Because what the COVID-19 pandemic has done to U.S. education — from preschool through college — it seems like a good time to examine closely where education has gone, and what might happen in the future. WHY is this thorough (nonpartisan) analysis by L.E. Wood III (and a group of experts who are his friends) worth sharing on these GEITP pages? Because GEITP-ers represent a very heterogeneous group (students, postdocs, junior faculty professors, chairs of department or heads of institutes, emeritus faculty, lawyers, judges, real estate agents, nurses, technicians, other lay persons), we all might have children or grandchildren about to enter college, or we are in academia and/or currently are working on federally-funded research, or administering such research.
For those GEITP-ers outside the U.S. — perhaps this analysis is not as relevant. Or perhaps you-all will also find this far-reaching and very insightful essay very intriguing. 😊
THE HIGH COST OF COLLEGE:
IS IT WORTH IT?
By: Leonard E. “Scotty” Wood, III
RESEARCH AND FINDINGS OF THIS COMPENDIUM BEGAN IN THE FALL OF 2019, SEVERAL MONTHS BEFORE THE COVID-19 PANDEMIC. WITHOUT WARNING, THE PANDEMIC POSED IMMEDIATE, MAJOR STRATEGIC AND FINANCIAL CHALLENGES TO THE ENTIRE COLLEGE AND UNIVERSITY SYSTEM. THEY ARE RESPONDING WITH URGENCY TO THE MANY CHALLENGES, SEVERAL OF WHICH WERE IDENTIFIED HEREIN PRIOR TO COVID-19, AND OTHERS RESULTING FROM THE PANDEMIC ITSELF.
SECTIONS I. – XII. REPORT ON THE RESEARCH AND FINDINGS CONDUCTED PRIOR TO COVID-19.
THE REMAINING SECTIONS, XIII. – XVII. CONSIDERATION OF THE IMPACT OF COVID-19 AND THE COMING TRANSFORMATION OF THE WHOLE SYSTEM. IT OFFERS APPROACHES, SOME OF WHICH WILL SPARK CONTROVERSY — WITH THE PURPOSE OF STIMULATING DISCUSSION AND DEBATE, AND TO IMPROVE THE COLLEGE AND UNIVERSITY SYSTEM FOR THE PEOPLE.
I. THE HIGH COST OF COLLEGE – IS IT WORTH IT?
The short answer is – yes, it’s worth it for some, but not for others. This paper is a compendium of scholarly papers, editorials, magazine articles and similar legitimate source material. Its purpose is to engage critical thinkers on the subject, share its information widely across the public, and propose solutions to make the college and university system more effective for everyone involved.
II. IS COLLEGE COSTLY?
Yes. According to the Consumer Price Index (CPI), between 1980 and 2014, the cost of a college education increased by 260% compared with 120% for the CPI itself — i.e. more than double. Student debt stands at $1.5 trillion dollars amongst 45 million students and ex students. More than 5 million are delinquent, and a larger number have loan deferments.
There is another high cost involved. It’s not economic – It’s societal. As Dr. Richard Better, Ohio University Emeritus Distinguished Economics Professor, notes, “many colleges and universities admit students who are academically unqualified because an incentive to do so exists in the form of student loans and government assistance programs. Many of these students fail to graduate, leading to bitter disappointment, financial hardship, and the stigma of being academic failures. “
Colleges have no consequences for this practice, and many argue that they need “skin in the game” — and be incentivized to admit fewer academically unqualified students. Alex J. Pollock , former President of the Federal Home Loan Bank of Chicago, suggests that colleges should pay 20% of the debt obligations of former students facing loan delinquency or default.
III. JUST HOW COSTLY IS COLLEGE?
America spends about $30,000 per student per year. The spending is exorbitant, and it has virtually no relationship to the value that many students get in exchange according to Amanda Ripley, an author published in The Atlantic Monthly magazine, September, 2018.
