“Sloppy” red tape requirements costing universities millions

Study says Vanderbilt University spends $150 million, or 11 percent of its expenditures, annually, complying with federal rules and regulations–not the only university.

tape-regulation-universitiesAccording to a new report released by college and university leadership, government red tape requirements are costing colleges and universities not only millions in administrative tasks, but depriving students of lower tuition costs and hindering university research and innovation.

U.S. Senator Lamar Alexander (R-Tenn.), chairman of the Senate education committee, yesterday said a report released by a task force of college and university leaders—and commissioned by a bipartisan group of senators—shows colleges in a jungle of red tape that “should be an embarrassment to all of us in the federal government.”

At a hearing on the report, Sen. Alexander said: “These should not be excused as normal, run-of-the mill problems of government. These examples, and others like them, are sloppy, inefficient governing that wastes money, hurts students, discourages productivity and impedes research.”

Sen. Alexander, along with Senators Barbara Mikulski (D-Md.), Richard Burr (R-N.C.), and Michael Bennet (D-Colo.), commissioned the report from the group in November 2013, seeking specific recommendations on reducing, eliminating or streamlining duplicative, costly or confusing regulations before the committee began work on a ninth reauthorization of the Higher Education Act.

According to Sen. Alexander, over a year ago, Vanderbilt University hired the Boston Consulting Group to determine how much it costs the university to comply with federal rules and regulations.

The answer: $150 million, or 11 percent of the university’s total non-hospital expenditures last year.

Vanderbilt Chancellor Nick Zeppos says that this adds about $11,000 in additional tuition per year for each of the university’s 12,757 students.

(Next page: Where the costs come from for colleges and universities)

Complicated FAFSAs

“Each year, 20 million American families fill out a complicated, 108-question form called the FAFSA (Free Application for Federal Student Aid) to obtain a grant or loan to help pay for college,” explained Sen. Alexander in a statement. “Several experts testified before our committee that just two questions would tell the Department of Education 95 percent of what it needs to know to determine a student’s eligibility for a grant or loan: One, what is your family size? And, two, what is your family income?”

Based off of this testimony, a bipartisan group of six senators in January introduced legislation to try and simplify the student aid application and repayment process, including reducing the 108-question FAFSA form to just two questions.

“Most important, according to financial aid expert Mark Kantrowitz, the complicated, 108-question form discourages up to 2 million Americans each year from applying for aid,” emphasized Sen. Alexander. “Last fall, the president of Southwest Tennessee Community College in Memphis told me that the complex form turns 1,500 students away from his campus each semester.”

Tennessee has become the first state to make community college tuition-free for qualifying students. But first, each student must fill out the FAFSA. Now that tuition is free, the principal obstacle for a qualified Tennessee student to obtain two more years of education after high school is not money: it is the “unnecessarily complicated federal form,” he noted.

Admin time sucks

According to Sen. Alexander, surveys conducted in 2005 and 2012 by the National Academy of Sciences found that principal investigators spend 42 percent of their time associated with federal research projects on administrative tasks instead of research.

“I asked the head of the National Academies what a reasonable percent of time would be for a researcher to spend on administrative tasks. He replied: perhaps 10 percent or even less. How many billions could we save if we reduced the administrative burden?”

He also noted that, according to media reports, taxpayers spend more than $30 billion a year on research and development at colleges and universities.

“This year, the average annual cost of NIH research project grant ‎is $480,000. If we reduce spending on unnecessary red tape by $1 billion, the NIH could potentially fund more than a thousand multi-year grants,” said Sen. Alexander.

Why it’s not a party issue

The Senator explained that President Obama and Education Secretary Arne Duncan, though they have contributed to the problem, are not the only ones at fault, since “every president and every education secretary—and that includes me—since 1965 when the first Higher Education Act was enacted [is partly to blame].”

“And the list of those embarrassed should also include the Congress of the United States for year after year adding to and tolerating a pile of conflicting, confusing regulations.”

The Higher Education Act totals nearly 1,000 pages, with over 1,000 pages in the official Code of Federal Regulations devoted to higher education. On average every workday, noted the Senator, the Department of Education issues one new sub-regulatory guidance directive or clarification.

“No one has taken the time to ‘weed the garden,’” he said. “The result of this piling up of regulations is that one of the greatest obstacles to innovation and cost consciousness in higher education has become—us, the federal government.”

(Next page: Can the problem be fixed?)

“If all of us created this mess, then it is up to all of us to fix it,” said the Senator.

Roughly four years ago, four members of the committee—two Democrats and two Republicans—asked a group of “distinguished” educators [including Vanderbuilt University Chancellor Nick Zeppos and University System of Maryland Chancellor Brit Kirwan] to examine the current state of federal rules and regulations for colleges and universities. The committee asked them not just to detail the problem, but to give specific solutions.

These recommendations are included in a document, titled “Recalibrating Regulation of Colleges and Universities,” in which the educators outline 59 specific regulations, requirements and areas for Congress and the Department of Education to consider —listing 10 especially problematic regulations.

In their own words, America’s 6,000 colleges and universities live in a “jungle of red tape” that is expensive and confusing and unnecessary, and that consumer information that is too complicated to understand is worthless.

“Colleges must report the amount of foreign gifts they receive; disclose the number of fires drills that occurred on campus,” said Sen. Alexander. “’Gainful employment’ disclosures require 30 different pieces of information for each academic program subject to the regulation.”

He also said that when a student withdraws from college before a certain time period, a student’s federal money must be returned to the government—a simple concept. Yet, the regulations and guidance need for implementation are complex: 200 paragraphs of regulatory text accompanied by 200 pages in the Federal Student Aid handbook.

For example, the University of Colorado reports that they have two full-time staff devoted to this issue: One to do the calculation and the other to recheck the other’s work. Ohio State University estimates that it spends around $200,000 annually on compliance for this regulation.

Institutions offering distance education are also subject to an additional set of bureaucracy that can result in additional costs of $500,000 to a million dollars for compliance, notes the Report.

“All of these are examples of colleges and universities spending time and money on compliance with federal rules and not on students,” noted the Senator. “Senator Murray and I will discuss how to develop a bipartisan process to take full advantage of the recommendations in this Report and to include many of them in reauthorization of the High Education Act, which we plan to do this year.”

Sen. Alexander said he and Sen. Murray will schedule additional hearings to gather comment on the Report from institutions not directly involved with the report and consumers of higher education, including parents, students, and taxpayers. Some of the recommendations require a change in the law, but many can be fixed by the Department itself, he explained.

“I have talked with Secretary Duncan more than once about this effort and he is eager to do his part to solve the problem,” he concluded. “I look forward to working with him and with President Obama on eliminating unnecessary red tape, saving students money, and removing unnecessary regulatory obstacles to innovation in the best system of higher education in the world.”

Material from a statement was used in this report.

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