Tag Archives: Education

Young Turk voters show deep divisions of Erdogan era

Demhat Tari poses for a picture during an interview with Reuters in Diyarbakir, June 4, 2018.REUTERS/Umit Bektas

By Umit Bektas

ANKARA (Reuters) – Eighteen-year-old student Sena Su Baysal, a first-time voter in Turkey’s election on Sunday, can’t remember life before President Tayyip Erdogan took power but she wishes she had grown up in those earlier times.

“Turkey used to be a more modern and secular country,” she says at home in the capital Ankara, where she lives with her parents. “I would have liked to have lived then.”

Mehmet Salih Takil, another student born in 2000, disagrees. He says Erdogan is his idol, and he criticizes the “old Turkey”.

“I was two years old when Erdogan came to power. My family tells me of the pre-2000 years, life was difficult then. I wouldn’t have wanted to live in those years,” he said at an election rally for Erdogan in Ankara.

Like the rest of the country, Turkish teenagers taking part for the first time in elections on Sunday have sharply differing takes on Erdogan – the most successful and polarizing leader in recent Turkish politics.

His AK Party won elections in 2002 and he took power early the next year, ruling the country since then, first as prime minister and then as president.

Polls suggest Sunday’s vote may be close, with the AK Party possibly losing its parliamentary majority and the presidential vote potentially going to a second round.

Erdogan’s supporters, many of them pious conservatives from Turkey’s rural heartlands, say he has brought economic growth and restored Islam to public life. Opponents say he has eroded the secular pillars of the republic established by Mustafa Kemal Ataturk and is plunging Turkey into authoritarianism.

EDUCATION SYSTEM

But the young Turks Reuters spoke to, all born in the first six months of the millennium, share an overriding concern for education and employment prospects.

Arman Tihminlioglu has chosen to attend university in Germany instead of Turkey, saying that repeated changes to Turkey’s education system had worried students. A new curriculum adopted last year excluded Darwin’s theory of evolution, university entrance exams were changed, and money has poured into “Imam Hatip” religious schools.

“The education system has changed seven times during my high school years. Morale is low for all young people, but it is the people who are responsible for all this. After all, we are ruled by those we elect,” Tihminlioglu said.

Welat Aydin, a Kurdish citizen in a remote village in the southeastern province of Mardin, is concerned about the status of the Kurdish language, and a lack of resources in schools.

“We did not receive education in our mother tongue. Education is of poor quality anyway. When there is no chemistry teacher, the literature teacher takes chemistry classes. That is why I did not apply for university entrance exams. I didn’t believe I would stand a chance,” he said.

A young farmer in the southeastern province of Diyarbakir, Demhat Tari left education after secondary school, and instead traveled to Istanbul to find work.

“I was earning 1,500 Turkish lira ($320) a month which went to pay rent, water and electricity bills and no money was left. When I realized that there was no way I could save money, I returned to my village,” he said.

“There are no jobs, the dollar is on the rise, gold is expensive. As things are, I will never be able to get married.”

FOREIGN POLICY

Cag Buyurgan, who is studying for university exams and wants to be a dentist, says Erdogan’s policies have been divisive.

“If he does not win these elections, we can once again restore the unity we have lost and together solve our problems one by one,” Buyurgan said in Ankara.

Twin sisters Sinem and Simge Tuncbilek think otherwise. They say that despite Turkey’s problems, things can get back on track, and both believe Erdogan will win on Sunday.

“We stand up for one another. Sure, we have problems but these are nothing that cannot be resolved,” Sinem said.

“The name of Erdogan for us is the name of love. He is a very good father, he has stood up for the whole Islamic world. We believe in his ideal of great Turkey.”

Zeynep Arslan, a volunteer for the opposition Islamist Saadet (Felicity) Party, has been wearing a Muslim headscarf since she was 12 – a right which Erdogan’s government championed – but she faults him for his foreign policy.

“Because I’m wearing the scarf, this doesn’t mean that I must ignore the country’s problems. This government allows me to cover my head, but it doesn’t sever relations with Israel,” she said.

In the secular Istanbul district of Kadikoy, Derin Kaleli says she is losing the freedom to choose how to dress.

