As enrollment continues to soften at four-year residential colleges, college administrators must increasingly justify the philosophies behind and the costs associated with them.
It’s a sad commentary when colleges must defend what was once perceived to be the best justification for students to attend them.
The older argument fell along these lines:
Attendance at a four-year residential college offers students the luxury to explore their interests, grow in maturity, and broaden their horizons.
Residential colleges impose expectations on students. They must learn to live together. They must utilize the dozens of student-organized clubs and activities that can shape their extracurricular experiences to become well educated, committed, and productive citizens.
In short, the residential college supports the academic interests to provide a comprehensive education for their students.
Indeed, many residential colleges do just that. They have a clear focus, mission statement, and governing and operational philosophy. They offer a wide variety of programming and link their residential experience to in-class philosophy and practice.
But as the market softens, there are growing problems with how residential colleges will develop against a backdrop of the mounting pressures on them.
The first pressure is internal. While many colleges have a respectable sense of self, for countless others the student life programs that shape the residential college experience are often a mishmash “cookie cutter” hodgepodge drawn from peer and aspirant experiences that are not explicitly linked to their college’s strategic direction or even a precise program fit.
A review of most residential college literature, for example, seldom produces a clear statement of mission or how students translate their first efforts at interdependence to independence.
What is the seamless path that prepares them to move psychologically, socially, and culturally into the workforce after graduation?
Second, colleges must be judged ultimately by the buy-in their programs receive, especially from students, staff, and faculty. At many colleges, student life programs operate quite separately from the academic programs they should support.
Further, student life professionals lack the level of respect that the faculty enjoys. They are decidedly junior players in the campus pecking order. Senior administrators often see them less as developmental agents and more as some combination of truant officer and baby sitter.
These problems extend to student life professionals’ relationship with the students. In this regard, campus culture can play a large role in how residential life develops.
More progressive campuses involve students in residential life, including in critical areas like discipline. Progressive campuses often have honor codes and student disciplinary boards. But these processes require that campus administrators share power with students. This act can translate into a teachable moment for students on the best-run campuses. And it can also foster the trust and transparency that make good residential life programs better.
Third, the cost of residential life plays directly into the impact it has on campus. A good residential life program is expensive. Colleges that do not take a hard look at their programs also run the risk of adding programs to ensure comprehensiveness while seldom rejecting what no longer works. The result is that many colleges run a much larger offering of programs than is needed. Students should be able to start new programs, especially when the costs of the proposed program is prioritized and matched to the available resources. But in the end a residential life program is a rationing tool.
As such, residential life administrators can support any program that they choose but not all of the programs that students want. This is where strategy comes into play.
There must be a clear sense of direction, an ability to execute and assess, and a strong connection to the academic programs to determine whether the teachable moment provided by residence life staff meets the academic standards espoused by the college. There must be synergy between student life and the academic programs in a residential setting.
The best educational strategies balance people, programs, and facilities. A residential life program is also an open invitation to intersect the needs of the college with those of the community. In a fully integrated strategy, the social, cultural, wellness, human rights, and philanthropic initiatives supported by residential life programs are grounded in the neighborhood, town, and region. They share common purpose and direction. They avoid duplicating facilities.
In an era of diminishing resources, a robust residential life program is essential to a college’s identity. But if its purpose is unclear, its detractors will take advantage to open residence life to debilitating cutbacks.
The solution begins with a deeper commitment to the four-year residential college. It starts with a reaffirmation of why the residential learning experience defines them and who and what they teach. Their renewed commitment must establish metrics that shape each of the four years in a student’s life, linking the programs to critical outcomes like retention and graduation rates.
A residential college is an expensive way to educate students. Yet for many students, it is the transformative experience of their lives. Its advocates must shepherd its programs into responsible and cost-effective alignment to demonstrate to families as consumers — without apology and with considerable pride — that “you get what you pay for.”
Athletics contribute enormously to college life. They provide a unifying force across the campus community in which the college’s principal stakeholders – faculty, students, staff, alumni, parents, donors, and the community – can rally with pride in support of the institution.
Athletics are often the public face of a college. At the largest institutions, this can sometimes create special risk – think Baylor and Penn State – but for the most part a robust college athletics programs delivers far more than it risks.
Too Often College Sports are Separate and Unequal
Too often athletics can be its own fiefdom. There are times when trustees and donors step across a bright red line in the sand to put athletic interests above the academic program. The faculty are often divided over their benefit, seeing athletics as a competing interest for student time and attention. If college governance works, many of the problems emerging from athletics can demonstrate how a college that typically operates with the complexity of a small city works out the pressures of competing interests amicably.
The role of athletics can take on a very different meaning, depending upon the campus. At the largest NCAA Division I schools, the stakeholders treat sports as the defining factor that shapes their loyalty to the university. They see student athletes as budding national sports figures, at least in their premier sports programs. In many cases, these students stand apart from the rest of the student body and are often treated accordingly.
In Division II and III, student athletes are more like the general student body, but they also play a critical role albeit one with less frenzy and hoopla. One of the best-kept secrets at smaller Division III schools, for example, is that athletic programs can not only improve diversity but also directly affect the gender balance of an incoming class. Maintaining a large football roster, for instance, can offset the skewing toward women who matriculate in greater numbers than men at small liberal arts colleges.
Higher education leadership must make a decision on where administratively to house sports. Their decision is colored by how they see the contribution of athletics to student life.
College Athletics Must Be Aligned With Student Life
However athletics fit into the organizational chart, sports programs must ultimately be seen as the most valuable asset – linking the college’s stakeholders together – in the student life arsenal. But it is critical to break up the athletic fiefdom, even at the risk of trustee and donor angst, to align sports with student life.
The biggest problem is that athletic programs can’t meet their “all in” expenses. Most estimates suggest that only one in eight athletic programs support themselves. This issue will become increasingly important as the pressure to look for internal savings grows as the economic model that shapes a college’s operating budgets moves toward collapse.
How can colleges justify high tuition sticker prices, rising tuition discounts, and decreasing net tuition revenue while continuing to bankroll a wide variety of costly sports programs?
Dispelling the Myth that Athletics Can Bankroll a College
One answer may be to rethink how colleges finance athletics. The sports program costs a lot, especially if scholarships are provided and the college makes heavy investments in people, programs, and facilities to recruit and compete. The costs also increase with NCAA reporting and compliance requirements. Finally, the college, especially at the Division I level, must run almost two programs simultaneously – a competitive program for Division I athletes and a general recreational, health and wellness program for the general student body. The costs in duplicated facilities can be enormous.
Colleges Must Get a Handle on How to Finance Athletics Programs
The bottom line is that we must work to get a handle on how to pay for the costs of college athletics. It is pointless to fight an open battle to reduce the number of college sports, since each finds a committed constituency. But there can be expectations placed on how a college or university runs its sports program and pays its bills.
First, not all sports are equal. It is possible to run a tiered competitive program that allocates resources based upon the importance and level of investment required for each sport while still meeting Title IX guidelines.
Athlete Recruitment Must Be Integrated into Enrollment & Financial Aid Strategies
Second, athletic recruitment must not be a stand-alone operation but fully integrated into enrollment and financial aid strategies. If done correctly, the recruiting and student financial aid packaging can neutralize the overall cost of sports on a campus.
Athletic Facilities Should Be Considered Investments in Community
Third, colleges and universities must see their facilities as community investments. In some cases among sports in lower ranked tiers, it is possible to utilize existing community facilities in their regions. In other cases, these facilities can be designed as public-private partnerships. Whatever the solution, they must not tie up a college’s debt capacity unless this investment makes sense as part of a larger comprehensive solution. Indeed, the development of new athletics facilities is an important opportunity to attract micro-targeted donor interest in a college.
In the end, colleges and universities searching for efficiencies must look at athletics. It must be accomplished with an eye to strengthening a sustainable sports program. But done correctly, it may also be the best way to preserve the role of athletics in student life.
The range and scope of academic programs in higher education has become increasingly complex. New programs emerge almost daily to adjust to consumer demands and workforce needs. Applicants can easily become confused as they attempt to judge quality, complexity, cost, and a return on investment.
The result is often a mishmash of academic offerings developed upon a foundation that no longer seems to be built upon bedrock principles.
What is the purpose of a new program offering?
Is it a response to workforce demands?
Does the program emerge from a particular academic strength for which the college or university is noted?
Do the outputs – notably an education path that leads to a productive life – match the potential of the program?
These questions mask a transition that now faces American higher education. Consumer demands and expectations shift depending upon factors that go well beyond the academic program. One of the most notable shifts since the Great Recession has been the consumer attention paid to why students choose majors in employable fields. The best example is the effort to develop public policy to promote education in STEM fields.
By itself, choosing a STEM field is an admirable decision. America needs more scientists, mathematicians, and engineers. The jobs often pay well, and STEM graduates contribute enormously to the common wealth.
But the country also needs social workers, poets, and museum curators. For America to prosper, its policy makers must not pick winners and losers, narrowly choosing economic benefit and workforce development in key fields over breadth and the social good in American society.
