Archive for ‘higher education bubble’

December 2, 2013

Seeking ‘people skills’, investment banks plan to hire more liberal arts graduates

by Grace

Investment banks plan to hire more liberal arts graduates as they seek to add on employees “from all backgrounds”.

Michael Ridley, a vice-chairman in investment banking at JP Morgan and a senior capital markets banker with more than 30 years of experience, said there has probably been “unconscious bias” against arts graduates but that their skills are valuable. He said: “Even our traders are selling and dealing with people.

You need some communication and presentation skills to be able to persuade people to change their mind on things.”

A push for diversity has several banks seeking employees “with a strong focus on behaviours and attitudes rather than just an expertise in finance”.

JP Morgan is making a push to hire more humanities students this year than it has in previous years.

RBS is also focusing on arts graduates. Its Indian Summer student programme targets candidates from non-finance-related backgrounds and Glen McGowan, head of RBS Early Career, said academic diversity is key to providing a good service to clients.

“Fundamental to this is ensuring that RBS has an attractive proposition to engage students from varying educational disciplines,” he said.

McGowan said the bank has adjusted its selection and assessment criteria to accommodate students from all backgrounds.

Tim Skeet, a managing director in the financial institutions group at the bank, said “With the rise in trading across the financial services sector over the past two decades, the tide has flowed against humanities. Now the tide is turning.”

Jane Clark, head of corporate and investment banking campus recruitment, Europe, Middle East and Asia at Barclays, said the firm recruits “from all degree disciplines with a strong focus on behaviours and attitudes rather than just an expertise in finance”.

What about math skills?

Alix Roe, head of graduate recruitment at Citigroup, said the bank is “moving to dispel the myth that banks only look to hire graduates from economics or finance subjects”….

More banks are coming round to the view that liberal arts graduates have skills that can equip them even for areas such as trading, in which more technical subjects such as mathematics have previously been the norm.

The typical liberal arts curriculum has been watered down, with minimal math and science instruction.

Just to clarify, the traditional liberal arts disciplines include economics, as well as math and science.  However, the way colleges have diluted the curriculum means a liberal arts degree offers little added value in qualifying workers for today’s job market”.  The typical liberal arts graduate of today has probably received very little rigorous math and science instruction.


November 25, 2013

MOOCs have not lived up to expectations, at least so far.

by Grace

Online education continues to evolve after first-generation MOOCs falter.

After a year of setback after setback, the hype around MOOCs is settling down a bit. The latest evidence of this comes courtesy of an interesting profile piece at Fast Company of Udacidy CEO Sebastian Thrun, a man who is in many ways the godfather of the MOOC concept.

Instead of his original goal of offering a “Stanford-quality education to millions of students around the world”, Thrun is shifting to “more vocational-focused learning”.

MOOCs have been a “lousy product“.

… Thrun highlights his disappointments with MOOCs’ record: 90 percent drop-out rates with only half of the remaining 10 percent actually earning a passing grade; the student demographic overwhelmingly populated by well-educated, college-degreed professionals rather than the underprivileged students he had hoped to reach; the San Jose State University debacle, in which San Jose students taking Udacity-delivered MOOCs performed significantly worse than their peers in physical classrooms; and the unexpected failure of Thrun’s interventions intended to raise passing rates. Thrun tried adding mentors and TAs to provide personalized attention and interaction with students, incorporating immediate feedback and rewards in the forms of badges and progress meters, and partnering with schools such as San Jose to provide college credit, which Thrun expected to ramp up student interest. “We were on the front pages of newspapers and magazines, and at the same time, I was realizing, we don’t educate people as others wished, or as I wished,” Thrun remarked. “We have a lousy product.

Online education will clearly continue to change higher education, and the first wave of MOOCs were only part of this evolution according to Walter Russell Mead.

Thrun’s change of focus may not be as big a shift as it appears on its face. It’s been apparent from the beginning that the format is better suited for some subjects than others. Math, science and business are easier to teach online than liberal-arts subjects like English and philosophy that rely more heavily on in-class discussions. And while a liberal arts education remains a good option for many people, the vast majority of American college students are choosing majors that are tightly linked to future careers: only 7 percent of all students major in the humanities. On the other hand, subjects like business, science, nursing and computer science are among the most common majors in the country. Even if MOOCs only impact the “vocational” side of the higher-ed world, this still amounts to a pretty sizable chunk of the industry.

Furthermore, while MOOCs as they’re currently offered may not be enough to upend the higher-ed system on their own, there’s lots of promise for “blended” courses in which the online material is supplemented by regular meetings with teachers or tutors who lead discussions and proctor exams. These meetings could be handled remotely using teleconferencing technology, or they could be done in person at local testing centers, in either case adding that human component that remains the weakest link in how these courses are offered today.


