Colleges and Universities and Education Finance and Tuition Costs and Education & Workforce Development

Rising tuition fuels Lumina's reform agenda

September 24, 2007

The Lumina Foundation for Education's offices in downtown Indianapolis scream establishment. They have the feel of a Manhattan law firm, with upscale decor, glass and wood paneling.

But make no mistake: The 7-year-old foundation, formed as part of the sale of USA Group, is on a radical mission--to overhaul the way higher education is funded in this country. The not-for-profit, armed with $1.4 billion in assets, believes the nation's economic future depends on making college more affordable, and accessible, to high school graduates, as well as to adults who want to return to school.

And thanks in part to that financial firepower, and the soaring cost of higher education, Lumina's agenda is gaining momentum nationally, business and academic leaders say.

"The financing system is increasingly dysfunctional; it's a very complex, hard-to-deal-with issue," said Charles Miller, former chairman of U.S. Secretary of Education Margaret Spellings' Commission on the Future of Higher Education. "What Lumina did was bring the topic to the forefront. ... While we haven't found the answer to it, they have provided a great contribution to the issue."

Lumina makes its mark by giving out about $50 million a year, with about 10 percent staying in Indiana. The money doesn't go to scholarships. Instead, it flows to initiatives at foundations, policy groups and schools that further Lumina's three main goals: making college more affordable, helping more community college students succeed, and helping teen-agers and their families take the steps necessary to be ready for college.

The foundation is facing stiff headwinds. Over the past five years, tuition at public colleges has soared 35 percent, leaving an increasing number of lower-income students feeling higher education is out of reach.

"The puzzling thing is that, usually when quality goes up, costs go down," said Martha Lamkin, 65, Lumina's founding CEO, who is retiring at the end of the year. "But that's not happening in education. As a society, we have to do better."

But not everyone believes Lumina's motives are entirely pure.

Lumina has its roots in the highly profitable student loan industry--a business that, according to critics, adds excessive costs to the financing of higher education. Because locally based USA Group was structured as a not-for-profit, the $770 million Virginia-based Sallie Mae paid to acquire it had to go to a charitable use, a requirement that paved the way for Lumina's launch.

Lamkin had been a USA Group executive vice president. Today, 10 of Lumina's 14 board members have a prior tie to the student loan industry.

"I don't know that one can take the foundation seriously," scoffed Barmak Nassirian, associate executive director for external relations of the American Association of Collegiate Registrars and Admissions Officers.

Lumina counters that it intentionally steers clear of the student loan industry to avoid potential conflicts.

Packing a punch

What Nassirian or other critics can't dispute is Lumina's growing clout. Thanks to investment returns, Lumina's assets have doubled to $1.4 billion, placing it among the top 50 foundations in the country. And it's the only one focused so narrowly on making higher education more affordable and accessible.

The foundation is playing a particularly big role in helping disadvantaged students and adults get into--and stay in--college, said Miller, who served for six years as chairman of the University of Texas System, which has received nearly a half million dollars in Lumina grants.

Lumina's decision to address access and affordability was logical, Lamkin said, because the various levels of education don't seem to talk to one another, creating roadblocks for young people seeking a path to college.

At the outset, Lumina's board decided that using the foundation's financial firepower to spur systemic change was a better long-term investment than providing scholarships or other direct aid.

In 2006, Lumina approved 174 grants supporting research and programs. In Indiana, for instance, the Sagamore Institute for Policy Research received $226,800 to examine the impact of immigrants on the state's colleges and universities, while the Indiana International Science Fair Foundation received $10,000 to increase middle school and high school interest in science and math.

Some say Lumina's greatest contribution is not the money it gives, but the conversations it sparks that otherwise wouldn't occur because the issues are contentious and lack easy answers.

"I think it's fair to say they foster a lot of dialogue," said Patrick Callan, president of the National Center for Public Policy and Higher Education. "We don't solve problems no one is talking about."

Among those problems: the lack of transparency in college costs, which stems from a complicated patchwork of discounts. It's a shortcoming shared with the health care industry.

"Many students pay different prices even at the same school," Miller noted. "That's a very bad economic system."

And the accreditation process for higher education also can have negative effects, Miller said. Because of that process, universities are highly regulated, which some university leaders use to shut out competition or new ideas.

Those sorts of problems have no quick fix, Callan said.

"Most of what Lumina invests in are long-term investments. They have taken on a very intractable set of problems that are very hard to address and have no short-term payoffs.

"That's what foundations should be doing. [Lumina] has become a national leader in pushing government, schools, everyone to the fact that this country has not done well in education."

Lumina's publications are packed with data making that case. Fewer than 40 percent of U.S. adults have an associate's degree or higher, and in Indiana just 31 percent do. In several countries, including Canada and Japan, more than half of adults have degrees.

Critics weigh in

Intentionally absent from Lumina's agenda is anything related to the student loan industry.

Lumina recently turned down a grant request for $100,000 from a national group that wanted the money for a student lending study. Lumina said it would consider providing a grant to the group in the future if the topic were closer to its mission.

"The foundation's board recognized early on the need to distance itself from the source of its funding," Lamkin said.

But that doesn't satisfy Nassirian.

"These people made their fortune in this market with a very particular take on how things should be done. Now you suddenly dub them as philanthropists?" he said.

"Common sense tells you if you put someone once in charge of a tobacco company in charge of a health care organization to study lung cancer, he's not going to pick on the smoking industry as his first culprit."

Given the board's commitment to distancing Lumina from its source of funding, Lamkin's successor probably will have no existing or current affiliation with the student loan industry, foundation spokesman Kevin Corcoran said.

The foundation isn't providing details on the CEO search, but says a successor likely will be announced this fall.

The next CEO should be able to help national education organizations find common ground, and also have the skills to work on policy issues at the state level, where many of the financial decisions are made, said Stan Jones, Indiana's commissioner for higher education.

"They have a lot of clout to pull people together," Jones said. "They've been pretty assertive and aggressive with their agenda. They could do more in terms of working with states to develop state policy."

John Mutz, Lumina's chairman since 2002, is on the same page.

"I believe in the next tenure of leadership that we'll be even more aggressive in the public policy than we've been in the past," he said. "We may be spending more time on a state-by-state basis."

Whoever is at the helm, Lumina will face no shortage of challenges, said Callan, of the National Center for Public Policy and Higher Education.

"The jury is still out on whether or not they are going to succeed," he said. "If what they're working on doesn't succeed, the country is going to be in big trouble."

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