America is only great when it is as complex as the problems that it faces and the potential that it promises to those who seek a college degree.
This is where American colleges and universities receive a failing grade. It is ludicrous and shortsighted to expect that colleges should adopt a mindset that effectively says, “build it and they will come.” (Apologies to “Field of Dreams.”) To do so would presume that American families understand what colleges do, how they educate, and why they exist.
For many families, a college education is simply a pathway to a good job. In the last century, this argument was sufficient and filled seats when demographics and government policy worked in favor of college admission practices.
College Admissions Now a Marriage of Academics and Business
These days are gone. College admissions has become a marriage of academics and business, introduced by the admissions office through marketing and communications strategies and tactics. Critics will complain that education is a business. They believe that this business mindset is the root cause of many of higher education’s problems.
But others will point out that those families who pay steep tuition prices – tuition discounts disguised as scholarships notwithstanding – have every right to understand more about what they are buying.
College Marketing Fails to Differentiate Academic Programs from Competitors
What is most lacking on this issue is clarity – or expressed differently – a coherent and compelling academic marketing strategy. The problem begins with how colleges market their academic programs. While there are innumerable exceptions that display creativity and focus to lay out quality indicators and outcomes expectations imaginatively, most are described by worthless four-color brochures that fail to differentiate how their program differs from those of peer and aspirant institutions.
Academic Programs Without Direct Career Outcomes Often Given Short Shrift
It’s a shame because there are many outstanding academic programs that receive scant attention after the deals struck among the promotional efforts of marketing, communications, admissions, financial aid, and academic leadership. It’s easy to promote management, nursing, or engineering because these academic disciplines are linked to employment outcomes that are easily understood by consumers.
If a college or university offers a comprehensive field of academic programs, however, it is equally critical to think imaginatively about how students in fields like English, history, and sociology will be shaped by the unique quality of the academic program that they will consider.
Faculty are Keepers of the Higher Education Flame
The answer to “why us” in a particular field begins by emphasizing the quality and creativity of the faculty. The faculty are the keepers of the flame, outlasting students, administrators, and trustees in tenure. This means that faculty must be chosen well and resourced sufficiently.
But the defense of any academic program to a broader constituency must go well beyond dollars to explain what contributions an academic program makes to learning, how it fits into a broader curriculum, and why its presence is important among the academic disciplines offered.
We can predict that as the business of higher education and academics continue to be intertwined, there will be growing calls to defend the size of upper division classes, the amount of money appropriated, and the number of majors graduated in a particular discipline.
Before we get there as a society, however, it is critical to build a case for the academic programs that a college supports by explaining what’s unique and special about them. It may turn out that differentiation communicated through better marketing aligns best with a college’s mission and consumer interest.
A hotly debated topic making the rounds in higher education now is whether American colleges and universities – public and private – face a round of mergers and acquisitions over the next several years.
There are a number of reasons that the discussion of this topic had gained momentum.
Tuition discount rates are creating revenue squeeze for colleges
First, many colleges, especially small private colleges, are seeing their tuition discounts — now at 50% on average for every tuition dollar received — rise while their net tuition revenue remains flat or continues to fall. In fact, there are some colleges where the tuition discount now approaches 70 percent.
Financial health of many schools is questionable
Second, federal composite credit scores, which reflect the overall relative financial health of institutions along a scale from -1 to 3, have shown a good number of institutions to be in questionable financial health. A score greater than or equal to 1.5 indicates the institution is considered financially responsible. Colleges with scores of less than 1.5 but greater than or equal to 1.0 are considered financially responsible, but require additional oversight. These schools are subject to cash monitoring and other participation requirements.
The Chronicle of Higher Education reports that 177 degree-granting private colleges failed the U.S. Education Department’s financial-responsibility test, which seeks to quantify the financial health of proprietary and nonprofit institutions, for the 2014-15 academic year. That’s 18 more than failed the year before.
Further, of the 177 failing institutions, 112 (63%) are nonprofit and the rest are for-profit. For the previous year, 58 percent of the 159 failing institutions were nonprofit.
Third, Moody’s has revised its outlook for U.S. four-year higher education to stable from negative, reflecting the expectation that the sector’s business environment will neither erode significantly nor improve materially in the next 12-18 months. Until this latest ratings change, higher education had received a negative rating since January 2013.
Moody’s rating suggests that higher education is at best treading water and not in a robust recovery from the impact of the Great Recession.
Fourth, there is growing anecdotal evidence of a struggle over financial health. Nearly four of ten private colleges reported that they still had available seats in their upcoming admissions class last year. On the public side, some states are considering closing or merging small and underperforming (often rural) campuses. The number of students entering community colleges is also dropping. Years of underfunding public sector institutions have produced problems like the collapsing infrastructure and structural deficit issues at respected institutions like UMass Boston.
In addition, much of the public discourse over projected closures like Sweet Briar College, failed merger attempts, and persistent rumors of financial distress continue to feed the higher education gossip circuit.
The cumulative effect is to pit trustees, staff, faculty, students, and alumni against one another as the blame game over failed efforts at transparency and worse indications of poor stewardship shake higher education’s foundations.
Free tuition at public schools could be detrimental to private institutions
The newest wrinkle addresses the likely impact that variations in the free public tuition proposals might have in the 35 states where such proposals have arisen. In New York, for example, a number of private college and university presidents with whom I have spoken recently wondered what will happen when the state uses the program to encourage New York State families to vote with their feet for four-year public colleges. The impact on the state’s private and community colleges could be detrimental, lasting and severe.
There’s little question that American higher education is now going through a period of chaos and uncertainty that is upsetting the otherwise glacial pace by which higher education has historically evolved.
But history also tells us that there have been at least two other periods characterized by the same level of disruption. In each case, higher education grew and adapted but did not suffer from an agonizing collapse. It is possible to imagine the possibility and to see the potential amidst the chaos, even if some of it is self-inflicted.
Disruption in higher education may spark creative, positive change
And perhaps this is ultimately the point. Higher education will need to change the way that it operates. Leadership at all levels must modernize and re-think financial models, operating principles, and governing structures. It is likely that American colleges and universities will not be able to rely on traditional state and federal partnerships in the way that they have in the past.
It is essential that institutions begin to imagine broad cooperative efforts that cut across rigid but now outmoded divisions as “public” and “private,” research and teaching, and two-, four-, and graduate-level institutions. Education must be a seamless, lifelong pathway.
The most important change will be to build an aggressive, unapologetic defense of what higher education represents, why what it does is important, and how its colleges and universities contribute in unique ways to American society.
Disruption makes anything possible. Now is the best time to think about how to manage this disruption rather than simply react to what’s coming.
On June 1, President Trump announced that he was taking the United States out of the Paris Climate Accord, making the U.S., Syria, and Nicaragua (which felt the deal was not sufficiently ambitious), the only nations not to support the agreement.
The Paris Agreement sets a series of goals and is voluntary by design. Its value principally is that the agreement got everyone to the table to work on a pressing global issue that crossed national boundaries and directly impacted the quality of life on the planet.
Predictably, there has been a sharp reaction on both sides. Mr. Trump’s critics object to the use of discredited “doomsday” data to justify the American exit. His supporters argue that it was a job-killing “bad deal.” When asked the generic question about whether they were concerned about climate change, over 70 percent of Americans believe that it is a challenge that Americans must face. But differences in opinion emerge as the implications for the American consumer and taxpayer become clearer.
Higher Ed’s First Climate Leadership Conference was 10 Years Ago
The leadership in American higher education has taken a stand on climate commitment for more than ten years. The American College & University Presidents’ Climate Commitment (ACUPCC) emerged when a group of presidents meeting at Arizona State University sent a letter to almost 400 of their colleagues to join them. By June 2007, the ACUPCC, with a signatory group of 284 higher education leaders, went public with the first Climate Leadership Conference. By 2010, there were 697 higher education institutions in all 50 states and the District of Columbia as signatories. Collectively, they represented 5.6 million students.
Higher Education Leaders Encouraged Support of Initiatives to Battle Climate Change
In December 2016, as the transition of national political power began, 235 senior leaders in higher education sent a letter to the new Congressional delegation and incoming presidential transition team. They asked that the Trump Administration continue to support the Paris Agreement, encouraged research based on leading scientific and technical knowledge, and petitioned the Trump Administration to make investments in a low carbon economy.
In letter to Congressional and executive leadership, these college and university leaders noted that they prepare graduates for the American workforce and that their institutions led the country in innovative and ongoing research to address climate challenges, pledging to work with the new administration to meet them.
Decision to Exit Paris Accord is Global Teachable Moment, Beyond Politics
Mr. Trump’s decision to abandon the Paris Agreement moves the discussion to a new stage. The question that higher education leadership must now address is what to do next. It’s an ethics and morals question that will likely also emerge as a global teachable moment for America’s colleges and universities.
Whatever the next step, higher education now has an opportunity to align with an issue of global importance rather than a policy emerging from a political platform promise. In fact, the opportunity is so large and significant that whatever higher education puts forward will move immediately beyond politics.