“I cannot wear the clothes I like. People in Europe live as they wish. Here I am not as free as I would like to be. We are becoming more and more conservative. We are worried for the future,” she said.

Takil said the new executive presidency which will be instituted following the elections would restore some of the power Turkey enjoyed as the center of the Ottoman Empire.

“This is what the West fears. All plots of the Zionists, the freemasons, and the children of evil against Turkey will be foiled,” he said.

Arslan, however, says Erdogan’s supporters are too quick to condemn all opposition as traitors, making life almost unbearable. “There is immense pressure on us. We are living in a society which is similar to George Orwell’s 1984,” she said.

(Editing by Dominic Evans and Alison Williams)

Venezuelan schools emptying as Chavez legacy under threat

Juliani Caceres, grand daughter of Carmen Penaloza, have rice and platain for lunch at her home in San Cristobal, Venezuela April 5, 2018. Picture taken April 5, 2018. REUTERS/Carlos Eduardo Ramirez

By Vivian Sequera and Francisco Aguilar

SOCOPO, Venezuela (Reuters) – It is mid-morning on a weekday yet all that can be heard in the once-bustling corridors of the Orlando Garcia state primary school is the swish of palm trees outside in the wind.

The white, tin-roof building in the town of Socopo once held nearly 400 children, yet closed two months ago in a protest by teachers and parents at low salaries and lack of school lunches.

Nearly 3 million children are missing some or all classes in Venezuela, according to a study by universities, in a depressing knock-on from a deepening economic crisis that could cause long-lasting damage to the South American country.

Venezuela has about 8 million school children in total, and free education was a cornerstone of ex-President Hugo Chavez’s 1999-2013 socialist rule of the OPEC nation.

Now, along with hospitals and other flagship welfare projects, the education sector is in crisis, heaping pain on Venezuelans and eroding Chavez’s legacy as his successor Nicolas Maduro seeks re-election in a May 20 presidential vote.

In Socopo, in the agricultural savannah state of Barinas that was once home to Chavez, half of the 20 public schools, including Orlando Garcia, closed completely in February, mid-term.

They have since reopened, but, along with the rest of Barinas’ approximately 1,600 public schools, they are operating just three days a week.

Venezuela’s economic implosion has led to millions suffering food shortages, unable to buy basic goods. Prices double every two or three months and the currency is worth less every day.

Education experts fear a stunted generation.

“Hungry people aren’t able to teach or learn,” said Victor Venegas, president of the Barinas chapter of the national Federation of Education Workers.

“We’re going to end up with a nation of illiterates.”

A major bonus for school children was once free food but state food programs are now intermittent, and when lunches do come, they are often small and missing protein.

The problems are felt across the country, with children often falling unwell or dizzy due to poor nutrition.

“We were singing the national anthem and I felt nauseous. I’d only eaten an arepa (a local cornbread) that day, and I fainted,” recounted Juliani Caceres, an 11-year-old student in Tachira state on the border with Colombia.

“BACK TO THE 19TH CENTURY”

While critics lambast him for incompetence and corruption, Maduro blames Venezuela’s crisis on Washington and the opposition, accusing them of waging an “economic war.”

Officials constantly downplay the social problems.

“There may be weaknesses in the food program in some municipalities, but we are always attentive and looking to improve the situation,” Education Minister Elias Jaua said in an interview in Barinas.

The government insists education remains a priority and says that 75 percent of the national budget goes to the social sector.

“Amid the economic war, the fall of oil prices, international harassment and financial persecution, not a single school has closed,” Maduro said at a Caracas rally last month, referring to U.S. sanctions against Venezuela.

His Barinas governor, Argenis Chavez, however, acknowledged the closures in Socopo, blaming them on the opposition as part of a plan to sabotage the upcoming election.

Despite Venezuela’s plethora of problems and Maduro’s personal unpopularity, he is widely expected to win re-election, given that the opposition’s most popular leaders are banned from standing and the main anti-Maduro coalition is boycotting the vote on grounds it is rigged in advance.

One opposition leader, former state governor Henri Falcon, has broken with the boycott and is hoping Venezuelans’ fury at their economic woes will translate into votes for him.

According to the opposition, prices rose more than 8,000 percent in the 12 months to March.

Teachers in the public sector earn around four times the minimum wage of just over a dollar a month at the black market exchange rate. That is nowhere near what Venezuelans need to feed themselves and their families.

