Sunday’s session for presidents and chancellors had the following topics:  Vision and Change at BYU-Idaho: A Model for America’s Colleges and Universities, Information Technology:  Seize the Day, and a luncheon at which Terry Hartle, SVP of Government and Public Affairs of ACE spoke about the pending Department of Education regulations regarding Credit Hours, State Regulation, Gainful Employment, Accreditation, and Misrepresentation.  Later in the day, Yale’s President Richard Levin spoke about “Why Colleges and Universities Matter.”  I also attended a session hosted by Stan Ikenberry, former president of the University of Illinois and ACE, and George Kuh, Professor Emeritus of Higher Education at Indiana University Bloomington and the founding director of the Center for Postsecondary Research and the National Survey of Student Engagement (NSSE), regarding assessment and ways in which institutions implement it.

Having the conference in Washington provided some benefits.  Eduardo Ochoa, Assistant Secretary of Postsecondary Education at the U.S. Department of Education was an unscheduled speaker at the luncheon and provided a few comments regarding the administration’s position regarding higher education and reminded the group that he had served as a provost at Sonoma State University.  He also stated that he was unable to provide a statement about three of the issues because of a lawsuit against the Department.  Terry Hartle’s major points were that the industry can regulate itself and does not need increased federal regulation at a time when there are many changes occurring as well as innovations required in order to remain competitive.

Rick Levin’s lecture provided three main points:  (1) the basic research principle of our universities is a driver of our nation’s growth and healthcare improvements, (2) the diverse array of higher education institutions provides an education to a broad workforce, and (3) our colleges are the principal avenue of upward mobility for our citizens.  President Levin is an economist and unabashedly stated that his lecture had an economic focus although his sincere comment that “the most profound consequence of higher education is that it improves the soul” was not economically based.

As one of a number of presidents invited to attend the session on assessment, I was pleasantly surprised about the depth of discussion.  Our comments were recorded by a researcher for a project sponsored by the National Institute for Learning Outcomes Assessment (NILOA) and all of us participating received the prerequisite Institutional Review Board (IRB) disclosure.  Assessment has been an interest of the accrediting bodies for the last ten years or so, but usually is not a topic about which college and university presidents are conversant.  The group representing a variety of institutions ranging from public research universities to private liberal arts colleges to an online university.  All the presidents in attendance were focused on the measurement of learning outcomes at their institution.

Many years ago I took a course in oral history at Duke.  Interviewing people who participated in a historical event years after the event took place gave me an appreciation for the fact that reporters write about an event from their perspective which may not be the perspective of the participants.  While some of the lectures and panels at this year’s annual meeting have been discussed in articles published by The Chronicle of Higher Education and Inside Higher Ed, those articles are related to specific topics.  As a somewhat regular attendee of ACE’s annual meetings, I observed a difference through the statements of the speakers, the questions of the participants, and the general tone of the conversations at the social events.  Usually, the major determinants of change in any sector are the market or the government or both.   This year may be the year where a need for change is finally recognized by the entire sector.

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.

Thelin states that the result of generally bad news in education is to either “discredit the data or kill the messenger.”  His essay is intended to place current graduation rates in an historical context in order to facilitate a more measured discussion of the topic.  I suggest that anyone interested in the topic of retention spend a few minutes reading this 21 page essay as it provides a balanced and illuminating historical perspective of the issue.  Thelin’s recommendation is thoughtful as well.  He suggests that the statistical results as portrayed in the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) and other databases do not explain the qualitative reasons for attrition at most schools.  He suggests that provosts examine the educational culture of their institutions for explanations of a student’s integration/socialization into academic life.  His final paragraph states that combating the problem of attrition is expensive, difficult, and persistent (particularly throughout the past 100 plus years). 

Thelin’s comment about the IPEDS data is accurate, but slim with data supporting it.  The system was designed during an era when more college students were “traditional,” i.e. first-time, full-time freshmen whose goals were to graduate in four years.  Over time, the system evolved to track students who graduate at 150 percent of the time expected to earn a degree (2 years times 150 equals 3 years for an associates’ degree; 4 years times 150 equals 6 years for a bachelor’s degree).  By the Department’s estimates, approximately 75 percent of today’s college students are “non-traditional,” meaning that they do not conform to the first-time, full-time freshman category when they start.  Not only does that fact suggest that the IPEDS data collected may not be relevant to the average college, but it also stresses the importance of a quantitative and qualitative analysis of retention by provosts and presidents.

