Posts published in July, 2013

Economic Benefits Of College Overemphasized

Peter Ewell blogs for AAC&U’s Liberal Education Nation: Increasing the proportion of young citizens with a college credential has become a major national goal, and the need to do so is prominent in today’s political rhetoric.  The case for doing so is almost always economic—higher personal incomes, increased tax revenues, and greater worker productivity.  The resulting “commodification of college” rankles many of us because, raised as scholars, we tend to see higher learning as more broadly beneficial.  More importantly, the narrowly economic argument about rates of return leads many observers to misleadingly label college majors such as English or anthropology as “dead ends” and advise students to avoid them.  Even if one sticks with a purely economic argument, statements like this about the “worth” of traditional liberal arts and sciences majors are overblown at best.  But there also are other concrete benefits of completing a college degree that go far beyond these strictly economic benefits. 

Source: Carnegie Foundation

Why First Year Students Fail To Appear In Fall

Why Poor Students’ College Plans ‘Melt’ Over the Summer
A large number of poor high school students who say they are continuing on to college fail to show up in the fall. The reason is referred to as the “summer melt.” Students face many hurdles, including lack of resources and mentors. A Harvard study found that upward of 20% of recent high school graduates who indicate that they will continue on to college do not show up in the fall. . (National Public Radio, 07/16/13)

College For Free In Oregon? Not Really

by Dr. Watson Scott Swail, President & CEO, Educational Policy Institute

A few weeks ago, reported about the Oregon’s proposal to eliminate tuition fees at public colleges and universities. That statement, in isolation, isn’t exactly factual. Nothing is for free, is it? Or, at least, nothing good is generally for free. And the Oregon plan is not remotely close to free.

What Oregon plans to do, and only plans at this point, is to pilot what essentially is an income-contingent loan program. Students attending public colleges and universities in the state would not pay tuition costs during college. Rather, they would pay a relatively nominal percentage of their annual income for 24 years after graduation.

The state is looking at this because they, like every other state, understand that the current system of higher education finance—both to institutions and individuals—is untenable. There is simply not enough funding to properly support colleges, nor is there enough private (e.g., parental and student) funds to prime the pump.

Other countries, most notably Australia, have used income continent repayment plans, although Australia’s system has changed considerably over the years. The basic premise is sound: set repayment on what a person can afford to pay over a period of time. In theory, this negates affordability issues at the front end, which are attributed to reducing access and equity in our higher education system.

In Oregon, graduates from four-year institutions would pay 3 percent of their income for 24 years while those from two-year institutions would pay 1.5 percent. Seems simple enough, right?

The devil is in the details, and ICLs are tricky endeavors because of so many caveats. Critical questions include:

  • What do you do with dropouts?
  • What about the typically more expensive costs associated with going to college, including room, board and books?
  • What about students who leave the state or the country? How do you “tax” them?
  • What do you do about students who fail to pay (it happens in Australia).
  • What do you do about part-time workers who fall below the repayment table?
  • How much of lost tuition do you lose to people who die? (It is a real issue)
  • Perhaps most importantly, how does the state ramp up a program when there would conceivably not be any tuition revenue until the first cohort of students is in the workforce? And also paying the smallest portion based on their lowest income?

I will bypass these questions in this Swail Letter to focus on the simple personal costs of the Oregon ICL. Below I have created a series of tables that illustrate a plausible extrapolation of salary, inflation, and repayments. This is simple math stuff that someone with Algebra I can easily decipher. However, the problem is that most ICL calculations fail to adjust for inflation. This is critical to understanding the real cost of a future program and it amazes me how many analysts fail to do this.

The table provides three scenarios: a starting income of $25,000, $40,000, and $50,000. I peg inflation at 3 percent per year, which is typical over a long period of time, while also pegging annual salary increases at two percent (which is probably conservative, but this is a difficult one to peg, for sure), for a total of five percent.

In the article, it suggests that a student who makes $800,000 over the 24-year period would pay back $24,000, compared to a student who makes $2 million would pay back $80,000. These are poor calculations for several reasons. First, I can’t imagine, in most cases, where any graduate would make only $800,000 over that time period. Possible, to be sure. Probably, not really. My table below, which starts at $25,000/per year and goes up conservatively, still earns over $1 million. As well, the calculations, including mine, I must add, do not consider that the greatest earning years are typically in the last quarter of life, not steady increases over time. But that becomes a big analytical assumption for another time, hopefully under contract. Remember, nothing great is free. Nor is this!

But even in the $25k scenario, the payback would be $33k at a four-year institution and $17k at a two-year institution. But this is before we adjust for inflation. Once taken into account, the cost drops dramatically to $23k and $12k (in today’s dollars), respectively for four- and two-year institutions. That’s a bargain no matter how one counts it. I know I’ll be paying $40,000 for in-state tuition for my sons in Virginia, so it is clearly a bargain.

If we skip to the $50k scenario, where over 24 years the graduate earns $2.2 million ($1.5 million in today’s dollars), we see a repayment of $67k and $33k, respectively for four- and two-year graduates. After adjusting for inflation, these come to represent $46k and $23k in today’s dollars. Still a huge bargain, especially given ability to pay.

