Category Archives: Financial Crisis and Higher Education

Entitled Professors Try a Coup in Maine

Maine’s higher education structure is a little unusual. The flagship university, in Orono, is too remote from the state’s economic and cultural core on the Kittery-to-Rockland coastline. The state’s second-largest public university, the University of Southern Maine, has campuses in Portland and nearby Gorham, but long had a reputation as a more second-tier institution.

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The Student Loan Debacle–What a Mess

Until recently, much talk about student loans was fact-free: There simply weren’t publicly available figures worth paying attention to.

The official balance of student loans from the NY Fed were unreliable:

There was a bucket of random obligations called “Miscellaneous”, which included things like utility bills, child support, and alimony. And it turns out that if you went burrowing in that miscellaneous debt, there was actually a pile of weirdly-categorized student loans in there. [AG: And these mis-categorized student loans were not included.]

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‘Cutthroat Admissions’ at Elite Colleges?

The Chronicle Review is notorious for publishing outlandish opinion pieces more in the nature of white-hot rants than well-reasoned essays. A good case in point is Professor John Quiggin’s “A Vicious Duo” (September 16 – subscriber site), is one of the most overwrought pieces I’ve read there.

Quiggin, who teaches economics at the University of Queensland in Australia, contends that America is beset by the twin problems of rising inequality of income and “cutthroat admissions” at our elite colleges and universities. That combination allegedly leads to a “self-sustaining oligarchy.” Whatever superficial plausibility his argument might have — especially for people like himself who live outside the United States — vanishes when you comprehend the following points.

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Women’s Studies Professor Takes a Vacation

How easy do some college professors have it?  Here is a paragraph from an Aug. 28 story in the Chronicle of Higher Education about the effect of recession-hit Nevada’s higher-education budget cuts at the University of Nevada-Las Vegas:

One person who hasn’t spent much time on the campus since May is [Lynn] Comella.  Sitting behind a desk piled with files and loose papers from spring semester, the women’s-studies professor was too discouraged by this year’s session of the Legislature to return to her small fourth-floor office all summer.  “For some of us, we needed the summer to regroup,” she says.

How fascinating!  A professor doesn’t feel like going to work because she’s “discouraged,” so she takes a three-month vacation, paid for by the taxpayers of a state whose unemployment rate has hovered between 13 percent and 15 percent over the past year.

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After Graduation, Get a Job Immediately, or Else

One of the frequent complaints one hears from humanities professors and figures in the “softer” social sciences is that students and a growing number of higher education officials, consultants, and commentators regard college more and more as a job-training program.  While driving across the country this week, I heard Rush Limbaugh declare that the only point of going to college was to find a job—nothing about general knowledge and skills that go with citizenship and being an adult of taste and discernment and historical understanding.

The economic crisis makes their workforce-readiness arguments even stronger, and this story in The Fiscal Times adds an aggravating component to it.  It bears the headline “The Lost Grads: Born into the Wrong Job Market,” and it focuses on graduating classes of '08-'10 who left school only to find that employers weren’t hiring.  The result, according to the Economic Policy Institute: college grads under 25 have an unemployment rate of 9.9 percent, while older grads have a rate of 4.4 percent.

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The Money Problem at U Cal

UC_Berkeley_Walkout.jpg
As a regent of the University of California (UC), I voted against “fee” increases proposed by the administration as often as I voted for them, but with each vote I realized that UC was slowly moving toward the day when basic decisions would have to be made about how the university is financed, who can attend it, and what the public should expect from the institution. Well, that day has come; and the public can either dodge the issues or face them and try to craft a new relationship with UC.
Several days ago, the regents voted to increase fees by a whopping 32% – that’s right, 32% – starting in the fall of 2010. Notwithstanding the predictable assertions about “quality” being threatened and the prospect of a “faculty exodus,” with a loud voice, I would have voted against this increase. Not because the university isn’t justified in raising fees to some extent, but because the economy is in the tank, many students’ parents are unemployed and no business in its right mind raises its prices 32% under such a set of circumstances.
The operative word above is “business.” The University of California IS a business that likes to operate as if it were merely a public service enterprise. It doing so, it gets to have the best of both worlds. As a business, UC chooses to compete with other businesses for talent – and seeks to compensate them accordingly. As a public service enterprise, the university expects to be subsidized heavily by the taxpayers – when we can afford it – and to have all of the protections and perquisites of a public corporation.

