College Costs: It’s More Than The Dollars Spent

 Paul Wrubel : Guest Blogger: pwrubel@collegecompany.com

We all know that college costs are rising dramatically. According to the College Board, the typical college price tag has increased by over 30% in the last five years.  But that tells only part of the real story.

A college degree should be attainable in four years or less but across the board it is taking longer.  Depending upon where you enroll, recent figures from the College Board suggest that it will take an average of 6.2 years at a public college and 5.3 years at private colleges. Too often as we assess the increased cost that accompanies extended college, we simply tack on the out-of-pocket costs to the extra years needed to obtain a degree but there is more, much more to consider.

In another recent survey, colleges were asked about the percentage of students who graduated within six years…six years!  Averages in the high eighty percent bracket or above were considered to be solid colleges but few in number.  But wait! What is so laudable about taking six years to complete a four-year program?  Whatever happened to the four-year standard?

Tolerance for a six-year college experience is in part the result of a faulty and incomplete accounting of costs.  When projecting the costs of college, add to the cost mix not just the cash outlay of another year or two but include “opportunity costs” as well.  Opportunity costs refer to the income the student could have been earning as a college graduate if he or she were not languishing an extra year or two at college.  Using this math, the cost of year five or six dramatically escalates.  Thus, as you look into various colleges, it makes sense to ask each college, “What percentage of the students graduate in FOUR years?”  If they respond by saying they don’t know, they do know but they just prefer not to tell you.

So when you are planning to deal with college costs, you would be well-advised to always consider opportunity costs.  That may make some low-cost, “knee-jerk” choices like community college or a local public, four-year college within commuting distance, actually more expensive in the long haul than colleges that may have higher sticker prices but a more predictable, four-year path to a degree.  Remember too, things are not always what they seem.  For instance, in California, with one of the nation’s largest community college systems (110 institutions serving over 2.5 million students), a report published widely in early November 2006, revealed that among those who entered community college with the intent of transferring to a 4-year college, only 1 in 4 actually did that and for those who made the transfer, the total time spent on the road to a college degree was in excess of six years or, put a different way, another $70-100 thousand dollars lost in opportunity costs alone.  This does not include the substantial out-of-pocket cost of college in years five and six.  Even more sadly, fewer than 1 in 10 who went to community college in search of a two-year (AA) degree ever got one.  In fact, the report noted that about 25% of the new students entering community colleges each year drop out before the second year.  Where’s the bargain in all of that?  (Despite the generally gloomy picture, there may be some downstream benefit.  Several studies have shown that a little college, even if it does not include a degree, seems to have some lasting social and personal benefits.)

The relatively painless remedy for such woes is to understand how you will pay for college before you even look at colleges. With that knowledge, college selection is more likely to be based upon fit and not cost and those of us with long experience will bear witness to the fact that students who are happy and well-adjusted in a public or private college setting typically get a degree in four years.

In an age where college costs are spiraling upward and where the raging bulls in the china shop are increasing student debt and the very real threat to parental retirement security, timing becomes more important.  College should take four years.  Students and parents electing to enroll in colleges that take longer should do so with their eyes and pocket books wide open.  Before you sign on any college’s enrollment dotted line, be certain that you are prepared to pay a premium for any extra semesters needed to attain your degree.  According to the Project on Student Debt, nationally, student indebtedness is averaging about $25,000 with an alarming number of students carrying much higher debt in the range of up to $100,000 or more and because that high-end debt undoubtedly includes private student loans, some are paying interest rates “as high as 19%”. The National Association of Student Financial Aid Administrators (NASFAA) reported in its daily bulletin of October 26, 2010, that the current total amount of college loans taken out in the academic year 2009-10 was $97 billion!  And that includes only public loans. Escalating student and/or parent college debt and opportunity costs share the same parentage, time.

Paul Wrubel is a college adviser and expert on college tuition and costs.

Community College Dropouts Cost Taxpayers Nearly 4 Billion in 5 Years.

 

Low Completion Rates Generate Growing Costs to States

 

Washington, D.C. – Nearly $4 billion was spent by federal, state, and local governments over five years on full-time community college students who dropped out after their first year without completing their certificate or degree programs, according to a new analysis released today by the American Institutes for Research (AIR). About a fifth of full-time students who enroll at a community college do not return for a second year. 

 

For the 2008/2009 academic year, the most recent year for which data are available, nearly $1 billion of taxpayer money was spent on first-year, full-time students who dropped out, about 35 percent more than five years earlier.

 

A copy of the full report – The Hidden Costs of Community Colleges – including state-by-state figures, is available on the AIR website, www.air.org, and on the CollegeMeasures.org website. The report was funded by the Bill & Melinda Gates Foundation. An interactive map of the state results and a breakdown of the financial implications of dropouts at each community college campus are also available at CollegeMeasures.org, a joint endeavor by AIR and Matrix Knowledge Group to help improve outcomes and performance among higher education institutions.

