Unlike the federal government that is allowed to print money, most state constitutions have a balanced budget requirement.  When taxes decrease, expenditures must decrease as well.  K-12 education and Medicaid are two of the largest mandated expenditures at the state level.  Higher education has never been a mandated expenditure at the state level, so when state budgets have to be cut, higher education has usually been one of the first areas impacted.  Some states in some years increase student tuition rather than cut their higher education expense budgets.

The State Higher Education Executive Officers (SHEEO) publish an annual report entitled State Higher Education Finance that provides overall information on the costs of public higher education as well as the state and local tax subsidies and net tuition contribution by students and their families.  For example, in fiscal year 2008, the net tuition average for the United States as a percentage of public higher education revenue was 36.3 percent.  However, net tuition revenue ranged from a low of 13.0 percent for Wyoming to a high of 69.9 percent for New Hampshire.  Those averages typically reflect the ability and desire of a state to subsidize its higher education institutions.  Wyoming, the state with the lowest population in the U.S., benefits from a state budget subsidized by oil and gas revenues.  New Hampshire’s population is small also and the state does not have oil and gas to subsidize taxes.  However, it is located in the middle of the New England ski area and its public institutions utilize that geographic location advantage to enroll out-of-state students paying unsubsidized tuition rates.

The American Recovery and Reinvestment Act of 2009 provided $53.6 billion  to the states to cover shortfalls to K-12 and higher education and another $30 billion to students and parents through increased Pell grants and tax credits for higher education to low income families.  Those two-year stimulus grants are expiring and many states’ budgets have not recovered to their pre-2008/2009 levels.  The shift of the majority in the U.S. House of Representatives to the Republicans is likely to lead to no chance for additional funds to be allocated to the states for higher education.  With continuing state budget shortfalls, public institutions are increasing tuition and cutting expenses.  While the tuition increases exacerbate the decreasing affordability of higher education (see The National Center for Public Policy and Higher Education’s report, Measuring Up 2008), the expense reductions in many cases eliminate low enrollment degree programs, reduce the availability of selected courses in the remaining degree programs, cancel construction projects, defer facility maintenance, reduce the number of students enrolled, and impact faculty pay and workload.  Interestingly, I haven’t seen a state legislature propose the closure of a public institution yet, but a continued recession may instigate evaluations of the efficiency of capacity.

Historically, public institutions have enrolled nearly 80 percent of all college students.  In an economy where nearly 10 percent of the workforce is unemployed, higher tuition at the lower cost alternative doesn’t bode well for future student enrollments.  As tuitions at public institutions increase, the percentage of students who utilize federal student loans as well as the total loans outstanding per student will increase.  With calls for greater accountability of higher education institutions going back to the Spellings Commission and others, increased federal funding of a sector that was traditionally funded by state legislatures will add to the scrutiny of the higher education sector.

The authors point out that according to the U.S. Department of Education, only 20 percent of community college students graduate within three years and only 40 percent of four year college students graduate within six years.  In fact, only 27 percent of college students attend the traditional residential college that most people envision as the idyllic college environment.  Even more telling of the changes in college student profiles, 45 percent of students attending four year colleges reported working more than 20 hours per week and 60 percent of students attending two year colleges reported working more than 20 hours per week.

Data from the survey indicates that the number one reason students cite for dropping out of college is that they had to work and attend school at the same time and the stress of doing both caused them to leave school eventually.  Balancing work and school was a bigger barrier for them than financing the cost of an education (54 percent versus 31 percent).  Only 10 percent of students who left college cited boredom as the reason.  Over 55 percent of students surveyed stated that they had to work full-time and that they did not see how they could work full-time and go to school at the same time.

Nearly six out of 10 people in the study who left college stated that they had to pay for college themselves without parental support.  In addition, their process for selecting the college of their choice was much less rigorous than most people imagine.   Nearly two-thirds of those students who did not complete college stated that they selected a college because of its convenient location to them while 60 percent chose their college because its schedule worked with theirs and 57 percent selected a college because its tuition and fees were affordable.