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The Trouble With Community Colleges

Community colleges stand to be major beneficiaries of the massive Student Aid and Fiscal Responsibility Act passed by the House on Sept. 17, with about $9 billion in federal dollars to be directed their way if the bill becomes law. Community colleges, as locally based, take-all-comers institutions that typically offer two-year degrees for minimal tuition, are also objects of solicitude by the Obama administration. In a July speech in Warren, Mich., a recession-battered suburb of Detroit, President Obama expressed hope that a federal cash infusion would help an additional 5 million Americans earn degrees and certificates from community colleges over the next 10 years. By retraining at community colleges, displaced autoworkers and others who have lost their jobs during this time of 10 percent unemployment would learn “the skills they need to fill the jobs of the future,” Obama said. Earlier Congress had earmarked $3 billion in federal stimulus money for community-college retraining programs.

That’s the hope. The reality, as Elyse Ashburn of the Chronicle of Higher Education has reported in following a cohort of real-life displaced autoworkers who took generous buyouts from the Ford Motor Co. when it closed a plant in northeastern Ohio in 2006, is that using community colleges for job retraining is easier said than done. Of the 18 young people Ashburn tracked who used their buyout funds plus other Ford help to attend community colleges, only five had graduated or transferred to another college when Ashburn re-interviewed them in 2009. Five had dropped out, and eight were still working on degrees three years later. “Even for the successful students…getting a two-year degree has taken much longer than two years,” Ashburn writes in the Sept. 21 issue of the Chronicle.

The biggest problem was that most of the former Ford workers who had gone right out of high school to the assembly line were completely unprepared for college-level work. Many had to enroll in remedial courses, and others had no idea how to study or manage their time. One young woman found that her two-year nursing program was actually going to be more than four years of full-time study (she won’t graduate until December 2010) because she had to take so many general-education classes before she could even begin her nurse’s training. “There were times when I cried,” she told Ashburn. A young father of five wasted a year after the Ford line in community college class, then decided he’d be better off attending a trade school that offered a preservation-carpentry program.

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How UC Dodges Real Cuts

Some faculty members in the University of California system plan to stage a walkout starting on Sept. 24—which also happens to be the first day of classes at several of the system’s 10 campuses. The aim of the walkouts is to protest an $813 million cut in state funding for the university system during the 2009-2010 academic year occasioned by California’s efforts to close a $26 billion budget shortfall that nearly brought state operations to a halt earlier this summer.
UC professors—and not just the several hundred who have indicated that they plan to start canceling classes that day—are angry that the university system’s Board of Regents decided to implement the cuts by mandating across-the-board furloughs (essentially salary cuts in return for less work) for all UC faculty and staffer, and that the system’s Office of the President subsequently ruled that professors could not take their furloughs on teaching days.
The idea behind the canceled classes is to make UC students feel so much pain that either they or their parents will goad state legislators into restoring the cut funds. “Instructional furloughs pressure the state to cease defunding the UC system,” said a letter signed by 16 professors from various campuses. One of the signatories, Nathan Brown, an English professor at UC-Davis, put it this way in an interview with the Sacramento Bee: “We’re not walking out on students. We are refusing to implement the university’s destruction of the education system.”

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Community Colleges Are Bulging, But…

Cuyahoga Community College expects to see nearly 30,000 students enrolled for credit on its three campuses in Cleveland when it opens for the fall semester late in August, with an additional 30,000 taking non-credit courses for job-training “personal enrichment” (instruction in art, photography, and other hobbies). According to campus officials, the 30,000-strong for-credit student population represents an all-time high: about 20 percent more than the 24,311 for-credit students whom the college reported as enrolled last spring. The projected 6,000-student increase is unprecedented, too; in the spring of 2009, college records show, there were only about 800 more students attending Tri-C, as Clevelanders call their community college, than were on the rolls for the spring of 2008. Chalk up the current surge to the recession, which has suddenly made the $25,000-a-year-tuition typical of U.S. private four-year-colleges look unaffordable to many families (private colleges nationwide have reported lower-than-usual freshman acceptance rates for this fall). Annual tuition at Tri-C is a tenth of that: $2,418. That’s a bargain even compared with tuition costs at Ohio’s public four-year colleges, which charge $8,583 annually on average to state residents.
So it’s perhaps only logical that President Obama, in a July 14 speech at Macomb Community College in Warren, Mich., announced a proposal to invest $12 billion in federal spending in the nation’s community college system, all with the aim of helping an additional 5 million Americans earn degrees and certificates from community colleges over the next 10 years. The president called community colleges the under-appreciated “stepchild of the higher education system” and declared that the money would help workers learn “the skills they need to fill the jobs of the future.” His message seemed designed as a boost to Warren, a recession-battered suburb of Detroit with a 20 percent unemployment rate, but also to millions of other American young people desperate to cut the cost of attending college.

