Archive for ‘rising costs of college’

April 14, 2014

It’s no longer feasible to work your way through college

by Grace

Let’s get this straight once and for all.

It’s impossible to work your way through college nowadays

Michigan State University graduate student Randy Olson listened to “his grandfather extol the virtues of putting oneself through college without family support’”  But then Olson did some calculations to show how that is almost impossible to do today.

Here is the trend of wages and tuition costs from 1987 to 2010.

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To get a better sense of the trend, I fit a linear regression to the data. According to the model, students have to work 23.7 extra hours every year to pay for tuition. If we extrapolate this trend back to 1979 and forward to 2013, we recover the same trend that I found in my previous post: The average university student in 1979 only had to work 182 hours per year (a part-time summer job) to pay for tuition, whereas the average 2013 student had to work 991 hours (a full-time job for half the year). That’s over 5x as many hours worked for the same education!

Today’s American Dream differs from that of previous generations.

…  somehow, the idea that we can work our way through college still persists. This ethos seems to be the latest generation’s version of American Dream: If you work long and hard enough, and if you sacrifice enough, you will eventually graduate college without debt and land your dream job. But with the way this trend is going, it looks like even long and hard hours at work won’t even pay off any more.

In short, I’d like my readers to walk away knowing that it’s not nearly as easy to work your way through college as it used to be — stop telling us to do it just because you did a decade or more ago.

Loans and other forms of financial aid make up some of the difference.

… If the Federal aid trends in the past 30 years are any indication, students actually have less of their tuition costs paid for by financial aid nowadays than 30 years ago! With rising costs and lowered financial support, it’s no wonder that student debt has spiraled out of control in the past decade. The system is practically setting the modern university student up for financial failure.

Related:  Recent college graduates suffering worst unemployment rates in 50 years (Cost of College)

April 8, 2014

‘Budget woes are particularly acute at small, mid-tier private’ colleges

by Grace

Tough financial times are hitting many colleges, and “some are downsizing staff, while others are slashing athletic programs and even selling off buildings”.

Hardest hit are ‘mid-tier private schools’.

Budget woes are particularly acute at small, mid-tier private schools, which lack the massive endowments and guaranteed stream of top students of their more prestigious counterparts. In an effort to compete with higher-profile competitors, many of these schools borrowed heavily to fund expensive construction projects during the early 2000s, only to see their endowments shrink when the financial crisis hit. Making matters worse, tuition revenue has dwindled with declining enrollment.

One example of such a school is Ashland University in Oregon.

The “glory days” are gone.

… Such colleges ‘might have been doing fine in the glory days,’ when they had ‘more students coming in than you knew what to do with,’ she said, ‘but that doesn’t work now.’”

What will happen to second-tier private colleges that charge premium prices?

Students who face little chance of getting into an Ivy League school or select liberal arts college (Williams or Amherst in the East, Pomona in the West) are increasingly asking: why should my family pay $30,000 to $50,000 a year (the exact amount unknown at the time of application because of uncertainties arising from massive price discrimination in the form of so-called “scholarship” aid) to go to a mid-quality private school when for somewhat less, say $20,000 to $30,000 a year, I can go to a top public flagship school of roughly equal quality?

Related:  Private colleges see declining enrollment (Cost of College)

——

“More Colleges Are Feeling the Pinch”, The Feed / The American Interest, April 3, 2014.

March 21, 2014

Is money the most important factor in being ready for college?

by Grace

Money certainly is important.

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Because whatever your academic credentials are, it’s good to be rich.

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February 24, 2014

You can get a college degree for almost free

by Grace

This college degree may not be prestigious, but it’s truly affordable.  Tuition is free, although each proctored exam costs $100.

Just in time for its first graduates, the University of the People, a tuition-free four-year-old online institution built to reach underserved students around the world, announced Thursday that it had received accreditation.

The University of the People currently offers degrees in business administration and computer science.  Present enrollment is 700 students, but with newly acquired accreditation that number is expected to grow to 5,000 students by 2016.

It appears that real learning is taking place.