Affordability and access have an ongoing theme with some of the survey responses, similar to the two key themes from the final report of the Spellings Commission.  Approximately 80 percent of students who dropped out indicated that more financial aid should be available for part-time students and that more college classes should be offered at nights and on weekends.  Nearly the same percentage stated that the cost of attending college should be cut by 25 percent.  Approximately 57 percent indicated that it would be helpful if there were more classes offered online.  Over 60 percent of all students surveyed (graduates and dropouts) stated that most people do not have the opportunity to go to college.

While the survey results were interesting, there were not many findings that surprised me.  The data from the Measuring Up annual reports indicate that many Americans cannot afford college.  The growth of online programs at both for-profit and non-profit institution demonstrate the need for adult students to attend an institution whose courses are available on their time schedule.  The request for federal student aid for part-time students is long overdue, and if there were one item from this study that I would recommend policy makers to consider, it would be that recommendation.  Data from the U.S. Department of Education confirms that 73 percent of today’s college students do not meet the traditional profile of full-time, residential students.  The financial aid system rewards full-time students and penalizes part-time students, particularly those who work full time.  With our president’s goal of having more Americans attain college degrees, finding ways to make a college education more affordable should be a national imperative.

While access and affordability of higher education have been stated goals of the Spellings Commission, the National Center for Public Policy and Higher Education (NCPPHE) in its annual Measuring Up reports, President Obama, and others, the recommendations for improving affordability are few and far between.  The Spellings Commission stated that colleges need to think more like entrepreneurs and examine partnerships and distance learning as options to improve access and cost.  Many in traditional higher education panned the Spellings Commission’s recommendations although little was said that had not already been identified by many of the other public policy organizations like NCPPHE, State Higher Education Executive Officers (SHEEO), Western Interstate Commission for Higher Education (WICHE), and The National Center for Higher Education Management Systems (NCHEMS).  This past January, I wrote an article for this blog about a survey of college presidents entitled The Iron Triangle: College Presidents Talk About Costs, Access, and Quality.  I was aghast that during a period of economic downturn, most of the presidents surveyed stated that the only solution to improving access was to provide them with more funding at the federal and state levels.  I wonder how many entrepreneurs have succeeded by waiting for more money to pay for a product rather than designing the product to meet the ability of their customers to pay for it.

A recent whitepaper published by the Delta Cost Project on Postsecondary Education Costs, Productivity, and Accountability caught my attention the other day.  Written by Dr. Nate Johnson, the paper compares approaches to measuring “cost per degree” in order to examine the question: “What does a college degree cost?”  Johnson states that while considerable effort has been spent examining college costs, there has been no consensus on what standards to utilize in order to measure the cost of earning a college degree.  Johnson outlines five approaches to studying the costs of a degree:  catalog cost, transcript cost, full cost attribution, regression-based cost estimates, and the student’s cost of a degree.  He states that his intent was not to calculate what a degree costs, but to outline the various approaches that public policy and governmental entities may choose to utilize to determine the overall cost of a degree.

Johnson’s research utilizes financial data from the State University System of Florida.  I find the data interesting from my point of view as the President of a university that is committed to providing an affordable college education and as someone who believes that too many norms are entrenched in higher education without consideration of the ramifications on the cost/benefit to the student.  Data from the Florida system is allocated by Lower Level (community colleges), Upper Level (bachelors degree granting), Grad I (masters’ degree granting), and Grad II (doctoral degree granting).  Armed with this data, Johnson is able to provide examples where the cost per credit hour for instruction ranges from $159/credit hour for an Upper Level credit in family/consumer sciences to $509 for a credit in natural resources/conservation.  Another example is where the cost per credit for Upper Level instruction in math and statistics was $1,277 one year and $754 the following year with the difference attributable to having an extra section of 32 students in a three credit class the following year.

Using catalog cost analysis, Johnson is able to demonstrate  variability in institutional cost for a bachelors’ degree ranging from $22,332 to $43,817 with a weighted average of $26,485.  The catalog cost analysis is particularly helpful at looking at programs that the legislature has targeted for future growth (like nursing and engineering).  Johnson also claims that the catalog cost analysis is useful for comparing degrees at institutions in other states although some of the cost allocations limit the “apples to apples” comparability.

