The ChroniCle
of Higher Education
chronicle.com
College Giving
Has Yet
to Recover
From Recession
February 11, 2011 • $3.75
Volume LVII, Number 23
®
HUNTSVILLE: One Year Later
Wealthy donors pledge
lowest total in a decade
By Kathryn Masterson
A
lthough the recession officially ended more than
a year ago, private giving
to colleges and other charities remained depressed in 2010, two surveys have found.
after a steep drop-off in 2009,
donations to higher education during the 2010
fiscal year rose
Top Money
Raisers,
just 0.5 percent,
2009-10
the annual voluntary support
of education
Stanford U.
survey found.
$598,890,327
The report was
released last
week by the
Harvard U.
Council
for
$596,963,000
aid to education. adjusted
The Johns
for inflation,
Hopkins U.
total giving ac$427,593,283
Source: Council for
tually declined
Aid to Education
slightly, a clear
signal that the
economic recovery that colleges
have been hoping for has not yet
arrived.
one reason might be that wealthy
donors pulled back their charitable
giving. The 54 most generous donors gave a total of $3.3-billion to
all nonprofit organizations last year,
the lowest total in a decade, according to a survey released this week
by The Chronicle of Philanthropy.
one bright spot for colleges: nearly
half of the 65 gifts of $5-million or
more from that group went to higher education.
over all, american colleges
and universities raised $28-billion in 2010, the same amount they
brought in during 2006, the vse report said. While that finding is most
likely a sobering one for institutions
whose expenses and ambitions have
grown since then, college leaders
may take solace in the fact that fund
raising did not decline further. last
year’s flat results followed a year
that showed an 11.9-percent drop,
the sharpest in the survey’s 50-year
history.
The survey, which counts cash
gifts and includes about 1,000 colleges, found that the percentage of
alumni who gave continued to decline, dropping to a record low of
9.8 percent. The average alumni gift
was also down.
Continued on Page A17
1
2
3
ChrisTine priChard For The ChroniCle
Joseph Leahy of the U. of Alabama at Huntsville is struggling to recover his teaching and research skills, with the help of his wife, Virginia.
A Professor’s Long Road Back
Shot in the head at a department meeting, Joseph Leahy is relearning his job
By Robin Wilson
E
ach time he goes to
the biological-sciences
department at the University of alabama at huntsville,
Joseph g. leahy walks by the
conference room where one of
his colleagues tried to kill him.
but the proximity holds no
horrors for Mr. leahy, an asso-
ciate professor of microbiology.
“it’s funny because it’s just a dark
room,” he says of the place where
amy bishop, then an assistant
professor, is accused of opening
fire during a faculty meeting last
February—killing three of Mr.
leahy’s colleagues, shooting him
in the head, and wounding two
others. “it’s kind of a big nothing
to me since right now, i don’t re-
member the events at all.”
More difficult for Mr. leahy
has been resuming his career.
The bullet severed the optic
nerve in his right eye before shattering his jaw and then lodging
in his neck near his jugular vein.
he credits his colleagues with
helping to save his life by stanching the blood from his head with
Continued on Page A10
O
Rebuilding the faculty:
A message on campus
captures the shattered
biology department’s
comeback: Page A7
Fast-Growing U. of Phoenix Calculates a More Careful Course
By Goldie Blumenstyk
Phoenix
n the fall of 2009, after closing the
books on yet another banner year of enrollment growth, and with its parent company’s stock climbing toward a five-year high
of $90 per share, the University of phoenix began to question fundamental pieces of the very
formula that had fueled its years of success.
even as its executives celebrated, recalls
one, they were uneasy. a feeling was building
“in the pit of everyone’s stomach: That felt too
good.”
From that “moment of truth,” as that executive, robert W. Wrubel now describes it, phoenix quietly began what it calls a major change
of direction.
out of the public eye, north america’s
I
This week’s news briefing: Page A3
l
largest private university not only put in motion an overhaul of what had come to be seen
as its grow-at-any-cost admissions practices.
it also ended a compensation schedule tied
New Student Enrollment Drops
Total new students over the past eight quarters
120,000
80,000
56,500
90,000
60,000
30,000
0
Feb. May Aug. Nov. Feb. May Aug. Nov.
2009 2010
Source: Apollo Group Inc.
to enrollment, began a required orientation
program for inexperienced students, and instituted a host of other reforms in marketing and nearly every other important facet
The Chronicle Review: Section B
l
of this 438,000-student institution.
The moves, orchestrated from its headquarters here, and from corporate outposts like san
Francisco, where the university has assembled
a team of silicon valley veterans and computer scientists to create a cutting-edge electronic
course platform, are part of a top-down campaign led by a team of a half-dozen executives,
all of whom have joined its $5-billion parent
company within the past four years.
“We are investing in academics like no other
higher-education company can do,” says Joseph
l. d’amico, who as president of apollo group
inc. oversees the campaign it calls “reinventing education, again.” The goal, he says, “is to
take our business to a new level.”
last month apollo provided The Chronicle a
behind-the-scenes (but by no means unfettered)
Continued on Page A13
294 job opportunities: Page A38
T h e Ch ron icle of H igher Educat ion
•
Februa ry 11, 2011 A13
money & management
Fast-Growing U. of Phoenix Calculates a More Careful Course
Continued From Page A1
look at some of the new recruiting techniques,
educational moves, and marketing tactics being used to reshape the University of Phoenix.
The timing of the changes, and no doubt
the company’s willingness to share the details, is hardly coincidental. This most significant re-engineering of Phoenix in its
35-year-history comes as it and the sprawling $20-billion for-profit higher-education
industry it helped to create face the greatest
political, financial, and public-relations pressures of their existence. New laws that make
the colleges more accountable for some students’ inability to repay their federal loans,
intensifying scrutiny from news media and
government on aggressive recruiting, growing legal activism on the part of dissatisfied
former students, and collapsing stock prices
are prompting the companies to shift gears
on the problem-laden growth strategies that
have fueled the industry for half a decade.
At Phoenix the biggest problem-laden strategy goes by the name of Axia College. This
entry-level division, created in 2004, failed
to graduate many of the thousands of underprepared students it had relentlessly enrolled
in mostly online programs, leaving them with
student-loan debts they couldn’t pay.
“That grew very large very fast,” says
Gregory W. Cappelli, formerly a stock analyst at the Credit Suisse investment bank, who
joined Apollo in 2008 and became co-CEO
in 2009. “I think we lost our way a bit.”
While Phoenix had long made its name
using its innovative scheduling and online
technology to serve working adults, Axia
catered to younger, less academically prepared students. The company set tuition for
the two-year-degree program low enough
that students could use federal loans—and
if they were financially needy enough, Pell
Grants—to cover most of their costs. Phoenix now gets nearly 90 percent of its revenue
from those federal sources, the maximum allowed by law. That includes more than $1-billion in Pell Grants last year, the most of any
university. Its rate of student-loan defaults
has also risen markedly, largely among Axia
The moves are taking a toll. In January,
Apollo announced that the number of new
students enrolling in the previous quarter had
dropped by 42 percent from a year earlier. It
predicted that the slowdown would very likely continue for at least a year. The news sent
its already depressed stock price to $36, one
of its lowest levels in five years. It remains to
be seen whether investors stick with the company, and whether the “new” University of
Phoenix, even with all of its marketing muscle, can hold its own against the many non-
The university has put in place a new compensation system
for its counselors. Instead of filling enrollment and retention
goals, they now value “emotional intelligence.”
students, which under the tougher laws enacted in 2008, put it closer to the point where it
could lose access to federal student aid.
Apollo’s new three-week orientation program, along with efforts to better connect
students with the university’s 600,000 alumni
and a push to revive its corporate-education
business (a move that could help it reduce its
dependence on federal student-aid money),
are all part of the change in course. The new
direction, which it is pursuing even as it continues to furiously lobby and make campaign
donations to lawmakers to beat back tougher
federal rules, is designed to attract a different
kind of student. “We don’t want to take their
money if they’re not going to succeed,” says
Mr. Cappelli.
profit and for-profit colleges now competing
for similar kinds of students.
Phoenix’s strategy is a risk, says Kevin
Kinser, an associate professor of education at
the State University of New York at Albany,
who closely follows the sector. “What makes
you profitable is getting new students in.”
The Sell
Step onto one of the football-field-size
floors of the University of Phoenix call center
here—an airy room buzzing with a cacophony of conversations—and there’s no doubt
that the university continues to put a lot of
energy into selling its programs.
Enrollment and retention still involve a
vast, competitive, technologically sophisti-
cated, 24-hour-a-day operation. Phoenix still
relies on a force of more than 8,700 enrollment, finance, and academic counselors—
about two-thirds of them in admissions—to
attract and keep students and advise them on
financial aid. (Although one-sixth Phoenix’s
size, the for-profit American Public University says it has just 30 enrollment counselors.)
What’s changed is how Phoenix is selling.
In September the university put in place a
new compensation system for its enrollment
and financial-aid counselors, eliminating any
use of enrollment and retention goals in determining salaries. Requirements that enrollment advisers make 65 to 85 calls a day and
put in four hours of “talk time” per shift have
been replaced with customer-service training
based on “emotional intelligence.” Apollo executives decline to share full details on the
new techniques but say the change is meant
to encourage behaviors that will allow the
advisers to make personal connections with
prospects, relying on techniques like asking
open-ended questions and maintaining a dialogue.
Or, as Brett Mitnick recited when two of
his managers quizzed him during a training
session, “Let the students relate their needs to
you. Let them tell you how they’re going to
use the degree.” An enrollment adviser here
since September 2009, Mr. Mitnick and the
two supervisors allowed a reporter to sit in on
a critique as they played back a recording of
a phone conversation with a woman who was
considering returning to college as an online
student at Phoenix to complete a degree.
The call was one of 46,000 that come in
Continued on Following Page
LAURA SEGALL fOR ThE ChRONICLE
Pay raises for enrollment advisers like
Brett Mitnick are now based on their
mastery of behaviors like showing
compassion and getting prospective
students excited about an education.
The re-engineering of the U. of Phoenix
comes as it and the $20-billion for-profit
higher-education industry it helped
to create face substantial political,
financial, and public-relations pressures.
LAURA SEGALL fOR ThE ChRONICLE
T h e Ch ron icle of H igher Educat ion
NEWS
|
|
M a rch 11, 2011
A13
publishing
As Borders Goes Bankrupt, Academic Presses Worry About Ways to Reach Readers
T
he debt-ridden Borders
bookstore chain filed for
bankruptcy last month, saying it would close 30 percent of its
retail stores and reinvent itself as
a purveyor of e-book and nonbook
options.
Even
though
JeNNifer
Borders isn’t a big
Howard
source of sales for
Hot Type
most
university
presses—and, like
most publishers, they saw the bankruptcy coming—the news has unsettled them. It’s a reminder of just how
much the book-distribution chain
has changed, putting more pressure
on presses to find new ways to get
their books to readers.
University presses don’t stand to
lose anything like the $41.1-million
the chain reportedly owes Penguin
Group USA. But the failure of a
large brick-and-mortar outlet does
affect university presses with regional lists or books with crossover
appeal—the kinds of books a chain
is likely to stock. Those titles help
support the more academic portions
of the publishers’ lists.
The news also gives Amazon.com
more power to call the shots at a time
when the online retailer has already
established itself as a major conduit for
university-press books. And Barnes
& Noble announced in January that it
would cut back on a sales force that
bought many academic-press titles.
“We’re going through the same
transition the music industry went
through 10 years ago,” John P. Hussey,
director of sales and marketing at the
University Press of Kentucky, told
me. “We used to be this ivory tower
that never interacted with anybody, in
some ways, and now we’re becoming
much more grass-roots.”
Mr. Hussey said Borders had provided a modest part of the press’s
sales. But Kentucky publishes a lot
of books on the state’s history and
culture, and the chain had been a
strong supporter of that part of the
list. Its support helped maintain
Kentucky’s scholarly publishing program of books that a general-interest
bookseller tends not to carry.
“We are concerned that if some of
NEWS
|
these regional lists go away, that is
going to affect our academic books,”
Mr. Hussey told me. “That’s what
scares us the most.”
When the big Borders store in
downtown Louisville, Ky., shuts its
doors, he wondered, how will the
press put its Kentuckiana books in
front of the tourists and other browsers who shopped there? University
presses have to step up and do a lot of
direct marketing to consumers, an effort that they used to count on booksellers to make, Mr. Hussey said.
The decision by Barnes & Noble to
cut many of its buyers with strong
regional publishing connections has
added to the sense of urgency.
For the Kentucky press, that means
finding sales partners in unlikely
places. “Our bread and butter has
been things like state parks and gift
shops,” Mr. Hussey said, because they
attract visitors interested in the state.
But he’s been cultivating relationships
with less obvious sales outlets, including clothing stores and distilleries.
The press has a number of titles
devoted to the state’s famous liquor,
including The Social History of
Bourbon and The Kentucky Bourbon
Cookbook. “There’s more money in
bourbon than there is in books right
now,” he said. “I sold our Kentucky
Bourbon cookbook to a grill store in
North Carolina.”
The press has also become a regular
at the state-sponsored Kentucky Crafted show, which features the state’s
arts and crafts and has turned out to
be a lucrative source of new accounts.
“You can’t find that stuff on Twitter,”
Mr. Hussey said. “You need to be in
a location where they find you.” That
used to be a bookstore. Now it can be
almost anywhere.
What Choice?
Other publishers I talked with reinforced Mr. Hussey’s points about
how different the supply-and-demand
landscape is looking these days. Alison Mudditt, who took over late last
year as director of the University of
California Press, pointed out that the
supply chain “is undergoing as much
transition as we are as publishers.”
Borders hasn’t been nearly as im-
GARY FABIANO, SIPA PRESS, NEWSCOM
Borders isn’t a big source of sales for most university presses, but its bankruptcy puts more pressure
on them to find new ways to get their books into readers’ hands.
portant a supply channel as Amazon
.com, which she described as “a
very efficient partner” and an increasingly important source of sales
for the press as some traditional outlets fade away. The Amazon boost
comes at a price: The online retailer
has more power to ask publishers to
do business its way when it comes to
negotiating contracts and prices and
how orders are fulfilled.