IV. HOW MUCH DOES COLLEGE COST IN THE REST OF THE WORLD ?
The $30,000 annual cost per student in America is roughy twice the cost per student in other developed countries according to the Organization of Economic Cooperation and Development’s (OECD) “2018 Education At A Glance Report”.
V. HOW WELL ARE PUBLIC HIGH SCHOOL STUDENTS BEING PREPARED FOR COLLEGE?
The National Center for Education Statistics May 2019 Report entitled Public High School Graduation Rates shows that 85% of students in the United States graduated on time, the highest rate ever recorded.
Meanwhile, the publication The Nation’s Report Card reports that only 37% of 12th grade students performed at or above the 12th grade Proficiency Standard in reading. The math scores were slightly lower.
Thus, our country is faced with a striking disparity between public high school graduation rates and academic proficiency. It suggests that most high schools do not base graduation decisions on student academic achievement as measured by reading and math proficiency metrics that are nationally recognized.
This apparent overemphasis on graduation rate at the expense of academic achievement may help explain why so many students fail to finish and graduate from college.
VI. HOW DO AMERICAN STUDENTS PERFORM ACADEMICALLY, COMPARED WITH THOSE IN OTHER DEVELOPED NATIONS?
Sadly, the OECD’s “International Assessment of Adult Competencies” reports that Americans under age 35 with a bachelor’s degree performed below their similarly educated peers in 14 other countries on practical math skills, below 6 other countries in reading skills, and below 13 other countries in their ability to solve problems using digital technology.
VII. WHY ARE AMERICA’S COLLEGE COSTS SO HIGH ?
Many reasons — some preventable, some systemic, and some demographic. Of the $30,000 annual cost per student, college staff and faculty consume $23,000 of the total which is more than twice what Finland, Sweden and Germany spend on these “core” services. In addition, we spend just under $3,400 per student per year on “amenities,” which include non academic activities and athletics, more than 3 times the average in the developed world.
The competition for top students and revenue assistance programs has created a “spending arms race”. Many colleges now compete for out-of-state and foreign students who pay much, much more than in state tuitions. One highly regarded midwestern university reduced its in state enrollment by 4,300 students over the last decade, while adding 5,300 out-of-state and foreign students who pay triple the tuition.
Global rankings of colleges and universities heavily weight the amount of research published by faculty — a metric that has no relationship to whether students are learning as The Atlantic Monthly article noted.
US colleges employ armies of fund raisers, athletic staff, lawyers, admissions and financial aid officers, diversity and inclusion managers, building operations and maintenance staff, security personnel, transportation workers and food service workers. One Ivy League university, for example, has a full-time diversity staff of 150.
Many state legislatures have been spending less and less per student on higher education for the past three decades. The cuts were particularly stark after the 2008 recession. Colleges and universities did not adequately respond with cost reductions but rather burdened students with higher tuition costs.
VIII. HOW AFFORDABLE IS COLLEGE IN AMERICA COMPARED TO ELSEWHERE ?
Alex Usher of Higher Education Strategy Associates reports on the affordability of college — based on the cost of tuition, books, and living expenses, divided by the median income in a given country. By this metric, the US does very poorly, ranking third from the bottom with only Mexico and Japan doing worse.
IX. WHAT HAS HAPPENED TO AMERICA’S COLLEGE ENROLLMENT ?
In short, huge growth driven by the notion that you must have a college education. In 1980, 53% of eligible Americans were enrolled in some form of collegiate education; by 2012, this had grown to 69%. The principal driver of this growth is the societal belief that “you must go to college”.
X. HAS THE GROWTH OF COLLEGE ENROLLMENT PRODUCED A GROWTH IN INCOME ?
NO — when adjusted for inflation. According to the National Association of Colleges and Employers (NACE), the average starting salary in 1980 when adjusted for inflation was $51,047 — compared to $47,823 in 2014, a 6% reduction in income over a 34-year period.