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The Student Debt Crisis Is Not Being Fixed

A recent report from Education Sector shows that about half of America’s college undergraduates go into debt these days in order to work toward their degrees. In 1993 only 32 percent of college students took out loans to pay for their educations, so these latest figures, from 2008, based on the U.S. Education Department’s National Postsecondary Student Aid Survey, represent quite an increase in student debt over the past 15 years.
Furthermore, Ed Sector points out in its report titled “Drowning in Debt: The Emerging Student Loan Crisis,” the biggest increase in student loans has been in the private loan sector: loans not originated through federal programs whose (sometimes subsidized) interest rates and repayment schedules are strictly regulated. Private student loans were nearly nonexistent in 1993, but by 2008, according to Ed Sector, they accounted for 14 percent of undergraduate borrowing. “Drowning in Debt” attributes the private-lending surge partly to the cheap-credit phenomenon of the middle of this decade, which inspired an array of entities that included Sallie Mae and the Bank of America—plus a raft of bubble-years outfits such as EduCap (under investigation by the Internal Revenue Service) and the now-moribund Campus Door (which settled a lawsuit by New York state authorities over alleged deceptive marketing)—to begin “aggressively marketing private loans to hundreds of thousands of college students.” According to Ed Sector, the interest rates on those loans (which have been vastly curtailed with the collapse of financial markets) were often at sub-prime levels of up to 19 percent. Without the protections of the federal loan programs, it’s also much harder for students to delay repayments of such loans if they can’t find jobs after graduation or decide to go on to graduate school.
The multi-billion-dollar private-loan business is only part of an alarming upward trend in student borrowing. During the school year ending in 2008, for example, about 65 percent of students at four-year private universities borrowed in order to pay for their educations with loans averaging just under $10,000 a year—a 70 percent increase over 1993’s average debt loads as calculated in 2007 dollars. Even at state schools charging low tuition, more than 50 percent of students took out loans in 2008. At for-profit-universities, the number of students using borrowed funds jumped to 92 percent in 2008, compared with 53 percent in 1993 (the average size of students’ annual debt load at for-profits similarly soared by 57 percent over the past fifteen years, to $9,600. It’s at for-profit schools that private loans (as contrasted to federal loans) are most heavily represented, with 43 percent of loans to full-time students originating in the private sector, a near-tripling of a 16 percent figure for 2004.

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Does Tenure Mean You Can’t Be Laid Off?

Two weeks ago a state district judge in Denver issued a ruling that makes it next to impossible for a college in the Colorado state system to revise its faculty handbook so as to make it easier to lay off tenured faculty members in the event of a reduction in employment force, even when state law and the previous version of the faculty handbook itself allow the college to make the revisions.
Denver District Judge Norman D. Haglund’s June 8 order, in the case of Saxe vs. Board of Trustees of Metropolitan State College of Denver, which has spent at least five years in the Colorado court system, including an appeal, stated that the “public interest” in the academic freedom of tenured faculty outweighs any public interest that a financially stretched public college might have in preserving flexibility in hiring and firing tenured professors so as to serve its student body more effectively. As Inside Higher Education reported, Haglund effectively said that “not only is tenure a good thing for the professors who enjoy it, it is valuable to the public.”
As Inside Higher Ed also reported, the Saxe case is “much more important” than the specific issues at play, which involved the efforts of the trustees of Metro State, a 21,500-student, heavily Hispanic four-year public college in one of Denver’s oldest urban neighborhoods, to put into effect a revised faculty handbook in 2003 that rescinded a provision in the previous handbook, issued in 1994, generally requiring that non-tenured faculty be laid off before the jobs of tenured faculty members be touched. The 1994 handbook also required that that college first attempt to place affected tenured professors in other campus jobs, a requirement that the trustees rescinded in 2003. Haglund ruled that the changes amounted to a deprivation of the “vested rights” of tenured Metro State professors.