But what choice do publishers
have? They need to do business with
e-tailers just to keep up the sales numbers that used to come from other
stores. “We’ve all seen tremendous
sales growth through Amazon, but it’s
mainly been displacement from other
outlets,” Ms. Mudditt said.
She expects that California’s revenue stream from electronic books
soon will be greater than that from
print books. “The challenge for us
is both how we can work effectively
with online retailers and how we
can get word out about books ourselves electronically,” she said. For
instance, like a number of other university presses, California has yet
to come to a satisfactory agreement
with Apple to have its books included
in the iBookstore. It also wants to
reach more customers directly.
As for direct losses because of Borders’s bankruptcy, all of the universitypress officials I talked with said
they had seen this coming and had
been cautious lately in their dealings
with the company. (Ms. Mudditt estimated that California’s losses would
run somewhere in the $20,000 to
$25,000 range.) Some presses decided not to deal with Borders directly but to work through intermediaries, like the wholesaler Ingram Book Company, that could
decide when to stop accepting orders
and thus assume the risk.
Garrett P. Kiely is director of
the University of Chicago Press,
whose Chicago Distribution Center handles the output of 90 presses.
Sixty of them could lose money because of Borders, possibly close to
a million dollars, but the final accounting isn’t in. He pointed out
the losses “are nowhere near some
of the big creditors. The orders
haven’t been that large, so the exposure hasn’t been that large, either.”
Still, he said, “it’s not nothing.” He
compared Borders to a terminally ill
patient. “You know they’re going to
go, but it’s shocking when it happens.”
No publisher likes to see a bookseller fail. “It’s still a bitter pill, and
whether you’re doing 1 percent of
your business with Borders or 5 percent, it’s still painful,” said Richard
Brown, director of Georgetown University Press and president of the
Association of American University Presses. He also noted the human cost: “There will be thousands
of people who no longer have jobs.”
I wondered whether Princeton
University Press, whose list has
strong crossover appeal, stood to
lose much money. Peter J. Dougherty, the director, said he couldn’t
say right now, but expected to have a
better sense in the coming weeks.
For now, uncertainty rules. Borders
says it plans to reorganize, but no one
knows what that will mean. “What will
a reorganized Borders look like?” Mr.
Dougherty asked. “There’s a lot of uncertainty and a lot of question marks.
We just don’t know how it’s all going to
shake out.”
n
government
Got the Inside Scoop on For-Profits? Investors Will Pay—and Handsomely
By Goldie Blumenstyk
N
ot all talk is cheap. Especially not if it comes from the
mouths of professors, former
corporate executives, or Washington
insiders who understand the workings
of the $20-billion for-profit higher-education industry and how impending
tougher regulations might affect it.
Then the talk can be worth hundreds
of dollars an hour, thanks to the growing role of “expert networks” now focused on the for-profit college sector.
The networks—which in the past
several months have featured the
likes of Terry W. Hartle, the top gov-
ernment-affairs official at the American Council on Education; Mark
Kantrowitz, an expert on student
loans; and Kevin Kinser, an academic who studies higher education—
are banks of on-call experts who get
paid to speak privately about trends
to the networks’ clients. The clients
are hedge funds and other investors,
which pay handsomely—$40,000 a
year, in some cases—for that ready
access.
The experts get paid, too, with
several reporting fees that run from
$250 to $850 a pop for a 30-minute
or hourlong conversation—similar
to a lawyer’s billable hour.
Expert networks have become increasingly significant players on the
Wall Street scene in the past decade,
and recently, with allegations that
some of them have been involved in
insider trading, they have become
controversial, too. In the for-profit
higher-education industry, where
the involvement of expert networks
is only about two years old—and
where there have been no known
charges of insider trading—their
growing use coincides with the coming of new federal regulations and
rising attention on the sector from
Congress and the Department of
Education.
“You’ve got an industry that is
so dependent on what the regulators do,” says Dennis M. Cariello,
a former deputy general counsel
for the Education Department in
the Bush and Obama administrations, who worked for a while with
an expert-network company after
leaving the government but no longer does.
Mr. Hartle, senior vice president
for government and public affairs at
the American Council on Education,
says the shifting climate appears to
be spurring investors’ desire for information from him and others. The
for-profit sector has done very well on
Wall Street over the past few years,
and “you’ve probably got a lot of people who jumped on the moving train,”
he says. Now, following a year of
growing public and government scrutiny, says Mr. Hartle, some investors
are wondering if the train is “moving
off onto a siding.” (He says he doesn’t
invest in any of the companies.)
Mr. Hartle says he speaks at least
once a week with investors, sometimes
receiving a fee of $250 from an expert-network company called the Gerson Lehrman Group as a “GLG Council Member” and sometimes without
charge to people who call him.
Continued on Following Page
A14
NEWS
M a rch 11, 2011
|
|
T he Chron icle of H igh er Educat ion
government
Continued From Preceding Page
He says he sees no conflict between that work and his duties at
ACE, where he is often the public
face of the 1,600 campuses the organization represents. “I’m frankly
not doing anything on the phone
with them that I would not say to
a reporter,” says Mr. Hartle, noting
that ACE has permitted him to do
the work as a private consultant.
Last summer Gerson also paid
to fly him from Washington to San
Francisco to meet with a group of
more than a half-dozen investors.
Mr. Hartle says he avoids gigs where
clients are seeking information
about particular companies and typically talks about topics such as the
likelihood that Congress will block
tougher federal regulations, or why
the Education Department is taking
so long to issue a final regulation.
Expert-network companies rely
heavily on academics, particularly
for clients that invest in information
technology, biotechnology, and the
pharmaceutical industries. Only a
handful of the three-dozen expertnetwork companies known to service Wall Street specialize in forprofit higher education, with firms
like Gerson, the Coleman Research
Group, and the Marwood Group
among the most prominent.
Gerson, the firm that hires Mr.
Hartle, features more than a dozen
former executives and government
officials on its roster of experts on
the for-profit industry, including two
people it identified as former company presidents (at the Career Education Corporation and Corinthian
Colleges Inc.) and four former officials at the Education Department
and the White House.
A Gerson salesman told The
Chronicle that the company typically required clients to pay a license
fee ($20,000 a year for companies
with revenues below $25-million;
$40,000 for those with higher revenues). In return, the clients receive
“white glove” service in setting up
telephone calls, Webcasts, or live
meetings in restaurants or similar
locations with the expert of their
choice, paying an additional fee per
event. For some Webcasts, nonclients can also buy transcripts.
The services run as a two-way
street, with expert-network companies
sometimes offering up their experts in
conference calls, and sometimes with
clients posting requests to the networks for an expert to answer their
questions. Last month, for example,
the Coleman network featured at least
three requests from clients “looking
to gain insights into industry trends,
market dynamics, and the competitive landscape of the industry.”
Intense Interest and Panic
Mr. Kantrowitz, the student-aid
expert, says he began working with
expert networks in 2008, about the
time the federal government started proposing major changes in the
bank-based student-loan system,
moves that proved tumultuous to giant lenders like Sallie Mae and Citibank. “Profit and education were
still at that intersection,” he notes,
but the anxiety and interest he hears
on calls these days from investors
in the for-profit college industry are
“a lot more intense” than they were
among loan-industry investors.
“They panic when the news comes
out” about a college company’s studentloan default rate or a new regulation,
he says. Right after the Education Department released its proposed “gainful employment” regulation, designed
to bar federal student aid to programs
whose graduates end up with overly
burdensome levels of student-loan debt,
Mr. Kantrowitz says he participated
in about a half-dozen expert-network
calls in a single week. In a more-typical month, he says, he does one or two.
He says his fees (he declines to make
public how much he gets) are turned
over to a scholarship fund created by
the sponsor of his FinAid Web site.
William G. Tierney, a professor of
higher education at the University of
Southern California who writes frequently about for-profit colleges and
academic governance, says the investors he gets connected to, some of them
from Europe, don’t know very much
about American higher education. He
AMERICAN COUNCIL ON EDUCATION
Terry W. Hartle
suspects many are low-level analysts
hired by investment funds, or privateequity firms, to scope out the landscape. And there’s no doubt about their
interest: “It’s always about for-profits.
It’s not about tenure or academic freedom.’” Like Mr. Hartle, Mr. Tierney
and Mr. Kantrowitz say they don’t invest in the industry they study.
Mr. Kinser, an associate professor of education at the State University of New York at Albany who has
worked for an expert-network company for about 18 months, says most
of what he has provided to callers
in three conference calls and a halfdozen conversations with individuals
is a perspective on the industry as a
whole, how it fits into all of higher
education, and his expectations about
the impact of new regulations. “They
wanted me to tell them who was a
winner and who is a loser,” says Mr.
Kinser. “That’s not what I do.”
Mr. Kinser is known for his deep
understanding of Education Department data, which he has used to highlight the poor rates of graduation at
COURTESY MARK KANTROWITz
Mark Kantrowitz
some of the college companies, and
for having no personal financial interests in the sector (he too does not
invest, because he studies it). He says
the callers seem to come from two
camps: those who think “all the regulations the government is proposing
are bull” and want evidence to prove
that, or people “who think the whole
system is ripe for collapse” and want
to know the biggest vulnerabilities.
As a higher-education researcher
in a field where colleagues “always
gnash their teeth” over the scant attention being paid to their work, Mr.
Kinser says the interest of investors,
as well as the notice his scholarship
is getting from news reporters and
government officials, is a kick.
“This,” he says, “is what having a
relevant research topic looks like.” n
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The ChroniCle
of Higher Education
chronicle.com
March 18, 2011 • $6.99
Volume LVII, Number 28
®
For-Profit Colleges
Manage Defaults
to Mask Problems,
Analysis Indicates
3-year default rates on student
loans are 5 times as high
as 2-year rates at some colleges
By Goldie Blumenstyk
and Alex Richards
I
t is no surprise that student-loan default
rates go up the longer they’re tracked:
Give borrowers more time, and more of
them will default.
But a Chronicle analysis has found that at
hundreds of colleges, most of them for-profit, the three-year default rate is inordinately
greater than the two-year rate, giving credence to concerns that certain colleges are aggressively using “default management” tools
to mask problematic rates of default.
Education Departof col- ment data released last
leges
month show that rates
with the biggest
at nearly all institutions
jumps in 2-year
rose when measured for
to 3-year student- three rather than two
loan default rates years, as federal law
will soon require. Yet at
are for-profits.
243 colleges, or about 8
percent of the 3,168 degree-granting institutions The Chronicle examined, the three-year
rate was at least 15 percentage points higher
than the two-year rate, a substantial increase.
Of those, 83 percent were for-profit colleges, including 27 institutions owned by Corinthian Colleges, 25 owned by ITT Educational
Services, and 17 owned by Career Education
Corporation, At five of Career Education’s
Cordon Bleu culinary colleges, the two-year
rates hovered at 5 percent or below and the
three-year rates exceeded 24 percent.
Those three companies are among the most
Continued on Page A6
83%
JEFF MILLER, U. OF WISCONSIN AT MADISON
Carolyn A. (Biddy) Martin, chancellor of the U. of Wisconsin at Madison, wants her flagship campus freed of many
regulatory constraints and separated from the regional campuses that make up most of the state’s university system.
Flagships Just Want to Be Alone
Hard times strain relations between big public research universities and their states
By Jack Stripling
O
T
hey thought they were made for
each other.
Hearing today’s higher-education
leaders opine about the heady days of the
1800s, when the Morrill Land-Grant Acts
created many of the nation’s flagship public
universities, is a bit like listening to some
Two chancellors in the U. of
Wisconsin system debate changing
the flagship’s status: A34
tired soul recall a once vibrant romance
that has slowly soured. While major public
research universities and state governments
have always had their differences, observ-
ers say they’ve never seen the relationship
between the two as strained as it is now.
And, in what is often the death knell
for couples, several flagship presidents are
now saying they think their campuses need
some space.
At the heart of this story is Carolyn A.
(Biddy) Martin, chancellor of the UniverContinued on Page A3
Much Ado About Building Costly Arts Centers
Even in an era of cutbacks, some colleges see big performance halls as the new necessities
By Lawrence Biemiller
Northridge, Calif.
t’s an irony Shakespeare
could write a play around:
Officials of California State
University at Northridge spent
10 years planning a $125-million
performing-arts center and figuring out how to pay for it—securing more than $60-million in capital-projects money from the state
and raising millions more from
gifts and grants. They pleaded
with donors and local politicians
I
CSUN
The Valley Performing Arts Center is a hard-won jewel on the campus
of California State U. at Northridge.
INSIDE
a
The Dissertation, Undone
Sometimes the only copy of a research paper that
took years of effort is the one that the laptop thief
got. A16
a
to make up shortfalls and promised anxious students that none of
the money would come from their
pockets. It wouldn’t be a surprise
to hear that the project’s biggest
backer, President Jolene M. Koester, had checked between the sofa
cushions in her office for loose
change.
Finally Northridge scheduled the
opening gala for late January, only
to have it take place just two weeks
after Gov. Jerry Brown proposed
slashing $1.4-billion from state
support for higher education. This
Zip It
In a few courses,
secrecy prevails outside
the classroom. A14
month Joan Rivers, Kiri Te Kanawa, Ed Asner, and Roseanne Cash
are performing in the 1,700-seat
main hall, and a student production
of A Midsummer Night’s Dream is
running in the black-box theater—
while across the campus, students
stage protests against fee increases
and program cuts that the university says will be necessary because of
the state’s revenue shortfall.
The Valley Performing Arts
Center here isn’t the only one to
make its debut amid recessionary
Continued on Page A8
a
Get That Degree
Western Governors U.
