America’s declining college graduation rates have been the subject of many a political speech or hearing lately.  President Obama set a long term goal for his administration to restore America’s prominence in the percentage of its citizens with college degrees.  When you examine the research literature regarding student attrition, persistence, or graduation rates, there are thousands of publications and numerous dissertations written about some aspect of those topics.

John Thelin is a research professor in the Department of Educational Policy Studies and Evaluation at the College of Education at the University of Kentucky.  He also authored A History of American Higher Education.  The American Enterprise Institute (AEI) recently sponsored a working paper (#2010-01) authored by Thelin entitled The Attrition Tradition in American Higher Education:  Connecting Past and Present.  Thelin’s research documents that attrition in higher education has been a problem since the early 1900’s, but that it has only been the focus of research, discussion, and improvement efforts for the past 30 years.  He cites several recent publications, AEI publication Diplomas and Dropouts:  Which Colleges Actually Graduate Their Students (and Which Don’t) and a publication of The Andrew W. Mellon Foundation, Crossing the Finish Line: Completing College and America’s Public Universities, which both deliver distressing news about college graduation rates.  The first publication indicates that graduation rates are not entirely a function of the selectivity of admissions by the school and the type of institution.  The second publication focuses on the 20-year decline in state university graduation rates noting that few state universities graduate more than 65 percent of their students in six years.

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An August 11th article in The New York Times caught my attention.  Written by Tamar Lewin, the article describes a policy brief released by the College Board which concludes that for the most part, recent graduates are carrying “manageable” debt loads.  Using data published in the Department of Education’s National Postsecondary Student Aid Study, the policy brief notes that while the number of students using loans to pay for their post-secondary educations has increased in the last five years, the volume of students who carry overly burdensome levels of debt upon graduation remains small in comparison.

According to the policy brief, of the students who earned a degree or certificate program during the 2007-2008 academic year, some 41 percent graduated with no debt whatsoever.  Those students borrowing more than $40,000 to pay for their educations represented only six percent of total student borrowing.  Students borrowing money to pay for a certificate program carried substantially less debt overall than those borrowing money to pay for an associate or bachelors degree.  A meager one percent of those borrowing money for a certificate program found themselves $40,000 or more in debt upon graduation while ten percent of those borrowing to complete a bachelors degree carried that level of debt or more upon graduation.  The above statistics found in the College Board’s policy brief are logical when one considers the number of credits required to complete each of the three degree types compared above.  What’s not logical is the $40,000 threshold selected to evaluate reasonable debt loads.  Obtaining a $40,000 loan for a certificate program is almost certain to lead to a negative ROI unless the certificate is related to technical training in an extremely high paying profession.  Even then, it is a risky venture.  While borrowing $40,000 for a four year degree sounds better, it may not be relative to the average loan balance of graduating students.  The College Board briefing does not take into account the students who borrow money to attend college who don’t graduate at all, or the students who attend college until their money runs out.  Using limited outcomes with a broad brush to stimulate policy discussions can be misleading.  With approximately half of college freshmen graduating in six years, we shouldn’t ignore the half that don’t finish.

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Last week President Obama announced the American Graduation Initiative, a 10-year, $12 billion plan focused on community colleges.  Community colleges play an integral role in the American higher education system and will play an even bigger role as America works toward President Obama’s goals of regaining America’s place as the world’s leader in college completion rates and establishing an American workforce that is able to compete with that of other nations. 

According to a May 2009 report published by the Brookings Institute, enrollments in community colleges increased between 2000-2001 and 2005-2006 by 2.3 million students.  In total, community colleges enroll approximately 45 percent of the nation’s college students.  Community college populations represent far greater diversity than is found on traditional four-year campuses.  According to the Brookings Institute, in 2004, 67 percent of Latino and 47 percent of African-American students entering college were enrolling in community colleges.  Given the large volume of community colleges in the nation, they provide affordable and convenient options for many groups otherwise underrepresented in other higher education institutions.  Community colleges are also appealing for non-traditional-aged college students, many of whom are juggling families and full time jobs. 

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From the earliest days of the most recent presidential election, President Obama made it clear that one of his highest priorities if elected would be addressing climate change, energy consumption and the economy.  It seems that within the first several months of taking office, President Obama has remained dedicated to those priorities.  More recently, he maintains that he has found a single solution that will address all three problems: the development of a “green economy.” 

The green economy, according to the Administration, will “invest in alternative and renewable energy, end our addiction to foreign oil, address the global climate crisis and create millions [five million, to be exact] of new jobs.”  President Obama has stated his intention to invest $150 billion over the next ten years in efforts meant to encourage private efforts to establish and use clean energy.  Through this investment, the President expects to not only create jobs (developing, installing, and maintaining new green technologies) but also reduce greenhouse gas emissions 80 percent by 2050 through the use of clean and renewable energy sources.  Breaking the nation’s addiction to foreign oil is an obvious underpinning of the Obama plan. 

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Last night, President Obama delivered an address to the nation.  He focused on the state of the economy and his administration’s plans for the economic future of our country focusing on energy, healthcare, and education.  I thought I would examine his plans for education as it relates to higher education and compare them to the public policy initiatives and thought pieces that have previously been published.

President Obama’s speech led off with a discussion of the global economy and the fact that “the most valuable skill you can sell is your knowledge.”  One of the first persons to stimulate a national discussion on this topic was author Thomas Friedman with the publication of his book, The World is Flat, in 2005.  Friedman cogently makes the point that technology has opened up the ability for companies to effectively employ engineers from India and China while conducting their business from the U.S.  Friedman also discusses the higher rates of education in countries with former third world status where it is recognized that the ticket to financial success is a good education.

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In 2003, Michael Silverstein and Neil Fiske published the book Trading Up: Why Consumers Want New Luxury Goods…And How Companies Create Them.  As partners at The Boston Consulting Group, Silverstein, Fiske (now the CEO of Eddie Bauer Holdings, Inc.) and others worked to research the consumer purchasing trends in the United States and overseas.  The phenomenon that they identified was the willingness of consumers to pay a premium for certain goods even in times of economic downturns.  Identified as “trading up,” the researchers also identified that consumers often “trade down” in order to afford the items for which they “trade up.”  In fact, they state that the effect of luxury brands in a market segment is to cause that category to polarize where the growth and profits move to the high and low ends of the spectrum while “companies caught in the middle struggle to succeed and survive.”  The authors provide a historical perspective that the trend to trade up has been around for centuries and that economists from Adam Smith to Thorstein Veblen to John Kenneth Galbraith have observed the trend of consumers to buy goods that cost more than what most others can afford to pay.

Silverstein and Fiske believe that the trading up phenomenon is positive and is driven by middle class consumers who are aware of the price/value ratio of what they are purchasing.  Furthermore, they state that so many middle class consumers are able to afford premium goods that the conventional wisdom of “higher price, lower volume” does not follow the trading up phenomenon.  Instead, the middle class consumers have a stronger emotional attachment with their luxury purchases than with other goods.  That emotional attachment is why they choose to ignore the mid-price product.  Silverstein and Fiske believe that the consumers have no desire to purchase a product that offers “neither a price advantage nor a functional or emotional benefit.”

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