. The Student Loan Debacle. New York Times, July 24, 2013, pa. A22.

Ruth Tam. Warren: Profits from student loans are 'obscene." Washington Post, July 17, 2013. Accessible at: http://www.washingtonpost.com/blogs/post-politics/wp/2013/07/17/warren-profits-from-student-loans-are-obscene/

Wayne Winegarden. Uncle Sam's Phantom Loan Revenues. Wall Street Journal, June 21, 2013. Accessible at: http://online.wsj.com/article/SB10001424127887323394504578608071549952576.html

Monday, July 22, 2013

This explains so much! Lots of Obama's People Graduated From Elite Colleges

This explains so much!
I recall seeing a cartoon awhile back showing the puppet Ernie from Sesame Street at the doctor's office. Ernie and his doctor were viewing Ernie's x-ray, which showed a giant hand in Ernie's torso. "This explains so much," Ernie exclaimed.

Yes, and the National Journal's recent report showing where Obama administration officials went to college also explains a lot.  Among 250 prominent officials in the Obama administration, more received a graduate degree from Oxford University (the one in England) than any American public university.

More Obama officials got  their undergraduate degrees from Harvard than any other university.  Forty percent of the 250 Obama administrators got undergraduate degrees from Ivy League schools.  And if you added the one ones who went to other elite schools--Georgetown, University of Chicago, Williams, etc--I am sure we would find that more than half of them went to exclusive private colleges.

In my opinion, this is a bad thing and goes a long way toward explaining why the country is going to hell in a hand basket.

There is a common myth that people who graduate from elite colleges received an exceptional education and acquired skills and values that will make them valuable citizens.  But I don't think that's true. In fact,many of them acquire traits and outlooks that contribute to the degradation  of American culture.

Postmodernism. Most of the people who are schooled at our elite institutions are thoroughly indoctrinated  into the culture of postmodernism.  And what are the characteristics of postmodernism? Secularism (atheism); individualism (selfishness);  and relativism, the cynical worldview that there are no ultimate truths.

Without a moral compass to guide their lives, our postmodern elitists gravitate toward an obsessive drive for recognition, power, and gratification, which is portrayed so powerfully in the recent movie, The Ides of March.  In the beginning of the movie, the main character, played by Ryan Gosling, is a political idealist, but by the end he is a cynical, power-driven schemer, just like all the other political figures in the movie.

Provincialism. I received a doctorate from Harvard Graduate School of Education, which admittedly is the least prestigious school at Harvard; and so I won't say my experience was typical. Nevertheless, I was astonished by the provincialism of the people I met while I was at HGSE.

Most of them had only a hazy idea about United States history or geography. I think I could have given them a child's puzzle map of the United States and most of them would not have been able to put the states in their proper places.

We see this elite regionalism displayed when we look at where Obama's top advisers grew up. According to the National Journal report, half of the top people on Obama's second-administration team grew up in the Northeast corridor (including Maryland and Virginia) or oversees. Only 12 percent of his top people are from the South.

Racism and Bigotry. I also encountered a lot of racism and bigotry during the years I was at Harvard. Not the hard kind of bigotry that is stereotypically displayed in movies about the South, but a soft kind. People in my classes would make offhand remarks about the insensitivity of white males--the same people who would be sure to use the term "mentally challenged" instead of "retarded" when talking about people of limited intelligence.

And the obsession with affirmative action that infests our elite colleges is often nothing more than a thinly disguised contempt for working class white people. It would be one thing if affirmative action benefited a poor white kid who grew up in the Delta country of Arkansas without regard to race , but so often the beneficiary of affirmative action is a minority person who attended an elite private high school.

And bigotry toward Catholicism at our elite colleges? Hey, let's not go there. I've talked about that already.

Not Problem Solvers

It would be OK if Obama's top advisers all came from Harvard or some other elite school if these people were smarter than the rest of us.  But they are not.

Indeed, if Obama's advisers are so smart, what are we doing in Afghanistan?

If Obama's people are such great problem solvers, why haven't we taken one sensible step to solve the student-loan crisis or at least reduce the suffering of people who are overburdened by their college loans?

No Sense of Social Justice

Many of the graduates of our elite institutions believe they have a keen sense of social justice and are particularly sensitive to human rights issues.  But I don't think that is true either.