Indiana wants college
dropouts back. A12
A6
M a rch 18, 2011
NEWS
|
|
T he Chron icle of H igh er Educat ion
For-Profit Education
Many For-Profits Are ‘Managing’ Defaults
to Mask Problems, Data Suggest
Continued From Page A1
rates as a proxy for measuring an inactive in the political fight against stitution’s quality. For-profit college
tougher new federal rules that would leaders contend that this approach
limit or bar colleges with low rates ignores findings that students at their
of loan repayment by their students institutions tend to default at a highfrom participating in federal stu- er rate because they are, as a group,
dent-aid programs. Such aid is the disproportionately poorer than the
lifeblood of most for-profit and other general population of college stutuition-dependent institutions.
dents, and more of them are juggling
The analysis showed that at 69 work and family obligations.
institutions, the difference between
Critics of the sector, however,
the two-year rate and the three-year say that explanation, recently reiterrate was 20 percentage points or
greater. At a dozen of those, the
Higher Default Rates
difference was greater than 25
percentage points, an increase
Three-year default rates were
that would have put two-thirds
inordinately greater than two-year
of them above the 40-percent
rates at some colleges.
threshold at which colleges will
become ineligible to participate
243 institutions with a
in federal student-aid programs
default-rate change of 15
when the new law goes into efpercentage points or higher
fect, in 2014.
202 for-profits
The college showing the big24 nonprofits
gest gap was Professional Busi17 public colleges
ness College, a private nonprofit institution in New York City,
where the difference between the
two-year rate and the three-year
3,168 total degree-granting
rate was more than 30 percentinstitutions with 30 or more
age points. (For a sortable table
borrowers in repayment status
of the degree-granting colleges
The Chronicle analyzed, please
go to chronicle.com.)
Note: Institutions may include more than one campus.
The findings raise questions
source: U.S. Department of Education; Chronicle Analysis
about whether some colleges are
offering comprehensive, objective loan counseling to their students, ated in a report from the industry’s
or “conveniently placing people into trade group, the Association of Prioptions that are best for the schools, vate Sector Colleges and Universinot for the borrowers,” says Deanne ties, does not explain the big jump
Loonin, director of the Student Loan between the two-year and three-year
Borrower Assistance Project at the rates at some institutions. If it was
National Consumer Law Center.
just demographics, “you would ex“I just don’t see how you would see pect the two-year rates and the threethese kind of disparities in the second year rates and the 10-year rates to all
year to the third year if it was being done show the same kinds of trends,” says
in a comprehensive way,” she said.
Deborah Frankle Cochran, who diMany federal higher-education rects a program on financial aid at
policies and regulations use default the Institute for College Access &
2-Year vs. 3-Year Default Rates
Average default rates for major higher-education companies
2-year
19.1%
Corinthian Colleges
39.1%
12.3%
ITT Educational Services
29.6%
10.4%
Alta Colleges
26.8%
10.1%
Career Education Corporation
24.3%
16.9%
Kaplan
Education Management Corporation
Percentagepoint
difference
3-year
29.2%
7.0%
DeVry
U. of Phoenix
All for-profit colleges
18.3%
9.2%
20.1%
12.9%
22.8%
11.3%
24.0%
20.0
17.3
16.3
14.2
12.3
11.3
10.9
9.9
12.8
Note: Institutions may include more than one campus.
source: U.S. Department of Education; Chronicle Analysis
Success, a group that advocates for
tougher regulation of the sector. “It’s
puzzling unless you assume the colleges were working hard to assure
that their two-year rates reflected
them in their best possible light.”
The Default Gap:
How One Company Measures Up
After September 30, 2014, colleges’ student-loan default rates,
now measured over two years, will be measured over three years.
A college will lose federal aid if its three-year default rate is
equal to or greater than 30% for three years, or if it is greater
than 40% for a single year. Here’s how Corinthian Colleges
would fare, based on recent data:
2-yr.
default rate
Big Jumps Are Red Flags
The Chronicle’s analysis was
based on the unaudited informational-only “trial” data that the Education Department released in February on borrowers who were required to begin repaying their
loans at some point between
October 1, 2007, and September
30, 2008. The department noted that the data could contain
errors. The government tracks
information on institutions according to their Education Department identification numbers,
and in some cases, an institution
with a single ID number could
include several campus at additional locations.
In its analysis, The Chronicle
considered only degree-granting institutions and included only
those that had 30 or more borrowers in “repayment status.” (Federal
regulations on default rates are different for colleges that have fewer
than 30 borrowers in a repayment
cohort.) The analysis then compared the two-year rate—the proportion of those borrowers who
subsequently defaulted on or before
September 30, 2009—with the threeyear rate—the proportion who defaulted on or before September 30, 2010.
For the public institutions analyzed,
the two-year rate was 6 percent and
the three-year rate was 10.8 percent;
for private institutions, the two-year
rate was 3.7 percent and the threeyear rate was 7.1 percent; and for the
for-profit colleges, the two-year rate
was 11.3 percent and the three-year
rate was 24 percent. (The Chronicle
figures differ slightly from the sector
averages reported in February by the
Education Department, which counted all institutions regardless of their
degree-granting status or number of
borrowers in repayment status.)
The difference between the two-year
default rate and the three-year rate is
not itself the focus of any current regulation or any new ones. But according
to the Education Department and several experts, a big jump can be a red
flag. It can be a signal that a college has
been aggressively managing its defaults
for the two-year period by encouraging
borrowers to obtain deferments or forbearances on their loans.
Because the stakes can be so high,
“default management” has become
a business in its own right, particularly in the for-profit-college sector
(The Chronicle, July 16, 2010).
A forbearance gives borrowers
more time before they are required to
begin repayment, but the cost of the
interest on the loan during the extension can be added to the principal they
owe. Forbearances, which are notoriContinued on Page A8
National averages
3-yr.
default rate
30% threshold
10%
20%
10%
20%
40%
threshold
50%
Public
Private
For-profit
Corinthian
Everest University*
Tampa, Fla.
Wyotech*
Long Beach, Calif.
Everest Institute*
Cross Lanes, W. Va.
Everest Institute*
Rochester, N.Y.
Everest College*
Thornton, Colo.
Everest Institute*
Miami, Fla.
Everest College*
Newport News, Va.
Everest Institute
Miami, Fla.
Everest University*
Orlando, Fla.
Everest College
Phoenix* Ariz.
Heald College
Stockton, Calif.
Everest College*
Portland, Ore.
Everest College*
West Valley City, Utah
Everest Institute
Pittsburgh, Pa.
Everest College
Henderson, Nev.
Heald College
Milpitas, Calif.
Everest University*
Largo, Fla.
Heald College
Fresno, Calif.
Heald College
Hayward, Calif.
Everest College*
Colorado Springs, Colo.
Everest University
Pompano Beach, Fla.
Heald College
Salinas, Calif.
Heald College
Concord, Calif.
Wyotech
Fremont, Calif.
Heald College
Rancho Cordova, Calif.
Everest College
San Bernardino, Calif.
Everest College*
Springfield, Mo.
Heald College*
San Francisco, Calif.
Heald College
Roseville, Calif.
* Institution has one or more branches in other locations, listed under the
same Office of Postsecondary Education identification number.
30%
40%
50%
source: chronicle reporting,
U.S. department of education
A8
M a rch 18, 2011
NEWS
|
|
T he Chron icle of H igh er Educat ion
For-Profit Education
Continued From Page A6
ously easy to get, can help colleges
avoid higher default rates by postponing the date by which the borrower
needs to begin repaying. If the forbearance pushes that new repayment
date outside the two-year window, the
college doesn’t face any consequences
if the borrower subsequently defaults
on the loan. The borrower, however, is
still ultimately liable.
Mindful that some institutions
were using these techniques to, in
effect, run out the clock on default
rates, Congress in 2008 extended the
measurement period to three years to
get a truer sense of institutions’ default rates. Now colleges are barred
from federal student-aid programs if
their two-year default rate is 25 percent or higher for three successive
years, or above 40 percent in a single
year. Under the new law, which will
take full effect after September 30,
2014, colleges with three-year rates
of 30 percent or higher for three successive years, or above 40 percent in
any single year, will be barred, which
NEWS
|
could cripple them financially.
Erin Dillon, a senior policy analyst at Education Sector, an independent group that focuses on education
policy, says the worsening economy
might explain some of the differences
highlighted by the analysis but not the
disproportionately higher disparities.
She says colleges’ focusing their
default-management efforts heavily
on students during the two-year measurement window was the likeliest explanation. “If they’re only doing that
as long as the government is watching, that’s a problem,” says Ms. Dillon, even if the colleges were doing
more than encouraging students to get
forbearances, such as counseling them
on how to enter income-contingent repayment plans.
Hardly Improper
Harris N. Miller, president of Apscu, acknowledges that for many institutions in his sector, the focus for
corporate personnel and spending has
been on averting defaults for only two
years “because that’s where the win-
dow was.” But he says that’s hardly
improper. The idea that helping their
students get forbearances or deferments “is somehow an evil thing to
do is absurd,” says Mr. Miller, noting
that these tools are provided in the
law for a reason, to help students.
He and several of the college companies’ representatives also suggest
that some of the increase is based on
confusion in the student-loan market,
which occurred after the Department
of Education assumed the loan portfolios of two major lenders in 2009.
Mr. Miller and his colleagues contend
that poor management of those loans,
which were “put back” to the department, has created confusion that may
be adding to the levels of default.
The Education Department has
said the “put” loans were not a factor in the jump between the two-year
and three-year rates.
Corinthian says some of its defaulted loans were part of those
“put” portfolios.
Taken as a group, Corinthian institutions showed a two-year default
rate of 19.1 percent and a three-year
rate of 39.1 percent, or about 15,000
of its 38,000-plus borrowers in repayment status. Its three-year rate
and the 20-percentage-point gap between the two- and three-year rate
were the highest of any major higher-education company.
Kent Jenkins, a Corinthian spokesman, says the company has also substantially beefed up its default-management activities, spending $10-million
a year, to encourage students to make
regular payments once their loans come
due, and “not merely to kick the can
down the road through programs that
defer or delay repayment problems.”
Career Education says it is still
examining the factors affecting the
big jump in rates at its Cordon Bleu
institutions.
A statement from Alta Colleges,
another company where the rates
showed a sizable increase, says the
company provides a team of loan
specialists to help students, but it
does not provide any explanation for
the difference between the two-year
rate for all of its institutions, which
is 10.4 percent, and the three-year
rate, which jumped more than 16
percentage points to 26.8 percent, or
nearly 2,400 former students.
ITT declines to comment. Collectively its rate for two years was
12.3 percent; its three-year rate was
29.6 percent, or about 9,000 former
students.
In terms of percentages, the giant
University of Phoenix showed less of
an increase than the for-profit sector as
a whole: Phoenix’s two-year rate was
12.9 percent, and its three-year rate
was 22.8 percent. A spokesman attributes that to the difficult economic
conditions over the last several years.
Professional Business College, the
nonprofit institution that showed the
highest gap, says that it is “surprised
and disappointed” by the statistics, and
that it has already begun new counseling programs to redress the problem,
even as it notes that the numbers involved are fairly small. The college had
79 students entering repayment status,
and 33 of them defaulted.
Facilities
In an Era of Campus Cutbacks, Performing-Arts Centers Keep Going Up
Continued From Page A1
fallout. Multimillion-dollar venues, many of them financed largely by state money, are opening or
planned at colleges across the country. Even though ticket sales and donations cover much of the operating
cost, the centers prompt critics to
talk about “edifice complexes” and
“conspicuous consumption.”
The number of new facilities, at
least, is conspicuous. In February,
James Madison University opened its
five-venue, $82-million Forbes Center for the Performing Arts. Smaller
facilities have opened within the past
The new centers
prompt critics
to talk about
“edifice complexes”
and “conspicuous
consumption.”
year or so at George Mason University’s branch campus in Manassas, Va.
($46-million), Sam Houston State
University ($38.5-million), and on
Montgomery College’s campus in
Silver Spring, Md. ($31-million).
All of those were planned before
the recession started. But even with
the economy sputtering and gloom
pervading legislative budget committees, new arts venues are in the
works at institutions as diverse as
Hagerstown Community College, in
Maryland; the University of Texas’s
Permian Basin campus; and the State
University of New York at Potsdam.
With colleges everywhere raising
tuition and cutting programs, such
projects have some people questioning administrative priorities.
ROBERT BENSON
The Hylton Performing Arts Center, on the Manassas, Va., branch campus of George Mason U., opened last fall at a cost of $46-million.
Modeled on 19th-century European opera houses, its 1,121-seat theater includes a copper ceiling and three levels of box seats.
“In the order of sins, performing-arts centers are probably a tad
better than rec centers, studentunion buildings, and indoor-practice facilities,” says Richard Vedder, a professor of economics at
Ohio University who is director of
the Center for College Affordability and Productivity. “They present
events that have some tie to artistic
expression, and that’s part of what
universities do.”
But when you start adding up personnel costs, heating and air conditioning, and depreciation, he says,
“the real problem is, we simply can’t
afford this stuff.” Even though arts
venues may not “be socking it to kids
directly, there are no free lunches.”
A Glut of Theaters?
Some of the arts projects have
been particularly controversial on
Continued on Page A10
The ChroniCle
of Higher Education
chronicle.com
April 8, 2011 • $6.99
Volume LVII, Number 31
®
Presidents Defend Their Pay as Public Colleges Slash Budgets
By Jack Stripling
and Andrea Fuller
I
f there’s a sure lesson from the economic recession, it’s that perception matters.
When Wall Street bankers took taxpayer bailouts and then made off with big bonuses, they were vilified. Moral outrage ensued when chief executives of the Big Three
automakers flew into Washington on private
jets to ask for a government rescue.
Indeed, America’s anemic economy ensures that people at the top of the heap, including some public-university presidents,
will often have targets on their backs, particularly if they are asking for more state or
federal support.
