Archive for ‘rising costs of college’

December 18, 2014

Informed consumers put pressure on rising college costs

by Grace

For the first time in years, the rise in tuition at many colleges is expected to be below the rate of inflation.

Today’s college students are more aware and informed about rising costs and financial aid, and more sensitive to price. That’s going to put ongoing pressure on the whole higher education industry’s finances, according to a Moody’s report (paywall) which gave a gloomy outlook for the whole sector.

A severe version of this is putting major pressure on US law schools, which are actively competing on tuition (paywall) for students, slashing faculty, or closing altogether. Since the 1970s, US tuition costs for undergraduate and graduate degrees have climbed to historic highs. But tuition hikes have slowed substantially as the number of schools have grown, spurring more competition.

This year, a far greater number of the graduate and undergraduate schools Moody’s surveyed projected under 2% tuition growth, a fraction of what we’ve seen for years, and below the cost of inflation:

20141214.COCDecliningTuitionIncreases1

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Max Nisen, ” People are getting smarter about college costs and it’s squeezing the whole industry”, Quartz, December 4, 2014.

December 4, 2014

Failure to graduate on time adds thousands of dollars to college costs

by Grace

Most College Students Don’t Earn a Degree in 4 Years, Study Finds

Is this really news to most people?

The vast majority of students at American public colleges do not graduate on time, according to a new report from Complete College America, a nonprofit group based in Indianapolis.

“Students and parents know that time is money,” said the report, called “Four-Year Myth.” “The reality is that our system of higher education costs too much, takes too long and graduates too few.”

At most public universities, only 19 percent of full-time students earn a bachelor’s degree in four years, the report found. Even at state flagship universities — selective, research-intensive institutions — only 36 percent of full-time students complete their bachelor’s degree on time.

Every extra year costs thousands of dollars.

… “it is costing students and their parents billions of extra dollars — $15,933 more in cost of attendance for every extra year of a public two-year college and $22,826 for every extra year at a public four-year college,” the report said. “Hands down, our best strategy to make college more affordable and a sure way to boost graduation rates over all is to ensure that many more students graduate on time.”

Students who require remediation, transfers between colleges, and too many course choices are blamed for failure to graduate on time.

Each year, the report said, 1.7 million students begin college in remediation, including a majority of community college students — but only one in 10 remedial students ever graduate.

Also, 60 percent of bachelor’s degree recipients change colleges, with almost half of them losing some of their credits when they transfer.

Too much choice in college catalogs contributes to the problem, the report said, often overwhelming 18-year-olds “with an enormous cafeteria of possibilities in the college curriculum” and too few counselors to help them chart their course.

Here are some more “Common reasons for failing to graduate college in four years”.

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Tamar Lewin, “Most College Students Don’t Earn a Degree in 4 Years, Study Finds”, New York Times, Dec. 1, 2014.

November 3, 2014

Reduce college dropout rates by only admitting qualified students

by Grace

One way to lower the college dropout rate is by providing extensive remediation and financial aid to students who struggle to stay in college.   Another way is by restricting admission and financial aid to students who are prepared to handle the course work.  Richard Vedder thinks the second option makes more sense.

College dropouts pay a heavy price, in both financial and opportunity costs.

There are two fundamentally different approaches to dealing with the problem. One says “let’s remove some of the problems that afflict today’s dropouts.” In particular, let us remove some of the educational and economic barriers that might enhance dropping out. Let’s give more financial aid to the low income student, for example, or more and better remedial education. In other words, let us spend money trying to alleviate some causes of dropping out.

The second approach is almost the opposite. Let us not accept into four year colleges students whose record suggest would have a very low probability of success. For example, students in, say, the bottom half of their high school graduating classes typically have a very low probability of graduating successfully in a reasonable time frame (four or five years) from college. Students with very low SAT (say a composite on the verbal and analytical sections of below 900) or ACT (say 18 or less) scores should not be admitted to four year schools. Indeed, it should be possible to devise a “probability of college success” index based on a combination of three factors: quality of the high school attended, high school rank, and scores on college admissions test.

Those failing to meet the admissions thresholds should be allowed to attend community colleges or non-degree schools offering certificated vocational training and, if they succeed there, be allowed to proceed to four year schools. This approach should not only reduce the dropout rate, it should save a good deal of money, both for students and taxpayers. It should reduce student loan repayment problems a bit, and lower loan delinquency rates.

Above all, a more restrictive admissions approach would in the long run reduce the mismatch between the availability of relatively high paying jobs and the numbers of college graduates seeking those jobs. We have too many college graduates, not too few.

Vedder argues this solution is not “anti-minority”.

