A Student Loan Tragedy of the Commons?

by Andrew Gillen

Tim Ranzetta has a great post up discussing student loans and bankruptcy.

The crux of the matter seems to be an access issue vs. an equity issue. On the access side, there are those who will argue that private loans will be more difficult to get if the rules are changed to make them fully dischargeable in bankruptcy. On the equity side, are the consumer advocates who ask why private student loans seem to receive the same special consideration in bankruptcy as outstanding income taxes, alimony, maintenance and child support in not being fully dischargeable.

Before we dig in, suppose we moved from a system where private student loans are dischargable (declare bankruptcy and they go away, though you won't be able to get a loan for anything else for a long time) to a system where they are non-dischargable (you have to pay them not matter what). We would expect for the interest rates charged to go down, and for underwriting standards to be loosened. As it happens, we can go straight to the record, since that's what happened in 2005.

Back to Tim:

provisions limiting the dischargeability of private student loans passed in October 2005... the margins on private student loans went up...

Did this change in the bankruptcy law increase lender appetite for taking on riskier borrowers?...Sallie Mae's loans to the non-traditional (i.e. high-risk) borrower climbed almost 40% between 2006 and 2008...

So we got looser underwriting, as we expected, but instead of interest rates going down, they went up. I don't think that banks are more greedy post 2005 than pre 2005, so what gives?

My first hypothesis is that this is an illusion from focusing on averages. While the averages moved as reported, the types of students who comprised those averages changed. Pre 2005, you had students with good credit who met relatively tough underwriting standards, and thus faced relatively low interest rates. Post 2005, lenders weren't as concerned, so they loosened standards, which resulted in a bunch of new higher risk loans. While they weren't dischargable, they were still more risky, thus they faced a higher interest rate. When these riskier loans were averaged in with the old low risk ones, it brought the average interest rate up. In other words, the type of students who could have borrowed pre 2005 did not see higher rates post 2005, but the average went up because it now includes lots of riskier students who couldn't have received loans before.

My second hypothesis is that there was a tragedy of the commons type occurrence where the students were the commons. Post 2005, lenders would have been less concerned about whether their loan sent students over the edge and into bankruptcy since they would have a claim anyway. Lenders therefore had an incentive to lend (explaining the lower standards), but such lending imposes an externality on the other lenders in the form of higher bankruptcy risk (to which they respond by raising rates). In other words, lenders had a strong incentive to lend, but were worried about overgrazing.

We Need Truck Drivers Too: Michael Bettersworth's Lament

By Richard Vedder

I am getting tired of going to higher education conferences where rent-seeking college professors lament that America will need millions of new college graduates to take all of the new jobs being created that require high skills. The arguments have been overdone and exaggerated. If, for example, we had a real shortage of skilled people in the STEM disciplines, we should see sharp increases in the relative pay in engineers, scientists, and mathematicians. We have not.

Not only that,we need a lot of fairly skilled persons who do not receive all the necessary training in high school, but who can get those skills at technical or career colleges. I attended a delightful one day forum on higher education put on by the American Legislative Exchange Council (ALEC) in San Antonio over the weekend. Unlike most meetings on higher ed, the sessions were not lovefests where overpaid college administrators kept telling other overpaid persons how great they are and how they need more money.

I enjoyed several speakers, including Michael Bettersworth, an administrator at Texas State Technical College. Michael --a sharp articulate guy who may be going places -- made the point that psychology graduates are having a terrible time getting jobs, often ending up delivering pizzas. One of my very best students from last year is working at Ruby Tuesday. But those becoming electricians and plumbers and truck drivers, etc., seem to be doing a bit better.

Most of the occupations expected to require the most new employees over the next decade are NOT jobs requiring high levels of technical skills. I think there is a fundamental mismatch developing between the number of college graduates and the employment needs of employers, so the college educated pizza delivery boy may be more than a temporary phenomenon. This is still another reason I am high on many of the non-traditional schools that offer non-degree forms of post secondary training.

Links for 9/30/09

Free Exchange:

a key value of universities has nothing at all to do with what a student does while enrolled, and instead stems from the filtering mechanism of the admissions process. College degrees may be useful because the admissions department has done the difficult background work of identifying promising candidates for employment. They act as ratings agencies, in a sense, screening products and declaring them "safe" or "risky". It would be interesting if in the future there are organisations which play this role more explicitly, offering to investigate a candidate's history and skillset for a fee, and certifying qualified candidates, all in a fraction of the time and at a fraction of the cost of an actual university education.

But one way or another, the digital and internet revolution should ultimately reveal just what everyone is paying for when they write that tuition cheque.

Brian Faler on the CBO:

the more sweeping the proposal, the more likely its estimates will miss the mark because on such legislation the agency has the least amount of data, CBO Director Doug Elmendorf said.

The seven deadly sins of the academy.


Kelly Field:

Between January 1, 2008, and the end of June 2009, the top 20 participants in the federal bank-based loan program spent nearly $14-million lobbying the federal government… At the same time, they've showered members of the Congressional education committees with close to $600,000 in donations. The lenders' chief goal: to persuade Congress to reject President Obama's plan to end bank-based student lending.

Links for 9/29/09

Chad Aldeman on higher ed advertising:

Does it bother anyone else that car commercials tell us about miles per gallon, horsepower, price, etc, but that we get absolutely nothing about quality or cost in our higher education ads?

Edward Bloom on the lack of clarity regarding higher ed diversity admissions law as a result of Grutter vs. Bollinger:

How much, or how little, serious consideration of race-neutral alternatives must be made is undefined, which has allowed college administrators to operate unrestrained when it comes to their school's race preferences.

Caroline Hoxby on "Poor Students at Rich Colleges":

low-income students who are qualified to attend selective schools (based on their board scores and other measures) have a probability of applying to such schools of just 8 percent. Once they apply, though, they’re likely to get in and receive a generous financial aid package — and once they receive their financial aid packages, they are very likely to enroll. But many such students may be put off by sticker shock.

CollegeScholarships.org has a neat circular chart depicting the student loan process (HT Jennifer Rotman):

Overblown Concerns

by Andrew Gillen

Doug Lederman had a piece on data systems yesterday. Apparently, while the push for a federal system has been killed, many states are being encouraged to establish their own.

That we don’t already have widespread longitudinal systems in place boggles my mind. The fact that there are enough holes in the data available that we can’t even determine something as clear cut as graduation rates is ridiculous (lots of schools like to point out that some students have transferred away, and possibly graduated elsewhere).

Critics of such systems are, in my humble opinion, largely using overblown concerns to sink these efforts. For example, one critic is quoted as saying

"These will become the data marts of choice for activities that we would not endorse today," he said. "If you build it, the [Federal Bureau of Investigation] will come looking for criminals. The military will come looking to recruit. [Health and Human Services] will come looking for deadbeat dads.

This might be a valid concern, except for the fact that the government already has access to much more complete data systems. For instance, the IRS has info on everybody, not just those who’ve been educated in the US. If the government really wanted to do any of those things, there are much better ways to do it.

I’m all for putting safeguards on the data – both IRS and future educational systems. While this will reduce the risk of misuse, it will not eliminate it. But this risk, while real, must be weighed against the benefits of such data systems. And the benefits are enormous - such data would provide so many insights into our educational system and it’s effects that all of the arguments against it seem pretty weak in comparison.

Links for 9/28/09

Robert Connor on assessment

I found myself making the strange hiss sounds of “assessment,” a sound so savagely obnoxious that my friends began to hint that I was opening the gates to the barbarians.

I tried to conciliate them by substituting the term “evidence” for “assessment,” but they were too smart for that. And when I found I needed to investigate the various instruments that had been developed to help measure student learning, it was clear to many friends that I had gone over to the dark side. Terms such as NSSE, CLA, HERI, and CIRP were shibboleths that marked me as one of them.

Alex Tabarrok on US teacher absences.

On a typical school day, 5-6% of teachers are absent, i.e. equivalent to an absence once every 20 days!

Jake has a nice chart showing endowment returns relative to some benchmarks.

The very, very, very scary side of game theory.