The highest-paid public-college executives, who receive compensation packages in
the high six figures and more, walk a difficult political tightrope. They must at once argue that their state budgets have been cut to
the bone and need to be restored, while at the
same time acknowledging their rarefied personal financial circumstances in states where
layoffs, program closures, and pay reductions
have been all too common. In making that
case, presidents and the trustees who set their
salaries have for years argued that, irrespective of economic conditions, those presidential pay levels are fair, necessary, and performance-driven. While that case appears to
have been effectively made in many states,
some higher-education officials and compensation experts say a prolonged budget crisis
could hamstring the wealthiest presidents as
they argue that their institutions are deserving
of increasingly scarce public resources.
Bob Graham, a former U.S. senator who
helped shape Florida’s higher-education system when he was governor, said he viewed
Continued on Page A10
Total Cost of a Public-College President
Highest:
$1,818,911
E. Gordon Gee, president of Ohio State U.
$440,487
Lowest: $212,800
Median:
Timothy J. Donovan, chancellor
of the Vermont State Colleges system
INSIDE: Top 10 highest-paid executives: A10
Complete table of 185 CEO’s: A12
Colleges Scramble
to Avoid Violating
Federal-Aid Limit
For-profits’ tactics to comply
with 90/10 rule raise questions
By Goldie Blumenstyk
C
KRISTEN SCHMID SCHURTER FoR THE CHRoNIClE
For Blue Waters, a supercomputer to be housed here at the U. of Illinois at Urbana-Champaign, quickness is not of the essence.
Supercomputers Let Up on Speed
With big money and competitiveness at stake, smarter—not faster—designs may be winners
By Jeffrey R. Young
Champaign, Ill.
he warehouse-sized supercomputer under construction here at the University of Illinois at Urbana-Champaign comes with a price tag of nearly half
a billion dollars, making it one of the most
expensive supercomputers ever devoted to
academic research. And yet, when engineers
turn on the machine this year, it very likely
T
INSIDE
a
won’t be the fastest computer in the world.
And its designers don’t care.
“We’re not looking to be on the Top
500 list,” says Thom Dunning, who leads
the computer’s development as head of the
university’s National Center for Supercomputing Applications. Rather than hit a peak
sprint speed measured by the Top 500, the
most widely used supercomputer ranking,
he wants to build a distance runner, capable,
for example, of powering through intricate
New Competition for Foreign Students
Eyeing efficiencies of scale, public and private
colleges in “flyover” states are teaming up to join
the growing rush to recruit from abroad. A23
simulations of a tornado that can predict
where a storm might strike.
Flat-out speed, for a long time the
measure of a supercomputer’s worth, may
be going out of style. A recent report from
an influential federal panel recommended
more emphasis on software and alternative designs rather than computational
Ferraris. Still, fast computers attract top
faculty—and federal money. “Every conContinued on Page A3
a
E-Mails at Issue
Politics and academic
freedom collide in
Wisconsin. A25
a
orinthian Colleges Inc.’s decision
this winter to raise tuition at dozens of its Everest, Heald, and WyoTech campuses by an average of 12 percent,
knowing that most of its students would have
to go even further into debt, had nothing to
do with rising costs or any improvements it
was making in the curricula.
With many of its students already receiving
the maximum in federal grants and loans, the
company said it was raising its prices to create a financial gap that students would have
to cover with private loans or other funds besides those from the federal student-aid programs.
Corinthian’s move is just one of the latest—and some say one of the most cynical—
strategies that some for-profit colleges are using to avoid violating the so-called 90/10 rule,
so they can remain eligible for the billions of
dollars in federal student aid that have fueled
their growth. The rule requires them to receive at least 10 percent of their revenue from
other sources.
“They are making loans, just like the subprime lenders did, that they know their students will not be able to repay,” said Pauline
Abernathy, vice president of the Institute for
College Access & Success.
Corinthian’s decision to comply with the
90/10 rule in this manner, said Ms. Abernathy, even as it acknowledges that the company-sponsored loan program most of its students will use has a default rate of more than
50 percent, is “the height of cynicism.”
The 90/10 rule is also driving activities at
other college companies. In recent months,
Education Management Corporation, parent company of the Art Institutes, South
University, and Brown Mackie College, announced it would increase its recruiting of
Continued on Page A6
Funny Business
M.B.A. students improvise in a leadership
course at MIT. A30
A6
A pr il 8, 2011
NEWS
|
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T he Chron icle of H igh er Educat ion
For-ProFit EducatioN
For-Profits Scramble as Limits on Federal Student Aid Draw Near
Continued From Page A1
foreign students. Kaplan University and the
University of Phoenix created new colleges of “professional studies” so they could
count more of their nontraditional-educational revenues as part of the 10-percent
side of the calculation, and Career Education Corporation has beefed up marketing
for a chain of restaurants called Technique,
tied to its Cordon Bleu culinary schools,
all in the service of bolstering non-Title IV
as employer-sponsored tuition plans. If the
colleges exceed the 90-percent level for two
consecutive years, they lose access to federal
student aid.
Creators of the law saw it as a way to show
outside validation for a college’s offerings.
But with the rising availability of federal student aid—and colleges’ increasing creativity in exploiting the many exemptions now
found in the law—some of its supporters, as
well as its critics, are now questioning wheth-
How the 90/10 Rule Plays Out
The rule requires for-profit colleges to receive at least 10 percent of their revenue from
sources other than federal student-aid programs to be eligible for such aid.
90% 10%
What counts:
■
■
Pell Grants
Federal student
loans
What can count:
■
Cash payments by students
■
GI Bill benefits
■
■
■
■
■
■
■
■
Federal tuition assistance for activeduty military
Department of Labor Workforce
Investment Act tuition vouchers
Tuition reimbursements from
employers
Income from culinary-school
restaurants, education-school
childcare programs, and other
services related to students’
education
Fees for real-estate courses,
continuing teacher education, and
other training that leads to licensure
or industry-recognized certificate
Proceeds from private loans made
from third-party lenders
Up to $2,000 in federal student loans
issued from July 2008 through June
2011
The value of proceeds from collegeprovided private loans issued
since July 2008, excluding
the amount they expect
will never be repaid
(expires July 1,
2012)
revenues (so named for the section of the
law that authorized them).
Overshadowed in recent months by the
legal and political disputes over proposed
regulations on how recruiters are paid and
the costs of programs and student debt, the
longstanding 90/10 rule could soon reclaim
the spotlight, bringing new attention to a
law that many for-profit colleges consider
an ill-conceived and inappropriate measure
of quality, and some student advocates call a
consumer safeguard in need of toughening.
The 90/10 rule was enacted decades ago
to ensure that institutions were not relying
solely on federal student aid, but also generating revenues from other sources, such
er 90/10 serves the purpose for which it was
intended.
‘Counterproductive’ Strategy
Revenues that flow from other federal programs, like the GI Bill and tuition assistance
for active-duty members of the military, don’t
count toward the 90 percent. Even so, several
of Corinthian’s Everest campuses and hundreds of other for-profit colleges, including
Kaplan, Phoenix, and Bridgepoint Education’s Ashford University, have been moving
closer to that limit, according to Education
Department data released in February (The
Chronicle, February 15).
In addition to the 260-plus institutions
above or close to the limit, many more have
remained below the 90-percent mark thanks
only to a temporary provision enacted by
Congress in 2008. When federal loan limits
were increased by $2,000 in 2008, Congress
agreed to temporarily allow colleges to count
that additional amount of Title IV as part of
the 10 percent rather than the 90. That measure will expire at the end of June.
Along with Corinthian, many other forprofit colleges are lobbying furiously to get
the temporary measure extended (along with
another provision, which authorizes favorable
treatment for college-issued loans and will
expire in June 2012), or to get the 90/10 law
gutted altogether. Corinthian’s tuition hikes
are an explicit part of that lobbying fight. The
company said it would reverse the increase
if Congress changes the law. It maintains, as
its CEO, Jack D. Massimino, recently told
investors, that the price increase was “not
something we want to do, it’s something we
have to do.” He said that’s because so many
of Corinthian’s students are financially needy
and qualify for the maximum in federal student aid.
The gambit has drawn attention and criticism, not only from the consumer-advocacy
sector but also from at least one Wall Street
analyst, Ariel Sokol of UBS, who in a message to investors called it “perhaps the most
counterproductive public negotiating tactic
that we’ve ever witnessed.”
In an interview, Mr. Sokol was even more
scornful. Corinthian officials announced the
tuition increase “as if they are somehow the
victims,” he said. But the company knowingly pursued this kind of a growth strategy.
The levels of student aid have risen, he noted,
but the 90/10 rule has been around for many
years. “It’s not as if it happened by surprise,”
and now, “students are being burdened with
debt they can’t repay,” he said. For the company, “that’s not a viable long-term strategy.”
The cause championed by Corinthian and
others faces an uncertain political fate. The
for-profit college industry maintains strong
support in the Republican-controlled U.S.
House of Representatives as well as among
some Democrats, like Rep. Robert E. Andrews of New Jersey, who has been working with the Association of Private Sector
Colleges and Universities, the industry trade
group, on an alternative to the 90/10 rule.
Some Senate Democrats, along with student
advocates, meanwhile, want to strengthen
90/10.
Senators Thomas R. Carper of Delaware,
Richard Durbin of Illinois, and Tom Harkin of Iowa have all recently said they might
push to count revenues from the GI Bill and
military-assistance programs as part of the
90 percent. Military recruiting has been
a growing focus for many of the colleges.
Twenty for-profit companies received a combined $521.1-million in veterans and U.S.
Defense Department benefits in 2010, according to a report by the Senate education
committee. The for-profit sector as a whole
has received more than a third of the benefits paid out under the new GI Bill, even
though it enrolls only about 10 percent of
all students.
The National Consumer Law Center,
which has been critical of the ways colleges have “gamed” 90/10, is pushing for other
changes. It wants Congress to toughen rules
for treatment of revenues generated through
loans like Corinthian’s, which it said colleges were using as “loss leaders that keep
the federal dollars flowing.” Colleges “make
unaffordable loans as a way of filling up the
10-percent category with vapor revenues derived from loans that will never be repaid,”
the center’s Deanne Loonin, a staff attorney,
wrote in a report in January. Under the temporary provision, only a portion of the revenues generated via the college-sponsored
loans can count in the 10 percent. Still, the
center said that rather than extend that measure beyond 2012, Congress should end it
now.
Gaming 90/10
The coming political debate could also
bring attention to the many other tactics
colleges have begun to employ to satisfy
the 90/10 rule. In addition to its push for
more military and international students,
for example, Education Management has
also just reported in financial documents
that it would undertake some “internal restructuring” to deal with the issue, which
could mean moving some academic programs where federal student aid is close
to the 90 percent mark over to institutions
where the rates are lower. The company
said it would not comment beyond what it
had reported.
“The 90/10 rule has created
untold numbers of millionaires
… on the backs of those who
can least afford it.”
Phoenix and many other colleges have also
been revving up their lobbying in California’s and other state legislatures, to help preserve the availability of state grants for students who attend for-profit colleges. Student
aid that states provide also counts in the 10.
Thirty-one states provide such aid, according
to the most recent data, but, as in California, some programs are under fire because of
tight budgets, lawmakers’ concerns over the
colleges’ quality, or both.
In some instances, the colleges are taking advantage of looser provisions of the law
that they successfully lobbied for in 2008.
Kaplan, for example, created its new professional college by merging its Kaplan Professional division, which provides courses for
people studying for real estate, accounting,
and financial-planning exams, into Kaplan
University. The move allows Kaplan University to treat revenues from about 125,000
students who annually enroll in those professional courses as part of Kaplan University’s
10 percent. Kaplan would not provide financial details about how the merger affects its
90/10 ratio. It was among those that pushed
for the change in the law in 2008 that allowed such professional courses, which run
from a few days to a year in length, to be
counted in the 10 percent. Previously, only
revenues from programs that qualified as
Title IV-eligible would have counted in the
10.
Income that colleges generate from education-related activities, like salons staffed by
cosmetology and massage-therapy students,
can also count toward the non-Title IV side
of the equation. “We know some schools that
have opened nursery-school programs” in
conjunction with their early-childhood-eduContinued on Page A8
A8
A pr il 8, 2011
NEWS
|
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T he Chron icle of H igh er Educat ion
For-ProFit EducatioN
Continued From Page A6
cation programs and now offer English as a
Second Language courses, said Stephen B.
Freidheim, a Dallas-based consultant who
advises colleges on how to satisfy the law
and other matters.
Mr. Freidheim said colleges resort to
these tactics because complying with the
law has become harder, thanks to the increases in Pell Grants and the availability
of larger federal student loans over the past
four years.
One owner of several small colleges in
Louisiana said the massage-therapy fees he
receives do help with 90/10. But the owner,
Billy L. Clark, said that’s only part of his solution. He also offers students at his Delta
colleges an alternative to the federal student
loans, at an attractive rate: zero-interest loans
while the students are in school and 3 percent
after they leave.
Running and managing the loan program
cuts into his profits, he said. And it carries financial risks for his colleges. (Consumer advocates say such loans might also be less advantageous for students than federal student
loans, depending on terms.) But in not trying
to satisfy 90/10 by pricing his tuition above
the Title IV maximum, Mr. Clark said he can
offer his courses less expensively than many
of his competitors.
“It would be nice to pocket another $6,000
a student per year, but the student has to pay
that debt back,” said Mr. Clark. With this approach, he said, “I can sleep at night.”
Still, he contends that he and most everyone else would be better off without the law:
“The 90/10 rule has created untold numbers
of millionaires and billionaires on the backs
of those who can least afford it.”
Diversifying Revenue
Not all for-profit colleges oppose 90/10.
Strayer University, for one, said it had no
concerns about the rule and wasn’t lobbying
to change it or extend the exemption. In 2009
federal student aid accounted for 78 percent
of its revenues (the 90/10 ratio for 2010 hasn’t
been calculated yet), and even if the exemption for the $2,000 is eliminated in July,
Strayer does not expect problems complying,
said Sonya G. Udler, a spokeswoman for its
parent company.
