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Patriot News (Harrisburg, Pennsylvania)
October 20, 2007 Saturday
FINAL EDITION

PHEAA suddenly hits a wall // Student loan agency once flush with cash says
economy, federal law force sharp budget, aid cuts
BYLINE: JAN MURPHY, Of The Patriot-News
SECTION: A SECTION; Pg. A01
LENGTH: 874 words

Hard times have hit the Pennsylvania Higher Education Assistance Agency, and they are likely going to impact college
students next year.
The number of full-time students receiving state grants or the number of grants distributed is expected to decrease.
Aid that the student financial aid agency offers to help adults take classes for job training will likely dry up.
And money that PHEAA's nonprofit foundation has available to hand out to nursing students and nursing educators
won't be as plentiful.
PHEAA's board on Friday accepted a list of recommendations to reduce its spending on agency-supported programs in
2008-09 by a projected 58 percent, according to a document obtained by The Patriot-News.
This reduction means it anticipates spending $44.4 million on aid programs for students, down from $105.8 million this
year.
James Preston, PHEAA's interim president and CEO, said after the meeting that the adjustments are precipitated by a
federal law enacted in September governing student lenders and by unsettled financial market conditions.
"We're going to try to look carefully at 2008-09 going forward in terms of our mission to public service and to keeping
the business going," Preston said.
The agency, which owns $12 billion in student loans and services $80 billion in student loans now in repayment,
continues to generate revenue, but must adjust to a new business paradigm, he said.
"We're just going to have to let that play out," Preston said.
The board's action comes less than two months after its executive committee voted to award a $180,857 bonus to the
agency's former president and CEO, Dick Willey, on top of his $289,118 salary.
A total of $1.1 million in bonuses were awarded to the agency's top 23 executives in September, according to an interim
audit report released Oct. 4 by state Auditor General Jack Wagner's office.

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PHEAA suddenly hits a wall // Student loan agency once flush with cash says economy, federal law force sharp budget,
aid cuts Patriot News (Harrisburg, Pennsylvania) October 20, 2007 Saturday
The day of the audit's release, PHEAA's board asked Willey for his resignation. He resigned as of Oct. 10.
In August, the agency estimated the federal law and market changes would result in a $44 million hit on its bottom line.
"It is more than that now," Preston said. But he declined to be specific because the agency is in the market for some
bond financing and that information could impact the agency's position.
Preston said PHEAA continues to look for places to cut following the "dislocations" that are affecting the student
lending industry nationwide.
"I told the board ... once I go through the budget for the first time then I'm going to go back and do it again, because
that's how tight it's going to be for us," said Preston, who was appointed to the interim post on Oct. 11.
The agency has been under fire by state officials in recent months for such spending practices as handing out $2.5
million in bonuses to 325 employees in 2006-07; spending more than $860,000 on seven vacation-like retreats for
board members and executives and their guests since 2000; and last spring, spending $108,000 for an employee
appreciation event at Hersheypark. An agency spokesman said $29,000 of the Hersheypark event was paid for by
employees.
Reacting to the decision about anticipated cutbacks in aid programs, Rep. Josh Shapiro, D-Montgomery, said the board's
decision is "in part because they wasted money on incomprehensible excesses designed to serve the interests of
high-level PHEAA executives rather than the students."
And he said it stands to place "yet another burden on Pennsylvania families struggling to pay for college." Shapiro has
introduced legislation calling for reforms at PHEAA.
Matt Brouillette, president of the Harrisburg-based Commonwealth Foundation and a critic of the agency's spending
practices, also reacted with dismay.
"If PHEAA had cut out its swanky retreats for board members, bonuses for executives and advertising itself on
everything but the Goodyear blimp, they might not have to be reducing PHEAA-supported programs" that benefit
students, he said.
Agency spokesman Keith New said there are many unknowns that PHEAA, which is a self-supporting agency, must
deal with in the coming months. It is unclear when the markets will improve, he said.
"Regardless, we will do our best to ensure that every student receives the most aid possible," he said.
JAN MURPHY: 232-0668 or jmurphy@patriot-news.com
INFOBOX:
Student aid reductions
The changes in funding levels in some of PHEAA-supported student aid programs between this year and 2008-09:
Supplement to the taxpayer-funded allocation for state grants 2007-08: $75 million 2008-09: $35 millon
Grants to adult students to obtain new job skills 2007-08: $11 million 2008-09: zero
Funding to support the Pennsylvania Higher Education Foundation, which uses PHEAA's money to leverage private
donations to support nursing student and nursing educator grants 2007-08: $10 million 2008-09: zero
Supplement to the taxpayer-funded New Economy Technology Scholarships that assist students majoring in science or

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PHEAA suddenly hits a wall // Student loan agency once flush with cash says economy, federal law force sharp budget,
aid cuts Patriot News (Harrisburg, Pennsylvania) October 20, 2007 Saturday
technology fields 2007-08: $2.45 million 2008-09: zero
Funding for the merit-based Academic Excellence Scholarships to be limited to renewal of existing recipients only
2007-08: $4.1 million 2008-09: $3.1 million
Source: Pennsylvania Higher Education Assistance Agency
WEBHEAD: PHEAA suddenly hits a budget, student aid crunch
-ENDNOTES: AN INFOBOX APPEARS AT THE BOTTOM OF THIS STORY.
LANGUAGE: ENGLISH
PUBLICATION-TYPE: Newspaper
JOURNAL-CODE: hrn
SUBJECT: STUDENT LOANS (92%); STUDENTS & STUDENT LIFE (92%); COLLEGE STUDENTS (91%);
STUDENT FINANCIAL AID (91%); COLLEGES & UNIVERSITIES (90%); BUDGETS (90%); GRANTS & GIFTS
(90%); APPOINTMENTS (89%); RESIGNATIONS (89%); AUDITS (89%); US STATE GOVERNMENT (78%);
NONPROFIT ORGANIZATIONS (78%); GOVERNMENT CONTROLLERS & AUDITORS (77%);
INTERNATIONAL ASSISTANCE (73%); BANKING & FINANCE (73%); EXECUTIVES (73%); INTERIM
MANAGEMENT (73%); FOUNDATIONS (72%); WAGES & SALARIES (71%); TALKS & MEETINGS (70%)
LOAD-DATE: October 20, 2007

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