Selling Research

by Andrew Gillen

Prior to coming to CCAP, my academic work focused on R&D spillovers, so I was quite intrigued by this CHE story by Goldie Blumenstyk.

as RIT's new president, Mr. Destler began to champion a new approach to the sometimes-stormy negotiations surrounding corporate-research relationships, believing the dissonance was nothing less than a threat to America's economic competitiveness.

A key problem: Too many starry-eyed universities dreaming of financial windfalls from that potential blockbuster patent were driving away companies with unrealistic demands for intellectual-property rights.

…Mr. Destler took to the stump, arguing in speeches and op-eds that it was time for universities and companies to break from common practice, stop the haggling, and simply let corporations own the inventions or other intellectual property that might result from the work they sponsored.

It’s an interesting idea, and I’m glad it’s being tried. I do think that such arrangements need to be carefully set up – there are lots of things tilting the scales. Perhaps the most important is that cross-subsidization of research, primarily in the form of low teaching loads, imply that the public is already paying for a lot of research, an investment that is often overlooked. Before supported research gets off the ground, a lot of unsupported research takes place. This opens the door to the possibility that private companies may get the benefit from both types while only paying for the supported research. But overall, I think experimenting with different arrangements like this holds a lot of potential.

For those that are interested in this topic generally, I recommend The Economic Laws of Scientific Research and parts of Universities in the Marketplace.

This Is Why You Don't Watch Sausage Being Made

by Andrew Gillen

Ben Miller does an ill-advised thing that no one in their right mind should do. He actually read the SAFRA bill. He was immediately punished with the task of trying to reconcile statements such as "service the loans at a competitive market rate, as determined by the Secretary" with the actual meaning of those words.

SAFRA:

In determining such a competitive market rate, the Secretary shall set such rate so that (i) the rate is commercially reasonable in relation to the volume of loans being serviced by the eligible not-for-profit servicers, and (ii) in the Secretary’s judgment, the eligible not-for profit servicers can reasonably provide any additional services, such as default aversion or outreach, provided for in the contracts awarded.

Miller comments:

In general, for a rate to be competitive in the market, it needs to be set by, you guessed it, the market. Having an auction or some sort of market-clearing bidding process is how you determine this rate, not depending on the secretary, Congress, or the guy in the hot dog cart down the street to pick a number that seems right. But the text gets better...

It’s a competitive market rate picked by the secretary and then arbitrarily increased so that they can provide some additional functions. Even worse, the text also calls for the payment rate to be raised again so that nonprofit servicers with fewer account will get more money per-borrower. That’s not a market rate, it’s a guaranteed payday.

So let me see if I've got this straight. The logic behind SAFRA is that FFEL loans are to be killed off because they were using an arbitrarily determined interest rate guaranteed by the government, in a program that left enough wiggle room for lobbyists to exert continous pressure on the powers that be, ultimately resulting in a guaranteed payday for lenders at the expense of students and taxpayers.

But in practice, SAFRA will introduce those exact same features into loan servicing. And here I thought SAFRA was anti-FFEL. It's really just FFEL light. I guess it's time to dust off my shovel.

Textbook Affordability

by Anthony Hennen

With the rising cost of college and the economic downturn that we are currently facing, students and institutions alike are looking at ways to cut costs. Possibly the best way to reduce costs would be to incorporate technological advances to assist in bringing the price of college down. Textbooks appear to be an area where technology can drastically reduce costs. The average student incurs a cost of $700-$1,000 each academic year from textbooks alone; from 1987-2004 textbooks costs rose 109% at four-year public universities.

The Amazon Kindle and the Sony Reader debuting on the market make digital textbooks a more practical, viable alternative to buying a $200 science book from the college bookstore down the street and could replace most physical textbooks in the next 5-10 years. Various efforts are already underway promoting digital textbooks to save students money. The Campaign to Reduce College Textbook Costs pushes for more accessibility to digital textbooks to drive down costs. Open Educational Resource (OER) is a collection of digital resources for educators to use materials that include almost 200 digital textbooks.

The digital textbook market is still fairly limited, but two sources are Textbook Media and Flat World Knowledge. The success of these could propel traditional publishers to embrace the digital option and better alter the textbook market. Flat World Knowledge is expected to have 50 textbooks in development by 2010, and Textbook Media currently has a library of almost 40 textbooks.

Currently digital textbooks do have some drawbacks. As a report by the California State Auditor in August 2008 highlights, publishers usually restrict how many pages students can print, and some digital textbooks expire after a certain date. When limitations are modified or abolished on digital textbooks, the demand for them will rise and lower the costs and price in the textbook market.


Anthony Hennen is a student at Ohio University and a research associate of the Center for College Affordability and Productivity

Working While In College: New Research

By Richard Vedder

I have a young colleague, Charlene Kalenkoski, who I am high on, partly because she does research that actually is meaningful --it looks at real world issues and provides insights into the consequences of various dimensions of human behavior.

Charlene and Sabrina Wulff Pabilonia, a Bureau of Labor Statistics scholar, have a neat paper that is forthcoming in the Journal of Population Economics. They look at the financial and academic implications of students working. They use data from the highly regarded National Longitudinal Survey of Youth and use all the contempoary econometric gimmicks to get as many insights as possible from the data.

A few interesting observations:

1. It is noteworthy that a majority of students at four year colleges in the NLSY sample did not work at all while in school, and only about 20 percent worked a lot (over 20 years per week). A much larger proportion --nearly 50 percent -- of two year college students worked at least 20 hours per week.

2. For four year students, the relationship between the net price of schooling and the amount of student working is statistically insignificant --the notion that students work hard at jobs to pay college bills is not supported by the evidence.

3. As expected, the higher the price of schooling, the greater parental transfers are to cover costs, and bigger parental transfers mean students work less at a job.

4. The overall picture that I get, and Charlene seems to confirm in conversation, is that students do not work to pay the bills, but to finance other things --call it beer money.

5. There is a negative correlation between working and student performance, but it is not overwhelmingly large. Working 10 hours a week might lower GPA by 12 basis points (e.g., from a 3.30 to a 3.18).

If I am interpreting the results right, every dollar that the net price of college rises, parental contributions also rise, but typically less than a dollar. Since work effort and net price is not significantly related, this implies to me that students finance increases in tuition fees (net price) beyond some low base level in significant part by non-parental, non-work income sources --almost certainly student loans. And, if the above is correct, student loans both are one of the means by which colleges can raise the net price a lot, and allow the students to use work income more to finance personal consumption (beer drinking) than to cover colege costs. I may be going too far here, but, as the authors state, the results certainly provide enough evidence to justify more research on the topic.

Joe White's Resignation at Illinois

By Richard Vedder

We have blogged a bit about the Illinois admissions scandal, where preferential treatment was given to sons and daughters from influential families. The scandal has led to the ouster (sometimes voluntary) of several university trustees. I have argued, however, that the actual implementation of a policy of preferential admissions was at the order of senior administrators, and they should be held accountable.

Now I learn that President Joseph White is resigning. It is the right thing to do, and whether it happened voluntarily or in response to trustee or other pressure, I do not know, but I am glad it has happened.

However, I am also saddened. By all accounts, Joe White was generally an able administrator, a dynamic leader. I met him on two or three occasions, and was generally highly impressed. The totality of his performance at Illinois might have been positive, but the manipulation of the admissions process so strikes at the heart of the integrity of the academic enterprise that President White had no real alternative. Probably, other heads should roll as well, including the campus chancellor and perhaps other admissions officials.

I hope a constructive lesson is learned from the Illinois tragedy. Other university presidents, who have been doing similar things for years, should be scared out of their minds and rapidly adopt a Simon pure admissions process where favoritism plays no role. It seems to work at Cal Tech, why not other great schools? I am concerned that a new trend of moving away from objective criteria for admissions (e.g., looking at both grades and test scores) increases the possibility of mischief similar to what happened at the University of Illinois, a great institution that Forbes and CCAP in their latest rankings considered the best public school in the Big Ten athletic conference.

Links for 9/23/09

Alex Tabarrok:

on a typical day 11% of teachers are absent in Peru, 16% are absent in Bangladesh, 27% in Uganda and 25% in India.

