TIME Innovation

Five Best Ideas of the Day: July 15

1. With the $3 billion annual cost of fighting piracy at sea, we could invest in economic and infrastructure development on the Somali coast to take down piracy’s root causes.

By Anja Shortland and Federico Varese in The Conversation

2. Simply by letting students understand their financial aid picture earlier, we can improve college access and post-secondary options for low-income students.

By Fawn Johnson in National Journal

3. The story of ISIS, which has seemed to be all about religion and military developments, is actually mostly about politics: access to government revenue and services, a say in decision-making, and a modicum of social justice.

By Jessica Tuchman Mathews in the New York Review of Books

4. Giving a supercomputer “life after retirement” means investing in the future of technology in Africa.

By Jorge Salazar at the Texas Advanced Computing Center, UT-Austin

5. Europe has a role – and a responsibility – to stay engaged as the U.S. ‘rebalances’ toward China.

By Joseph S. Nye in Project Syndicate

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

MONEY Student Loans

WATCH: Why Illinois is Suing Over Student Loans

Illinois is suing debt consolidation companies for allegedly fraudulent student loan practices.

MONEY College

The Worst Dropout Factories and Diploma Mills: Is Your School on the List?

Paul Quinn College, Texas.
Among students who matriculated as freshmen, Paul Quinn College in Texas had a 2012 graduation rate of 0.6%, according to the Education Trust report. Ashley Daly

A new report identifies underperforming institutions and suggests that the government withhold funding to those that chronically lag their peers.

Every year, the federal government spends more than $150 billion on federal financial aid in the form of student loans, grants and tax benefits—and according to a new report, $15 billion of that is funneled to underperforming schools.

The report, Tough Love: Bottom-Line Quality Standards for Colleges, was released today by the Education Trust, a nonprofit advocacy organization. The report highlights 300 underperforming colleges among for-profit, non-profit, public and private institutions. These underachieving schools include what Education Trust calls “college dropout factories” with six-year graduation rates below 15%, “diploma mills” where roughly three out of 10 student borrowers default on their loans, and “engines of inequality” that fail to enroll at least 17% of low-income students. Scroll down for a list of the 40 schools with the lowest grad rates; you can find the schools with the highest defaults and lowest low-income enrollment on pages 30 and 24 of the study, respectively.

In the report, Education Trust argues that too much taxpayer money is spent on underperforming institutions that fail to meet the most basic standards of graduating students and granting them meaningful degrees.

“Some institutions out there are not improving socioeconomic mobility as they should be,” says Michael Dannenberg, director of higher education and finance policy and a co-author of the report. “Instead of improving socioeconomic differences, they’re calcifying them.”

Of course, certain schools simply serve more students who arrive underprepared for college. Even so, among peer institutions with similar student demographics, some lag behind in graduation rates, the researchers found. Truett-McConnell College, a small private Southern Baptist college in Georgia, is an example. With 14% of students graduating within six years of enrollment, Truett-McConnell has one of the lowest rates in its peer group. But schools with similar student bodies, including Averett University in Virginia and Cazenovia College in New York graduate 41% and 50%, respectively.

“We think what colleges do matters,” says Dannenberg. “Demographics aren’t destiny when it comes to higher education.”

Currently, schools that enroll students on any form of federal financial aid must meet three criteria: they must be accredited by a Department of Education-approved agency, they must be licensed to operate in their state, and they must be judged eligible by the Department of Education. After these three hurdles, however, the government gives minimal consideration to an institution’s performance.

What Dannenberg and co-author Mary Nguyen Barry propose: stricter standards for schools, enforced by the federal government. Their report outlines a plan in which schools with graduation rates of less than 15% for those who matriculate as freshmen, student loan repayment rates ranking in the bottom 5%, or Pell Grant-eligible full-time freshman enrollment of less than 17% would face consequences if they did not improve within a set number of years. Institutional tax benefits would be cut, and in the cases of the so-called dropout factories and diploma mills, the authors suggest that the government should reduce or eliminate students’ eligibility for financial aid at those schools.