“With my last paycheck, I was able to buy a kilo of meat and a kilo of sugar,” said Roxi Gallardo, a 35-year-old teacher in the Andean city of San Cristobal who, like so many others, is looking to leave Venezuela.

In addition to food shortages, school communities are suffering from a collapse in transport systems and inability to pay bus fares, plus frequent water and power-cuts.

“We’re heading back to the 19th century,” said Luis Bravo, an education researcher at Caracas’ Central University.

Doctor Marianella Herrera, at the same university, said the combination of inadequate nutrition and patchy education would cost Venezuela dearly in the future, depriving it of skilled workers.

“The longer this goes on without reversing the situation, the tougher it will be,” she said.

Eudys Olivier, a 39-year-old homemaker in a poor area of San Felix in southern Bolivar state, and her two children, live off her husband’s bakery wage of just under $5 per month.

“If there isn’t enough food, I prefer to leave the children at home,” she said. “I want them to go to school every day because it’s their future. But I can’t send them hungry.”

(Reporting by Vivian Sequera and Francisco Aguilar, Additional reporting by Maria Ramirez in Bolívar and Anggy Polanco in Tachira; Writing by Girish Gupta; Editing by Andrew Cawthorne, Daniel Flynn and Rosalba O’Brien)

Oklahoma House approves education tax bill amid teacher walkout

A teacher stands next to a music stand holding a sign during a school walkout in Tulsa, Oklahoma, U.S. April 4, 2018. REUTERS/Lenzy Krehbiel-Burton

By Lenzy Krehbiel-Burton

TULSA, Okla. (Reuters) – The Oklahoma House of Representatives approved a $20 million internet sales tax on Wednesday as part of a revenue package aimed at ending a statewide walkout by teachers seeking higher pay and more education funding.

The walkout, now in its third day, is the latest upheaval by teachers in a Republican-dominated state after a successful West Virginia strike last month ended with a pay raise. More than 100 school districts in Oklahoma will remain shuttered on Thursday.

Lawmakers approved the tax measure as hundreds of teachers, parents and students packed the Capitol in Oklahoma City to press for a $200 million package to raise education spending in Oklahoma, which ranks near the bottom for U.S. states.

“This is a win for students and educators and signals major progress toward funding the schools our students deserve,” Alicia Priest, head of the Oklahoma Education Association, the teachers union, said in a statement after 92 lawmakers approved the sales tax measure.

Across the state, protests were held near schools and along streets, with demonstrators holding signs bearing slogans such as “35 is a speed limit, not a class size.”

The tax bill requires third-party vendors on internet sites such as Amazon to remit state sales taxes on purchases made by residents.

The bill now goes to the Senate, where lawmakers on Thursday will weigh a measure expanding gaming at Native American casinos as part of the $200 million package. Lawmakers are also weighing such options as repealing exemptions for capital gains taxes.

The teachers’ protests reflect rising discontent after years of sluggish or declining public school spending in Oklahoma, which ranked 47th among the 50 states in per-student expenditure in 2016, according to the National Education Association.

Kentucky teachers also have demonstrated against stagnant or reduced budgets by a Republican-controlled legislature. Arizona educators have threatened similar job actions.

“My books were old when I was in high school more than 15 years ago and chances are a lot of them are still being used today,” Oklahoma City resident Ashley Morris said by telephone from a statehouse rally.

“Students just aren’t getting what they need or deserve and that puts teachers in a tough situation,” said Morris, whose roommate is a first-grade teacher who relies on a second job to make ends meet.

(Reporting by Lenzy Krehbiel-Burton in Tulsa, Oklahoma; Writing by Ian Simpson; Editing by Ben Klayman and Leslie Adler)

Saudi Arabia says revamping education to combat ‘extremist ideologies’

FILE PHOTO: Saudi Arabia's then Deputy Crown Prince Mohammed bin Salman reacts upon his arrival at the Elysee Palace in Paris, France, June 24, 2015. REUTERS/Charles Platiau/File Photo

RIYADH (Reuters) – Saudi Arabia is revamping its education curriculum to eradicate any trace of Muslim Brotherhood influence and will dismiss anyone working in the sector who sympathizes with the banned group, the education minister said.

