Catching Up with President Bair

By The Elm - Feb 24,2017@1:00 am

President Sheila Bair

President Sheila Bair

By Catalina Rigther and Molly Igoe
Editor-in-Chief and News Editor

Q: Recently, FixedFor4, a program that fixes tuition for a four year period, was announced. How long has FixedFor4 been in the works?

The concept of a fixed-rate tuition plan had been kicked around before I got here. Some schools have tried it with various levels of success; I didn’t like the model adopted by some large public universities because it applied a really big tuition jump for the first year, and I knew that wasn’t a direction we wanted to go. We started looking at smaller liberal arts colleges, and I thought Sewanee offered the best model. I got on the phone with their president, their finance people, and their communications people, and we talked about it. They’ve had tremendous success—increased applications, better retention, just about every metric showed improvement. Sewanee did not accompany its fix-rate plan with a tuition increase; they actually lowered tuition the year before.

Q: Did Washington College’s tuition freeze help?

It was helpful. That was the idea, to have a one-year freeze to reset, to rethink where we were going. Our numbers showed that WC had been more conservative than most in terms of implementing year-after-year tuition increases. It creates a lot of uncertainty if tuition goes up because financial aid remains static, so providing that certainty with tuition is important. [Fixed tuition] also a good incentive for students to graduate in four years because extending beyond that can grow student cost and debt. Sometimes you need to go longer, for health reasons or whatever, and we’ll make exceptions for those students.

Q:  By fixing tuition for the next four years, do you see any other potential increase in expenses — such as room and board, meal plans, or other similar costs? How do you plan to combat these increases?

Room and board is obviously much more price sensitive to the Consumer Price Index (CPI) through food and energy prices, so those are really hard to model and control. You’re going to have to pay housing and living expenses whether you’re in college or not, so that is not really imposing uncertainty on families. And as always, we will try to be very smart while maintaining the quality of our educational program and considering how we spend students’ money.

Q: How do you plan to get this information out to families who want to know more about it?

The annual tuition letter that has gone out to parents explains the program, we have information on our website, and our admissions staff is making sure prospective and incoming students understand the program. We think it will help us because if you look over the past three years, the average annual tuition increased at small colleges nationwide has been about 3.5 percent. When FixedFor4 starts, tuition will increase 2 percent, but that’s where it will stay for those four years. So over four years’ time, you can see that’s going to be a significant sum of money to save, and we want to make sure people understand that.

Q: Do you and other administrators see FixedFor4 having a positive impact on admissions? How about retention? What kind of student or family do you see this program really targeting?

Improved retention certainly was Sewanee’s experience, and we’re hoping to see similar results. We made a big improvement in freshman retention over the last year, and we’re focused on continuing that trend while getting the sophomore retention rate up. The first year is really the most critical; if you lose students then, that’s a big percentage drop. I do think that’s why the communications team is so important, because they help families understand that if students leave and go to another college, they’re going to be exposed to tuition increases. Helping families understand the importance of fixed tuition is a high communications priority for us.

Q: In your letter to President [Donald] Trump following the election, you addressed the student debt crisis, writing that “a growing body of research concluded that as young people struggle with high, monthly student debt payments, they forgo financial commitments in other areas, such as buying a car, purchasing a home, or starting their own small business.”  Ideally, what would you hope the response of President Trump and his administration to be? As someone with government experience, what kind of partnership would you hope for between higher education and the federal government in the next few years?