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A Benefit From The Recession?

Even the dark cloud of the current recession has some silver linings. One of them seems to be an unexpected up-tick in the number of college students majoring in engineering, an academic field that actually leads to production of useful things, such as bridges and medical devices, in contrast to, say, women’s studies, which produces mostly angry women. The American Society for Engineering Education (ASEE) recently released a report indicating that enrollment in undergraduate engineering rose 4.5 percent in 2008 over 2007, and enrollment in master’s-level programs grew by. 5.4 percent. The nearly 93,000 students enrolled in master’s engineering programs marked an all-time high.
That’s good news on several fronts. One of them, as Andrew Gillen of the Center for College Affordability and Productivity (CCAP) and Massachusetts Institute of Technology economics professor Esther Duflo have noted in different forums, more young people choosing engineering as a career likely means fewer among the brightest of them choosing investment banking, a career that has taken severe hits in the collapse of the exotic instrument-based mortgage market and its related financial crisis
In an October 2008 post on the Vox economics website Duflo took note of the “Harvard and Beyond” survey, a 2006 report sponsored by the Harvard economics department on the career choices and earnings of Harvard graduates over the decades. The survey showed that, thanks to the outsize rewards available to bankers during the boom years of the mid-2000s, “in 2006 those who worked in finance earned almost 3 times more (195%) than other [Harvard graduates], after controlling for grades in college, standardized scores at entry, choice of major, year of graduation, etc.,” as Duflo wrote. She added, “What the crisis has made bluntly apparent is that all this intelligence is not employed in a particularly productive way.”

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Colleges: Who Had The Money To Apply?

If you thought last fall’s staggering endowment drops were the end of collegiate financial troubles, you haven’t been paying attention. Another minefield awaited – application season. It wasn’t simply colleges that were feeling a pinch, so were their future customers. After decades of tuition increases that failed to dent application numbers, colleges were suddenly forced to contemplate declining enrollment as parents wondered whether $40,000-a-year for only-average colleges was really worth it. So profilgate universities would lose students to thriftier (and cheaper) peers? Well, partically. The issue is complicated – take a look at the developments that lead up to this application cycle. .
A number of elite institutions, in the last two years, have undertaken significant expansions of already-generous financial aid for lower and middle income students that have not been scaled back, and in fact loom even more attractive for a certain demographic of less-affluent applicant, for whom elite colleges are in fact likely to be cheaper than all but the most affordable public institutions.
One casualty of declining endowments has been a scaling back of financial aid at some colleges, or the tacit statement that the ability to pay full tuition can increase an applicant’s chances. This no doubt influenced some choices – improved chances of admission in paying for a full-ride? Bowdoin, a “need-blind” institution, has expanded its class by 50 over the next five years – slots imagined for transfer and foreign students – who do not receive “need blind” consideration. As Robert Sevier, an enrollment consultant, told the New York Times, “If you are a student of means or ability, or both, there has never been a better year.”

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Should The Unemployed Go Back To School?

The last time President Obama gave a speech dealing with education (his address to Congress on February 24), he misrepresented government data to make his case that the country needs to put a significantly higher percentage of people through college. (I wrote about his fudging of the figures here)
For that reason, Americans would be wise to look skeptically on his policy pronouncements regarding education. Last week the president gave another speech this time extolling college and especially community college programs as a good path for unemployed people who want to prepare for new and better jobs. He gave a couple of nice anecdotes about people who had greatly improved their lives by taking vocational training courses and he wants to make it easy for unemployed workers to get federal money for education and career training.
In one case, a woman in Maine who had lost her job as a receptionist decided to take courses in nursing, and now makes a good living as a registered nurse. Without question, that’s a success story, but it’s never a good idea to make government policy on the basis of some individual success stories. That’s because policy changes usually have hidden costs. To get a few success stories, we often have a greater number of failure stories.
Before looking at the president’s proposed changes, we should examine the broad vision he articulated. Here are his key sentences. “Now is the time to put a new foundation for growth in place – to rebuild our economy, to retrain our workforce, and re-equip the American people. And now is the time to change unemployment from a period of ‘wait and see’ to a chance for our workers to train and seek the next opportunity…”
That sounds quite uplifting. It sounds obvious and simple. But is it realistic?