From an affordability perspective, an ICL like this would support affordability and equity agendas; not distract from them. The article quotes Sara Goldrick-Rab of the University of Wisconsin as saying that the Oregon plan places the burden of paying for college directly on the backs of students, rather than parents and others. Shouldn’t that be where the burden lay? There is such a misperception in America that parents should be paying this bill, even though the student is the ultimate benefit of the degree and career outcome. In the next quarter century, we are going to be inundated with parents who are working until they are OVER 75; who have divested their retirement accounts (if they even had them to begin with) to pay for their children’s college. This will be a financial epidemic that is going to put HUGE strains on the social welfare safety net of every state and the nation at a whole.

The burden of access should be on society. The burden of repayment should rest jointly on society and the recipient.

Still, the challenge comes with cost of attendance. The Oregon plan only covers tuition, which typically is about 40 percent of the cost of attendance for residential students. Of course, this differs for commuter students, but not by as much as some might think. Even for commuter students, their cost of attendance would be close to the tuition mark.

Oregon is looking at the ICL because they understand there is a problem. Something has to change. The ICL may or may not be the answer, but at least Oregon is asking, so I’ll give them credit for it. This type of progressive socialism (and yes, when we have the state subsidize higher education, it IS socialism, ladies and gentlemen) is needed. Our higher education system will only work if we have an appropriate shared responsibility between the taxpayer and the student/family. Where that balance lay is beyond my pay grade, but it clearly isn’t where it needs to be given that the higher education institutions keep overspending, placing even more burden on students and parents.


New Book on For Profit Postsecondary Education

In their new book Private Enterprise and Public Education, Michael B. Horn of the Clayton Christensen Institute and Frederick M. Hess of the American Enterprise Institute facilitate a thoughtful discussion among education leaders on how for-profit education providers can promote quality and cost-effectiveness at scale. The contributors note that for-profits have unique strengths, including the ability to move more nimbly, readily attract capital and talent, and scale more rapidly. But they are not without their weaknesses. For-profits may also be less rooted in community institutions, less stable, and more willing to cut services or personnel.

 Horn and Hess conclude that, given sensible policies and quality control mechanisms, policymakers can leverage the power of for-profit innovation and investment to better serve students.


National Commission On College Governance Created

The Association of Governing Boards of Universities and Colleges announced the formation of a national commission to review how schools are governed and make recommendations for change. Former Tennessee Governor Philip N. Bredesen Jr. will lead the commission, which will be made up of college presidents and board members, business leaders, faculty representatives, association leaders, and experts. (Washington Post, 07/24/13)

Student Loan Rates Near Congressional Action

Dems argue over bill to reduce student loan rates – by Kathryn Baron

Posted: 23 Jul 2013 04:35 PM PDT

A compromise bill in Congress could reverse the doubling of student loan interest rates that took effect at the beginning of the month, saving California students an average of $1,565 in loan repayments. President Barack Obama and Education Secretary Arne Duncan are lobbying hard for lawmakers to approve Senate Bill 1334, dubbed the Bipartisan Student Loan Certainty Act of 2013, as quickly as…

New Book On College Access And Completion

OCCRL is pleased to announce the publication of a new book on college access and completion, edited by Laura Perna, Professor, Graduate School of Education, University of Pennsylvania and Anthony Jones, Deputy Director & Director of Policy Research, Advisory Committee on Student Financial Assistance. The book, titled The State of College Access and Completion: Improving College Success for Students from Underrepresented Groups was recently published by Routledge.   

Chapter authors include Debra Bragg, OCCRL Director, University of Illinois; as well as David Conley, University of Oregon; Jim Hearn, University of Georgia; Don Heller, Michigan State University; Don Hossler, University of Indiana; Bridget Terry Long, Harvard; Tatiana Melguizo, University of Southern California

International Report On Success And Failures Of USA Career Education

Career- and technical-education programs offered by employers and colleges in the United States are diverse and decentralized, and those traits are both their strength and their failing, according to an OECD report. One concern is that program accountability is “relatively weak and fragmented,” especially given that in 2008 an estimated $68 billion in public and personal funds were spent on such training

State Outlook For Higher Education Funding

The American Association of State Colleges and Universities (AASCU) is pleased to present the next installment in its State Outlook series. This briefing discusses economic and state policy issues affecting public higher education at the start of the new fiscal year.

The report discusses economic and state revenue conditions and forecasts that present implications for public higher education funding. The first composite sketch of state funding for public universities in the new fiscal year is provided, the results of which illustrate that most states have begun the process of reinvesting in public higher education in the aftermath of the Great Recession.The report provides a summary of highlights from states’ 2013 legislative sessions involving higher education. Integrated throughout the report are links to an array of information-rich resourc


Get An Associates Degree Before Transferring

A new the Community College Research Center study underscores the value of getting an associate degree, rather than just attending a community college, before transferring to a four-year university. It can increase the likelihood of completing a bachelor’s degree, save students money, and improve their earnings compared with that of earlier transfers. (Education Week, premium article access compliments of, 07/11/13)