November 19, 2013

Private colleges see declining enrollment

by Grace

Enrollment in private colleges plummets as fewer families are willing to pay $200,000 for a second-tier school.

From 2010 through 2012, freshman enrollment at more than a quarter of U.S. private four-year schools declined 10% or more, according to federal data The Wall Street Journal analyzed. From 2006 through 2009, fewer than one in five experienced a similar decline.

Ivy League enrollments are flourishing, but less selective schools are suffering.

The trajectory reflects demographic and technological changes, along with questions about a college degree’s value that are challenging centuries-old business models. The impact is uneven: Some wealthy, selective private colleges are flourishing, while many others suffer.

A “shakeout’ in higher education

Schools on the losing end are responding with closures, layoffs, cutbacks, mergers and new recruitment strategies. Many see these as the first signs of a shakeout that will reorder the industry.

Some schools will close.

“I think it’s fair to say 30% of these private schools won’t exist in a decade,” said Jonathan Henry, vice president for enrollment at Husson University, a private school in Bangor, Maine, whose 2013 first-year enrollment was 17% lower than in 2009. “A lot of these schools will have to learn to live with less.” Husson has built graduate programs to offset the declines, he said.

A toxic combination of trends is hitting hard.


… long-term trends are buffeting these schools, including a national decline in the number of graduating high-school seniors, a swarm of technologies driving down costs and profit margins, rising student debt, a soft job market for college graduates and stagnant household incomes. Meanwhile, college costs have climbed at more than triple the inflation rate.

Online alternatives are gaining ground.

That stagnation coincides with new lower-cost online alternatives. The number of college students taking at least one online course nearly doubled to 45% between 2008 and 2013, according to a survey by Crux Research, a market-research firm.

What will happen to second-tier private colleges that charge premium prices?  They may become extinct.

November 6, 2013

U.S. spends ‘extraordinary amounts of money to produce college dropouts’

by Grace

We spend more of our economy on higher education than almost any other developed country, and achieve some of the worst results. 

… We devote more of our economy to postsecondary education than any other developed country (except South Korea, with whom we’re tied), according to a new report by the Georgetown Center on Education and the Workforce. But we’re rated near the bottom of the 20 countries included by college spending “efficiency”—or, degrees earned per percentage point of GDP spent.*


Much of the waste is related to colleges with low completion rates, which essentially function as “dropout factories”.

… Unlike, say, Germany with its renowned apprenticeship systems, there aren’t really great alternatives to college if you want a middle-class life in the United States. So ill-prepared young adults flood into degree programs they never finish, leaving the U.S. with some of the lowest completion rates in the developed world.

It is undeniably expensive to provide low-income students with the opportunity for higher education, but these numbers call into question how well the U.S. is doing in this endeavor.

Related:  Increasing college merit aid decreases enrollment of minority and low-income students (Cost of College)

October 8, 2013

‘In the near future, the residential college experience will become a luxury item’

by Grace

Joanne Jacobs predicts the residential college experience will soon be out of reach for most students.

In the near future, the residential college experience will become a luxury item, I predict. Most people will decide it makes more sense to hang out with their friends, play beer pong, root for a professional football team and earn a low-cost career credential.

This quote comes from a post where Jacobs wrote about Michael Gibson’s perspective on the four elements of a traditional college experience.

  1. Academic — study time
  2. Tribal membership — loyalty to an institution
  3. Friends, community, and network
  4. Status that comes with being identified as an alumnus of a particular school

Although he foresees significant changes for higher education, Gibson isn’t quite sure how these elements will “crumble”, recognizing that “the bonds of tribe, status, and friendship are very strong”.  The academic element may be the easiest to replace, with new options enabled by technology,

How do you replace the status bestowed by a traditional college degree?

Time will tell if the loyalty, community, and status that college students seek will be continue to command high tuition prices, or will be obtained by other less costly methods.  Is status the most important benefit a college now offers?  It depends.  Many graduates value their college friendships and networks the most.   However, status would seem to be the most difficult element to replace if college no longer offers it.  As suggested by Jacobs, even without college I can find like-minded friends and a professional football team to support.


September 25, 2013

Is your college ‘likely to be around for many years to come’?

by Grace

Besides sentimental reasons for wanting your alma mater to “be around for many years to come”, there are practical reasons for hoping your college is able to withstand the intense financial pressures bearing down on higher education today.

Do not ignore financial fitness when making a list of potential colleges to attend.

Lucie Lapovsky, former V.P. of finance at Baltimore’s Goucher College, a higher-ed financial consultant and a FORBES contributor, cautions against ignoring the financial health of the colleges you choose: “Visible signs of financial stress can include fewer classes offered less frequently, more classes taught by adjunct professors, less money for clubs and cutbacks in the upkeep of campus facilities.”