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Obama’s Loan Plan – Scary Stuff

Like Caesar’s Gaul, President Obama’s plan for higher education is divided into three parts:

1) Every American should have postsecondary educational training, and within a few years we should again lead the world in the proportion of young graduates with bachelor’s degrees;

2) Federal financial assistance to pay for college should become an entitlement like Social Security or Medicare, available to all in need;

3) The private provision of loans to students should end and the Federal Government should become the provider of student loans.

The American higher education establishment has mostly endorsed this sweeping proposal. As is so often the case, they are wrong. On every count, this proposal is an Obamination – a perverse set of policies that will raise costs to taxpayers and, surprisingly, also to many college students and families.

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J-Schools Struggle To Cope

Newspapers are folding right and left—the Rocky Mountain News in February, the Seattle Post-Intelligencer in March, the Boston Globe any day now, it would seem—and, according to the American Journalism Review, some 15 percent of the newsroom jobs, about 5,000 of them, last year (with another 7,500 vanishing so far this year) at newspapers across the country assaulted by an Internet that has gobbled up not only their readers but their advertisers.

Still, until just recently—this year, to be exact—at many of the nation’s journalism schools you’d think it was still 1973. That was the year the Watergate reporting of Bob Woodward and Carl Bernstein for the Washington Post helped topple a sitting president. Back then every college English major in the country wanted to work for a big-city print newspaper like the Post and become a celebrity investigative reporter like Woodward and Bernstein, nemeses of Richard Nixon, who resigned in 1974 during the Watergate scandal. Now, however, even Rick Redfern, the bearded, insufferable Woodward-Bernstein clone in “Doonesbury,” has lost his job, the movie State of Play, starring Russell Crowe as yet another old-school investigative reporter doing homage to Woodward and Bernstein, tanked at the box office, and newspapers are hoping for a government bailout (so far resisted by the Obama administration) on the theory that they perform a public service that taxpayers ought to subsidize. Journalism schools, which once cultivated the mystique of the pure-of-heart reporter speaking truth to power, are hastily revamping their antiquated curricula to conform to a completely different business model—part of which seems to be recognizing for the first time that journalism is a business, not a priest-like calling.

It’s amazing how long it took for the changes to come. At the Columbia School of Journalism, the nation’s flagship J-school, Reporting and Writing 1, the entry level course required of everyone who goes through Columbia’s graduate-level program, has scarcely changed its intensively print-focused content since Columbia instituted the course in 1971, around the time that Woodward and Bernstein went to work for the Washington Post. Only this coming fall term, under Bill Grueskin, a former managing editor at WSJ.com who is new dean of academic affairs, will Columbia be completely overhauling Reporting and Writing to emphasize blogging, slideshows, and other multimedia skills. According to a New York magazine blog, Columbia underwent an “existential crisis” when the Times announced last winter that its New York City-focused blog “The Local” would be assisted primarily by journalism students from the City University of New York (which has an intensive new-media curriculum and no longer requires its students to specialize in any particular journalistic format), not the venerable Columbia.

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Why Not Eliminate Tuition?

In a recent article that received a fair bit of buzz, The New York Times spun a story of the supposed new reality in the recession-plagued U.S.—Students from more well-off families being given admissions preference at increasingly cash-strapped universities. But the Times article misses the larger point. Lawrence University, Colby College and Brandeis (some of the institutions mentioned) are all fine schools that provide good educations, but they are not entry points into the elite post-graduation professional networks in the same way that top Ivy League schools (and a few others of similar prestige) are. For those schools, the real story is the same as it has been—in a time of increasing economic stress, “need blind” admissions will continue for those fortunate enough to be on financial aid—but the uncontrolled escalations of costs for everyone else will continue, putting an increasing financial burden on these students and their families.
When my father entered Harvard University in 1958, fresh from public high school in Ohio, it had just raised it’s tuition a staggering 25% from the previous year. . . to $1250. While inflation would make that figure equivalent to about $9,000 now, the fact remains that this less than one-fourth of the cost of Harvard’s tuition and fees today.
Through a combination of scholarships, parental savings and a summer job each summer at Republic Steel, my father’s family was able to easily afford an supposedly elitist Harvard. Had my father been applying to Harvard today under similar financial circumstances, his parents likely could not have afforded to send him.

