Student Loans, Private Universities and NPR

The factoid, from the June Harper’s Index, sent my blood pressure north and my fingers to the keyboard:

Amount of federal money that went to National Public Radio in 2010: $2.7 million
To Jerry Falwell’s Liberty University: $446 million

WTH?

It did not take long to find the source of the Liberty University funds: in March, according to U.S. Department of Education data, Liberty received more federal student aid dollars than any other institution of higher education in the state of Virginia. You read that right: more than the University of Virginia. More than Virginia Tech. More than any other institution of higher education.

The private institution (what makes something a “university” instead of a “college”?) was founded in 1971 with the stated mission of training “young champions for Christ.” It has a resident campus of 12,200. The state’s two major public institutions dwarf Liberty on campus enrollment. UVA? 21,000.  VT? 29,000.

So what gives?

Liberty (Lynchburg, VA) sucks in federal dollars because it has set up an online university (think University of Phoenix et al) which it has used to claim 58,000 students. The online university provided a windfall:

In the span of a year, Liberty’s experienced about a 56 percent spike in federal student aid, from $284 million in 2008-2009 to $445 million in 2009-2010, according to Department of Education data compiled by The News & Advance.

Ironically, in 2007, Liberty was $20-$25 million in debt. The school used a $34 million insurance policy to pay off debt when Falwell, Sr. died.

The federal windfall, if it follows the law of averages, is coming at the expense of the American taxpayer. That’s because students at for-profit colleges/universities default at an astronomical rate relative to public colleges. Private school students account for about half of all federal student loan defaults yet these institutions account for about a quarter of federal financial aid while enrolling only about 10 percent of college students.

Officials at for-profit colleges say that their students default at higher rates because a majority of them are poorer to start with and face many more financial challenges. Critics of the colleges say their high default rates show that many of those institutions are loading up their students with unaffordable debt that the students cannot repay once they graduate or drop out. – Chronicle of Higher Education

Despite that poor performance, the rate at which private colleges and universities suck in federal dollars is accelerating and federal money underpins finances:

In 2008, about 2,000 for-profit colleges eligible for federal student aid enrolled nearly 1.8 million students — an increase of 225% in 10 years… Last year, federal student loans and grants made up an average 77% of revenue at the five largest for-profits.

Last year, student loans outpaced credit card debt for the first time. There are few speed bumps to slow the money-printing machine that is for-profit higher ed (watch Frontline – College, Inc. to read why Wall Street loves them and how the founders co-opt accredited institutions — because accreditation is the big deal). This begs the question: what is the role of publicly-financed higher education in the 21st century?

Arguably, post-WWII access to public education was a driving force in the nation’s economic growth in the middle 20th century. But today, state legislatures are shrugging off their commitment to public education. In the state of Washington, state money contributes less than half the cost of undergraduate tuition at the University of Washington. Can we truly call it a public university?

Clearly, we need a national conversation about the role of public education — K-12 and higher ed.

I think that loan reduction, forgiveness or deferrals should be offered to graduates who ignore the lure of Wall Street (and the Beltway) and embrace the needs of Main Street. Doctors, pharmacists, teachers, nurses, fire fighters even IT professionals and maybe even public defenders — entice them to serve our nation’s rural and less affluent communities (like those where much of my family lives in southwest Georgia, southeast Alabama and northwest Florida). This assumes, of course, that their education truly prepares them for a career in their chosen field. (Again, see Frontline – College, Inc. for how a California for-profit graduated nursing students without their ever setting foot in a hospital.)

This is not the only conversation about education that our nation needs to undertake. But it’s one that should be at the top of the national agenda.

:: First Appeared At WiredPen : Follow Me On Twitter!