XI. DOES EVERYONE NEED TO GO TO COLLEGE ?
NO. Review any of 100 ultra successful people who did not get a college degree. Names like Bill Gates, Paul Allen, Mark Zuckerberg, Larry Page. Richard Branson, Steven Spielberg and Steve Jobs. Then there are others from prior times — George Eastman, Henry Ford, Thomas Edison, Ray Kroc, Colonel Sanders, John D. Rockefeller, George Washington and Abraham Lincoln.
There are millions of people who just do not benefit from or need a college education, and why should they be potentially saddled with the debt or the stigma? They have other skills that are not compatible with the academic life in a college or university. Why should society shun them for not attending college?
XII. WHY NOT SIMPLY DO WHAT OTHER COUNTRIES HAVE DONE AND HAVE GOVERNMENT TAKE OVER THE FUNDING OF COLLEGE EDUCATION ?
There are significant tax consequences of such a move. Currently, according to the US Census, there are 16.8 million Americans enrolled in colleges and universities. At $30,000 a head, the “bill” for nationally funded college education would exceed $500 billion dollars annually which represents 11% of the current gross expenditures of the federal government. Accordingly, unless the top tax rates were dramatically increased to a point where many high earners would shelter money off shore, all taxpayers would receive a significant tax increase including those who have no reason to attend college.
Then, there is the matter of the current high cost of US college attendance in relation to other developed countries. As a policy question, should American taxpayers pay for what is a comparatively inefficient system? OECD notes that “universities extract money from students because they can. It’s the inevitable outcome of an unregulated fee structure.” In many developed nations, the government limits how much that colleges can extract by capping tuition.
XIII. ENTER COVID-19, WHICH INITIALLY HAD SHUT THE ENTIRE SYSTEM DOWN. IS IT THE GREATEST THREAT TO THE SYSTEM IN ITS HISTORY? IS IT ARMAGEDDON?
There seems to be little question that the COVID-19 pandemic is THE defining moment in the history of the college and university system as well as the smaller communities (eg.-college towns) that are highly dependent upon their local college or university. All sorts of retail establishments in college towns are directly affected by COVID-19, and sadly in some cases these businesses will not survive.
Without warning, all institutions were thrust into crisis management mode and in some cases emergency management mode. Complicating the dilemma is that very few institutions have any meaningful experience with crisis management and expense control, both of which are vital components in an institution’s successful response to the extreme risks (safety, revenue, expense, etc.) created by the crisis.
Colleges and Universities have prided themselves on providing advanced instruction in good business practices, critical thinking and thoughtful decision making. Unfortunately, many have not “practiced what they preach”.
Institutions have relied on revenue sources that now are threatened. Enrollment levels are in jeopardy as millions of parents have lost jobs or businesses and can’t afford to send a child to the college of their choice. Tuitions are in jeopardy as instructional transformation has already occurred with the movement to embrace virtual learning (payers are already litigating for tuition reductions to reflect the lower costs of virtual learning). Every other source of revenue is threatened, some with extinction — to name a few — revenues from on campus room and board (fewer boarding students) , state government funding (states losing tax revenues), foreign students (travel restrictions), athletics (near empty venues). Endowments have sustained major losses, as the investment markets declined.
In addition to the revenue challenges, there are also new expenses that must be incurred in order to function safely. Investments in facilities to maintain social distancing, provision and stockpiling of PPE (personal protective equipment), increased medical expenses to test students and staff, increased maintenance costs to provide necessary sanitizing and training of students and staff to practice safe living. Young people are notorious for believing that medical issues just don’t happen to them, and that is a threat to everyone’s health in a pandemic environment.
XIV. WHAT CAN INSTITUTIONS IMMEDIATELY DO?
1. Consider strategic alternatives and mission — ranging from continuing as is, to downsizing, to specialization, to actual closure.
2. Implement immediate expense reductions and controls to reduce the cash burn rate. Salary reductions for top staff and coaches, hiring freezes, furloughs, benefit reductions, organizational streamlining, etc.
