Tag Archives: finances

Higher Education’s ‘Obesity’ Problem

ACTA crowd.jpg

Open a marketing brochure for any college or university
in the United States and you’ll find an info-graphic touting the variety and
number of degree programs that the institution offers.  The more options, the rationale goes, the
more likely a student will find a desired specialty.  The distinction between programs can be
subtle, for instance “Music, General” versus “Musical Theatre,” or
Agricultural Engineering” versus “Agronomy and Crop

But the dreary fact is: higher education is in the midst
of a major financial crisis. 
Institutions’ bond ratings are falling and resources are in short
supply.   Boards of trustees must  figure out how to do more and better with
less. While administrative costs have to be examined, they are only part of the
problem.  According to former president
of the University of Northern Colorado and co-founder of the Lumina Foundation
Robert C. Dickeson, “[t]he failure of governing boards to focus on academic
programs is arguably the single greatest cause of overspending.”

This month the American Council of Trustees and Alumni
(ACTA) is sending Dr. Dickeson’s guide,
Setting Academic Priorities: A Guide to
What Boards of Trustees Can Do
to ACTA’s network of more than 13,000
trustees around the country. It provides governing boards with a framework for
establishing academic program review policies that direct resources to
mission-critical areas of their institutions without neglecting students’ needs.
 Of course, achieving this goal must
entail consolidating some academic programs into larger, more cost-effective
units or eliminating them.  

Continue reading Higher Education’s ‘Obesity’ Problem

In Hard Times, Diversity Bureaucracies Do Well

By Duke Cheston

Originally Posted from the Pope
Center for Higher Education Policy

About a year and a half
ago, the University of North Carolina at Greensboro attempted to hire a new
chief diversity officer. The university sought an administrator who would focus
on increasing appreciation for racial differences on campus–even though UNCG
already had five administrators in its Office of Multicultural Affairs tasked
with a similar mission. When the news surfaced, many people (some of them
writing in the Greensboro newspaper) expressed anger, arguing that the new
administrator was unnecessary, especially in a time of financial hardship.

Initially, UNCG chancellor Linda Brady
defended the new position (which would have cost the school roughly $200,000 in
salary and benefits) as a cost-cutting measure. In a letter to a local lawyer
obtained by the Pope Center, Brady wrote that the new position would save money
by fixing “an environment that doesn’t sufficiently embrace inclusion and
equity.” Without that fix, she wrote, UNCG would continue to lose money through
additional spending on remediation programs, responding to grievances, and the
cost of students dropping out. By March 2011, however, Chancellor Brady
officially abandoned the search for a new chief diversity officer, maintaining
the office’s current staff level.

Continue reading In Hard Times, Diversity Bureaucracies Do Well

Elite College ($50,000 a Year) or Good State School ($20,000)?

vedder pictures.jpg

The new Sallie Mae-Gallup survey of attitudes toward higher education, “How America Pays for College 2012,” shows that Americans are becoming increasingly resistant to rising college prices. Some people who were saying “I want the best college money can buy” a few years ago, are now saying “We aren’t going to pay sky-high tuition when there are much cheaper colleges nearly as good.”

Continue reading Elite College ($50,000 a Year) or Good State School ($20,000)?

A College with 90,000 Students May Go Under

The City College of San Francisco, the largest college in California with 90,000 students, appears to be on the brink of closing. California’s Accrediting Commission for Community and Junior Colleges put it on probation and gave it just eight months to demonstrate why it should stay in business. Without accreditation, City College will be ineligible for public funding, which provides the bulk of revenues for the college’s $190 million annual budget. 
One of City College’s problems, according to the accrediting commission, is that the sprawling institution  has too few administrators–just 39–supervising 1800 faculty members on 200 campuses, including nine main campuses plus dozens of neighborhood centers scattered throughout the city. But the real problem may be this: Why is San Francisco, a city with 805,000 residents, operating a 90,000-student college? The math means that nearly one out of every nine San Franciscans is taking at least one course at City College (though some City College students probably live outside San Francisco). 
While the commission did not find fault with the quality of instruction, its report noted that faculty was stretched thin trying to teach too many different things and couldn’t assess how much students were learning. The hugely varied student body includes young people looking for vocational training or hoping to transfer to a four-year institution, plus older people enjoying “lifelong learning” and immigrants simply trying to learn English. The report noted, for example, that a City College program in airplane repair at the San Francisco International Airport employs only one full-time instructor and one part-timer–something to think about for anyone flying in or out of San Francisco. A culinary-arts program has no way of tracking how many of its graduates got jobs at restaurants–and thus whether its instruction was actually useful. The course catalogue typically lists dozens of classes that never materialize either because the classes are under-enrolled or because City College can’t pay for them.     
Right now, city officials are hoping to save City College by imposing a city-wide $79-per-parcel property tax assessment. But the problem with City College isn’t a shortage of administrators or money. It’s too many students, too many programs, too many courses, too many locations. My suggestion: Shut down about 198 of those campuses and centers, pare down the student body, and then focus on a reformed curriculum.