But some in the industry say that it would be difficult to effectively implement such a strategy. The six-year graduation rate metric, for instance, isn’t as tidy as it seems. The federal formula for calculating these does not include transfer students, even though more than one-third of college students transfer. And the six-year graduation rate figure also discounts students who take more than six years to earn their diplomas.

“Many students are non-traditional,” says Terry Hartle, senior vice president of the American Council on Education. “To actually have a good idea of what a graduation rate would be, you’d need a national database with individual identifiers for each student so you could track them across postsecondary institutions. But that has been a very controversial proposal for privacy reasons.”

Student default is another messy calculation. The federal government currently measures cohort default rates (CDRs) without accounting for the percentage of any given student body that took out loans. For instance, if two students out of a hundred defaulted on their loans, it may disproportionately skew the default rates. (A different student debt default measure, called the Student Default Risk Index, has been proposed to correct for the percentage of a student population that borrowed.)

Despite some of these data intricacies, Dannenberg says that ultimately it’s in the government’s best interest to identify the “worst of the worst” in higher education and hold institutions accountable for their results.

“At some point we have to ask ourselves, how low is too low to be entitled to government support?” he says.

Colleges Graduating the Lowest Percentages of Those Who Matriculated as Freshman (Based on 2012 Data)

Name State Sector Overall Grad Rate (2011) Overall Grad Rate (2012)
Paul Quinn College TX Non-Profit, HBCU 5% 1%
Oglala Lakota College SD Public, Tribal 5% 1%
University of Phoenix-Wichita KS For-Profit 12.8% 1.5%
ITT Technical Institute-Norfolk VA For-Profit 10% 2%
Yeshiva Toras Chaim NJ Non-Profit 2.9% 2.2%
Western International University AZ For-Profit 2.4% 2.6%
Rabbinical College of Long Island NY Non-Profit 3% 3%
Torah Temimah Talmudical Seminary NY Non-Profit 5% 3%
University of Phoenix-Cincinnati OH For-Profit 9% 3%
Talmudical Seminary Oholei Torah NY Non-Profit 2% 4%
University of Phoenix-Richmond VA For-Profit 3% 4%
University of Phoenix-Online AZ For-Profit 6.2% 4.3%
University of Maryland-University College MD Public 10.3% 4.3%
Chancellor University OH For-Profit 5% 5%
Arkansas Baptist College AR Non-Profit, HBCU 4.2% 4.8%
ITT Technical Institute-Greenfield WI For-Profit 14% 5%
Concordia College-Selma AL Non-Profit, HBCU 3.4% 5.5%
National University College-Bayamon PR For-Profit 9% 6%
Boston Architectural College MA Non-Profit 9.1% 6.8%
University of Phoenix-Milwaukee WI For-Profit 10% 7%
Le Moyne-Owen College TN Non-Profit, HBCU 15% 8%
Harris-Stowe State University MO Public, HBCU 8.5% 8.2%
East-West University IL Non-Profit 7.7% 8.7%
University of Phoenix-Idaho ID For-Profit 9.1% 8.8%
Hebrew Theological College IL Non-Profit 5.7% 8.8%
University of Phoenix-Philadelphia PA For-Profit 11% 9%
Truett-McConnell College GA Non-Profit 13.6% 9.4%
Colorado Technical University-Online CO For-Profit 9.4% 9.5%
Bacone College OK Non-Profit 4% 10%
ITT Technical Institute-Knoxville TN For-Profit 12% 10%
University of Phoenix-Nashville TN For-Profit 14% 10%
University of Phoenix-Springfield MO For-Profit 10.9% 9.7%
University of Phoenix-St Louis MO For-Profit 7.6% 10.2%
ITT Technical Institute-Indianapolis IN For-Profit 8.3% 10.5%
University of Phoenix-Metro Detroit MI For-Profit 11.4% 10.5%
Baker College of Owosso MI Non-Profit 13% 11.1%
ITT Technical Institute-Earth City MO For-Profit 10.7% 11.1%
Salem International University WV For-Profit 14% 11%
University of Phoenix-Oklahoma City OK For-Profit 14% 12%
University of Houston-Downtown TX Public, HSI 15% 12%
Texas Southern University TX Public, HBCU 12% 12%


Notes: HBCU stands for historically black colleges and universities; HSI is Hispanic-serving institutions

MONEY College

Scholarship Judges’ Secrets Revealed: Three Essay Topics Likely To Win Money

...And one topic that will definitely get your application forwarded to the circular file.

