Student loan misuse tempting, profitable but illegal
By DAVID WEED Staff Reporter
Instead of using the guaranteed student loan for education, he deposited it in the bank and let it accumulate interest for four years.
When he graduated, he immediately paid the loan back - just the principal, because he did not owe any interest on the loan. The government took care of that.
The interest the loan had accumulated for four years in his savings account was his to keep.
This is an example of how people are saving and investing their guaranteed student loans, such as those from the Higher Education Loan Program, instead of spending them for educational expenses, or supporting their hard Hawk, president of HELP in Kansas.
"There have been a few cases," Hawk said this week, "and some have been prosecuted. But to the best of my
knowledge, none have been prosecuted in Kansas."
TO MISUSE THE LOAN is a violation of federal law, Hawk said, punishable by fine, imprisonment or both.
"I bought a stereo with my HELP LOAN," he said. "I got $2,000 loan and I spent 600 of it on new stereo. I should have done it before I needed the money for school."
One of the problems with prosecuting students who misuse loans, Steve Dorsson, student financial and program specialist for the Chesapeake Bay City, Mo., said, was catching the offender.
FOR EXAMPLE, courts have decided
that purchasing an automobile is an acceptable use of a student loan, Dorssom said.
"They've got to have transportation to get to school and back." he said.
He said unless a student blatantly misused the loan, such as making a and investment, the courts would not find him guilty.
Jerry Rogers, director of KU financial aid, said that catching student misuse of financial aid was hindered by the nature of student finances.
"Students don't separate their finances like businesses, so student funds tend to all be in one or a few accounts," Hawk said. "It's hard to prove which money is the
Obtaining or holding cash will not need the money to meet expenses are getting loans. Royers said.
"People no longer have to list their adjusted gross income on the application
"PARENTS OR STUDENTS invest this money," Dorsass said, "and use it, invest it, for three or four years. If the loan is paid back within a nine month period after graduation, the federal government pays the taxpayer. Congress has chosen to ignore these facts."
because of the Middle Income Student Assistance Act," he said.
Hawk said more people would invest financial aid loans, 'but the amount of money earned plus the risk one takes in finance a law makes it not very profitable'.
Students also misuse short-term financial aid loans, a KU student who asked not to be identified, said.
"A LOT OF PEOPLE take out small loans around spring break," she said, "and finance vacations with them.
"I went to Padre Island last year. I went in and said I needed some money for living expenses. I pointed out that I needed the
money for living expenses, and I was really never questioned about the use."
Jeff Weinberg, associate director on financial aid and "we know not everyone is trying to rip us off. we students tell the truth when they tell us what they need
Another KU student, who asked not to be identified, said he was with a friend when the friend got a small financial aid loan.
He said the student bought a pound of marijuana, sold it, paid the loan off, and kept the profit.
"We make about 6,000 of these small loans every year," Weinberg said, "for over $1.5 million."
"The student can use it for luxury items if he wants to lie, but it says on the contract that if he lies he can be suspended or expelled.
"The program was designed for students to use for tuition, books, and living expenses."
ROGERS SAID the number of KU student loans had tripped in the past few years, partly because no bank in Lawrence made student loans anymore.
Bill Lienhard, vice president of the First National Bank of Lawrence, said, "We could be swamped with student loans, but they aren't the right loans to land from a lending institution standpoint."
Karen Gaulke, student loan assistant at the First National Bank, said the bank had trouble collecting past student loans.
Lienhard said the volume of student loans forced them to stop making them.
"Most banks had the same problem," said. "We woke up one day and found we were flooded with student loans."
Out-of-town students are sent to their hometown banks to get loans through their parents. Lienhard said.
"Some students," Gaulke said, "just didn't understand the loan, what they were doing and the importance of paying it."
THE UNIVERSITY DAILY
KANSAN
The University of Kansas—Lawrence. Kansas
Thursday, March 6, 1980
Vol. 90, No. 107
Mall promoted by Action 80
By LYNN ANDERSON Staff Renorter
Is a proposed downtown shopping mall at "Hollies-Royce in a Volkwagen town?" A diamond tiara would have to mortgage the property. A monster that would control its master?