Johnson’s full cost attribution methodology is an interesting concept in that it takes into account the cost of educating those who flunk out, drop out, or transfer in determining the total cost of a degree.  Johnson acknowledges that his analysis worked best when used with larger enrollment degree programs.  When Johnson compared the full cost methodology to catalog cost analysis, the full cost analysis was 53 percent higher than the catalog cost analysis.

Johnson’s paper is an excellent example of the various ways that the costs of college can be examined.  I find it particularly helpful from a public policy perspective as a taxpayer evaluating the dilemmas facing legislatures funding public institutions in a time period where many state budgets are under duress because of the economy.  If I were a legislator, I would find this analysis helpful in determining whether or not the funding request data was presented to me in the most realistic scenario or in the scenario that was most beneficial to the requesting institution(s).

While it is too soon to tell if the current economic crisis will lead to a dramatic reformulation of higher education, there are signs that in many states, people are examining the situation in ways that were unthinkable a few years ago.  Earning bachelor degrees in three years is an example that has been touted, but is difficult given the fact that only 58 percent of all full time freshmen graduate from college in six years now.  Creating “low frills/no frills” colleges is another idea that has been proposed with a few examples beginning to appear.  Expanding the number of online courses and programs offered is another example.  Shutting down unprofitable or low enrollment programs is another.

There is a sea change coming to American higher education.  While many argue that the top 50 “elite” status institutions will be the least impacted because of their ability to attract many more students than they can educate regardless of the cost of tuition, I think they will be interested observers in what happens with the other institutions, private and public alike.  Public policy researchers have argued for years that we need to improve access, affordability, and quality/accountability.  With students and their parents voting for lower cost options and institutions denying access to many because of decreasing public subsidies or lower endowments, the landscape of higher education will change as it has several times over the past 200+ years.  Successful institutions will listen to the market.

In a typical year, the federal government contributes approximately $20 billion to higher education and the states contribute about $80 billion. At the state level, funding for higher education is behind mandated priorities such as K-12 education and Medicaid.  Many governors and legislatures have relied on the public’s willingness to bear tuition increases and in times of budgetary crisis, have pared back funding to higher education assuming that the colleges can increase tuition to offset the state funding cuts.  Given the fall in real estate values and real estate foreclosures, the unprecedented level of job layoffs at companies reacting to the economic downturn, the lower income taxes paid by fewer people working, lower sales taxes paid by people forced to pare back on their discretionary expenditures; it is inevitable that most of the state budgets have to be reduced this year and next.  Some states like Maryland are using some of the stimulus funds to delay cuts to education.  Other states are unable to use stimulus funds to absorb all of the declines in tax revenues and are cutting higher education before K-12.  Among the more notable state cuts that I have read about include:

• Tennessee – $180 million in cuts over two years
• North Carolina – $175 million in cuts this year and $191 million next year
• Washington – $500 million in cuts
• Arizona – $388 million in cuts
• California – $1.1 billion in cuts
• Louisiana – $219 million in cuts

Public institutions are not the only ones tightening their belts.  Faced with endowment values that have plummeted due to the global stock markets declining in value by as much as 40 percent, private universities have implemented staff reduction plans as well.  The most notable of these was the plan that Harvard announced in February.  Most private institutions are not as financially secure as Harvard, and many have announced staff reductions, wage freezes, hiring freezes, etc., in order to prepare for reduced earnings on their endowment as well as lower charitable contributions. 

Meanwhile, families who find their college savings investments diminished by 40 percent or more due to lower stock values and interest rates are encouraging their children to apply to public four year and two year colleges resulting in higher application levels with fewer available spaces.  Several state institutions have announced that they will admit more out-of-state students in 2009-2010 in order to increase the tuition revenues paid to the institution.  The FAFSA applications for financial aid are up 20 percent over a year ago through February according to the National Association of Student Financial Aid Administrators.  The Princeton Review released a survey last week of parents and students and the number who are considering a more affordable school have increased by more than a third.  Because of these concerns of families about affordability, several private institutions have announced that they have admitted more applicants than usual as they are hedging their bets on whether or not students choose to attend more reasonably priced public institutions next year.