…In India, where a quarter of the teachers are absent on any particular day, only about half of those present are actually teaching…

The problem is not low salaries…

Teachers are literate and they vote so they are a powerful political force especially where teacher unions are strong… As a result, it's virtually impossible to fire a teacher for absenteeism.

Jay Schalin on “the most recent incident involving the UNC-Chapel Hill student organization Youth for Western Civilization (YWC) and a coalition of radical leftist groups.”

Carol D. Leonnig on a "research" institute at the Indiana University of Pennsylvania:

the John P. Murtha Institute for Homeland Security…

raised questions among watchdog groups and outside critics about using taxpayer money to fund projects that appear to mostly benefit Murtha loyalists.

"He who pays the most homage to Murtha is the one who gets the money," said Cathy Wentzel, who managed a research group linked to the Murtha Institute and left when her boss was fired…

Jeffrey Crane, its director from 2006 until last month, said the institute for years served as a "paper institute" with no clear mission. Crane was rebuffed by the IUP administration when he shared his concerns about contractor billing practices on some projects that the Murtha Institute was ostensibly overseeing…

Megan McArdle:

When you have only one chance to get it right, you tend to open up your wallet and pray. So one-shot deals are very, very expensive—a logic that prevails with weddings, funerals, and college diplomas.

Good News, Bad News

by Andrew Gillen

The good news is that for profit schools are educating lots of low income students, the bad news is that some of them are cheating.

Links for 9/22/09

Robert J. Nash:

more than 90 percent of higher education is built on the teaching function of its workers. Shouldn’t we, therefore, avoid sending the message to our constituents that the university would be a great place to work if only there were no students there to interrupt what’s really important — our research, intra-mural politicking, grantsmanship, and committee work?

• The publish-or-perish reward syndrome on college campuses today is the major cause of the retreat from effective and innovative teaching and learning.

Kevin Carey on HE having its cake and eating it too:

the law allows states to require private colleges to provide “appropriate information,” the best way for states to do that is to require private colleges to provide appropriate information via a longitudinal data system, which this provision explicitly prohibits. This leaves states in the position of having to ask for information via separate, cumbersome, information-deficient forms, which private colleges will then complain about on the grounds of burdensome administrative expense...

the worst kind of having-it-both-ways: asking the government for money but refusing to be accountable for how the money is spent or whether it actually helps students finish college.

Edububble on debt holding back a nun:

she can’t take a vow of poverty until she crawls out of a hole that’s sort of like negative poverty. When you’re in debt you’ve got less than nothing. She got to get $94,000 before she can have nothing.

Charlotte Allen:

That sort of attitude---that if you have a postgraduate degree, you're too good to do any other kind of work except teach in a college setting---is the precise reason why adjunct professors are systematically exploited by the colleges that hire them.

Paul Basken:

Federal auditors are raising new questions about the rush by universities and government agencies to build hundreds of new high-security laboratories to study biological pathogens.

Federal officials encouraged the expansion of the labs after the anthrax attacks in 2001…

But the U.S. Government Accountability Office, in a report to Congress released Monday, said various agencies of the federal government have been encouraging the lab expansion since 2001 without making a comprehensive assessment of the needs and risks.

AG: Why does the rush to implement huge new, expensive, and fairly irreversible programs based on unquestioned assumptions sound so familiar?

Links for 9/18/09

H. William Rice on student evaluations:

…the benefits far outweigh the risks, and faculty members who actually want to become better teachers—and who believe that good teaching skills are not bequeathed to them in perpetuity with the awarding of a Ph.D.—should read them over and over…

…Imagine going to a neurosurgeon who tells you to ignore the complaints her patients have made to the medical board: She has a medical degree, so she can do surgery in any way she damn pleases…

Mark Lilla on studying conservatism. The most surprising thing to me was that he’s a professor of humanities.

Conservatism is a tradition, not a pathology.

Marc Parry on cheating:

A new study contradicts the perception that cheating is more widespread in online classes, finding that students in virtual courses were less likely to cheat than their face-to-face peers.

Michael Hennessy on endowments. HT: Felix Salmon. I was going to include some juicy quotes from the story, but they somehow disabled the select text feature. First of all, I didn’t know that was possible. Second of all, Grrr. I won't be linking to sites that do that in the future.

Myles Brand, R.I.P.

By Richard Vedder

As regular readers know, I am not wild about the NCAA. It is a cartel that has contributed to the excessive emphasis on intercollegiate sports in America, and its practices have enriched adults (e.g., coaches) at the expense of younger persons (e.g.,college athletes). Myles Brand, who has just passed away, was the president of the NCAA for years. Yet Myles improved the NCAA a bit from some of the shameful ways of the past, and tried to make supporters of that cartel realize that intercollegiate athletics are part of a larger academic setting, and ignoring that fact hurts not only universities but college sports as well.

Myles was a philosopher who became a successful administrator, leading two major American universities (Oregon and Indiana) before taking over the NCAA leadership. He is the person who first pointed out to me, at a meeting in Denver, some of the problems with published graduation rates, and that athletic graduation rates were not all that different, in many cases, from those of the general university population. Intercollegiate swimmers and cross country team members, for example, do reasonably well academically, and critics of intercollegiate sports should acknowledge that fact.

Myles was the person who pushed to implement more rigorous academic standards within the NCAA. Relative to the myopic coaches and athletic directors who largely ignore the role of athletics within the broader higher education milieu, Dr. Brand was a strong reformer. I always respected him as a person of integrity who, in a modest but tangible way, made American college sports a bit less scandalous and dubious than otherwise would be the case. He did not do anything to erase some of the huge problems, and was perhaps too accommodating to the "good old boys" who still largely run intercollegiate sports, but he was better than any other alternative that likely could have been elected NCAA president.
********************

I have read a lot from NCAA types suggesting that they don't want to have a university president running "their" organization. I think it should be mandated that the organization be run by a bona fide academic, either a sometime university president or a scholar of some repute in an academic discipline (or, both). Indeed, I would go further, and insist that all or most of those voting on NCAA matters come from the academic side of universities, and that attendance by athletic directors and coaches at major meetings be limited in size to assure academic primacy in the affairs of the organization. Unfortunately, that is unlikely to happen.

I suspect the modest reforms that Brand brought to the NCAA upset many jock groupies, alums, and athletic directors and that they will try to resume a path towards even greater commercialization and support moves away from closer relationships to the academic enterprise that forms the core missions of all reputable institutions. If the Barbarians are successful in the post-Brand NCAA, I suspect that scandals will ultimately put an end to anti-academic excesses, and perhaps lead to congressional threats of removal of anti-trust and tax exemptions. But the damage to higher education could be large --intercollegiate sports can have negative as well as (allegedly) positive spillover effects. Myles Brand's contribution was less what was done during his tenure, but what was NOT done --he kept the inmates from running the asylum.

Federal Involvement in Student Loans

by Daniel L. Bennett

Our friend George Leef of the Pope Center for Higher Ed Policy had an excellent letter published in the WSJ yesterday on federal involvement in student lending. For your reading pleasure:

Your editorial illuminates the folly of believing that taxpayers will ultimately save money with the Obama administration's plan for a federal monopoly on college lending. Just like the president's proposal to "reform" health care by making it subject to even more political control, this proposal takes us in exactly the wrong direction.

Federal housing policy, premised on the false idea that home ownership is good for nearly everyone, led to a vast number of mortgage defaults. Similarly, a federal college lending policy devoted to President Obama's chimerical notion that the U.S. must have the highest percentage of college graduates in the world—the goal he announced last February—will lead to the educational equivalent of the housing bubble. That is to say, a large number of young Americans will wind up with college debt, perhaps college degrees, but no employment that comes close to paying enough to cover the costs. Stories like that are already common.

The truth is that we lure a large number of students into college who are academically weak and disengaged. Quite a few of them drop out, but quite a few manage to graduate—and then end up in rather mundane jobs that almost any high-school student could learn. Bureau of Labor Statistics data confirm that significant percentages of workers with college degrees are doing jobs that only call for on-the-job training.

College is a wise human capital investment for some, but we already have many young people in college who learn little and merely obtain a credential of scant value. That waste of resources will only increase under a federal student-loan monopoly. Instead, the government should withdraw from the business of financing education.

