Most Agree That Education Is More Valuable Than Ever, But Dynamic Change Continues to Bring Complex Challenges
Higher education is in the spotlight this year, thanks to the presidential election’s focus on cost and affordability, and if there is one issue that thought leaders and educators can agree on, it’s the need for new thinking – especially with respect to financial and operating models. In surveys, discussion papers and reports, the complex topic of financing higher education remains central and influential in other issues from shared governance to new models of learning to data-informed decisions at all levels.
Example: A new report by the American Council of Education (ACE) and co-authored by Louis Soares, vice president of the Center for Policy Research and Strategy, calls for “rethinking the university’s ‘business model’…not to become like a business, but rather to analyze how processes, technologies and resources are used to deliver value.” The report calls for institutions to evolve as “networked organizations” of faculty and staff who have a working knowledge of activities, costs, revenues and margins and who are coordinated to make data-driven decisions in an environment of financial transparency.
Example: In May, the National Association of College and University Business Officers (NACUBO) published its report on tuition and revenue trends. Among the findings: tuition discount rates (what colleges offer to students in the form of institutional scholarships) reached 49% for freshmen, a “staggering” number even before the federal and state loans that students might bring into the mix. Revenue growth is stagnant – 3.2% at research universities and 1.8% at comprehensive universities – and 37.5% of institutions reported enrollment declines in their freshmen classes as well as across their entire undergraduate bodies.
Example: Some governors and legislators are stepping aggressively into institutional policies with headline-making clashes over spending, politics, curricula and campus social practices. The latest example is underway at the University of Louisville, where Kentucky Gov. Matt Bevin dismissed all board members and the university’s president in mid-June, and the following week faculty members stepped in, warning the shakeup could jeopardize the university’s accreditation and spark a “governance crisis.”
Example: Noting the universities must evolve and adapt to survive and thrive, boards “must have vision and the discipline to execute institutional strategy as informed by goals, KPIs and dashboards. They must believe in the value of shared governance to transform the university into one that both breaks new ground and produces predictable and repeatable outcomes for students,” one state university board chair contended in the May-June issue of Trusteeship Magazine, published by the Association of Governing Boards.
Higher education policy across the board is a leading issue on the campaign trail, the American Association of State Colleges and Universities (AASCU) notes in its 2016 higher education policy brief. In addition to the more emotional issues of campus sexual assault, guns and undocumented students or those with federal deferred status, among the top 10 issues are: keeping college affordable, improving institutional outcomes and degree production, meeting state economic needs, aligning secondary-postsecondary standards, free community college and student loan refinancing and debt assistance.
Close seconds, according to higher ed presidents and other thought leaders, are personalized online learning and other advances in academic technology, partnerships with private enterprise, college athletics and other new models of learning.
Value, Costs and Financing
These and other discussions often begin with an affirmation of education’s “value.” The ACE opens this way: “Higher education is more important than ever to both individual opportunity and national competitiveness. While the pressures vary across stakeholder groups, college and university leaders, public policymakers and students and families are eager for new ways to deliver and receive a quality and affordable postsecondary education. Moreover, there is a growing expectation that college and university presidents, provosts and chief financial officers will use data to drive decisions, including those about overall institutional expenditures, needed investment in innovation and the tie between these dollars and student outcomes.”
Thus, despite public, political and educational concerns about student debt and college costs, there are many signs that higher education remains valued, necessary and an important philanthropic investment. And many institutions are seeking solutions that respond to the public outcry about costs while developing creative solutions. For example, in mid-June, the University of Tennessee System was poised to consider a 2.2% tuition increase, the lowest percentage hike in more than 30 years. “Shout it from the mountaintop,” University of Tennessee System President Joe DiPietro quipped before the board of trustees meeting. As part of the overall proposal, some students at UT-Martin (which has many first generation and lower income students) will participate in a restructured fee program called “Soar in Four,” designed to reduce the cost of obtaining an undergraduate degree by incentivizing completion in four years.