Strayer has long relied on its corporate-
alliance programs, which include relationships with companies like Verizon, Lowe’s,
General Dynamics, and Bank of America,
to generate non-Title IV income. About 2
percent of Strayer’s revenue comes from
active-duty members of the military. Although several higher-education compa-
Strayer, along with the
thousand-plus colleges that
remain safely in compliance,
shows that the law can work.
nies say their efforts to land corporate alliances have been hurt by the recession, Ms.
Udler said Strayer hadn’t found that to be
a problem.
Consumer advocates say that the Strayer case, along with the experience of the
thousand-plus colleges that remain safely in compliance, shows that the law can
work. Ms. Abernathy noted, for example,
that the University of Phoenix has recently reported that with a new focus on loan
counseling, fewer of its students are now
taking out the maximum levels of student
loans.
Corinthian’s Mr. Massimino said the demographics of its student body make that a
less feasible strategy for his company.
Yet critics say companies like Corinthian have brought their 90/10 problems on
themselves by using the availability of federal loans as a recruiting tool to attract students.
“Their programs are designed to soak up
as much federal aid as possible,” and the
90/10 rule is one of the few brakes on that
practice, said Rich Williams, a higher-education advocate at the U.S. Public Interest
Research Group.
He doesn’t buy the arguments of Corinthian and others that demographics are at
the root of the problem. Many community-college students “are just as eligible” as
most for-profit-college students to borrow
the maximum in loans, he noted. And while
it’s true that their tuition costs less, he said,
they don’t borrow nearly as much.
A Year After Bank-Based Lending’s Demise, Shrunken Industry Redefines Itself
By Derek Quizon
A
year after President Obama
signed a law eliminating bankbased student lending, the
lenders and guarantors that formed
the backbone of the old system have
laid off thousands of workers, eliminated programs, and sought out new
roles in the student-loan industry.
The Education Department is
working to soften the impact with
money to help retrain student-aid
workers, servicing contracts for nonprofit lenders, and offers to pay loan
guarantors to develop default-prevention programs. But those steps
may not be enough to prevent further cuts and layoffs.
Students took out some $65-billion in federally subsidized loans
through the bank-based system during the last year it was in place,
and the lenders are still collecting
interest and servicing fees on the
loans they made before the law was
passed.
But without the ability to make
new federal loans, they are looking for ways to stay in the market—
for example, by offering new credit
“products,” some of which combine
elements of tuition-installment plans
and student loans.
The guarantors, which insured
bank-based loans against default,
are redefining themselves as loan
servicers or providers of financialaid advice.
Those efforts could bring about
innovative ideas for helping people
pay for college. But many of the
ideas may not work out, which could
lead to a further shrinking of the industry.
Subsidies Gone
Until last year’s change, the federal government had paid subsidies
to private lenders to provide federally supported student loans through
the Federal Family Education Loan
program, or FFEL. Lenders partici-
pating in the program faced virtually no risk, because guarantee agencies insured most of the loans, and
the government reinsured the guarantors.
That system ended when Congress eliminated the program as part
of legislation that also overhauled
the nation’s health-care system. Under changes that went into effect last
July, students seeking federal loans
now must borrow directly from the
government.
The Congressional Budget Office had estimated that the government would save about $87-billion,
which would otherwise have gone
to the banks in the form of subsidies
and administrative fees, over a period
of about nine years. The Obama administration said those savings would
help pay for increases in Pell Grants,
which were expanded last year.
The major student-loan companies started focusing more on providing what’s known as “gap funding”—private loans to help pay costs
left uncovered by a student’s federal
loans and other financial aid, says
John Dean, a lobbyist for the Consumer Bankers Association.
The shift meant that the companies were significantly scaling back
their student-lending programs, offering smaller loans to far fewer students. Sallie Mae, the largest lender under the FFEL program, is laying off 2,500 employees this year, a
reduction of 30 percent of its work
force.
Joe DePaulo, the company’s executive vice president, says Sallie Mae is
still heavily involved in servicing loans
and is looking to buy loan portfolios
from lenders that were crippled by the
credit crisis and the new law’s changes.
According to its annual report to the
Securities and Exchange Commission,
Sallie Mae has four years left on a contract with the Education Department to
service millions of federal loans and
faces “very little competition” in that
portion of the industry.
At least two major national
banks, Key Bank and Citibank, have
stopped lending money for education
altogether, with Key Bank’s education division remaining in place only
to service existing loans. Citibank
sold its portfolio to Discover Bank
last year.
Mark Kantrowitz, a student-aid
expert and publisher of Finaid.org,
says some lenders have come to him
in the past year asking for his input
on proposals to create new credit
products for students. He declined
to name the lenders, saying they had
not decided whether to go through
with the proposals.
Most of the proposals, he said,
have characteristics of both student
loans and tuition-repayment programs. Under one proposal, lenders
would work with colleges to allow
students to hold off on paying tuition
until after college, when they would
pay it back in installments over four
to five years. The programs would
have low interest, which wouldn’t
begin accruing until after graduation, and an annual fee.
Lenders are also considering a repayment plan that would take a percentage of a student’s income rather
than a fixed monthly payment, similar to the income-based repayment
program put into effect by the Education Department last year.
That could lead to a variety of
new options for students and families, Mr. Kantrowitz says, but whether those options would be good for
students remains to be seen.
Hardest Hit
The government’s changes hit
guarantors especially hard. Many
are laying off workers, cutting programs, and transforming their business models.
Under the old bank-based loan
program, about 34 organizations acted as guarantors, providing the first
line of insurance against defaults
and administering the loans at the
local level. Many of them were statebased nonprofit organizations that
performed a variety of functions, including servicing loans, administering state scholarship programs, and
offering loan counseling. Some also
offered loans to students.
Last year’s changes have all but
eliminated the need for guarantors,
although the Education Department
will allow some of the state-based
nonprofits to service a portion of its
direct-loan portfolio and continue
some administrative services locally.
Those organizations, like Vermont Student Assistance Corporation, face the prospect of layoffs and
major cuts in their counseling and financial-literacy programs.
Scott Giles, the nonprofit corporation’s vice president for policy, research, and planning, says outreach
programs for first-generation college
students will serve about 250 fewer
students this year. Over the next two
years, he estimated that the organization will have to cut its budget by
18 percent. This week 58 members
of its 300-plus-member staff took
early-separation packages.
The cuts mean that counselors
who help students fill out their federal student-loan applications and
provide information on financial-aid
options will be able to help fewer
students.
Those services aren’t offered anywhere else in Vermont, Mr. Giles
says. “That’s the part that’s really
heartbreaking for us. If we don’t do
the work, nobody will.”
The Vermont nonprofit is hoping
to secure a contract with the Education Department to help service federal loans, but Mr. Giles isn’t sure the
department will offer enough money
to cover administrative costs. It received some state funds last year, for
the first time since 1997, and is looking for philanthropic support.
Mr. Giles says the organization
is now focusing mainly on administering the state’s higher-education
grant program, just one of the many
services it offered before.
Administrators of similar nonprofits in South Carolina, Louisiana, and
New Mexico reported cuts in their
outreach programs. South Carolina
Student Loan, for example, will cut
in half the number of presentations
to schools, churches, and community
groups it makes this year. Presentations will be made only at locations
within an hour of the organization’s
offices, in Columbia.
The Education Department is giving out about $19-million in grants to
the lending industry this year toward
retraining its workers, including many
employees in local guarantor agencies.
The department also plans to release pricing information on loan-servicing contracts with nonprofit lenders
and to solicit applications within the
next two weeks from guarantors that
want funds to help develop defaultprevention programs, officials say.
American Student Assistance,
which guaranteed loans in Massachusetts and the District of Columbia, has laid off about 75 staff members as a result of the changes, says its
chief operating officer, Michael Finn.
But despite the reduction in funds, he
says, the company will shift its focus
toward loan counseling.
“There’s clearly a need out there
for student-loan borrowers to get
counseling and advice on how best
to manage their student-loan debt,”
Mr. Finn says. “And this frees us to
go out and make a business of it.”
But Mr. Kantrowitz says there
isn’t enough of a market for loan
counseling and debt-management
services to sustain the number of
firms providing them. In the next
few years, he predicts, many of those
groups will fail.
“We have … at least 50 entities trying to do something like that,” he says.
“We don’t need that many.”
Kelly Field contributed to this article.
The ChroniCle
of Higher Education
chronicle.com
July 29, 2011 • $6.99
Volume LVII, Number 42
®
Discipline
by Discipline,
Accreditors
Multiply
Despite debate over its cost,
specialization thrives
By David Glenn
T
Joon PoWELL FoR THE CHRonICLE
P. Jeffrey Conn co-directs Vanderbilt U.’s Center for Neuroscience Drug Discovery,
which has attracted top researchers from pharmaceutical companies.
Big Pharma Finds a Home on Campus
As drug companies scale back spending on R&D, academic research takes on financial risk
By Goldie Blumenstyk
O
Nashville
Jeffrey Conn left a full professorship for a job in Big Pharma 11
years ago because he saw no path
in academe to turn his novel idea for treating Parkinson’s disease into an actual drug.
now he and a corps of scientists are closing
P.
through work and luck, a research
program at Wichita State U. takes
off, literally. A6
in on a molecule that could bring relief to
the millions suffering with the condition’s
debilitating tremors and paralysis.
But the screening, testing, formulating,
and reformulating that brought Mr. Conn’s
team to this point didn’t happen in a lab
at a multinational pharmaceutical company—he left his job at Merck & Company
after just three years—nor at a venturecapital-backed biotech firm. It’s advancing
in the laboratories of Vanderbilt University, one of a growing number of universiContinued on Page A3
wo decades ago, some of higher education’s most-prominent leaders waged
war against specialized accreditation.
Robert H. Atwell, who was president of the
American Council on Education, believed
that accreditors that assessed the quality of
programs in particular disciplines were more
trouble than they were worth: They sapped
administrators’ energy
with fees, site visits, and O What some
long lists of requirements
specialized
that did little to improve
accreditors
the quality of education.
tell the public
(He made exceptions for
that others
fields that trained studon’t. A8
dents to save lives.) When
he served on the board of
the Council on Postsecondary Accreditation,
he voted against virtually every specialized
accreditor that applied for membership. John
V. Lombardi, who was president of the University of Florida, told The New York Times in
1998 that specialized accreditors “blackmail”
college presidents by demanding unwarranted
resources.
For better or worse, the mood has changed.
Specialized accreditors are proliferating. The
Association of Specialized and Professional
Accreditors has 61 members, up from 46 a decade ago. Some provosts say they would like
their programs to apply for as many specialized accreditations as they can, even though
the fees for an initial accreditation can run
past $25,000.
Several forces have driven that shift. Some
Continued on Page A7
A Recruiter Offers the Humanities, and Second Chances
By Eric Hoover
Santa Monica, Calif.
n unlikely audience
has filled a dozen chairs.
There’s a 40-year-old man
who spent most of his adult life in
prison, a 29-year-old woman who
recently gave up booze, a middleaged guy who lost his job and everything else years ago when, he
says, his mind just went “kablooey.”
For the next few minutes, they’re all
prospective college students.
Each of them is a regular here
at the local office of Chrysalis, a
nonprofit group that helps poor and
A
DAVID ZEnTZ FoR THE CHRonICLE
Kathryn Pope, director of Antioch U.’s humanities program for low-income
adults, speaks with a potential student at a service center for the poor.
homeless people find jobs. This
morning Kathryn Pope has come
to visit. Each summer she recruits
in places most admissions counselors never see. Shelters. Community
centers. Rehab clinics. Adult day
schools. Wherever men and women are trying to loose the knots of
the past.
Ms. Pope, 34, introduces herself as the director of Antioch University’s Bridge Program, which
provides free humanities courses
to low-income adults. Unlike programs that offer training for lowlevel jobs, Bridge was designed to
impart academic skills.
Few, if any, members of her
audience, Ms. Pope knows, have
heard of the institution, about
eight miles away, in Culver City.
And she knows that they may have
doubts. If you happen to lack a degree, a paycheck, and a computer,
you might question what Socrates
or Shakespeare, Anne Sexton or
the Cubists, could ever do for you.
So, at each stop, Ms. Pope, a
writing instructor at Antioch, must
tell a story about the benefits of
a liberal-arts education. To those
with little or no college experience,
she describes what nine months of
Continued on Page A10
Section B
Great ColleGes to Work For: seCtIoN B
The ChroniCle
of higher eduCaT
ion
111 Colleges and What Makes Them Great | Leadership That Works | The Faculty Life Cycle
THE CHRON
ICLE
GREAT
2011
SPECIAL
REPORT
The Academic Work
place
COLLEGES
TO
WORK FOR®
July 29, 2011
T h e Chron icle of H igher Educat ion
|
J uly 29, 2011
A3
The Week in Brief
NEWS
|
RESEaRch
Academe Takes On Risks of Drug Research
Continued From Page A1
ties now taking on the high-stakes work of
drug discovery.
This academic pursuit of new medicines,
fueled at Vanderbilt and several other institutions by big-dollar research collaborations
with pharmaceutical companies like Johnson
& Johnson, Pfizer, AstraZeneca, and Gilead
Sciences, has put research universities at the
heart of what one AstraZeneca executive
calls “a new economy of drug discovery,” one
that shifts some of the responsibility, along
with some financial peril, away from industry
and onto academe.
Converging financial realities drive
the shift. Drugs like Lipitor, Plavix, and
Gleevec, collectively worth hundreds of
billions in annual sales, will lose their patent protection between now and 2015. The
pharmaceutical industry, which has laid off
thousands of researchers during the past
several years of mergers and consolidation,
is scrambling for new medicines to fill its
sales funnel.
The biotech industry, once a major source
of new drugs for Big Pharma, is being
squeezed by its own financial pressures.
Universities, meanwhile, realize that they
need alternatives to the federal government
for research support. And they face growing
pressure from politicians and patient groups
to demonstrate that the billions in philanthropic and taxpayer dollars flowing into
their labs can produce cures.
“All of this is either a perfect storm or a
new opportunity,” says John Reid, director of
global alliance management at AstraZeneca,
who oversees its 18-month-old, seven-figure
collaboration with the University of Pennsylvania, where neuroscience researchers are
trying to develop a drug to treat Alzheimer’s
disease.