George C. Leef
Director of Research
Pope Center for Higher Education Policy
Raleigh, N.C.

Online Education Faces a Unique Challenger

by Peter Neiger

The growing number of online schools continue to face strong opposition from traditional institutions, finding new problems around every turn. Today’s battlefield: Maryland.

The University of Maryland University College is a public university that houses a large distance-learning program. UMUC has not really had any problem with their distance-learning program until they began their doctoral program in community college administration. You see, Morgan State University has a similar program and a unique status as a traditionally black college -- it is able to prevent other institutions from competing with their programs. The original intent of this rule was to encourage desegregation by eliminating redundant programs at the state level. This puts UMUC in a unique position: they can only allow students into this program that are not living in Maryland because MSU has a similar doctoral program.

Logistically this is absurd. It is unrealistic to think that the MSU program, which is geared towards working adults and only held on the weekend, can really accommodate every potential candidate in the state. UMUC's online program has the potential to offer an education to a multitude of people across the state and nation.

It is downright disgusting that MSU would intentionally act to deny an education to potential students. MSU does not have an inherent right to teach a certain program, especially if they are not up to snuff and UMUC can better meet the needs of potential students. Tradition is one thing, but it should not get in the way of progress. If MSU wants to gain a competitive advantage in programs that it offers in a certain field, then they should have to due so through, well competition--not monopolistic politics that block it.

CCAP is all for reducing redundancies, but we also believe in markets and choices. If UMUC believes that there is a need for its doctoral program or that it can offer a better product than what is currently available, then it should be allowed to do so. After all, the focus should be on what is best for the students, not the institutions. If an online doctoral course presents the best opportunities for students to get the education they need, then it should be utilized.

Winston Salem State U. Deserves A Pat On The Back

by Daniel L. Bennett

It is not often enough that an institution of higher ed rejects the status quo in admitting that one of its ambitions is unsustainable and actually backs off. Winston Salem State University has done just that in announcing that it will abandon its "campaign to become an active member of NCAA's Division I, electing to remain in Division II for financial reasons," as reported by CHE. WSSU deserves a pat on the back for setting a good example that should be emulated with more regularity.

WSSU Chancellor Donald Reaves issued the following statements to support the decision, which the Board of Governors unanimously approved:

in the final analysis the resources to complete the reclassification simply were not available, currently nor prospectively, in sufficient amounts

If there were any reasonable way to complete this transition without diverting resources from competing academic priorities, I would have recommended that we stay the course

Over the past two years, we have continued to be concerned that budgetary constraints would not allow us to successfully complete the transition...As the athletics deficits continued to mount, there appeared to be no rational way we could continue the process

While our expenses have increased as one would reasonably expect, the budget problem that we have encountered is a revenue-side problem

University of North Carolina President Erskine Bowles voiced support for Reaves' decision, stating:

WSSU – like every other UNC campus – must operate its athletic department on a fiscally responsible basis. And it cannot put the burden of doing so all on the backs of its students

I suspect that there are plenty of other programs and expenditure items that would fall into a similar category of being financially unsustainable and as diverting resources away from competing academic priorities. Now, if we could only get more institutions to conduct similar cost-benefit analysis of their myriad programs in order to determine their priorities within a revenue-focused budget constraint (rather than an expenditures-focused one) and actually make tough decisions about what stays and what goes, then there is a chance that the rapid inflation of college tuition will cease and we will start to see a convergence towards an equilibrium price. I believe this is something that both sides of the aisle would agree is in the best interest of our nation and is a realistic ambition.

Links for 9/16/09

Eduwonk:

Did you know that in a lot of U.S. school districts a teacher is more likely to die than lose their job for poor performance? So does that mean that American school systems have the very best human resource selection methods of any field or industry or does it mean that TNTP was really on to something with The Widget Effect?

Robert Zemsky on HE reform:

To put the matter more bluntly, the higher education attainment gap is in fact a preparation gap...

Matthew Yglesias on why alumni shouldn’t give money to Harvard:

If you can’t think of a charitable institution that could use your money more than the already-richest university in the world—one that overwhelming educates the children of prosperous people—then you’re obviously not thinking very hard.

SLA announces Honor Roll of schools with low default rates.

Talk about a disincentive. HT: Economix

Illinois: Do the Right Thing

By Richard Vedder

I am pained by the admissions scandal at the University of Illinois, one of my alma maters. It was revealed by the Chicago Tribune that large numbers of students were given preferences in admission because of their family connections, typically as the result of pressure from high level politicians, university trustees, or high level university officials. President Joe White's first defense ("everyone does it") was disturbing, even though probably true. The practice is inconsistent with the meritorious nature of American society and the role that universities play in promoting equal economic and educational opportunities.

Now the Faculty Senate has recommended that the President and Urbana campus Chancellor be fired. The last time I recall faculty at Illinois doing this was in 1953, when the faculty were successful in having a president removed from office --this is a rare thing that appropriately happens only one or twice in a person's lifetime. To this point, Illinois has ousted several trustees but none of the high level employees who actually made the ultimate decision to preferentially admit students. Lamentably (since I think Joe White is generally a good leader), I am afraid I have to agree with the Faculty Senate --the integrity of the university is at stake, and merely slapping wrists is not enough. Illinois now has agreed to do what all schools should do --move to a rigid policy of admission only on the basis of merit.

By the way, all of this reminds me, again, of my nervousness with the move to do away with required SAT examination scores for admission, which serve to give more weight to subjective judgments by admissions officers in selection decisions, and invites favoritism and corruption.

More Student Aid Does Not Mean Higher Graduation Rates

By Richard Vedder

One of the dirty little secrets in higher education is that massive increases in federal student financial aid over the last generation have been accompanied by a slowing down, not an acceleration, of the rate of growth in college attainment. Writers like Claudia Goldin, Larry Katz, Bill Bowen and Mike McPherson have been writing books dealing with the slow down, and all recommend more, not less financial aid to deal with the problem. If giving X amount of aid doesn't work, give 2X.

The reasons for this seemingly strange aid/attainment relationship are many, but two factors are critical. First, higher amounts of aid have contributed to rising tuition costs neutralizing the positive impact of the aid itself on college affordability. Secondly, incremental students lured by financial aid to go to college are often marginally prepared academically.

When we run regressions on the relationship between state assistance for higher education and student enrollment, the correlation is usually positive (although less strong than you might expect). However, when we relate state financial assistance for higher education to adult college attainment, the correlation is usually zero or even negative. This suggests that rising aid may be associated with rising dropout rates that offset the effects of rising enrollment.

A new study by Matthieu Chemin of the U. of Quebec, unearthed by the indefatigable Doug Lederman of Inside Higher Ed, makes the point. The author examined huge increases in financial aid for lower income students in Quebec. The money did increase college enrollment rates, but not graduation rates. Chemin concluded: "These results..cast doubt....at needs-based grants...to improve graduation rates." It is nice to see our findings confirmed by others.

Speaking of financial aid, the State of Michigan is America's leading economic basket case, hands down, and the state government has been forced to do a lot of retrenching. The Governor wants to keep their HOPE-scholarship like program that gives third and fourth year university students large grants automatically. The GOP leaders in the legislature, worried about a precarious budget situation, want to end the program. I would have to say on the basis of the research that we have done or seen, my sympathies are with the GOP position.

Links for 9/15/09

Part 3 of the Pope Center discussion is up.

Goldie Blumenstyk reports that

Administrative salaries rose by 5.4 percent, up from 5 percent a year earlier; fringe-benefit costs went up by 3.6 percent, down from 5.5 percent in the previous year.

Salaries for faculty members rose by 3.4 percent, down from the previous year's rate of 4.1 percent.

Bureaucracy run amok! A 580 page report on the reports that are required. At least this is amusing:

The Required Reports Prepared by State Agencies and Institutions of Higher Education is not itself listed in the Required Reports Prepared by State Agencies and Institutions of Higher Education.

Quote of the day from IHE

'graduating in four years is like leaving the party at 10 o'clock,'

University endowments investing in commodities as a hedge against possible future inflation.

Richard Vedder on Reason TV

Richard Vedder discusses the rising costs of college on Reason TV.