There are many other research articles and publications that address the topic of college student retention.  Over the next few months, I intend to discuss a few of them that are relevant to institutions that focus more on the “non-traditional” student.

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.

Lewin points out in her article that “over all, for all kinds of degrees and settings, the median student loan debt of borrowers in 2007-08 was $15,123, up 11 percent from…2003-04.”  There are many who argue that even this amount of student debt is too much.  It seems ironic that today’s students seem to realize the importance of a college education as evidenced by increasing enrollments nationwide yet are often hindered in their efforts by the daunting costs.  A later article in the September 4th issue of The Wall Street Journal cites evidence of the government’s National Postsecondary Student Aid Study (NPSAS) that two-thirds of college students borrow money for college while only 12 years ago, just over half of all college students borrowed money to fund their educations with the average amount borrowed significantly less ($13,172) than it is today ($23,186 according to the article).

An article published in The Chronicle of Higher Education on the same day the New York Times article appeared takes a different view on the data presented in the report.  The author, Beckie Supiano, writes of the increasing level of student debt over the last five years rather than focusing on the 41 percent who manage to graduate with no student debt.  Supiano also points out in her article that the data does not account for PLUS parent loans, loans to students from family members or friends, or credit card debt accumulated from paying college tuition.  College students and recent graduates are carrying more credit card debt than their counterparts who graduated only four years ago.  According to a recent study conducted by Sallie Mae, today’s graduates leave college with 41 percent more credit card debt than those who graduated only four years ago with one in five owing at least $7,000 in credit card debt upon graduation.  Only 20 percent of students with credit card debt reported paying off their balances every month.  Considering the increasing levels of credit card debt among today’s college students and recent graduates, taking such debt into consideration may dramatically change the report’s conclusions. 

While the College Board appears to find these results reassuring, there are several elements of the big picture that should be given consideration.  First, “manageable” is a relative term.  What may be “manageable” for one individual may not be for another.  While there is obvious value in identifying trends in the higher education industry, we must be careful to realize that individual cases matter.  As the report states, there are still at least ten percent of the 2008 graduating class who are carrying $40,000 or more in student debt.  When the National Center for Public Policy in Higher Education issues its annual Measuring Up report, it reports college affordability data by income quintile since earnings above or below these thresholds can be quite influential over the ability of a student to attend college.  Given the fact that students from the higher income quintile groups have a higher college completion rate, the College Board’s usage of data from graduates only doesn’t reflect the overall picture.

Additionally, in today’s turbulent economic conditions, job prospects for recent college graduates are limited.  Factor in jobs that pay a “good” salary and the options shrink that much more.  As I discussed in an article earlier this summer, recent college graduates are struggling to find relevant jobs, much less one that pays them a salary high enough to live and pay off their student loans in a timely manner.  A May 9 article in The Wall Street Journal predicted that “even those who land jobs will likely suffer lower wages for a decade or more compared to those lucky enough to graduate in better times.”  As The Wall Street Journal article of September 4th points out, many recent college graduates are so economically strapped by student debt upon graduation that they are beginning to delay significant milestones in their lives including getting married, buying houses, and having children.  The article notes that a 2006 survey conducted by Mathew Greenwald & Associates, Inc. found that of 1,508 college graduates under the age of 35, 39 percent believe that it will take them more than ten years to pay off their household’s education-related debt. 

Lastly, the College Board  analysis  does not differentiate between full-time students and part-time students.  Attending part-time not only allows a student to maintain some form of employment while in school, it also may be a method used to avoid incurring significant student debt.  The Associated Press (AP) published an article on August 28th that outlines President Obama’s plan to boost Pell Grants in an attempt to not only increase access to college opportunities but to provide greater affordability for low-income students.  The plan would “ensure lower interest rates for need-based college loans” and “provide more college aid to veterans.”  Pell Grants are funds that a recipient is not required to pay back.  Even with President Obama’s stated goals for the Pell Grant system, however, many question whether the initiative goes far enough in addressing the economic burdens of attending college.  For example, as the AP article describes, “the maximum Pell Grant last year was $4,731” while “public college tuition and fees were $6,585.”  It is important to note that not every Pell Grant recipient receives the maximum amount and even if he or she is so lucky, there remains a shortfall of nearly $2,000 still needed to attend even a public college.  Additionally, there are no caps on tuition increases in the Federal Financial Aid system similar to the Medicare and Medicaid systems in healthcare.  Increasing Pell Grants may not make any headway if colleges continue to increase tuitions at rates higher than the earnings of the average family.

