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Business Intel

A roundup of short news articles and useful resources for business officers

RESEARCH
New Mandate for Reporting Loan Defaults

On September 28, the Department of Education released official loan default rates. The department is in the process of switching from a two-year cohort default rate (CDR) to the three-year measurement as required by the Higher Education Opportunity Act of 2008. Due to the greater number of borrowers who default in their third year out of school, Congress mandated the switch from the two-year to the three-year CDR to present a more accurate picture of student defaults. This was the first year that official three-year cohort default rates were released.

The new mandate is an effort to give a more accurate indication of the number of students who default at a particular institution. The more robust data point is intended to educate students on debt burdens, to help them manage their specific student loan debt levels.

Review of both the two-year (FY10) and three-year (FY09) CDR indicates continuing issues with mounting student debt. The national two-year CDR increased from 8.8 to 9.1 percent, with numbers rising in both the private nonprofit and the public sectors. While for-profit institutions—recently under fire for their high number of loan defaults—decreased 2 percentage points in their two-year CDR to 12.9 percent, this is still significantly higher than the respective 5.2 and 8.3 percent CDR of private nonprofit and public institutions. The national three-year default rate was 13.4 percent for the FY09 cohort. This figure varied widely among sectors: for-profit schools had a CDR of 22.7 percent; private nonprofits, 7.5 percent; and public institutions, 11 percent.

By the numbers

 

NACUBO Members' Default Profile

A separate analysis of only NACUBO members showed an average three-year default rate of 9.1 percent: however, 25 percent of members had a three-year CDR greater than the 13.4 percent national rate. Breaking out data by NACUBO constituent group reveals large differences among institution groups when comparing several aspects of the CDR:

  • Two-year default rates. Looking at all four groups—community colleges, comprehensive/doctoral colleges, research universities, and small colleges—the two-year CDR has slowly risen since FY08, as seen in Figure 1. As seen in three-year results, there is a large disparity between community colleges and the other groups in both absolute values and growth in the CDRs. From FY08 to FY10 community colleges experienced a 2.6-percentage-point growth, while the other constituent groups hovered close to a 1-percentage-point growth.
  • Three-year default rates. On average, for the three-year CDR, community colleges are at 20 percent higher than the national default rate at 16.1 percent, while research institutions have a rate much lower (4.3 percent) than the national default rate.
  • Two- and three-year CDR comparisons. For both the two-year and three-year CDRs, public institutions have reported nearly double the default rate as their private institution counterparts. Although the high CDRs of community colleges are driving the differing performance of the two sectors, public institutions in all four NACUBO constituent groups have higher default rates than private colleges and universities, and the gap has widened markedly since FY08.

When evaluated by geographic region, NACUBO members in the South have a higher rate than the rest of the country—as seen in Figure 2—with those in the Southwest topping the list of Bureau of Economic Analysis (BEA)-designated regions. A similar narrative is display-ed in the two-year CDRs, where Southwest schools have the highest FY10 CDR (10.5 percent) and have seen the greatest growth (3 percentage points) since FY08.

Continued research profiling individual debt burdens of students is needed to fully understand these striking differences between public and private schools.

Federal Sanctions

Sanctions on an institution's eligibility for federal aid are tied to default rates in an effort to encourage institutions to help students manage their debt, and increase the effectiveness of federal dollars.

While sanctions will not be tied to schools' three-year CDR until three years of data are available, those penalties will continue to be imposed if a school's two-year CDR is 25 percent or more for three years in a row. Although sanctions are not yet tied to three-year rates, schools with a three-year CDR higher than 30 percent are required to set up task forces to address the issue. Based on the FY09 data, 218 schools will need to submit a default management plan to the Department of Education.

RESOURCE LINK Department of Education report, "First Official Three-Year Student Loan Default Rates Published"

NACUBO CONTACT James Ward, research analyst   

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RESEARCH
WAHE Conference: Leadership Challenges

Overall, the college and university presidency remains a man's domain," said Rosemary E. Kilkenny, in her keynote address at the 2012 Annual Women Administrators in Higher Education (WAHE) conference in Washington, D.C., in late September. In her presentation, "Higher Education and the Gender Landscape in the American Society," Kilkenny, vice president for institutional diversity and equity, Georgetown University, Washington, D.C., noted the contrast between the increasing achievements of women in college and professional schools and the slow progress "in the quest for the corner office."

Read An Online Extra

To read about college leadership in college completion for lower-income students, see "Finishing What We Start" in Business Officer Plus at www.nacubo.org.

Kilkenny admitted that "as the only woman on the president's cabinet, it can be lonely. And you cannot always share freely." She finds her salvation in her network outside the university, but notes the importance of participating in events on campus—"so that people know you are a team player."

Kilkenny's talk mirrored the conference theme, "Redefining Leadership: Navigating the Politics of Higher Education." Other sessions included:

  • Weathering the Storm. Bronté Jones, treasurer, St. John's College, Annapolis, described the effects on the business office of market instability, skyrocketing tuition discount rates, reduced state funding, and increased compliance regulations. After surviving the recent financial volatility, Jones said her new motto is, "No more bad news."
  • Navigating With a New Compass. Sharon Markley, assistant vice president for public affairs and strategy, Stevenson University, Stevenson, Maryland, described the institution's latest efforts to support its "career architecture" concept by focusing attention and resources on career services and professional opportunities for students. Describing a program on innovative practices that an outside firm conducted at Stevenson, Markley said, "It's not only the creativity itself that's important. It's the rate of innovation that is going to make the difference in your institution."

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QUICK CLICKS 

Web Site Assists in Gainful Employment Calculus

http://collegemeasures.org/

A free Web tool makes it easier to review the U.S. Department of Education's "gainful employment" data to determine whether the cost of career training programs complies with federal standards. In June, the department released data on career-oriented programs at for-profit colleges, as well as certificate and vocational programs at nonprofit and public institutions. The new Web site is organized by state and allows users to view institutions by name to see if each of their programs complies with federal requirements.

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