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“Need Blind” Admissions In Trouble

Here’s a sign of colleges’ desperate need for tuition cash to make up for shrunken endowments and less generous donors in today’s economic downturn: many institutions are slinking away from their vaunted “need-blind” admissions policies that admits applicants deemed qualified regardless of their ability to pay and makes up any shortfalls with scholarships and other aid.
One of the first to announce a partial suspension of need-blind as the April college-acceptance season approached was Tufts University. Tufts, in Medford, Mass., is a highly selective private university, but as at most private universities, the costs of attending Tufts are steep: nearly $39,000 a year in undergraduate tuition alone. In years past, according to the Princeton Review, Tufts has lived up to its need-blind policy by giving some form of financial aid to 41 percent of its undergrads.
This year Tufts, also like many private universities affected by a recession-induced scramble by potential students and their parents to enroll in cheaper public or close-to-home institutions, suffered a drop in applications for its 2009-2010 entering freshman class (the decline was 4 percent in Tufts’ case), but it accepted nearly as many applicants as it did last year (the decline in acceptances was less than 1 percent, Tufts reported). That was one sign that Tufts was willing to relax its tough admissions standards, if only slightly, in the interest of maintaining its entering class size of about 1,300 students with its attendant cash flow. Then, Dean of Undergraduate Admissions Lee Coffin told the Tufts Daily that the university’s admissions committee had jettisoned its need-blind policy in considering the final 850 applications—about 5 percent of the 15,038 total. Coffin told the daily that Tufts had simply run out of scholarship money. As might be expected, part of the reason for the change in policy was that applicants’ recession-strapped families were requesting larger amounts of aid. Nonetheless, Tufts’ concomitant willingness to dip farther down into its applicant pool in order to maintain the same number of entering freshmen as last year indicates that Tufts needs tuition dollars as much as some of its students need scholarships.

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Pruning Ph.D’s

Finally, it would seem, colleges are doing something realistic to cut costs in this era of tight budgets and shrunken endowments: they’re scaling back or declining to expand their Ph.D. programs. Inside Higher Education reported last week that a range of institutions, including Emory, Columbia, Brown, New York University, and the University of South Carolina plan to reduce—by as much as 40 percent at Emory–the number of students they will admit this coming fall into their doctoral programs in arts and sciences. All those colleges cite recession-mandated budget cuts as the chief reason for the planned shrinkage.
Doctoral programs are expensive in every way you can think of. Unlike undergraduates and students enrolled in professional programs aimed at imparting specific career skills, nearly all of whom pay full tuition freight for their schooling (or have their tuition paid by parents, employers, or loans), Ph.D. candidates are typically subsidized by the universities that enroll them. Those subsidies can range from a few years of free tuition at the poorest institutions to living stipends that can exceed $30,000 a year at top research universities. (Universities recoup some of this by employing graduate students as a minimum-wage labor force, filling slots as teaching and research assistants.)
Those are the direct costs. The chief indirect cost is professors’ time. Salaried professors are paid the same, use up about the same amount of campus overhead, and receive the same credit toward their three-course-a-semester teaching loads for overseeing a tiny, highly specialized graduate-level seminar as for a large lecture course that might draw hundreds of undergraduates with their attendant academic problems. As Kevin Carey of Education Sector has pointed out, lower-level lecture courses are campus cash cows when you multiply enrollment by tuition, and the steep opportunity costs of having five students in your class when you could have 200 can make a doctoral program look like luxury a college can live without during hard times. Added to that are decades’ worth of vast overproduction of Ph.D.’s, especially in the humanities, in relation to the academic job market for their services. William Pannapacker, an English professor at Hope College in Holland, Mich., who writes for the Chronicle of Higher Education under the pseudonym Thomas H. Benton, extrapolated data from the Modern Language Association (MLA) 2000 newsletter to conclude that for every five people who enter a Ph.D. program in literature, only two emerge with doctorates after the long slog of five to ten years that the process can take. Of those two, only one finds a tenure-track teaching job at a college. The other one typically hacks together a subsistence living as a $3,000-a-course adjunct or a $10,000-a-semester visiting lecturer for a few years, then gives up, unable to compete for a permanent placement with the cohorts of fresher-minted (although equally marginally employable) Ph.D.s emerging from doctoral programs every June.