Financial woes are also the leading cause of accreditation suspensions. Indeed, more than a dozen schools among our C- and D-rated colleges are already facing some kind of accreditation inquiry. The last thing you want is for Junior’s college to lose its accreditation. When that happens the feds pull financial aid, enrollment plummets and the lights get turned out.

To help determine the financial health of a college on your list, you can use the FORBES College Financial Grades.  Over 900 private colleges are graded based on several components:

Balance Sheet Health (40%)
Operational Soundness (35%)
Admissions Yield (10%)
Freshmen Receiving Institutional Grants (7.5%)
Instructional Expenses per Full-Time Student (7.5%)

Higher education is facing a tough situation.

The prognosis is ominous in part because institutions of higher education operate in an extremely difficult business environment today. Imagine, if you will, running a company that sells a commodity product, where pricing is opaque and you have hundreds of competitors all clamoring after the same shrinking customer base–which, by the way, happens itself to be in financial distress.

Then consider that one of your other chief revenue drivers, subsidies and grants from federal and state governments, has either been cut back or eliminated. Add to this an evaporating competitive moat being stormed by newly minted for-profit businesses and cheap online alternatives.

Management may be the biggest problem.

… By far the biggest problem at most colleges is that they are governed in a way that flies in the face of sound business practices. The vast majority of colleges in the U.S. are bloated with personnel and programs that make little economic sense.

It’s no surprise that the highest scoring schools on the Forbes list include the Ivy League and other elite institutions.  I was a little surprised to see two local schools, Pace University and Concordia College, at the bottom of the list with D grades.  This financial information would certainly be a factor if I were considering these schools for my child.

September 16, 2013

College enrollment was down last year

by Grace

The number of college students dropped last year.


A Wall Street Journal story gives us the details.

Overall undergraduate and graduate school enrollment dropped by about half a million to 19.9 million in 2012, reversing a six-year pattern of solid growth, according to the Census Bureau’s annual school enrollment report released Tuesday.

Fewer older students, but more Hispanic and international students

The overall decline in college enrollment was driven by students age 25 and older. That group fell by 419,000 students from 2011, while enrollment of younger students dropped by 48,000.

The number of Hispanic students enrolled in college last year rose to 3.4 million, up 447,000 between 2011 and 2012. Hispanics accounted for nearly 22% of students from preschool to adult education in 2012, up from 15.6% a decade earlier.

“This increase in the number of Hispanics enrolled in college can be attributed to the combination of an increase in the adult Hispanic population and their climbing likelihood of being enrolled,” Census Bureau statistician Julie Siebens said.

The collegiate student body overall has been getting more diverse: the percentage of all college students who were Hispanic rose to 17% from 11% between 2006 and 2012. The number of black students rose one percentage point to 15%, while non-Hispanic white students declined to 58% from 67%.

With fewer high school graduates projected, college enrollment may continue to decline in the coming years.  

September 10, 2013

Sign of a student loan bubble starting to burst?

by Grace

Student borrowers are facing fewer choices.

The largest bank in the United States will stop making student loans in a few weeks.

JPMorgan Chase has sent a memorandum to colleges notifying them that the bank will stop making new student loans in October,according to Reuters.….

“We just don’t see this as a market that we can significantly grow,” Thasunda Duckett tells Reuters….

Remember the housing bubble that peaked in 2007?

The move is eerily reminiscent of the subprime shutdown that happened in 2007. Each time a bank shuttered its subprime unit, the news was presented in much the same way that JPMorgan is spinning the end of its student lending.

Student loan debt has more than tripled over the last ten years.

There is over $1 trillion in outstanding student loans, making it the second largest source of household debt after mortgages. Just 10 years ago, student loans stood at $240 billion. About $150 billion of the total is comprised of private student loans made by banks and other financial institutions, according to a report issued by the Consumer Finance Protection Bureau last year.

The CFPB reported that around $8 billion of private student loans were in default. That number is likely to go higher if interest rates rise because most private student loans, unlike federal loans, are variable rate loans linked to Libor or the prime rate.

Which institutions are still in the private student loan business?

JPMorgan’s actually the second big private lender to step away from the business. Last year US Bancorp exited the business. That leaves Wells Fargo & Co.,Discover Financial Services Inc., PNC Financial Services GroupSunTrust Banks Inc., and various credit unions as the largest private student lenders. Oh, and of course, Sallie Mae, which was privatized in 2004.

We’ll have to stay tuned to see any more departures, but some data suggest a trend toward a deflating bubble.


Related:  A checklist before you take out a student loan (Cost of College)

September 4, 2013

Politicized federal student loan program bails out ‘deadbeats’

by Grace

After a Wall Street Journal editorial related how the federal government advises “deadbeats” to avoid paying back student loans, George Leef of the John W. Pope Center for Higher Education Policy escalated the conversation with charges that politicized federal student-aid programs are promoting waste, fraud, and abuse,  In a surprising development, similar criticism is being echoed on the left.