The Higher Ed Bubble–Not as Big as You Think

Cross-posted from Big Think.

When even the judicious George Will is chiming in on an important policy issue, you just know the concern must be serious and supported by all the right studies.

THE HIGHER EDUCATION BUBBLE, the thinking goes, is just like THE HOUSING BUBBLE.

Continue reading The Higher Ed Bubble–Not as Big as You Think

Cheaper Student Loans–A Bad Idea Whose Time Has Come

student-loan-debt.jpgWhen Victor Hugo claimed that all the world’s armies are powerless against an idea whose time has come, he probably had in mind good ideas. But the time can come for a bad idea also. Low-cost student loans, embraced by President Obama, Governor Romney, and Congressional leaders of both parties, is a bad idea. Students and prospective students love the prospect of paying less for college, and so do their parents. Moreover, some economists say that investing more in educating youngsters from low-income families will increase the ability of American workers to compete in the global marketplace.

But students don’t need cheaper loans. What they need are loans that give them an incentive to get good enough college educations to qualify for jobs – well-paying jobs that enable them to pay off their loans. The flaw in the federal guaranteed student-loan program – from its beginning in 1965 – has been its exclusive concern with whether or not students came from families with low-incomes, not whether loans would help launch careers.

Continue reading Cheaper Student Loans–A Bad Idea Whose Time Has Come

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.

Continue reading Women’s Studies Professor Takes a Vacation

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.

Continue reading After Graduation, Get a Job Immediately, or Else

Sometimes Tuition Increases Are Good News

Almost lost in the welter of legislation to make it through the New York State government policy mill in its closing minutes was some help for New York’s two public universities – CUNY and SUNY.  Having endured hundreds of millions of dollars of cuts in state support over the last three years, they are finally getting some relief (but not from state taxpayers); they will be permitted to raise tuition by $300 per year for the next five years.  This may not appear to be a big deal unless one puts the new revenue opportunity into context. 

The two university systems, with over 650,000 students between them, are among the most important linchpins of New York State’s long term economic prospects and frankly, they have been budgetarily starved for years.  Over the last three years, SUNY, for example, has lost $500  million in state support, amounting to 20 percent of its operating budget.  Even with the new tuition revenue, only $50 million of that loss will be restored in the coming year, and $250 million by 2017.  Both university systems’ officials are gleeful about the ostensible windfall but, at best, it only gets them half way to where they were before the state’s recent economic and fiscal meltdown.  Further, it remains to be seen how much of the new tuition revenue really translates into more generous budgets for SUNY and CUNY.  Although the new agreement – in soft and essentially unenforceable language – promises “maintenance of effort” with respect to the state’s tax levy contribution, in the past any tuition increases were invariably offset by corresponding – or sometimes larger – reductions in state support.  One can only hope that this time will be different.

For years the state assembly has held up tuition increases proposed by university officials, alleging that this would be financially devastating for prospective students and make college attendance unaffordable.  First off, the charge is hypocritical because the assembly has been raising tuition for years, but rather than authorizing the kind of gradual and predictable annual increases just adopted, it favored huge hikes in the middle of recessions.  In any case SUNY and CUNY have always been bargains, and will continue to be, even with the projected tuition increases.  Even at the end of the five year run of increases, all CUNY and SUNY campuses will be cheaper than any university – public or private – along the Eastern seaboard or New England.  Under the state authorized increases, SUNY’s tuition and fees in 2012 will average $7,200, and by 2017, $8,400 (CUNY’s will be slightly lower).  In contrast, New Jersey’s Rutgers today costs $10,000; the University of Virginia: $11,600 and Penn State: $14,400.  Even the lesser colleges of surrounding states cost more today than any SUNY or CUNY campus will in five years. 