It is also, therefore, the perfect opportunity for higher education leadership to regain some ground as a leading voice of moral authority as America’s bedrock institutions like higher education continue to come under fire and diminish in reputation.
America’s higher education leaders must have the courage to lead. And they must be strategic in how, when, and where they exercise this leadership. Colleges and universities must not become centers of unfocused, if well meaning, protest. Yet they must vigorously protect the First Amendment rights of their stakeholders, including the right to protest.
That having been said, the optics must show that colleges and universities are the sane and reasonable centers of rational thinking about the impact that climate shifts will have on global society. They must be the “go to” authoritative source that will dampen nationalist efforts to ignore global challenges for political gain.
In American society, colleges and universities are the conduit through which society passes on its history, traditions, challenges, and aspirations. They are where theories are tested and research is undertaken.
The outlandish efforts to deny climate change must be met with ongoing advanced research that supports the efforts by the American educational community to act responsibly and globally. Whatever the action that emerges to Mr. Trump’s decision, it has to be more than a political response. The federal government is now too dysfunctional to operate effectively to address higher education’s concerns on climate.
As Economic Engine, Higher Ed Can Join Cities & States in Battling Climate Change
Higher education needs a game plan on climate change. A good opening step may be to align the higher education message on climate change with local and state authorities. If the states work together to develop a kind of alternative national policy on climate change – even if only temporarily – then colleges and universities might be able to use their moral influence and capacity as economic engines to work with regional economies to offset the worst excesses of the abandonment of the Paris Agreement.
At least it’s a start. At best it may be a pathway to a sane and seasoned approach to addressing a global problem.
The NACUBO study found that the average institutional tuition discount rate for first-time, full-time students hit an estimated 49.1 percent in 2016-2017, up from 48 percent the previous year. The discount rate was highest at small institutions, where the first-time, full-time freshman rate was 50.9 percent for 2016-2017. And perhaps most troubling, more than 25 % of the institutions surveyed have rates well above 50 percent.
Why Does College Tuition Discounting Matter?
Why does this matter?
As Inside Higher Education’s Rick Seltzer points out, the tuition discount rate is defined as institutional grant dollars as a percentage of gross tuition and fee revenue. Translated, a discount rate of 50% means that fifty cents of every tuition dollar never makes it to the college’s bottom line because it is dedicated immediately to financial aid. All but a handful of American colleges and universities are highly dependent on tuition, although they also work to supplement tuition revenue through fundraising in areas like student scholarships.
The problem is that endowments do not fund much institutional grant aid. In 2015-2106, for example, endowments funded only 12.4 percent of institutional grant aid provided to students. In general, 79 percent of aid awarded went to meet need, regardless of whether that need was classified as need-based or merit-based.
Need for Financial Aid Increases but Tuition Revenue is Flat
Mr. Seltzer notes that as tuition prices continue to increase, the share of students with financial need will also likely rise. What’s especially concerning is that the percentage of first-time, full-time freshman receiving institutional grants is estimated to be 87.9 percent in 2016-17. That doesn’t leave much space for the tuition from full-pay students to make much of a dent in the financial aid budget.
The overriding fact is that net tuition revenue per full-time freshman – the cash that supports the college after financial aid — is essentially flat, rising only 0.4 percent in the past year. Worse yet “well over half of survey respondents, 57.7 percent, reported a decline in total undergraduate enrollment between the fall of 2013 and the fall of 2016.” Further, just over half of schools surveyed reported a decrease in enrolled freshmen. The respondents blame price sensitivity, increased competition, and changing demographics as the primary reasons for this decline.
That leaves many colleges in a precarious position. If net tuition revenue is flat, discount rates are rising, the economic headwinds are blowing against them, and their enrollments are declining, financial options are narrowing at most colleges and universities.
A college or university can no longer depend on rising tuition or increased demand to grow its way out of what is now a systemic financial problem.
Discounting Strategies Aren’t Sustainable; Schools Know It but Few Admit It
Yet the most curious result in the survey was on the question of sustainability. In the IHE study, 44 percent of schools reported that their discounting strategies were not sustainable over the long term. Of the remainder, 32 percent said that they were sustainable over the short- but not the long-term. But only 9 percent “were willing to say that their strategies were not sustainable.” They presumably believe that some combination of new programs, better recruitment, and improved marketing strategies could work to improve their competitive position.
Financial aid is a complex question. Many of the colleges now suffering from their discounting practices have increased their discounts, for example, in an effort to serve more financially needy and diverse students. There can be time-specific reasons as well like the development of major new program initiatives.
But the inescapable fact is that American higher education continues to rely on outmoded and archaic financial strategies that used their primary source of revenue – tuition, fees, room and board – to balance out their expenses.
It’s an expense-driven model in which most of the large expenses – financial aid, cost of labor, technology, health care, and debt on capital expenditures – determine the revenue needed, effectively setting the tuition. Any institution increasing tuition much above the cost of inflation, now running at less than two percent, is effectively kicking the can down the road.
Despite the worrisome results of the NACUBO survey, many of us are still betting on American higher education to thrive. It must change how its financial pieces fit together and think imaginatively about how it can finance itself. It is likely that colleges will abandon long-time efforts to finance their capital expenditures exclusively on debt. It is possible to explore creative ways to manage targeted capital campaigns and rethink annual fund efforts. Change will require consortial efforts that move beyond paper and library purchases to see what can be accomplished in common on health care, retirement benefits, and technology.
The NACUBO study forces three conclusions upon us:
Higher education must evolve more rapidly.
The broad philosophical debates among staff, trustees, and the faculty must be about institutional sustainability.
There is only so much time left to take the first big steps.
There is some truth to the saying that those who fail to learn from the past will be doomed to repeat it.
Essentially, this was the message that former Treasury Secretary Larry Summers delivered recently as part of his larger concern that Massachusetts not become complacent despite U.S. unemployment hitting a 10-year low in April.
In an interview with the Boston Globe, Summers compared the problem facing the state — the lure of complacency — to what he found on assuming the Harvard presidency, as Stanford cleaned Harvard’s clock as all things Internet came to dominate the new American economy. The impact locally on Route 128’s hold as “America’s technology highway” was dramatic.
The emergence of biotechnology saved the Boston area from a precipitous decline in economic standing among major innovation regions in a technology-driven global economy.
Mr. Summer’s admits that Massachusetts’ $500 million state deficit might make his call for investment seem a bit odd as Massachusetts’ governor, Charlie Baker, works to close the gap. He argues: “Ironically, sometimes not spending money is taking a much bigger risk than spending money, because it’s gambling with your preeminence.”
Further, Mr. Summers warns that some budget balancing acts, like trying to reign in Medicaid spending (40 percent of the state’s budget) as well as fees on employers and caps on health care might have the opposite effect.
Massachusetts is “Eds and Meds” Capital of the World
Massachusetts stakes a claim as the “eds and meds” capital of the world. Mr. Summers asserts that Medicaid may appear to be a budgetary expense, for example, “but at the margin, it’s coming out of being the place where the smartest scientists want to come and work their miracles.” He suggests that the efforts to end Obamacare and replace it with Trumpcare, moreover, could effectively destabilize the state’s critical health care economy. And Mr. Summers notes that rival technology regions like New York are already making heavy state investments in new life science initiatives.
Mr. Summer’s comments have tremendous implications for the role that American higher education will play in the American economy in the future. When the U.S. House of Representatives passed its version of a new health care bill, it legislated changes that impacted one sixth of the American economy. Separate out how and why this was done. Set aside the timing tied to the first 100 days of the new Trump Administration.
The facts are that the American economy is a little like a three-dimensional chessboard. Any move has a dramatic effect that must be comprehended on multiple levels.
Higher Education Is Foundation of U.S. Economic Competitiveness
There’s much at stake for higher education that reaches beyond the different political philosophy, chronic dysfunction, and incremental governmental bureaucratic practices. From an economic perspective, higher education plays two important roles in the American economy:
The first is that it trains an educated workforce through programs that adjust this education to evolving economic needs.
The second is that the “eds and meds” complexes of America largely moved the American economy – and the regions that they support — into a competitive post-industrial global economy. They are the foundation for the future of American competitiveness in a global market.
These centers of innovation and creativity are typically in urban, blue states or in regions where the voters historically vote or are trending blue. They inhabit one side of a cultural divide in an anxious America. They welcome immigrants, many of whom provide the talent and skill sets to keep the “eds and meds” miracle happening. As such, the “eds and meds” community has a great deal at stake as the states and the federal government move the chess pieces around.
Many in the western U.S. repeat a saying that is pertinent to this discussion: “I’m from the government and I’m here to help.” But, in fact, government at all levels does have the perspective and resources that can move the needle.
What government lacks are the courage and consensus to put an investment strategy in place. Government funding is a rationing tool built on an annual funding cycle. This hardly supports imaginative and enlightened government policy and programs.
We can have the debate over whether higher taxes, deficit funding, or better economic growth will ultimately pay the investment bill. But America must get over its deeply partisan divide to support what drives the American economy.