These questions were all raised yesterday in the aftermath of a Topeka legislative hearing on the use of industrial resources to finance a downtownwerenever evacuation.
At the hearing Lawrence City Manager Buford Watson testified in support of the
use of bonds for mail construction. Watson is an ex-officio member of Action 80, a group of private citizens promoting mail development.
HIS ROLE in the hearing was questioned at Tuesday night's city commission meeting by Commissioner Marci Fran-
Mall talk
JEFF HARRING/Kansan sta
Lawrence City Manager Buffalo Watson (right) discusses the proposed downtown building with Barbara Wagher, 7211 Louisiana St., following a Senate Local Government Committee hearing on a bill that could provide the law for financing
of the project, Watson, who testified in favor of the bill, spent more than a half-hour following the hearing discussing the mall proposal with Waggoner and another Lawrence resident also against the proposal.
Finance bill for mall criticized
By BLAKE GUMPRECHT
Staff Reporter
TOPEKA - A bill that pave the way for financing a proposed downtown Lawrence shopping mall was sharply criticized by local Government Committee hearings.
Meanwhile, Buford Watson, Lawrence city manager and Warren Rhodes, president of Action 88, a private group that is leading the downtown development project, presented their reasons for asking him to return German, DALawrence, to sponsor the bill.
A downtown merchant, a member of the East Lawrence Neighborhood Association and a concerned citizen urged the committee to reject the proposal.
The committee is expected to vote on the bill today or tomorrow, according to committee chairman Jan Meyers, R-Overland Park.
Under current state law, only tax increment bonds—which are repaid through property taxes—can be used for downtown redevelopment.
THE BILL would allow Kansas municipalities to issue industrial revenue bonds as a low-interest source of money for downtown redevelopment projects.
Proponents of the bill insist that it would be easier to attract investors with bonds because of low interest rates available.
If the proposal becomes law, city of officials say, industrial revenue bonds could be used to finance the building of the mall, and financial bonds could be used to clear the site.
"I have not asked the city government to finance through bank contributions of money, but the financier would be unaffected to established businesses. If I need money today, I have to walk into a bank."
"We're looking at 15 to 17 percent in the bottom line. It looks be feasible with rates like this. It's all a matter of the bottom line. But if we're able to get money at 10 to 16 percent, it might be better."
"It is quite evident that the money market is going to have a tremendous effect on whether we are able to redevelop and improve our buildings in an important option that we have to look at.
Larry S. Flaunny Sr., president of Learny's department store, said that Weaver's had spent $100,000 on imitations and planned to spend pro-business $150,000 in 1980.
OPPONENTS OF THE BILL charge that the issuance of industrial revenue bonds to mall developers would be unfair to existine retailers.
"If you can't use industrial revenue bonds, then the interest rates might be so high that they would be private investors," said Gary Sith, downtown redevelopment coordinator for Manhattan. "Without private investment, downtown development doesn't mean a business."
Suburban development, they say, would be significantly cheaper than urban redevelopment.
The bill's backers, however, contend that without the use of industrial revenue bonds, downtown development might not be possible in Lawrence.
the suburban plan, saying that it could cause the demise of downtown.
A 500,000-square-foot suburban mall south of Lawrence had been proposed originally by developers.
DOWNTOWN MERCHANTS and many city officials have been strongly against
Two Lawrence residents who testified yesterday said that arguments about financing were ridiculous until an actual plan for the mail had been announced.
She cited a recent study, commissioned by the Downtown Lawrence Association, which stated that 60,000 square feet would be needed in Lawrence by 1985.
The Cleveland development firm of Jacobs, Viscansi, Jacobs has released no information about the project except that it will be used to install a temporary airstore and controlled temperature storage.
She said she had asked last summer for the matter to be placed on a commission agenda and someone "forget to add it." She also said that 25 residents had left the meeting, the issue was raised and voted on, she said. Francisco cast the only dissenting vote in the 4-1 vote.
"The real question is," Lawrence Roberta Barbara, manager 728 Louisiana, told me. "I talk about the financial matters of the plan when they haven't even come up with a plan."
cisco, who said the move was an example of the cloud of secrecy Action **Action** has hidden in while nearing its nexus for a mail
Barbara Willits, a board member of Citizens For a Better Downtown, and a member of the East Lawrence Neighboring downtown mail.wallace.com
She also complained that residents were not being informed of the group's deliberations.