All of this points to a crisis in the funding of higher education.  The Spellings Commission, the Measuring Up reports, and numerous papers published by other policy commissions indicate that America has fallen behind on the percentage of working adults who hold a college degree and that America will need an additional 15-16 million more college degree holders by 2025 in order to meet President Obama’s goal of returning America to its position of pre-eminence in the percentage of adults with college degrees.  The Measuring Up 2008 report indicates that a college education is unaffordable for those in the lowest quintiles of household income.  Other data indicates that the lower income population of the United States is not successful in completing or even attending college.  Affordability and access were two of the four tenets of the Spellings Commission.  The National Center for Public Policy and Higher Education measures preparation, participation, affordability, completion, benefits, and learning for each of the states in their Measuring Up reports.  Unfortunately, California is the only state with a passing grade on affordability.

In the last 50 years, states have funded the majority of the costs of higher education.  Given the importance of an educated citizenry in our quest for global competitiveness in the 21st century, we need to examine whether or not the current system is working.  Increasing the amount of Pell Grants available to low income students will not solve this problem.  If the President were to create a National Commission on the Future of Higher Education that could bring together representatives of students and families, policy organizations, the state governors and legislatures, and Congress, a meaningful dialogue could be established to address the most fundamental obstacles to the future of higher education.  The problems are systemic, the solution is not nigh, and many different factions have to align.  The major higher education initiatives at the federal level; the Morrill Land Grant Act of 1862, the G.I. Bill of 1944, and the National Defense Education Act of 1958; spurred higher education and the country to action.  Perhaps President Obama’s stimulus package and its shortcomings in relation to higher education, and the economic crisis facing higher education and our nation, will be the impetus for another call to action.

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.

The introduction of this report provides the standard background data about (1) the influx of 20.4 million new students by 2016 (NCES data), including many minority and immigrant populations who have had inconsistent academic preparation for college; (2) the rapidly rising cost of a college degree which has more than doubled as a percentage of family income over the past two decades (data from the Losing Ground 2004 report which I believe is also in the Measuring Up 2008 report); (3) competition from other countries who are educating their younger workers at a faster rate than the U.S. (Measuring Up 2006 and Measuring Up 2008); and, (4) growing demands for accountability, transparency and assessment in higher education (e.g., the Spellings Commission).  The authors of the report mention that in over a decade of researching how different groups view large-scale public issues, the only way to work toward a resolution is to have all of the constituents agree on a common definition of the problem.  Based on their interviews of the 30 college and university presidents AND their public opinion research studies related to higher education over the past decade, the authors believe that most of the college presidents hold a different opinion about the issues than the general public.

The authors state that the college and university presidents believe that the three iron triangle factors of cost, quality, and access are “linked in an unbreakable reciprocal relationship, such that any change in one will inevitably impact the others.”  The authors cite previous research where (1) 56% of the public believes that colleges could spend less and still maintain high quality, (2) 52% of the public believes that colleges and universities are a business “with an eye on the bottom line,” (3) 40% of the public believes that “waste and mismanagement is a factor in driving up the cost of college,” and (4) more than 6 out of 10 government and business leaders believe that higher education is “too bureaucratic and resistant to change.”

The interviews and quotes in the report are anonymous.  They are organized around five parts:  (1) overview, (2) cost, (3) access, (4) quality and accountability, and (5) the way forward.  If you only have the time to read part of the report, read the introduction, Part V, The Way Forward, and the Afterward.  The consensus of the presidents as portrayed by the researchers is that government needs to pay more money if they expect increased access, quality and affordability.  The individual quotes are telling.  It is interesting to me that none of the presidents interviewed suggested utilization of technology to expand access and improve affordability as some distance education institutions have managed to do.