Mr. Summers was right. Having the vision and confidence to invest strategically — despite the competing pressures on government budgets — makes sense. Combining the social and cultural need to invest in better schools with the economic necessity to make infrastructure and life science investments is a sane path forward.
Last week’s efforts that led to the passage by one vote of a House Republican proposal to change health care illustrates the deeper questions now bubbling up about what Americans demand of their government. The Republican-controlled Senate will now take up their version of a health care plan that is likely to differ significantly from the House plan. Meanwhile the Affordable Care Act (ACA) – tagged by supporters and detractors alike as Obamacare – remains the law of the land.
The present donnybrook is likely to play out over several months. The health care debate is set against an even more volatile backdrop as questions about the federal government’s continuing commitment to Medicaid expansion swirl around the efforts to repeal and replace the ACA. These arguments raise even larger questions about how the government should treat other society-wide entitlements like Social Security.
Almost every American agrees that the government has basic responsibilities in defense, infrastructure, and in other areas that protect and regulate American society and how America relates to the world.
But should its citizens also expect that the government work to improve their quality of life from “cradle through career,” that is, from birth to death?
Whatever the mechanism, should government, coordinated at the local, county, state, and federal levels, determine what quality-of-life “markers” best meet the needs of American citizens? There is an old adage that Democrats must always be stopped from misguided efforts to create new entitlements. The argument goes that once citizens appreciate the new benefit, it is almost impossible to take the entitlement away. Americans must make sense of – and be willing to fund – entitlement programs that improve their quality of life.
Open Since the Great Depression, Entitlement “Door” Unlikely to Close
The plain fact is that the entitlement door swung wide open in the Great Depression and will likely never close. Policy debates over state’s rights, free market solutions, and cost have real meaning but are really more about tactics and philosophies rather than outcome. There are times, like the “guns and butter” policy debates of the Vietnam War years, that inform the partisan arguments over health care emerging from the quagmire of the Washington swamp today.
But voters’ support for entitlement programs has been a given for 80 years. The debate is over even if the skirmishes over tactics, philosophies and funding continue.
We should accept that entitlement programs are a cornerstone principle upon which the foundation of American society is built. Any efforts to end them or diminish their reach or value will meet sharp resistance from American voters. It’s something tangible – like Social Security or Medicare — that Americans feel that their government guarantees to work for them.
Debate About Role of Entitlement Programs is Bigger than Health Care
That having been said one of the most interesting historic policy debates of the 21st century will be the continuing role that entitlement programs play in American society. Central to this debate will be which entitlement programs must be supported and whether there is room for a deeper analysis of how current and potential entitlements contribute most to meet the challenges of the 21st century.
We should prepare for these challenges now.
Americans clearly want a safety net that includes Medicaid, Medicare, and Social Security. The task will be to put these programs on a solid footing, looking at a variety of efficiencies, partnerships, their scalability, and new revenue streams, including tax adjustments to pay for these programs. But within these parameters, any new programs proposed must include progressive thinking about what we mean by entitlement.
Is Education a Privilege or a Right in American Society?
One example illustrates this point: Is education – from pre-kindergarten through college – a privilege or a right in American society?
If we focus on higher education, there’s a pragmatic side to this question. America now competes in a global marketplace, despite the rhetoric about “America first.” We know that a college degree is roughly akin to a high school diploma from a generation ago. Economists studying market and labor conditions estimate that as many as sixteen million jobs requiring at least a college degree may go unfulfilled in the next few years.
Higher Ed Leaders Must Claim College Education as Entitlement
Yet despite the considerable funding available, education is a politicized, chaotic mess that frustrates consumers and policy makers. Higher education leadership must lay out a crisp, common sense justification for why education – specifically, higher education – should move above prisons in the laundry list of fundable priorities.
To be fearless in claiming education as an entitlement right for American citizens, college and university leaders must ask – and answer – bold questions:
Can Americans establish a better, broader definition of “entitlement” that provides a continuous pathway to a productive life from cradle through career?
Is the current definition of “safety net” too narrow and simplistic to meet the global economic demands that America faces?
Is the funding solution to each entitlement different based upon the history, existing revenue streams, and the value to society?
What benefits are Americans entitled to receive from their taxes?
The answers to these questions will shape the quality of life in the United States for generations to come.
Mr. Daniels argued that before the acquisition Purdue had little presence in online education and had “basically been a spectator to this growth.” Kaplan University has 32,000 registered students, but enrollment has been falling for several years. Kaplan’s students are heavily skewed toward military veterans, lower-income students, and members of minority groups, including first generation college students. Their average age is 34, a sharp contrast with the 20-year old average age at Purdue.
Purdue University photo/John Underwood
The deal has a number of parts. For Kaplan the deal offers a profitable way out of a battered reputation and declining enrollments.
Deal Could Be Game Changer for Purdue
For Purdue, the deal may be a game changer if the right puzzle pieces fall into place. Purdue’s total enrollment will grow from 30,000 to 70,000, with 30,000 registered online. The new online initiative will receive no state funds and rely solely on tuition and donations for support.
Under the terms of the deal, which would create a new public university, Kaplan students, academic programs, 15 campuses and learning centers, and academic staff of about 3,000 will become part of Purdue. Kaplan, Inc., the parent company (a part of Graham Holdings that for decades owned the Washington Post), will continue to provide the technology, marketing, admissions, and financial aid, as well as other back-office operations. In return, Purdue will pay Kaplan 12.5 percent of the online program’s revenue, but only after Purdue and Kaplan have both recovered their direct costs.
The deal could stretch 30 years. Purdue will also be guaranteed a minimum of $10 million annually by Kaplan before Kaplan is reimbursed for its direct costs or receives 12.5% of any additional revenue. Kaplan will no longer be subject to the “gainful employment regulation,” that scrutinizes career-focused programs that load debt on to students relative to the income that they will earn.
Proposed Deal Has Critics and Supporters Alike
Many independent analysts suggest that the deal makes sense, although the move also has its critics. For Purdue, the structured deal permits the University to move quickly and efficiently into online education without developing the technology, staffing, marketing, and enrollment start-up costs that it would otherwise incur. It will now compete at a scale and in the same market as other large non-profit online education programs like Penn State. The deal will also improve the national and global reach of a major research university that is best known for its highly regarded science and engineering programs.
Purdue will need to undergo a series of regulatory, accreditation, and internal administrative hoops before the new arrangement takes hold. Mr. Daniels estimates that this process might take several months.
The move by Purdue will be watched carefully across higher education. It represents a startling realignment of the for-profit and non-profit community, in which one of the lead players has an established reputation, but is weighted down by the baggage attached to the highly public criticism of large for-profit educational providers. On the other side, Purdue’s president is perceived as a maverick change agent whose approach may not be received well by Purdue’s faculty who were not part of the acquisition discussions.
Is Purdue-Kaplan Deal the Higher Ed Partnership of the Future?
Beyond the internal dynamics, there are a series of important policy questions to address. If we accept the premise that higher education will evolve at a faster pace because of the accumulated pressures – especially on revenue – that its institutions face, is it likely that the Purdue/Kaplan arrangement is an outlier or instead a prediction of the kind of tectonic changes higher education is likely to face?
In this respect, Purdue provides an interesting case study. What is most intriguing about Mr. Daniel’s approach is that he understands that sustainable growth in the University’s future could not be built off tuition, state appropriations, and debt. Purdue is a research university but also a state institution committed to educating Indiana’s citizens. It must think strategically in a league in which other large research universities play.
A Follow-the-Money Moment for Purdue
As such, this is a follow-the-money moment in which the Purdue brand goes global and the financial underpinnings of what Kaplan will provide pay for the move to online education. Done correctly, the new arrangement will likely improve Purdue’s competitive standing among its peers. If the test fails, then Purdue will become the poster child for why non-profits and for-profits can’t mix.
Despite the uncertainty, Purdue earns an “A” for the effort it has made to move strategically by searching for new resources under new terms and through new arrangements to meet its strategic goals. It left the old understandings and financial foundation for the flagship and branch campuses untouched. Now, we’ll watch to see if big chess moves can match ambition to reality.
Community colleges are the entry point to higher education for millions of Americans, but, according to Inside Higher Education’s 2017 Survey of Community College Presidents, their leaders report significant enrollment challenges and precarious financial support.
Six in 10 of the 236 community college presidents reported a decline in enrollment over the past three years. Their response often was to add new programs, increase strategies to support student transfers, grow their marketing budgets, add new online programs, and freeze or cut tuition. Significantly, most looked first to program enhancements designed to boost enrollment rather than cuts to cover deficits and meet expenses.
Community college presidents report financial matters and enrollment management are top concerns.
The enrollment and financial difficulties faced by community college leaders reflect broader trends. Employment opportunities have increased with the improving economy, for example, causing some enrollment declines. Further, the tactics utilized to stabilize community college finances often reflect the approaches adopted elsewhere among four-year, graduate, and professional schools.
Community Colleges Often First Entry to Higher Education
But what’s most telling is that a uniform communications and marketing message has not yet taken hold to build a case for community colleges.
The plain fact is that community colleges are the defining point of access for most students in the American higher education system.