The new activity raises many new ethical
and practical questions, and not only the obvious ones concerning the increasing potential for conflicts of interest. Are universities
any more likely than the drug companies to
succeed in finding useful new drugs? If the
financial risks of drug discovery have become too great for giant multinational companies, is it really practical and timely for
universities to take them on? Are universities
delving into drug discovery with unrealistic expectations of a big payday? And more
broadly, will having universities, with their
public mission, more integrally involved in
drug discovery make it any more likely that
new drugs are affordable to people in the developing world, or for that matter, even here
in the United States?
Proponents of this new role for universities say involving top-flight academics more
directly in the drug-discovery process could
result in more innovative and more effective
drugs. And as university researchers shepherd a molecule scientifically beyond the very
earliest stages of its path to becoming a drug,
they can also make it more valuable when it
comes time for the institution to license it to
a company.
But entwining academic research with the
pharmaceutical industry has its own special
risks, notes Susan Solomon, who heads a
nonprofit stem-cell bank in New York City
The “new economy of drug
discovery” shifts responsibility,
and financial risk, away from
industry and onto academe.
that works with many university scientists.
The companies’ research priorities can shift
quickly due to competitive and financial
pressures. And sometimes a research group’s
rights to its own findings and data can get tied
up if the company drops the project or plays
it down in favor of a more promising one. “If
they change their mind and they don’t want
your thing, you’re stuck,” Ms. Solomon says.
And even relationships that do produce
new medicines pose the potential for problems, note some drug-industry skeptics. Donald W. Light, who has written critically about
the health risks and high costs of prescription
drugs, for one, warns that unless universities
are careful, they could find themselves simply becoming “full partners in a system that
leads to 85 percent of all new drugs being
little or no better” than the existing one, or
worse, helping to create drugs that he says
too often come onto the market without adequate testing for side effects. “If universities
are setting out to maximize profits on discoveries,” says Mr. Light, “then like companies,
they become corporatized and become more
likely to emphasize benefits and downplay
harms” of new drugs.
Big Investment, Big Payoff?
VANDeRBILT U.
A nuclear magnetic-resonance spectrometer, which will be used by drug researchers to evaluate
protein structures in their efforts to devise medically useful compounds, is put into place at Vanderbilt.
Across the country, academic researchers
are taking on a role that was once the purview of the research divisions of Big Pharma
and the biotech industry. Only a few, howevContinued on Following Page
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The Chronicle reserves the right not to accept an advertiser’s order. Only publication of an advertisement shall constitute final acceptance of the advertiser’s order.
Gifts to colleges, universities, and
private schools rose an estimated
4.7 percent for the fiscal year ending June 30, according to a survey
by the Council for Advancement and
Support of Education. At the group’s
annual meeting, some officials said
they were confident about their billion-dollar campaigns.
A federal judge struck down a portion of the Education Department’s
controversial “state authorization”
rule but upheld a pair of rules barring
deception in college recruiting and
commissions for college recruiters.
Days later, the main trade association of for-profit colleges said it would
appeal the ruling.
Marc D. Hauser, the renowned Harvard psychologist found responsible
for eight counts of scientific misconduct, resigned, ending speculation
about whether he would return to
the campus this fall.
Community-college students enrolled
in online courses fail and drop out
more often than those whose course
work is classroom-based, according
to a recent study.
The vast majority of colleges rated
by Moody’s Investors Service could
see their credit ratings downgraded
if Congressional leaders and President Obama fail to strike a deal by
next week to raise the federal government’s ability to borrow money,
according to a report by the creditrating agency.
Nearly three years after causing an international outcry by ranking humanities journals with an A-B-C system
based on perceived quality and influence, the European Science Foundation has released a revised list that
does not seem to be making scholars
much happier than before.
The recent growth in state laws requiring voters to show a photo identification has advocates for students
worried that their clout at the polls
could be sharply reduced.
An online activist was charged with
sneaking into a computer closet at
the Massachusetts Institute of Technology and making unauthorized
downloads of more than four million
journal articles from JSTOR, a subscriber-only database. The activist
was a fellow at Harvard University’s
Center for Ethics at the time of the
alleged intrusion.
Read these articles and keep up
with the latest news at
chronicle.com
Inside
COMMENTARy. . . . . . . . . . . . . . . . . . . . . A21
ADvICE . . . . . . . . . . . . . . . . . . . . . . . . . . A23
GAzETTE . . . . . . . . . . . . . . . . . . . . . . . . . A25
JObS. . . . . . . . . . . . . . . . . . . . . . . . . . . . A30
THE ACADEMIC WORKPLACE . . . . SeCtion B
Note to Readers
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next issue, dated August 12, will be
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J uly 29, 2011
NEWS
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T he Chron icle of H igh er Educat ion
RESEaRch
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er, have gone as far as Vanderbilt has in developing in-house expertise and facilities.
Since the late 1990s, Vanderbilt has invested about $50-million of its own money
to develop the scientific infrastructure and
recruit the personnel that now make possible the work of the program that Mr. Conn
co-directs, the Center for Neuroscience Drug
Discovery. It aims to develop drugs to treat
autism and schizophrenia as well as Parkinson’s. The full-time equivalent of 100 researchers and technicians work with the kind
of equipment for screening, synthesizing,
and purifying compounds that until recently
At Vanderbilt, researchers
are pursuing approaches
that were considered
“not druggable” by industry.
would have been found only in drug-industry
settings.
Several top scientists from pharmaceutical
companies have joined Mr. Conn, including
the co-director, Craig Lindsley, also formerly
of Merck, and J. Scott Daniels, a recent émigré from Pfizer who oversees pharmacokinetics, the science of how molecules interact
in the body, a mainstay of any commercial
drug-development program.
The Vanderbilt researchers are pursuing
experimental approaches that “were considered ‘not druggable’ by industry,” says Mr.
Conn, who is a professor of pharmacology.
They are following it up with scientific work
that advances ideas farther along the development pipeline than has traditionally been the
case for academic labs—not quite developing
the pills that a company will eventually sell
but, as Mr. Conn describes it, developing a
knowledge base for a “druggable” molecule.
(Long before it goes into human clinical trials, a compound must pass a battery of cellular and animal-based tests to show that it
can both hit its intended target without excess
toxicity and retain its chemical potency and
stability.)
Other institutions pursuing drug discovery follow different approaches. “What’s
new is the systemization of it,” says Stephen V. Frye, himself a former head of medicinal chemistry at GlaxoSmithKline, who
now leads the drug-discovery center at the
University of North Carolina at Chapel
Hill. Thirty-three of the 56 academic-based
drug-discovery centers that responded to
Mr. Frye’s recent survey about their priorities and financing were founded within the
past six years.
Skeptics question the appropriateness of
universities’ taking on the costs of drug discovery. But proponents like Mr. Frye say it’s
a logical step. Drug discovery is more perilous for industry because companies need to
make a profit, he says. But in an academic
environment, it can yield new knowledge
and other kinds of results that are also of
value. “There’s a different risk equation,”
he says.
Academic medical centers have long conducted clinical trials on drugs as part of the
approval process of the Food and Drug Administration. Some universities specialize in
training students in drug manufacturing. And
basic-science researchers often identify enzymes or proteins in the body that trigger a
disease. Finding that target is the first stage
of drug discovery.
But academics haven’t typically gone
JOON POWELL FOR THE CHRONICLE
No one at Vanderbilt is about to turn down a financial windfall from drug discoveries, but officials say basic research is still key.
“These programs would have never survived in another setting,” says Mr. Conn.
deeper into the science of making and then
evaluating how permutations of a molecular
compound could actually affect that disease
target. The teams of drug-discovery researchers at places like Penn and Vanderbilt are doing just that.
“It’s not just finding a target, it’s finding
a drug,” says Michael Cleare, Penn’s associate vice provost for research and executive
director of its Center for Technology Transfer.
At Penn, researchers work directly with
AstraZeneca scientists, sometimes side by
side in university-owned laboratories, with
the Penn professors focusing on basic science
to identify the parameters of what a new drug
At Yale, “the intensity of
the interactions” between
commercial researchers and
the university is what’s new.
should do and the company’s scientists doing the sophisticated analysis and synthesis
to build molecule after molecule to try to accomplish that.
It’s a new approach for AstraZeneca,
which in 2010 began a four-year plan to cut
employment by 8,000, including 1,800 from
in-house research and development. Now it’s
“investing in the best science wherever it may
be,” says the company’s Mr. Reid. “It’s a way
of sharing risk.”
In addition to the sponsorship support, the
collaboration includes potential payments of
up to $15-million to Penn if the researchers
hit agreed-upon milestones toward the development of a drug. It also includes an unusually flexible license that promises royal-
ties to the university if a drug based on the
researchers’ work ever goes on the market,
even if the product itself isn’t a Penn invention. AstraZeneca is expected to announce
similar collaborations with other universities
by this fall.
Penn calls its AstraZeneca relationship
an “integrated partnership,” differentiating
this style of university-industry collaboration
from prior models that weren’t as outcomefocused.
A giant deal between Gilead Sciences and
Yale University for developing cancer-fighting therapies, which guarantees at least $40million in research support to Yale researchers over the next four years and as much as
$100-million if the arrangements run for 10
years, also is designed to result in jointly developed drugs.
“The intensity of the interactions” between
researchers from the company and the university is what’s new, says Jon Soderstrom, managing director of Yale’s Office of Cooperative
Research. A committee of Yale and Gilead
scientists choose which projects will receive
support. Then the academics work with corporate scientists on selecting targets and assessing the results. The intellectual-property
terms of the Yale deal are not public.
‘They’re All Desperate’
Before now, pharmaceutical companies
felt that they were just “throwing money over
the wall” when dealing with universities, says
Regis B. Kelly, a molecular biologist and a
former executive vice chancellor at the University of California at San Francisco. But
now “they’re all desperate,” he says, and they
expect payoffs from their research sponsorships.
UCSF, which has given birth to dozens of
successful biotech and drug companies (a former top executive at Genentech is the chancellor) has been a magnet for the pharmaceu-
tical-industry partnerships. It has two drugdiscovery sponsorships with Sanofi-Aventis,
plus an agreement with Bayer HealthCare to
encourage future collaborations with minimal red tape.
In late 2010, UCSF was also the first to
land a partnership with Pfizer—worth up to
$85-million over five years—under a new
collaborative program that matches company
scientists with academic researchers to create
new medicines.
Pfizer, which dubs the model “science outside our walls,” has since announced two additional Centers for Therapeutic Innovation,
one involving major research universities in
New York City and the other for universities
in Boston. For researchers in these programs,
Pfizer grants access to some of its proprietary scientific technology to speed the development of drugs, and liberal terms for intellectual property and rights to publish results
of research.
Another pharmaceutical giant, Eli Lilly
and Company, has taken a different tack.
Having identified its own goals for treating
Alzheimer’s, diabetes, cancer, and osteoporosis, it invites academic and commercial researchers to submit compounds to the company for screening as possible drug candidates.
If the molecule shows promise, Lilly has the
first right to negotiate a research sponsorship
or license to develop it.
In the two years that the program has been
under way, researchers at more than 200 institutions, in 26 countries, have submitted
over 30,000 compounds for evaluation. Lilly has struck one deal, with researchers from
the University of Notre Dame, for a molecule
that shows promise in starving tumors of vital blood flow.
Professional investors are also looking
to get in on the trend, in some cases offering financing and scientific advice to university researchers to help them advance
T h e Chron icle of H igher Educat ion
potential drug discoveries before trying
to license them to pharmaceutical companies.
One such group, a new venture called
BioPontis Alliance, promises to evaluate
and “pressure test” potential drug candidates from its partner universities with the
help of experts recruited ad hoc, and to provide financing for those that show commercial potential. The chief executive, Richard
A. Basile, says its model is more suitable
to academic-based drug discovery than the
typical, riskier approach, in which venturecapital firms finance start-up companies
based on early-stage ideas. With BioPontis’s
approach—financing projects, not companies—“we can kill a technology early” and
move on, he says.
Penn, North Carolina, and five other universities have signed nonexclusive agreements
with the alliance, which has yet to conclude
its first-round fund raising.
A Long Horizon
Vanderbilt’s Center for Neuroscience
Drug Discovery began as a one-man operation under Mr. Conn, who joined the
faculty in 2003. (He got his Ph.D. there
in 1996.) Now it boasts an annual budget of nearly $18-million and is outgrowing its prime home, in three medical-research buildings. About $11-million of
its budget comes from the National Institutes of Health, up from about $4-million
in 2006—a reflection of the federal government’s growing willingness to support
this kind of translational research in drug
discovery.
Most of the rest of the financing comes
from foundation grants and industry sponsorships. In 2009 the Johnson & Johnson
subsidiary Janssen Pharmaceuticals announced a three-year, $10-million sponsorship to develop schizophrenia drugs—a
deal that could yield an additional $100million in milestone payments to Vanderbilt if the work succeeds. The center also
“We’re still making basicscience discoveries. …
We’re still doing what
scientists in academe do.”
has a license with a smaller company, Seaside Therapeutics, which supports its work
on an autism drug. Terms of that deal are
not yet public.
Vanderbilt’s work on a Parkinson’s drug,
which involves regulating neurotransmitter
activity in ways that may be more effective
than the traditional focus on dopamine, is financed with $4.4-million from the Michael
J. Fox Foundation. Vanderbilt hasn’t yet licensed that drug.
While no one at the university denies
the desire for a financial windfall from
the drug-discovery program, officials in-
sist that the most significant opportunity
the center provides is a venue to pursue
novel ideas. “These programs would have
never survived in another setting,” says
Mr. Conn.
For example, a Big Pharma company
would have never invested in such an unvalidated approach for treating Parkinson’s, he says. (Indeed, Merck didn’t do so
when he was there.) And “a venture investor wants something to happen in the first
year,” Mr. Conn says. “I’ve been here eight
years, and we’re just now” close to final
results with the molecules that he and colleagues will soon put forth as drug candidates for human clinical trials in treating
the disease.