Classes at the university are 10 weeks long, and have 20 to 30 students — often from as many different countries — who have weekly homework and quizzes. The university depends largely on volunteer labor.  Mr. Reshef said some 3,000 professors have offered to volunteer, although so far the university has only been able to use about 100 of them.

Its deans are volunteers from New York University and Columbia.

The school was created by Israeli entrepreneur Shai Reshef, who has been able to attract the attention of some big guns in the realm of higher education.

The University of the People, almost from the start, has attracted high-level support, with partnerships or backing from New York University, the Clinton Global Initiative, the Bill and Melinda Gates Foundation, the OpenCourseWare Consortium and many others. In August, Microsoft agreed to provide scholarships, mentoring and job opportunities to 1,000 African students who enroll at the University of the People.

I’m reminded of this:

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February 13, 2014

Paying for SAT tests can be the first financial hurdle in affording college

by Grace

The cost of SAT and AP tests can easily amount to hundreds of dollars, but low-income students may be eligible for fee waivers.

A high school senior complains about the high costs of College Board tests.

With college-admission deadlines quickly approaching, my debt to the College Board keeps growing. Two SAT tests, five subject tests and six Advanced Placement (AP) tests later, I am ready to report my scores through the College Board website to the 10 colleges to which I am applying. On top of the total $102 I paid to take the SAT, $114 for the subject tests, and $534 for the AP tests, the College Board now demands $11.25 for each electronic submission of the test scores to the schools on my list.

That makes a total of $750, including the $100-plus needed for electronic scores submission.  Are these fees too high? 

The College Board should behave more like the nonprofit it claims to be. Lowering the cost of the SAT would encourage more students whose parents make modest incomes to retake the test and compete against students from higher income households who often take the test upward of four times, aiming for higher scores. (I took the test twice.)

The total cost of applying of applying to college can easily reach thousands of dollars, creating a strain for many low- and middle-income families.  On the other hand, doing well on an AP test can generate college credit for a student, presenting a substantial value when compared to the typical cost of college tuition.

The College Board offers fee waivers for lower-income students who meet their criteria.

Related:  A recommended schedule for taking the SAT, ACT, and AP tests (Cost of College)

January 13, 2014

Cost-effectiveness analysis and the declining productivity of higher education

by Grace

Higher education productivity, as measured by academic degrees granted by American colleges and universities, is declining….

From “Addressing the Declining Productivity of Higher Education Using Cost-Effectiveness Analysis” by Douglas N. Harris

… Since the early 1990s, real expenditures on higher education have grown by more than 25 percent, now amounting to 2.9 percent of US gross domestic product (GDP)—greater than the percentage of GDP spent on higher education in almost any of the other developed countries. But while the proportion of high-school graduates going on to college has risen dramatically, the percentage of entering college students finishing a bachelor’s degree has at best increased only slightly or, at worst, has declined.

20140110.COCHigherEdProductivity1

Key points:

 Basic Elements of Cost-Effectiveness

•Using effectiveness-cost ratios (ECRs): The primary metric for understanding the relationship between a program’s cost and its effect is the ECR, which divides effectiveness (“bang”) by costs (“buck”) to give a simple estimate of cost-effectiveness. Generally, larger ECRs imply greater productivity.

•The challenges of ECRs: On the cost side, data on higher education costs are notoriously incomplete. It is also unclear what is meant by a program’s effect. In his analysis, Harris uses reliable data and informed assumptions to determine costs, and defines a program’s effectiveness as increasing degree completion.

Cost-Effectiveness Varies across Policies

•No single strategy stands out, but some appear to be more productive than others: The results vary most within the instructional category (student-faculty ratios, full-time versus adjunct faculty, and remediation), while financial aid programs seemed to generate more consistent but low cost-effectiveness ratios.

What are the Implications for Leaders?

•Collecting better data: Going forward, policymakers and institutional leaders should collect more detailed measurements of what higher education programs cost to better assess cost-effectiveness.