Well over forty percent of American college students have some educational experience in a community college. For most of these, it is their first college experience.
If community colleges provide primary access in a world of shifting demographics, persistent income inequality, and the failing college and business and financial models that are causing open consumer revolt over sticker prices, should enlightened local, state and federal policies reward community colleges more deliberately for the public good that they provide?
Isn’t it time for policymakers to set basic parameters in place to offer an agenda that sponsors access and better supports the institutions like community colleges which provide it?
Higher Education is Lifelong Learning Experience
For policymakers to make a difference, they must first see what educational consumers already understand – education is a life-long learning experience “from cradle through career” and beyond — that creates a pathway along which citizens travel.
Education remains the great safety valve in American society, assimilating new immigrant groups and providing Americans in general with their best hope to secure a sustainable place in the American middle class.
But the pathway goes beyond access. Getting students into the educational pipeline, as free tuition plans in states like New York and Rhode Island propose to do, is not enough. The likely effect will be to jam the pipeline and blame the students or the institutions when retention and graduation rates do not improve.
Regardless of how the financial pieces are put together, community colleges must have reliable sources of revenue to do their jobs, ensuring that accepted students not only attend but persist and graduate in reasonable time.
A realistic community college operating model is not likely to suggest that they be like four-year colleges, offering a full range of residential and non-academic programming. There is a good case for public/private partnerships in areas like housing, dining, and wellness facilities, however, to support students who need basic services. But any new money that flows into community colleges must assist students to move along the education pathway at reasonable cost.
Community colleges are different from residential four-year institutions. It’s part of the secret to their success. It’s also one important reason why they remain more affordable than most other types of postsecondary education.
In the future, it’s essential to better position community colleges within higher education where internal infighting often erupts over questions of process and prestige. Community colleges are not junior colleges nor are they four-year wannabe institutions. They are the primary access point for most Americans seeking to live out the American dream.
For policymakers, it’s time to take a step back to avoid the pitfalls and costs of populist strategies, band-aid solutions, and knee-jerk, reactive panaceas.
Changes in American higher education must be systemic and systematic. It begins by understanding higher education, how it works, and how and why the pieces fit together.
American higher education institutions must change their operating models, which are now built too heavily on tuition and government aid. Determining new pricing strategies requires imagination and new thinking, but it does not absolve local, state, and federal governments from some measure of continuing support.
Since GI Bill, Higher Education is a Right
American society decided with the GI Bill after World War II that education was a right and not a privilege. In the minds of most Americans, this debate is over.
It’s time to understand instead that a successful and robust higher education system — one that includes community colleges — must be decentralized and well funded to be a continuing safety value.
Education grows the middle class, supports a well-educated citizenry, and develops an employable workforce. It’s not a solution built on incremental funding increases that don’t address, access, choice, persistence, graduation rates, and employability.
But it is an urgent question. How do you build and fund a life-long education pathway that best serves American citizens?
Everyone knows that money plays a major role in students’ college enrollment decisions. How big a role?
According to a recent study by Royall & Co., the enrollment management and alumni fundraising arm of EAB, “almost one-fifth of students who were admitted to their top choice of college or university in 2016 but decided not to go there turned it down because of the cost of attendance.”
The study’s finding was echoed in my recent conversation with a well-heeled mother of a high school senior, who expressed sentiments I’ve heard repeatedly for more than 20 years. Her daughter wanted to attend an Ivy League institution that had accepted her. The mother preferred that her daughter accept a large merit award to a prestigious research university. It was a simple cost-benefit analysis by parents, who likely would not qualify for financial aid, seeking relief from high tuition sticker prices.
The Royall findings were fairly uniform with different SAT scores and minority groups. Royall’s managing director, Peter Farrell, concludes: “Something has happened more recently that’s accelerated change. It could be demographics. It could be what we’re seeing on the macroeconomic scale about low socioeconomic (status) families being pinched. I don’t know the actual causality of this change in sentiment, but the slope line of concern seems to be upticking.”
When viewed from other perspectives with different data, the conclusions are the same. The fact is that over 40 percent of the first-time college experiences of admitted students are in a community college.
How Colleges Market “Cost of Attendance” Matters
The obvious answer may be that the sticker prices – now approaching $70,000 at a handful of the selective private colleges and universities — are the culprit. In their interpretation, however, Royall argues that families are more fundamentally questioning the value proposition. Royall asserts that colleges must focus on both their marketing and aid strategy. It’s not so much the discount but the marketing and packaging of the cost of attendance.
“Cost of College” Result of Many Factors
The Royall study also highlights other problems in how Americans understand the cost of a college education. Much of the confusion emerges from a variety of factors including how colleges price themselves, what role state and federal aid play in cost of attendance calculations, the differences between need-based and merit financial aid, and the growing importance of merit aid among higher income families.
The consumer and political pressures over the level of indebtedness that stretch back to the days in which some states offered free college tuition further compounds this problem.
New York’s Free Tuition Plan Resonating Across Other States
It is especially relevant today as the progressive agenda in American politics moves forward with new free tuition plans. Governor Cuomo’s program to extend free tuition to New Yorkers whose families make $125,000 or less annually is last week’s dramatic example.
But the New York State approach will likely resonate elsewhere as the progressive wing of the Democratic Party seeks programs and strategies that will re-attach the American middle class by re-aligning the Party’s value proposition to popular middle class entitlements.
It’s gone beyond major policy shifts emerging from polling and anecdotes that have formed the basis of some education policy. The fact is that America has a growing student debt problem set against a backdrop of persistent and historically worsening income inequality.
It is equally uncertain that free tuition will do anything to build a seamless pathway for students to improve retention and graduation rates.
For families and independent students, it’s all very confusing. Neil Swidey’s feature in the Boston Globe was a sobering assessment of how students did not fully appreciate the ramifications of their grant and loan commitments.
America’s colleges and universities must bear significant responsibility for the confusion students and families face in determining costs and indebtedness. They are hotbeds of cultural inertia, embracing college aid and pricing strategies from the last century that no longer apply, however noble the original intention might have been.
The hard truth is that the pricing of tuition, fees, room and board has broken down. It’s an “all individuals for themselves” approach that conflates and confuses grants and loans without simple definitions and clear direction. It pits one educational institution against another.
It’s a hopeless educational quagmire because the range of state, federal, corporate, donor and college partners all operate under different rules that make it extraordinarily hard to calculate what and whether to save, where to go, and how to know when you have struck the best deal.
It’s time for common sense to win out in tuition pricing strategies. For families, it begins with a better sense of who’s on first base. For tuition-dependent institutions in an uncertain political environment, time is running out.
One of the great myths about American higher education is that all colleges are wealthy. If most Americans have an mental image of a college, it’s often a bucolic bricks-and-mortar residential facility separated by rolling green lawns, entered through an impressive if forbidding-looking gate, and populated by attractive students who drive fancy cars.
What they can’t see past the stately columns or newest facility highlighted by energetic tour guides is the level of deferred campus maintenance. They fail to comprehend the amount of debt or the inability for a college to sustain its existing campus footprint. They don’t see is that the average discount – the percentage of total gross tuition and fee revenue institutions give back to students as grant-based financial aid – is now 50 cents on the dollar at most colleges. And they seldom appreciate how reasonable staff and faculty compensation, including health and retiree benefits, the impact of technology, and the rising cost of government regulations and reports constrain most college operating and capital budgets.
On one level, a college is a business. But at the same time, it’s a heavily regulated business that produces – in business terms – a product that requires significant inputs of labor, capital, and technology.
College Revenue Streams Are Drying Up
The problem is that college and university sources of revenue are drying up. Consumers are voting with their feet as over half choose public- or locally-supported options like community colleges, for-profit providers, or certificate programs. The sticker price that “sticks” in the minds of these consumers is the widely-reported $70,000 annual price tag at the most selective colleges and universities.
At most colleges, it’s no longer possible to match revenue to expenses by setting tuition prices to meet annual operating needs.
College Endowments Are Not Magical Money Trees
But what about tapping into the endowment? In the minds of consumers and many public officials, an endowment is a kind of imaginary money tree from which additional needs are met.
The reality is that few colleges or universities have large enough endowments to produce significant revenue. In 2015, the National Association of College and University Business Officers (NACUBO) and the Common Fund reported that the 94 institutions with endowments of $1 billion or higher control 75 percent of all endowments nationwide. If colleges typically draw down five percent on a rolling quarterly average, the amount available to most of the remaining 3,900 institutions surveyed is negligible at best.
The other potential sources of revenue are auxiliary services, like residential housing or athletics, or debt. Revenue from auxiliary services are essentially flat, with many colleges using residential housing to support their academic programs. Only one in eight colleges have sports programs that break even. And debt – often used indiscriminately and for the wrong reasons – is a particularly worrisome source of support. Many colleges are at the end of their debt capacity or find the amount capped by trustee action.
Fundraising Campaigns Aren’t Financial Panaceas
What is left is revenue from fundraising. Colleges will sometimes tie a presidential search to the reputation of prospective candidates as potential fundraisers. But the cold facts are that there may only be about 50 colleges and universities in America where fundraising is anything more than running in place.