3. Reduce tuitions for those courses employing increased virtual learning — as a means of preserving enrollment levels.
4. Reduce or ELIMINATE “feel -good programs” — such as large diversity staffs and courses with questionable academic benefit.
5. Reduce or eliminate entire academic departments and/or extracurricular activities including selected athletics. Only a handful of institutions can be “all things to all people”.
6. Cancel/defer all discretionary capital expenditures (CAPEX). Facility enhancements are nice to have, but unaffordable in the crisis environment.
7. Repurpose facilities no longer in use by renting /leasing/selling to the outside.
XV. HOW WILL THE COLLEGE AND UNIVERSITY LANDSCAPE CHANGE IN THE NEXT FEW YEARS?
Uncertainty and threats to institutions’ very existence — will see Darwin’s Law at work. The strong will survive (and even prosper), the marginal will struggle, and the weakest will close. How many in each category is the great mystery and dependent upon many factors, but chiefly enrollment levels and the effectiveness of college and university leadership in successfully responding to the pandemic and setting the new stage for operations going forward.
COVID-19 temporarily forced movement of instruction to a virtual format across all educational platforms from kindergarten to graduate school. Virtual instruction has been present for years, but largely subordinated to the class room.
A transformation is underway that will significantly change the entire college and university system in different ways for different institutions. New instructional models are emerging, most of them using virtual and related technology, and the college and university landscape will change dramatically over time.
XVI. ASSUMING THAT THE PANDEMIC GETS CONTROLLED, WHAT THEN?
Medical experts suggest that this pandemic and others to come could affect our lives permanently. Social distancing and face coverings in public places could be with us for years to come, creating a “new normal” society. College- and University-age children may be staying at home longer than their parents might prefer — causing a delayed empty nest and perhaps less preparation of the children for productive, independent living.
The long-term answers are uncertain because of this societal transformation and also difficult because the college and university paradigm is so big, so ingrained in our society, and now so threatened, but creative and critical thinking can produce action steps including:
1. Focus on the basic mission of academic achievement, emphasize applied knowledge majors, de-emphasize soft majors. De-emphasize wasteful prestige games among elite schools, gold plating of amenities for students, out-of-control college athletics, and a lax workplace culture that breeds both inefficiency and a stiff resistance to innovation. Budgets should be reduced in non-academic areas, particularly college sports.
2. Grow virtual instruction and, where indicated, blend it with class-room instruction (call it the hybrid model). It can provide significant benefit to students’ academic achievement. Rather than students attending small classes conducted mostly by teaching assistants, they can attend a virtual course conducted by a world-renowned academic who can reach thousands of students simultaneously at a fraction of the per student cost. In some models, a course conducted twice a week could have one virtual and the other in class to assure student debate and interaction where desirable.
There is a potentially significant role for technology companies like Microsoft, Apple, Google and others to partner with institutions by creating new approaches to learning, communication and virtual interaction among students and faculty. However, the danger with this is that even more than now, High Tech will indoctrinate ideology rather than teach facts. It is probable that artificial intelligence (AI) technology will be central to such a new dynamic.
Institutions large and small should consider partnerships — where one institution offers certain courses, while the other offers different courses — but students could blend the two and graduate on time with a joint degree.
3. Adopt the goal of keeping overall bottom line costs at or below CPI with penalties for institutions that fail to meet the goal. Colleges and universities should not increase costs faster than payers’ ability to pay.
4. Increase productivity and facility utilization by moving to year-round schooling — 180 or less annual days of learning is poor utilization of both human and physical resources. Armies and businesses don’t train that way — why should colleges and universities?
5. Offer alternate approaches to learning such as learn on your own time and pay as you go. Learn on your own time requires discipline but it allows the student to work or be an at home parent while attending college. This is currently done ad hoc and could be more efficient and effective if formalized as an alternate learning model.
