Originally published in Business Digest, April 1998

VSAC Helps Students to
Various Degrees

by Craig C. Bailey

Don Vickers "We have an excellent reputation as being a leader in our field nationally," says Vermont Student Assistance Corp. president Don Vickers, who emphasizes customer satisfaction, "the ability to go the extra mile for that student or parent." (Photo: Jeff Clarke)

If debt load were measured in tons, the tenants of the lower floors of the Champlain Mill would be in imminent danger of a cave-in. The Vermont Student Assistance Corp. (VSAC), the quasi-state agency that occupies the fourth and fifth floors of that Winooski landmark, will reach an outstanding debt of more than $800 million by the end of June. It’s a figure that’s already larger than the debt load of the entire state of Vermont, and is growing by approximately $200 million each year.

The numbers are staggering, but it’s all part of the plan for the nearly 300 employees of VSAC and the organization’s president/CEO since 1990, Don Vickers. In a lot of ways, debt is VSAC’s business. Issuing tax-exempt bonds to originate an increasing number of student loans accounts for it, but doesn’t come close to detailing the entire scope of VSAC’s operations, the Holy Trinity of which is loans, grants and outreach programs.

With a 27-year tenure at VSAC, Vickers, 50, is in a prime position to sum up the history of the organization, and identify areas of growing concern for Vermont’s educational community.

VSAC was established by the Legislature in 1965 as a public, non-profit corporation to provide Vermonters with information and financing to pursue post-secondary education. The ’60s were a decade of change for the educational system in Vermont and beyond. Under the leadership of Gov. Philip Hoff, Johnson, Castleton and Lyndon state colleges evolved beyond teacher training schools to become the state college system. The Incentive Grant Program was established to help fund education and training for Vermonters beyond high school by providing cost-free grants to students, while at the federal level a new loan program allowed students with no credit history to borrow from local lenders.

It was VSAC’s original function to act as guarantor for those federal loans, paying off defaults to the bank and trying to collect from the borrower, and to administer the state grant program. “One of the things that we learned very quickly was as times changed, we needed to provide not only a fair amount of grant aid and loan aid to pay the cost of college,” says Vickers, “but also to provide support services.” That expanded mission has blossomed to include a variety of student and parent workshops and counseling projects to build an early awareness of the need to plan and save for college, all flying under the broad banner of “outreach.”

When Vickers joined VSAC in late 1971, it was following what he describes as a “non-traditional” education that began at Hudson Valley Community College in Troy, N.Y. While attending high school near Albany in Cohoes, N.Y., Vickers worked his way to assistant manager at Woolworth’s. With hopes of becoming a retail manager, he agreed to continue his education past high school with encouragement from his father, the owner of a dental laboratory who was unable to attend college due to the Depression. “I didn’t even know what the hell college was,” Vickers admits. “So I went to a community college for two years because I wasn’t sure what I wanted to do.”

When the chairman of the liberal arts department told him Johnson State College was “the ideal school” from which to earn a bachelor’s degree, Vickers reluctantly left the retail world for good. “Something kept telling me that you’d better get that bachelor’s degree at least,” he says. After an associate of arts degree in liberal arts from Hudson Valley, he graduated from Johnson with a bachelor of arts in liberal arts in 1970. In May he was hired at the college as director of financial aid when the previous director was drafted.

In October 1971 Vickers joined VSAC’s tiny staff of five as director of grant programs. The organization was housed above The Burlington Free Press on College Street, because, he explains, “the banks used to be the source of capital to make loans to students. So it was necessary for us to be close to the banking community to facilitate those loans.” That changed between 1983 and 1994, as smaller Vermont banks found it increasingly difficult “to comply with the ever-changing federal regulations on servicing student loans,” according to Vickers. “They supported VSAC creating a secondary market for the purchasing and servicing of student loans. VSAC is also able to offer education loans at a lower cost because we are able to issue tax-exempt bonds to fund the loan capital needs.”

Vickers, father of two grown children and a resident of Colchester, describes VSAC’s services as “one-stop shopping” for students, parents and adult learners. VSAC administers state grant aid to full- and part-time students, and is the only state to offer a grant for non-degree study. Loan services include federal Stafford and PLUS loans originated, serviced and guaranteed by VSAC through the Federal Family Loan Program, as well as non-federal supplemental loans and a consolidation plan to combine several federal loans into one, manageable monthly payment, or to extend the term of loans while lowering the monthly payments. VSAC manages student summer employment programs, serves as a financial aid office for nine Vermont colleges, and administers the scholarship initiatives for approximately 50 organizations.

In fiscal year 1997, the organization served 70,000 students and their parents with $135 million in assistance. VSAC outreach programs provided college and career counseling to more than 27,600 students, more than half of whom were adult learners. “I don’t think the public understands the scope of the operation,” says Vickers. “We’re one of probably a half-dozen comprehensive agencies like ours across the country.”

Shortly after Vickers’ arrival at VSAC, the corporation moved to 156 College St. for five years, followed by residency at Five Burlington Square, before finding a home in the Champlain Mill 16 years ago as its staff, numbering 270, continues to grow. Vickers says, “The biggest growth we’ve had is directly related to loan volume.” While a lot of organizations might be bullish on growth, this type of growth has Vickers concerned for the future.

