Students will pay
Tuesday, March 13, 2007
By John Lichteneggerand Sean McGinnis
In late January 2006, we were told Gov. Matt Blunt had a major announcement to help universities build buildings, and as former curators of the University of Missouri, we were asked by university leaders and supporters to back this proposal.
The governor's proposal, called the Lewis & Clark Discovery Initiative, would include $85 million for a new medical research building on the Columbia campus as well as provide an assortment of buildings on other campuses to the tune of $380 million to $400 million.
The governor's proposal required the taking of $400 million from the assets of the Missouri Higher Education Loan Authority (MOHELA). At that time, we enthusiastically agreed to support this plan. A life-saving, cutting-edge research facility on MU's campus would be terrific. Yes, governor, we're on board.
However, we had not read the statute starting MOHELA back in 1981. Had we done so, many of us would not have endorsed the method of funding the governor proposed. State Sen. Wayne Goode, one of the founders of MOHELA, began offering historic information on MOHELA, its purpose and its role in student lending.
There are three huge problems with this approach to funding university buildings.
First, the surpluses generated by MOHELA in buying, selling and servicing loans of students were generated entirely by students paying interest and costs in excess of what MOHELA was paying for the money it obtained through bond issues to lend to the students or to buy the loans banks made to students. To be certain, MOHELA does earn interest on its surpluses, but the students created the surplus.
Second, by the admission of MOHELA that it has $400 million to give away to universities to build buildings all over the state, it makes a prima facie case of overcharging interest and costs on student loans for years, or that it will charge students more in interest in the future to pay for this giveaway of assets.
You see, the MOHELA statute -- Section 173.385 (11) -- limits MOHELA to charge the students "reasonable fees and charges in connection with making and servicing its loans." MOHELA was set up as a not-for-profit lending authority.
Obviously, if MOHELA can simply transfer $400 million, it has grossly overcharged or will overcharge students in the future a rate of interest and costs in excess of what their own charter (the initial enabling statute) allows. This amounts to a theft of more than $400 million from students who have paid or will pay too much in interest and costs to or through MOHELA.
Third, all of the above gives rise to potentially the largest class-action lawsuit to ever hit a quasi-public corporation started by Missouri. All of the students who paid or who will pay the excess interest and costs to fund the campus building projects have a potential cause of action against MOHELA and the state for unauthorized use of their loan payments. While some bondholders may have approved the MOHELA building plan, the students did not.
The students should have reduced rates or loan forgiveness, but not have their loan payments taken for the governor's pet projects or any of the pet projects we want to see built.
We believe the governor plans on taking credit for all of these building projects. If this theft from MOHELA through a majority of board members appointed by the governor takes place, it is the students -- the young men and women, the middle class and poor of Missouri who needed and will need loans to attend college -- who will have built these buildings, not Governor Blunt nor the taxpayers. I'll give the governor credit for the scheme, but credit students for paying for the buildings.
Unknowingly, the students of Missouri, without disclosure to them, are asked once again to fund higher education in Missouri. The universities are up front about tuition and fees. MOHELA needs to disclose to their students their building plans and how that impacts the students: interest rates, costs and loan forgiveness program. That information has not been forthcoming.
The reason Missouri has high tuition at our two-year and four-year public colleges is because the state only funds our colleges at a rank of 45th to 50th in the nation. To remain competitive without state appropriations requires our colleges to charge relatively, but not excessively, high tuition. Our legislators and governor want the MOHELA pot of gold, which was produced by our students' paying too much in interest or a higher amount of interest than necessary in the future.
We have learned that the legislation containing the MOHELA funding plan also includes a plan to take powers from university governing boards and to give more control to the politicians in Jefferson City.
We are looking for absolution. Here's the solution:
1. Let MOHELA make more low-interest loans to provide more access to college, trade schools and vocational schools.
2. Use the projected $350 million to $400 million growth (surplus) in the state budget to build these buildings. Use state tax revenue, not student-loan interest. By using state tax revenue, the governor could claim credit for his initiative.
3. Let the boards of all universities in Missouri, which have been underfunded for years, govern their campuses. Local control is best for our universities and colleges.
4. Let market forces and the quality of an institution determine the future of our state.
5. Give every student who obtains a GED or graduates from high school a voucher of up to $2,000 per semester to attend any university, public or private, or vocational or trade school in Missouri for at least one year to start post-high school education. Follow that up.
6. Do not favor private universities over public universities.
7. Scrap the record-keeping and bureaucratic nightmare of Senate Bill 389.
8. Let our college boards set their budgets, tuition and fees and avoid the wartime price controls contained in SB 389.
Essentially, what the governor is proposing is robbing Peter (the students) to pay Paul (the institutions).
This is not public money. It is the money of past, present and future students. It is a public trust fund, and the governor is seeking to break this trust. All of the "Pauls" have paid lobbyists. The "Peters" have none.
In the words of George Bernard Shaw, government that robs Peter to pay Paul can always depend on the support of Paul.
Let's show everyone that Mr. Shaw wasn't talking about Missourians.
SB 389 and legislation to undermine the financial strength of MOHELA should be defeated.
John P. Lichtenegger of Jackson and Sean McGinnis of Springfield are former members of the University of Missouri Board of Curators.