Compounding the bargain for those students opting for – and getting into – the most prestigious SUNY or CUNY campuses, the legislature continues to insist that all undergraduate public college tuition be the same, regardless of campus or program.  Every other state public higher education system in the United States, without exception, has tuition schedules that vary by campus, and usually program, charging more to attend the more rigorous and prestigious “flagships” and charging more for engineering or nursing than say English or history.  For example, the University of Massachusetts in Amherst costs $12,600 while a typical Massachusetts state college charges $7,550.  But students attending SUNY’s highly ranked Binghamton or Buffalo campuses pay the same – even with the new tuition schedule – as those going to Alfred State or Plattsburgh, and those enrolled in City College’s architecture program pay no more than those studying Spanish at Medgar Evers College in Brooklyn.  Finally, none of this makes any difference for New York’s poorer students because the higher SUNY and CUNY tuition rates are still well within the combined value of New York’s tuition assistance program (TAP) grants and federal student aid such as PELL. 

As a SUNY faculty member, and former administrator of the SUNY system, I am grateful for any crumbs that the New York legislature throws our way.  And, given the unreasonable intransigence of the assembly (Assembly Speaker Silver and Assemblywoman Glick have been the most vociferous opponents of tuition hikes) in the face of pleas from SUNY and CUNY chancellors over several decades for a “rational tuition policy,” maybe this is indeed a signal moment.  For my part, I will uncork my champagne bottle when the state legislature some day leaves tuition-setting – and budgeting in general – entirely to the two systems’ trustees. 

Continue reading Sometimes Tuition Increases Are Good News

The Financial Pressure on Faculty

The report entitled “What’s It Worth? The Economic Value of College Majors” is an important study that adds to the growing data base on the outcome of a college education.  It’s a product of Georgetown’s Center on Education and the Workforce, and is authored by Anthony Carnevale, Jeff Strohl, and Michelle Melton.

The study collects data from the 2009 American Community Survey, administered by the U.S. Census Bureau, which asked people the usual questions about income etc., but also asked those who earned a bachelor’s degree what they majored in.  The result is a breakdown of majors by income.  (Respondents had to work full time and be 25 to 64 years of age.)
Nothing surprising showed up.  Engineers, computer science, mathematics, and business topped the field, while humanities, arts, education, and psychology/social work came out at the bottom.  This survey includes actual salary figures for each field, along with a breakdown of each field into specific majors. 

Continue reading The Financial Pressure on Faculty

Why University Presidents Are Clueless About the Real World


New Pew Research Center data show that a large majority of Americans think U.S. colleges and universities offer only fair or poor value for the financial cost -but college presidents strikingly disagree, with a majority of them thinking college offers at least a good value (though college presidents are overwhelmingly pessimistic about the quality of American higher education compared to the world ten years from now). Similarly, a majority of Americans question whether college is truly affordable any more, a view that most college presidents do not share. More generally, people in the academy have views widely divergent from the mainstream of the American population.

Turning to college presidents, I think a lot of this attitudinal divide relates to the non-market environment in which colleges operate. How do you become a successful college president? You raise lots of money, which you then use to bribe the various constituents in the university community to keep them happy. The faculty you bribe with low teaching loads, good fringe benefits, and perhaps a nearby parking place. Your fellow top administrators whose support is vital you bribe with not only good salaries, but also lots of assistants who do much of the heavy lifting associated with the job. You bribe the students by giving them nice recreational and dorm facilities, and reach an implicit bargain with them to not demand much academically (hence grade inflation) and to largely ignore their hedonistic bouts of alcoholic and sexual excesses. You bribe the alumni with decent football and basketball teams and a nice campus facility where they can hang out. You bribe the trustees with whatever idiosyncratic whim they want. In short, you spend money to keep a narrow group of people associated with the Ivory Tower happy.

Contrast that with business leaders. They are motivated by profits, maximizing the gap between revenue and costs. To increase revenues, they must please vast numbers of persons with new or improved products. They also enhance profits by reducing costs, raising productivity so they can do more with less. They reward subordinates who further these goals with bonuses, stock options, etc.