 

Community college enrollment is growing rapidly, and policymakers are calling on these institutions to play an even greater role in the nation’s higher education system. More than six million students attended community colleges last year, 25 percent more than a decade ago, and President Obama has called for five million more community college graduates by 2020.  As community colleges are increasingly relied upon to play a key role in increasing the number of Americans who have a postsecondary education, and retraining jobless workers, more federal and foundation dollars are flowing to these institutions and their students.

 

Analyzing the five academic years from 2004/2005-2008/2009, the AIR study found that the amounts spent on first-time, full-time students who didn’t return for a second year included:

 

•     Almost $3 billion appropriated by state and local governments.

•     More than $240 million on state grants to students.

•     About $660 million in federal student grants.

•     A total of $3.85 billion in federal, state, and local appropriations and grants.

 

“Taxpayers are investing billions of dollars to support students who never complete their first year,” said Mark Schneider, a vice president at AIR who authored the report. “And these students are paying tuition, borrowing money, and taking time away from work to pursue certificates or degrees they aren’t getting.”

 

“We must pay far more attention to the high costs of low retention rates,” Schneider said. “The hidden cost of community colleges is rising,” he said, noting that community college enrollments have grown, while completion rates have fallen.

 

Using U.S. Department of Education data, AIR analyzed full-time students who didn’t return for a second year, while adjusting figures to account for students who transferred to four-year institutions. The cost of dropouts would be higher if part-time students and other government funding, such as direct federal support and capital expenditures, were included in the analysis.

 

With states and localities spending far more than the federal government on community colleges, and nearly every state facing serious budget shortfalls, the cost of community college dropouts to state taxpayers is especially troubling.

 

The annual amount state and local governments appropriated for full-time college students who dropped out before the second year grew by almost a third during the five-year period analyzed by AIR, rising from more than $500 million in 2004/05 to more than $650 million in 2008/09.  Eight states spent more than $25 million in 2008/09 in grants and appropriations on the dropouts. California spent the most, more than $100 million, while Texas and New York each spent more than $40 million that year alone.

 

Federal grants that go directly to needy students have risen in recent years. Over five years, more than $650 million of this federal student aid, primarily Pell Grants, went to first-year community college dropouts, $64 million to California students alone.

 

“Given the central role community colleges play in the nation’s plans to regain its position as the number one country in the world when it comes to college-educated adults, and given the increasing fiscal difficulties facing individual states and the nation as a whole, it is clear that ‘business as usual’ is far too expensive,” the AIR report said.  “We need to find better ways of ensuring that students who enter a community college expecting to earn a degree or a certificate finish the first lap and ultimately get across the finish line.”

 

The postsecondary dropout problem isn’t confined to community colleges. In August, AIR released another report showing how one year of bachelor-degree seeking students who didn’t graduate within six years cost $4.5 billion in lost income and federal and state income taxes.

 

Analysis Of 13 Projects To Increase College Completion

The American Association of State Colleges and Universities (AASCU)  published:

A Guide to Major U.S. College Completion Initiatives

While the United States has focused on improving access to higher education, many other nations have made steady progress over recent decades in increasing educational attainment. As a result, the U.S. has slipped to 15th place in the proportion of younger workers (ages 25-34) who hold a postsecondary degree or certificate; this is a threat to the nation’s global competitiveness.

Spurred by President Obama’s goal to have the highest proportion of college graduates in the world by 2020, a large number of organizations (funded by major foundations) have recently adopted a “college completion agenda” and have undertaken a wide variety of initiatives to boost college completion. This paper provides background information on the topic and summarizes 13 major college completion projects. The origins for each completion initiative are briefly discussed, as are the associated funding partners, key goals and objectives, accomplishments achieved and time frame for future plans.

Authored by Alene Russell, Senior State Policy Consultant

State urged to form strategy to produce needed college degrees

State urged to form strategy to produce needed college degrees

By Erica Perez

Experts warn that California needs to significantly boost the number of undergraduate degrees granted each year in order to turn around the state’s economy and help the country remain competitive.

But a new report [PDF] from Sacramento State University’s Institute for Higher Education Leadership & Policy says the state’s public higher education segments are not on track to meet that goal.

Also, the report finds the UC, CSU and community colleges have no guidance on how to divide increasingly precious state resources among themselves to produce the necessary degrees.

The report insists California needs a more deliberate strategy, rather than the current approach to education finance policy, which involves keeping costs in line with what they’ve always been, cutting spending around the edges and raising revenue from other sources – mostly tuition.