Yet nationally the trends are often in conflict, indicating a still fluid and dynamic environment in which most of the big issues remain unresolved. For example, while paying for a college education is increasingly tough on the middle class and as student debt grows, states are still spending dramatically less on public higher education. Meanwhile, the evidence shows that college graduates earn more and have more career choices. Higher education endowments are growing and philanthropic investments to education exceed most other categories, yet the richest institutions are disproportionately benefiting. More details are provided below.
Value of a Degree
More than ever, obtaining a college degree is the best option to finding a good job, says Georgetown’s Center on Education and the Workforce. Of the 2.9 million “good jobs” produced in the U.S. economy since 2008, 2.8 million (or nearly 97%) went to college graduates. (“Good jobs” are defined in the report as paying the median household income of $53,000 or more annually and with the majority receiving health benefits and employer-sponsored retirement plans.) Meanwhile, the wage difference between college and non-college graduates nearly doubled – from 33% to 62%, even as the supply of graduates grew. Managers, STEM and healthcare professionals accounted for the majority of growth in the good jobs tier. Middle and lower wage jobs have recovered at a slower rate.
Using data from the U.S. Census Bureau and the Bureau of Labor Statistics, studies by the New York Federal Reserve and Pew Research Center have consistently shown that young adults with college degrees make more money, have lower rates of unemployment and are less likely to be living in poverty than those with just a high school education. In May 2016, the unemployment rate for those with a bachelor’s degree or higher was 2.4% compared with 5.1% for high school graduates with no college education and 7.1% for those who never completed high school.
While the price of college has more than doubled, when adjusted for inflation, since 1986, more and more public and private institutions, including public research universities, are explaining to students and families what their tuition money funds in practical terms. Their reports describe the actual dollars invested or yielded, along with metrics and measurements of progress, in such areas as commercially sponsored research, regional economic development and the economic and social impact of alumni. Such data-driven efforts, such as those from the Institute for Research on Innovation and Science (IRIS), are aimed at countering skepticism because today, “trust us” is not enough, explains Jason Owen-Smith, who oversees IRIS.
When a college investment is analyzed like a bond or stock, comparing costs against accumulated returns, the returns on investment range from 7% to 15% depending on variables such as four-year or six-year graduation rates. Nonetheless, such generalized data is regarded less favorably by some analysts because of the significant variation in costs across colleges – and, as a result in one study, as many as 200 colleges where students on average never fully recouped the costs of their education.
In this environment, fundamental shifts would increase students’ ability to receive the best return on their investment, according to the Indianapolis-based Lumina Foundation – (1) measure learning (not time in the classroom), (2) improve financial aid so that students get the most from it and (3) help consumers make good decisions. Shifting both the higher education system and the conversation to these themes would ensure that “yes” is the resounding answer to the question, “Is college worth it?” says Jamie Merisotis, Lumina Foundation president and CEO.
Funding and Affordability
Despite the gradual recovery of the economy since the recession, most states are spending considerably less on public higher education – in fact, 17% less since 2007, according to the Center on Budget and Policy Priorities, using inflation-adjusted figures. Meanwhile, published tuition prices at public colleges are 33% higher in the same period. While grants and other aid decrease the net price by more than half that percentage, according to the College Board, other expenses are rising, such as housing, food and transportation. Overall the picture is mixed: A few states have raised public funding (including Montana and Wyoming) and several have nearly returned to pre-2008 levels (including California and New York) or are increasing funding based on incentives such as in-state enrollments. Collectively, though, more than 40 states are spending less per student.
Middle class families are struggling. Student debt in America is now over $1.2 trillion, surpassing credit card debt. Over the past four decades, the cost of college has increased nearly three-fold, rising 5% to 6% above the rate of inflation, with most of the blame directed at state funding costs.
This has led to fewer enrollments. In fall 2015, the number of students at colleges and universities dropped for the eighth semester in a row, down nearly 2% below the previous year, according to the National Student Clearinghouse. Tuition discounting is at an all-time high of nearly 50% for freshmen, according to NACUBO. In private institutions especially, more accepted students have used this knowledge to negotiate better tuitions and fees, a new reality for colleges and universities.