Defending Career Colleges

by Daniel L. Bennett

Stephen Burd of the New America Foundation criticized career colleges for "destroying the dreams of many of their students" and declaring that there is a "looming student debt crisis at our nation's for-profit colleges and trade schools," because career college graduates finish with higher levels of debt, on average. Burd's partial conclusion is based on data originating from a College Board report.

According to CB's data, a greater percentage of BA recipients from 4-year career colleges have $30k+ in student debt than BA graduates of public or private not-for-profit schools; however, as the career colleges comprise only a small share of students (~9% per CCA) in this country, the number of graduates with $30k+ in student loans from public and private not-for-profit institutes vastly exceeds that of the for-profit sector by many multiples --meaning that the public and private not-for-profit colleges are "destroying the dreams" of a far greater number of their students than the for-profit schools.

Burd states that "disturbing is the extent to which proprietary school students are being asked to rely on high-cost private student loan debt to help cover their costs," without commenting on the fact that the CB report indicates that 88% of for-profit students took out an average of $5,658 in federal loans, whereas only 50% of public 4-year students took out an average of $2,603 in federal loans, and 62% of private 4-year students took out an average $3,494 in federal loans in 2007-08. In addition, the average private loan was only marginally different between for-profit students ($3,071) and private 4-year not-for profit students ($2,895) in 2007-08. Public 4-year students borrowed an average of $1,078. This data suggests that the majority of career college students are taking advantage of the federal student loan programs and that students at career colleges have a higher propensity to borrow for college, probably due to the fact that they are from less affluent families than their public and private not-for-profit counterparts. More on this shortly.

I agree with Burd that it is important to "understand the population of students that for-profit colleges and trade schools serve." He cites data from the Career College Association that "43 percent of proprietary school students are members of minority groups and almost half are the first in their families to attend college," and "Of those who are of traditional college age, more than 50 percent come from families with an annual income of less than $40,000." This data suggests that career colleges serve a very high percentage of low income and minority students who are most in need of loans in order to pay for the continually rising tuition levels.

While I don't have comprehensive comparable data in front of me for the public and private not-for-profit sectors, the evidence that I have seen is that these sectors serve a significantly lower proportion of low income and minority students who are less likely to need student loans to pay for college than does the for-profit sector. This suggests that students at public and private not-for-profit schools are more likely to have at least some help from their parents or other private sources to help pay for college. CB's report lends some strong support to this conclusion: 92% of for-profit students borrowed, whereas only 54% of public 4-year students borrowed and 66% of 4-year private not-profit students borrowed money from either a federal or private source.

This leads me to conclude that career college students, on average, come from lower income families than students at public and private not-for-profit schools and would need to borrow more money, on average, than more affluent students, regardless of the type of school they attend. Thus, I believe that Burd's conclusion that there is a looming student debt crisis at the career colleges and that policy makers should take notice (implying a crack down on the sector) failed to consider this evidence in his analysis. The truth of the matter is that career colleges are providing access and career training opportunities to students who are being under served by the traditional colleges, which are stuck in lockstep by not offering flexible scheduling, distance learning opportunities and career training programs that meet the needs of the non traditional students --who flock to the career colleges for these reasons.

Unbelievable

by Andrew Gillen

If you haven’t done so already, and have taken your blood pressure medicine, go read The Rubber Room by Steven Brill.

You will learn that teachers accused of crimes and incompetence in NY get sent to the Rubber Room

[600] teachers have been in the Rubber Room for an average of about three years, doing the same thing every day—which is pretty much nothing at all… until the charges are resolved—the process is often endless—they will continue to draw their salaries and accrue pensions and other benefits.

According to a teacher there, “Before Bloomberg and Klein took over, there was no such thing as incompetence,”

Seven of the fifteen Rubber Room teachers with whom I spoke compared their plight to that of prisoners at Guantánamo Bay or political dissidents in China or Iran.

“Randi Weingarten would protect a dead body in the classroom. That’s her job.”
When the bill for the arbitrator is added to the cost of the city’s lawyers and court reporters and the time spent in court by the principal and the assistant principal, Mohammed’s case will probably have cost the city and the state (which pays the arbitrator) about four hundred thousand dollars.

Nor is it by any means certain that, as a result of that investment, New York taxpayers will have to stop paying Mohammed’s salary, eighty-five thousand dollars a year. Arbitrators have so far proved reluctant to dismiss teachers for incompetence. Siegel, who is serving his second one-year term as an arbitrator and is paid fourteen hundred dollars for each day he works on a hearing, estimates that he has heard “maybe fifteen” cases… In fact, in the past two years arbitrators have terminated only two teachers for incompetence

Klein’s explanation is that “most arbitrators are not inclined to dismiss a teacher, because they have to get approved again every year by the union, and the union keeps a scorecard.”

by making it so hard to get even the obvious freaks and crazies that are there off the payroll, you insure that the teachers who are simply incompetent or mediocre are never incented to improve and are never removable,” Anthony Lombardi says.

I asked the woman for her reaction to the following statement: “If a teacher is given a chance or two chances or three chances to improve but still does not improve, there’s no excuse for that person to continue teaching. I reject a system that rewards failure and protects a person from its consequences.” “That sounds like Klein and his accountability bullshit,” she responded. “We can tell if we’re doing our jobs. We love these children.” After I told her that this was taken from a speech that President Obama made last March, she replied, “Obama wouldn’t say that if he knew the real story.”

New Obaminations: The President on Universities

By Richard Vedder

Bob Villwock sent me a transcript of parts of President Obama's speech last night that shows two things. First, it reminds us of the president's fundamental ignorance of the gains that capitalism has provided to Americans, gains that made us the richest nation in the world. It helps understand the president's fundamentally socialist tendencies and his contempt for free enterprise and the workings of markets.

Second, the speech draws analogies between private and public universities on the one hand and private and public health insurance companies on the other. The President opines that if public and private universities can coexist and both thrive, the same is true of health insurance --a public insurance option would not destroy, but invigorate and strengthen private insurance.

Before commenting further, let's quote the President directly:

"...the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers...it would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities."

By implying public universities have helped serve to keep college affordable, the President is ignoring decades of factual evidence to the contrary. The university/insurance comparison is silly anyway, since most of higher education is not-for-profit (unlike insurance), and is heavily subsidized by the federal government --per student government grants to ostensibly private Harvard are far greater than at, say, public Illinois State University. The private/public distinction is largely meaningless in higher education. It is precisely the rising governmental involvement that has caused the huge cost explosion in higher education --and in health care. Government is the problem, not the solution.

The notion that government run businesses can offer a better deal because of "overhead eaten up by profits" in the private sector is laughable as well. Despite massive government subsidies (e..g, paying no property taxes or rent on their facilities), the U.S. Post Office is broke and losing market share to far more efficient FedEx and UPS. Government run prisons are costlier than privately run ones. Overhead and administrative costs are higher in commercial enterprises where the political process allocates resources than in such enterprises where decision making is made by profit motives and market forces.

The abysmal ignorance of the president is upsetting. Profits are compensation for the use of capital resources, and serve an extraordinary useful social function-- serving as a signaling device that helps efficiently allocate resources. New investments in newspapers is non-existent because they are unprofitable, but investment spending on innovative Internet information providers is relatively robust because potential profits seem large.

The for-profit university sector offers instruction for less cost to society per student than the not-for-profit sector precisely BECAUSE of profits, not in spite of them. High executive salaries at the University of Phoenix have not kept that institution, or others like it, from offering a service that is rapidly gaining market share despite the enormous advantages the publicly subsidized not-for-profit competition has.

Why Are College Graduation Rates So Low?

Richard Vedder discusses this topic in an essay published by Minding the Campus today.

The Difference Between Reich and Wrong

By Richard Vedder

REICH

Robert Reich is not one of my favorite persons. Au contraire, when he was Labor Secretary, I got into a very public written brawl with him in a major newspaper. If Robert Reich announced the sun would rise in the east tomorrow morning, I would probably rethink my own similar views on that subject-- so far are we out of sync with one another.