Promoting a more moderate form of Islam is one of the promises made by Crown Prince Mohammed bin Salman under plans to modernize the deeply conservative Muslim kingdom.

The education ministry is working to “combat extremist ideologies by reviewing school curricula and books to ensure they do not reflect the banned Muslim Brotherhood’s agenda,” Ahmed bin Mohammed al-Isa said in a statement issued on Tuesday.

It would “ban such books from schools and universities and remove those who sympathize with the group or its ideology from their posts,” he added.

In September, a large Saudi public university announced it would dismiss employees suspected of ties to the Muslim Brotherhood, adding to concerns that the government is clamping down on its critics in academia and beyond.

Earlier this month, Crown Prince Mohammed told CBS in an interview that Saudi schools have been “invaded” by elements of the Muslim Brotherhood, which has been designated by Saudi Arabia as a terrorist organization along with other militant groups such as al Qaeda and Islamic State.

INTERNAL THREAT

The young crown prince has already taken some steps to loosen Saudi Arabia’s ultra-strict social restrictions, scaling back the role of religious morality police, permitting public concerts and announcing plans to allow women to drive.

The ruling Al Saud family has always regarded Islamist groups as a major internal threat to its rule over a country where appeals to religious sentiment resonate deeply and an al Qaeda campaign a decade ago killed hundreds.

Since the kingdom’s founding, the Al Saud have enjoyed a close alliance with clerics of the ultra-conservative Wahhabi school of Islam who have espoused a political philosophy that demands obedience to the ruler.

By contrast the Brotherhood advances an active political doctrine urging revolutionary action.

A political Islamist organization founded in Egypt nearly a century ago, the Muslim Brotherhood says it is committed to peaceful activism and reform through elections, and its adherents span the region, holding elected office in Arab countries from Tunisia to Jordan.

Brotherhood members fleeing repression in Egypt, Syria and Iraq half a century ago took shelter in Saudi Arabia, some taking up roles in the kingdom’s education system and helping to establish the Sahwa or “Awakening” movement which agitated in the 1990s for democracy.

The Sahwa mostly fizzled, with some activists arrested and others coaxed into conformity, though admirers and its appeal lingered.

(Adds dropped first name of education minister in paragraph 3.)

(Reporting by Marwa Rashad; Editing by Ghaida Ghantous and Andrew Heavens)

Trump administration will allow states to test Medicaid work requirements

U.S. President Donald Trump attends the Women in Healthcare panel hosted by Seema Verma (R), Administrator of the Centers for Medicare and Medicaid Services, at the White House in Washington, U.S., March 22, 2017.

By Yasmeen Abutaleb

WASHINGTON (Reuters) – The Trump administration said on Thursday it would allow states to test requiring some Medicaid recipients to work or participate in community activities such as volunteering or jobs training as a condition of eligibility for the government health insurance program for the poor.

The Centers for Medicare and Medicaid Services issued guidance making it easier for states to design and propose test programs that implement such requirements. States must propose such changes through waivers and receive federal approval.

Seema Verma, the agency’s administrator, said the policy guidance came in response to requests from at least 10 states that have proposed requiring some Medicaid recipients to work or participate in activities that may include skills training, education, job search, volunteering or caregiving. Those states include Kentucky, Maine, New Hampshire, Arizona, Indiana and Utah.

Certain Medicaid populations would be exempt from the rules, including those with disabilities, the elderly, children and pregnant women. Verma also said states would have to make “reasonable modifications” for those battling opioid addiction and other substance use disorders.

“This gives us a pathway to start approving waivers,” Verma said on a call with reporters on Wednesday. “This is about helping those individuals rise out of poverty.”

Under the 2010 Affordable Care Act, former Democratic President Barack Obama’s signature domestic policy achievement commonly known as Obamacare, 31 states expanded Medicaid to those making up to 138 percent of the federal poverty level, adding millions of people to the rolls.

Republicans have repeatedly failed to repeal and replace Obamacare, a top campaign promise of President Donald Trump. Instead, the Trump administration has sought to weaken the program through executive orders and administrative rules.

The Obama administration opposed state efforts to implement work requirements in Medicaid because it could result in fewer people having access to health insurance.

