In the past several years, online higher education has come under increased scrutiny by the federal government and policymakers.  As a relatively new trend, online education has been closely examined by some, not so closely examined by others, and has a number of critics.  In a recent report called “Odd Man Out: How Government Supports Private-Sector Innovation, Except in Education,” published by the American Enterprise Institute, author John Bailey notes that an acute lack of support and engagement from government agencies to the private sector in education is not only out of sync with other public-private enterprises, it is counterproductive in attempting to reform higher education. 

Bailey points out that the public sector has frequently employed the expertise of private industry in various attempts to solve the nation’s problems.  For example, in March 2010, President Obama reached out to private-sector businesses, agreeing to provide some $150 billion in support of those businesses developing an alternative to foreign oil.  He said to the CEOs in attendance, “’Your country needs you to mount a historic effort to end, once and for all, our dependence on foreign oil…And in this difficult endeavor, in this pursuit on which I believe our future depends, our country will support you.’” 

In another example, Bailey points out that the Review of US Human Spaceflight Plans Committee established by the White House Office of Space and Technology Policy recommended that NASA seek private sector assistance in developing commercial spacecraft.  “The review argued that this would free NASA to focus its attention and investment on developing more advanced capabilities, particularly in deep-space exploration.”  In each of these examples, a significant problem or dilemma has been acknowledged and government has rightly recognized that private sector innovation has the business agility and market understanding to propose and execute a meaningful solution.

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The October 2011 issue of American Enterprise Institute for Public Policy Research’s (AEI) Education Outlook included an interesting analysis of the total cost of a bachelor’s degree titled, “Cheap for Whom?:   How Much Higher Education Costs Taxpayers.”  The authors, Mark Schneider and Jorge Klor de Alva, go beyond a surface analysis of tuition rates, student fees, and books.  Their analysis delves deeper into the overall financial cost model to consider and analyze taxpayer subsidies as part of the cost of a bachelor’s degree. 

Schneider and de Alva note that consumers are largely oblivious to the cost of an item, focusing almost solely on the price instead.  As long as the price seems reasonable (or, at least comparable to other similar products), the consumer is not likely to consider what the actual cost of the product is.  As the authors point out, nowhere can this be seen more clearly than in higher education.  Since the downturn of the economy in 2008, a deluge of articles have been published exploring the price of a college education (see the “Impact of the Economy on Higher Education” section of this blog) but little has been written for the American public about the true cost of a degree (that data is typically buried in academic policy and research reports that typically do not receive broad media coverage).  Schneider and de Alva have undertaken the daunting task of publishing the total cost of a bachelor’s degree for the American taxpayer.  Their findings are notable, assuming that those in a position to influence public policy and a broader national discussion read their paper.

The authors divided their sample into the following categories: public, private not-for-profit, and private for-profit institutions.  Beyond that,  they used a variation of the well-known rankings reported in Barron’s Profiles in American Colleges which provides six categories for schools ranging from “noncompetitive” (open admissions schools) to “most competitive” (highly selective, elite institutions).  Interestingly, American taxpayers subsidize the least competitive schools far less than they do the most competitive.  The irony is that the largest and fastest growing sector of the college population includes low-income and non-traditional students who are attending the lesser competitive schools.  These schools tend to offer greater flexibility for part-time students, working adults, and other “nontraditional” student populations.  To provide perspective on the dramatic differences in taxpayer subsidies, consider that “among not-for-profit institutions, the amount of taxpayer subsidies hovers between $1,000 and $2,000 per student per year…”  Among the most selective institutions in the nation, “the taxpayer subsidy jumps substantially to more than $13,000 per student per year.”

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Today is Veterans Day, a day designed to celebrate our nation’s armed forces, their commitment, and their ultimate sacrifices.  Though this day comes only once each year, the special individuals to whom it is dedicated deserve our thanks every day.  The last year has been a tumultuous one for the entire world and the men and women of the American military have been engaged in various theaters of operations beyond Iraq and Afghanistan.  At home and abroad, US military forces continue to provide proof of General Douglas MacArthur’s statement that, “Americans never quit.” 