Having said that, however, I have to give Reich credit where credit is due. He showed some innovation in the face of big budget cuts at Berkeley, where he is currently teaching. He teaches a lecture course of 440, aided by nine TAs. He lectures 2-3 hours weekly, followed by some student time in smaller groups with the teaching assistants, a commonly used model for large classes throughout America. The Administration said, we are cutting your enrollment by 140 because we can only afford six TAs.

Reich thought this was a bad move, but he understood budget constraints (which often in public life he does not seem to do, such as the current brouhaha over health care). The average cost of educating a student in Reich's class would rise substantially with enrollment restrictions, since the big cost, I suspect, is Reich's own salary, more than the TAs. Reich said: let us offer Reich and Reich Light -- a 4 and a 2 credit hour version of the same course, with the two hour version consisting only on his lectures and a slightly watered down exam format with less essay writing. As he said, perhaps not the ideal solution, but one that probably increases the outcomes achieved relative to the inputs used.

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WRONG

Speaking of people I don't like, Ariana Huffington is very high on the list. She is a loud opportunist of limited capabilities in my judgment, and I don't agree with her politics. An associate of hers is now claiming the Fed may control the economics profession and what economists can say. She is dead wrong about that, since the Fed's tentacles over economists is limited to a small percentage of active academic economists. I have been critical of the Fed, think Bernanke is far inferior to Volcker and Greenspan, etc., etc., etc. I worry about Bernake's duplicity with Obama in macroeconomic policy and am scared about all sorts of problems arising form huge excess bank reserves and massive government borrowing.

Having stated my anti-Huffington bona fides, let me also say that the author and the Huffington Post does have a point. Writers and scholars are beholden to their patrons, and, if as is claimed, a majority of the editorial board of the Journal of Monetary Economics has the Fed as their employer, there is at least a theoretical possibility of conflict of interest, and the stifling of good publications. I would not rule it out. I doubt, however, the Fed controls also the Journal of Money, Credit and Banking, the Journal of Finance or, for that matter, the American Economic Review. In other words, there are multiple outlets for research, the number growing as informal internet-based publishing gains in importance.

In a broader sense, I think of the left-wing orientation of most intellectuals, including economists, comes in part because they are paid by the state (broadly defined to include the central bank and multiple governmental entities). People don't want to kill the goose that lays the golden eggs that they live on. In a world with less government support for higher education, would professors be more balanced in their political orientation? It is an interesting question that, alas, I do not know the answer.

How Colleges Respond to an Economic Crisis

by Daniel L. Bennett

HEPI, the higher education inflation index, was released today for FY 2009 (ending June 2009). Apparently we are supposed to be congratulating higher ed for managing to limit its inflation index to 2.3% during the onslaught of America's worst economic crisis since the Great Depression? This same crisis has resulted in millions of Americans losing their jobs, homes and significant portions of their life savings; leaving them no choice but to reduce their spending habits significantly in order to make due, which in turn has had a deflationary effect on many goods and services.

There are great deals abounding on goods such as automobiles, homes, vacations, appliances, and on services such as casual dining, cable TV and utilities --due to the downturn in the economy. Even gas prices have normalized at around $2.50 a gallon. It seems that almost everything is less expensive today than a year ago except for the price of college. So excuse me if I'm not jumping up and down in my seat in excitement because the higher education inflation index only rose by 2.3% last year, especially when the
CPI-U decreased by 1.9% over the same period (July 2008 to June 2009).

It seems that there were a few bright spots in the index for FY 09. The cost of supplies and materials increased by only 0.9%, while the cost of utilities was actually down 15% from the previous year. But the good news ends there, as administrative salaries were up by 5.4% from the previous year. This provides additional support for the case that I made here that administrative bloat is one of the primary drivers of rapidly increasing college costs.

As for the other components comprising the index:

The cost of fringe benefits increased by 3.6%, faculty salaries increased by 3.4%, salaries for clerical and service employees were up 2.7 and 2.8 percent, respectively, and costs for misc services was up 2.7% from the previous year. The table below shows the percent increase year over year in FY 09 and FY 08 by index component.

Links for 9/9/09

The National Association of Colleges and Employers reports that starting salaries for college graduates is down 1.2%, and job offers are down 20%.

Zephyr Teachout on the coming demise of the academy:

Colleges, like newspapers, will be torn apart by new ways of sharing information enabled by the Internet. The business model that sustained private U.S. colleges can’t survive…

…at noon on any given day, hundreds of university professors are teaching introductory Spanish, geometry, or Sociology 101. The Internet makes it harder to justify these redundancies, even if they bring a great cultural value…

C. Cryn Johannsen on how the Income Based Repayment program is a disincentive for marriage.

Joe Weisenthal on the tuition bubble. HT: Edububble

Arianna Huffington comes out in favor of vouchers, but apparently can’t quite bring herself to utter the dreaded word. HT: Eduwonk

the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would then be free to enroll their child in the school of their choice.

The Blogosphere is Unhappy with Faust

by Andrew Gillen

This essay by Harvard president Drew Gilpin Faust is drawing quite a bit of criticism.

William Easterly:

I’m not sure WHICH academics in WHICH department she is calling upon to supply shallow moralizing and bad economics...

I don’t mean to pick on the Harvard President in particular, many heavyweight figures are dispensing sophomoric rhetoric ever since the crisis made it open season on economics. I'm just following her counsel to supply some inconvenient doubt about the social value of such rhetoric.

Felix Salmon:

This is the kind of lying-with-statistics which academics should be debunking, not propagating. If you want to know what the rewards are of going to college, you need to compare the lifetime earnings of people who went to college with those who could have gone to college but didn’t. It’s trivially true that the kind of people who go to college will earn more than the kind of people who don’t. What’s interesting is whether the kind of people who can go to college benefit financially from doing so.

Kevin Carey:

Correct me if I’m wrong but didn’t Harvard indulge the bubble of false prosperity as much as anyone, with various catastrophic results? … And if that’s the case, what are you going to do about it? It’s not like someone else is in a better position to fix these problems.

The End of Masculinity?

By Richard Vedder

Before 2009 ends, a historical trend dating back to the first European settlements in America in the early 17th century will end. Specifically, before the year is out, data will show that more women are working than men. When I first earned a paycheck as a high school kid in the 1950s, there were more than two males workers for every woman --now men are going to become a minority. Similarly, in the formation of human capital through formal education, the male-female gap has not only narrowed by long disappeared, and men are a distinct minority on most campuses these days.

Throughout most of history, a man's role was to provide and protect his family. A woman's role was to be the manager of the family household --raise the kids, see to their education and religious training, keep the house clean and everyone fed and clothed. That has radically changed.

There are lots of interesting implications for college life.

1) The assumption that we need affirmative action to promote female access to college, etc., may be outmoded, independent of whether you believe those programs ever were effective. Women are no longer a minority. In a nation with an African-American president and whose secretaries of state have all been female or African-Americans for the past two decades, it is hard to conclude that women are discriminated against in the labor force. Unemployment rates for women are significantly lower than for men, and most layoffs have been male --hardly a sign of gender discrimination.

2) Since women are still more prone than men to take prolonged spells from working to have children, it may be the shifts of the modern era increase the need for adult learning and retraining.

3) The decline in male dominence of work may be associated with some trends in education, such as women excelling more than men in school. It may be that there are unintended adverse consequences of the changes observed. Why is criminality dramatically higher among males than females, for example?

4) The welfare state may have worked to contribute to the robbing males of some of their masculinity. I aways contended that the rise of welfare payments in the 1960 to 1995 period contributed importantly to divorce rates --women said, "I don't have to live with my husband for economic support --the government will provide." A growing segment of the male population lost a sense of importance, of being needed, adding to the drug and criminal pathologies of modern times.

No doubt there are other implications, but that is enough for now.

Links for 9/8/09

Rolfe Winkler on the tuition bubble.


Part 2 of the Pope Center discussion on holding colleges accountable is up.


Felix Salmon on student loans:

It’s ridiculous that colleges can charge pretty much whatever they want, and the federal government will always be there to provide loans. One good way of decelerating the inflation in tuition fees — and the concomitant rise in student debt — will be for the federal government to start getting much stricter about the kinds of sums it’s willing to countenance.

Universities should not be wasting scarce resources designing their own content management systems. It can make professors very, very angry.