 The College Board data does not reassure me that today’s students are not carrying as much debt as many previously thought. There are conflicting sources of data that make it appear that the College Board’s policy piece is not representative of the entire college continuum.  I think the nation’s policymakers would be better off commissioning a consumer survey to see what the debt expectations are of our graduating high school seniors and their families and then comparing that data to the various sectors (fulltime, part-time, etc.).  The enrollment shift that appears to be occurring this fall and may well continue into the spring semester and next year may prove that the student consumers have become more educated than the organizations who study them.

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. 

Federal, state, and local funding for community colleges has been abysmal when compared to funding for public four-year colleges and universities.  By one estimate, four-year public colleges receive greater than three times the amount provided to community colleges per full time student.  According to the Brookings Institute report cited above, “from 2003 to 2008, state budgets for all public services – Medicaid, transportation, corrections, public assistance, and other expenditures – grew at an average rate of nearly 6 percent, but growth in state support for higher education lagged 1.5 percentage points behind.”  This translated into substantially less funding for community colleges leading to additional problems including significant cuts in amount spent per student at these schools, lack of resources for effective faculty training, and neglected maintenance projects on community college campuses. 

A recent article from Time Magazine noted that “these institutions are our nation’s trade schools, training 59% of our new nurses as well as cranking out wind-farm technicians and video-game designers – jobs that, despite the ballooning unemployment overall, abound for adequately skilled workers.”  An article on CNN.com quoted the President as saying, “’jobs requiring at least an associate degree are projected to grow twice as fast as jobs requiring no college experience.’”  Community colleges are quite appealing to many students who seek associates degrees.  The Chronicle of Higher Education reports that many community colleges are facing such overwhelming enrollment increases that some students are being turned away, unable to enroll at all. 

While visiting Macomb Community College in Warren, Michigan, President Obama outlined the specific elements that would come with the American Graduation Initiative.  Telling the crowd that “Time and again, when we placed our bet for the future on education, we have prospered as a result,” he likened the significance of the program to that of President Lincoln’s innovative land-grant program that established numerous colleges around the country and President Roosevelt’s signing of the GI Bill.  According to the president, the American Graduation Initiative “will reform and strengthen community colleges…so they get the resources that students and schools need – and the results workers and businesses demand.  Through this plan, we seek to help an additional 5 million Americans earn degrees and certificates in the next decade.”  For those perhaps concerned about the program’s impact on an already unprecedented federal deficit, President Obama added, “And let me be clear: We pay for this plan – this isn’t adding to the deficit; we’re paying for this plan – by ending the wasteful subsidies we currently provide to banks and private lenders for student loans.” 

A White House “fact sheet” on the program outlines several specific actions to be taken under the American Graduation Initiative.  To address the low completion rates found in many community colleges (the Brookings Institute notes that only one-third of community college students obtain a degree of any kind within six years of enrollment), President Obama’s plan will provide funds for community colleges that develop innovative strategies for addressing low completion rates among their students.  Additionally, funds will be earmarked for maintenance and renovation of out-dated buildings as well as for updating equipment and resources in labs and other “hands on” disciplines. 

Interesting for those in the online education community is President Obama’s plan to establish an “Online Skills Laboratory.”  “Teams of experts in content knowledge, pedagogy, and technology” will develop the courses and the Departments of Defense, Education, and Labor will work together to provide the courses online for free through one or more community colleges as well as the Defense Department’s learning network.  There has been little doubt that the Obama Administration understands the benefits of online learning; the Department of Education recently released a report that highlighted the effective and beneficial nature of online education (see my recent blog article on this topic). 

Many are touting the significance of the American Graduation Initiative.  A recent article in The Chronicle of Higher Education quotes David S. Baime, vice president for government relations at the American Association of Community Colleges (AACC), as saying, “’There’s never been a federal program anywhere close to this size targeted specifically at community colleges.’”  In an email to member presidents, Molly Corbett Broad, President of the American Council on Education (ACE), wrote, “The president should be applauded for his effort to enhance the good work being done at our nation’s community colleges.  This investment will go a long way toward meeting our nation’s work force needs at this critical time when the economy is struggling to rebound.” 