The problem is that fundraising has become seen as a panacea to cure all ills that plays out like every college is a major research university with a significant, mature fundraising machine in place. To create momentum and garner visibility, most colleges favor a comprehensive campaign. Under this approach, colleges throw almost everything into the mix, including their annual fund, deferred gifts, and any specially cultivated donations. The college establishes targeted goals in specific categories. The president makes periodic reports at campaign events. The college offers updated reports within a specified time frame about how well the institution is doing to reach its stated goal.
Campaigns are expensive, and at times, counterproductive to the immediate goals that a college needs to meet. To assess the success of a comprehensive campaign, multiply the “all in” amount raised annually before the campaign started by the number of years of the campaign. When this number is subtracted from the announced comprehensive campaign goal, how much is needed to reach the announced campaign goal?
Does it really make sense for colleges to play like the big boys when what they are actually doing is re-characterizing money that they are already raising without the costs associated with a full-fledged campaign?
Targeted, Micro Campaigns are Alternatives to Comprehensive Campaigns
For colleges and universities that do not have the money, staff, and alumni and donor base to run a full-scale, multi-year comprehensive campaign, there may be better, more targeted approach. These institutions should consider putting most of their work into cultivating – that is, growing — the annual fund and deferred gifts.
To the extent that a college seeks the optics of a successful campaign, its leadership should think about micro-campaigns that address specific, identified, and fundable campus needs. College stakeholders can touch and feel these advances. The effect is the same, absent the bragging rights to an inflated comprehensive campaign goal.
One size – or approach – does not fit every college. Success in fundraising relies upon common sense and a clear understanding of what’s possible given the scale and resources available.
In post-industrial America, the roles played by large nonprofits – especially its hospitals and universities – power the economic engines in many regional economies. What would cities like San Francisco, Philadelphia, Pittsburgh, and Boston look like without their large educational and medical research complexes? Would other cities, such as Houston, Chicago, Los Angeles, Austin, and Washington, DC, be as vibrant without the diversification made possible by these important economic drivers?
The facts are clear. America may – or may not – regain some of its manufacturing capacity, although this re-growth is likely to be infused with a level of technology certain to assure that what develops is not likely to be your grandfather’s auto assembly line. America may develop energy policies that re-open coal mines even as newer, alternative sources of power move forward to increasingly dominate the energy landscape.
But the future of the American economy is to prepare and lead a global economy. The alternative is to be lost in a political quagmire that will lessen America’s impact and influence on the rest of the world.
Whether you like NAFTA or the Trans Pacific Partnership really doesn’t matter in the end. What matters is that the boat has long since sailed on whether we live and work in a global economy. The relevant questions are how will we be transformed by it? And, which countries will lead it?
Higher Education and Medical Research Are Economic Engines
The heart of the post-industrial economy arguably is the education and medical research complexes that fuel our regional economies. From these pulsing economic engines emerge spin-offs created by entrepreneurs who transform – and effectively recreate — the American economy. Together with small business, they shape the direction of American society, often from the ground up.
President Eisenhower once warned Americans about the dangers of the military-industrial complex. It was an important admonition that has continued relevance in a transforming America. Rules and protocols – matched by common sense and good will – must continue to shape the political, cultural, and economic relationships between politics and the economy.
Trump Administration Proposals’ Troubling Impact on Higher Ed
That’s why two of the Trump Administrations proposed policies, in particular, are deeply troubling. It doesn’t matter whether these policies are part of a first-year executive policy and budget request that is likely “dead on arrival.” They show a predisposition by the executive branch that speaks more to ideology than cost.
The first is the much discussed travel ban, part of a larger discussion about the role that immigrants have and will play in the history of the United States. The future of the travel ban will likely be settled by the courts, but there are some early trends that bear close scrutiny.
According to Inside Higher Education (IHE), “Four in ten colleges are seeing drops in applications from international students amid pervasive concerns that the political climate might keep them away.” For many years now, US colleges have benefited from steady increases in applications from international students. As students, they often pay full tuition and fees, providing a valuable revenue stream for these institutions.
Travel Ban Already Hurting International Applications
IHE’s Elizabeth Redden writes, “the highest reported declines involved applications from the Middle East. Thirty-nine percent of universities reported declines in undergraduate applications from the Middle East, while 31 percent reported declines in graduate applications. Fall enrollment numbers from the region will likely be hard hit by President Trump’s executive order.” Higher education officials find similar trends in China and India, which account for nearly half of the international students in the United States.
Do we really want international students to go elsewhere? Shouldn’t the next great innovations in America come from a global workforce educated here that stays here because Americans – whether native born or naturalized – create a climate that encourages and supports global innovation developed by the best and brightest from across the globe?
Trump Budget Proposal Will Stifle Innovation & Growth
The second problematic proposal, the Administration’s budget blueprint, compounds the first. In a statement on the proposed budget, Mary Sue Coleman, president of the American Association of Universities, was blunt: “This budget proposal would cripple American innovation and economic growth. The President’s FY18 budget proposes deep cuts to vital scientific research at the National Institutes of Health, Department of Energy, NASA, NOAA, and other critical scientific agencies.”
Coleman argues that the budget proposal “would lead to a U.S. innovation deficit, as it comes at a time when China and other economic competitors continue their investment surge in research and higher education. For decades, federal investments in these areas have paid enormous dividends in medical advancements, new technologies, and enhanced national security, and helped to produce high-wage American jobs and the most talented workforce in the world.”
If we accept the premise that America’s nonprofit education and medical centers power the economic engines that fuel the most promising contributors to American economic growth, does it make any sense to damage these global institutions, perhaps irreparably?
In the end, it’s not a “guns versus no butter” decision to favor military buildups over domestic discretionary spending. It’s about labor, capital, partnerships, and investment. At its most fundamental, “it’s the economy, stupid.” Let’s not muck it up.
Let’s set aside the obvious political concerns among presidents about the Trump Administration or the selection of the new U.S. Education Secretary that underscored many of the questions put to the presidents in the IHE survey, which was conducted in January and early February.
It’s really too soon to tell what the new policies will be toward higher education or what rollbacks of disliked Obama Administration programs and dictates are likely to occur. President Trump has paid scant attention to higher education during the election, the transition, and the first months of his tenure.
The higher education community will have a lot to say as positions and platforms become clearer. But these comments should be seasoned and informed after the fact and not anticipate the best hopes or worst fears before the first steps occur.
The findings that address the climate facing American higher education are the most fascinating.
Disconnect Between Academe and Much of American Society
Perhaps the most interesting finding is that the “2016 election exposed a disconnect between academe and much of American society.” Seventy percent of the presidents sense a growing level of anti-intellectualism in American life. Two-thirds of the presidents agreed that campus protests created optics that the American public interpreted as unfriendly to conservative views.
The presidents were especially concerned that the current political climate works against consensus views on science, including but not limited to areas like climate change.
A majority of the presidents agreed that higher education suffered badly in public perceptions, including in areas like campus diversity and inclusion. They believed that campus racial unrest “led many prospective students and families to think colleges are less welcoming of diverse populations than is really the case.”
Campus Leaders Frustrated with Media Focus on Wealthy, Elite Schools
These concerns extend to the heart of the higher education enterprise. Eighty-four percent believe, for example, that media attention to the rising levels of student debt makes a college education seem less affordable than it actually is. These presidents are also frustrated by the media obsession with a few institutions with large endowments that paints all colleges as wealthy when in fact most of them are not. The majority of presidents also agree that the construction of Taj Mahal-like facilities in rising competitive consumer wars contributes to these perceptions.
In addition, the presidents were concerned about the attitudinal gulf between their concentration on students as individuals who graduate as educated citizens and the “graduates as workforce” focus of most of American society.
Alison Kadlek, senior vice president and director of higher education and workforce engagement in higher education at Public Agenda, notes in the IHE survey release: “What we’re hearing is that the tight connection between education and socioeconomic mobility has been weakened for the public, and confidence in college as a certain path to economic security is waning….”
In other areas, there were signs of improving perceptions. Public college and university presidents were increasingly confident, for example, in the financial stability of their institutions. But among the uncertainties and anxieties faced, the one dominant feature remains a weakening public perception of American higher education.
Leaders Have Not Made Strong Enough Case for Value of Higher Education
One lesson seems obvious from the IHE’s survey. American higher education is not building a case that is sufficient – or, more troubling, even compelling — for the role it plays in American society.
Higher education leadership has failed to capture the narrative succinctly to explain the value proposition to American families and their children, politicians, business leaders, and the wider public.
The belief in the bedrock principle that higher education is the best path into the middle class seems increasingly at risk.
Leadership carries with it considerable risk. But if America’s colleges and universities lose control of their own narrative, they subject themselves to a broad-brush analysis that no longer resonates with key stakeholders, like the American families upon whom they depend for tuition and other means of support. Higher education also runs the risk of being painted less than comprehensively, defined instead by one issue or perception rather than the whole of its parts.
In a sense, the best solution is to violate the principle that all politics is local by thinking about how to craft perceptions beyond the college gates.
