Monday, April 30, 2007

What to do in College to Be Successful in Your Career

A classic post from Penelope Trunk, a career/life writer I've been appreciating more and more lately.

Free Tuition Demands

Today marks the April Mobilization for Higher Education by a group called the Democratizating Education Network. They demand full public funding for higher education; a rollback and eventual phaseout of tuition; the democratization of higher education in the USA.
They've supported the Tent State movement, which I've written about elsewhere and attended in Ann Arbor.
Here's their charter:


1) Full Public Funding for Public Higher Education
2) Free Access to Higher Education and Abolition of Tuition
3) Affirmative Action to End Institutionalized Racism and Sexism
4) Full Recognition of the Right of Students and Workers to Organize
5) Democratic Self-Government of Higher Education
6) Service to the Public Welfare, Not Corporate Profits
7) Free Speech and Academic Freedom
8) Debt Forgiveness of Student Loans
9) Civic Education for a Democratic Society
10) Education, not war; Schools, Not Jails

As recently as the 1970s it was normal for students to call for free education, and it didn't seem that strange when many public colleges charged only nominal tuition. Militancy provides -not a realistic policy option but a clear rallying message and a good starting point for debate.

Wednesday, April 25, 2007

Student Addresses the Gender Gap

I was really struck by this column in the Cornell Daily Sun, about the gender gap as it applies to paid vs. unpaid internships, particularly this argument:

"Thankfully, I stuck with my gut and took the courses that interested me; the difference wouldn’t have paid out, anyway. Even if I’d switched my major three years back and taken one of those paid internships, I’d probably be making less than the guys to my left and my right."

Ed Dept "Asleep at the Switch," Cuomo sez

NY Atty General Andrew Cuomo testified before the House Education and Labor Committee during an investigative hearing today, saying Secretary of Education Margaret Spellings "has defaulted on her obligation" to oversee the $85 billion student loan industry, and that his investigation should lead to criminal charges.

Spellings herself will testify before the committee May 10, says George Miller's office. It ain't Alberto Gonzalez, yet, but stay tuned.

Good Q&A on NPR, primer on the issue (transcript) with Kelly Field of the Chronicle of Higher Education.

Tuesday, April 24, 2007

"Idealism and Narcissism Can Coexist"

A thoughtful response to the "Generation Me" (c)rap, in the Boston Globe. The writer is in his early 20s.

In related news, a small group of students at Stanford ended a nine-day hunger strike , succeeding in raising the hourly wages for maintenance, groundskeeping, housing, and food-service workers, even contractors, to at least $11.15 with benefits.

Monday, April 23, 2007

"Lord's Lament"

Pretty awesome takedown of Al Lord in Sunday's Washington Post:

"What do you call someone who earned more than a quarter of a billion dollars over a decade by privatizing a government-chartered monopoly that made its money trafficking in government-guaranteed student loans -- and then turns around and complains how awful government is?

How about ingrate? Or hypocrite?

No doubt Al Lord thinks he deserves every penny that he's earned because of all the value he created for Sallie Mae shareholders since ousting the previous management and taking control of the company in 1997. He'd probably also have us believe that he wouldn't have done it if the prize were only $100 million -- or that there was nobody equally skilled who would have done it for $50 million. These are the standard rationalizations for excessive executive compensation."

Gen-Y Feels Gender Gap

I was surprised to read this. What is wrong with this picture?

"-College women on the brink of graduation this spring may be in for a rude awakening.
While they have enjoyed majority status on campus and graduate with higher grade point averages than their male classmates, young women still conspicuously lag in one crucial area: income earnings immediately after graduation.
The American Association of University Women, the Washington, D.C.-based advocacy group, released a report today that finds that [ONLY!!] one year after college graduation, women [ALREADY] make 80 percent of what their male counterparts earn. As women's age increases they fall further behind men. Ten years out of school, women earn 69 percent of what their male peers do.
"We controlled for everything that could have had an effect on earnings," Catherine Hill, director of research at the American Association of University Women, told Women's eNews. "And we still found a wage gap among a demographic that you'd expect there to be very little difference with, given, for the most part, that they don't have caregiving obligations. But surprisingly, and unfortunately, we find that women already earn less; even when they have the same major and occupation as their male counterparts."

By the same author, Hannah Seligson: Young Women Face Culture Shock in First Jobs

Thursday, April 19, 2007

Sallie Mae--Dept of Ed Revolving Door

Stephen Burd of the New America Foundation ; It's kind of like if the EPA was run by former GM and Exxon execs.