If these people have such a good sense of social justice, why is our economic system rigged such that pensioners and people on fixed incomes are forced put their retirement funds in the  risky stock market to get a decent return because the Fed keeps interest rates artificially low to benefit the banks?

And if Obama's people have such a keen pining for human rights, why won't Obama and his people allow Italy to extradite Robert Lady, the CIA operative who was convicted of involvement in a kidnapping in Milan?  How can the Obama administration howl for the rule of law when it comes to Edward Snowden while helping Robert Lady avoid the justice that was meted out for him in Italy.

And what about Guantanamo?

What about those drones?

No this country would be better off if we declared a moratorium on Ivy League graduates serving in any public office at the national level--and that includes the Supreme Court, which is stuffed with nine old fogies who all graduated from either Harvard Law School or Yale Law School.

I am only kidding of course. We can't ban people from public office just because they went to Harvard. My point, however is this: Our elite colleges are not preparing people to be good public servants. We need to put people in positions of authority who are truly civic minded, and many of the leaders we need received their education at good public universities, including the universities of the Midwest, the Rocky Mountain West, and the South.

References

Brian Resnick & Brian McGill. More Top Obama Officials Have Graduate Degrees from Oxford Than Any Public University in the United States. National Journal, July 19, 2013. Accessible at:
http://www.nationaljournal.com/decision-makers/more-top-obama-officials-have-graduate-degrees-from-oxford-than-any-public-university-in-the-united-states-20130719





Sunday, July 21, 2013

American Universities Should Help the Christian Universities in Africa

Since 9/11, nothing has shocked me more than the recent news that militant Islamists attacked a boarding school in Nigeria, killing about 30 children. Most were burned alive when the attackers doused the children's residence hall with gasoline and set it afire. A few children were shot to death trying to escape--which was a mercy, I suppose.

And why were these children killed? Because they attended a Western school.

Let's Get Out of Afghanistan, Where Everybody Hates Us, and Help Christian Africa

When President Bush sent troops into Iraq, I remember thinking that he surely knew best. When President Obama doubled down in Afghanistan and sent 30,000 additional troops to the fight, I had my qualms; but again I figured his military people must know what they are doing.

And if President Obama--a Nobel Peace Prize winner, wanted to widen the war in Afghanistan, well then, that must be the right thing to do.
Aftermath of bombing at Catholic Church in Tanzania (AP photo)
But lately I've decided to do my own thinking, and I urge others to do the same. Surely even a child can see that a dozen years of warfare in Afghanistan--years during which we bribed the Pakistanis to allow us to pack supplies over the Khyber Pass and sent packets of cash to the Karzai regime--has accomplished nothing. The British and the Russians mucked around Afghanistan to their sorrow, and we too now know we made a mistake. We just don't have the courage to admit it.

Even a small-town college professor like me can see that the United States has sent men and women to die in the Middle East in support of various regimes that don't like us, don't respect us, and share none of our values. We've squandered our national wealth, our national power, and our role as a world leader by launching these disastrous military adventures in Iraq and Afghanistan.

Meanwhile Militant Islam is making great strides in Africa.

Last May, terrorists threw a bomb into a crowd of worshippers at St. Joseph Mfanyakazi Catholic Church in the Tanzanian town of Arusha, killing two people. Tanzania is about evenly split between Christians and Muslims, and the two groups have lived together peacefully for many years. This incident of sectarian violence is deeply worrying.

And let's take a look at Mali. Although Mali is about 90 percent Muslim and only about 10 percent Christian, the two religious communities have lived together in relative harmony.

But that was before militant Islamists showed up and established a rump state, which they called Asawad. They imposed a harsh regime over the areas of Mali they controlled, even executing people The French did the right thing when they drove Islamic adventurers out of northern Mali earlier this year.

American Universities Could Help Strengthen African Higher Education

I am not a military person. Frankly, I don't know any more than the New York Times does about military strategy. But I am an educator, and I've spent some time observing African higher education, which has a very weak infrastructure.

The United States has excessive resources in the higher education realm. We've got more colleges and universities than we know what to do with. We should put some of them to work in Africa.

For several years, our elite institutions have been establishing branches in the Middle East. New York University is in Abu Dhabi. Carnegie Mellon University, Virginia Commonwealth University, and Texas A & M are in Qatar. George Mason University was in Ras al Khaymah for a time.