While it is heartening to articulate a series of high road value statements about the lasting importance of a college education that will always ring true, the message must also account for the realities that colleges and universities face in the 21st century.
In today’s climate, it may be as critical to stress how colleges and universities transform lives, meet workforce needs, and shape the development of American society as to rely on older arguments about educated citizens.
The goal is the same. It’s just that the language needs to be re-imagined and re-stated more clearly.
Many of us have long been proponents of “laboratory” initiatives in the humanities, social sciences, professional and graduate programs that translate academic learning into real world experience.
These initiatives serve a variety of purposes. They make critical inquiry more pragmatic. Most colleges and universities build their academic program on the traditions of the liberal arts. It’s an education that provides a broad and encompassing view of the world. The best liberal arts programs teach students to think not by memorizing but by better integrating what they learn into a comprehensive understanding of an issue. They graduate with an ability to write, articulate their positions, apply quantitative methods, use technology, and work in a collaborative setting.
As an employer, would you rather have an engineer trained in the liberal arts or one trained more narrowly as an engineer without these additional skills?
Arguably, both have similar technical skill sets. But in the first case, the liberal arts engineer also enters the workforce with a capacity to move beyond the narrow technical training to contribute earlier and more meaningfully to his employer. Put in other terms, an engineer trained in the liberal arts is the more logical hire, if the quality of the engineering training is roughly equivalent.
In a sense, it’s the softness of traditional arguments supporting the liberal arts that obfuscates the case for an educational foundation based upon the liberal arts, in whatever field.
The historic argument – which I continue to believe and advocate as a former college and university president – is that the liberal arts create both educated citizens and train graduates for life.
It’s a good political argument but insufficiently pragmatic to address the needs of prospective applicants and their future employers.
College Career Services Are Changing to Meet Marketplace Demands
Market demands change with new workforce demands each day. To offset this shift, colleges and universities have enhanced their liberal arts foundation by expanding the scope and range of their career counseling centers. For undergraduates, they offer more robust internships and externships, technical help in application writing, and increased connections to alumni and parents who are in a position to assist them with employment.
The better career centers also move beyond the “easy sell” degrees like business, management, and engineering. They invigorate the job market prospects for humanists, social scientists, and others for whom career centers are insufficient counselors.
Filling Gaps in Pathway from College to Employment
Yet there is an important gap in creating a seamless pathway between education and employment. Some students need to fill in their time outside the classroom with completing their academic projects. Others must work to meet expenses – especially independent adult students who often have outside responsibilities that place additional pressure on them. The result is that many students have limited ability to access some of the newer “real world” initiatives; despite the broadening effect these experiences have to improve their entry into the labor market.
Northeastern’s Experiential Network: Short-Term, Real Life Collaborations
To answer this problem, Northeastern University in Boston created the Experiential Network (XN). In this program, graduate and professional students work virtually with a sponsoring business or non-profit organization on a short-term project over a six-week period. Students and sponsors work closely to produce deliverables for their employers to inform critical business decisions.
Dr. Charles Kilfoye, senior director of XN, reports: “Employers believe that there is a skills gap in which students must be acculturated to the shifting demands of the job market.” He argues that many adult learners cannot devote more time or interrupt their full-time work schedules to participate in other Northeastern offerings like the co-op program, so they benefit enormously from these more flexible, limited term collaborations.
There are numerous advantages for students who participate:
The XN Network allows students to apply classroom theory to practice in a collaborative setting.
As part of the selection process, students grow their professional networks since they choose where they will interview and work. Each student gets between three and five matches from which to choose.
For many employers, these graduate and professional students often demonstrate maturity that more traditional undergraduates lack.
These projects also align with an academic course, worked through Northeastern’s XN offices. Their students devote about 35 hours over the six weeks to their project. Dr. Kilfoye suggests that Northeastern anticipates market trends and effectively “‘future proofs’ its students by keeping pace with what’s happening in the broader world.”
To ensure success, each project has formative and summative surveys as well as a mid-term review. Students are placed in a wide range of venues that also allows them to think more broadly about how their degrees relate to the shifting demands of the job market.
Student Rupali Agrawal, a graduate student earning an MS in Project Management, said of his XN experience:
“Being a full-time student and executing an XN project takes you out of your comfort zone, and gives you the opportunity to learn professional skill sets. It prepared me to face professional responsibilities.
Learning professional communication etiquette through my Experiential Network project was one of the most valuable things I learned. As an international student, the way we communicate in my country is different from communication here in the United States. Being able to learn these skills before entering the professional world is very valuable.
The beauty of doing an XN project is that it’s an opportunity for students to get practical work experience, delivered right to students.”
One of the most unfortunate results of the overheated political rhetoric that consumed the presidential election, transition, and early days of the Trump presidency has been the unwillingness of either side to see the opportunity for reasoned intellectual debate with those with whom they disagree and perhaps don’t even respect.
Protesters Force Speaker from Middlebury College Campus
The most recent example took place last week at Middlebury College where conservative author and activist, Charles Murray, faced a hostile crowd that forced his speech to be relocated to another site. According to the New York Times, “When Mr. Murray rose to speak, he was shouted down by most of the more than 400 students packed into the room…. Many turned their backs to him and chanted slogans like ‘racist, sexist, anti-gay, Charles Murray go away!’”
Police were able to clear the crowd after considerable effort. A professor accompanying Mr. Murray was injured by protestors as she was escorting him from campus.
Bill Burger, Middlebury’s vice president for communications and marketing, reported that they were “physically and violently confronted by a group of protestors [who] violently set upon the car, rocking it, pounding on it, jumping on and trying to prevent it from leaving campus.”
Charles Murray co-authored The Bell Curve in which he held that there are biological differences in intelligence between racial groups. Murray’s opponents argued effectively that this was bad science and widely discredited. They reasoned that Middlebury’s campus should not host a discussion on topics where one side’s opinion was intellectually unsound and rhetorically weak, only further reinforcing some of the worst biases in American social and cultural history.
A New Litmus Test for “Informed Discussion”?
In doing so, Middlebury’s protestors established a litmus test for informed discussion. Their actions played into the hands of their opponents – especially on a political level – who use their own litmus test to brand debate on college campuses as narrowly ideological, heavily biased, and part of a larger propaganda effort to indoctrinate American students in left-leaning policies and positions.
On one level, Americans can admire the passion that has brought us to the positions that Americans hold on either extreme.
On the other hand, there is a case to be made for more seasoning, maturity, and balance in how America’s colleges and universities foster and encourage political debate about science or any issue on their campuses.
Further, there is real danger in playing out the cards in the wrong sequence.
America’s colleges and universities must remain the place where we nurture the best ideas to protect, incubate and develop new ones.
Some fresh ideas will not stand competing research or the test of time. But it shouldn’t stop anyone from expressing them, providing that the expression is civil.
Colleges Must Practice What They Preach About Tolerance
American higher education must avoid being stamped by their detractors as the intolerant home of limited free speech whose campus communities fail to practice what they preach about tolerance. Why hand the opposite extreme a political weapon with which they will bludgeon you, whether you identify on the left or right politically? Either higher education advocates tolerance or it does not.
Tipping Point in Intellectual Debate
In these days of growing intolerance, we have reached a tipping point in intellectual debate. The U.S. college campus symbolizes what we cherish most about global ideals that transcend even American core values (to the extent that these exist).
American higher education cannot lose its lead as the home of creative inquiry, even when the ideas occasionally have little merit in the eyes of many.
The next months are likely to produce even more heated rhetoric and bigger street protests across college campuses and throughout the country on a variety of proposals that illuminate this growing spirit of intolerance. For those in higher education, demonstrations like the one at Middlebury weaken the moral higher ground that will be necessary to hold positions that will resonate with the American public. At the very least, the guiding spirit must be Dr. King’s non-violent approach to promote an activist agenda.
Upholding Tolerance Requires Leadership
Standing up for tolerance will also require courageous leadership. In this regard, there was a very hopeful moment that emerged from Middlebury’s uproar. Laurie L. Patton, Middlebury’s president, issued a strong moral statement, demonstrating the value of a president who has the courage and maturity to lead a campus.
“Last night we failed to live up to our core values. But I remain hopeful,” wrote Patton. “Last evening, several students, faculty, and staff representing a large spectrum of political perspectives remained in Wilson Hall to discuss the events and to talk about building bridges. Their ability to reach across differences in a rigorous but respectful way was a stark contrast to the events that preceded it. I firmly believe these are the Middlebury values that we have lived so long and that we must strive to embody in the future.”
Teachable moments about tolerance come to us in numerous ways. Let’s hope that the dialogue occurs, and a lesson, long since learned at Middlebury, is now remembered.
It’s enlightening to watch what issues surface when the subject of the faculty arises. Education Secretary Betsy DeVos, whose experience in higher education is minimal, offered her first substantive comments at the Conservative Political Action Conference last week when she called out faculty for silencing free speech: “The faculty, from adjunct professors to deans, tell you what to do, what to say, and more ominously, what to think. They say that if you voted for Donald Trump, you’re a threat to the university community. But the real threat is silencing the First Amendment rights of people with whom you disagree.”