Every year, companies, non-profits, charities, churches and clubs award about $6 billion in private scholarships to undergraduates.

But many students fail to apply because they get stumped by the essay requirements, while those that do decide to submit often recycle a familiar theme—”here’s why I need the money.” But everybody who’s applying needs money.

The more likely path to reward, judges say, is to demonstrate why you’ll be a good investment of their scholarship dollars. Three topics that can give you that edge:

1. What you love and why. Do you love your dog? Your church? Basketball? Your shoes? Great! There’s your topic! But scholarship providers want to know why you love something, not just that you do. An ability to analyze the whys and wherefores of your own likes and dislikes is an indication that you’ll do well in life. There’s nothing too mundane, as long as you’re passionate about it. Says Amy Murphy, who oversees 35 different scholarship programs worth more than $1.3 million through the Greater St. Louis Community Foundation: “One of the best essays that crossed my desk was about a student’s shoes—where they had been, what messes they had gotten into and out of, how they supported the student as troubles were averted and successes achieved.”

2. How you recovered from a mistake, challenge or disappointment. “We’re looking for qualities like persistence, determination, optimism and a maturity of decision making,” explains Oscar Sweeten-Lopez who runs the Dell Scholars Program, which awards 300 scholarships of up to $20,000 each year. “Since college life brings new challenges and adversities, students need to demonstrate self-determination to succeed.” So tell them about a time when you faced a challenge and carried on. Did you make a mistake? Write about what you did, how you took responsibility for your actions, and what you learned. Did you fail at something? What happened, and how did you recover from that? Were problems at home hurting your ability to succeed in school? What were they, and how did you handle them?

3. Your family history. “Many students limit their scholarship essays to what they want to study, their income level or their ethnicity, completely missing out on other opportunities,” says Kim Stezala, a scholarship coach. Instead, she suggests students ask relatives about military service, clubs they belong to, or causes they have been active in. What you learn can serve as a winning essay topic. Students who can show that they can think broadly, and see themselves as a part of a bigger history, are demonstrating critical thinking skills needed to succeed.

Amy Weinstein is an expert on private scholarships and directs the National Scholarship Providers Association (NSPA).

MONEY

More Money Wednesday Roundup: Tax Credits & Hedge-Fund Flatulence

Personal finance from around the Web:

  • If you are sending a kid to college next year, this is the week financial aid offers should be arriving from colleges and universities. To help cushion the blow of what can sometimes seem a paltry sum, here’s advice on how to negotiate for more aid. [ABC News]
  • Rather than focus on the medical impact of not having health insurance, a new study looks at the financial impact. And guess what? It’s bad. If a member of an uninsured family is struck by illness, the household will lose 22% to 51% of assets within two years. [The Huffington Post]
  • There’s a financial-industry metaphor in here somewhere: A New York hedge fund manager has published a children’s book all about a Mrs. Buttkiss — a woman who has been holding in her, uh, flatulence, for a very, very long time. [City AM]

Follow MONEY on Twitter at http://twitter.com/money.

MONEY

More Money Friday Roundup: Government Jobs & Recess for Adults

Personal finance from around the Web:

  • Unemployed? Consider working for Uncle Sam. The federal government will add more than 190,000 jobs to its payroll over the next few years. [Wise Bread]
  • A trip to the slums of India taught a rich, privileged New York teen how to change her spoiled ways. Read her account of the trip as well as her mother’s version. [New York Post]
  • Adults need playtime, too. A nonprofit CEO claims that companies would be more productive if they provided a “recess” for employees. [The Huffington Post]

Follow MONEY on Twitter at http://twitter.com/money.