Continue reading Why University Presidents Are Clueless About the Real World

Why Do the Big Donors Give?

From reading news stories about multimillion-dollar gifts to universities, it’s easy to get the impression that the donors are mostly rich people with pronounced ideological agendas–or else they wouldn’t open their wallets so readily. In April 2010, for example, the billionaire-financier George Soros, known for his funding of progressive causes and his efforts to defeat George W. Bush in 2004, pledged $10 million to Oxford University. The gift will set up an institute at Oxford aimed at steering university economists  away from support for free markets and deregulation, and in the direction of heavier government intervention in financial markets. Soros’s gift came via the Institute for New Economic Thinking, a $50 million foundation he created in 2009 to fund similar projects at universities.

At the opposite end of the political spectrum are the many gifts to colleges and universities from the banker John Allison, with stipulations that the recipients incorporate Ayn Rand’s free-market ideals into their curriculums. One of the largest controversies over  a conservative gift was the famous Bass debacle at Yale. Billionaire-financier, Lee Bass, who had graduated from Yale in 1979, gave $20 million to his alma mater in 1991 to create a program (including seven endowed professorships)  for the study of Western civilization. Amid complaints from professors hostile to the idea of focusing on the West, as well as charges that Bass was interfering with Yale’s academic autonomy by trying to retain veto power over the hiring of the program’s professors, Yale returned the $20 million in 1995.


Does the record show that most college and university donors are inspired by politics or ideology? The picture appears to be more subtle and complex. The Manhattan Institute’s Center for the American University surveyed 1,353 substantial gifts to U.S. institutions of higher learning from 2003 to 2010 collected in the Foundation Directory Online’s data base and interviewed development and public-relations officers at several elite private and public research universities that are typical beneficiaries of large gifts. Their donors tend to be self-made billionaires and multimillionaires, but few are eager to propagate their views at institutions of higher learning. Most large gifts to universities are apolitical, the Center for the American University found. Science and medicine accounted for the largest category of targeted donations. Campus building projects and student scholarships also ranked high for wealthy donors and their family foundations.

Continue reading Why Do the Big Donors Give?

In Praise of Ideological Openness

Many people, some conservatives included, say we need to get ideology out of the college classroom. Some professors say proudly, “my students never come to know where I stand.”
I practice an opposite approach. I tell students that I am a free-market economist, a classical liberal or libertarian.  And I am not suggesting that it is wrong to be ideologically reserved. Different styles suit different professors.
And of course some professors go much too far in pressing their ideological judgments and requiring conformity, even forms of activism. But we should not fall into simplistic ideals of neutrality and objectivity. There is an ethical high-ground in temperance, but that does not necessarily mean reserve and circumspection. One can open up about ideology without falling into intemperance. Here I meditate on some merits of being open about your own ideology, even somewhat outspoken, when teaching a college course.
When listening to testimony on financial regulation, we like to know whether the testifying expert has a vested interest. And we like to know if he has other sorts of commitments that might affect his interpretation and judgment.
An individual’s ideological commitments are like his religious commitments, in that they run deep and change little. They suffuse his professional and personal relationships; they suffuse his sense of self. They are like vested interests, only deeper and more permanent. 

Continue reading In Praise of Ideological Openness

Should University Flagships Go It Alone?


Overshadowed by the big political confrontation in Wisconsin is a higher-education story of note: The highly regarded “flagship” Madison campus of the University of Wisconsin seeks permission to secede from the rest of the state public higher education system (yet remain under the state’s oversight and subsidization).  While this is being justified now by the state’s budgetary problems, it is an aspiration long held by Madison and some of its sister “flagships” in other states. Is flagship independence a good idea?  Probably not, but in each state it depends on how its public higher education institutions are currently managed, and what any new-found autonomy might permit or restrict.

Two quite distinct issues are embroiled in this debate. One –the more important, I think–is the degree of financial and managerial autonomy that any state campus is allowed.  The other is the coherence and consistency with which state campuses are managed and financially supported as a group.  My views are colored by my ten-year experience as the chief academic officer of the State University of New York System, the largest in the nation, and one that manages, under one administrative roof,  64 diverse institutions, from community colleges to research universities.