The roots of “the dilemma,” as the easel in Vickers’ fourth-floor corner office calls it, reach back to the 1970s and Gov. Deane Davis. While Hoff placed an emphasis on education as the key to Vermonters’ futures, Davis, his replacement, grappled with the financial crunch of the ’70s and how to fund the colleges Vermont had created. The issue boiled down to reducing the number of colleges — “Vermont has more colleges per capita than any state in the nation,” according to Vickers — or raising tuition to pay the cost of maintaining them while also raising the amount of aid to keep education affordable. Davis chose the latter, doubled VSAC’s appropriations in a single year, and the so-called “high tuition/high aid” model has remained in place to this day.

The seed of the dilemma is the increased role college education plays in today’s workplace. “A high school diploma isn’t as attractive to a prospective employer as it might have been in the past,” according to state Treasurer James Douglas, who serves on VSAC’s 11-member board of directors by virtue of his office. “An undergraduate degree is the bare minimum required for many positions in an era when the workplace is becoming more specialized and technical.”

At the same time, the cost of a college education has risen disproportionately to income — 21.5 percent in the last five years for four-year colleges in Vermont — compared with a 14.3 percent rise in median family income for the same period.

The clincher, according to Douglas, is that “Grant resources haven’t kept up with the rapidly escalating cost.” Today grants and parent contributions cover 39 percent of the cost to attend a Vermont state college. In 1980, that figure was 65 percent.

“The largest financial aid program in this country and in Vermont is loans for college,” says Vickers, pointing out the dramatic difference between grants and loans: Grants are gifts that aren’t repaid; loans, like a mortgage, are repaid with considerable interest over time. Furthermore, he says, “a Vermonter will incur 25 percent more debt than the national average for a bachelor’s degree.”

“We’re seeing an increasing number of applicants decide against continuing their education because they simply can’t afford it,” says Douglas. “More Americans are beginning their working lives with a mountain of debt, so something has to give.”

“This next generation’s going to be in so much debt they’re not going to be able to support the same level of public services that we’re accustomed to receiving right now,” adds Vickers, who says he foresees a “real train crash down the road,” with the debt load on graduating students nearly doubling every five years.

“We need to convince the Legislature and others that we need to restore an appropriate balance between grant aid and loan aid,” he says. “We’re not saying that people should have a free ride. We’re saying there needs to be an appropriate balance.”

The forecast for the future might be rocky, but Vickers’ outlook is enthusiastic and optimistic. On a tour through the maze of cubicles that constitutes most of VSAC’s 60,000 square feet, he shows no sign of being taxed by the deluge of statistics that seem to reside in his head. Nor does he acknowledge that operating an organization on a budget gleaned mostly from a delicate margin between what interest rate it charges students for loans and what it pays to investors in its bonds might be considered infinitely complex to some. In fact, the suggestion is met with modest laughter.

“Don is always there with a big smile on his face and a good handshake,” says Lake Champlain Chamber of Commerce president Wayne Roberts. Roberts, an associate of Vickers since his Johnson days, says Vickers and the VSAC staff “are extremely involved in helping the chamber work in the community with our school-to-work collaborative. Anytime we need help, they’re there.”

VSAC board member Bette Matkowski, director of the western region for community College of Vermont, echoes the sentiment: “I think we’re really fortunate that he has given his professional career to VSAC. I think he’d be amazingly difficult to replace.” She believes a majority of board members feel Vickers is under-compensated for his efforts, an issue the board grapples with annually. “It’s a very politically sensitive issue, because people believe that whatever we pay Don comes out of grants. But that’s not true.” (As of fiscal year 1997, all state grant funds go directly to students; none are used for administrative costs. “You give us a dollar in Montpelier,” says Vickers, “and it’s going to go to a student.”)

"Don does a tremendous job,” offers Douglas. “With his experience it would be easy to work somewhere else for a lot more money. Fortunately for us, VSAC isn’t just a job to Don; he’s deeply committed to ensuring that Vermonters have the information and resources they need to further their educational goals.”

VSAC’s latest program is the Vermont Higher Education Savings Plan (H. 427), a program that would allow parents and students to make regular deposits into an account to save for college. “A lot of college savings plans require fairly large investments,” says director of public affairs Irene Racz. “We would take contributions as low as $20 a month.”

The funds collected, interestingly, would be turned around and immediately lent to students attending college. “Your investment in a college student today will help put your kids through college tomorrow,” Vickers muses.

The bill allows for two savings options: one with a guaranteed return based on the 91-day treasury bill, similar to a passbook savings account. “State savings plans are deferred from federal taxes until the student uses the money and then it’s taxed at the student’s rate,” Racz adds. “That’s why it becomes a little more attractive than a regular passbook account.” The other option would be similar to a mutual fund investment.

“The program has been approved by the Vermont House and awaits action by the Vermont Senate,” says Vickers. “We expect it to be approved by the Senate before the 1998 session ends.” With luck, VSAC will be accepting deposits into the program by Jan. 1.