•College leaders have more power than they typically assume: ECRs can be used to make comparisons across programs, so we can say whether one program is more cost-effective than another. This helps leaders allocate limited dollars in ways that are most likely to help students.

•Avoiding rote use of ECRs: Cost-effectiveness analysis cannot and should not replace the judgment of educational leaders, but the information that comes from it can provide useful guidance and perhaps improve the way those decisions are made.

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December 17, 2013

Spending other people’s money drives up prices

by Grace

Dr. Jeffrey A. Singer writes about “Health Care’s Third-Party Spending Trap”.

Contrary to “conventional wisdom,” health insurance—private or otherwise—does not make health care more affordable. The third party payment system is the principal force behind health care price inflation. This should come as no surprise.

Nobel-winning economist Milton Friedman, in his masterpiece “Free to Choose,” wrote of four ways to spend money:

Category I—You spend your money on something for yourself. Here you are very careful, because it is your money, and the good or service you are buying is for you.

Category II—You spend your money on something for someone else. Here you have the same incentive as in Category I to economize, but since you are buying something for someone else, you are not quite as meticulous when it comes to the purchase meeting the needs or values of the recipient.

Category III—You spend someone else’s money on something for yourself. Here you are not concerned about how much you spend, because it is not your money. But because you are spending on yourself, you make sure you are getting what you want.

Category IV—You spend someone else’s money on something for yet another person or persons. (This is what we ask our legislative representatives to do every day.) Here you are the least incentivized to economize, or to buy something that meets the needs or values of the recipient.

Healthcare prices are affected by Categories III and IV spending. 

Medicare, Medicaid, and private insurance are examples of Category IV.  Politicians and bureaucrats buy goods and services with other people’s money.

Meanwhile, when the third party payer is perceived as picking up most of the tab, then health care consumers and health care providers engage in Category III spending. Neither have an incentive to take cost into consideration.

Health insurance should not cover “routine, predictable events”.

This isn’t to say we don’t need health insurance. Health insurance that covers truly unforeseen, costly catastrophic occurrences makes sense for most people. As does life insurance, property and casualty insurance, and auto insurance. But health insurance that covers routine, predictable events isn’t really insurance. It’s prepaid health care. And it is driving up prices for everyone with everyone else’s money.

Policymakers need to understand that the key to “affordable health care” is not to increase the role of health insurance in peoples’ lives, but to diminish it. We need much less Category IV spending on health care, and much more of Category I.

Third-party payments are also a factor in higher education.

Higher education, which along with healthcare has experienced a recent history of soaring costs outpacing inflation”, also suffers from the inefficiencies of third-party payments.  The latest number I saw was that the average student at a private, nonprofit college only pays about 57% of the sticker price of her education.

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Related:  Can young college graduates burdened by student loans be convinced to buy health insurance? (Cost of College)

December 9, 2013

Where do students put the blame for their student loan problems?

by Grace

Students put most of the blame for rising student debt on colleges and the federal government.

A national poll of four-year college students has found that they are more likely to blame colleges than other institutions for the rising levels of student debt. The poll, by the Harvard University Institute of Politics, found that 68 percent of those polled viewed student debt for young people as a major problem, while 21 percent viewed it as a minor problem. Asked who was “most responsible” for rising levels of student debt, students cited the following:

  • Colleges: 42 percent
  • Federal government: 30 percent
  • State governments: 9 percent
  • Students: 8 percent
  • Other: 4 percent
  • Refused to answer: 7 percent

Colleges may claim that they are blameless since they are subject to forces beyond their control, but it’s certainly reasonable for students to point fingers at the institutions to which they are paying tuition.

Do students think federal spending has been too little, or too much?

Federal government spending has climbed over the long term, with substantial increases in recent years*.  If it’s true that government spending has been a major reason for the dramatic escalation of college costs as well as related debt levels, then students are right to blame the federal government.  But I suspect that was not their line of reasoning, and that they want taxpayers to fund more of their education.

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Meanwhile, state spending per student has been dropping but very few students see that as the major problem.