"According to a report last week in The Wall Street Journal, at least eight senior Education Department officials during the Bush Administration either came from the loan industry "or have taken lucrative jobs in that arena since leaving the agency."

What effect has this revolving door had on the integrity of the loan programs? The answer to that question can be found in a little-noticed 34-page audit report that the Department's Inspector General released in September. That report blasts the Financial Partners division of FSA for failing to "provide adequate oversight and consistently enforce FFEL program requirements."

"According to the report, the Financial Partners division of FSA:
Emphasized partnership over compliance in dealing with guarantee agencies, lenders, and servicers.
Significantly overstated the number of program reviews it performed on lenders and failed to assess liabilities for regulatory violations.
Lacked adequate policies for conducting program reviews.
Failed to follow the procedures it did have when performing reviews."

Wednesday, April 18, 2007

"Taxpayers Pay the Bill for the Sallie Mae Buyout"

Bethany McLean of Fortune gets unusually demonstrative over the Sallie Mae buyout:

"Sallie markets itself as friendly to students ("Helping millions of Americans achieve their dream of a higher education," reads its Web site), but critics have long charged that the opposite is true. Until recently, though, no one - save students and their advocates - seemed to care. When the Democrats took over Congress, they spotted an opportunity, and announced that they would chop the interest rates on student loans, and pay for it in part by reducing subsidies paid to lenders. Sallie, along with the rest of the industry, cried poor - and said that their real concern was not their own profit margins, but the well being of those they serve."

"The deal may also mean that despite Sallie's cries that Congress's cuts will send it and the nation's students to the poorhouse, there is still a ton of profit in its business - enough for it to absorb a significant cut in profits, add to its debt pile, and still make its executives and its new owners even richer. Reportedly the buyers believe that Sallie will benefit from any action Congress takes, because its market share will grow as weaker players fall by the wayside. That's great for all of those parties. Just keep in mind who is paying the bills: Taxpayers and students."

Monday, April 16, 2007

Sallie Mae up for Sale!

They don't want to be a public company no more.

"Sallie Mae agreed late last night to be sold to JP Morgan Chase, Bank of America and two private equity firms for $25 billion, said people involved in the negotiations.The deal would move the nation’s largest education lender, officially known as the SLM Corporation, into private control amid increasing turmoil for the company. The deal is expected to be announced today, these people said."

One of its private buyers is known for snapping up companies with serious problems.

Sunday, April 15, 2007

Weekend Student Loan Roundup

Whee! The news is coming fast and furious.

Education Finance Partners will pay $2.5 million into the same fund that Citibank and Sallie Mae are anteing up for. (New York Times)

"In a fierce contest
to control the student loan market, the nation’s banks and lenders have for years waged a successful campaign to limit a federal program that was intended to make borrowing less costly by having the government provide loans directly to students." (New York Times) (also see my piece from January 2006 on this topic.)

Lenders Misusing Student Database--Improper searches raise privacy fears
(Washington Post) Some lending companies with access to a national database that contains confidential information on tens of millions of student borrowers have repeatedly searched it in ways that violate federal rules, raising alarms about data mining and abuse of privacy, government and university officials said.

Overseeing this database was Matteo Fontana's job.

Friday, April 13, 2007

Village Voice Ed Supp on Student Loans

I have a couple of pieces back in the Village Voice, one a roundup of student loan reforms, one a quickie piece on the Columbia situation.

"'Wow—as if I'm not paying Columbia enough already, now there's a dude profiting off my financial misery.' According to an online poll last week by the university's student newspaper, The Spectator, that's the most common campus reaction to news that Columbia's financial aid director, David Charlow, held $72,000 in stock in Student Loan Xpress from 2002 to 2005, even as his office at Columbia was promoting the student loan company as its top "preferred lender.""

Revolving Door

Wall Street Journal today reports on the "revolving door" between the student loan industry and the department of Education. This is the article I've been waiting for.

Critics Blame Lax Oversight
Resulting From Close Ties
Of Industry, Government
April 13, 2007; Page B1

Four years ago, Sally Stroup, then an assistantsecretary at the U.S. Education Department, got a memo from theagency's inspector general urging her to curb any "illegal inducements"lenders might be using to win college loan business.

Ms. Stroup, who had previously worked for aPennsylvania loan company and a for-profit education concern dependenton student loans, didn't take the memo's advice.