After reading the report, I can only predict the issues and the debate regarding higher education to continue at the legislative and executive branch level despite the sighs of relief from some now that we have “a professor in the White House.”  There are institutions that focus on the issues of access, affordability and quality.  Fourteen of us joined together to form Transparency by Design, about which I intend to write in the future.  I think the public is responding to institutions that focus on the three corners of the triangle by applying to and attending institutions who believe in their ability to improve the 3 without government intervention.  Read the report and let me know whether you agree with my assessment or not.

In America, we are transitioning the leadership of our government which we have done every four or eight years since 1792.  This year, the voters wanted change.  The Obama administration has promised change while facing the formidable challenges associated with stepping into the leadership role of the world’s largest economic engine during a global and domestic economic crisis which is unprecedented since the Great Depression.  By all accounts, the situation has not reached its bottom and it will be years before we climb out of a trough created by our own hands.   Even worse is the knowledge that many of the “solutions” may be politically inspired and not the “best” solutions for the situation.

Higher education has not escaped the challenges created by the recent economic downturn.  Public universities, funded primarily by states and municipalities, are impacted by the declining sales and property tax revenues which put pressure on funding to the public institutions.  Already, some states have announced large tuition increases for next year while cutting or holding flat the level of funding.  Private institutions, particularly those not able to claim medallion or elite status, are bracing for a possible downturn in admissions while experiencing a downturn in endowment earnings.  These economic issues have surfaced after the Spellings Commission issued its report stressing a need for higher education to improve access, affordability, accountability, and quality.

We are fortunate at the American Public University System.  Jim Etter, our founder, passionately believed in the need to provide an affordable education to members of the military and public service communities.  He also believed that we should be accessible to anyone who graduated from high school or who had a G.E.D.  In order to provide an affordable education while offering access to all, we chose to deliver our classes online.  Our online platform has provided us with the capability to expand our program offerings without having to build physical infrastructure such as classroom buildings, dormitories, dining halls, and athletic facilities.  It has also allowed us to maintain our undergraduate tuition at the same reasonable level for approximately eight years.

We strive for continuous improvement of our institution.  In 2007, we participated in the National Survey for Student Engagement, the Transparency by Design initiative, and The Higher Learning Commission’s Academy for Assessment of Student Learning.  Internally, we conduct reviews of a third of our undergraduate and graduate programs every year.  Annually the numbers of graduates of our programs increase over those from the year before, a statistic that we are proud to publish.

Colleges and universities have complexities based on the rules of accreditation and regulations of the states in which they operate.  Changes in both are inevitable as are changes in the marketplace.  Managing through change is easier when you have a sound mission to follow.  Our mission, “to educate the nation’s military and public service communities by providing respected, relevant, affordable and student-focused online programs…” keeps us focused on access, affordability, and quality.  We look forward to serving our students, current and future, in 2009 and beyond.

Graphic from Measuring Up 2006, a publication of The National Center for Public Policy and Higher Education, showing the increasing costs of various consumer goods and services in relation to the Consumer Price Index.

As a recipient of financial aid in the 1970′s when I attended Duke and Tulane, I can relate to the continual and ongoing debate about the affordability of college.  I was fortunate to have parents who believed in the benefits of higher education and who told me to “go to the best school that you can get into and we’ll figure out how to pay whatever the financial aid office says that we have to pay.”  Thanks, Mom and Dad.

Fast forward a few decades and it’s difficult to pick up a newspaper or magazine without reading about the issues surrounding the affordability of higher education.  The subject is complex, solutions are complex, and many people have opinions on the issue.  Robert Bliwise writes an article in the July-August issue of Duke Magazine that articulates the view from his vantage point as a professor of public policy.  There are a few highlights that I’ll mention and will certainly resurface in a few ongoing pieces about the financial aid debate.