California Watch

Students With Much College Credit Are Target For Completion Increase

Low-Hanging Fruit 
The Institute for Higher Education Policy held a meeting focused on how “near-completers” – people who have earned most but not all of the credits they need for a college degree. The organization also discussed their Project Win-Win, which has helped nine institutions award nearly 600 associate degrees and identify almost 1,600 students who are candidates for earning degrees. (Inside Higher Ed, 09/14/11)

USA Losing Ground In Global College Attainment

Playing catch-up on college completion

The United States trails much of the developed world in college attainment among young adults, a key measure of global competitiveness. One reason: Other nations are pressing harder on quick-turnaround professional degrees. More  Source: Inside Track

Latino’s Will Be Biggest group For postsecondary growth

Latino population growth key issue for the future of higher ed
New data from Pew Research indicates that as “Latinos were responsible for almost 40 percent of the growth in the population under the age of 16 over the last decade,” meeting their needs in higher education will be critical to the United States’ success.
blog.american.com

10 Informative Talks On Postsecondary Education Issues

Onlineuniversities.com, has just
published , “10 Essential Talks on Higher Ed”.  Considering
this overlap in subject matter with this blog,  I want to share these with my readers.  All the presentations are here: (http://www.onlineuniversities.com/blog/2011/10/10-essential-talks-on-higher-ed/). The coverage of issues in postsecondary education is impressive in these 10 talks. Two of my colleagues are included -Anya Kamenetz and Brdget Terry Long

 

New Study Analyses Community College Growth Since 1969

The Growth of Community Colleges in the American States: An Application of Count Models to Institutional Growth
by William R. Doyle & Alexander V. Gorbunov
The authors use a panel data set covering all 50 states from the years 1969-2002 to investigate the growth of community colleges. They find that community college expansion was driven in large part by changes in state populations, while growth was slowed by competition from other institutions. Source: Teachers College Record On Line

10 year Finance Study Shows Broad Access Increases Much Less Than Selective Colleges

Jane Wellman, Delta Cost Project

WASHINGTON – Analysis of revenue and spending patterns in higher education for the 1999 – 2009 period shows growing gaps between public and private institutions, with the public community college sector falling behind in efforts to meet enrollment demand in the face of deep budget cuts. The twenty-year trend toward students and families paying ever larger share of costs continued in all types of institutions. In most cases these tuition increases were the result of cost-shifting as other revenue sources declined, rather than new spending.  (See “Highlight on Haves/Have-Nots”)

 

The report – Trends in College Spending 1999-2009: Where Does the Money Come From? Where Does It Go? What Does It Buy? – examines national college spending and revenue trends in the years leading up to and including the beginning of the current recession. Focusing on the period from 1999 to 2009, the report uses the most recent data available to identify several ongoing and new patterns in how institutions get and spend their money.

 

Tuitions up, other revenues down.  The recession’s effects are visible in all types of institutions, from declines in funding per student in public institutions, and large losses in private gifts and endowment returns.  Public research and comprehensive colleges were able to offset state funding cuts through increases in tuition, resulting in spending levels per student that are virtually unchanged between 2008-2009. Analyses of the relation between tuition and state funding shows that tuition increases were entirely fueled by revenue shifts, rather than increases in spending. Community colleges however saw absolute declines in spending, down by nearly 2.5% per student in 2009. The reductions are likely to continue for several years, as public revenues continue to lag and federal stimulus funds will be spent.  (See “Highlight on Tuition/Spending”) 

 

Instructional spending protected – in public four-year institutions.  Despite these signs of the recession, the report did find some positive trends in 2009. Unlike the across-the-board cuts seen in past recessions, public four-year institutions maintained spending on instruction and student services by shifting spending away from administration and deferring maintenance. This approach indicates a more strategic approach to budget cuts than in previous recessions.

 

Also, colleges and universities in all sectors became more productive in producing degrees from 1999 to 2009 — even with the rapid growth in enrollments. Private non-profit research and master’s institutions still have the highest number of degrees relative to enrollment. However, public institutions have become more efficient in getting students to completion or a certification. The number of undergraduate credits compared to completion declined across both two- and four-year public institutions by eight to 10 credits. (See attached “Highlight on Instructional Productivity”) 

 

Finally, the report includes new data on employee compensation, showing large increases in part-time and graduate teaching assistants and virtually flat spending for employee salaries, but large increases in spending for benefits. Unlike other spending areas, where private institutions outspent public institutions, employee benefits have increased significantly more in public institutions than in private institutions. (See attached “Highlight on Employee Compensation”)

 

“While the data on efficiency and instructional spending are encouraging, we still face serious questions about whether these trends can and will be sustained, particularly as the ripples of the recession continue into the next few years,” said Jane Wellman, Executive Director of the Delta Project.  “If we hope to increase college attainment, we need to find an investment strategy that will get us there. This isn’t it.” 

 

“In Congress and in statehouses across the nation, worry about our dysfunctional system of higher education finance is second only to jobs as a major topic of public and political concern,” said Robert Atwell, Chair of the Board of Directors of the Delta Project, and President Emeritus of the American Council on Education. “It’s a topic where debate is generating more heat than light. We badly need a new national dialogue about future financing for higher education. I am confident that the types of metrics presented in this report will be major contributors to any such discussion.”

 

Trends in College Spending is the fourth in a series of annual reports on higher education finances and results and is available at http://www.deltacostproject.org/resources/pdf/Trends-in-College-Spending-99-09.pdf. Additional information about the report and the Delta Project are available at www.deltacostproject.org.

 

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