Philanthropy
The latest report from the Giving USA Foundation, released in June, shows that charitable giving reached $373.5 billion in 2015, up 4% from the previous year. Education grew by 8.8%, the second biggest jump, reaching $57.5 billion. However, the results for 2015 were not quite as strong as in in 2014, when giving surged 6.1%.
Some nonprofits have been concerned that the presidential election might divert donations to candidates and that a rocky stock market could also have a negative effect, according to the Chronicle of Philanthropy. However, stocks have rebounded since January and “some recent studies suggest that elections do not discourage giving to charities,” the journal says.
In other results from the annual Giving USA report:
- Gifts from living individuals grew 3.7% to 71% of total donations.
- Bequests rose by only 1.9% compared with 26% growth in 2014 (but these can fluctuate dramatically depending on how many large estates close in a given year).
- Growth in giving by companies slowed in 2015 (but results may have been heavily affected by a spike in corporate donations in 2014).
- Giving from independent, individual and operating foundations rose 6.3%, reflecting recent trends likely influenced by a robust stock market.
- Only nonprofit foundations experienced a drop in donations, which were down 4% and may be due in part to increasingly popular donor-advised funds.
A report earlier this year by the Council for Aid to Education showed that a small and exclusive group of institutions is disproportionately benefiting from contributions to 3,900 higher education institutions; under 2%, or 60 colleges and universities, received half the total of $40.3 billion given in 2015 as reported in the Voluntary Support of Education survey in January.
One growing niche of alumni giving to colleges and university is directed at nurturing entrepreneurs and cultivating business skills, another report shows. Institutions such as Princeton University, University of Chicago Law School, Carnegie Mellon University, Santa Clara University and New York University have been among the beneficiaries.
Sources:
- “Evolving Higher Education Business Models: Leading With Data to Deliver Results,” by Louis Soares, Patricia Steele and Lindsay Wayt, American Council of Education, 2016.
- “Access, Affordability & Survival in American Higher Education,” (NACUBO report), Academe Blog.org, June 10, 2016.
- “U. of Louisville Faculty Group Aims to Thwart Governor’s Shake-Up,” Chronicle of Higher Education, June 21, 2016.
- “The Role of the Board in Transformation,” Trusteeship Magazine, May-June 2016.
- “Top 10 Higher Education State Policy Issues for 2016,” by Thomas L. Harnisch and Kati Lebioda, American Association of State Colleges and Universities, January 2016.
- “Good Jobs Are Back: College Graduates Are First in Line,” Georgetown University Center for Education and the Workforce, August 17, 2015.
- “New York Fed study: College degree is still a good investment, despite costs,” Minneapolis Star-Tribune, June 24, 2014.
- “PBS NewsHour: Facing skepticism, colleges set out to prove their value,” by Jon Marcus of The Hechinger Report, January 22, 2016.
- “College Calculus: What’s the real value of higher education?” by John Cassidy, The New Yorker, September 7, 2015.
- “Yes, College Is Still a Good Investment and Here Are 3 Ways to Make It a Better One,” by Jamie Merisotis, Time.com. October 22, 2015.
- “States have cut money for higher education 17 percent since the recession, report finds,” by Mikhail Zinshteyn, The Hechinger Report, May 19, 2016.
- “Special Series: Middle Class Pain – Families Struggle to Afford College,” By Emmeline Zhao, RealClear Politics.com, June 16, 2016.
- “Been accepted into college? Now it’s time to start negotiating for a better price,” by Adrianna Skibell, The Hechinger Report, March 31, 2016.
- “A Growing Niche in Alumni Giving: Nurturing Entrepreneurs on Campus.” Inside Philanthropy, July 1, 2015.
- “UT Board to consider 2.2 percent tuition increase; lowest percentage hike in 30-plus years,” University Business, 6/19/16.