I learned soon after I began as a SUNY system official how desirable it was to give the state’s public campuses enough administrative freedom to effectively meet their local responsibilities and balance their budgets.  After all, there was no way that a small staff in Albany could possibly micro-manage 64 widely dispersed campuses with different missions, thousands of faculty and staff and more than 450,000 students.  Thus, after 1997, every SUNY campus, not Albany, was given the last word on how its budgetary resources were spent, how its faculty and staff were deployed, and how it delivered education in the classroom.  But, giving campuses a greater measure of administrative freedom only worked because we also held campuses accountable to clear-cut, mutually agreed upon, operational academic and financial goals and metrics. 

Continue reading Should University Flagships Go It Alone?

Highly Stressed Students and the Aimless Curriculum

AnxiousFemale.jpgWhen news came out recently that this year’s college freshmen rank their emotional well-being at record-low levels, observers in the media and the ivory tower began to wring their hands. Just how depressed are young men and women on campus? According to researchers at UCLA who conduct the annual “American Freshman” survey, the percentage of students who described their emotional health as above average fell to 52 percent from 64 percent in 1985 when the survey first began.
The experts interviewed on this trend suggested that the country’s financial woes were to blame. Brian Van Brunt, president of the American College Counseling Association, told the New York Times that “today’s economic factors are putting a lot of extra stress on college students, as they look at their loans and wonder if there will be a career waiting for them on the other side.” Denise Hayes, the president of the Association for University and College Counseling Center Directors, told the Chronicle of Higher Education: “College tuition is higher, so [students] feel the pressure to give their parents their money’s worth in terms of their academic performance.”
But the idea that money is behind all of the anxiety of college students seems an insufficient explanation, at best.

Continue reading Highly Stressed Students and the Aimless Curriculum

A Fishy Proposal for Albany

George Philip deserves a prominent place in any 2010 academic hall of shame. The SUNY Albany president recently terminated the university’s French, Russian, Italian, Classics, and Theater departments, citing financial concerns. That Albany purports to be a quality university (and is, in fact, one of SUNY’s better branches) makes Philip’s move all the more unjustifiable.
At nytimes.com, Stanley Fish appropriately excoriates Philip’s decision, and astutely analyzes many of the reasons for the situation in which humanities departments currently find themselves. Among them—the decline of core curricula, which Fish notes “has happened in part because progressive academics have argued that traditional disciplinary departments were relics from the past kept artificially alive by outmoded requirements.”
Alas, Fish’s proposed solution to the crisis in the humanities at public universities requires all but ignoring the conduct of the academy over the past generation. He writes, “The only thing that might fly — and I’m hardly optimistic — is politics, by which I mean the political efforts of senior academic administrators to explain and defend the core enterprise to those constituencies — legislatures, boards of trustees, alumni, parents and others — that have either let bad educational things happen or have actively connived in them.

Continue reading A Fishy Proposal for Albany

Who Pays the Hidden Cost of University Research?

Higher education in America is in financial crisis. In constant dollars, the average cost of tuition and fees at public colleges has risen almost 300 percent since 1980. Our best public research universities, like my own University of California (UC), are wracked with doubt: will they be able to continue their historic role as institutions with a vital public mission, or will they become “privatized,” demanding ever higher tuition and therefore inevitably serving a more elite clientele?
Let me note some pointed comments by citizens outside the campus. A letter to the editor in the San Francisco Chronicle last March 9th said: “What the public college students (and their parents) in this state must understand is that the days of the taxpayers subsidizing their higher education are over, sad as that may be. …The costs at all colleges and universities have risen dramatically over the last few years (much higher than the cost-of-living-index). … Those of us in California who are taxpayers are having a difficult enough time paying our mortgages and for the education of our own children. It simply is not sustainable to expect that there will be free or substantially below-cost education provided on the backs of the state’s increasingly dwindling number of taxpayers. …”
A similar complaint is voiced in an article published by the Howard Jarvis Taxpayers Association, July 5, 2010: “As California faces an unprecedented budget crisis, students at California colleges have been asked to pay a greater share of the total cost of their education, most of which is still borne by taxpayers. …[T]axpayers pay 60-70% of the cost of … UC students’ education, without even counting financial aid.”