Why are they there? To make money, of course. As Congressman Dana Rohrabacher observed, “A lot of these educators are trying to present themselves as benevolent and altruistic, when in reality, their programs are aimed at making money.”

I was briefly heartened by recent Reuters news story reporting that America's wealthiest universities have taken an interest in Africa. Before I read the article, I assumed that interest meant an educational interest. But no, university endowment funds want to invest in Africa because they think they can make money.

William McLean, who manages Northwestern University's huge endowment, put it this way in an interview with Reuters: "Our motivations are making some money."

But why don't American universities establish a philanthropic presence in the underdeveloped regions
Student Union Office
Uganda Martyrs University
of Africa by partnering with African universities to help them develop their infrastructures? After all, the African universities are struggling, and they could use some help from their American counterparts.

Which ones should we help? I can only comment on East Africa, but in the nations of Kenya, Tanzania and Kenya, the best and most respected universities are the ones begun by Christan denominations--particularly those founded by the Catholic Church. In general, the Christian universities in East Africa are more disciplined, more civic minded and less corrupt than the public institutions. Uganda Martyrs University, for example, is highly regarded as the most rigorous university in Uganda; and St. Augustine University in Mwanza, Tanzania is likewise well respected.

Strengthening Christian universities in Africa will strengthen African Christianity, which must be supported and maintained to preserve peace and stability in that part of the world A radical element is loose in Africa that is willing to burn children alive just for going to school. If American universities don't care about that, what do they care about?

References

Adamu Adamu, Michelle Faul. 29 boarding school students burned alive, shot dead by Islamists militants in Nigeria. NBCNews.com. July 6, 2013.

Jon Lee Anderson. Letter from Timbuktu: State of Terror. New Yorker, July 1, 2013, pp. 37-47.

Tamar Lewin. Universities Rush to Set Up Outposts Abroad, New York Times, February 10, 2008. Accessible at: http://www.nytimes.com/2008/02/10/education/10global.html?pagewanted=all&_r=0

Tosin Sulaiman. Insight--Africa makes the grade for richest U.S. university investors. Reuters, July 7, 2013. Accessible at: http://www.reuters.com/article/2013/07/08/africa-endowments-idUSL5N0FB2IZ20130708



Thursday, July 18, 2013

Like Rock and Roll, The Federal Student Loan Program Will Never Die. But's Let Try to Make It Smaller

Rock and Roll is here to stay.
It will never die.
It was meant to be that way.
Though I don't know why.
                                                                                 Danny & the Juniors
As Danny and the Juniors so eloquently reminded us, some American phenomena are perpetual and will never die. Rock and Roll falls in this category, and so does the Federal Student Loan Program.
 According to Rohit Chopra, the Student Loan Ombudsman for the Consumer Financial Protection Bureau, total student-loan indebtedness under the  Federal Student Loan Program grew by 20 percent in just 18 months!   Total indebtedness now tops out at $ 1.01 trillion.   In addition, total student-loan indebtedness to private lenders is $165 billion.  So--total student-loan debt now approaches $1.2 trillion. 
 
By the way, how would you like to have Rohit Chopra's job--Student Loan Ombudsman for the Consumer Financial Protection Bureau?  It must be something like a medic's position in a World War II concentration camp--handing out aspirins to inmates slated for oblivion.
Turn out the lights. The party's over.
I'm a realist. I know the federal student loan program cannot be dismantled.  The American higher education community absolutely depends on it, and most for-profit colleges could not exist without it.  The for-profit colleges have powerful lobbyists, and we will never get the for-profit colleges out of the feeding trough.
 
Nevertheless, let's at least try to impose some level of decency on this train wreck of public policy.
First of all, let's treat the wounded.   Let's stop garnishing the Social Security checks of elderly student-loan debtors who  defaulted on their loans.  Let's give student-loan debtors reasonable access to the bankruptcy courts.  Let's make all student loans subject to state consumer-protection laws so injured students can sue college and universities who entice people to take out student loans through fraud or misrepresentation.
 
Second, let's try to stop the growth rate in student-loan indebtedness by encouraging low-income students to attend community colleges that have low tuition rates instead of borrowing money to attend more prestigious institutions. Because you know what? If you are poor you shouldn't be borrowing money to attend Harvard; and besides you probably wouldn't like it anyway.
 