There is no doubt that America’s community colleges provide access to higher education for millions of American students and they will play an integral part in the president’s overall higher education agenda.  I have one concern regarding this program.  To the best of my knowledge, there is nothing that prohibits states from shifting money away from two year colleges to four year colleges.  If other initiatives relating to the Stimulus Act are any indication, I am concerned that this money will not prove to be incremental funding to community colleges, but instead will be a back-end subsidy of other programs inside the states most strapped for money.

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. 

While Obama was still working to secure the votes needed to secure his place in the White House, he continuously espoused his intention to execute the plan described above.  For example, during the second Presidential debates in October 2008, Obama said, “…if we create a new energy economy, we can create five million new jobs, easily.”  Interestingly, as Obama made these promises to the American people in hopes of winning the presidency, other world leaders were taking similar efforts.  A November 2008 article in Britain’s The Independent, describes the efforts of British Ministers to increase environmentally friendly investments as a central part of their economic rescue plan.  Similarly, according to the article, Australian officials were discussing execution of a plan that would result in a 3,000 percent growth in green jobs over the next several decades.  Clearly the idea of a green economy benefitting not only citizens who will work within it but also the environment is gaining momentum.

There are significant implications that must be considered, however.  Several economists and conservative politicians and analysts have challenged the most fundamental element of the proposal, arguing that government initiatives to create jobs to bolster a weak economy have historically failed.  Rich Lowry argues in a recent article in the National Review that there are “currently 1.8 million jobs in the economy related to oil and gas.  Why layer more than double – if the Obama goal can be taken seriously – that number of ‘green’ jobs on top of already existing energy jobs?  Even if all the traditional energy jobs disappear, we will have succeeded only in employing more people in energy than otherwise necessary.” 

In a November 2008 article, Kenneth Green, writing for the American Enterprise Institute for Public Policy Research, Obama’s plan to create jobs through a green economic revolution to French economist Frederic Bastiat’s 1850 “broken window” fallacy.  Bastiat’s theory refutes the idea that it is wise for government to try to create jobs and not possible to stimulate a dwindling economy through such means.  The explanation of the theory goes something like this:  A kid throws a rock and breaks a shopkeepers’ window.  Most people feel bad for the shopkeeper but eventually decide that broken windows are not such a bad thing because it creates work for the glassmaker who can then benefit from having work and potentially even creating another job by hiring an assistant.  Bastiat’s 1850 argument contends that the kid breaking windows is not performing a public service by creating work for the glassmaker; the money that the shopkeeper paid the glassmaker to replace the windows would have been better spent investing in his own shop and potentially, in the process, creating jobs himself.  According to Green, “Obama’s ‘green jobs’ plan would indeed create jobs, but it would do so by killing other jobs” (including jobs in the coal, gas, nuclear, and automobile industries which currently “directly employ more than 1 million people.”) 

The green economy will have a significant impact on higher education regardless of whether the effort ultimately benefits the larger economic picture.  President Obama’s so far unwavering dedication to the green economy should be a call to arms for those in higher education who are responsible for preparing the nation’s workforce.  The current workforce is inadequately prepared for Obama’s green economy jobs, a realization of many colleges and universities as they attempt to prepare their students for a competitive entrance into the job market.

The Department of Education has realized this academic shortcoming and has promised to hold a Sustainability Summit no later than September 2010.  The Energy Independence and Security Act which is not yet funded would provide $500 million in loans and $250 million in grants for the establishment of green technologies; half those funds would go to institutions of higher education.  The Obama Stimulus Package finally settled in February of this year will allot between $50 billion and $75 billion to higher education with an additional $16 billion going to federal agencies for research grants and facilities over 2 years.

A year or two prior to the 2008 election, a group of concerned college presidents formed the American College and University Presidents Climate Commitment (ACUPCC).  The premise of the ACUPCC is that higher education is in a unique position to address the pending climate crisis.  The purpose of the commitment is to call attention to the issue of global warming and signatories pledge to reduce greenhouse emissions on their campuses.  Some notable improvements have been made at many campuses as a result of participation in this initiative.  Only 637 of the approximately 4,000 institutions of higher learning have signed the agreement to date, but President Obama’s focus on the “green economy” may stimulate more colleges to participate.