For instance, Kentucky last year proposed work requirements for able-bodied adults to get insurance and establishing new fees for all members based on income. A study found the proposal would reduce the number of residents on Medicaid by nearly 86,000 within five years, saving more than $330 million.

Republicans argue that Medicaid was created to serve the most vulnerable and has become bloated under Obamacare. Verma and other Republicans said implementing work and community engagement requirements could help improve health outcomes by connecting people with jobs and training.

(Reporting by Yasmeen Abutaleb; Editing by Peter Cooney)

Student tax breaks survive the tax bill, make the most of them

Graduates celebrate receiving a Masters in Business Administration from Columbia University during the year's commencement ceremony in New York in this May 18, 2005 file photo. dreams of many college seniors. REUTERS/Chip East/Files

By Gail MarksJarvis

CHICAGO (Reuters) – If you are going to college, getting extra training for a job, or paying off student loans, there are myriad tax breaks worth thousands of dollars to people burdened by college costs.

Although many were threatened in early versions of the tax bills crafted by the Senate and House and Representatives, students can breathe a sigh of relief that the benefits all remain. Tax experts suggest using these strategies before the end of December to get every penny possible:

* Student loan interest deduction

About 12.4 million borrowers make use of this deduction. You can deduct up to $2,500 in interest per year, which can result in tax savings that for some top $600.

The deduction depends on how much you have paid in a single tax year toward your student loans and also depends on your income.

If your loan payments made so far for 2017 do not qualify for the $2,500 maximum deduction and you are still paying off student loans, consider paying more before the end of the year to boost the deduction, said Mark Kantrowitz, publisher of www.Cappex.com. You can find out how much interest you have paid so far this year from the student loan servicer that collects your monthly payments.

To take the full $2,500 deduction, an individual cannot have a modified adjusted gross income over $65,000, and for couples $135,000. For individuals with incomes up to $80,000 and for married couples earning up to $165,000, smaller deductions apply.

Paying extra by Dec. 31 would be particularly wise if your income next year is likely to put you over the income cutoff, said Gil Charney, director of tax and policy analysis for The Tax Institute at H&R Block.

* College credits

Both the American Opportunity Credit and Lifetime Learning Credit provide tax breaks to help pay for education, but apply to different stages.

For undergrads, the American Opportunity Credit is worth up to $2,500 per year, but can be used only for the first four years of college. Students must attend at least half-time.

If you have not paid enough tuition and fees to qualify for the full credit this year and have been billed for the first quarter or semester in 2018, consider paying the bill now to maximize the 2017 credit, Charney said. The credit covers 100 percent of the first $2,000 in tuition and fees paid in a year; then 25 percent of the next $2,000.

Remember, there are income limits. You can’t get the full credit with modified adjusted gross income over $80,000; $160,000 for couples.

If your income will exceed the limit in 2018 but qualifies in 2017, this would be the year to capture as much as possible.

The same strategy applies to the Lifetime Learning Credit, which is valuable to part-time students, graduate students or workers trying to enhance job opportunities with an extra course or training.

The Lifetime Learning Credit is worth $2,000, or 20 percent of the first $10,000 spent in a year. So consider paying ahead for 2018 education, especially if you are near an income cutoff: over $56,000 in modified adjusted gross income for individuals, or $112,000 for couples for the maximum credit.

Keep in mind that if two spouses are going to school they cannot both claim the $2,000; it is a maximum per household. The American Opportunity Credit is kinder because it applies per student. Parents with three children in college at the same time could claim the credit for each child and do it annually for the four years a child is in an undergraduate program.

For more details, see IRS Publication 970

The opinions expressed here are those of the author, a columnist for Reuters.

(Editing by Beth Pinsker and Leslie Adler)

An update on winners and losers on the U.S. tax scorecard

A man walks the campus of the City College of New York in the Harlem borough of New York, U.S., December 16, 2017. REUTERS/Eduardo Munoz

By Beth Pinsker

NEW YORK (Reuters) – In the lead-up to the conference agreement for the U.S. Tax Cut & Jobs Act released on Friday, there were too many moving parts for most Americans to know how it would affect them.

Until the bill is voted into law, the various provisions are still a moving target, but taxpayers now have a better sense of the real math of what it means to them.