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Don’t Cut The Sacred Cows

A modified version of this piece appears today in the Washington Examiner

Georgetown University, like many colleges and universities hit by the current economic downturn, is in what look like dismal financial straits. The value of Georgetown’s endowment shrank 25.5 percent last year, to $833 million, the annual deficit it has been running is estimated to climb to $37.8 million this fiscal year with little abatement in the near future, and donations are expected to be down–and likely to fall further if President Obama’s proposal to reduce tax deductions for charitable gifts takes effect. So Georgetown’s president, John DiGioia, like many another college CEO these days, recently announced a plan to cut costs.

The nature of DiGioa’s proposed cost-cutting, however—freezes on salaries, delays in filling vacant positions, and a hold on the construction of a planned science center—seem anemic in the face of the university’s obvious financial problems. That’s probably because Georgetown’s desire to trim its budget is running smack into the reality of campus politics, in which every program, silly, overstaffed, or non-essential as it might seem to outsiders, has an aggressive constituency ready to raise the pitchforks in its defense. Harvard, for example, facing a projected 30 percent drop in the value of its massive $38.5 billion endowment, announced in February it would trim the ranks of its contract janitors—not even Harvard employees—by a few dozen, leaving some Harvard buildings a shade less spic and span. The upshot? A series of student protests, denunciations by the Service Employees International Union, and on March 23, a unanimous condemnation of Harvard by the city council of Cambridge, Mass. Georgetown clearly doesn’t want to go down that road.

Private businesses might shrug off such negative publicity, but most universities are sensitive to their images as repositories of progressive values. So there is a long list of campus sacred cows that can’t be nicked by the budget-cutting knife without an uproar. One is tenured faculty. Tenure means having a job for life, no matter how lackadaisically you perform it or whether the department in which you teach attracts many students. The University of Texas Medical Branch laid off 30 of its 127 faculty members, many of them tenured, after Hurricane Ike devastated its Galveston campus last year and forced the temporary closing of its main teaching hospital. The Texas Faculty Association is now suing the state university system to force the professors’ rehiring.

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Endowments Are Still Massive–So Spend

Many people think the colleges and universities are overreacting to the sharp drop in their endowments. Lynne Munson, former deputy chairman of the National Endowment for the Humanities, is one of these critics. In a letter (subscription only) to the Chronicle of Higher Education, she argues that higher ed endowments haven’t lost much value if you put the recent drop in context of the astonishing gains of the last few years.
She writes: “College and university endowments increased, on average, 17.2 percent in the 2007 fiscal year and 10.7 percent in 2006. Taking compounded gains into account, these funds went up more than 26 percent just in the two years preceding their recent decline. And endowment increases at wealthy schools soared far past those averages. Harvard and Yale Universities increased the size of their endowments 45 percent from 2005 to 2007.
“So how concerned should we be that higher-education endowments have suffered a dramatic loss? The answer is: not very. Today college and university endowments are basically worth what they were in 2005. In other words, they’re massive….Being concerned about the value of college and university endowments today is a little like worrying about whether Warren Buffett still has enough inheritance to share among his children.”
The real problem, Munson argues, is that colleges will cite their recent losses to justify cutting endowment spending. Before the market drop, the colleges had come under heavy pressure from Congress and the public to spend at least the minimum payout required of private foundations–five percent.
In a recent survey, 27 percent of colleges and universities said they would decrease endowment spending while only 1 percent planned an increase. Munson writes: “This is the absolute reverse of the reaction they should be having at a time when students and families need help — particularly since colleges still have plenty to share.”
Munson currently studies college and university endowments for the Institute for Jewish and Community Research.