Nelson Mandela said, “Education is the most powerful weapon which you can use to change the world.”  In today’s evolving world, it is imperative that higher education keep up with changing trends in the marketplace.  With President Obama’s initiative to create “green” jobs, higher education must accept and respect that and make efforts to create curricula and initiatives that cultivate the educational experience necessary to compete in the new green economy.

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.

After the publication of Friedman’s book, the National Conference of State Legislatures’ Blue Ribbon Commission on Higher Education issued a publication entitled Transforming Higher Education:  National Imperative – State Responsibility (2006).  President Obama stated that “we have one of the highest dropout rates of any industrialized nation and half the students who begin college never finish.”  Reading through the NCSL report, you will find several chilling statistics, one of which is that “for every 100 ninth graders who enter high school, only 18 finish college within six years.”  President Obama stated that “three-quarters of the fastest-growing occupations require more than a high school diploma, and yet just over half of our citizens have that level of education.”  It doesn’t take a degree in mathematics to figure out that with an 18 percent college graduation rate (calculated from the base of ninth graders) our percentage of college-educated citizens going forward is on a much more rapid descent rate when compared to the ascent in other countries.

Part of the problem in lower college participation and graduation rates is that the fastest growing populations in America (Latinos, African Americans, and immigrants) are the lowest participating populations in higher education.  There are many research studies that document some of the reasons why our minority populations are participating in college at a lower rate.  One of them is affordability.  The NCSL report expresses a concern that America is in danger of creating a permanent underclass in that “the poorest individuals have only an 8 percent chance of obtaining a college degree compared to a 70 percent chance for the wealthiest individuals.”  Last night, President Obama said, “We’ve made college affordable for nearly 7 million more students, 7 million.”  That comment is misleading.  The stimulus package increases the amount of the Pell Grant awarded to recipients of federal financial aid from $4,731 to $5,350.  That is a notable increase and it would currently benefit the 5.4 million students who received Pell Grants last year and the estimated 6.7 million students who are projected to be using Pell Grants.  But increasing the Pell Grant does not make college affordable for nearly 7 million more students.  Our federal financial aid system has been designed to focus on loans, not grants.  The design of the Higher Education Act (HEA) of 1965 was to distinguish between mandatory entitlement programs and discretionary entitlement programs.  Student loans are considered mandatory entitlements and all other programs, including Pell Grants, are considered discretionary.  Thus, as the numbers of students eligible for federally subsidized loans have increased and the tuitions that colleges charge have increased, the government has been required to fund those increasing loan amounts (over $60 billion in 2008).  Pell Grants remained flat at $4,050 per year for the first five years of the Bush administration as tuitions made their meteoric rise and only recently, has Congress increased that amount.  At the same time, in some years, Pell Grant funding had to be legislated in arrears after it was determined that the number of students eligible for Pell Grants exceeded the original Department of Education projections.

There are many who say that the current financial aid system is broken.  The Spellings Commission suggested simplifying it and others have suggested that it does not achieve the educational goals that we need to attain as a country.  The formula for financial aid calculates the estimated family contribution for each student based on income and assets and the costs of attending the institution.  The higher the tuition and fees, the higher the loan while the Pell Grant amount stays relatively fixed.  In an article in yesterday’s Chronicle of Higher Education entitled “Don’t Fix the Student-Aid System.  Kill It.”, Robert Ronstadt, a former vice president at Boston University and author of Surviving the Tuition Travesty: How to Take the Financial Sting Out of Paying for College, says that colleges need to focus on lower tuition strategies and reduce the amount students must borrow, which has inched its way up to $21,000 per graduating undergraduate in 2007.  Ronstadt cites the disparity between tuition increases and family income increases that were reported in Measuring Up 2008 whereby the lowest income quintile of Americans perceives that they cannot afford college regardless of the tuition charged. 