Here is an update on what some of the key issues would mean to your wallet:

* EDUCATION

Graduate students pleaded with Congress not to adopt the U.S. House of Representatives’ proposal to make tuition waivers count as taxable income. In the end, the conference bill left that provision out.

The final bill still allows for individuals to deduct up to $2,500 in student loan interest and retains the current selection of higher education tax credits.

Teachers can continue to deduct up to $250 in supplies. Employees can still receive tuition without claiming it as income.

However, the bill changes the rules for the use of contributions to 529 college savings plans. In the past, the funds could only be distributed for higher education expenses. The final bill allows for $10,000 a year to be taken for each child’s K-12 expenses.

* CHARITABLE DEDUCTIONS

The charitable deduction was never going to go away, but experts predict many fewer people will itemize deductions under the new rules, which almost double the standard deductions and get rid of personal exemptions.

People who expect not to itemize their taxes in the future should think about making major donations before Dec. 31 to capture as many tax advantages as they can.

The compromise in the tax bill to double the estate tax exemption also would affect charitable giving because fewer wealthy people will need to donate assets to avoid going over the limit and sticking their heirs with a tax bill.

* CHILD TAX CREDITS

The conference bill settles on a $2,000 per child deduction, with $1,400 of it refundable to people with no income tax liability. The deduction is now phased out at a much higher income level.

These credits will help offset the tax bill’s removal of personal exemptions, which would hit families with children hard.

* MEDICAL DEDUCTIONS

There is good news for those worrying that the tax overhaul will do away with the itemized deduction for medical expenses.

The conference bill not only keeps the deduction, it also makes it available for expenses above 7.5 percent of adjusted gross income for the next two years, rather than the recently established 10 percent threshold.

* ALIMONY

Get ready for a flood of divorces in 2018. The final bill does away with a tax deduction for paying alimony and with the need for those receiving alimony to claim it as income, but it delays this until 2019.

Those who were rushing to get divorced by Dec. 31 can take a deep breath. But as the news sinks in, expect couples where one spouse is anticipating alimony to file for divorce sooner rather than later, or face tough negotiations on how much he or she might get.

* STATE AND LOCAL TAXES

The compromise in the final bill is that filers will be able to claim $10,000 in some combination of state and local taxes, including real estate taxes. The cap on mortgage interest was bumped down from $1 million to $750,000.

There has been a lot of worry that the proposed changes would dampen home sales because it will change the math on affordability. While the final bill ended up better for homeowners than expected, there are still lingering questions about its impact.

* BRACKETS AND AMT

For those on the lower end of the income scale, the change in brackets will probably not be top of mind, at least until the Internal Revenue Service sorts out the final tax tables and starts to adjust withholding rates, probably sometime in late winter.

Wealthy Americans are getting somewhat of a mixed bag, however. The top rate is dropping to 37 percent, but the Alternative Minimum Tax remains.

While this sounds like something to mourn, the AMT might not have as big an impact as people generally believe.

* RETIREMENT SAVINGS

When the tax overhaul process started, the way we save for retirement was on the table for big changes, including to workplace 401(k) retirement savings plans. In the end, however, Congress left it all pretty much alone.

(Editing by Lauren Young and Lisa Von Ahn)

Thousands of protesters disrupt traffic in India’s financial capital

Thousands of protesters disrupt traffic in India's financial capital

By Rajendra Jadhav

MUMBAI (Reuters) – More than 200,000 protesters poured into India’s financial capital on Wednesday, disrupting traffic and straining the railway network, to press their demands for reserved quotas in government jobs and college places for students.

Rising unemployment and falling farm incomes are driving farming communities across India, from the state of Haryana in the north to Gujarat in the west, to redouble calls for reservations in jobs and education.

“Farming is no longer profitable and jobs are not available,” said one protester, Pradip Munde, a farmer from Osmanabad, a town more than 400 km (250 miles) southeast of Mumbai. “Reservation can ensure us better education and jobs.”

Two-thirds of India’s population of 1.3 billion depend on farming for their livelihood, but the sector makes up just 14 percent of gross domestic product, reflecting a growing divide between the countryside and increasingly well-off cities.

Young people and senior citizens of western India’s Maratha community waved saffron flags in a protest police said was free of incidents of violence, with more than 10,000 policemen on guard amid an estimated turnout of 200,000 demonstrators.