At least eight top officials in the EducationDepartment during the Bush administration either came from student-loanor related organizations or have taken lucrative jobs in that arenasince leaving the agency. Former Education Department staffers say arevolving door between the department and industry has led to laxoversight of federal financial aid. Members of Congress -- includingthe Democrats who head committees overseeing education, Sen. EdwardKennedy of Massachusetts and Rep. George Miller of California -- saythey are concerned about the industry ties. Mr. Miller plans to hold ahearing on student loan abuses this month.
Later the story gets into the 9.5% loophole.

Also in 2003, Mr. Oberg wrote an internal, widely distributed memo warning that lenders were exploiting a legal provision that guaranteed lenders a minimum 9.5% rate of return no matter how low the prevailing rate might be. The 9.5% guarantee was supposed to apply only to loans funded by tax-exempt bonds. Congress eliminated the guarantee in 1993 but grandfathered in the existing arrangement, thinking the high-rate guarantees would disappear. Mr. Oberg warned that the proliferation of these loans could cost taxpayers billions of dollars in excess subsidies.

A later report by the inspector general confirmed Mr. Oberg's findings. It focused on student loan company Nelnet Inc., which figured out a complicated strategy to collect about $278 million in what the report said were excessive payments from the government from January 2003 through June 30, 2005. The report recommended that the department require Nelnet to "return the ... overpayments received and exclude ineligible loans from future billings." In securities filings addressing the issue, Nelnet said it had received verbal approval from the department to collect the higher rate.

Despite the inspector general's report, the Education Department announced this past January that it would let Nelnet keep the bonanza, though not future payments. In a statement, Nelnet spokesman Ben Kiser said the company's receipt of those payments conformed to department regulations.
The obvious point that the article doesn't point out: Nelnet wasn't the only lender exploiting the 9.5% loophole improperly. They were all doing it. What about overpayments to other companies?

Wednesday, April 11, 2007

UWM-Correction-Hojan-Clark not on leave

From the office of University Relations and Communications:

"UW-Milwaukee Financial Aid Director Jane Hojan-Clark has NOT been put on
leave. She does, in fact, enjoy the strong support of her division's
leader, Provost Rita Cheng.

One somewhat-related development. This morning, it was reported that she
resigned from the Student Loan Xpress advisory panel on which she was

How Corruption Works- A seat at the table

The Wall St Journal (paywall) ran a story today, sent to me by a smart reader, reporting that the National Association of Student Financial Aid Administrators
in 2003 considered and rejected a policy of a $50 cap on gifts from lenders to financial aid officers. This failure of self policing , they suggest, came because NASFAA has lots of lender-members and also enjoys the lavish sponsorship of lenders at its annual conference. NASFAA counters lamely on its website that "student loan lenders have been members of the National Association of Student Financial Aid Administrators (NASFAA) almost since its inception in 1966."

This gets you off the hook how?

A really thoughtful article on Inside Higher Ed last week talked to lots of financial aid administrators about how they deal with lender swag and other conflicts of interest. Craig Munier is a leader of the National Direct Student Loan Coalition , a coalition of public university financial aid administrators which promotes the cheaper of the two federal loan programs as a better option for students. Though for some reason the article doesn't mention this affiliation:

"Craig Munier, director of financial aid at the University of Nebraska at Lincoln, said that he has “deep reservations” about how closely intertwined the financial aid world has become with the lending industry. He has been urging the National Association of Student Financial Aid Administrators to stop letting lending officials join the group and to stop letting the companies sponsor its events. “We should have emancipated ourselves,” Munier said. “Even if those contributions and financial support didn’t sway our decisions, it gives the appearance that it may have.”

Munier is also the member of a small group of public university financial aid officers. That group meets annually — with no real budget and no outside support — and Munier said that the discussions focus on how to help students. Student loans may be part of the equation, but he said he has noticed that when aid officials aren’t worried about making association sponsors feel included, much more of the discussion is about aid programs.

“When I go to NASFAA, it will be nearly impossible for me to find a table at lunch where at least one or more people from the industry are not seated at the table, so the conversation invariably feels obligated to include that private sector, and I would love to discuss lots of things that aren’t about banks and lending,” he said."

Newshour--further thoughts

I appreciate the kind words, y'all.
Someone asked me why there wasn't some "conservative yahoo" up there debating me.
The interesting thing about this scandal as it continues to unfold is that neither the lenders' lobbyists (ie the Consumer Bankers Association) or the financial aid group (NASFAA) seem willing to defend the financial aid officers. They are twistin in the breeze even though the corruption demonstrated by the college-level officials seems petty compared to the corruption on the federal level. How about Spellings letting Nelnet keep $278 million in improper overpayments -- payments her own inspector general said were improper--and refusing to even look to see how much other student loan companies were also overpaid thanks to the 9.5% loophole?