Third, let's crack down on colleges and universities that raise their tuition every year because they can't control their costs.  It is a scandal that university presidents like Ohio State University's Gordon Gee and New York University's John Sexton make more than $1 million dollars a year (far more actually) while college students across the country are borrowing more and more money every year to attend college.
 
American college students are tapped out.  According to Ombudsman Chopra's remarks, people with student-loan debt are now less likely than other people to have home mortgages or outstanding auto loans.  Why?  Because many people are now so burdened with college-loan debt that they can't participate in the consumer economy--they can't buy homes or purchase cars.
 
For years now, colleges and universities have been singing a variation of Rock and Roll is Here to Stay; they think the student loan program was meant to be this way and will never die. But if we don't reform this program soon, higher education will be singing a different tune, this one by Willie Nelson.
"Turn out the lights. The party's over."
 
 
References
Rohit Chopra. Student debt swells, federal loans now top a trillion. Excerpted remarks from speech given on July 17, 2013.  Accessible at: http://www.consumerfinance.gov/speeches/student-debt-swells-federal-loans-now-top-a-trillion/


Wednesday, July 17, 2013

Yuba Community College Drops Out of Federal Student Loan Program: What a Great Idea!

According to a recent article in the Sacramento Bee, Yuba Community College District  (YCCD) is dropping out of the federal student loan program due to its high student-loan default rate.

YCCD officials project the college will have a student loan default rate in the neighborhood of 31 percent.  Under new DOE guidelines, a college that posts a student loan default rate of 30 percent or Pell Grants. Thus, if YCCD stays in the federal student loan program, it risks losing access to all federal student aid programs.
Photo credit: Hechinger Report
more for three consecutive years loses access to all student aid programs, including

Since only 275 of the Yuba Community College District's 15,000 students took out student loans last year, dropping out of the federal student loan program  will effect very few of its students. And YCCD students can still receive Pell Grants and participate in the federally subsidized student work program even if the federal student loan program is suspended.

This is an important story because it shows that the vast majority of students who attend some community colleges don't take out student loans. In fact, Yuba Community College District will join 17 other California community colleges that don't participate in the federal student loan program, and apparently have no trouble attracting students.

Congress should encourage all community colleges to drop out of the federal student loan program.  Community colleges all over the United States should become "No Student Loans" zones where students can get college credit for a reasonable price without taking out student loans.

Here is a modest proposal that would go a long way toward reducing student-loan indebtedness and student-loan defaults: Congress should pass a law that contains these three elements:
  • Community colleges would get modest financial incentives for dropping out of the student-loan program altogether.  They would still be eligible to participate in the Pell Grant program and the federal student-work program.
  • In addition, in order to receive the federal financial incentive, community colleges would be required to bar students from taking out private loans to attend college.  
  • All four-year colleges that participate in the federal student-loan program would be required to have articulation agreements with community colleges that become "No Student Loan" zones. Under these articulation agreements, four-year colleges would agree to accept community-college course credits earned by their transfer students.
If such a law were passed, no one attending a community college in a "No Student Loan" zone would accumulate any student loan debt.

Apparently, a lot of community college students have already figured out that they can take classes at a community college and can get at least an associate's degree without borrowing money. That's the only explanation for the fact that only 275 out of YCCD's 15,000 students took out loans.

Yuba Community College District made a good decision when it dropped out of the federal student loan program.  If Congress would pass a simple law encouraging other community colleges to make the same decision, it would take a big step toward reducing student loan indebtedness and student-loan defaults.

References

Loretta Kalb. Yuba Community College District suspends federal student loan program. Sacramento Bee, July 15, 2013.


Monday, July 15, 2013

Feed Me, Seymour: New York University and Ohio State University Should Be Kicked Out of the Federal Student Loan Program

American colleges and universities love the Federal Student Loan Program.  Many of them wouldn't last a week if their students couldn't borrow money to pay their tuition bills.  And universities could



Feed me, Seymour!
not raise their tuition and fees every year were it not for the fact that student can absorb these increased costs simply by borrowing more money.

Does participation in the Federal Student Loan Program impose a moral obligation on universities to prudently manage their affairs? In particular, are they obligated to put some limits on their executive compensation packages and to disclose the terms of those packages to the public?
 
Apparently not.  Some universities--both public and private--pay their presidents and senior executives obscene salaries and lavish benefits like bonuses, travel and entertainment allowances, and luxury housing.  And they don't want the public to know about it.
 