Traffic came to a halt in many parts of the business district, while protesters jammed suburban trains.

It was the concluding protest of a series of 57 marches last year across the surrounding western state of Maharashtra, organized by the state’s Maratha community to press its demands.

The city’s famed dabbawalas, who deliver packed lunches to hundreds working in offices across Mumbai, suspended operations for the day, as did schools in the affected area.

(Reporting by Rajendra Jadhav; Editing by Clarence Fernandez)

Bond market braces for impact of New York’s free tuition plan

Graduates celebrate receiving a Masters in Business Administration from Columbia University during the year's commencement ceremony in New York in this May 18, 2005 file photo. REUTERS/Chip East/Files

By David Randall

NEW YORK (Reuters) – Little known private colleges that are already struggling to grow their revenues are facing a new threat that could further weaken their finances and make borrowing harder: free tuition at public universities.

The State of New York passed in April a bill that will by 2019 offer free tuition at community colleges and public universities in the state to residents whose families make less than $125,000 per year. At least six other states are considering similar laws, to ease the burden of student debt that has doubled since 2008 to over $1.3 trillion, according to the Federal Reserve Bank of New York.

Fund managers expect that such initiatives, combined with other pressures that have long been building up, will cause bonds issued by smaller private colleges to fare far worse than the broader market if interest rates continue to rise.

So far the bond market has largely ignored such a threat as historically low rates encourage many investors to take on greater risks in search for better yields.

“There are many schools that are going to be losers in this game,” said R.J. Gallo, a portfolio manager at Federated Investors in New York.

Gallo, who owns debt issued by well-known institutions such as Northeastern University in Boston and Northwestern University in suburban Chicago, said that bonds of lower-rated schools yield only about 1.3 percentage points more than AAA-rated ones. That, for him, is not enough to compensate for the additional risk.

Nearly 80 percent of college-age students in New York qualify for the scholarship, according to state estimates. While the state has yet to say how many new students it expects to take advantage of the plan, analysts say that they expect a significant number forgoing private colleges located in the Northeast and opting for public options instead.

RECORD HIGH ‘DISCOUNT RATES’

The prospect of competition from free public programs comes at a time when many private colleges are already forced to offer incoming students discounts because of stagnant personal incomes and years of above-inflation tuition hikes.

The proportion of gross tuition revenue that is covered by grant-based financial aid averaged a record 49.1 percent for full-time freshmen in the current school year, according to a May 15 report by the National Association of College and University Business Officers.

The average U.S. private non-profit four year institution charges $45,370 per year in tuition, room and board, a 12 percent increase over the last five years, according to the College Board. Graphic: http://tmsnrt.rs/2qHVUBj

Moody’s forecasts that financial pressures will triple the number of schools that close their doors nationwide from today’s rate of two to three schools per year. Free public education will add to those pressures, said Christopher Collins, an analyst at Moody’s.

“It’s a highly competitive sector and there’s also now the fact that these really small schools are competing with public colleges and universities with a much lower price,” he said.

Given that there are more than 1,000 private colleges and universities nationwide, closures are rare.

Earlier this year, Connecticut’s Sacred Heart University and St. Vincent’s College announced plans for a potential consolidation. Last November, Dowling College in Long Island, New York, filed for bankruptcy after defaulting on $54 million in debt issued through local government agencies.

New York’s scholarship plan alone is unlikely to cause any private school to go under, said college financial aid expert Mark Kantrowitz, the president of consulting service Cerebly Inc. Instead, regional private schools that tout their small class sizes may lose their appeal if the competition from free programs forces them to lower tuition and they try to offset that by increasing enrollment.

“These colleges justify their costs by saying that you will get a more personal education, but will increasingly start to fail,” he said, adding that he expects to see more private colleges closing their doors over the next decade.

Nicholos Venditti, a bond fund manager at Thornburg Investment Management in Santa Fe, New Mexico, said he has been cutting his funds’ exposure to private college debt in part because other states could soon emulate New York’s model.

“If free tuition becomes a widespread phenomenon, it puts pressure on every higher education model throughout the country,” he said.

(Reporting by David Randall; Editing by Jennifer Ablan and Tomasz Janowski)