The New York Times says Senate investigators are now calling the stock transfers to Fontana and the financial aid directors from Student Loan Xpress's president possible "securities fraud". Meaning a criminal investigation. Sounds like Al-Capone-for-tax-fraud to me.

Tuesday, April 10, 2007


I'll be on PBS's NewsHour tonight at 6:28 pm to discuss the student loan scandals.

Student Loan Xpress and the Senators

see my post at the Huffington Post.

Full Disclosure

I'm scheduled to speak about "Generation Debt" at the University of Wisconsin-Milwaukee tomorrow. UWM, it emerges, it emerges, is the single school that handled the largest volume of federal student loans from Student Loan Xpress, the company now under scrutiny by the Attorney General's office. $72.4 million, as their sole preferred lender for a few years. Their financial aid director, Jane Hojan-Clark, is one of several who have been placed on leave CORRECTION: SHE WAS NOT PLACED ON LEAVE AFTER ALL. She didn't get tens of thousands in stock options; she did sit on an advisory board and get free trips to Ohio and New York.

Here's the thing. Obviously, I get paid for these appearances at colleges. And part of the money that pays me comes from tuition. And part of that money comes from student loans. I even got paid last fall to appear at a conference sponsored by a nonprofit student loan servicer who, I think, is one of the good guys. But never has the irony been so obvious. Even as I do my best to remain independent in outlook and bring a message that will help students, I'm part of the system, too.

Monday, April 09, 2007

Job Market Better for Class of '07

Best fields are education, finance and health care, says the Post. And though they need Millennials, recruiters seem to not like them so much.
They are using text msg spam to reach Millennials. And cheesy customized web pages--red for chicks, navy for guys.

"With a personalized Web page, we're giving this generation a couple of things they've grown used to - quick access to information and the feeling that they're very important to us," says Consolidated Graphics' national recruiting manager, Rachel Seff Koenig, who recently gave a seminar to human-resource managers called "Capturing College Talent: Creative Strategies for a Competitive Market."
"You've got to remember," she says, "this generation is kind of pampered. They're a little bit wussy. These are the children of Soccer Mom Nation, and they're used to having every aspect of their life arranged for them."

Gee, that's real respectful. I'll go tell all my friends to work for Consolidated Graphics.

George Miller on Suspension of Lender Execs

Congressman Miller's statement today:

WASHINGTON, D.C. – U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, issued the following statement today on the CIT Group’s decision to suspend three top executives of its student loan division, Student Loan Express, after it was revealed that financial aid officers at three universities and an Education Department official involved with administering the federal student loan program once held stock in the company.

“Over the past several weeks, serious and alarming conflicts of interest within the college loan industry have been revealed – conflicts of interest that greatly jeopardize the credibility of our federal student aid system and the services that students and parents depend on to help afford today’s high college costs. The CIT Group’s decision is an important move in helping to uncover all relevant information relating to these practices. The Department of Education should immediately take similar measures to ensure that any individuals involved in this matter are held accountable for their actions.

“For far too long, questionable practices and relationships have been muddying the waters of our federal student loan programs. We have an obligation to ensure that the federal student loan programs are working as intended: to help students and parents pay for college. It is clear that many changes, including requiring full disclosure of the nature of relationships between school financial aid officers and student lenders, must be made within the college lending industry as we work towards this goal.”

Sunday, April 08, 2007

USC and Sallie Mae--Business Partners?

USC is one of the schools where a financial aid official, Catherine Thomas, has been put on leave after it came out that she owned lender stock. Student Loan Justice sent around this page from Sallie Mae's annual report, with a picture of the same Catherine Thomas.
She is quoted as saying,
"We depend on Sallie Mae as a business partner, not simply a lender/servicer."
Famous last words...

Net Widens in Student Loan Scandal

On Friday I posted on the Huffington Post that Matteo Fontana, accused of holding 10,000 shares of stock in a student loan company while overseeing student lenders for the federal government, used to work for Sallie Mae.

By the end of the day Friday, Andrew Cuomo's office had subpoenaed Sallie Mae
for "a list of all of its former employees who had worked for the Education Department in the last six years, and for e-mail messages and other communications between those former employees and the company." And Fontana had been placed on leave.

Friday, April 06, 2007

Education Dept. Official Held Lender Stock

check my post at the Huffington Post.

Bravo, New America Foundation.

Wednesday, April 04, 2007

Breaking News: Columbia Financial Aid Dean Invested in Loan Stock

From the New America Foundation's Higher Ed Watch blog, referred to me by an alert reader--

"...Several financial aid administrators who had significant personal investments in a publicly traded, for-profit student loan company. Following a request for university comment, an implicated Dean [at Columbia] was placed on leave by his parent institution.