Bliwise begins with a description of a book published twenty years ago by Charles Clotfelter (Duke ’69) called Buying the Best.  Clotfelter, a public policy professor at Duke, examined the way selective colleges and universities competed for the best students and awarded aid.  Students weren’t price sensitive about an elite education in those days and financial aid was growing faster than any other area of campus spending.  In the article, Clotfelter discusses the issues between need-based aid and merit aid.  Clotfelter defends need-based aid as “a guarantor of the brand,” and states that the value of the institution would be diminished if only the affluent could attend.  I agree, personally and professionally.  Bliwise quotes Duke’s undergraduate admissions director, Christoph Guttentag, as stating that there’s now a competition between the “haves and the have-mores” in demonstrating the social contract balancing the affluent and the needy.  Bliwise provides a list of thirty-six “elite” schools that have created more generous financial-aid packages for families with incomes ranging from $40,000-$100,000 per year.

While the efforts of the “have-mores” are laudable, they don’t go far enough.  One of the biggest reasons we have a problem is that colleges increased their tuitions at a rate much higher than the increase in the average family’s income over the past twenty-five years.  I believe that my tuition and room and board at Duke was approximately $4,000 in 1972-1973.  $4,000 was thirty-two percent of the average family income in America that year which, according to the U.S. Census Bureau was $12,625.  Duke’s tuition, room and board in 2006-2007 was $43,155 which was fifty-five percent of the average family income of $77,315 according to the U.S. Census Bureau.  Using more recent data from the Spellings Commission’s final report, families making a combined income of less than $34,000 could expect to pay forty-one percent of their total family income for a public four-year institution after grant aid in 1992; by 2003, that same group could expect to pay forty-seven percent of their family income after grant aid for the same school.  Had tuitions increased at the same inflation rate as family incomes, perhaps more families would consider higher education or higher education options beyond community colleges as affordable.  I wonder if my parents would provide the same encouragement to me today that they did three decades ago.

Federal aid programs have not kept up with the increases in tuition and increasingly, student aid packages have higher percentages of loans versus grants.  Debt loads of undergraduate students influence their choice of post-baccalaureate careers and also determine whether or not they decide to attend graduate schools.  Bliwise cites a study from the Project on Student Debt, an offshoot of the Institute for College Access and Success, which shows that “debt levels for graduating seniors from private universities increased from $11,356 to $22,125 over the past decade.”  It’s not unusual to hear of students who exit professional graduate schools with debt exceeding $100,000.  Prospective students from lower income families are not considering the higher cost institutions because the tuitions are so high compared to their income levels.  Minorities, particularly Hispanics, are reluctant to borrow to fund their education and their numbers continue to increase as a percentage of the students graduating from our high schools today and into the future.
 
No wonder then that Richard Kahlenberg, editor of America’s Untapped Resource: Low-Income Students in Higher Education, is cited in the article as “not[ing] that a visitor is 25-times more likely to run into a rich student than a poor student on the nation’s elite campuses.”  Bliwise ends his article with an interview with Tom Mortenson, a senior scholar with the Pell Institute for the Study of Opportunity in Higher Education (and a speaker at the ACE Annual Meeting in 2008).  Mortenson says that “families will be looking for strong signals that they can absorb college costs” and “they’re not likely to feel assured until higher education forges a fuller and more forceful social contract.”

The discussion that Robert Bliwise provides is oriented toward the manner in which Duke and other elite institutions have handled some of the biggest issues in financial aid.  However, there are more than 3,000 colleges and universities that are not considered elite.  Some have patterned their tuition increases to run parallel (as a percent) with the elites.  They cannot afford to provide the “free college” guarantee for certain income levels.  Public institutions are under pressure from increasing costs and reduced funding from their legislatures.  Regardless of the pressures, it’s clear that continued increases in tuition beyond the Consumer Price Index leads to reduced access at a time when America’s competitive place in the world depends on increasing numbers of college graduates.  I don’t think that the federal government can be counted on to fund the difference between affordable tuition and today’s average tuition at a private college or university given the projected budget deficit that our next President and administration will inherit.  We’ll see how the marketplace of higher education adjusts over the next few years.