6. Improve the current federal student loan program by requiring that using their endowments as a funding source, colleges and universities pay a minimum of 20% of the debt obligations of students who fail to graduate. Adopt ceilings on federal student loan debt so that a few don’t benefit at the expense of many.
7. Require that all incoming students take a course in Debt Management so that they clearly learn and understand the advantages, disadvantages and responsibilities of debt, may it be personal, commercial or public debt.
8. Adopt minimum ACT scores for college entry. Require that students pass an academic achievement test in order to graduate from college or university, not just those pursuing professional designations.
9. Base college accreditation on academic achievement, as measured by graduation rates, graduate achievement test scores, career placement results, and graduate earnings vis a vis norms established for each area of endeavor.
10. Convert endowment development marketing from an emphasis on brick-and-mortar naming rights to course-naming rights (e.g. the “John Doe Thermodynamics Lecture Series”). Public Broadcasting System has used this approach successfully for years.
11. Develop a process enabling colleges to determine the “return on investment” of tenured faculty. Develop a faculty code of conduct that rewards unbiased instruction and prescribes sanctions for biased instruction.
12. Publish annual report cards to the general public reporting on tuition history, graduation rates, graduation test results, and other achievement metrics.
13. Adopt tax-free thresholds for college endowments, and tax endowments in excess of thresholds. Require restricted use of the excess endowment tax revenue to support the federal student loan program. Unlimited tax free status is not universal amongst non profit organizations; why should colleges and universities endowments be totally tax free?
14. Replace secondary education college placement programs with career counseling that may or may not lead to college enrollment.
15. Educate the public about the alternatives to college education, and the benefits thereof — in an effort to reduce the stigma of academic failure and the burden of unnecessary student debt.
XVII. WHAT CAN YOU DO TO HELP COLLEGES AND UNIVERSITIES BETTER SERVE THE PEOPLE?
Like any other endeavor in life, helping means getting involved. Stimulate the conversation by forwarding this compendium to people of all ages – family, friends, students, educators, business people, theologians and government leaders at all levels.
You need not drop everything and devote lots of time to this unless you want to. Rather, give it serious thought and engage others in the subject. If colleges and universities are to effectively serve students and payers, they need to know what the people want and need, not what sounds good or feels good.
“Should colleges and universities focus more on specialization, as a means of delivering higher quality instruction at lower cost?” — is an example of what can and should be debated. “Should state universities that have multiple campuses increase concentration of specific subjects at specific campuses rather than offering all subjects at all campuses?”
But what about the uncertainty of whether the “new normal” will see more students staying at home and/or using virtual learning making concentration less important? Will technology companies partner with elite universities and dominate higher learning?
We must find the answers to these questions without “breaking the bank” by minimizing “trial and error”.
The college and university system needs the benefit of critical thinking more than ever, and you can contribute. Get involved. Start by forwarding this to many others.
The author wishes to thank a small group of critical thinkers who reviewed various iterations of this compendium, and provided valuable input. Only the author knows each of the individual contributors, and yet each shares many, but not necessarily all, of the items expressed herein. Without their assistance, this could not have been completed.
Who are they?
A distinguished professor of finance at a major state university.
A senior officer of a major health system with significant fund-raising expertise. A trustee of a small private college.
A former executive of a major insurance company.. A former engineer and business executive.
A woman non-college graduate who broke the glass ceiling at a major company.
Thanks also goes to those individuals and organizations who are mentioned in the body of the compendium.
Who is the author?
He is a retired business executive who spent his career in insurance and employee benefits. He has served on nine Boards of Directors, traveled all 50 states, 67 countries, and remains active in community affairs as a Trustee of a major health system and Chairman of the Planning & Zoning Board in his home city. He has three adult children, all college graduates — two from state universities and one from a private university. His four grandchildren haven’t made choices about higher education — yet.
This compendium is protected by U S Copyright Law but may shared with that understanding.