Continue reading Who Pays the Hidden Cost of University Research?

What Happened at Berkeley in November

4123344197_3c3696375a.jpgWe now have a long and fascinating report by the campus police review board on last fall’s disruptive protests at the University of California, Berkeley.
The 128-page document, entitled “November 20, 2009: Review,
Reflection, and Recommendations,”
released in mid-June, is the product of months of yeoman work garnering volumes of evidence. It chronicles and evaluates responses to the events sparked by resentment over tuition increases and cutbacks in the wake of California’s financial debacle.
Berkeley deserves credit for thoroughly investigating the situation. And the report is worth reading for many reasons, one of which is because it casts light on a dilemma that Berkeley and many other schools have been unable to resolve since the famous Berkeley “Free Speech Movement” of 1964 launched decades of illegal student protest: how to balance students’ passions for social justice (and sometimes other motives) with the rule of law.

Continue reading What Happened at Berkeley in November

How the Campuses Helped Ruin California’s Economy

4409800624_179a583cf6.jpgAll across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year’s. In 1964 there was focus and clarity. This one was brain-dead. The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.
The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of “the struggle,” and of “oppression,” and—of course—of racism. “We are all students of color now” said Berkeley’s Professor Ananya Roy, and a student proclaimed that this crisis represented “structural racism.” (Why not global warming too?) Berkeley’s Chancellor Birgeneau called the demonstrations “the best of our tradition of effective civil action.” Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn’t seem to occur to anyone that the old “shut it down” cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.
One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted “Who’s got the power? We’ve got the power.” In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

Continue reading How the Campuses Helped Ruin California’s Economy

Why The Student Protesters Are Wrong

By Daniel Bennett
Thousands of students on more than a hundred college campuses joined together symbolically yesterday to protest sharp tuition hikes. The students pointed the finger at hard-pressed state and local governments. That was a mistake. State and local subsidies to public colleges and universities increased by 44% in real (inflation-adjusted) dollars during the 25-year period between 1982 and 2007. Had colleges managed to hold their cost increases to the level of inflation over this period, real tuition prices would be slightly less today than they were 25 years ago.
Why weren’t the colleges able to do this? First, colleges are rewarded for fiscal irresponsibility and punished for not keeping up with Joneses. Because we collect very little information from colleges about student learning and educational outcomes, we know nothing about the actual value of the education taking place. So we are left to rely on arbitrary indicators such as price and prestige to decide which institutions are of the highest quality. College administrators understand this and are known to make decisions based on how it will impact their institution’s prestige. The things that boost prestige (fancy dorms, state-of-the-art fitness centers, elaborate student centers, etc.) cost lots of money and do little or nothing to increase the quality of education. The colleges that avoid such elaborate upgrades in lieu of keeping costs down are perceived to be lower -class institutions. Call this the college arms race.
Next, there has been very little, if any, gain in productivity in higher education over the past few decades. Some evidence suggests that there has actually been a drop in productivity, while the information technology age has boosted productivity in nearly every other economic sector. Part of this is explained by the bureaucratic bloat on college campuses. Between 1987 and 2007, the number of senior administrators and professional support staff at public two- and four-year colleges increased by 84 percent, while student enrollment grew by only 37 percent. In this sense, administrative productivity dropped by more than 25 percent during this 20 year period, as the student-to-administrator ratio dropped from 24:1 to 18:1. Meanwhile, faculty teaching loads have diminished by a factor of up to two over the past two decades, while salaries have increased by at least the rate of inflation, not accounting for rising health care costs, retirement contributions and other forms of non-wage compensation. Rather than using technology to cut labor costs and improve employee productivity, colleges have expanded their staffs and seemingly ask less of each employee. Call this diminishing productivity.