The 1 DuPont Circle crowd (the higher education establishment’s lobbyists) would fight such a proposal tooth and nail. They would argue that it is anti-access, anti-minority. I would argue it would be a proposal for successful access and align student expectations more closely with potential outcomes. It would reduce enrollments and revenues for the colleges, forcing some needed creative destruction upon higher education.

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Richard Vedder, ‘The Dalit of American Higher Education: The Social “Untouchables”‘, Forbes, 10/16/2014.

October 22, 2014

Federal aid programs allow colleges ‘blithely to raise their tuitions’

by Grace

New York Times economics pundit Eduardo Porter explains “Why Aid for College Is Missing the Mark”, allowing ‘colleges “blithely to raise their tuitions,” at little benefit to students’.

In 1987, when he was Ronald Reagan’s education secretary, the conservative culture warrior William J. Bennett wrote a famous essay denouncing federal aid for higher education because it allowed colleges “blithely to raise their tuitions,” at little benefit to students.

Nearly two decades later, it seems, he was broadly right. Indeed, he didn’t know the half of it.

It’s not just that many colleges and universities are bleeding taxpayers. The government’s overall strategy to subsidize higher education is failing at its core task: providing less privileged Americans with a real shot at a college degree. Alarmingly, it is burdening low-income students with risks they cannot bear and steering them into low-quality educations.

“Institutions of higher education in the United States extract a lot of money without delivering value but the government has no way of influencing that,” said Andreas Schleicher, the top education expert at the Organization for Economic Cooperation and Development, the research organization for the world’s major industrial powers. “It has very few levers of control over equity-related issues.”

Porter comes down on for-profit colleges, leaders in enrolling low-income students.  But their higher tuition does not produce consistently successful outcomes.

Low-income students in the United States often end up with the short straw: no degree, no job and a bundle of debt that they must pay anyway.

The level of government spending on higher education does not seem to be at the heart of the problem.

State and local financing for public higher education fell to some $76 billion last year, nearly 10 percent less than in 2003 after inflation. On a per-student basis it is 30 percent less than it was a decade ago.

But that doesn’t mean there is less government money in the system. Federal aid to college students more than doubled over the period, to some $172 billion last year. Of that, nearly 25 percent went to private, for-profit colleges.

More accountability is needed.

Porter believes the “case for government financing of college is as strong as ever”, but the method of allocation is “wasting both money and opportunity”.  Although I may disagree with his specific recommendations to fix the problem, I wholeheartedly agree with the need “to curb abuses arising from the haphazard distribution of billions of dollars of taxpayer funds with very little accountability”.

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Eduardo Porter, “Why Aid for College Is Missing the Mark”, New York Times, October 7, 2014.

October 21, 2014

Tax deductions give a big boost in government funding of elite private universities

by Grace

Taxpayers subsidize private elite universities at a rate that is ten times higher than that for public universities.  Generous tax deduction policies are the reason for this imbalance, according to Robert Reich’s opinion piece, “The Ivy League is ripping off America”.

Government subsidies to elite private universities take the form of tax deductions for people who make charitable contributions to them. In economic terms a tax deduction is the same as government spending. It has to be made up by other taxpayers.

These tax subsidies are on the rise because in recent years a relatively few very rich people have had far more money than they can possibly spend or even give away to their children. So they’re donating it to causes they believe in, such as the elite private universities that educated them or that they want their children to attend.

Private university endowments are now around $550 billion, centered in a handful of prestigious institutions. Harvard’s endowment is over $32 billion, followed by Yale at $20.8 billion, Stanford at $18.6 billion, and Princeton at $18.2 billion….

Because of the charitable tax deduction, the amount of government subsidy to these institutions in the form of tax deductions is about one out of every three dollars contributed.

Tax deductions boost per-student government spending at elite private universities to amounts significantly higher than spending at public universities.

The annual government subsidy to Princeton University, for example, is about $54,000 per student, according to an estimate by economist Richard Vedder. Other elite privates aren’t far behind.

Public universities, by contrast, have little or no endowment income. They get almost all their funding from state governments. But these subsidies have been shrinking….

That means the average annual government subsidy per student at a public university comes to less than $4,000, about one-tenth the per student government subsidy at the elite privates.

A flat tax could be the solution.

Reich asserts there is no justification for this inequity, but does not go so far as to propose cutting tax deductions for contributions to private universities.  Perhaps he agrees with the majority of Americans who favor a flat tax, which would likely eliminate most deductions, including those for contributions to private universities.

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Robert Reich, “The Ivy League is ripping off America!”, Salon, October 16, 2014.

October 13, 2014

Student debt doubled for high-income families

by Grace

Borrowing for college among high-income families increased from 24% to 50% over the last twenty years.  Similar increases occurred among middle-income families.

… A new Pew Research Center analysis of recently released government data finds that the increase in the rate of borrowing over the past two decades has been much greater among graduates from more affluent families than among those from low-income families. Fully half of the 2012 graduates from high-income families borrowed money for college, double the share that borrowed in 1992-93.1.

20141008.COCPewHiIncomeBorrowers1

 

These numbers show how college affordability is no longer just an issue for low-income families, but now affects families across the income spectrum.

What has changed over the course of roughly two decades then is the pervasiveness of student borrowing across income groups: In the early ’90s, only among graduates from low-income families did a majority of graduates finish college with student debt. Now, solid majorities of graduates from middle-income families (both lower-middle and upper-middle) finish with debt, and half of students from the most affluent quartile of families do the same.

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Richard Fry, “The Changing Profile of Student Borrowers”, Pew Research, October 7, 2014.

September 29, 2014

Allow college students to forego climbing walls to save money

by Grace

Extraneous luxuries help drive up the cost of college. Matthew LeBar of The Center for College Affordability and Productivity (CCAP) suggests that going à la carte would enable families to make wiser choices and curb rising costs.

Colleges have become more than just a place of education. They are as much homes for their students as they are classrooms. As such, many colleges are competing to provide the most lavish amenities to attract students. Some services are generic and uncontroversial, but many are exorbitant and beyond reason. Although these extra amenities may not feel burdensome, they are not free. Student services are financed through student tuition and fees, driving up both.

Some services are sensible, like basic room and board.  But other perks like a jumbo Jacuzzi or a climbing wall are unnecessary and unused by many students, yet they add thousands of dollars to a college education.

Give students choices to pay for what they can afford.

Instead of forcing their students to pay for all sorts of extravagant amenities, colleges should give their students the option way to pay for what they want. If a student wants to pay for a gym membership or a climbing wall, there’s no reason that they shouldn’t be able to. Only the students who want and use a service should be charged for it. Although taking away Jumbo Jacuzzis also removes the university’s ability to teach student how to relax in style, there are always costs, and it seems doubtful it’s worth the $2,000 students are paying for it.

The schools could still advertise that they offer these amenities, but emphasize that they personalize students’ choices while offering them the best value for their tuition dollars.  This might exacerbate class divides that exist within some elite colleges, but no solution is perfect and many families would welcome such choices.

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Matthew LeBar, “‘Free’ Student Luxuries Contribute to the Rising Cost of College”, Forbes, 9/18/2014.

September 22, 2014

Getting a college degree doesn’t seem as important as it used to be

by Grace

Amid a national debate about the worth of a college education, a respected annual poll about the education views held by Americans has found that only 44 percent of Americans now believe that getting a college education is “very important” — down from 75 percent four years ago.

20140919.COCImportanceOfCollege2

…. Similarly, in 2010, 77% of parents said it was somewhat or very likely that they would be able to pay for college for their oldest child. That percentage declined to 69% this year.


Interestingly, confidence in being able to pay for college dropped down to the same level seen in 1995 after rising in 2010.

20140919.COCImportanceOfCollege3

I will be on the lookout for an update to the 2011 Pew Research survey that found 80% of parents believed paying for their child’s education is an extremely important (35%) or very important (45%) goal.

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Valerie Strauss, “Poll: Most Americans no longer think a college education is ‘very important’”, Washington Post, September 16, 2014.

September 1, 2014

Will today’s families regret that they “grossly overpaid” for college?

by Grace

20 years from now, people who grossly overpaid for their bricks & mortar college experience and are still paying off their massive student loans, will feel like incredible chumps.

Looking at families digging deep into their pockets to pay exorbitant college tuition, this same thought has crossed my mind.  As college administrators ponder the rough road ahead, Stuart Butler of the Brookings Institution advises that it will take more than a few tweaks for some institutions to survive the coming years.

…  if today’s college leaders—even at the Ivies—believe they can merely tweak their business models to carry them into the future, then they are in for an even more unpleasant surprise. They should ponder the still recent experience of the music industry, film and television, booksellers, and news media. If they did, they would soon recognize that the higher education industry is encountering a multi-pronged and existential threat composed of successive waves of disruptive innovation. This disruption will force top-to-bottom changes in the very concept of higher education and its relationship with the broader economy.

Butler sees a pattern affecting many industries, including higher education.

1. The underserved consumers are targeted first, “leaving the upstarts to occupy a sector of the market of little interest to industry leaders”.  Online news aggregators looked to “young people with distinct tastes and only casual interest in the news”.

…Early versions of online courses appealed to students who could not easily maintain a regular schedule, or who needed more time to understand material….

2. The initial product is substandard.

… The Apple I, introduced in 1976, hardly seemed a harbinger of doom to the managers of IBM’s mainframe monsters. So it is no surprise today to read college presidents denigrating MOOCs and the cheap, no-frills degrees being rolled out in Texas and Florida….

3. Episodes of adaptation and refinement occur amid harsh criticism.

… The clunky Apple I sold just a couple hundred units, but the elegant Macintosh, introduced twenty years later, ransacked the computing industry.

That’s why the shortcomings of MOOCs today should be of little comfort to the higher education establishment….

4. Unbundling is to be expected, as both hospitals and newspapers have discovered.

As with hospitals and newspapers, bricks-and-mortar institutions of higher education are particularly vulnerable to unbundling. Universities are modular institutions, and lower-cost competitors can easily siphon off customers and revenue from individual modules. For instance, universities are partly a hotel and food service industry, and partly sports and entertainment centers. They have invested heavily in buildings and services that package these elements together at essentially one price. But this makes them vulnerable to competitors that find much less expensive ways to provide discrete modules like housing or even basic first-year classes—or that simply shed costly facilities like libraries or student centers, as online colleges have done.

While credentials are highly valued, academic information is priced at nearly zero.

Indeed, the most challenging and decisive feature of unbundling and competition for the low-cost parts of the college bundle of services comes from the fact that the price of academic information is falling nearly to zero. Why pay a ton of money to sit with 300 other freshmen, listening to a Nobel Prize winner you will never actually meet on campus, when you have access to everything he has written, maybe even video versions of his lectures, free of charge on the internet?…

Even the social part of college can be unbundled.

But what about the social “college experience”? Well maybe that can be unbundled, too. Does undergraduate college have to last four years, or could the residential, networking, or sports elements occupy just part of the period of study at much less total cost? Britain’s Open University has for years brought students on campus for just a few weeks each year. It retains a similar model today using online classes instead of its original televised courses. Yet it is number three in the UK for student satisfaction, tied with Oxford. Moreover, for many young people today online networking provides the relationship of choice for professional purposes, not just for social life. For them, Facebook, LinkedIn, and texting can be a more efficient and even more personal way of building and maintaining future career contacts than paying for a dorm or hanging out at a college gym.

How should universities respond?  Brooks recommends that they need to “price discriminate” in a way that supports what they are selling.  And “they will have to determine their true competitive advantage”.  So some schools, Ivies and other elite institutions, will be able to maintain high prices for the exclusive campus experience they are selling.  Other schools will drop their prices for the cut-rate learning experience they provide.

How should families respond?  Butler’s forecast is consistent with other predictions of sharper class distinctions and a  ‘growing bifurcation between elite universities and “trade schools”‘.  So families should be careful about paying premium prices today for what may be heavily discounted 20 years from now.

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Stuart Butler, “Tottering Ivory Towers”, The American Interest, August 11, 2014.

August 5, 2014

Purdue University tries consolidating and streamlining to cut costs

by Grace

Purdue University president Mitch Daniels has been taking an aggressive stance in addressing high college costs, using “a combination of systemic cuts, organizational realignments and cash incentives”.  Of course, it is not an easy undertaking.

… criticism has come from both directions. Some think he is moving too fast, others not fast enough when it comes to cutting student costs.

Daniels faces many of the same challenges experienced by most other university presidents.

  1. Diminishing state funding, some of which was initiated while Daniels was governor of Indiana
  2. Administrative bloat. which has grown 75% over the last 13 years at Purdue

Consolidating and cost-shifting

Mr. Daniels says he is consolidating administrative jobs where prudent and leaving jobs unfilled where the duplication of effort makes that possible. He has jettisoned 10 university cars, consolidated hundreds of thousands of feet of off-campus rental storage and introduced a higher-deductible health-care plan.

Incentives to develop a three-year degree

He has also created two, half-million-dollar prizes for the first department that devises a three-year degree or a degree based on what a student already knows, not the number of hours he or she sits in a class. This summer, the school offered 200 more classes than last year in an effort to speed time to degree and generate more income for the school.

According to Daniels, there are ‘lots of opportunities” to cut costs’.

The problems are obvious and the ideas for solutions are plentiful, but can Purdue’s president lead the university to a successful implementation?

J. Paul Robinson, a former president of the faculty senate, said Mr. Daniels’s worth as a leader will be tied to his ability to prune that administrative bloat. “Let me put it this way,” Mr. Robinson said: “A blind man on a galloping horse at midnight with sunglasses on can see the problem. The question is, What can he do about it?”

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Douglas Belkin, “At Purdue, a Case Study in Cost Cuts”, Wall Street Journal, July 25, 2014 .

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