President Obama and his Secretary of Education, Arne Duncan, would be well-advised to establish a Commission to examine a financial aid system that incentivizes its participants (institutions) to charge more since the financial aid system will fund a loan that a student will eventually have to repay.  The President stated that “if you are willing to volunteer in your neighborhood or give back to your community or serve your country, we will make sure that you can afford a higher education.”  Maybe he has a plan to revamp financial aid and we have not seen it yet.  Ronstadt believes that lower tuitions and consequently lower loan balances can only benefit the student and the economy since students will have more disposable income with lower loan balances to pay after graduating.  The Spellings Commission cited affordability and access as two of its four key issues that higher education needs to address.  I believe that increased affordability is the primary  way that we can increase the number of college graduates and that it will expand access.  Serving adult learners through a financial aid system that recognizes that not everyone attends college immediately after graduating from high school will expand access and affordability.  Ronstadt says that colleges need to become more competitive and revise their operating model.  Some of the for-profit institutions and non-profit institutions that are tuition dependent already operate with efficient models and generally, affordable tuition rates.  The Presidents cited in the Iron Triangle Report (see my recent blog article about this report) state that they can increase access and affordability only if someone gives them more money.  My guess is that they haven’t studied economic models in a free-market economy or chose not to go through the heavy lifting required to solve the affordability problem.  Either way, it is disappointing that the attitude is more entitlement-oriented than geared toward designing a product that will benefit America’s students.

Lastly, President Obama ended his thoughts on a motivational note.  “So, tonight, I ask every American to commit to at least one year or more of higher education or career training. This can be a community college or a four-year school, vocational training or an apprenticeship. But whatever the training may be, every American will need to get more than a high school diploma.  And dropping out of high school is no longer an option. It’s not just quitting on yourself; it’s quitting on your country. And this country needs and values the talents of every American.  That’s why — that’s why we will support — we will provide the support necessary for all young Americans to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world. That is a goal we can meet.”  This is motivational and ambitious.  I hope that President Obama’s goal is attained as was President Kennedy’s goal to place a man on the moon by the end of the decade (1960’s).  I think that there will be a lot of heavy lifting required by higher education policy makers at the state and federal level, state legislators, governors and Congress, higher education leaders and others in order to accomplish this goal.  If our dialogue can be as direct and as blunt as the budget that the Obama administration promises to deliver, progress may occur.

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.”

I have revisited Silverstein and Fiske’s book in reviewing the current economic situation as it relates to higher education.  It is my belief that their theory of consumer behavior can be applied to higher education.  For the most part, the elite schools in America are the luxury item.  They can charge what they want and despite leading the country in pricing, their applications increase year after year while their enrollment is generally maintained at a steady level with little increment.  Demand clearly exceeds supply, but for the most part, these schools have slowly increased enrollment, obviously much less than demand and less than how a traditional business in a competitive marketplace would respond to market demand.  Fewer than 8 percent of all college students attended the 99 highest priced colleges in 2007-2008 (source: http://nces.ed.gov/ipedspas/index.asp where I queried the database for a list of colleges and their Fall 2007 enrollments with tuitions equal to or greater than $33,000 in 2007-2008.  NCES is a database maintained by the Department of Education.  Searching it can be frustrating to a beginner.)  A lesser percentage of students attended the 30 or so schools referred to as the “medallion” schools.

On the other hand, according to the College Board’s 2008 report, Trends in College Pricing, over 56 percent of all college students in 2007-2008 attended an institution whose tuition was under $9,000.  These colleges are generally not selective.  Most of these schools are public institutions, but a few are private and a few are even for-profit.  For the most part, their mission is to provide an affordable education to all.  A recent article in the New York Times explores the potential impact of decades of rising college costs.  The article cites the biennial report of the National Center for Public Policy and Higher Education stating, “…published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent.”  Even more astounding is the net cost of college (tuition, room and board and fees less scholarships or grants) as a percentage of median family income.  Last year, a four year public university was 28 percent of the median and a four year private university was 76 percent of the median.  Sadly, the cost of a community college education as compared to the median family income of the lowest 20 percent rose from 40 percent in 1999-2000 to 49 percent last year.  That’s not surprising when you look at the aggregate tuition increase versus the average family income.
 
Families and students have been borrowing money to finance these increases in tuition that have outstripped their wages and income and the current economic situation will certainly cause some of them to review those decisions, most likely impacting the fall of 2009 enrollments.  Early this week, an article in the Greentree Gazette cited CNN as stating that the average graduate of a four year school leaves with $21,000 in debt after completing college.  That looks like a large number given the current economic outlook.  Given the “trading up” versus “trading down” phenomena, I am guessing that even more will “trade down” or possibly defer a college education if it is perceived as too expensive for the benefit.