I have had a few conversations with people on his transition team, and I think there are mixed views in the administration on Income Share Agreements (ISA), but it appears that they are moving in that direction. He made a speech during the campaign where he suggested an ISA approach, but a lot will depend on getting the new administration’s appointees for the Department of Education in place. White House Education Advisor Robert Goad, who is close to Mitch Daniels [president of Purdue University], likes what Purdue has done, so I’m optimistic that they will shift away from this debt model that really has not worked very well to an investor relationship — not a creditor relationship — and I mean that in a positive way.
Students carrying student loan debt have always had protection against downside risk. If you lose a job, or get your hours reduced, your payment will automatically change. I think the government can do this more easily because there’s an adverse selection problem with individual schools. Potentially, though, what we’re looking at here would benefit all students, no matter what their income level is. But with a government program, because it would apply to everybody, you’re not going to have the adverse selection problem, just the volume, as you can really get that percentage payment down. So I’m hoping Trump does go ahead with it.
It’s good for macroeconomic reasons too, because you can get into a downward cycle, (the same thing we saw with the housing debt), where debt becomes very inflexible. So if you lose your job, you’re defaulting on your loan. And with student loans, you can’t declare bankruptcy. So it’s a huge drag, if you’re struggling to pay student loans, or mortgage payments, or whatever the debt may be, that contracts your disposable income, which in turn hurts the economy. So, in the case of ISAs, you’ll have a payment that automatically adjusts to economic cycles so there wouldn’t be another huge hit on discretionary spending.
In terms of families, American Enterprise Institute (AEI) just did a survey explaining ISAs versus debt, and it was clearly a very attractive option for the families surveyed. What we’re looking at here would obviously be optional. We want to be very transparent about the fact that  federally subsidized loans are still going to be the best bet in terms of payments. The federal government does have income-based repayment plans, but they’ve been kind of a disaster. Your loan balance can actually get bigger over time with these plans. Some borrowers qualify for debt relief which many view as unfair to borrowers who are repaying in full. Debt forgiveness is taxable so when relief is provided, borrowers get a big unexpected tax bill. The ISA concept is just a contract between the student and WC, or the government, to pay a certain percentage of their income, up to a certain cap, over a certain period of time, and they’re protected. I think that’s a really attractive option.

Q:  In addition to FixedFor4, the Dam the Debt initiative has returned to aid graduating seniors in Fall 2016. The award was distributed to eight eligible seniors at the end of last semester, and 119 seniors last May. Do you have goals for how many seniors you would like this program to aid in Spring 2017? Do you see potential for the program to expand? And if yes, how might that be accomplished?

Well, I hope so. That’s driven by philanthropy, so we certainly will maintain Dam the Debt aid at similar levels this spring, and we’ve prefunded it for a couple more years. It’s a priority for me, but it really will depend on funding. There were a lot of ways we could have prioritized who benefits. We decided to help pay down the federally subsidized debt, because a student who qualifies for a federally subsidized loan is a bit of a proxy for need. There were a good number of students who qualified for Dam the Debt, and I wish we could help more. If we raise more money, maybe we will.

Q: The Elm heard that you made some changes to senior staff and the advisory council. How is that strategic for you, and what is that called now?

Senior staff stays the same. But instead of holding senior staff meetings, we’re holding what we call cabinet meetings. Cabinet members are all of my direct reports plus one person of my direct report’s choosing. The reason I did this was because senior staff was starting to get big, and for good reason, because we needed input from people who weren’t always on senior staff. However, it was getting a bit unwieldy. This way we can rotate people in and out. I think this will give more staff members an opportunity to attend these higher-level meetings. The make-up of senior staff status has not changed — just the meetings.

Q: Pertaining to the email you sent out on Monday, what is going to happen to interational students as a result of the travel ban? Are any students going to be affected?

Well, the good news is we don’t think anybody on our campus is impacted, because we don’t have students, faculty, or staff from those seven countries on the list. But, obviously, it’s a broader concern. I support the president’s efforts to keep us safe, and I think there is bipartisan consensus that there’s more we can do to tighten scrutiny of those who truly pose a risk, but to say somebody who is not a risk, who has been legally approved by our government to be here on a student visa, to go to college, I mean, what’s that about? I just don’t believe it was thought out as well as it should have been, and I hope he’s getting a lot of feedback on a bipartisan basis. For the most part, there are people on both sides raising some legitimate issues, which I hope he considers. We all want to be safe, but we need a better calibration for those who are truly a risk. There are 17,000 students in the country from those seven countries, and they’re contributing, they’re enriching the campuses where they go to school. It’s not good for America to take them all in a broad swipe, so I just don’t agree with that. Fortunately, we are not directly impacted here.

The Elm

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