The Vanderbilt center counts other measures of success as well. Since 2007 its researchers have filed for more than 100 patents and published more than 140 scholarly
papers based on their work. Although the
center uses industry processes to advance its
work, including high-tech studies that assess
how its compounds react in test tubes and in
live animals, it doesn’t operate like a commercial-contract research organization.
“We’re still making basic-science discoveries,” says Susan R. Wente, associate vice
chancellor for research. “We’re still publishing papers. We’re still doing what scientists
in academe do.”
And Vanderbilt hasn’t limited itself to
neurological drugs. It’s begun a second
drug-discovery program, in cancer. That
program is headed by Stephen W. Fesik,
ADVANCING EFFICIENCY
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J uly 29, 2011
who left a vice presidency overseeing cancer research at Abbott Laboratories to join
Vanderbilt in 2009.
For a while, at least, it appears unlikely
that universities’ expanding role in drug discovery will result in lower-cost drugs. Although some institutions (not yet including
Vanderbilt) sometimes add clauses to their licensing deals to require companies to make
their drugs available at little or no cost in the
world’s poorest countries, few if any seem to
have gone so far as to try to impose general
pricing controls.
Even the director of the NIH, Francis S.
Collins, says that’s not something he’d want
the agency to encourage. The costs of health
care and drugs are a national concern, he said
in a recent interview with The Chronicle, but
“this is the wrong place to get the leverage”
to try to fix that.
Putting price controls on the table during
negotiations of a university-industry collaboration, Mr. Collins says, “means there will be
no collaboration.”
Given the times, it’s those collaborations,
along with other drug-discovery efforts arising from academe, that will be much in demand. And as Mr. Kelly, of UCSF, contends,
it’s not just the ailing drug industry that
stands to gain. Higher education, not to mention society at large, could benefit, too. After
all, governments and benefactors don’t give
tax money and donations to universities “because they love our beautiful papers,” says
Mr. Kelly. “If the universities don’t do it,
who’s going to?”
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A5
The ChroniCle
of Higher Education

chronicle.com
October 28, 2011 • $6.99
Volume LVIII, Number 10
®
Atlanta Colleges
Strive to Outrun
the Recession
CorNell aNd staNford both want a 10-acre, city-offered site near the southern tip of Roosevelt Island,
which lies in the East River and is connected to Manhattan by tram and subway and to Queens by road.
A soon-to-close hospital on the site will probably be demolished.
Region’s 11-percent
unemployment means layoffs
and scholarship cuts
By Lawrence Biemiller
Dunwoody, Ga.
he economy blows.”
that’s ariel stitt’s take. she
lays her textbook flat on a table
in the crowded student center at georgia Perimeter College’s campus here and then continues: “the hoPe scholarship got cut, so a
lot of students got their hoPe taken away, or
got a traumatic cut. one of my best friends’
parents’ house was foreclosed, so they moved
back to new york. and gas prices—oMg! i
used to have an suV, and i could spend $240
to $260 a month on gas.”
“now i have to take Marta”—that’s the
Metropolitan atlanta
rapid transit authority—“to get to school.
i walk to the bus,
take that to a train,
take that train to another train, then another bus, then i walk
here.”
Ms. stitt lives with
her family and works
part time as a server at
a Mellow Mushroom
kendriCk brinson
pizza restaurant. she’s
for the ChroniCle
an international-business major at georgia Perimeter, a two-year
college with four campuses on atlanta’s outskirts (the “Perimeter” of the name is interstate
285, which encircles the city). but her catalog
of recession-related woes would sound familiar to almost any college student in the region:
unemployment here hovers around 11 percent,
about two points higher than the national average, and foreclosure signs dot suburban streets
and cul-de-sacs.
Visits to three local institutions—agnes
scott College, georgia state university, and
Perimeter—turn up students who say they’re
spending more hours at part-time jobs and
less money on themselves. faculty members
say they haven’t gotten raises but are glad they
still have jobs. administrators say they’ve had
to resort to furloughs or even layoffs to keep
budgets balanced. and everyone is worried
that the recession won’t end anytime soon.
a few tables away from Ms. stitt sits asmir
Vehabovic, who says he’d be at georgia tech
studying computer science if the economy were
better, instead of working full time in customer service for Publix super Markets and taking
classes here. daniela duque, who works full time
as an emergency medical technician, says she just
enrolled this semester as a full-time nursing student—a feat she’s managing by taking classes
Continued on Page A8
“T
Silicon Valley, New York-Style
Paul Cantrell
Universities jockey to build
a new tech campus in the city
By Goldie Blumenstyk
New York
ew York City hates seeing itself
as a second-string town.
yet for technology entrepreneurs here like Micah rosenbloom, ever
on the lookout for talented software en-
N
gineers and academic collaborators, the
city too often comes up short.
“recruiting engineers in new york City
is really hard,” says Mr. rosenbloom, and
it’s missing institutions with the mind-set
of a place like the Massachusetts institute
of technology. as he knows from a company he founded near boston, postdocs
there routinely keep an eye on commercial trends, and professors are encouraged
to work in start-ups. “that’s not what the
new york scene is.”
Mr. rosenbloom’s alma mater, Cornell
university, along with stanford university
and at least eight other institutions, from as
far away as india and israel, are clamoring
for the chance to remake that scenario.
the administration of Mayor Michael r.
bloomberg has invited universities to build
or expand an “applied sciences” campus
here, in a competition that has turned into
a head-to-head contest between Cornell
and stanford for the biggest prize.
Continued on Page A3
 Columbia owns an 18-acre site in
Upper Manhattan near the Hudson River,
assembled over the past decade as
part of a 30-year, $7-billion expansion.
The university would renovate a former
automobile plant at this “Manhattanville
campus,” and construct buildings on two
other sites.
aN NYu-led CoNsortium seeks a
370 Jay Street, in Brooklyn, a 13-story
former MTA headquarters, located
adjacent to an F train stop. Its reflection
is shown here on NYU’s Polytechnic
Institute across the street.
PhotograPhs by Mark abraMson for the ChroniCle
INSIDE
Fulbright Program Looks Forward Despite Budget Uncertainties
a
Scholars in Northern Ireland and Sierra Leone
discuss their research; a scholar from kabul goes home. A13
a
See where this year’s students and scholars hail from,
and where they’re headed, with charts and maps. A12
Photo Credit
T h e Ch ron icle of H igher Educat ion
|
Oc tober 28, 2011
A3
The Week in Brief
NEWS
|
After a decade of record growth,
enrollment seems to be slowing at
many community colleges. Final figures are not out yet, but California,
Connecticut, and Michigan all predict
statewide drops in their numbers of
full-time students compared with enrollments last fall, and other states’
figures are uncharacteristically flat.
RESEaRch
Colleges and other big nonprofit organizations expect to raise more
money in 2011, but the increase
won’t come close to making up the
donations they lost in the economic
downturn, according to a survey by
The Chronicle of Philanthropy.
A recent incident in which a stuttering student was told to save his comments and questions until after class
shows how relatively little training
on disability issues many adjuncts receive. While full-time faculty members
typically get a reasonable amount of
training on the Americans With Disabilities Act, most two- and four-year
institutions offer minimal training to
adjuncts, says one expert.
In a precedent-setting move, the
Marine Corps cut tuition aid for its
service members by 80 percent,
reducing the maximum benefit from
$4,500 a year to $875. The move
could hurt for-profit colleges that rely
heavily on military tuition.
Mark abraMson for The ChroniCle
TechStars is a New York City business incubator for tech companies near Union Square. David Tisch, TechStars’ managing director, is dubious
about a new technology campus. “Over the next five years,” he says, “this scene is not going to be impacted by academic research.”
Colleges Vie for Tech Tract in the Big Apple
Continued From Page A1
To encourage bidders, the city is offering
up to $100-million toward capital costs and
some prime real estate—including a treelined, 10-acre site on roosevelt island with
magnificent views of the Manhattan skyline.
The competition has spawned proposals
for nearly $2-billion in new construction over
the next 30 years for a commercially focused
campus that boosters say has the potential to
reshape the academic and business terrain of
one of the world’s most important cities. The
bidders are pledging spaces for as many as
2,000 tech-focused graduate students—about
20 percent more than the city has in those
fields today—and an influx of academic programs in new media, “smart cities” technologies, and other futuristic fields.
a foothold in new York City, still arguably
the world capital of finance and philanthropy,
could also reshape the institution—or institutions—that win.
and even with the uncertainties of a worldwide economic crisis in the air, those with
the wherewithal are taking their shot.
stanford and Cornell have each spent the
past few months relentlessly courting the
city’s business and start-up communities,
rallying alumni and potential donors, and
honing ideas for academic offerings and
commercialization programs in an all-out
effort to prove that its campus could be the
economic game-changer the city is seeking.
“We just keep reminding ourselves this is
about doing something that new York needs,”
says Daniel P. huttenlocher, Cornell’s dean of
computing and information science.
a familiar face on the university bus that
makes 21 round trips a week between the
Cornell Club, on east 44th street, and the
main campus in ithaca, in rural upstate new
York, Mr. huttenlocher has racked up more
than 200 meetings with alumni, business
leaders, and others in the city over the past
four months. (Cornell’s president, provost,
“We want to be the next
major innovation center
to be built in the U.S. of A.,”
says Stanford’s president.
and dean of engineering have all been active,
too.) The meetings have helped Cornell decide which degree programs best match the
city and, Mr. huttenlocher allows, have generated some “buzz on the ground” as well.
last week Cornell announced that the
Technion-israel institute of Technology had
joined its bid, with plans for a Technion-Cornell innovation institute, a 50-50 dual-degree-granting collaboration to which the two
institutions would contribute faculty and undertake joint research.
stanford, too, is coming on strong, capitalizing on its stature as the engine of hundreds
of silicon Valley successes.
it grabbed headlines with bold descriptions of its plans for a $2-billion campus
(and $1-million just to prepare the bid) and
is using its handsome stanford.edu/nyc Web
site to remind decision makers of the more
than 700,000 people now employed by
companies founded by stanford faculty and
alumni.
it also has the ideal spokesman in its president, John l. hennessy. Mr. hennessy, who
himself started a company, MiPs Technologies, as a young professor at stanford, has
used recent meetings with journalists in
new York City and White house officials
in Washington to highlight how his university can help with the competitive pressures
america faces.
as he stated in a CnbC interview, “We
want the next major innovation center to be
built in the U.s. of a., and from stanford’s
viewpoint, new York is the place to do this.”
bids are due by october 28. City officials
say they’ll make a decision by the end of this
year.
besides stanford and Cornell, at least two
other major proposals are expected. one is
from Columbia University, for what it calls
a Data sciences institute, and the other is
from a new York University-led consortium
of companies and five universities: Carnegie
Mellon University; the City University of
Continued on Following Page
Florida A&M University’s president
may no longer have an “evergreen”
contract. Under a new proposal,
James H. Ammons’s contract would
not renew every day, but a two-thirds
majority vote of the board would still
be required to dismiss him.
Gov. Rick Scott of Florida has sent a
letter to each of the state’s 11 public-university presidents, asking 17
questions about how well the institutions are measuring student learning,
preparing students for the work force,
and placing them in jobs. The Republican governor also posted online the
salaries of more than 50,000 employees at the universities.
At a meeting in Mexico of North American higher-education leaders, speakers expressed frustration over barriers like security fears and a lack of
integration among degree programs.
Read these articles and keep up
with the latest news at
chronicle.com
Correction
An article about how some law
schools are drawing questions about
the reliability of their job-placement
data (The Chronicle, October 21) referred incorrectly to the location of
John Marshall Law School. There are
two law schools with that name, and
the one in the article is in Atlanta,
not Chicago.
Inside
COMMeNTARy. . . . . . . . . . . . . . . . . . . . . A30
ADvICe . . . . . . . . . . . . . . . . . . . . . . . . . . A33
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JObS. . . . . . . . . . . . . . . . . . . . . . . . . . . . A46
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Oc tober 28, 2011
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T he Chron icle of H igh er Educat ion
RESEaRch
Continued From Preceding Page
New York; the Universities of Toronto and of
Warwick, in England; and the Mumbai campus of the Indian Institute of Technology.
Both Columbia and the NYU consortium
seek the city’s financial support. (The consortium is hoping to land a different city property, in a bustling Brooklyn business district,
for its venture.) Carnegie Mellon will also be
part of a somewhat smaller proposal for an
“It would be a pity if there
were an undue fascination
with the new and the novel,”
says Columbia’s president.
entertainment-technology program on another city-offered site, in the Brooklyn Navy
Yard. It’s proposed by Steiner Studios, a giant film-and-television operation that is already there. (See the box for details on who’s
proposing what, and how they stack up.)
Columbia, which wants to make its data
institute part of the $7-billion, 30-year expansion for about 3,000 new professors and researchers that is already under way near its
Upper Manhattan campus, recognizes that
it is an underdog, says its president, Lee C.
Bollinger. The idea of Cornell or Stanford
moving into town worries him—not, he insists, out of fear of competition, but because
he frankly questions whether the city will get
what it needs.
There’s value to a city from a great university, but “I don’t think it happens much
through branch campuses,” says Mr. Bollinger. “A more imaginative approach” for the
city, he says, would be to create incentives to
spur more collaboration between New York’s
established universities and its emerging industries.
“It would be a pity,” he adds with all deliberateness, “if there were an undue fascination
with the new and the novel.”
John Sexton, NYU’s president, says anything that “maximizes the intellectual capacity and the creative capabilities of the
city” is also good for NYU. He says he’s told
Stanford’s Mr. Hennessy that if he were in
his shoes, “it would be obvious to me that I
should take a quarter of my endowment and
pour it into New York.”
The applied-sciences proposal that the
NYU consortium is proposing is smaller in
scale than what the city is seeking, but its
chief architect says its focus on solving the
great problems of giant urban regions is an
important one for New York City. “Ultimately you want Shanghai not to be a competitor
of New York but a customer of New York,”
says Paul M. Horn, a former director of research at IBM who is now senior vice provost
for research at NYU.