The current economic pressures will impact most of higher education with a few exceptions.   Because of a continued demand for the “best” education, the medallion schools will continue to see high levels of applications.  My prediction is that the combination of tougher borrowing standards, lower home equity values, and higher unemployment will influence the decisions of college consumers to “trade down.”  I don’t think that the schools whose tuitions range between $9,000 and $33,000 will be favorably impacted unless it is at the lower end of the tuition scale.  I believe that many consumers who conclude that their ability to be admitted to a medallion school is slim to none will sharply analyze the benefit of paying higher tuition versus lower tuition and will “trade down.”   The unknown part of the equation will be the impact of the economy on state budgets and the states’ contributions to higher education.  Some states may choose to reduce funding which will force the state colleges and universities to either increase tuitions at rates that may make them unattractive or may choose to restrict admissions as the Florida system did in the fall of 2008.  If the number of lower priced institutions is reduced, that could push some students out of the college attendance decision, at least temporarily.

If you have any thoughts about this, I would enjoy hearing from you.

The College Board states that all costs of college attendance are important and that often, costs such as room and board and books influence the ability of a student to afford college more so than tuition and fees.  The College Board encourages readers to cite or reproduce the data as long as they are given proper attribution, so I’ll list a few facts that I found interesting in this year’s report.

In 2008-2009, the average published tuition and fees increased:
 Public four year   6.4%
 Private four year  5.9%
 Public two year    4.7%
 For profits           4.5%
The public four year in-state tuition and fees averaged $6,585 plus $7,748 room and board for a total charge average of $14,333.

Page 7 of this year’s report has an interesting chart called “Variation in Tuition and Fees, 2008-09.”  This chart shows the distribution in tuition and fees by category.  For example, 78% of public four year colleges have tuition and fees less than $9,000 annually whereas only 7% of private four year colleges and universities fall into that category (note that APUS‘ full-time undergraduate tuition and fees would be $7,500 per annum).  Another interesting chart examines the variation in tuition and fees and notes that while public four year colleges increased their tuition and fees on average 6.4% versus the 5.9% at private colleges, the dollar increase average at public four year colleges was $380 versus $1,484 at private colleges (due to the substantially higher tuition).

Net price is another area where the data collected is interesting.  In 2008-2009, private college full-time students received an average financial aid award of $10,200.  This amount reflects all sources (institutional and federal) and includes the federal tax benefits.  Thus, the net tuition and fees average is reduced to $14,900 from $25,100.  At public four year colleges the average financial aid is $3,700 which reduces tuition and fees to $2,900 (net) from $6,600.  At two year colleges, full time students received $2,300 in aid reducing the $2,400 in tuition and fees to $100 net.

The net pricing data confirms other theories about college access including “the higher the tuition, the less affordable college attendance is for students in the lower income group.”  Measuring Up 2006 is a report published by The National Center for Public Policy and Higher Education.  In December, Measuring Up 2008 will be published.  That group breaks out the cost of college attendance by quintiles of family income.  The College Board states that “the federal Pell Grant program provides about half of the grants received by full-time students at public two year colleges and a quarter of the grants received by full-time students at public four year colleges, but only about 10% for students at private colleges.”  With the wide disparity in net price cited above (from $14,900 to $2,900 to $100), it’s understandable why students from families with lower incomes would choose more affordable options or no college at all.

Concerns about the cost of college attendance caused Congress to act.  The Higher Education Opportunity Act (HEOA) passed in July of this year has a number of cost-related disclosure and reporting requirements for colleges.  Among them, HEOA introduces the concept of net price (similar to the above except it does not include the federal tax benefits received by a student), requires the Department of Education to publish on its website the top five percent of colleges and universities with (1) the highest tuition and fees for the most recent academic year, (2) the highest net price for the most recent academic year, (3) the largest percentage increase in tuition and fees over the most recent three academic  years, and (4) the largest percentage increase in net price over the most recent three academic years.  These reports will be categorized among nine institutional categories.  Schools in the lists on (3) and (4) will have to submit a written report to the Department of Education explaining the increases and the steps that they’re taking to reduce future costs of attendance.

Affordability can expand access to college.  It will be interesting to see if the current economic downturn will change the pricing trends or if they will accelerate upward due to some of the budgetary crises at the state level and the endowment issues at the private college level.