Here are a couple of examples. Recently, the press reported that John Sexton, president of New York University, receives a salary of $1.5 million, and NYU gave him a loan on favorable terms to purchase a second home.  When he retires, Sexton's pension will be $800,000, and he will get a "length of service" bonus of $2.5 million if he stays on the job until 2015. 

And Jacob Lew, our new Secretary of the Treasury, received a $685,000 parting bonus when he stepped down as Executive Vice President of NYU to take the Treasury post.  That's right. In addition to a generous salary and other perks, NYU gave Lew two-thirds of a million dollars as a going away present.

Senator Charles Grassley decided to look into NYU's executive compensation practices to see if they were in keeping with the university's tax status as a non-profit organization.  Did NYU cooperate with Senator Grassley's investigation?
 
Not really. According to a New York Times story, Senator Grassley accused NYU of impeding his inquiry. For example, NYU representatives allowed Senator Grassley's staffers to view some

John Sexton
documents but would not allow them to be copied. On the date of the NY Times story, Senator Grassley still had not received all the information he asked for.

 
Would you like another example? In 2012, Gorden Gee was the highest paid president of a public university in the United States. In the fiscal year ending 2012, Gee made $1.9 million, including base salary, bonus, deferred compensation, and supplemental retirement contributions. In addition, he lived in a 9,6000 square foot mansion stocked with antiques, art work, and Persian rugs.  And according to Dayton Daily News, Gee spent an average of $23,000 a month on entertainment.
 
A guy pulling down that kind of money obviously has tax issues--big tax issues.  Not to worry. Under his university contract, OSU provides Gee with up to $20,000 a year in tax preparation and financial planning services!
 
Did OSU make the terms of  President Gee's entire compensation package available to the public? No, it did not.  The Dayton Daily News pried the information out of OSU through an open records request. And it took OSU eleven months to turn over all the documents the newspaper requested.
 
This, then, is the status of higher education in the current age. College costs go up every year and students have to borrow more and more money to pay for it. Many can't find decent jobs when they graduate and many default on their loans. How many? We don't know because the Department of Education won't tell us.  Meanwhile, our universities pay avaricious  oligarchs like OSU's Gorden Gee and NYU's John Sexton ridiculous amounts of money.

Does anyone believe our universities need to pay their leaders unseemly amounts of money and provide them with regal benefits in order to get good leaders? I certainly do not. 


Gordon Gee
In fact, the emergence of the imperial university president is a core reason our public universities are in the mess they are in. We've appointed people to run our colleges who want to become wealthy, and indeed some of them have become wealthy.

We should have university presidents who see themselves as first among equals in a community of scholars--people who will turn all their energies into making sure students get an education that will fit them for a 21st century economy and who will work night and day to keep tuition costs down.

We need federal legislation to regulate all the colleges and universities that receive federal loans.  First, all institutions that participate in the student loan program should be required to post their senior executives' compensation on their web sites--with a direct link from the university's home page.

And by compensation, I mean ALL executive compensation: salary, bonuses, enhanced retirement benefits, housing, travel and entertainment allowances, financial services, speaking fees, etc. And senior executives should be required to report compensation they get from any source, including nonprofit foundations.

And we also need federal legislation to require all universities that participate in the federal student loan program to cap salaries and compensation for their senior executives at some reasonable level--say $300,000.

If Ohio State University and New York University want to pay their presidents outrageous salaries, they are free to do so. But they should be kicked out of the federal student loan program until such time as they bring their executive compensation packages down to some level of decency. 

References

Laura Bischoff. OSU president expenses in the millions. Dayton Daily News, September 22, 2012. Accessible at: http://www.daytondailynews.com/news/news/state-regional-govt-politics/expenses-of-osu-president-run-into-millions-for-tr/nSGkK/

David Haglund. NYU Neatly Embodies Everything Wrong With Higher Education in America. Slate,, June 18, 2013. Accessible at: http://www.slate.com/blogs/browbeat/2013/06/18/nyu_loans_for_summer_homes_ny_times_story_about_university_pay_for_john.html

Ariel Kaminer.  N.Y.U. Impeding Compensation Inquiry, Senator Says. New York Times, July 10,2013.  Accessible at: http://www.nytimes.com/2013/07/11/nyregion/nyu-accused-of-impeding-compensation-inquiry.html?_r=0