Links for 9/7/09

“Law Passed After Mattel Toy Scare Makes Exception for Mattel”

Somehow, I’ve got the sickening feeling that we are going to see a similar headline in the not too distant future regarding Sallie Mae. Perhaps I’m reading too much into their lobbying blitz, but it seems like big companies are all too willing to go along with costly government interventions that force competitors out of business.

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If this goes through, we might start seeing some lawsuits against accreditors instead of just colleges. Justin Fox discusses.

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Tyler Cowen on education as a placebo:

we're learning that placebos apply to a lot of other areas and that includes higher education. Schooling works in large part because it makes people feel they've been transformed. Think about it: college graduates earn a lot more than non-graduates, but studying Walt Whitman rarely gets people a job. In reality, the students are jumping through lots of hoops and acquiring a new self-identity.

The educators and the administrators stage a kind of "theater" to convince students that they now belong to an elite group of higher earners. If students believe this story, many of them will then live it.

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KC Johnson takes the AAUP president to task for abandoning academic freedom when it’s inconvenient:

The president of the AAUP asserted that "moral and political" considerations "are clearly fair when deciding whether or not to hire a faculty member in the first place. You have a right not to hire someone whose views you consider reprehensible."

Imagine if this approach had applied to the early 1950s---a period generally considered a low point in the history of academic freedom in the United States. At the high tide of McCarthyism, surely a majority of most academic departments considered communism to be morally and politically "reprehensible." The Nelson standard, therefore, appears to justify the decision of many such departments not to hire former members of the Communist Party. After all, according to Nelson, these ardent Cold Warrior faculty members had "a right not to hire someone whose views [they] consider reprehensible."

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Economix on SAT scores by region

Links for 9/04/09

Jim Hamilton on some UC professors plans to walkout on classes as a protest of furloughs:

I strongly believe that cancellation of classes is a very bad idea…

Students are taking a very serious hit in the form of higher tuition and fees. Faculty members have also taken a significant reduction in income, and that should be the basic message that we send to the world. Personally I would have preferred to see it called "salary cut" rather than "furlough" for precisely this reason…

There are any number of things that happen in life that may not be as I would have wished. But one of my core principles is never to take that out on the students I am asked to teach.

If some of my colleagues perceive that they now have better opportunities than teaching at the University of California, I'd encourage them to resign so that they can take advantage of those opportunities.

If not, they need to stop whining and do their jobs.

And perhaps even be thankful that, unlike many other Americans, they still have one.

USA Today asks “is college worth it?”

SLA on Prepaid Tuition Plans

what is wrong with the design of these programs?

In one sentence: As tuition rates have skyrocketed, equity markets have cratered leaving a significant gap between the assets and future liabilities of these programs. It reminds me of that time-worn cliche: If a deal (locking in tomorrow's tuition rates today) sounds too good to be true....oh you know the rest. No amount of financial alchemy could overcome this combination of tuition levels rising at rates consistently above inflation and fickle financial markets which don't grow at a stair step 8% annual rate.

David E. Shi had a good piece in IHE with this funny take on the state of higher ed:

recall the Buddhist story about a man on horseback galloping past a monk. “Where are you going?” yells the monk. The man replies, “I don’t know -- ask my horse.” In recent months we too have often felt that we’re riding on a runaway horse.

University of Oregon Football

By Robert Villwock and Matt Denhart

LeGarrette Blount, a running back at the University of Oregon, punched a player of the opposing team last night after Oregon’s loss on national television. Afterward, he pushed around teammates and tried to fight Boise State fans before being forced off the field by police. Upon hearing about this chain of events we went to Youtube to see what actually happened.

After watching the footage, a quote by former Kansas State Athletic Director Tim Weiser immediately came to mind:

“Athletics can be thought of as the front porch of a house. People will often see the university through the athletic program in a way that they might not otherwise see the university. . . .[I]f you drive by a house and you see a front porch that is not well-kept, with shingles falling off, you are likely to draw the conclusion that the rest of the house must also be in bad shape. Conversely, if you have a well-kept front porch, the rest of the university will take on the same image. So when it is done right, athletics give people all across the country the chance to draw very positive conclusions about the rest of the University.”

Unfortunately in this case, athletics was not done right and people all across the country draw very negative conclusions about the University of Oregon and its student athletes. Blount had already been excused from practices over the summer for emotional outbreaks such as this. Had Blount been an average football player instead of a starting tailback, he likely would have already been excused from the team.

Unfortunately given the culture of Division 1 FBS athletics, the costs and benefits of excusing a talent like Blount are skewed.

Blount was suspended by former coach Mike Bellotti in February for ‘failure to fulfill team obligations.’ However, Bellotti stepped down as head coach to take the athletic director position at the school and Blount was reinstated by new head coach Chip Kelly.

Given the fact that this is Blount’s third meltdown since February, it may be better to let somebody outside the athletics department decide his punishment.

The championship hungry alumni and coaches dependent on winning seasons to keep jobs once again showcase the flawed incentive structure of the NCAA Division 1 FBS.

For more about the current structure of the NCAA Division 1 FBS see our study here.

Keeping Costs Low By Focusing on Teaching

by Daniel L. Bennett

I've been having some back and forth discussion with one our our most avid readers in the comments of a prior blog concerning one of higher education's truly laudable institutions, Lindenwood University in Missouri. I made the comment that more colleges should emulate Lindenwood's low-cost teaching university model that offers a private college education at a price comparable to public universities. This prompted the dialogue that followed. Rather than continue to discuss this topic in the comments of a blog that is bound to get buried, I decided to write a new blog so that the rest of our readers will have the opportunity to chime in.

To rehash and bring readers up to speed, I provided a back of the envelop comparison of the enrollment-, residence-, and institutional aid-adjusted tuition at Lindenwood and the University of Missouri at Columbia. The result of this calculation was that the average student in 2007 at Lindenwood was responsible for coming up with ~$6,575, whereas the average student at UMC was responsible for coming up with ~$6,350 to cover the remaining tuition. Because there was concern that I had mistaken total financial aid package (including grants, loans work study) for institutional aid, I've included the chart* below that shows the percentage of students receiving and the average amount received at the two schools, by aid type. Please note that the above mentioned calculations only consider institutional grant aid that is provided by the school itself and not aid received from the government.



I also previously pointed out that Lindenwood is able to keep its costs under control with sensible policies such as, but not limited to:

1) having a single institutional mission: teaching
2) faculty focus on teaching and counseling, as opposed to research
3) use of long-term renewable faculty contracts instead of tenure
4) use of academic divisions (headed by a faculty member with teaching duties) as opposed to a plethora of individual departments
5) minimal bureaucracy

A concern was then raised that Lindenwood is able to offer relatively low tuition because many of its students major in business, education, communication and other "low cost" disciplines. I really don't see how this is a bad thing. If Lindenwood attracts students who are interested in careers in the above-mentioned fields, which also happen to be in demand by the labor market, then the university is doing itself a favor by specializing in fields that are in high demand, rather than trying to appease every Tom, Dick and Sally by offering a full menu of low-demand majors. It is also beneficial to graduates who are more likely to find employment in their field of study. And not having a tenure system, Lindenwood has the capability to shift its educational offerings in sync with labor market and student demands, making it more capable to adjust its programs to match the needs of a dynamic global economy.

Lindenwood faculty have higher teaching loads than faculty at most colleges, but are not held to the publish or perish research standard that has become the focus of many colleges and universities. I also see this as a good thing because it permits faculty to focus on engaging their students as well as helping keep costs down. Why? Because research is expensive and shifts faculty resources away from other activities, such as teaching and student counseling. These tasks still need to be performed, so the college hires additional staff to handle jobs previously performed by faculty, but who are not primarily engaged in research. This has been one of the primary drivers of upward spiraling tuition. While I believe that some research contributes to the advancement of society (e.g. engineering, sciences, medical, etc), I suspect that much of what is being published in obscure academic journals contributes little to society other than the intellectual stimulation of relatively few professors in highly specialized disciplines.

