California's higher education system could face decline

Sallie Mae and their Lobbying Showdown

This piece by Danielle Knight, "Lobbying Showdown Over the Future of Student Loans," deserves attention.

Knight provides some telling statistics on the amount of money that Sallie Mae shelled out to the biggest and brightest on K Street to beef up their lobbying efforts and defend the student lending industry (in the first half of this year, they've already spent $2 million). Sallie Mae is clearly nervous about the Obama administration's plans to restructure the student loan industry. There have already been several pieces in the last few months where Obama discusses the need to essentially cut out this "middle man" in the student lending process. Financial aid might be given back to the Department of Education entirely. It's presently run in part by privatized companies like Sallie Mae. As a result of sky-rocketing tuition costs, Sallie Mae enjoyed hefty profits in the 1990s, around the time it went private. Then the Great Recession hit them too.

Now Sallie Mae and other lenders (like Nelnet) are fighting two different battles: a political one and a financial one. It's no surprise that they're focused on the political fight. When companies feel threatened and smell change in the air that will affect their profits as a result of D.C. - those "meddling" lawmakers - they spend LOTS of money to campaign for their survival. That's the way business works. Plus, they have some amount of control when it comes to the political battles.

However, when it comes to the financial fight there are two problems out of their control:

1) Growing delinquencies in non-subsidized student loans (those are the ones that aren't backed by the U.S. government) are on the rise, and as a result, as Knight explains, "the company reported a loss of $122 million for the most recent quarter, compared with a profit of $265 million a year earlier."

2) There is a growing movement of students who understand that they are being charged unfairly and punished by companies like Sallie Mae - there is strong evidence that suggests that these companies are unwilling to work with lenders because they have profited from charging high interest rates and so forth. As a result of this growing frustration, in late January, an attorney, Robert Applebaum, started a Facebook Group called Forgive Student Loan Debt. The number of people who currently belong to this group is well over 200,000, and it continues to grow every day.

Sallie Mae might be able to cover the costs for lobbying, line the pockets of those on the Hill, and therefore win the political battle. But what are they going to do about the financial one?

News Alert about Student Loans

Obama just might be fired up to take on Sallie Mae. This story deserves attention . . .

Why Wall Street Greed is connected to education matters

Here's a concern for me: what's education worth? Why does it matter? Who cares about funding education and why? Education obviously has pragmatic purposes (learning the basics like spelling, arithmetic, etc.). That goes for earning a 4-year degree, too. Pragmatism isn't necessarily bad when it comes to education policy.

But Wall Street has cast a dark shadow over education in this country. In many ways, it seems that the aim of education has become tied up with only making money. The desire to make money isn't necessarily bad. But what happens to a culture when the financial industry rules above all else?

Before the financial crisis many students who started at the Ivies had one thing in mind - making it to Wall Street and making it big. Everyone wanted to be in finance. I have a hunch that that certainly wasn't out of a true passion to work 80 hours a week in stocks and bonds. Obviously that drive has changed - that's a good thing. Young adults are rethinking their options and looking into other industries. When it comes to the way education matters, it's painful to learn that Wall Street rewarded those who were not entrepreneurial and were not interested in growing companies for the right reasons (to create solid products, develop strong relationships). Instead, they were driven by greed. Some may accuse me of simplifying the aims. Granted, it's a complicated story, and even good writers like Michael Lewis have a hard time untangling the details . But from this angle, it seems clear as day. There is validity in those who can analyze from the outside - that's an example of why education matters and why the financial industry ought to be regulated to some degree.

There's another problematic piece to this whole story of greed and economics. Obama has a mission to improve things, especially education. As I already said, that's admirable. But take a look at those who are closest to him, Larry Summers. It seems Summers has a questionable history when it comes to finance - take Harvard as an example. The school last year had a $36.9 billion endowment (yes, that's correct. I didn't make an error in the numerical evidence). Keep in mind, in 1990 its endowment was at a healthy $4.8 billion. The financial crisis hit its guilded halls and in the first four months of the fiscal year of 2008, Harvard lost a staggering $8 billion. To those who are aware of the endowment numbers for other Ivies, that loss is mundane and shocking. For example Columbia's endowment is around $7 billion, and Brown - my alma mater as a Ph.D. student - in Ivy-circles is known for being the poorest Ivy of them all. Its coffers are at roughly $2 billion. (Brown struggles to keep their graduate programs afloat and sadly many people who have gone there have paid the price, and I don't mean in terms of dollars. That story is to come later).


On top of that, when Summers left the school , the man made millions speaking to companies that later collapsed or needed bailout money from the government. The name Harvard is so powerful in academic and financial circles that any other reputable school's value shrinks by comparison (I'm not suggesting that that is valid or necessarily true). But will Harvard's emblematic prowess disappear with the age of excessive deregulation that defined the post 9/11 world? There are murmurings in the lovely, ueber-intellectual streets of Cambridge, nervous chatter can be heard around Harvard Square and in popular watering holes like Grendel's Den, that Summers drove the university into the ground. He did so by making poor and risky investment decisions, or so many people suggest. One thing is certain, and as VF's article illustrates, Harvard is facing some hard times.

But the U.S. is facing even harder times, and perhaps this economic downturn will result in new analysis and positive change for educational institutions. This moment could also us enable us become better guardians and attend to our educational priorities. It just might allow us to get back to the basics, and that would mean re-emphasiing good, well-rounded education, over a putatively utiltarian approach that equals just getting some degree you can "use" in order to make, for example, oodles of money on Wall Street. All the while your personal life remains distant from your existenial experiences or even worse it is just a continual storm of chaos. After al, if those who earned practical degress (MBAs, business degrees, finance, etc) can't get jobs to pay of their student loans, maybe the sciences - soft and hard - as well as the liberal arts and humanities will benefit.

Crises don't have to lead to future crises. If we seize this moment, reasseess our values about money and finance and Wall Street, and have people educated in stronger, better ways, this society could very well flourish.

Quick fact about local education - Chancellor Michelle Rhee's approval rating

Fast News/Local Interest

Chancellor Michelle Rhee does not have the easiest role in this country. She took over one of the most broken school systems in this country. It's a position that she has assumed with vivacity, and I admire her for that. Moreover, her staff is committed to the mission of improving D.C.'s public schools.

In a recent survey, Rhee's approval rating is up. In fact, her approval rating is higher than Mayor Fenty's . (Perhaps to cynics that's not surprising). But there's an even more encouraging piece of evidence revealed: 74 percent of the D.C. locals who took the survey were in strong support of a federally-funding scholarship, called D.C. Opportunity Program.

Colliding Conversations

Because I think big, here's what I think about educational discourse in the U.S. (so we can get this large, complicated conversation going): there is, in my mind, a problematic division between conversations and policy concerns regarding k-12 education and higher education.

I applaud Obama's administration for its concern with k-12 reform. But what happens when those well-educated children reach college? There are so many enormous problems with higher education, it seems both systems should be addressed and conversations be connected.

Here's to our future in education.