The Trouble With Cutting College Costs

Harvard University, trying to trim its operating budget in the face of a projected 30 percent decline in the value of its endowment stemming from the current financial meltdown, announced its intention to cut 13 of the 27 janitors who service its medical school and an unspecified number of custodial workers elsewhere at Harvard residential facilities. The result: two student protest rallies on March 5, including a march to the office of university president Drew Gilpin Faust during which Harvard students joined union organizers and labor activists in chanting such slogans as “Hey, Harvard, you’ve got cash, why do you treat your workers like trash?” The affected employees don’t even work for Harvard; they collect their paychecks from a pair of independent firms to which Harvard subcontracts some of its custodial work. Nonetheless, Harvard undergraduate, law, and medical students turned out to support the protest, declaring (as one medical student told the Harvard Crimson) that they had the “power” to force the university to reconsider the planned personnel reductions.
The Harvard protests—in the name of protecting the jobs of perhaps a few dozen people who aren’t even on the Harvard payroll—exemplified the thorny political problems that college and university administrators face as they try to cut costs during this economic turndown without feeding bad publicity-garnering campus showdowns. Their job isn’t enviable. The University of California’s Berkeley campus, for example, decided that one way to cope with a projected reduction of $65 to $75 million in subsidies from the nearly insolvent state of California would be to halve the size of its physical education program, which offers academic credit to students who enroll in such courses as team sports, aquatics, and dance. Since educating minds, not bodies, is presumably the primary mission of a university, UC-Berkeley’s effort to save $250,000 nest fall semester by trimming a peripheral department and putting some of its full-time faculty on part-time status ought to be non-controversial. Not so. Students and phys-ed faculty at Berkeley have launched a letter-writing campaign and Facebook protest to preserve the department at full strength.

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How Will The Colleges Cope?

Dr. Macchiarola, chancellor of St. Francis College in Brooklyn, delivered these remarks on February 5th at a one-day conference in New York on “The Future of the University.” The conference was sponsored by the Manhattan Institute’s Center for the American University.

If I were making this presentation a year ago, I would not have some of the deep concerns about the future of the university as I do today. Certainly the changes that are occurring within the university today are due, in large part, to some of the real difficulties the university faces in adapting to forces that are internal to it. The presence of the deep economic recession that we face today – and that will be with us for some time to come – significantly adds to the uncertainties that today’s university has to confront. It puts solutions to a considerable extent beyond the scope of what some universities can actually manage.

The recession – or perhaps depression- has for private universities hurt their financial condition dramatically. Endowments drop and endowment income which is critical to the university’s operations fall as well. In virtually all instances this combination means that universities been tremendously impaired. Endowment income which can provide 5% of market value for operating expenses is less available and this adds to the gap between tuition income and expenses that universities must face. Endowments are affected, especially for the tuition dependant schools which require tuition to fund operations in significant ways. Well endowed universities are the exception, not the rule. Costs also increase, usually by a multiple of the rise in the cost of living. This has been almost the universal rule largely because of factors that have driven universities to give students “more and more.” The usual course of action -increasing tuition – is made more difficult by the hard economic times. Fewer students being able to afford college mean a shift to lesser charging private universities and the public ones. The factors that have operated to allow universities to grow are not present in anything like the same way. The decline in the number of high school students exacerbates the problem even further. While students may choose public institutions as an alternative, things are not going well there either. The depression has hit states hard, and while the stimulus plan may be helpful to them in the short term, they will not be able to absorb more students at the subsidized costs that they have traditionally borne. The taxpayer is being hit hard, and the state economies are as well. The public universities will have to charge more and give less. There is tuition relief by the way of increased Pell Grants and tax credits for college tuition, but there is no way that we will be back to conditions ante recession.

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A Small Stimulus for Colleges

In the area of higher education especially, but in most other areas too, the Stimulus bill looks more like an emergency measure designed to maintain current programs than a strategic package aimed to stimulate growth. Among others, college and university presidents are likely to be among those sorely disappointed.
Last November, shortly after the election, a group of college presidents took out a full page advertisement in the New York Times to make the case that the proposed stimulus package to be considered by the new administration should include some $50 billion for the construction of new buildings on college campuses across the country. The academic leaders argued that such expenditures were an investment in the future of the country and would, in addition, create new jobs in the short run. They estimated that this allocation would represent but 5 per cent or thereabouts of the total stimulus package, which by their reckoning would add up to something like $1 trillion. Like governors, mayors, and representatives of other interest groups, they were eager to get in line for a piece of this once-in- a-lifetime jackpot of federal largesse.

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Harvard Endowment Plummets, Bonuses Continue

The Boston Globe reports that Harvard alumni have written to President Faust asking that, given the recent drop in endowment value from $36.8 billion to $28.7 billion, the latest bonuses paid to the fund’s managers be returned. The five highest-paid executives earned between $3.4 and $6.9 million during the last fiscal year. Those aren’t especially high figures compared to private sector earnings, but, as the alumni aver, the endowment’s recent direction doesn’t exactly suggest management worth rewarding.
For more on the backstory to these glittering endowment falls, look to our own “Ivy-Covered Hedge Funds” by Joe Malchow from December.