After purchasing the book, I realized that Zemsky and his co-authors, Gregory Wegner and William Massy, have been writing about the changes in American universities for over twenty years.   They catalog the birth of the modern era in Higher Education to coincide with the launching of two events by the federal government:  passage of the GI Bill which increased the participation of America’s middle class in higher education and the Vannevar Bush (Director of the Office of Scientific Research and Development) report recommending that the federal government fund scientific research through colleges and universities.  Since those two noteworthy events, the authors maintain that a college degree has become perceived as “an economic necessity pursued by the many, rather than a privilege reserved for the few.”

Zemsky, Wegner and Massy provide the reader with discussions of the market for education, the “arms race” for new students, and the influence of the U.S. News ranking systems.  They discuss consequences of some of these actions with chapters on college athletics, tenure’s “publish or perish” culture, and technology through e-learning.  Since our focus at APUS is on e-learning, I would take issue with the authors’ comment that “e-learning has become principally a way of distributing correspondence courses on the Web under the label of distance learning.”  I agree that there are institutions where their “online classes” are really an electronic assignment sheet and little else.  However, best practices developed and promulgated by organizations like the Sloan Consortium, are continuing to enhance the level of activity, learning, and learning outcomes through the serious providers of online distance education.

In the final chapters, the authors state firmly that there’s “no answer for those who want to put the genie back in the lamp.”  They maintain that quality has to be the focus of every institution and that access to higher education has to be expanded, particularly among minorities.  Teaching should be “a central criterion in review for all hiring, promotion, and tenure decisions.”  Learning assessments should be implemented.  Institutions need to talk more with their constituencies:  students, faculty, politicians and neighbors.

I highly recommend this book to anyone interested in the primary issues of the accountability debate, the historical actions that led to today’s status quo, and the authors’ opinion on what can and should be done to more actively engage institutions of higher education in participating in the national dialogues.

Paul Jansen and Debby Bielak, consultants at McKinsey & Company, published an article in the June 2008 Business Officer publication of NACUBO which summarizes the five key trends in higher education.  In conducting their research, McKinsey engaged with institutions affiliated with the Forum for the Future of Higher Education in Cambridge, Massachusetts.  The authors maintain that the five trends have the potential to be disrupters that could affect the status quo at many institutions.  The trends are:  1) growth of digital and other non-traditional students, 2) price-productivity squeeze, 3) new paradigm competitors, 4) globalization, and 5) answering to accountability.

Trend 1 has the potential to be a positive impact as the writers predict that the nation could see a 100 percent increase in college enrollments over the next 20 years.  Part of this trend is fueled by the forecasted growth in non-traditional students, currently estimated to be 48 percent of overall college enrollments.  However, today’s high school students, digital natives, are learning with different methodologies than in the past and will challenge traditional notions of learning, leading to more studying at a distance.

The price-productivity squeeze reflects data that demonstrates that while tuitions have increased 32 percent over the past 10 years, the average discount has increased to 22 percent reflecting a 10 percent net increase to cover more than that rate of increase in costs of education.  Nationally, revenue comprises only 59 percent of costs according to the authors.  Institutions “focused on the vast middle” will be forced to address this issue sooner rather than later as the elite institutions have the brand and financial resources and the lower cost institutions have the pricing power.

The University of Phoenix is cited as a new paradigm competitor whose cost per student declined from $7,200 to $4,800 when its student population grew from 67,000 to 233,000.  The authors maintain that the incremental costs of adding students for traditional universities is high when considering the costs of physical classrooms, dormitories, and dining halls among other expenses.

Globalization is an increasing challenge, but primarily for institutions searching for top faculty or students.  As the economies in China and India continue to grow, those countries continue to create educational institutions to keep their students and faculty in country.  Previously, many chose to attend or teach at U.S. institutions.

The questions asked by the Spelling’s Commission won’t go away.  Lawmakers are asking for accountability for the subsidies provided.  Fortunately, many accrediting bodies including the Higher Learning Commission of the North Central Association are encouraging their institutions to publish their outcomes as well as to become more transparent.

Business Officer asked several constituent groups to provide case studies that address these trends and they are published in the June issue as well.  As the authors state, “while the institution with resources or a reputation will be able to ride out its legacy position for some time, the majority of institutions will enjoy no such luxury.”