Our military responded to a series of natural disasters this year.  In March, through Operation Tomodachi (Japanese for “friendship”) the Marines, Navy, and Air Force offered humanitarian and disaster relief assistance to the Japanese people affected by an 8.9 magnitude earthquake and tsunami that killed more than 15,000 and left millions more homeless.  Marine helicopter units delivered thousands of pounds of rice, bread, and other food items to the hardest hit areas.  In addition, a significant number of American naval ships responded including the USS McCampbell, the USS Curtis, the USS Mustin, and the USS Ronald Reagan. 

The US Army Corps of Engineers (USACE) moved into action when a series of severe storms this past Spring plagued the nation’s mid-section.  Tornadoes, floods, and other significant weather events left thousands in a desperate state.  The USACE worked diligently to ensure the safety of structures following those storms and to assist in meeting the basic needs of those impacted by the devastation. 

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I read an article in the October 15, 2011 issue of The Economist entitled “Trouble in the Middle.”  The article begins by stating that interest in MBA programs at American business schools peaked in 2009 and applications have fallen since then.  The author states that some business schools are worried that the trend is related to more than just a slow recovering economy, but in fact a greater change.

The Economist presents data that may back the case that it’s not just the economy.  In examining data accumulated in their annual ranking of the top 100 MBA programs, they note that in 2010, the average cost of an MBA for the 85 schools outside of the top 15 was $81,911 while the average starting salary for the graduates of those schools was $81,178.  Five years earlier, the two year cost for the same 85 schools was $60,247 while the starting salary average was $78,442.  The attached graph shows that the disparity was greater ten years ago when the average starting salary was over $80,000 and the average cost was slightly less than $50,000.  The comparison could hardly be more dramatic; increasing costs of tuition have cut the noticeable advantage of attending a residential MBA program outside of the top 15. 

Elite schools like Harvard still have an advantage according to The Economist’s survey data.  Additionally, the article mentions a recent event at Harvard hosted by a large consulting firm where a member of that firm’s senior management noted while speaking to the faculty that the most valuable player on the Harvard Business School team was the Director of Admissions, a not so subtle reference to the elite students recruited to the school and subsequently recruited by that consulting firm.

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Last month the Delta Cost Project released its annual report on college spending, Trends in College Spending 1999-2009: Where Does the Money Come From?  Where Does It Go?  What Does It Buy?  Examining the decade between 1999 and 2009 the report paints a bleak picture of the current state of higher education spending with very small but notable improvements in specific areas. 

In general, the report finds that revenues are down and spending (overall and per student) reflects that decline.  Recession-related state budget cuts meant deep cuts to educational appropriations.  As a result, schools in every sector of the industry raised tuitions (in some cases significantly) in an attempt to make up that difference.  American Recovery and Reinvestment Act (ARRA) funds may alleviate some pressure in the future but because most institutions did not begin receiving those funds until the last part of 2009, the impact of that funding source is not fully captured in the report. 

Some of the most striking statistics are related to community colleges.  In 2009 alone, community colleges were educating more than 6.5 million students, accounting for approximately one-third of all the nation’s college students.  Though shouldering a large portion of the burden of educating the nation’s college students, community colleges also saw the largest funding declines during the decade.   

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The No Child Left Behind (NCLB) Act, which received bipartisan support for its passage in 2001, requires that states implement a variety of assessment mechanisms for students and teachers in order to qualify for federal education funding.  This federal act does not establish criteria to which all states must adhere; the means of assessment are left to each state to implement as it sees fit.  In January 2001, President George W. Bush said of NCLB, “’These reforms express my deep belief in our public schools and their mission to build the mind and character of every child, from every background, in every part of America.’” Calling it the “cornerstone” of his Administration, President Bush touted the various components of NCLB.

NCLB, at the time of its passage, was intended to provide “increased accountability for States, school districts, and schools; greater choice for parents and students, particularly those attending low-performing schools; more flexibility for States and local educational agencies (LEAs) in the use of Federal education dollars; and a stronger emphasis on reading…” The Act ties federal education dollars to performance on standardized testing.  In large part, this stipulation has been the foundation for continued criticisms of the program. 

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