Promoting such research via diverting resources away from teaching will prove to be the downfall of the university as a great American institution. Students, parents, donors and taxpayers are expending exorbitant amounts of money to educate the citizenry of this nation in an effort to preserve our nation's prosperity and improve the lives of its citizens, but I'm afraid that many of these resources are being wasted, as colleges have become less and less focused on providing an education. The students and future generations are the losers in this game, as they incur large amounts of both personal and public debt that will need to be paid for at some point down the road. Meanwhile, graduates will be unequipped to compete in the global economy due to a higher education system that pawned off the responsibility of educating them in favor of pursuing a whole lot of self-interested research (which the majority of undergraduates are not involved in) that for the most part, doesn't matter. The focus of colleges instead, needs to return to educating the students and helping them succeed in life, and Lindenwood (as well as a few other colleges) appears to have embraced this concept. I would hope that many more colleges would emulate the low-cost teaching model, which could be the saving grace of American higher education and this country's economic future.

*Data Source: IPEDS

Teaching Accreditation

by Andrew Gillen

Sandra Stotsky has an absolutely fascinating analysis of the revisions proposed by NCATE:

the National Council for Accreditation of Teacher Education (NCATE), the organization that accredits most of the nation’s education schools, announced a revision of its accrediting guidelines. It’s the first major revision in ten years.

... After the Foundation for Individual Rights in Education called attention to what amounted to an ideological litmus test for entry into teaching, NCATE dropped that standard.

Even worse was the blistering (and also unexpected) criticism of NCATE in Arthur Levine’s 2006 report on teacher preparation programs...

...Levine’s research team found no significant difference in mathematics or reading achievement in students taught by teachers educated at NCATE- and non-NCATE-accredited institutions. That was a staggering blow to the organization’s prestige.

The group’s new president, James Cibulka, hopes the new guidelines will repair the damage and persuade people that NCATE accreditation can lead to improving teacher education....

The problem with NCATE’s white paper is what it doesn’t say.

...As the National Mathematics Advisory Panel found, the common characteristic of effective teachers is a deep knowledge of the subject they teach. But nothing in NCATE’s new guidelines ensures that prospective teachers, especially for elementary and middle school, will have the academic background necessary to teach the subjects they will be expected to.

An even more serious problem we face is raising the academic caliber of those who want to become teachers... but NCATE’s revised guidelines don’t address this issue...

Even though the new guidelines aim at increased knowledge about “what works to improve student learning,” there’s nothing in the new NCATE standards about using what is already known about what works. That’s especially true in beginning reading instruction. The research evidence is clear that techniques such as phonics and direct instruction are effective, but they don't tend to be taught in education schools...

If accreditation is to improve the quality of our teacher preparation programs, the most important step must be a dramatic expansion of the organizations that supply the individuals who review education school programs and the incorporation of their standards into the process. The problem is that NCATE is composed only of educational, not discipline-based, organizations...

The absence of subject matter experts on review teams keeps constructivist, anti-content theories about teaching dominant in our education schools...

PLUS again

by Andrew Gillen

Ben Miller responded to my post on PLUS loans yesterday and brings up a number of points which I’d like to address.

• the U.S. Department of Education sent a letter to 921 schools in the Federal Family Education Loan (FFEL) Program that had more than 80 percent of their volume with a single lender.

This certainly gets at the prevalence of monopoly, and I was surprised that so many schools were dominated by a single lender. But I imagine (I couldn’t find a list) that these 921 are relatively small, so the proportion of students might be much smaller than that number would imply. However, if we assume that they are a representative/random sample, that is about a quarter of title IV institutions, which when added to the 1 in 5 denial rate from DL would give us the 2 in 5 denial for FFEL.

My main issue is that this letter went out to these 921 schools in 2007, so wouldn't this issue have surfaced back then? If there wasn't much difference in DL and FFEL denial rates back then, I'd be inclined to mark up current disparities to craziness in the financial markets. Either way, the solution to this problem is get rid of the monopolies at those schools.

• the denied PLUS applicants may be less likely to shop around, perhaps based upon the assumption that if that lender turned them down so will everyone else. In that case, if a lender denies a PLUS loan but then offers a private option right away, it may be very attractive to the parent.

This is a really good point that's got the potential to explain much of what’s going on. He later notes “these same lenders making the denial decisions also have the ability to market a competing and more expensive product makes me concerned that there are too many opportunities for a conflict of interest.” I would think that one of the tasks of the financial aid office would be to steer students toward their best option, reducing the potential threat of this. But we’ve seen corrupt financial aid offices before, and the fact that 921 apparently allow(ed?) near monopolies doesn’t instill confidence. It seems to me that if they aren’t already doing so, institutions should ensure that their financial aid offices have a) strict bans on bundling rejection of PLUS with offers of private loans, and b) a lending tree approach to loans – one application, with the borrower then seeing which lenders accept and at what terms.

• First, if lenders feel like the risk of a PLUS loan isn’t worth it, shouldn’t they have similar feelings about Stafford loans?

There are two keys to understanding why lenders may approve students for Stafford loans, but not for PLUS. First, since the interest rates are lower, students will max out Stafford, and parents will prefer home equity loans before moving on to PLUS. Second, Stafford loans are capped at relatively reasonable levels as far as repayment is concerned. Currently, the limit on Stafford loans is $23,000 ($31,000 if all unsubsidized). As Liz Pulliam Weston notes, “A good rule of thumb is not to borrow more, in total, for an education than you expect to make in salary your first year out of school.”

Thus, pretty much any graduating student with a decent job will be able to make the payments on their Stafford loans, even if they take out the max. Lenders will therefore be willing to lend. The story is different for PLUS loans, since lenders know that the borrower has probably already maxed out on Stafford loans (meaning the student is unlikely to be able to help repay), and that the parents couldn’t get a better deal on a home equity loan (meaning they probably already have debt issues), both of which make default, and therefore PLUS denials, more likely.

• But the issue is not with the rate of PLUS loan denials, it’s the difference in that rate between the two programs. I can’t believe that the borrower populations in the two programs is so different that the denial rate in FFEL would be double what it is in the Direct Loan Program. And that’s what caused the red flags to go up.

This is the main disagreement. We’re both assuming that the populations of applicants are the same. He sees the higher denial rate for FFEL as a potential red flag about the private side – FFEL lenders are trying to increase profits by pushing people into private loans with higher interest rates. I think that competition rules that possibility out, so I see the high denial rate of FFEL as a potential red flag about the public side – DL may be accepting too many people with unlikely prospects of repayment. We all know that financial companies are like a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," so if the squid is staying away, maybe there is a good reason.

Which of these stories is right hinges on how monopolistic student lending is. I’m still not sure that enough big schools have 1) a monopoly and/or 2) unethical financial aid officers to produce the reported aggregate figures. But I could be convinced otherwise.

Links for 9/3/09

by Andrew Gillen

Mike Rowe (of Dirty Jobs fame) HT: William McGurn

Doesn’t it seem strange that we can have a shortage of skilled labor, a crumbling infrastructure, and rising unemployment? How did we get into this fix? Are we lazy? Our society has slowly redefined what it means to have a “good job.” The portrayals in Hollywood and the messages from Madison Avenue have been unmistakable. “Work less and be happy!” For the last thirty years we’ve been celebrating a different kind of work. We’ve aspired to other opportunities. We’ve stopped making things. We’ve convinced ourselves that “good jobs” are the result of a four year degree. That’s bunk. Not all knowledge comes from college. Skill is back in demand.

Amusing/Scary story. HT: GM


Real Time Economics:

The intensifying competition to get into high-prestige private college colleges, particularly among upscale parents in the Boston to Washington corridor…

In a paper distributed by the National Bureau of Economic Research, John Bound and Brad Hershbein of the University of Michigan and Bridget Terry Long of Harvard…

“The increased competition that currently exists for admission to a more selective college might have real benefit it it were to increase learning amongst high school students,” they write. “However, our analysis suggests there are reasons to be suspicious that this congenial outcome might not hold true.”

Another NBER paper, by economists Garey and Valerie Ramey of the University of California at San Diego, suggests that competition to get into a good college is changing the way ambitious parents spend their time… To improve their kids’ chances of success in the college sweepstakes, they argue, parents are spending more time with their children. They call it “The Rug Rat Race.”

Cool chart at CHE showing freshman migration.