According to a September 2003 SEC filing by Education Lending Group (see chart on page 18), the original owner of the lender Student Loan Xpress, financial aid directors at Columbia University, the University of Southern California, and the University of Texas at Austin, were preparing to sell 10,500 shares of stock in the company, which were worth more than $100,000 at the time.

The three college aid officials -- Lawrence Burt of University of Texas at Austin, David Charlow of Columbia University, and Catherine Thomas of University of Southern California -- sit on an advisory board that provides strategic advice for Student Loan Xpress. According to sources familiar with the company, the owners of Student Loan Xpress offered stock options as a way to compensate members of that board. Some aid administrators on the board reportedly turned down the offer, citing ethical concerns."

These 3, apparently, had no such concerns. Cuomo's on the case with fresh subpoenas.

Debt Myths

A sharp piece on Newsweek by James Scurlock, the Morgan Spurlock of the debt industry with his movie Maxed Out.

Two years ago, I set out to tackle one of the most perplexing riddles of our time: After two decades of unprecedented prosperity, why can’t America get out of debt?....
It may be hard to believe that banks make most of their profits on the least responsible customers, but it’s the two thirds of us who can’t pay off our credit-card balances who contribute all of the interest and most of the penalties—money that goes directly to the banks’ bottom lines.


Over at the Huffington Post they asked me to put something up about the student loan scandals.
There's an attack on MyRichUncle in the comments:

"I find it very interesting, and somewhat suspect, that all of these "investigations" have started happening only after one lender that was shut out by most schools started what amounts to a slander campaign. That lender's name is My Rich Uncle--the reason for the shut out was two-fold: 1st, their products just are not that good. 2nd, Who in their right mind would list a company with the name My Rich Uncle on their lender list--the very name screams entitlement and is a turn off to most people."

Actually, this is a good point. Except it wasn't a slander campaign--it was a truth campaign. MyRichUncle believes that it can offer cheaper loans by marketing directly to students ( a debatable longrun business proposition, but their loans right now are indeed cheaper), and so they refused to play the sleazy preferred-lender game, choosing instead to draw attention to it (with a full-page ad in the New York Times, among other publicity plays). It may very well have been that publicity that drew Andrew Cuomo to his current investigation, and MyRichUncle, silly name and all, deserves some credit.

Monday, April 02, 2007

More on the Cuomo Settlements

So as part of Cuomo's still-ongoing probe into lenders' relationships with financial aid offices, 6 schools have agreed to reimburse students $3.27 million, Citibank is donating $2 million to a financial-industry education fund, while 29 New York State schools have simply signed codes of conduct without admitting wrongdoing.
To address some of the questions raised in the comments, I do see the quick payoff as an admission. If not overtly confessing guilt (and I agree that most lenders probably didn't break the law, as now written), it's an acknowledgement that both schools and lenders would rather that students and taxpayers hear as little about lender practices as possible. The money, frankly, is peanuts. This is an $85 billion industry which once sued the Secretary of Education. If the lenders wanted to, they could easily create a legal fund to defend themselves and every single one of the 100 schools involved.
Taking as a given the power of market forces to deliver the best prices to consumers in most circumstances, I think the incentives in the current system are messed up. Currently your financial aid officer is like a financial adviser who works on commission. He's going to try to sell you the financial products that give him the best commission, as well as making you happy.
Or a real estate buyer's broker. She's never going to get you the absolute best price, says economist Steven Levitt, because lowering your price lowers her commission too.

National Association of Financial Aid Administrators Speaks

Official statement on Andrew Cuomo's investigation:

New York Attorney General Andrew Cuomo claims that he is “beginning the process of restoring trust between universities and students.” But he needlessly tore the fabric of trust between schools and students in the first place with his inflammatory press statements and media comments. Financial aid administrators have built trust with students and parents for generations by offering well-informed, accurate, and unbiased information
NASFAA agrees that any preferred lender list abuses and genuine conflicts of interest should end, however such abuses are rare. NASFAA is confident that when the New York Attorney General’s office completes its investigation it will find only a very few problems; nearly every aid administrator and school is extremely ethical. Undoubtedly, some areas need improvement because we can always do better. It would serve the public interest to have greater transparency in how and why a school uses a lender list. Student aid administrators only want to serve their students’ best interests.

"nearly every aid administrator and school is extremely ethical." Quite an endorsement! But I agree that personal ethics are no substitute for transparency & accountability.