The membership of Watson and Mayor Barkley Clark in Action 80, Francisco said, has never been open to public scrutiny.
"Action 80 has gone through at least six alternatives in developing the mall site," she said, "and no one knows what they are."
FRANCISCO SAID she was glad the members of Action 80 were excited about mall possibilities and were preparing a whole team of them to fully whole needed to discuss their possibilities.
"Building too much new retail space too soon would likely result in the forced closing of existing businesses," she said.
"It's hard for them to know what the public concerns are if they've never asked." she said.
At least two downtown Lawrence merchants echoed Francisco's sentiments about Action 80's lack of concern about public opinion.
Jack Arensberg, president of the Downtown Lawrence Association and a member of Action 80, said yesterday that if faced with a choice between a downtown mall and a suburban mail, he would choose that some options were being ignored.
"I know for a fact that the possibilities I've been explored to our surprise are enormous. People are concerned we'll end up with some kind of monster without realizing the conundrum."
Arenssberg said one problem was that the major department stores being considered for the mall refused to locate in a city with an office space provided with a clalrized, populated mall.
IN THE PROCESS, he said, local department stores and specialty shops "dry up" and consumers lose.
"For the last 25 years, Sears and Penneys have dictated to urban American what will hannover to it," he said.
Arensberg said he had studied mall
buyers and that he was including
Pittsfield, Massachusetts. There was, as
citizens backed out of a proposed mall
when they consider the consequences
"The replacements, with their mass merchandizing and hot specials, just can't replace a good local store," he said.
"More and more towns," he said, "are looking at the devastation of their sister cities and saying, 'Let's look at alternatives.'"
The president of Weavers department store, Larry S. Fliarrery S., said he thought that by the time Action 80 presented its proposal it would be too late.
"We don't owe JVJ anything," Flannery said. "I can't understand why Action 80 is tied to the one firm."
RATHER THAN singing out the developer firm of Jacobs, Viscioni, Jacobs, he said, Action 80 should present a number of options to the public.
A Lawrence architect, Robert E. Gould, wrote down the layout of downtown mail wheelbailers, but that other ways of planning it might work better than those being pursued by Action News.
Gould said Manhattan was considering a similar project, but six months had been devoted to evaluating potential developers.
"The process was much more public, with public hearings on cable television," he said. "It has resulted in a much
See MALL page nine
State tentatively OKs KU, Regents budgets
By SCOTT C. FAUST
By SCOTT C. PAUS Staff Renorter
The Kansas House yesterday moved to grant the Kansas House budget a greater priority, stepping closer to legislation by giving both tentative approval as amended last week in the House Ways and Plans.
After final action tomorrow, the budgets will be sent to the Senate Ways and Means Committee for evaluation.
In its action, the House refused to adopt the full salary and fringe benefit increases for unclassified employees requested by the Regents.
Unclassified employees include faculty members and some administrative officials.
The House approved the committee's recommendation to hold the unclassified salary request to the 8 percent recurrent rate, instead of instead of a Recents request of 9.9 percent.
The House supported Carlin and the House committee in not approving a Regents request for a fringe benefit increase. The budget includes an additional 2.3 percent salary increase.
For tentative approval also was given for Curtius's recommended 7 percent increase in the student enrollment of Regents schools and an 8 percent increase for University of Kansas Medical Center.
THE BENEFITS included a 2.5 percent increase in retirement benefit for professors, an additional 3 years tenure, a percent retirement increase for those with live or more years tenure, and additional benefits.
The Regents had requested an 8 percent increase in OOE for Regents schools and a 9 percent for the hospital.
Richard Von Ende, executive secretary to the chancellor, said the University was not displeased with the House action.
Vogel said he thought the $1,450 limit was sufficient to hold down the amount of state funds provided to private school students.
Vogel said he did not "have any gripes" with the budget legislation tentatively approved by the House.
Carlin had recommended that the limit be set at $1,700.
"WE'RE FAIRLY PLEASED." Vogel said. "It was pretty much what the governor had recommended. You never get everything you want."