Continue reading Why The Student Protesters Are Wrong

Those Disastrous Student Loans

Alan Michael Collinge is back in his gadfly role agitating against the student loan industry. Collinge is the author of last year’s The Student Loan Scam: The Most Oppressive Debt in U.S. History—and How We Can Fight Back (Beacon Press) and founder of the website studentloanjustice.org, dedicated to, among other things restoring the bankruptcy protection for student loans that Congress removed for all but the most hardship-hit borrowers in 2005. Writing for the New York Times blog “The Choice,” which deals with college admissions and financial aid, Collinge calls the federally guaranteed student-loan system “a predatory lending scheme” and argues that Congress should curb the Education Department’s power (also granted in a 2005 law) to “extort not just the original principal and interest from borrowers, but also a massive amount in penalties fees and collection costs.”
Collinge wrote his book from his own 20-odd years of disastrous experiences with student loans. He graduated from the University of Southern California in 1988 with three degrees in engineering and $38,000 in loan debt, an amount that ballooned to $100,000—still mostly unpaid two decades later—when he fell behind on monthly repayments after consolidating his loans with Sallie Mae (the nation’s leading buyer of student debt) and penalties, back interest, and collection fees began to accrue with lightening speed. Loan consolidation often (although not always) means that graduates can lock in lower interest rates than they might otherwise pay, but it can also entail stretching out the life of the loan to as long as 30 years (the tradeoff is lower monthly payments). Collinge’s New York Times blog dovetails with the Obama administration’s goal of eliminating private lenders (banks, credit unions, and Sallie Mae) from the federal student-loan system and requiring all student borrowing to come directly from the government itself.
It’s difficult to say whether Collinge, who, with his engineering degrees could expect decently paying employment, actually got a bad deal from the federally guaranteed system. For one thing, he took out his loans long before the 2005 law went into effect, although as early as 1976 Congress had placed some limits on using bankruptcy to get rid of student debt. One might also ask whether it was prudent for Collinge, if he was strapped for college money, to choose to attend an expensive private university such as USC rather than a cheaper state school where he would not incur so much debt. Furthermore, students who borrow from private financial institutions under the federally guaranteed system enjoy below-market interest rates (the Department of Education sets annual caps), a nine-month grace period after graduaton during which no payments are due, and an array of forgiveness and deferment arrangements if economic hardship forces borrowers to fall behind. For example, the going interest rate (according to Sallie Mae) on Stafford loans, products of one of the most widely used federal loan programs, is 6.8 percent, and the going rate for PLUS loans (products of another popular program) is 9 percent (the rates are even lower for students whose income qualifies them for a federal interest subsidy). Compare that to the 17.28 percent annual rate on credit-card debt, and the interest rate that Collinge agreed to pay on his consolidated loans (it’s currently capped at 8.25 percent) could hardly be considered “predatory.” It should be remembered, too, that student loans are unsecured loans (no mortgaged house, no car or other collateral) to unemployed or partially employed people who can be as young as 18. In other words, the loans are ipso facto risky, which is why government guarantees are an integral part of private student lending. A government guarantee means that taxpayers pick up the tab when a loan goes into default—so it is perhaps not surprising that Congress has made it difficult to cancel the loans in bankruptcy court.

Continue reading Those Disastrous Student Loans

Out Of Her Depth?

Ruth Simmons, president of Brown University, quit the board of directors of Goldman Sachs, citing the “increasing time requirements associated with her position as President.” What she didn’t cite were the two or three weeks of steady criticism from financial analysts and students and the student newspaper in response to belated awareness of her lucrative remuneration from Goldman Sachs and her comments on her role on the board.

Simmons, who juggles membership on several boards, received $323,000 a year as a Goldman director and she leaves the board, which she joined a decade ago, with $4.2 million in Goldman stock, plus 10,000 options that could raise her take to $5.7 million.

In an interview with the Brown Daily Herald, Simmons, the only African-American on the Goldman board and one of only two women, stressed that as a director on several boards, her goal was “to make certain fields more accessible to women and minorities,” and implied that that she served on boards to learn something about economics.

The interview, which preceded the Simmons resignation, immediately drew strong criticism from Felix Salmon, a blogger at Thomson Reuters Corp. who called for a change in the composition of Goldman Sachs’s board because he said some of Simmons’s comments indicate that she lacks the business sophistication to challenge management.

Continue reading Out Of Her Depth?

Is an Endowment a Nest Egg or a Gambler’s Stake?