It’s conceivable that the Bloomberg administration could give at least some support to
each of these other bids if it decides it has the
will and the wallet to pony up the money.
It’s harder to see how it can award the bid
for Roosevelt Island without making either
Cornell or Stanford a loser.
A Fevered Pitch
Universities compete all the time, but academic one-upmanship is usually cloaked in
an air of collegiality. The Cornell-vs.-Stanford campaign has more of the feel of a hardfought political contest, complete with dueling big-name endorsements (Yahoo’s cofounder Jerry Yang and the investor Stanley
F. Druckenmiller for Stanford; Irwin M. Jacobs, a co-founder of Qualcomm, and Abby
Joseph Cohen, a partner at Goldman Sachs,
for Cornell); grass-roots petitions and other
online efforts on Twitter, Facebook, and YouTube (mostly from Cornell alumni and students); and orchestrated media tours by university leaders (landing Mr. Hennessy those
four minutes and 45 seconds of featured interview time in September on CNBC, a cable
channel favored by Wall Streeters and other
business leaders).
Stanford, considered a front-runner for its
Silicon Valley cachet and the strength of its
balance sheet, has never before considered
so big an academic investment outside of its
Palo Alto, Calif., home. The university says
Stanford-NYC is a test for a new multicampus model for research universities and, as
Mr. Hennessy has described it, a chance for
it to tackle important scholarly challenges
“We can’t sit here and let
Silicon Valley be bigger than
us,” says Mayor Bloomberg
of New York City.
in an urban environment “like no other in
the U.S.”
The campus would also present new avenues for its professors and graduate students
to connect with the financial sector and creative industries like publishing, that aren’t
major players in Silicon Valley.
“We like to think we’re a great university,
but to be honest, one never moves forward by
standing still,” says James D. Plummer, Stan-
ford’s dean of engineering and a key architect
of the university’s proposal.
Cornell, already with a medical school in
Manhattan and a strong alumni base in the
region, sees the New York City Tech Campus as the fulfillment of a long-held dream to
extend its technology and business expertise
well beyond Ithaca.
Both Stanford and Cornell hired big public-relations firms and top city lobbyists (Stanford’s choice ran the mayor’s most recent campaign) to help them manage their messaging.
Stanford drew the spotlight two weeks ago by
announcing a partnership with the City University of New York that would allow it to
open its tech campus in the fall of 2012 with
a cadre of professors based at CUNY’s City
College campus. The relationship is bound to
win Stanford some points with CUNY’s growing legion of political supporters.
More than two dozen research institutions
from around the world expressed initial interest in bidding, but as the costs and city expectations became clearer, many dropped out,
among them Purdue University, Stevens Institute of Technology, Rensselaer Polytechnic
Institute, and the Korea Advanced Institute of
Science and Technology. Others, like Warwick, IIT-Mumbai, and Toronto, were part of,
or have since joined, the NYU consortium.
“This is a great opportunity for any university to have a footprint at the center of the
earth,” says Richard O. Buckius, vice president for research at Purdue, whose officials
visited New York donors and alumni several
times before pulling out.
What the City Needs?
Mr. Bloomberg made his own formidable
fortune as a technology innovator, and with
close ties to higher education (he’s chaired
Continued on Page A6
The New Technology Campus: Handicapping the Contenders
New York Mayor Michael Bloomberg’s administration is offering land and up to $100-million for a “game changing,”
science-focused academic venture to develop and commercialize new technologies that will diversify the city’s economy.
The finalists won’t be known until after the proposals are due, on October 28, but four major bidders have emerged.
Pluses
Minuses
Has the likes of Google and Hewlett-Packard
among its spinoff success stories; new academic
alliance with City University of New York lends it
a locally connected partner; world-renowned for a
business-friendly academic and technology-transfer culture; a decade-plus of experience in teaching engineering via distance education; very rich.
Uncertainties about the transferability of its Silicon Valley commercial
successes to New York; management challenges for a venture 3,000
miles from the main campus; relatively small corps of full-time faculty
to be based in New York; reliance on
distance education.
Experience running a major local campus, since
its medical school is in Manhattan; local business
and philanthropic roots with 50,000 local alumni;
an international partner, the Technion-Israel Institute of Technology, with commercialization skills
and its own strong base of donors in New York and
throughout the United States.
Not known for big-time technology
spinoffs; nowhere near as rich as
Stanford.
ColuMbia u. Proposing to establish a Data Science Institute on portion of its newly developing 18-
Has most of the development and neighborhoodengagement approvals already in hand; physical
and intellectual proximity to the rest of Columbia
and its resources; only New York City institution
ranked in the top 50 for spending on engineering
research; consistently among the top universities
for generating royalties from licenses of intellectual property.
Doesn’t bring new players into the
city’s mix; uptown location is isolated from New York’s emerging “Silicon Alley” tech scene in lower Manhattan and Brooklyn; better known in
New York for its business, law, and
medical schools than for technology
entrepreneurship.
new York u. Proposes a university-industry consortium, focused on the energy, water, and transporta-
Introduces international partners with global perspectives; doesn’t preclude city from also choosing Cornell or Stanford for Roosevelt Island; corporate connections fit well with city’s commercial
goals for the venture; supplements NYU-Poly’s
second-tier engineering status with heft from Carnegie Mellon and other partners.
Could require financial resources
New York might rather devote to a
new campus; consortia of this size
are complicated to manage.
stanford u. Proposing what could eventually be a 1.9-million-square-foot campus on a site near the
southern tip of Roosevelt Island for 2,000 graduate students, including academic buildings, housing, parks, and an incubator for start-ups, with a full-time, New York-based faculty of 100 drawn largely from the university’s design institute and departments of engineering, computer science, and business.
Cornell u. Proposing what would eventually be a two-million-square-foot campus for academics and
research commercialization, gardens, and housing, also on the Roosevelt Island site,
with 250 faculty members plus adjunct and corporate research scientists, offering academic and entrepreneurship programs built initially around research on the “built environment, healthier lives, and connective media.”
acre Manhattanville campus, just north of its historic Morningside Heights home, with a
focus on technologies in new media, health analysis, cybersecurity, financial services,
energy conservation, and other matters related to “smart cities,” with an initial faculty of
70 to 100 professors from engineering and business, and ultimately 200 professors and
2,000 graduate students.
tion challenges of great cities of the world, called the Center for Urban Science and Progress, to occupy a vacant, square-block building at an F train stop in Brooklyn, near its
NYU-Poly engineering campus. Partners include CUNY; Carnegie Mellon University; the
University of Toronto; the University of Warwick, in England; and IIT Mumbai, plus Cisco,
Consolidated Edison, IBM, IDEO, National Grid, Siemens, and Verizon.
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the Board of Trustees at the Johns Hopkins
University), he sees the campus as a catalyst
for the city’s economic future.
That was clearly the message he delivered
this month at a “Tech MeetUp” talk in Greenwich Village. The event drew hundreds of
young, fashionably dressed-down members of
the city’s start-up scene, and they responded
with rousing cheers as he championed the proposed campus as a tool for raising New York’s
tech profile, declaring, “We can’t sit here and
let Silicon Valley be bigger than us.”
Still, for all the applause, the campus
may not be what New York City needs today. Alexis Tryon and Scott Carleton, both
in their early 20s, founded a company,
Artsicle, that uses the Internet to connect
emerging artists to buyers or renters of art.
Artsicle is “desperate for developers and en-
Creating Silcon Valley
was a fantastic challenge.
“Will that recipe cook
New York City ingredients?”
gineers,” Ms. Tryon said before going on
stage at the event. But, she added, a “really
well-done continuing-ed program” would
serve her company just fine. Mr. Carleton
said they’d be “willing to talk to high-school
kids if they could code.”
David Tisch, managing director of TechStars, a start-up incubator in Manhattan, says
the deep-science ideas that made Silicon Valley flourish aren’t what energizes the New
York scene now. “New York’s angle is different,” he says. The city’s homegrown tech
companies, like Foursquare, capitalize on
things like population and density. “Over the
next five years,” says Mr. Tisch, “this scene
is not going to be impacted by academic research.”
While several of the bidders say they’re
hoping to get started within a year in temporary locations, Bloomberg-administration
officials say they recognize that the appliedsciences campus is really a bet for the future.
Yet, as others have noted, a lot of what fueled Silicon Valley successes for the past 50
years—including a culture of unusually porous interaction between academic and industry research scientists and a sustained
gusher of federal research money, inspired,
back then, by the cold war—are not as easily
reproduced amid today’s political and economic realities.
“There are lots of reasons that Silicon Valley developed that can’t be replicated in the
21st century,” says Gina Neff, an assistant
professor of communication at the University of Washington who wrote Venture Labor,
a forthcoming book from MIT Press about
New York’s “Silicon Alley.”
Even Woody Powell, a leading innovationcluster expert at Stanford who wants to see it
win, recognizes the obstacles.
The “horizontal networks” that connect
professors and industry “are extraordinarily strong” in Silicon Valley, says Mr. Powell, a professor of education and sociology.
And many of those connections thrived because the industrial scientists were far from
their East Coast corporate headquarters. “It
was a lot less supervised,” he says, which
encouraged creativity and collaboration.
Plus, he says, in Silicon Valley, it doesn’t
take long to learn the likeliest late-night
sushi spot where programmers congregate,
MARK ABRAMSON FOR THE CHRONICLE
Columbia U. is already expanding its campus at this site on West 125th Street, and would build a data-sciences institute here if chosen.
or which wine bar to frequent to bump into
venture capitalists.
Translating that ambience to New York “is
a fantastic challenge,” says Mr. Powell. “Will
that recipe cook New York City ingredients?”
Stanford’s academic culture, famously industry-friendly, is a crucial piece of that. So
is MIT’s. New York’s universities say that
they, too, work well with companies, but that
their contributions aren’t as often recognized,
because New York’s economy is so large that
their efforts don’t register as much.
Whateveer the case, the Bloomberg administration is clearly looking for an academic
venture that will rev the city’s commercialization metabolism.
Mr. Powell, who has already agreed to
teach for a period at Stanford’s New York
campus, should Stanford win, says success
would be “vastly easier” for a university
that’s done it before.
Stanford hasn’t announced the academic
specialities it plans for New York but says
they will include things like entrepreneurial
education, sustainable urban systems, and financial math and engineering.
Its faculty didn’t embrace the New York
idea initially, concerned that a smaller campus 3,000 miles away would be too detached
from the academic culture of the university.
But many have warmed to it, ever since the
university sought their ideas for academic
and research programs, in a memorandum
from Mr. Hennessy himself.
Stanford’s leaders have also assured the
faculty that the proposal envisions “one university with two campuses,” and that New
York wouldn’t drain resources from Palo
Alto. One way the university will do that will
be through a reliance on distance learning,
with only 100 full-time faculty positions permanently based in New York.
But that, too, has raised some concerns,
says William J. Dally, a professor of computer science at Stanford who chairs a faculty advisory committee for the New York
campus. Keeping departments and academic programs vibrant through a telepresence,
he says, is “one of the hurdles we need to
overcome.”
Cornell is planning a campus of comparable size, with a New York-based faculty of
at least 250, including professors from the
Technion, plus corporate research scientists.
That’s equivalent to establishing an institution the size of its current engineering college. It would be focused initially on three
hubs of study, affecting health, interactive
commerce and media, and the “built environment.”
A Win for NYC
Along with information on the contendors’
academic offerings and research prowess,
New York will judge them on the number of
patents they’ve won, the number of companies and local jobs they’ve created, and matters like how their tenure and other policies
encourage faculty-industry ties. Stanford,
very likely the only university in the country
that can command as much as $2,000 simply for a tour of its technology-transfer office,
“It’s a remarkable
opportunity for all
of higher education
and for the country.”
no doubt will have the edge on that front. It
counts the founders of Google, Cisco, Sun
Microsystems, and dozens of other companies among its faculty and alumni. Cornell
hopes its new partnership with the Technion,
whose graduates lead 59 of the 121 Israeli
companies on the Nasdaq, will help it even
the field.
Given the costs (even outside of New York,
$100-million doesn’t go very far when it
comes to building top-flight academic complexes), the city is also looking for a bidder
who can carry it off.
Online petitions and Twitter traffic in and
of themselves don’t count for much, but “to
the extent that tweets calibrate to alumni support,” and alumni support translates to con-
tributions, it can help, says Robert K. Steel,
New York City’s deputy mayor for economic
development. “We talk about your ability to
support your ambition.”
Neither Stanford nor Cornell has publicly
laid out how it would finance a new campus.
Stanford’s $19.5-billion endowment is nearly
four times the size of Cornell’s, but both have
strong records in fund raising, and the Technion’s added donor connections could help
Cornell. Each would probably rely heavily
on gifts, and on the tax-exempt borrowing
options the city has offered, to help pay for
the construction. “It’s a big lift for any university,” says Cornell’s dean of engineering,
Lance Collins.
Mayor Bloomberg will make the final call,
and despite talk that he’s already decided he
wants Stanford, city officials insist the competitors will be judged on the merits of their bids.
Aside from CUNY’s role in both Stanford’s and NYU’s bids, only the wealthiest
private universities are contending from the
United States. They are the kinds of institutions that have rebounded most quickly from
the economic crisis that still grips most of the
rest of higher education. Still, says M. Peter
McPherson, president of the Association of
Public and Land-Grant Universities and a
former chairman of New York-based Dow
Jones Inc., it’s a remarkable opportunity for
all of higher education and for the country.
“Another big operator builds instead of detracts,” he says.
Research universities are in demand all
around the world, particularly in developing regions like China and the Middle East.
Apart from some very valuable real estate,
New York is offering a lot less upfront than
those places are. Given all that, Seth W. Pinsky, president of the New York City Economic Development Corporation, says the
interest of several of the world’s major universities is also a heartening vote of confidence in New York City.
“What they are all implicitly saying is
that they believe the future is here in New
York,” he says, “and for their own competitive advantage, it is worth it to them to make
that investment here.”