"I sometimes wonder if maybe we could have given the faculty more than an 8 percent salary increase. You just have to set the priorities and that's what the committee does."
In other action affecting the Regents budget, the House backed an amendment by State Rep John Vogel, R-lawrence, to allow grants on state grants to private college students.
The House tentatively approved KU's budget completely as recommended by the House committee.
"Those two committees (House and Senate, and Means) do complete independent investment in the assets," she said. "They look closely at the funds provided in pre-jury years. We have to justify the new and improved plan."
The House Committee had recommended a $1,200 allowance to allow redistribution of State Scholarship funds to Regents school students. This would be difficult because they were not needy enough.
"In this time of high inflation, 'Von Ende said, "the increase for faculty and for OOE could be a little larger, but we appreciate the support provided."
VON ENDE SAID the committee recommendations were not a rubber stamp process.
Responding to KU statements that more classified personnel were desperately
See BUDGET page nin
Several deans of KU schools say that without more full-time faculty members and space, their schools may not be able to handle the demands of increased student enrollment.
KU enrollment increase outgrows faculty, space
ByGRANT OVERSTAKE
UNDERSTAFFING HAS ALSO been a problem. Dickinson said.
At a time when experts are predicting nationwide declines in university enrollment, KU students at 25,173 students enrolled at KU this semester—1,100 more than were enrolled a year ago. But some KU deans said their students have limited and no room for more students.
THE BIGGEST PROBLEM in the School of Business is a shortage of full-time faculty, he said.
Martin Dickinson, dean of the School of Law, said Green Hall was already operating at near capacity. The enrollment of 555 is expected to increase with the building was built to accommodate he said.
"Over the past six to eight years, the enrollment in the School of Business has increased." We added resources so we can add to our faculty and staff. But resource additions are not limited.
A $2 million expansion of Summerfield is being planned, but funding for the project was cut. The Telfson team. If the funds were raised, the School of Business would be able to handle more students.
"We seriously need more faculty," he said. "We have the highest rates of students from low-income families, and just aren't offering nearly as good of curriculum as we should because of the lack of funding."
In the School of Business, John Toffleson, associate dean, said the undergraduate business program offered by UWL, 1,011. But Toffleson said the figure was projected to increase 13 percent over the previous year.
According to Charles Kahn, dean of the School of Architecture and Urban Design, only 144 students out of more than 380 applicants are accepted into the school each year.
"We have more teaching than we would prefer using part-time grads and graduate student instructors, Tolleson said. We should also have a teacher who would prefer to do in a mass-leisure mode.
"We're full. We're always full." Kahn said.
THE QUOTA for next year's new students was reached two weeks ago, he said.
An upcoming renovation of Marvin Hall will not solve the school's space problems, Kahn said.
"We're already bigger than we can handle effectively in the School, both in terms of space and faculty resources," he said, referring to how he deals with the programs we have now."
The School of Engineering's 1,608 students represent a two-fold increase in enrollment from six years ago, according to David Kraft, dean of the school.
HE SAID THE FACILITIES were tight but the school was running smoothly. Growth in enrolment was highest in the electrical machinery, and chemical manufacturing.
"We're short on faculty," Kraft said.
"The section sizes have increased but so far we're getting by.
"I think we’re getting toward the overload side, but the academic affairs office has placed more faculty in the school, so they are helping us meet our teaching requirements."
The School of Pharmacy will be moving into the Malot Hall addition next fall, accolades that he made to the school's school. He said the school's enrollment of 285 underclass may grow to 250 over the period.
But an increase in pharmacy students would not create a problem, he said.
"I think we could meet the influx of two students with some planning and a year or two lead time," Mossberg said. "Physically we could take care of those needs."
"Our problem would be getting the personnel in the budget to meet those needs."
THE 458 STUDENTS in the School of Social Welfare is "right at the limit" of the students that the school could handle with a staff of 200. Dr. Hardie Macleod, dean of the school, said.
"Taking five more wouldn't hurt the quality, but beyond that, I think we'd get to the point where there would be a difference," he said.
"The fact that any school in this University has made progress is contrary to economic laws.
"We have less in real terms than we did five years ago, less real money in the school and the University."
See ENROLLMENT page ten
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