College investments dropped 23 percent in 2009, the most disastrous year since the National Association of College and University Business Officers began compiling investment statistics in 1971. Two observations can be made about NACUBO’s report, issued last week:
One is: The richer the institution, the harder the fall, generally speaking. Harvard, the nation’s wealthiest university ($26 billion at the end of fiscal year 2009), lost the most: nearly 30 percent. Yale, second wealthiest ($16 billion), lost almost as much as Harvard: almost 29 percent. It was a dreadful investing year for nearly every college endowment manager in the country, what with the deep recession and the twin collapses of the stock market and credit markets in the fall of 2008. According to the NACUBO study, co-sponsored by Commonfund, U.S. colleges and universities lost a total of $93 billion in endowment value during fiscal year 2009. The average loss was 18.7 percent; in 1974, the second-worst year, endowments lost only 11.4 percent. Not one of the nation’s five wealthiest universities, a group that included, besides Harvard and Yale, Stanford, Princeton, and the University of Texas System, bested that 18.7 percent figure (Princeton emerged at the top of the five, with its $13 billion endowment losing only 23 percent of its value in fiscal 2009, while Stanford lost nearly 27 percent and Texas nearly 25 percent).
According to a Jan. 28 article by Inside Higher Education’s Jack Stripling, smaller colleges with lower endowments fared better than their super-rich cousins only—or at least mostly–because their endowments’ relatively modest sizes barred them from either participating in the riskier investments such as hedge funds and private equity funds and also kept those schools from hiring the kind of sophisticated endowment managers who gambled their way into disaster. They were stuck, so to speak, with portfolios heavy on unadventurous investments in fixed-income securities and cash, which happened to be the only ones performing relatively well last fiscal year. After all, as Stripling’s article points out, the wealthy elite institutions that lost the most remained just as wealthy and elite, comparatively speaking, as they had been before the rolling economic crash that began in 2007—in part because their high-risk investments had paid off royally during the boom years. They thus outpaced their smaller poorer cousins over the long run despite the devastating blows to the rich universities’ endowments during the last two years. “Colleges with endowments over $1 billion have an average 10-year return of 6.1 percent, compared with 3.9 percent for the least wealthy,” Stripling wrote—even though the 52 institutions that fell into that category suffered higher-than average endowment shrinkages of 20.5 percent during FY 2009, according to the Chronicle of Higher Education.

Continue reading Is an Endowment a Nest Egg or a Gambler’s Stake?

Another Thick Stack Of Paper

The Gates Foundation has just released a report “With Their Whole Lives Ahead of Them” on why students fail to finish college, which might seem a timely topic amidst recent hand-wringing about our persistent failure to actually get students to a diploma. The problem, as with about all studies on this topic, is that it shows little information of any real evaluative use.

We find that “most students leave college because they are working to support themselves and going to school at the same time.” 54% of the students who left school cited “I needed to go to work and make money.” They also reported problems with textbook costs and other fees greater than their peers who graduated as well. Simple enough.

Also unsurprisingly, those who did not have financial support from their parents were far more likely not to graduate, at a rate of 58% dropping out as opposed to 38% graduating. Similarly, those without scholarships or loans were far more likely to drop out.

And yet, when we venture into reasons why students selected their schools, 41% of those who indicated that financial aid or a scholarship was a major reason for choosing their school did not graduate. Perhaps these had additional insurmountable financial difficulties, yet it not, there are clearly larger problems at hand.

What’s left? Well, in keeping with prior indications, students who did not graduate were far more likely to choose colleges based on proximity to where they lived or worked, and to seek a class schedule that worked with my schedule (the students who graduated seemed to have far fewer prior commitments).

What is there to say, based on this sample of 614 students? Well, not much. Clearly, financial problems are at the root of numerous decisions to leave college before completion. Whether graduated or not, most students were supportive of the idea of cutting the cost of college by a quarter (who wouldn’t? and why only a quarter? How about half?). One interesting, and very-much neglected idea was “making part-time attendance more viable by giving those students better access to loans, tuition assistance and health care – benefits and services that are frequently available only to full-time students.” Otherwise, given the data in this report, it seems that there’s very little that can be done. Financial problems are intractable, and in an age where tuition restraint is an absent quantity and increasing federal support never seems to cut the actual price of education, this report is a series of points that fail to add up to anything resembling an answer.. Now if the Gates Foundation pledged to pay for all these shortcomings, that might make a difference. As it is, all we have is just another thick stack of paper.

The Money Problem at U Cal

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.

Continue reading The Money Problem at U Cal