*
 2009 marks an anomaly however since there was also a one-time accounting adjustment for all student loans issued since 1992, which made it appear that the federal government more than offset its spending for higher education during that year. These adjustments helped conceal the full magnitude of the federal government’s all-time record budget deficit in that year, which perhaps helps to explain the timing of these adjustments.
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December 5, 2013

The most expensive colleges in the country

by Grace

The Education Department’s list of most and least expensive colleges came out earlier this year.

Some familiar names were on the list of most expensive schools.

Columbia University narrowly edged out Sarah Lawrence College — a perpetual contender on the list, and one that has defended its high tuition – for the most expensive tuition list price, at $45,290 in the 2011-12 academic year. Among four-year public colleges, the University of Pittsburgh surpassed Pennsylvania State University for the most expensive list price, at $16,132. And the most expensive net price (based on what students actually pay after financial aid) was the School of the Art Institute of Chicago, at $42,882, on a list dominated by colleges specializing in music and visual arts. These figures do not include room and board, books, or various fees, which at the most expensive private colleges can push a full year’s sticker price above $60,000.

The schools with the highest list prices are listed below.  Room and board, books, and fees must be added to these numbers to come up with the total cost of attendance.  Not surprisingly, these schools are concentrated in the northeastern part of the country.  These figures would apply to families that receive no scholarships or grants.

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* Tuition and Required Fees, 2011-12

Go to the College Affordability and Transparency Center website for the complete lists, including those that show net prices..

Related:  States with the most and least affordable colleges (usatoday.com)

December 3, 2013

Would the proposed Affordable College Textbook Act cut costs for students?

by Grace

With the costs of college textbooks rising about three times the rate of inflation, students should be happy to see any change that would save them money in this expenditure.

The 812-percent growth in textbook prices is far greater than the percent growth for college tuition and fees over about the same period. Prices have gone up 82 percent in the last decade alone. The average college student is now paying about $1,200 a year on textbooks and supplies.

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The Affordable College Textbook Act

Democratic Senators Al Franken of Minnesota and Dick Durbin of Illinois have introduced the Affordable College Textbook Act, a bill that “would set up a competitive grant program to support pilot programs at colleges and universities ‘that expand the use of open textbooks in order to achieve savings for students’”.

Open-source textbooks are already in limited use, bolstered by programs like Rice University’s OpenStax that offer a selection of free texts for a limited number of introductory courses.  The Gates Foundation is one of its financial supporters.

Franken and Durbin are hoping to speed up the open-source trend. Their bill would set up a competitive grant program to support pilot programs at colleges and universities “that expand the use of open textbooks in order to achieve savings for students.”

Shouldn’t technology already be bringing down the cost of textbooks?

“The dirty secret about textbooks is that they don’t have to be so expensive given the rise of technology,” said Matthew Segal, co-founder of OurTime.org, which endorses the bill….

The reasons for the high cost of college textbooks have been the subject of much debate.

Academic Publishers will tell you that creating modern textbooks is an expensive, labor-intensive process that demands charging high prices. But as Kevin Carey noted in a recent Slate piece, the industry also shares some of the dysfunctions that help drive up the cost of healthcare spending. Just as doctors prescribe prescription drugs they’ll never have to pay for, college professors often assign titles with little consideration of cost. Students, like patients worried about their health, don’t have much choice to pay up, lest they risk their grades. Meanwhile, Carey illustrates how publishers have done just about everything within their power to prop up their profits, from bundling textbooks with software that forces students to buy new editions instead of cheaper used copies, to suing a low-cost textbook start-ups over flimsy copyright claims.

It seems that college professors would be central players in any move to cut textbook costs.  But it’s unclear that anyone has a strong incentive to make books more affordable.

Just as the schools have little incentive to keep their costs down, knowing the bills will be paid thanks to federal guarantees, the publishing industry has even less of an incentive to keep costs under control. Why? Because everyone — even the professors who often profit from royalties from textbook sales — except the student has a monetary incentive to keep things just the way they are.

Related:  Going to all-digital textbooks saves money for private high school students (Cost of College)

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