The Consumer Financial Protection Bureau produced a report explaining how taxpayers are bailing out “deadbeat” student borrowers.

A new analysis by the bureau shows federal-backed student loan debt surpassing $1 trillion, which is nearly double what it was at the start of the Obama Presidency. As college costs have continued to balloon in tandem with federal loan and grant subsidies, students have assumed more debt. Many jobless Americans have also sought asylum from the Obama economy by returning to school….

But deadbeats need not fear. According to the bureau, “there are ways to avoid default on a federal student loan even when you think you can’t afford your payment.”

For instance, income-based repayment plans allow borrowers who meet the Department of Education’s criteria for a “partial financial hardship” to cap their monthly loan payments at 15% of their discretionary income (which is defined as income above 150% of the poverty line). They can also have their entire remaining loan balance forgiven in 25 years regardless of how much they still owe….

Graduates entering “public service” (i.e., government or 501(c)(3) nonprofit employment) get an even sweeter deal since they can discharge their loans entirely after a mere 10 years of making regular payments. That’s right. Take out a big loan, work 10 years for the government repaying as little as possible, and then have your debt entirely forgiven. Maybe this incentive falls under some previously unknown “Making Government Work Pay” program.

Leef’s response chastises the government’s politicized misallocation of taxpayer money that has helped to inflate college tuition costs.

Regarding your editorial “The Rolling Student Loan Bailout” (Aug. 10): Whenever the government gets involved in an activity that is not properly any of its business, we get the infamous trio: waste, fraud, abuse, and then the politicians feel the need to meddle still more in an effort to solve the problems they’ve created. The federal student-aid programs are a perfect illustration. Repayment of loans is being politicized, with easy terms for students provided they make the “right” choices in employment. That will only further misallocate resources and help to keep the higher-education bubble inflated.

Instead of further politicizing student lending, the right move is to get out of it altogether. Even if there were any constitutional warrant for federal lending to college students (and there isn’t), it would be a bad policy. Politicians and bureaucrats are very bad at deciding how to lend other people’s money.

Even Rolling Stone is conceding that easy access federal funds has played a part in propelling college costs to staggering levels.

The federal government has made it easier than ever to borrow money for higher education – saddling a generation with crushing debts and inflating a bubble that could bring down the economy


August 12, 2013

Fewer high school grads means falling college enrollment

by Grace

The declining number of high school graduates coupled with a (possibly) recovering economy and soaring tuition point to falling college enrollment.

Trend of sharp growth in high school graduates is ending.*

Beginning around 1990 and continuing through about 2011, colleges and universities could count on an annually growing number of students graduating from the nation’s high schools. But that period of abundance appears to be about to end….


College enrollment may continue to decline.

College Enrollment Falls as Economy Recovers

The long enrollment boom that swelled American colleges — and helped drive up their prices — is over, with grim implications for many schools.

College enrollment fell 2 percent in 2012-13, the first significant decline since the 1990s, but nearly all of that drop hit for-profit and community colleges; now, signs point to 2013-14 being the year when traditional four-year, nonprofit colleges begin a contraction that will last for several years. The college-age population is dropping after more than a decade of sharp growth, and many adults who opted out of a forbidding job market and went back to school during the recession have been drawn back to work by the economic recovery.

The most selective colleges will likely continue to thrive, but the rest may not fare so well.

Hardest hit are likely to be colleges that do not rank among the wealthiest or most prestigious, and are heavily dependent on tuition revenue, raising questions about their financial health — even their survival….

The most striking signs of change came from Loyola University New Orleans and St. Mary’s College of Maryland. After the usual May 1 deadline for applicants to choose a college, Loyola and St. Mary’s each found that their admission offers had been accepted by about one-third fewer students than expected. Both institutions were forced to make millions of dollars in budget cuts and a late push for more enrollment.

What does this mean for your child?

Parents may want to look at the chart above, and get a sense of how their child might fare in the changing environment of the next decade.

  • Many colleges may become less selective, especially for full-pay applicants.
  • Regional differences in growth trends of high school graduates could help pinpoint areas of the country where your child may find it easier to get into college.  For example, according to Figure 2.22, Michigan colleges may go to greater lengths to woo students while Texas schools may become more selective in the next decade.
  • The trend of growing tuition discounts for top students could continue.
  • Fewer students may be headed for residential colleges as online education continues to gain steam.

If higher education pricing has hit a peak, it could be good news for young parents.  On the other hand, it could lead to even lower standards of learning, at least in the short-term.

* Source of the chart:  Knocking at the College Door: Projections of High School Graduates 8th Edition, December 2012 (Western Interstate Commission for Higher Education)s


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