MONEY

Colleges Cut Back on Generous Financial Aid

The college admissions process is already a crapshoot without throwing in the financial aid game. Subsidized Stafford loans, unsubsidized Stafford loans, Pell Grants, DirectPLUS loans — it all adds up to a bewildering tangle for which families of prospective students are turning to financial aid consultants to sort out.

And now, making the task of financing a recession-era college education even more difficult, colleges are withdrawing generous no-loan policies they implemented as the stock market hit its giddy heights.

Dartmouth College and Williams College are the most recent casualties.

In the wake of a $500 million decline in its endowment, Williams announced last week that it would repeal its 2008 pledge to drop loans from the financial aid packages of students. Williams was among nearly 30 top institutions to make the move for loan-free aid within the past couple of years, following harsh criticism – especially from politicians – that students were buried in debt post-graduation. Dartmouth said Monday it was limiting its no-loan policy to cover only families with income below $75,000, as part of an effort to address a $100-million deficit.

Senator Chuck Grassley (R-Iowa) helped catalyze the no-loan movement in 2007 when he addressed the crisis of conscience posed by sky-high tuition at a time when colleges were enjoying healthy growth in their endowments.

But the timing could not have been worse for pumping money into financial aid. 2009 turned out to be the worst year for university and college endowments since the Great Depression, with an average decrease of 18.7%.

Still, not all colleges and universities are rolling back their no-loan policies, even in hard times. Top-tier institutions like Harvard University, despite an $11 billion drop in its endowment, have continued their commitment to no-loan education. To do that, the university had to cut costs elsewhere, such as by halting construction on a $1 billion science complex this fall, leaving only its foundation in place.

In President Obama’s 2011 budget request he apportioned an additional $3.5 billion in educational spending, including an expansion of the Pell Grants, the lifeblood of college financial assistance for lower-income families. If approved, the expanded grants would provide aid to one million more students.

The debate continues among college cost experts about whether federal aid like Pell Grants, which will undoubtedly become more necessary as schools roll back no-loan programs, are actually counterproductive. There’s a chicken/egg dilemma here: Does more federal aid mean higher college costs, or do higher college costs necessitate more aid? With its generosity to students, is the federal government effectively padding the coffers of educational institutions?

As it stands, the math is this: Two-fifths of schools with billion-dollar endowments have some sort of no-loan policy in place. (The top 16 universities in U.S. News & World Report’s 2010 ranking, with the exception of Johns Hopkins, fall into this category.) If the endowment amount per equivalent full-time enrolled student exceeds $500,000, a school should be able to afford eliminating loans from financial aid packages for low-income students.

For many schools no-loan policies began as a way to increase enrollment for low-income students — that is, those coming from households with less than around $50,000 in income. But in the case of a number of schools (large universities and smaller liberal arts colleges alike), the programs cover all undergraduates.

Until, that is, it turns out they don’t.

Post updated 2/13/2010.

Follow MONEY on Twitter at http://twitter.com/money.



MONEY

More Money Wednesday Roundup: “Cheap” Super Bowl Seats & Underwater Mortgages

Personal finance from around the Web:

  • Worth their weight? 4.5 million homeowners in the US are carrying houses worth less than three quarters of their mortgage balance. Some are throwing in the towel instead of waiting out the real estate market. [The New York Times]
  • “Cheap” seats for this Sunday’s Super Bowl are selling for $1,500. Definitely not a bargain, but compare it to the Lower End Zone sticker price of $3,425. [Smart Spending]
  • The FAFSA is free, but more parents are turning to financial aid consultants to maximize their child’s chances of receiving money for college tuition. Before hiring this kind of professional, ask some questions first. And check out this advice for financial advisers on how to approach college funding. [Managing Your Money | Investment Advisor]

Follow MONEY on Twitter at http://twitter.com/money.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser