it’s notable that private colleges increased tuition above both a nationally-accepted rate of inflation (the Consumer Price Index) and HEPI. HEPI is often subject to critics – Vedder among them – who say that it shouldn’t be used as a benchmark for tuition, because it’s an index that increases based on what colleges spend – not necessarily the true costs they carry. If administrative salaries increase, for instance, HEPI goes up in tandem, regardless of whether those raises were reasonable or necessary
“If all schools increase their spending a lot from one year to the next, the HEPI tends to rise more than it otherwise would,”...“So the schools are creating their own alleged inflation and then they use that as an excuse to say ‘Oh our costs are going up so much.’ The cost of college is going up hardly at all, according to that index, but the tuition rates are [up] 4.5 percent. Why?”
Wednesday, June 30, 2010
Private Nonprofit College Tuition to Rise 4.5% -- The Vedder Perspective
Below is what CCAP's Richard Vedder had to say to Inside Higher Ed about the latest National Association of Independent Colleges and Universities survey, which revealed that private nonprofit tuition will increase by an average of 4.5 percent in the coming academic year:
Drawing Parallels: The Housing and College Markets
by Daniel L. Bennett
In a paper that he wrote in 2008, my colleague Andrew Gillen made an interesting parallel between the housing bubble that had just burst and the rapid tuition inflation that has occurred in higher education. Gillen wrote that
In a paper that he wrote in 2008, my colleague Andrew Gillen made an interesting parallel between the housing bubble that had just burst and the rapid tuition inflation that has occurred in higher education. Gillen wrote that
tuition increases are largely due to the unique characteristics of the market for higher education that were discussed previously—dominated by organizations that do not seek to maximize profits and that have no measure of output, which is needed for normal price competition. This does not, however, discredit the notion that low interest rates and a lack of lending standards exacerbate the situation. It is unlikely that speculators would have flocked into real estate had the low interest rates and lax lending standards not made the returns look attractive in the first place. It is also unlikely that tuition could have increased by anywhere near as much as it has unless the government continually increased the availability and size of subsidies for higher education, particularly guaranteed student loans.I came across an interesting article on CNBC today that discussed the idea of homeownership as an American right:
The government appears to say yes.Here again, the condition in the housing market is parallel to the higher ed market, as Gillen argues. If we substitute the term "higher education" for the terms "home ownership" and "housing", and "colleges" for "homes", then we arrive at a conclusion that accurately describes the current state of higher education in the U.S.
We know how we got here, and we know what happened when home ownership went completely haywire. Now the politicians are calling for "responsible" home ownership, and yet government continues to pour billions of dollars into programs and incentives that push more borrowers into homes that may not be the best fit.
Today's housing market is so out of whack with the usual fundamentals and, let's face it, the historical attitudes toward home ownership have been turned on our collective American heads.
...the future of housing, of home ownership, needs to reinvent itself without artificial stimuli.
Americans have to get back to basics, and by basics I mean affordability, responsibility, and plain common sense.
Is higher education an American right?Some members of the higher ed establishment may disagree with this assessment, but then again, Fannie Mae, Freddie Mac and their most influential Congressional cheerleader, Barney Frank, have also disagreed with the assertion that the government's subsidization of the housing market was responsible for the housing bubble that eventually burst.
The government appears to say yes.
We know how we got here, and we know what happened when higher education went completely haywire. Now the politicians are calling for "responsible" higher education, and yet government continues to pour billions of dollars into programs and incentives that push more borrowers into colleges that may not be the best fit.
Today's higher education market is so out of whack with the usual fundamentals and, let's face it, the historical attitudes toward higher education have been turned on our collective American heads.
...the future of higher education needs to reinvent itself without artificial stimuli.
Americans have to get back to basics, and by basics I mean affordability, responsibility, and plain common sense.
Links for 6/30/10
CATHERINE RAMPELL
So you can’t get your student loans discharged in a bankruptcy. Have you tried suing your parents instead?Ian Quillen
Online learning is spreading quickly in U.S. schools, with 27 percent of high school students saying they were enrolled in at least one online course in 2009, nearly double the 14 percent enrolled in 2008…RACHEL GROSS
The Advisory Committee on Student Financial Assistance, an independent committee that advises Congress and the secretary of education on national policy, presented a report in Washington on Friday that did not bode well for low-income college students seeking degrees.KC Johnson
The report, entitled “The Rising Price of Inequality” sent a clear message to the federal government: without a broad increase in need-based state and federal aid, fewer low-income students will have the resources to remain enrolled in college and earn degrees over the next decade...
Few higher education groups have as pernicious an agenda as the Association of American Colleges and Universities (AAC&U). The diversity-obsessed organization combines an unrelenting campaign against quality---especially at schools whose student bodies are more middle- or working-class---with an Orwellian tendency to use words to describe their opposite…
Tuesday, June 29, 2010
Credential Inflation and the Diversity of Minds
By John Glaser
The Daily Progress suggests that:
The idea behind credential inflation is that so much emphasis has been put solely on the degrees themselves, that it is having deleterious effects on the job market. Over-emphasizing the academic titles before or after somebody's name and under-emphasizing individual abilities not necessarily tied to that title will only serve as a detriment. Insofar as the increased college enrollment (and corresponding joblessness, underemployment, sustained student debt, rising tuition costs, etc.) has been the result of direct governmental intervention. These interventions should be curbed. In their place should be an emphasis on what there is actually demand for in the market and what people can actually afford in terms of higher education. We've spent so many years doing the opposite, that a degree is a pre-requisite for many occupations that one could easily perform with a high school degree (or less). This is the essence of credential inflation.
As I've noted on this blog before, a college degree isn't everything, and there is a huge diversity of minds out there who may not fit well into the status quo of academia, but may nonetheless be high value market contributors. As Catherine Fake, founder of Flickr, recently wrote:
The Daily Progress suggests that:
Unable to find jobs, many new grads opt for graduate school, living on educational loans and stipends and biding their time till the job market improves.I think that the argument that "too many college degrees" tends to lower their market value, leading to credential inflation, is often recieved wrongly. It sounds intuitively like an argument against widespread education, some rotten urge to hold down the masses with less education and low end jobs. This isn't the case.
“A four-year degree in business — what’s that get you? A shift supervisor position at a store in the mall.” So said Karl Christopher, a placement counselor at the Columbia (Mo.) Area Career Center vocational program, in an interview with the Associated Press.
Even in a good economy, there is the issue of credential inflation: The more people who hold four-year degrees, the less valuable a degree is in the job market. That’s partly why business degree graduates can’t land anything better than shift supervisor, or some similar position, as an entry-level job.
The idea behind credential inflation is that so much emphasis has been put solely on the degrees themselves, that it is having deleterious effects on the job market. Over-emphasizing the academic titles before or after somebody's name and under-emphasizing individual abilities not necessarily tied to that title will only serve as a detriment. Insofar as the increased college enrollment (and corresponding joblessness, underemployment, sustained student debt, rising tuition costs, etc.) has been the result of direct governmental intervention. These interventions should be curbed. In their place should be an emphasis on what there is actually demand for in the market and what people can actually afford in terms of higher education. We've spent so many years doing the opposite, that a degree is a pre-requisite for many occupations that one could easily perform with a high school degree (or less). This is the essence of credential inflation.
As I've noted on this blog before, a college degree isn't everything, and there is a huge diversity of minds out there who may not fit well into the status quo of academia, but may nonetheless be high value market contributors. As Catherine Fake, founder of Flickr, recently wrote:
College works on the factory model, and is in many ways not suited to training entrepreneurs.The problems with credential inflation are becoming even more poignant in an increasingly technology-driven education marketplace. How much sense does it make to continue to put so much emphasis on academic credentials when vast amounts of education and marketable skills can be acheived through simply buying a laptop, instead of decades long indebtedness to pay for a college diploma?
Links for 6/29/10
Robin Wilson
One of the most prominent scholars of policies promoting work-life balance in academe has just given up tenure for love…Nick Perry and Justin Mayo
It wouldn't be a story if I were a woman, because thousands of women do this every year…
A Seattle Times investigation has found that at least 40 university or community-college employees retired and were rehired within weeks, often returning to the same job without the position ever being advertised. That has allowed them to double dip by collecting both a salary and a pension…Aisha Labi
Konstanz is one of nine universities that have earned a coveted designation by the German government as being among the nation's strongest.Kartik Athreya on blogging
The project, which began in 2005, has unleashed a new dynamic that has reshaped German higher education, demolishing the pretense of egalitarianism and forcing universities to focus on defining their mission and sharpening their focus…
the country's once pre-eminent universities no longer commanded universal esteem, and the depths to which they had fallen was driven home by the relative dearth of German institutions in the top echelons of the newly influential global-rankings tables, dominated by American and British universities.
In 2004 the federal government proposed the Excellence Initiative in a bid to foster outstanding research and propel more German institutions ahead in the rankings…
The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading…
[With blogger pushback from Scott Sumner, Brad DeLong, Tyler Cowen, and Matt Yglesias.]
Monday, June 28, 2010
It's the Students, Stupid
by Daniel L. Bennett
Keith Hampson of Higher Education Management recently posted a Q&A session that he had with John Lowler -- who founded the Lowler Group, which is a higher education marketing firm. When asked,
Many career colleges have benefited by understanding this aspect of the market and in turn, have made a profit. Despite the fact that many career colleges are heavily reliant on the ability of their students to pay tuition with federally funded aid programs, such schools must offer a product or service that customers are willing to pay for (primarily by borrowing) and satisfied with in order to persevere. If the majority of a career college's students were not satisfied with the service they received, that school would soon be out of business (barring a government rescue package similar to that received by Wall Street and Detroit). By offering students what they want out of education - career guidance and help getting a job, for-profit education has become largely successful. In other words, it's the students, stupid.
Keith Hampson of Higher Education Management recently posted a Q&A session that he had with John Lowler -- who founded the Lowler Group, which is a higher education marketing firm. When asked,
"What parts of the student experience are we not paying enough attention to?"Lowler responded:
"...Students are seeking serious and relevant counsel about courses of study along with meaningful career counsel. The colleges that provide this type of meaningful advising will generate plenty of positive word-of-mouth endorsements, improve retention, and most likely, enhance their value proposition."Like it or not, students increasingly attend college to enhance their career opportunities, as a recent CIRP Freshman survey indicated that the top 3 reasons that students gave for attending college were:
To learn about things that interest meA focus on customer service, similar to that suggested by Lowler, has permitted career colleges (aka for-profits) to capture 10% of the postsecondary education market, and continue to grow at rates far exceeding that of traditional colleges and universities. Neal Rasmussen explains how this has occurred:
To get a better job, and
To be able to make more money
One of their major focuses is on not just enrolling students, but retaining them. Successful for-profits have realized that retention is the real key to success. The more students they can retain, the more students graduate, get degrees, get jobs and help the school make a profit. This is clearly a lesson more not-for-profit schools need to learn.
...a good career college does perform research but into its students and their needs or wants. For-profits actually focus on the students. And many they have learned that if students do not feel their investment will provide a good ROI, they are out of there
...[A good career college will] provide two things that make the usually high financial investment worth it. One – a quick 18 or 36 month to degree. Two – real career and placement services that make a job probable not just possible.
Many career colleges have benefited by understanding this aspect of the market and in turn, have made a profit. Despite the fact that many career colleges are heavily reliant on the ability of their students to pay tuition with federally funded aid programs, such schools must offer a product or service that customers are willing to pay for (primarily by borrowing) and satisfied with in order to persevere. If the majority of a career college's students were not satisfied with the service they received, that school would soon be out of business (barring a government rescue package similar to that received by Wall Street and Detroit). By offering students what they want out of education - career guidance and help getting a job, for-profit education has become largely successful. In other words, it's the students, stupid.
Student Financial-Aid Reform: It's All in a Footnote
by Richard Vedder
Someone once told me that the theory of imperfect competition, usually considered one of the major theoretical advances in economics dating from the 1930s, was actually pretty much laid out two generations earlier in a footnote in Alfred Marshall's Principles of Economics. I was reminded of that reading a superb paper by my former student and Center for College Affordability and Productivity employee, Matthew Denhart. It seems that two giants in economics, Milton Friedman and Simon Kuznets, both winners of the Nobel Prize, wrote a footnote on page 90 of a 1945 monograph for the National Bureau of Economic Research that contains an alternative way to finance college education.
Friedman (better known in educational-reform circles as the founder of the voucher financing idea in K-12 education) and Kuznets (better known as the father of national income accounting) thought it was peculiar that people borrow money to finance their education. They noted that when investments carry inherently high risks, usually they are financed by the issuance of equity (common stock). Individuals borrowing money face a fixed financial obligation upon graduation. But if they sell stock in themselves—say a right to 10 percent of their earnings for a decade or two after graduation—the financial burden varies with economic circumstances. Purchasers in equity interests in such persons make big profits on those who succeed well, and perhaps lose money on those who fail to live up to expectations.
As an economic historian, I have to say the Friedman-Kuznets proposal was not completely new even in 1945. Nearly three centuries earlier, at a time when major finanical institutions like the Bank of England or London Stock Exchange did not even exist (much less commercial banks), migrants to the New World could finance the very high costs of passage (about equal, relative to the average income, to what the costs of four years at a private college are today) by becoming indentured servants—agreeing to work for subsistence (below market) wages in America for a period of several years (usually not more than seven) in return for having the ocean voyage to America financed. The system worked well in bringing many of our founding ancestors to our shores.
Would a similar idea be a good idea today? There are lots of issues that need to be dealt with to make the idea viable—issues relating to the nature of the human-capital contract, as it might be called. How do companies decide on the percent of a person's income it must take, and for how long? While, on average, college graduates earn more because of their higher education, there are exceptions—students who fail to graduate, ones who fail to get very remunerative jobs, those who become drug addicts, etc. The percent of income payback required of fine-arts majors and historians would be less than that of business majors and engineers, for example. This, no doubt, would put some people into a dither. There has been at least one abortive effort to start such a scheme, but it succumbed as a byproduct of the 2008 financial crisis. A back of the envelope calculation tells me Harvard could probably finance the cost of attendance of all undergraduate students beyond existing financial aid for about 2 percent of its endowment—maybe investing in its own students would be a good use of endowment funds.
One person whose financial acumen I greatly respect, Charles Miller (who chaired the Spellings Commission and once also chaired the Board of Regents of the University of Texas) tells me that this is not a great idea. But if I were an aspiring presidential candidate wanting to break out of the mold and propose something different regarding higher education, I would at least explore the idea pretty intensely.
Mentioning politicians leads me to add: I don't think this should be a federal government activity. The Feds have pretty badly scrwed up our Byzantine current student financial aid system that has been accompanied by a decline in the portion of college students from lower income groups. The government would politicize it—we have too much government intervention in the economy as it is. Besides, the Feds don't have the money, and borrowing money from, say, the Chinese to finance student loans—what we are doing now—strikes me as highly dubious economic policy. But there are entrepreneurs like Michael Clifford or Randy Best out there who might see the potential in such a scheme.
I discuss this idea with some of the CCAP staff in this CCAP YouTube video.
Someone once told me that the theory of imperfect competition, usually considered one of the major theoretical advances in economics dating from the 1930s, was actually pretty much laid out two generations earlier in a footnote in Alfred Marshall's Principles of Economics. I was reminded of that reading a superb paper by my former student and Center for College Affordability and Productivity employee, Matthew Denhart. It seems that two giants in economics, Milton Friedman and Simon Kuznets, both winners of the Nobel Prize, wrote a footnote on page 90 of a 1945 monograph for the National Bureau of Economic Research that contains an alternative way to finance college education.
Friedman (better known in educational-reform circles as the founder of the voucher financing idea in K-12 education) and Kuznets (better known as the father of national income accounting) thought it was peculiar that people borrow money to finance their education. They noted that when investments carry inherently high risks, usually they are financed by the issuance of equity (common stock). Individuals borrowing money face a fixed financial obligation upon graduation. But if they sell stock in themselves—say a right to 10 percent of their earnings for a decade or two after graduation—the financial burden varies with economic circumstances. Purchasers in equity interests in such persons make big profits on those who succeed well, and perhaps lose money on those who fail to live up to expectations.
As an economic historian, I have to say the Friedman-Kuznets proposal was not completely new even in 1945. Nearly three centuries earlier, at a time when major finanical institutions like the Bank of England or London Stock Exchange did not even exist (much less commercial banks), migrants to the New World could finance the very high costs of passage (about equal, relative to the average income, to what the costs of four years at a private college are today) by becoming indentured servants—agreeing to work for subsistence (below market) wages in America for a period of several years (usually not more than seven) in return for having the ocean voyage to America financed. The system worked well in bringing many of our founding ancestors to our shores.
Would a similar idea be a good idea today? There are lots of issues that need to be dealt with to make the idea viable—issues relating to the nature of the human-capital contract, as it might be called. How do companies decide on the percent of a person's income it must take, and for how long? While, on average, college graduates earn more because of their higher education, there are exceptions—students who fail to graduate, ones who fail to get very remunerative jobs, those who become drug addicts, etc. The percent of income payback required of fine-arts majors and historians would be less than that of business majors and engineers, for example. This, no doubt, would put some people into a dither. There has been at least one abortive effort to start such a scheme, but it succumbed as a byproduct of the 2008 financial crisis. A back of the envelope calculation tells me Harvard could probably finance the cost of attendance of all undergraduate students beyond existing financial aid for about 2 percent of its endowment—maybe investing in its own students would be a good use of endowment funds.
One person whose financial acumen I greatly respect, Charles Miller (who chaired the Spellings Commission and once also chaired the Board of Regents of the University of Texas) tells me that this is not a great idea. But if I were an aspiring presidential candidate wanting to break out of the mold and propose something different regarding higher education, I would at least explore the idea pretty intensely.
Mentioning politicians leads me to add: I don't think this should be a federal government activity. The Feds have pretty badly scrwed up our Byzantine current student financial aid system that has been accompanied by a decline in the portion of college students from lower income groups. The government would politicize it—we have too much government intervention in the economy as it is. Besides, the Feds don't have the money, and borrowing money from, say, the Chinese to finance student loans—what we are doing now—strikes me as highly dubious economic policy. But there are entrepreneurs like Michael Clifford or Randy Best out there who might see the potential in such a scheme.
I discuss this idea with some of the CCAP staff in this CCAP YouTube video.
Links for 6/28/10
John Lawlor via Keith Hampson
The number of people who have the ability to pay for the price of a college education during a narrow four-year window is diminishing, while those with the ability to pay are showing more constrained willingness to simply pay for prestige. The marketplace is deleveraging and becoming more prudent in their decision making about colleges. We are already seeing more students stopping and starting, attending multiple colleges, “buying down” to less prestigious colleges, and for the very focused students, seeking the most convenient, efficient means of getting in and getting out of school…Kevin Carey
Some time in the last two or three years, we moved into the post-NCLB era of education reform… it is very difficult for the federal government to make state and local governments do good things they don’t want to do. And that’s where NCLB fell down. You cannot create a regulatory apparatus that mandates, via adherence to enforceable rules, the transformation of bad schools into good ones…Steve Kolowich
Rio Salado College… using the same printed textbooks in all sections of each course…Alexandra Tilsley
By only ordering one book per course, rather than allowing each professor to choose the book for her section, Rio Salado would be able to purchase volumes in bulk while saving Pearson the trouble of selling every professor on its product. The result? Publisher discounts that let the college retail the books to students for about 50 percent of what they used to have to charge in order to break even…
What allowed Rio Salado to secure the necessary support was the fact that nearly all the college’s faculty members are adjuncts…
Fewer people gave money to colleges in 2009, and those who did gave less than usual, a study of annual funds has found…
Sunday, June 27, 2010
Saturday, June 26, 2010
More on Technology and the Future of Education
By John Glaser
Here at CCAP, we talk a lot about the rising costs of higher education, public vs. for-profit universities, student debt, the potential "higher ed bubble," the declining value of a college degree, etc. But, as I posted on just last week, I think technological innovation and our society's increasingly digital universe is an underemphasized aspect of the coming sea-change many expect to see in higher education. Here's a brief excerpt (although I encourage reading the whole post):
(1) if technology and the market are allowed to freely take the education sector where it ought to go, we can't foresee what kinds of innovations or ideas might nullify this teacher-student interaction issue (maybe schools remain largely communtiy based - no moving away to college - but the learning is done online or otherwise digitally, and interaction is done with friends, families, and colleagues within community...who knows?) and
(2) these issues about technology and education have to be taken in the context of all the other issues currently pressuring the education system for radical change (aforementioned hyperlinks, for example). Pressure on the status quo is coming from all different directions and taking various forms, so we should avoid a narrow lens when thinking about the changes coming for education.
The future of higher education is largley unknown, except that big change is likely to happen in the not-too-distant future. And technology may just be our saving grace.
Here at CCAP, we talk a lot about the rising costs of higher education, public vs. for-profit universities, student debt, the potential "higher ed bubble," the declining value of a college degree, etc. But, as I posted on just last week, I think technological innovation and our society's increasingly digital universe is an underemphasized aspect of the coming sea-change many expect to see in higher education. Here's a brief excerpt (although I encourage reading the whole post):
The Internet has already begun to revolutionize the way we think about education, with its ease of use, widespread accessibility, and almost bewildering ability to disperse available information. This has implications for the declining costs of education as well. Entire course lectures from the world's most prestigious universities are already widely available for free on the web through sites like Academic Earth, YouTube EDU, iTunesU, Open Culture, and others, not to mention free periodicals from all over the world, NGOs and the free information they provide, freely accessible daily blogs from some of the most intelligent people on earth, Wikipedia has been shown to be as accurate as the Encyclopedia Britannica, on and on and on.Here's Inside Higher Ed's Eric Jansonn's take on it:
An often-cited example of "unbundling" is newspapers: with blogs and other online tools, one no longer needs a printing press or fleet of delivery vehicles to be heard. The newspaper editorial room competes with an army of bloggers and other online media outlets. Craigslist emerges as the marketplace for used household items, local job listings, and community announcements, replacing the advertising function of the traditional print newspaper. The combination is a perfect storm leading to a steady, nationwide stream of newspaper closures.He goes on to note, importantly, that much of education is based on close personal contact with professors and students, and so the elimination of the system we currently have is unlikely for that reason. I think he's on the right track, yet perhaps overlooking two relevant points:
Is liberal education as vulnerable to "unbundling" as newspapers are? Two characteristics suggest it is. First, it too functions under the economics of scarcity: gather some of the best teacher-scholars in various disciplines and seclude them with students in close learning environments on a residential campus. But where scarcity once existed, early signs of plenty are emerging: you can access engaging faculty lectures (with course materials) on Yale's OpenCourseWare site or browse the "how-to" video catalog of new upstarts like Khan Academy or dozens of similar online nonprofit and for-profit alternatives. (See Hassan Masum's recent interview with Salman Khan.) These and similar resources will grow in sophistication and offer alternatives to much general education coursework.
Second, education in general – and especially liberal education – is also primarily an information product. What you get for your money is not a set of real-world, physical goods, but intangible skills and information. So there is every reason to believe that whatever "liberal education" is, "it" can travel over a network. While the resources cited above focus on introductory curriculums, remember that we are in the early days of a digital transformation of academics: 20 years ago, most colleges did not even have reliable networks.
(1) if technology and the market are allowed to freely take the education sector where it ought to go, we can't foresee what kinds of innovations or ideas might nullify this teacher-student interaction issue (maybe schools remain largely communtiy based - no moving away to college - but the learning is done online or otherwise digitally, and interaction is done with friends, families, and colleagues within community...who knows?) and
(2) these issues about technology and education have to be taken in the context of all the other issues currently pressuring the education system for radical change (aforementioned hyperlinks, for example). Pressure on the status quo is coming from all different directions and taking various forms, so we should avoid a narrow lens when thinking about the changes coming for education.
The future of higher education is largley unknown, except that big change is likely to happen in the not-too-distant future. And technology may just be our saving grace.
Friday, June 25, 2010
Trusting an Arsonist?
by Daniel L. Bennett
Tom Matzzie, former Washington Director of Moveon.org, has taken a surprising stand against short seller Steve Eisman, who has been railing against the for-profit higher education industry recently. In an article for The Huffington Post, Matzzie criticizes Congress for enabling the short seller to use the political process to drive down the price of higher ed stocks in order to profit:
Tom Matzzie, former Washington Director of Moveon.org, has taken a surprising stand against short seller Steve Eisman, who has been railing against the for-profit higher education industry recently. In an article for The Huffington Post, Matzzie criticizes Congress for enabling the short seller to use the political process to drive down the price of higher ed stocks in order to profit:
While he is free to invest how he sees fit, the U.S. Senate HELP Committee shouldn't set the stage to help him cheer declining stock prices. Neither should any other part of the U.S government.
Steven Eisman wants the regulation of higher education to get rich -- not because it will be good for students or the schools. And now this hedge fund manager is leveraging a U.S. Senate hearing to take more short-selling profits.
A short-seller investor will always have a conflict of interest when speaking about a set of companies and that is why it is inappropriate to invite Eisman as an expert witness. He will typically always want to portray those companies in a bad light in order to generate news that would drive down their stock prices. His financial conflict of interest biases his testimony beyond redemption.
Could the committee possibly expect unbiased testimony? No. Eisman has staked a fortune on government action against higher education companies.
inviting Steven Eisman to a HELP Committee hearing on a sector he is short selling is like asking an arsonist whether a building will burn down. He'll say, "Yes" but that is because he plans to burn it down.
Senator Harkin's Horse and Pony Show
by Daniel L. Bennett
If you follow education news, then you're probably aware that the Senate held a hearing yesterday, ostensibly to, according to Kelly Field's Chronicle of Higher Education's article, take
According to Field's CHE article:
Although I'm optimistic that the for-profit industry will once again weather the storm and adapt to whatever changes in policy occur, the growing debt levels and loan defaults are serious problems that need to be addressed by not only the for-profits, but also the public and non-profit colleges. In an editorial for Forbes, I suggested a change in loan policy that Steve Eisman put forward in yesterday's trial, mainly that
If you follow education news, then you're probably aware that the Senate held a hearing yesterday, ostensibly to, according to Kelly Field's Chronicle of Higher Education's article, take
"aim at for-profit colleges...[in order] to crack down on "bad actors" in the rapidly growing sector to protect federal student aid dollars from being wasted through fraud and abuse."The hearing was, perhaps unsurprisingly, stacked with critics of the industry such as short-seller Steve Eisman, ED Inspector General Kathleen Tighe, former San Francisco Supervising Deputy Attorney General Margaret Reiter, and a former student who had a bad experience with a for-profit college. Devry's Sharon Thomas Parrott was the lone representative of the industry.
According to Field's CHE article:
Congress, which recently provided billions of dollars in additional Pell Grant aid, wants to be sure that taxpayer dollars are being spent wisely.I would tend to agree with Congress that we need to ensure that our tax dollars are being spent wisely and that we need better data on outcomes; however, as Sara Goldrick--Rab points out on her blog, Education Optimists:
Mr. Harkin [said] "We don't know how many students graduate, how many get jobs, how schools that are not publicly traded spend their Title IV dollars, and how many for-profit students default over the long term. More broadly, we don't know exactly what risk we are taking by investing an increasing share of our federal financial-aid dollars in this sector."
We should have the same concerns about our current public and private non-profit institutions of higher education. Many of us do have these concerns. We are just less vocal about them, perhaps because it is so much easier to object to treating people badly while making a buck, compared to treating people badly while not making a buck.In other words, the for-profits are perceived to be an easy target to scrutinize, although they shouldn't be, as the industry has the financial capability to defend itself through lobbying, and Harris Miller of CCA makes a strong case for the industry's legitimacy. This also isn't the first time that there has been an all-out attack on the for-profit industry. There were similar efforts to reign in the growth of the sector through federal regulation in the late 1960s and early 1970s, and again in the late 1980s and early 1990s. The industry has proven incredible resilient and capable of adapting to change forced upon it.
Our concerns are well placed, but they are also too narrow. We are looking for trouble only under a single lamplight, simply because that’s the spot illuminated. We need to look more broadly. There is a reason enrollment in the for-profit sector is growing, and it has at least partly to do with student demand. Our public colleges and universities aren’t sufficiently equipped to do the job—and blame for that is shared by states and localities, institutions, researchers, and taxpayers. It’s a little hard to know where the buck stops in that situation. It’s not so hard in the case of for-profits—so we disparage them more easily.
Although I'm optimistic that the for-profit industry will once again weather the storm and adapt to whatever changes in policy occur, the growing debt levels and loan defaults are serious problems that need to be addressed by not only the for-profits, but also the public and non-profit colleges. In an editorial for Forbes, I suggested a change in loan policy that Steve Eisman put forward in yesterday's trial, mainly that
colleges be required to bear some of the loss when their students default.Perhaps requiring that colleges put a "little skin in the game" would motivate them to put the interests of their students first. Stay tuned for more analysis of the for-profit industry, as CCAP will soon release a full-length study.
Links for 6/25/10
Bob Samuels
many faculty members in the humanities and social sciences feel that their budgets are being robbed to pay for expensive scientific research projects. One again, due to the decentralized nature of the UC budget, no one knows if externally funded research is being subsidized by high-enrollment undergraduate courses. Yet, what we do know is that money generated by undergraduate instruction is going somewhere other than instructional budgets…Sara Goldrick-Rab
how much does it actually cost to educate undergraduate and graduate students. Since there has been no effort made to answer this question…
whether common objections to the industry would exist even if its colleges were not-for-profit…Paul Basken
I’ve come to the conclusion that yes, objections would continue. We’d be worried about the quality of what’s being proffered, what students are actually learning, how hard the colleges are working to recruit students not really ready for college work, how much debt folks are graduating with relative to their new income, etc.
Here’s the rub: We should have the same concerns about our current public and private non-profit institutions of higher education...
Economic bubbles such as the unsustainable surge in housing prices "typically are built on ignorance and borrowed money," says one prominent pessimist on the matter, Glenn Harlan Reynolds, a professor of law at the University of Tennessee at Knoxville. "And the reason you've got a higher-education bubble is ignorance and borrowed money," Mr. Reynolds said…Clifford Adelman vs, well, just about everyone else on accountability.
Thursday, June 24, 2010
Wednesday, June 23, 2010
Trapped in Debt
by John Glaser
Cryn Johannsen has posted some frightening student loan testimonials on her blog, Education Matters. The testimonials are excerpts from her new paper, The Plight of Current Borrowers: An Appeal For Immediate Relief. Here is one story of how one woman tried to utilize higher education to improve her life situation, but got buried in a mountain of debt that has caused a lot of pain and heartache, in addition to that caused by health problems:
Cryn Johannsen has posted some frightening student loan testimonials on her blog, Education Matters. The testimonials are excerpts from her new paper, The Plight of Current Borrowers: An Appeal For Immediate Relief. Here is one story of how one woman tried to utilize higher education to improve her life situation, but got buried in a mountain of debt that has caused a lot of pain and heartache, in addition to that caused by health problems:
Today I am 46 years old...I had no idea what I was getting myself into when I took out student loans to finish my BAI'm sure there are many more stories like this one floating around out there. Stories of real people who buy into the dream of higher education providing them with pecuniary returns, only to be sadly disappointed. This case reveals that there are in fact diminishing returns to higher education.
I went on to get my Master’s in Counseling Psychology, which was paid for by my employer, Thank God. I found to my dismay that I just couldn't make enough money on a salary of $25,000 as a counselor to make the loan payments and take care of everyday life. My cancer in 1986 left me thousands in debt. In 1991, I ended up filing a chapter 13 for my medical bills. Subsequently, a woman at Wachovia Bank noted this, and accidentally put my loans in default instead of deferment.
My life became a nightmare for the next seven years. This was before the regular use of computers. I was on the phone for hours on hold, but I couldn't get anyone to talk to me. Creditors treated me like a leper. I was actually told by a well meaning person that "your loans have been bought and sold so many times, they are probably in a shoe box in someone’s closet."
Finally in 1995, after getting nowhere, I contacted the US Dept. of Education. I literally sent them a shoebox full of notes about my conversations and letters I wrote trying to ask for help. They eventually tracked them down and subtracted the penalties, but not the interest, so my $25,000 turned into $45,000.
I tried to make the payments on a counselor's salary, even on an income contingent plan or any plan I could find, but it was too much money on $28,500 per year. I made payments whenever I could afford to but they never seemed to count because they were never enough to cover even the interest. My payments were more than my rent! I have deferred and been in forbearance so many times it's not even funny.
I had to declare bankruptcy again in 2000 due to lack of finances and everyday living, and ongoing medical issues with my cancerous nodules on my thyroid which prevented me from working for 7 months in 1999 – (once) again, deferment, hardship forbearance, more compiling of interest.
I wanted to go into the NHSC (National Health Service Corps) which is a program for health professionals to go into public service into rural, urban (low income areas), or prisons to work for a period of time in exchange for loan forgiveness. I had a license in Michigan, but they changed their policy and you had to already have your national independent license.
I couldn't afford to stop working to get my PhD, so after 10 years of getting nowhere and the threat of default, I went back to school at age 41 in 2004 and got my MSW so I could be in the NHSC. This was not something I wanted to do, but I wanted to get my loans repayment [sic] and I already had devoted my life to public service, it seemed the logical thing to do. Another Masters would increase my loans, but I could pay it back through this program.
I have new student loans and consolidated them. Now, my loans have ballooned to $160,000. I can't afford even to make the smallest payment because I wasn't making enough on a social worker’s salary. The whole thing is insane.
I put off and sacrificed most things people my age have; a family, vacations, stocks, savings, investments, retirement and most of all children; because I had to pay my loans. My friends have watched me save and scrimp and never get anywhere.
There were times I had to decide whether or not to buy food or pay my loans. Pay the heat or pay the loans. Get my medication or pay my loans. Eat rice and live in the dark . . . I can never get good credit rates because this $160,000 shows up on my credit.
I have been made to feel like dead beat. I have felt very ashamed. I feel as though I can never get ahead. It would be nice once in my life to have some nice things, or not always having to worry about defaulting and having my social work license taken away, and then I can't work. I still have nightmares about this.
Myth Busting - UK Higher Ed Edition
by Daniel L. Bennett
Thanks to my friend George Leef at the Pope Center for adding another book to the my summer reading list. Leef reviewed James Stanfield's new book, The Broken University, for today's Clarion Call. Stanfield is a scholar at the E.G. West Centre in the School of Education at Newcastle University, which bills itself as the only research centre located at a UK university that is dedicated to developing a better understanding of the role of choice, competition and entrepreneurship in education. In other words, the E.G. West Centre sounds like a friend and ally of CCAP.
In The Broken University, Stanfield sets out to bust the myth that the subsidization of higher education has economic benefits that outweigh the costs by stating that:
Thanks to my friend George Leef at the Pope Center for adding another book to the my summer reading list. Leef reviewed James Stanfield's new book, The Broken University, for today's Clarion Call. Stanfield is a scholar at the E.G. West Centre in the School of Education at Newcastle University, which bills itself as the only research centre located at a UK university that is dedicated to developing a better understanding of the role of choice, competition and entrepreneurship in education. In other words, the E.G. West Centre sounds like a friend and ally of CCAP.
In The Broken University, Stanfield sets out to bust the myth that the subsidization of higher education has economic benefits that outweigh the costs by stating that:
After taking into account the costs and consequences of government intervention outlined above, it is clear that not only is the £14.3 billion public subsidy to higher education not providing any economic or public benefit, and not only is it transferring income and resources from low income families to families with higher incomes, but it is also disrupting, distorting and preventing the growth and development of one of the UK’s most important service sectors. In short, the government’s annual £14.3 billion higher education subsidy is doing much more harm than good. It can therefore be readily compared to those government subsidies which over the previous half-century supported a variety of national champions, and which also resulted in the exact opposite of their original intention.In his review, Leef draws parallels of Stanfield's observations about the UK to the U.S. higher education system:
That sounds exactly like the pitch that is made on behalf of colleges and universities in the U.S. Stanfield shows that the claims are overwrought.I'll have to read the entire book, which is available for free download or purchase from the Adam Smith Institute, to judge for myself whether Stanfield has in fact busted the myth that subsidizing higher education has great economic benefits. Stay tuned.
Consider the argument that universities are a vital part of the economy because the money they spend economically supports their communities. It’s unquestionably true that in Britain (as here and everywhere else) universities create many jobs and pump lots of money into their localities. That supposedly makes them a key “investment” and one of the most valuable sectors of the economy.
Stanfield retorts that such thinking is an instance of ignoring the unseen. All the higher ed spending merely transfers resources; money has been taxed away from some people (taxpaying individuals and firms) and devoted by politicians to higher education. It’s foolish to look only at the benefits of that spending without considering the loss of value to those who were taxed and the benefits that would have accrued if they had been able to spend the money on their own purposes.
University research is another example showing the similarities between the sales pitch for higher ed in Britain and America
Student Evaluations, Grade Inflation, and Declining Student Work Effort
by Richard Vedder
The Chronicle's Susannah Tully has brought my attention to a great article in the prestigious Journal of Political Economy by Scott Carrell and James West dealing with professorial approaches to teaching, student evaluations and student performance. It seems professors who do more than teach the basic bare-bones knowledge and are in some sense more rigorous tend to get poorer student evaluations (no surprise there). The less rigorous professors even get good performances out of their students in the courses taught but those students subsequently, in follow up courses, do poorer than the more rigorous professors who do more than teach to the standardized test. Sounds reasonable to me.
This got me thinking more about student evaluations and some other evidence. Specifically, I would note that student evaluations began to become popular during the 1960s and early 1970s as a common evaluation tool for faculty. I would also note that most of the great grade inflation in America has occurred since evaluations began, with national grade point averages probably rising from the 2.5 or 2.6 range in about 1960 to well over 3.0 today (admittedly, this is based on limited but I believe likely correct evidence). Professors to some extent can "buy" good evaluations by giving high grades, so the evaluation process is probably a major factor in grade inflation.
So what? What difference does it really make if the average grade is a B- or C+ instead of a B or B+? This is where another working paper of the National Bureau of Economic Research comes in. Philip Babcock and Mindy Marks present evidence in Working Paper 15954 that in 1961, the average student spent 40 hours a week engaged in their studies—attending class and studying. By 2003, this had declined by nearly one-third to 27 hours weekly.
One advantage of getting old is that you gain some historical perspective, and I have been in higher education for over a half of century and believe that Babcock and Marks are right. Students do less reading, less studying, even less attending class than two generations ago. Why? They don't have to do more. With relatively little work they can get relatively high grades—say a B or even better. And student evaluations are one factor in explaining the underlying grade inflation problem. Go to the campusbuddy.com Web site and see for yourself evidence on the grade-inflation phenomenon. The colleges of education, which in my judgment should be put out of business (topic for another blog), are the worst offenders, but the problem is pretty universal.
College is getting more expensive all the time—and students are consuming less of it per year as measured by time usage. The cost of college per hour spent in studying is rising a good deal faster than what tuition data alone suggest. Why should the public subsidize mostly middle-class kids working perhaps 900 hours a year (half the average of American workers) on their studies?
What to do? We could move to reduce the impact of student evaluations, or even eliminate them. One reason for their existence—to convey knowledge to students about professor—is usually met separately by other means, such as the RateMyProfessors.com Web site. Alternatively, colleges could by mandate or the use of financial incentives encourage faculty to become more rigorous in their grading. If state subsidies started to vary inversely in size with grade-point averages, state schools would quickly reduce grade inflation. In any case, we need more research into WHY students today are working less. But I would bet a few bucks that grade inflation and student evalauations are part of the answer.
The Chronicle's Susannah Tully has brought my attention to a great article in the prestigious Journal of Political Economy by Scott Carrell and James West dealing with professorial approaches to teaching, student evaluations and student performance. It seems professors who do more than teach the basic bare-bones knowledge and are in some sense more rigorous tend to get poorer student evaluations (no surprise there). The less rigorous professors even get good performances out of their students in the courses taught but those students subsequently, in follow up courses, do poorer than the more rigorous professors who do more than teach to the standardized test. Sounds reasonable to me.
This got me thinking more about student evaluations and some other evidence. Specifically, I would note that student evaluations began to become popular during the 1960s and early 1970s as a common evaluation tool for faculty. I would also note that most of the great grade inflation in America has occurred since evaluations began, with national grade point averages probably rising from the 2.5 or 2.6 range in about 1960 to well over 3.0 today (admittedly, this is based on limited but I believe likely correct evidence). Professors to some extent can "buy" good evaluations by giving high grades, so the evaluation process is probably a major factor in grade inflation.
So what? What difference does it really make if the average grade is a B- or C+ instead of a B or B+? This is where another working paper of the National Bureau of Economic Research comes in. Philip Babcock and Mindy Marks present evidence in Working Paper 15954 that in 1961, the average student spent 40 hours a week engaged in their studies—attending class and studying. By 2003, this had declined by nearly one-third to 27 hours weekly.
One advantage of getting old is that you gain some historical perspective, and I have been in higher education for over a half of century and believe that Babcock and Marks are right. Students do less reading, less studying, even less attending class than two generations ago. Why? They don't have to do more. With relatively little work they can get relatively high grades—say a B or even better. And student evaluations are one factor in explaining the underlying grade inflation problem. Go to the campusbuddy.com Web site and see for yourself evidence on the grade-inflation phenomenon. The colleges of education, which in my judgment should be put out of business (topic for another blog), are the worst offenders, but the problem is pretty universal.
College is getting more expensive all the time—and students are consuming less of it per year as measured by time usage. The cost of college per hour spent in studying is rising a good deal faster than what tuition data alone suggest. Why should the public subsidize mostly middle-class kids working perhaps 900 hours a year (half the average of American workers) on their studies?
What to do? We could move to reduce the impact of student evaluations, or even eliminate them. One reason for their existence—to convey knowledge to students about professor—is usually met separately by other means, such as the RateMyProfessors.com Web site. Alternatively, colleges could by mandate or the use of financial incentives encourage faculty to become more rigorous in their grading. If state subsidies started to vary inversely in size with grade-point averages, state schools would quickly reduce grade inflation. In any case, we need more research into WHY students today are working less. But I would bet a few bucks that grade inflation and student evalauations are part of the answer.
Tuesday, June 22, 2010
Becker vs. Posner on For-Profit College
by Daniel L. Bennett
I normally read the the Gary Becker-Richard Posner blog with great interest, eager to find out what these 2 great thinkers have to say about various economic topics. This past weekend, they posted a pair of essays discussing for-profit higher education. Both offered some interesting perspectives, with Posner generally taking the Steve Eisman gloom and doom view of the industry, while Becker offered a more balanced view.
Posner wrote:
Posner:
Posner:
Becker offers a different and perspective, taking into account market distortions and suggesting that public and nonprofit schools are not angelic either:
I normally read the the Gary Becker-Richard Posner blog with great interest, eager to find out what these 2 great thinkers have to say about various economic topics. This past weekend, they posted a pair of essays discussing for-profit higher education. Both offered some interesting perspectives, with Posner generally taking the Steve Eisman gloom and doom view of the industry, while Becker offered a more balanced view.
Posner wrote:
The colleges are also very profitable, so most of them will be able to survive with lower tuition—which is a bit of a puzzle, since one expects competition to drive the average price of a product or service down to cost (including an allowance for profit, viewed as the cost of equity capital). It is possible, however, that the industry faces a sharply rising average-cost curve, so that the costs of the efficient firms are lower than the market price. In addition, demand for for-profit college education has been rising rapidly, and when demand for a product rises at a fast rate profits may rise because of delay in expanding supply.Posner makes some good points concerning supply and demand, but he doesn't mention that government involvement and regulations, specifically 90/10, of the sector have contributed to higher tuition since for-profits serve a demographic that is largely dependent on federal aid as its means to pay tuition, and there are significant barriers to entry in the industry.
Posner:
There is evidence that just as in the case of the marketing of mortgage loans during the housing bubble of the early 2000s, the for-profit colleges use aggressive advertising to attract students from low-income families that lack financial sophistication and the ability to evaluate the benefits of attending a for-profit college. These people—who may be the only people who would consider a for-profit college, because no other college would admit them—almost by definition have little information about higher education and are therefore prey to skillful marketing that even if literally truthful may create a misleading impression of the benefits of attendance at a for-profit college. For-profit colleges often pay recruiters by the number of enrollments that a recruiter generates.Misleading advertising and paying recruiters based on enrollment are forbidden with the exception of 12 safe harbors, which ED has proposed eliminating. I do however believe that there are still problems in the industry and that more information ought to be provided to prospective students to help them make better decisions when selecting a college.
Posner:
An alternative possibility, however, is that most of the people who attend a for-profit college understand the risk of failure but prefer to gamble on succeeding in obtaining a college degree and using the credential and what they have learned to obtain a much better job as a result—a job that will enable them to repay their loan and derive a net benefit from having borrowed itThis is certainly an area in need of research, but Posner is misguided in suggesting that the dropout risk is higher among profit-seeking colleges. Retention rates at for-profits are actually higher in aggregate than public schools, and part-time student retention rates are highest in the for-profit sectors. And while it may be true that bachelor's degree seekers at for-profit schools graduate at lower rates than they do at private nonprofit or public 4-year schools, the completion rate at for-profit schools offering 2-year degrees and certificates is actually the highest among any sector. We should therefore not attempt to discern cost-benefit comparisons by profit status, but rather but program type. A significant proportion of the industry offers career-focused training that is much different than academic education. Grouping the two types of education together simply because they both seek profit would not result in a meaningful comparison.
College graduates earn substantially higher salaries than less-educated workers, but it is doubtful whether, in the aggregate, graduates of for-profit colleges earn enough more to compensate for the costs and the dropout risk.
Becker offers a different and perspective, taking into account market distortions and suggesting that public and nonprofit schools are not angelic either:
comparison of default rates between for-profit colleges and public colleges is not the right measure of how much government subsidies they receive. All public colleges and most private ones receive large direct subsidies from various governments that enable them to offer much lower tuition levels than are offered by for-profit colleges. Many students in public colleges, especially the lower quality ones, also drop out without finishing, and also receive low earnings, after having been generously subsidized by governments. The right comparison between for-profit and public schools might be the increase in earnings of students per dollar of government subsidy, no matter what form these subsidies take. The for-profits may still look worse on this measure than do the public colleges they compete against, but the difference would be much smaller than the differences in default rates.I generally agree with Becker's analysis and his recommendation that default rate standards should be stricter. I would note however that it would be advisable to look at default rates by program level and type, rather than simply by institution. It may be that some of an institution's programs lead to great outcomes while others lead to horrible outcomes. In such a case, it would be best to identify which programs add the most value and work to revise or eliminate those which add little value.
Some argue that for-profits can only compete by misleading students into believing they will benefit much more from such an education than they will actually benefit. Clearly, some of that does occur. However, even some of the best colleges and universities are quite misleading in their advertising and other attempts to attract students. For example, very few philosophy, French, or English Lit departments warn incoming students that jobs in their fields are scarce, and that most entering students may never get a decent job using their specialized training.
So my conclusion is that while stiffer default rules on government subsidized student loans are needed, for-profits should not be discriminated against in these rules since they offer valuable forms of education. Moreover, public colleges receive substantial direct government subsidies that for-profit colleges do not receive. With lower allowable default rates, for-profit (and other colleges) would cut back on the number of students accepted whom they expect to eventually default on their student loans.
The College Advantage Revisited
by Richard Vedder
I seldom respond to commenters on my blog posts or articles, but the rather serious attack on my first Chronicle post on the diminishing economic advantage of a college degree rquires a response. Sandy Baum and Mike McPherson (hereafter S and M) not only say I am wrong, but rather sanctimoniously imply that I deliberately ignored appropriate evidence to reach an erroneous conclusion, unlike "people like us who have devoted considerable time and energy to analyzing educational opportunities."
S and M are certainly right that time series data are often subject to different interpretations depending on the years used. So let us analyze earlier the data that S and M comment on. First, the unemployment rate. They are also technically correct that my comparison of the college-graduate unemployment rate with the overall unemployment rate suffers because the college graduates are included in the broader rate total. But correcting for that does not change the reality: The job security associated with a college degree is less today than earlier in our history. The unemployment rate for those with bachelor degrees or more degrees averaged 4.91 percent for the first five months of 2010, easily the highest in the 35 years that consistent educational attainment/unemployment rate data have been recorded on a monthly basis; that is far less true for other groups in the population that faced similarly high unemployment rates in 1982-3. Using annual data, my Center for College Affordability and Productivity staff regressed the college-graduate unemployment rate against the aggregate unemployment rate and a time drift variable for the period 1970 to 2009 and observed a statistically significant (at the one-percent level) sign on the time variable. Adjusting for the overall unemployment rate, the college rate has tended to rise over time.
Similarly, the income advantage of a college education is subject to various interpretations. Let us use three-year averages of data to mitigate an S and M criticism of my blog regarding dates. Using median income figures for all full-time, year-round workers over 25 from the consistent Census Bureau data on their Web site, we do find a rising differential for female bachelor-degree recipients from 1991-93 to 2006-08 (from 56.2 to 67.8 percent), although even with this measure the growth in the differential declines sharply after 1999-2001. Yet using the broader, more inclusive category of all workers 25 and over, the median income differential income advantage associated with college for females falls from 80.29 percent in 1991-93 to 77.46 percent in 2006-8.
Looking at the totality of the evidence, I stick to my guns. On the income-advantage side of the equation, the advantages of a college degree are no longer rising like they used to for females, the largest group both from the standpoint of numbers of college graduates and number of new jobs filled. By most reasonable standards, the pecuniary advantages of a college education are declining a bit for a majority of new workers. Job security is also somewhat less secure.
But that is missing half the story. The other half of the story is rising college costs. Sandy Baum usually tends to downplay this by emphasizing that net tuition fees are rising less than sticker prices, reflecting the increase in price discrimination by universities. But try telling that to parents or to students with rising loan debts. The tuition-fee component of the Consumer Price Index is rising faster than family incomes over the past generation, not a sustainable situation.
The reality remains:
1. College is getting more costly every passing day.
2. A large portion of those going to college either fail to graduate, or graduate only after taking far more time and spending far more money than originally expected.
3. The economic advantages of getting a college degree are not growing like they used to.
4. Labor-market projections of the Bureau of Labor Statistics for new jobs suggest a majority of them do not need college-level skills, suggesting that credential inflation will lead to more students taking jobs traditionally held by less educated persons.
5. The long-term obligations of feeding and providing health care for an aging population is rising sharply, while taxpayers resist paying vastly higher portions of their incomes to finance this obligation.
6. All of this is eventually going to force major changes in the way higher education is financed and probably delivered, whether the Doyens of Dupont Circle, their cheerleaders, and their constituencies like it or not.
I seldom respond to commenters on my blog posts or articles, but the rather serious attack on my first Chronicle post on the diminishing economic advantage of a college degree rquires a response. Sandy Baum and Mike McPherson (hereafter S and M) not only say I am wrong, but rather sanctimoniously imply that I deliberately ignored appropriate evidence to reach an erroneous conclusion, unlike "people like us who have devoted considerable time and energy to analyzing educational opportunities."
S and M are certainly right that time series data are often subject to different interpretations depending on the years used. So let us analyze earlier the data that S and M comment on. First, the unemployment rate. They are also technically correct that my comparison of the college-graduate unemployment rate with the overall unemployment rate suffers because the college graduates are included in the broader rate total. But correcting for that does not change the reality: The job security associated with a college degree is less today than earlier in our history. The unemployment rate for those with bachelor degrees or more degrees averaged 4.91 percent for the first five months of 2010, easily the highest in the 35 years that consistent educational attainment/unemployment rate data have been recorded on a monthly basis; that is far less true for other groups in the population that faced similarly high unemployment rates in 1982-3. Using annual data, my Center for College Affordability and Productivity staff regressed the college-graduate unemployment rate against the aggregate unemployment rate and a time drift variable for the period 1970 to 2009 and observed a statistically significant (at the one-percent level) sign on the time variable. Adjusting for the overall unemployment rate, the college rate has tended to rise over time.
Similarly, the income advantage of a college education is subject to various interpretations. Let us use three-year averages of data to mitigate an S and M criticism of my blog regarding dates. Using median income figures for all full-time, year-round workers over 25 from the consistent Census Bureau data on their Web site, we do find a rising differential for female bachelor-degree recipients from 1991-93 to 2006-08 (from 56.2 to 67.8 percent), although even with this measure the growth in the differential declines sharply after 1999-2001. Yet using the broader, more inclusive category of all workers 25 and over, the median income differential income advantage associated with college for females falls from 80.29 percent in 1991-93 to 77.46 percent in 2006-8.
Looking at the totality of the evidence, I stick to my guns. On the income-advantage side of the equation, the advantages of a college degree are no longer rising like they used to for females, the largest group both from the standpoint of numbers of college graduates and number of new jobs filled. By most reasonable standards, the pecuniary advantages of a college education are declining a bit for a majority of new workers. Job security is also somewhat less secure.
But that is missing half the story. The other half of the story is rising college costs. Sandy Baum usually tends to downplay this by emphasizing that net tuition fees are rising less than sticker prices, reflecting the increase in price discrimination by universities. But try telling that to parents or to students with rising loan debts. The tuition-fee component of the Consumer Price Index is rising faster than family incomes over the past generation, not a sustainable situation.
The reality remains:
1. College is getting more costly every passing day.
2. A large portion of those going to college either fail to graduate, or graduate only after taking far more time and spending far more money than originally expected.
3. The economic advantages of getting a college degree are not growing like they used to.
4. Labor-market projections of the Bureau of Labor Statistics for new jobs suggest a majority of them do not need college-level skills, suggesting that credential inflation will lead to more students taking jobs traditionally held by less educated persons.
5. The long-term obligations of feeding and providing health care for an aging population is rising sharply, while taxpayers resist paying vastly higher portions of their incomes to finance this obligation.
6. All of this is eventually going to force major changes in the way higher education is financed and probably delivered, whether the Doyens of Dupont Circle, their cheerleaders, and their constituencies like it or not.
Links for 6/22/10
Warren Buffett
My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well. I've worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate's distribution of long straws is wildly capricious…Michael C. Macchiarola
The fact that so many student borrowers are in distress today only serves to indict the value proposition that the education industrial complex continues to advance...Joanne Jacobs
The number one producer of associate degrees in the nation is University of Phoenix Online. Despite much higher tuition — partially subsidized by federal aid — flexible for-profits are taking students away from crowded community colleges.Randall Sherman
My undergraduate degree in German cost me a total of less than ten thousand dollars at the University of Missouri. Today, that amount of money would get me through January of my freshman year for an increase of over 600 percent in three decades…
Monday, June 21, 2010
Government Fix-Its Encourage Indebtedness
By John Glaser
How Income-Based Repayment will make you poorer:
Such circumstances certainly help explain why 80% of college graduates are going back to live with their parents, mainly to save money.
How Income-Based Repayment will make you poorer:
The federal government introduced Income-Based Repayment, or IBR, last year to provide relief to federal student loan borrowers who are struggling to manage their loan payments.This is another government provision in a long line of them (from student aid programs to university grants) which performs the opposite of its intended goal. It effectively sanctions the rising costs of higher education by placing less strain on the price to consumers, and encourages indebtedness until your twilight years.
IBR provides a formula that caps monthly payments at 15% of discretionary income. Borrowers who make all their income-based payments for 25 years have the balance of their federal student loan debt forgiven at the end of that period...
The problem for borrowers is that extending you payment term will dramatically increase the amount of interest you'll pay over the life of the loan - and if you take the full 25 years to repay your debt, you'll be around 46 by the time you're debt free. That's a very, very hard way to establish a solid financial life.
Such circumstances certainly help explain why 80% of college graduates are going back to live with their parents, mainly to save money.
A survey of last year's college graduation class showed that 80 percent moved back home after getting their diplomas, up significantly from the 63 percent in 2006. The CollegeGrad.com survey of 2,000 young people showed that seven in 10 said they would live at home until they found a job.
..."I want to save money, so I'm not just getting by," said the 22-year-old who graduated from Washington College in 2009, and spent nearly a year working internships — paid and unpaid — before she could put her degree to use in a marketing firm.
Obama and CCAP Agree...on West Point Ranking
by Matthew Denhart
Forbes/CCAP ranked the United States Military Academy tops in the 2009 list of America's Best Colleges. We were pleased to hear that the President of the United States agrees. In his May commencement address at West Point, President Obama had this to say:
Forbes/CCAP ranked the United States Military Academy tops in the 2009 list of America's Best Colleges. We were pleased to hear that the President of the United States agrees. In his May commencement address at West Point, President Obama had this to say:
It is wonderful to be back at the United States Military Academy--the oldest continuously occupied military post in America--as we commission theAt CCAP we have a small army currently working full-time preparing the 2010 list. There are a few changes both to the methodology and the list of schools. We believe these will serve students and parents well. Be on the lookout in the coming months for launch of this year's ranking.
newest officers in the United States Army.
Thank you, Gen. Hagenbeck, for your introduction, on a day that holds special meaning for you and the Dean, Gen. Finnegan. Both of you first came to West Point in the Class of 1971 and went on to inspire soldiers under your command. You've led this Academy to a well-deserved recognition: best college in America. [Applause.]
Links for 6/21/10
Catherine M. Haeck and Frank Verboven
based on the personnel records of a large Belgian university…Ben Miller
In many other countries promotions or tenure decisions are awarded through “tournaments”, but in Belgium the tournaments have two interesting specific features; they are held on an annual basis and decided within the university. The tournament implies that eligible candidates compete for a limited number of slots and winners are selected based on various aspects of performance, including research and teaching…
the university is characterised by a strong and persistent internal labour market. As a result, careers within the university tend to be long…
both research and teaching performance significantly contribute to the promotion probabilities, but there are important differences across the three university groups (exact sciences, medical sciences, and humanities). An increased teaching load of 1 course significantly increases the promotion probability by about 1-2%. An extra publication raises the promotion probability by a comparable amount in exact and medical sciences, but by a much larger amount of 9-16% in humanities…
One can make an argument that the accreditation process almost worked in this issue. The accreditor clearly reviewed the courses enough to realize that a 9 credit course should really only have been worth about 3 credits. They found the mistake and identified it, calling the whole thing “egregious.” If accreditation is supposed to review standards and ensure quality, that seems to have been fine.Caterina Fake
Instead, the issue is that the accreditation process basically walked up to the line of action and then backed down. Rather than taking action against what appears to be some egregious policies, the accreditor allowed for a minor rap on the knuckles and a visit or two. It didn’t do anything about the fact that inflated course credits would have resulted in overcharging of the federal student aid programs.
Clearly that’s insufficient. Even the NCAA acts in the face of egregious penalties. And that’s what ultimately must be addressed...
College works on the factory model, and is in many ways not suited to training entrepreneurs. You put in a student and out comes a scholar.Tim Pawlenty via Steve Kolowich
Entrepreneurship works on the apprenticeship model...
“Do you really think in 20 years somebody’s going to put on their backpack, drive a half hour to the University of Minnesota from the suburbs, haul their keister across campus, and sit and listen to some boring person drone on about econ 101 or Spanish 101?” Pawlenty asked Stewart, host of "The Daily Show."
“Can’t I just pull that down on my iPhone or iPad whenever the heck I feel like it, from wherever I feel like it?” he said. “And instead of paying thousands of dollars, can I pay $199 for iCollege instead of 99 cents for iTunes?”
Saturday, June 19, 2010
The Successful Under-Schooled
by John Glaser
This TED talk by Cameron Herold talks about how entrepreneurs - some of the most productive members of society - don't fit well into the current traditional academic culture because the structure and norms aren't conducive to the environment in which entrepreneurs thrive. Some of today's most successful people, he claims, suffer from bipolar disorder, ADHD, et al, and are actually under-schooled.
On a related note, Caterina Fake recently wrote about how she almost went to get a PhD in poetry, but instead founded the very successful photo-sharing site Flickr. Her post is titled "Want to become an entrepreneur? Drop out of college." She says, similarly:
This TED talk by Cameron Herold talks about how entrepreneurs - some of the most productive members of society - don't fit well into the current traditional academic culture because the structure and norms aren't conducive to the environment in which entrepreneurs thrive. Some of today's most successful people, he claims, suffer from bipolar disorder, ADHD, et al, and are actually under-schooled.
On a related note, Caterina Fake recently wrote about how she almost went to get a PhD in poetry, but instead founded the very successful photo-sharing site Flickr. Her post is titled "Want to become an entrepreneur? Drop out of college." She says, similarly:
College works on the factory model, and is in many ways not suited to training entrepreneurs.I think these types of ideas about the limits of higher education and the status quo under which these institutions operate, say quite a lot about the future of pre-career academic enrollment.
Friday, June 18, 2010
More on the Demand for Higher Ed
by John Glaser
Earlier this week I posted a response to Matt Yglesias's comments regarding the demand for college degrees, measured particularly in terms of salaries.
EduBubble has also posted a notable response:
Earlier this week I posted a response to Matt Yglesias's comments regarding the demand for college degrees, measured particularly in terms of salaries.
EduBubble has also posted a notable response:
Matt Yglesias is quite correct when he points out that many members of the middle class seem to sport super-fancy masters degrees and PhDs, but that’s not the same as saying that these are tickets to the middle class. There are too many rich people in Silicon Valley without degrees to treat this as a syllogism.I would agree that the exceedingly high cost of higher education translates to much higher risk on such an investment. If things don't work out, if something unexpected happens, or if your area of concentration has very low market demand, you may be out a couple hundred thousand dollars. Current tuition costs are unsustainable, and I would speculate that it has only lasted this long because of some very strong cultural commitments to the notion of institutional degrees.
Just because there are successful PhDs employed at the National Institute of Health doesn’t say anything about the people who didn’t get a job. Indeed every PhD granting department will tell you that there’s a surplus of candidates. They routinely get hundreds of applications for every faculty job. When these PhDs go off and get another job making widgets, it doesn’t mean that PhDs are a ticket to making widgets.
Even if there’s a wage premium paid to certified nerds with diplomas doesn’t mean that the diploma is worth it. $200k+ will buy a pretty nice house in many parts of the country. Which is more likely to keep the rain off your head? A degree from a fancy university or the house?
There are more and more people who fail to “use” the degree and to them, it’s just $200k down a rat hole. Just because many of the successful people have degrees doesn’t say anything about the number of people who can’t use their degree. If it’s true that 15% of the letter carriers have college degrees, then we’ve got a problem. They may be more enlightened but they’re also probably laden with debt.
CCAP in the News
Andrew Gillen and Daniel Bennett were cited by Juliana Keeping in a recent article for Ann Arbor News.
[Gillen said that] colleges compete for students and dollars in a market where brand is everything. To maintain that brand, universities need to continually spend to maintain and improve their reputations.Steve Smith cited Richard Vedder in this article:
"Higher education is structured in a way where institutions are forced to compete on reputation," Gillen said. "Because they're forced to compete on reputation, it's always beneficial for them to spend more money. They're always searching for ways to raise money, one of those ways being tuition."
[Bennett said that] the proliferation of government-backed loans drives higher tuition prices. He argues making loans available only to the students who most need them would fundamentally change a system where the sky’s the limit for increased tuition and the borrowed money to pay for it.
“Economics 101 would tell us this would decrease the demand and the willingness of people to pay exorbitant prices,”
Vedder's research shows that "…eight out of the ten job categories that will add the most employees in the next decade — including home-health aide, customer service representative and store clerk — can be performed by someone without a college degree."And the state of West Virginia is still in disarray over the level of subsidization for college athletics at Marshall that CCAP reported.
Links for 6/18/10
Joanne Jacobs
I was running out of enthusiasm for jumping through hoops and trig seemed more like a strategy for torturing 16-year-olds than an essential subject…Michael Sewall
For-profit colleges and community colleges were the most popular choices of students who used benefits from the Post-9/11 GI Bill this past academic year…Eric Ulas
Do you think $422,000 is a reasonable severance package for a school superintendent, especially when the state and so many other school districts are struggling financially?...EduBubble
A number of fancy universities are proudly proclaiming a “no loans” policy while demanding so much cash that the parents have no choice but to take out PLUS loans themselves...
Thursday, June 17, 2010
Higher Ed Priorities: Academics or Sports?
by John Glaser
Ever think about all that collegiate money going towards football stadiums, coaching salaries, and team advertising? College sports are a multi-billion dollar a year industry. What if univerisities paid more financial attention to academic pursuits and understanding our world, rather than games of physical competition? CCAP thinks about these issues, as does the The Knight Commission:
Ever think about all that collegiate money going towards football stadiums, coaching salaries, and team advertising? College sports are a multi-billion dollar a year industry. What if univerisities paid more financial attention to academic pursuits and understanding our world, rather than games of physical competition? CCAP thinks about these issues, as does the The Knight Commission:
The median budget for athletics programs in the Football Bowl Subdivision is about $40 million, but that number is deceiving. There is a wide gap in spending from the very top programs to the bottom. If we split big-time athletics programs into 10 deciles of 12 institutions based on expenses, the median budget for the lowest decile was $14 million in 2007 and the median budget for the top decile was $83 million. The highest spending categories for the average athletics program includes the following:And here:
Salaries and benefits, especially coaches’ salaries (32 percent of total expenses);
Tuition-driven grants-in-aid—or sports scholarships (16 percent);
Facilities maintenance and rental (14 percent);
Team travel, recruiting and equipment and supplies (12 percent combined);
Fund-raising costs, guaranteed payments to opponents, game-day expenses, medical costs, conducting sports camps and other miscellaneous costs (12 percent).
The greatest challenge facing universities and their athletics departments today is dealing with the rapid rise of expenses. Athletics expenses are growing at an annual rate approaching 7 percent, according to a variety of studies (For more information, see references to Cheslock, Fulks, and Orszag and Israel at the end of this report.)
At the same time, revenues are not keeping up. In 2009, the National Collegiate Athletic Association published a report that found median operating spending for athletics increased 43 percent between 2004 and 2008, but median revenue generated by athletics programs grew only 33 percent over the same time period (Fulks, 2008). In another telltale spending reality a few years earlier, the NCAA reported in 2005 that athletic expenses rose as much as four times faster than overall institutional spending between 2001 and 2003 (Orszag & Orszag, 2005).
Median athletics spending at public institutions in the Football Bowl Subdivision (FBS) has grown nearly 38 percent from 2005 to 2008, while academic spending grew only 20 percent.This is troubling on a number of levels, but, just intuitively, how would non-sports fans feel if they knew their tuition was markedly higher only for the betterment of the vast industry of college sports?
The ten public institutions spending the most on college sports are on pace to spend more than $250 million annually, on average, in 2020.
Median athletics spending per athlete ranges from 4 to nearly 11 times more than the academic spending per student in the FBS conferences.
Academic Internet: Threatening the Existence of Institutions
By John Glaser
From the Chronical Review:
Here's the long view: educational attainment which has long been correlated with economic progress, has been on an amazingly consistent world-wide trend upwards for at least three quarters of a century. The Internet has already begun to revolutionize the way we think about education, with its ease of use, widespread accessibility, and almost bewildering ability to disperse available information. This has implications for the declining costs of education as well. Entire course lectures from the world's most prestigious universities are already widely available for free on the web through sites like Academic Earth, YouTube EDU, iTunesU, Open Culture, and others, not to mention free periodicals from all over the world, NGOs and the free information they provide, freely accessible daily blogs from some of the most intelligent people on earth, Wikipedia has been shown to be as accurate as the Encyclopedia Britannica, on and on and on. Couple that with the always evolving, always innovating technological sector of the economy (iPad, replacing textbooks?) which is relatively cheap considering its place at the very forefront of human civilization, which is helping to 1) make every daily task more efficient and more convenient and 2) allowing us to use that extra time to focus on our increasingly free education. Furthermore, the environment of constant innovation and evolution creates very high levels of competition, which keeps prices declining and availability increasingly widespread. These trends, and others, could all contribute to a new paradigm of economic and academic norms for the next generation, and for the better.
It's simply not clear why we as a society would continue to be committed to a rigid, unimaginative system instead of fully embracing the innovative world of web-education, which is cheaper, cutting-edge, and more efficient. It's also not clear exactly what kind of system might replace the one we have; perhaps it's a hybrid of this dichotomy. But we should at least be more open to dropping the aspects of our current system that don't work, in favor of what is obviously the future.
This revolution seems to be happening at the same time that traditional university education teeters on the edge of sustainability, with less and less people being able to afford higher education, but these forces can truly disrupt longstanding institutions.
From the Chronical Review:
[Clay Shirky] argues that as Web sites become more social, they will threaten the existence of all kinds of businesses and organizations, which might find themselves unnecessary once people can organize on their own with free online tools. Who needs an academic association, for instance, if a Facebook page, blog, and Internet mailing list can enable professionals to stay connected without paying dues? Who needs a record label, when musicians can distribute songs and reach out to fans on their own? And so on.At a time when internet technology is transforming the way we attain information and fulfill intellectual inquiry, I think we should pay heed to statements like Shirky's. There has been much talk about a higher education bubble and the decreasing real value of college degrees, and the internet is a remarkable ingredient in this institutional academic transformation. It's clear even in this early stage that the internet will have serious consequences on how we think about academic achievement.
Here's the long view: educational attainment which has long been correlated with economic progress, has been on an amazingly consistent world-wide trend upwards for at least three quarters of a century. The Internet has already begun to revolutionize the way we think about education, with its ease of use, widespread accessibility, and almost bewildering ability to disperse available information. This has implications for the declining costs of education as well. Entire course lectures from the world's most prestigious universities are already widely available for free on the web through sites like Academic Earth, YouTube EDU, iTunesU, Open Culture, and others, not to mention free periodicals from all over the world, NGOs and the free information they provide, freely accessible daily blogs from some of the most intelligent people on earth, Wikipedia has been shown to be as accurate as the Encyclopedia Britannica, on and on and on. Couple that with the always evolving, always innovating technological sector of the economy (iPad, replacing textbooks?) which is relatively cheap considering its place at the very forefront of human civilization, which is helping to 1) make every daily task more efficient and more convenient and 2) allowing us to use that extra time to focus on our increasingly free education. Furthermore, the environment of constant innovation and evolution creates very high levels of competition, which keeps prices declining and availability increasingly widespread. These trends, and others, could all contribute to a new paradigm of economic and academic norms for the next generation, and for the better.
It's simply not clear why we as a society would continue to be committed to a rigid, unimaginative system instead of fully embracing the innovative world of web-education, which is cheaper, cutting-edge, and more efficient. It's also not clear exactly what kind of system might replace the one we have; perhaps it's a hybrid of this dichotomy. But we should at least be more open to dropping the aspects of our current system that don't work, in favor of what is obviously the future.
This revolution seems to be happening at the same time that traditional university education teeters on the edge of sustainability, with less and less people being able to afford higher education, but these forces can truly disrupt longstanding institutions.
Links for 6/17/10
Scott Jaschik
Carnevale acknowledged that such a shift would accept "a dual system" in which a select few receive an "academic" college education and most students receive a college education that is career preparation. "We are all offended by tracking," he said. But the reality, Carnevale said, is that the current system doesn't do a good job with the career-oriented track, in part by letting many of the colleges on that track "aspire to be Harvard." He said that educators have a choice: "to be loyal to the purity of your ideas and refuse to build a selective dual system, or make people better off."…Alan Contreras
For the past 11 years, I have regulated for-profit colleges…and have some thoughts as to how the federal government can accomplish its worthy goal of ensuring that students don't waste federal aid…Kevin Carey
First, the idea that a truly clear, meaningful definition of gainful employment is possible or useful in the context of postsecondary aid regulation is problematic…
Regulators should also forget ownership. Who owns a college does not matter. Behavior matters. Faculty qualifications, admissions standards, transfer policies, curricular structure, and the awarding of credit for students' work matter.
Debt burden matters, too, but only within the context of program quality…
milking the federal-aid cow is not limited to for-profits, nor is it always a result solely of college actions. For example, in 2009, social-service agencies in Oregon referred thousands of unemployed people to community colleges—not because the unemployed were interested in an education, but because they needed a way to eat…
When community colleges and regional public universities were established in the mid-20th century, they were assigned certain missions that are very different than what one would expect from established liberal arts colleges and research universities. But those new institutions got plugged into a monolithic preexisting higher education culture, one that reflected the values and norms of the the established liberal arts colleges and research universities. Over time, culture overwhelmed policy...Douglas Crets
We keep thinking of taking what is already being done and tweaking it until it works. There’s nothing wrong with that model if we know that the existing machine we are trying to tune is actually a long-term high-performing engine. But it’s not, and we know that. The lack of overall, across the spectrum success for all of our children shows that this engine is not knocking right. Something is wrong with much more than the valves. It’s not an add more oil, or more teacher pay problem…
Wednesday, June 16, 2010
ED Announces Consumer Protection Rule Proposals, Delays Gainful Employment
by Daniel L. Bennett
You may recall that the so-called negotiated rule-making committee failed to reach agreement on 14 issues of Program Integrity earlier this year, leaving the final rule setting to The Department of Education (ED). Today (actually I heard about this yesterday), ED released its long awaited draft rules for public comment. It addressed 13 of the 14 issues, with the controversial gainful employment rule being delayed for further study. According to an Inside Higher Ed article
You may recall that the so-called negotiated rule-making committee failed to reach agreement on 14 issues of Program Integrity earlier this year, leaving the final rule setting to The Department of Education (ED). Today (actually I heard about this yesterday), ED released its long awaited draft rules for public comment. It addressed 13 of the 14 issues, with the controversial gainful employment rule being delayed for further study. According to an Inside Higher Ed article
the department has chosen to hold off on proposing a specific "metric" to measure whether programs are preparing their students for gainful employment because “we want to get it right,” as Education Secretary Arne Duncan said in a statement.Although the rule proposals do not at this time include a debt-to-income metric, they did spell out much need and welcome steps in providing consumers with more and better information as part of defining gainful employment. IHE noted that the proposal:
Department officials say they expect to release the rest of the gainful employment proposal later this summer, with plenty of time to meet a Nov. 1 deadline for publishing a final version of the rules that would take effect on July 1, 2011.
includes regulations requiring institutions to publish on their websites detailed disclosures related to programs that prepare students for gainful employment. At minimum, institutions would have to post the following for each program:Although I've advocated for information disclosure as a better alternative to a price control mechanism (also here, here, here, here), I think that for-profit schools could one up this proposal. They should not only publish this crucial information on their websites, but also publish it in their other marketing materials, as well as provide it to students before they can officially enroll in the form of a disclaimer that students sign, indicating that they have received and understand the information.
The occupations that it prepares students to enter, with links to the Department of Labor’s O*NET.
The on-time graduation rate of students in the program.
The cost of the program, including tuition, fees, room, board and other institutional costs.
The placement rate for students completing the program (by June 30, 2013).
The median debt load incurred by students who completed the program in the previous three years, broken down into debt from federal student loans, from private educational loans, and from institutional financing.
Putting Salaries in context
by John Glaser
A lot of people out there seem to have the impression that there’s some kind of glut of college educated workers out there and that too many people are going to college. The steady increase in the wage premium paid to college graduates seems to say otherwise, as does the fact that in the depths of the current recession the unemployment rate for college graduates is dramatically lower than the unemployment rate for those with only a high school degree. And the trend is projected to continue.That's Matt Yglesias over at Think Progress. His comments are in reference to this study, which estimates the relative benefits of advanced degrees and predicts their future worth. Estimates are positive:
Postsecondary education has become the threshold requirement for a middle-class family income.While it's still true that having a bachelor's degree or better is associated with higher annual income, I don't think this fact can be considered in isolation. As Yglesias says, educational attainment for the past thirty years has "tended to level off." Notably, that same thirty years saw a 439% increase in tuition, while family incomes have risen only 147% (according to Matt's own colleague). College educated people may be earning higher salaries than non-college grads, but their burden of tuition debt is at an unprecedented level:
...the share of people with some college or Associate’s degrees in the middle class declined from 53 percent to 45 percent. But the key to understanding this phenomenon is discerning where those people are going when they leave the middle. For example, the share of people with Associate’s degrees in the top three income deciles increased from around 28 percent to 35 percent.
Therefore, while it is true that the middle class is declining, a more accurate portrayal of the American class dynamic would be to say that the middle class is dispersing into two opposing streams of upwardly mobile college-haves and downwardly mobile college-have-nots.
...The range in lifetime earnings by educational attainment is greatest between high school dropouts and professional degrees—a range of $1,198,000 to $4,650,000, or a difference of $3,452,000.
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate...These post-graduate circumstances also tend to lead to more debt in other areas of life as well. This, as Richard Vedder wrote on this blog just a few days ago, implies a falling rate of return on investing in a bachelor's degree. Daniel Bennett recently wrote on how the crippling debt burden of college graduates is leading to increasing defaults.
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