Let’s be clear. There is a case to be made that college campus communities need to be more open to viewpoint diversity, especially with speakers and groups with whom many might disagree. College communities must be careful to permit those qualified to address them and be willing to understand and respect different opinions. A wide variety of opinions are likely found on almost every college campus among students, faculty, staff, and trustees. Campus dialogue should present a full spectrum of their different opinions.
But are culture war politics really the best opening topic through which a new Education Secretary can begin a constructive conversation about higher education, given the deep, dividing, and disruptive issues facing college campuses today?
Don’t Paint All Faculty with Broad Brush
Some within higher education might argue that the most troubling aspect of Secretary DeVos’s comments was not her point about free speech, but rather the broad grouping of all academic staff into a single “faculty” category. It is especially dangerous to include adjunct faculty in any assumptions about faculty.
Adjunct faculty face looming employment issues, challenges that highlight the deep and significant financial plight faced by most colleges and universities. Follow the money – or the lack of it.
It would be wiser and more productive for the Education Secretary to open a dialogue about higher education with her in the role of critical thought partner with a seat at the head of the table.
Adjunct Conditions of Employment Highlight Larger Financial Issues
In fact, the great crisis emerging on many college campuses is not what the adjunct faculty teaches but the conditions of their employment and what impact their employment has on quality teaching. Kevin Birmingham, a Harvard writing instructor, laid this point bare in his speech accepting the Truman Capote Literary Award last fall. Reprinted in the Chronicle of Higher Education, his remarks, “The Great Shame of Our Profession” offer a sober assessment of the state of adjunct faculty, especially as their costs are weighed against other rising expenses borne by a campus.
Mr. Birmingham notes the growth and dispersion of adjunct faculty: “From 1975 to 2011, the number of part-time adjuncts quadrupled,” with many teaching classes at multiple institutions. Indeed, a 2014 Congressional study that found that “89 percent of adjuncts work at one or more institution; 13 percent work at four or more.”
As Birmingham noted, the 2014 study and others highlight the low wages and low-income status of many adjunct faculty:
Median pay per course is $2700.
Thirty-one percent of part-time faculty members live near or below the poverty line.
Twenty-five percent receive public assistance, like Medicaid or food stamps.
His analysis is sharply critical of why institutions flood their disciplines with unemployable PhD’s and how the tenure process is structured, offering a pessimistic outlook on the state of his profession.
Adjunct Pay is One of Many Chess Pieces in College Budget Game
Mr. Birmingham’s argument illuminates the plight of adjunct faculty, but it also demonstrates how universities make ends meet. The cost of labor is the largest single expense driver in most college budgets. If a college operates under an older, creaking financial model – and most do — its operating budget effectively illustrates how administrators move the chess pieces across the board.
The cold fact is that colleges and universities are subject to ever increasing fixed costs in areas like technology and declining revenues because of debt load, growing financial aid discounts, flat auxiliary revenues, and weak fundraising, forcing them into eternal comprehensive campaigns. It is hardly surprising that administrators, including deans, look to adjunct faculty to cut costs. It’s a toxic financial mess.
Yet Mr. Birmingham’s argument exposes the problem. Graduate revenue pays the bills and permits universities to cut costs through effective use of teaching assistants and adjunct faculty. Adjunct faculty often staff new programs initiatives, including online education that further increase profits.
Moving the budgetary chess pieces around permits educators to avoid internal political risk, compensate tenured or tenure-track faculty, and kick the can down the road for the foreseeable future.
The problem is that there is a natural shelf life to this approach, one that is now reaching its expiration date. It’s not a political question like free speech, tenure, or academic freedom. It’s about how we can end the practice of using adjuncts to support the educational status quo, including cutting labor costs through the use of adjuncts to support tenured faculty and full-time administrative staff.
Politicians — including but not only Secretary DeVos — who pay attention to polling assume that student debt and high tuition sticker prices are the cost drivers upon which they should focus. There may be others, beginning with a need to modernize operating models and how we finance them.
The federal government can play an important and helpful role in thinking about how to finance higher education by looking at what is driving costs. But its first actions as a thought partner shouldn’t be narrowly ideological by design.
Thirty years ago, we all understood what the term “culture wars” meant. It was about Mapplethorpe vs. Helms and teaching old, dead, white men vs. revisionist and black history. There were lines. Whichever side you were on, you knew where you stood.
The battle lines changed and have morphed into something quite different today. As the first efforts by the Trump Administration to enact an immigration ban sputtered in chaos, confusion and a “must see TV” legal battle, the implications of the fight over how to provide national security have become clear. So, too, did the historical precedents that informed this newest battle.
It turns out that the new culture wars are also social, economic, and political in nature.
The new battle lines are between visions of American society that are industrial vs. post-industrial in outlook, design, and practice.
Historical Perspectives on Economic Battle Lines
What’s most interesting is that these new lines mirror the pitched battles over industrialization in the early 19th century, especially in England, as machinery replaced manpower in textile production, especially weaving. The warriors then were craftsmen, rooted in an agricultural society, who saw their traditions and way of life threatened by the mechanization of their livelihoods.
The protesters – the Luddites – were English textile workers and independent craftsmen who destroyed weaving machinery to protest the mechanization of textile production. They were fearful that years spent learning their craft were wasted and that unskilled workers would take their place. Eventually, the military suppressed the Luddite movement. England became the world’s leading industrial power throughout much of the 19th century.
Two hundred years later, the parallels persist as America moved from an industrial to a post-industrial economy. Workers in the manufacturing sector have seen their jobs disappear and wages stagnate as income inequality has continued to rise for over twenty years, despite some recent upticks. The presumed culprit is cheaper overseas labor, principally identified as Mexican and Chinese. The Luddites of 19th century industrial England have become the “America first” nationalists of 21st century America.
Globalization and National Security Concerns Interwoven
Symbolized by the debate over renegotiating NAFTA and abandoning the Trans Pacific Partnership, it has become a battle to stem the tide over “free trade” globalization cloaked in concerns about national security. Internally, the battle lines are also cultural, on issues like Planned Parenthood, immigration and refugees, and Supreme Court picks. The philosophies behind these competing claims are decoded into a broader national debate about “American values.”
For the moment, the effect is to split the country almost uniformly, depending upon the crisis de jour. Practically, there is a political dimension with the red and blue states recast, within limits, as “nationalists” and “globalists,” respectively. The problem with the rhetoric today is that people will get hurt. It’s probably where the large crowds protesting immigration policies can do the most good, however, especially if they can humanize the negative impact of “America first” policies.
“Eds and Meds” are Economic Engines
There is another danger, already recognized in cities like Boston, New York, Seattle, Washington, and San Francisco. These are the “eds and meds” capitals of the country whose economies are in each case bigger than those of most countries with which America competes. They are the booming economic engines of the US economy. It’s why the Silicon Valley’s biggest technology players have joined together to speak against the immigration ban.
The stakes are high. How American higher education plays its hand could set the United States on a path that will shape its ability to compete.
To this end, it’s important to have clear strategic goals in mind. Here are some first thoughts:
Higher Education Must Choose Battles Wisely
Build a strategy out of the initial tactical responses that have occurred in response to the early policy initiatives of the Trump administration. Protests are fine – critical, in fact – but choose the battles wisely. America’s leading educators should speak out on policies that affect higher education, linking what they say to social, cultural, and political concerns about American values. Their campuses must be prepared to support them, particularly if they focus on the issues and stay out of the politics.
Higher Ed Must Be Broadly Inclusive
America’s colleges and universities must remove what can sometimes be seen as legitimate criticism and become more tolerant of ideas, including those with which they and their college communities disagree. They must practice what they preach on how best to be broadly inclusive.
Higher Ed Must be Leader in Post-Industrial Economy
“It’s the economy stupid.” American workers list job security as their principal worry. In a world in which “do no damage” should be a primary operating principle, it is dangerous for the American economy to power down, for example, because of knee-jerk immigration policies. We need the best and the brightest with us. But we also need a Manhattan Project version of a Tennessee Valley Authority initiative to move the Rust Belt mindset forward.
The goal is a growing economy to build a robust middle class across the country. America signaled that globalization would undergird the world economy when Bill Clinton signed on to NAFTA.
The trick now will be for leaders – including those who run American colleges and universities – to help America prepare to lead a post-industrial economy.
It will require sane, reasoned debate. Let us begin.
St. Joseph’s president, Robert Pastoor, argued that the College would need about $100 million to be feasible, with an immediate infusion of $20 million needed before the end of June. He stated: “Despite our best efforts, we were not able to escape the financial challenges that many tuition-dependent smaller universities have faced in the past several years.”
Financial Challenges, Decades in the Making, Were Insurmountable
Mr. Pastoor cited extensive debt, fears the College would permanently lose accreditation, depreciated facilities, and pressure from auditors that would limit access to student loans as the reasons for the Board of Trustees’ decision. Last November, an accreditor, the Higher Learning Commission, placed St. Joseph’s on probation through 2018 citing concerns over “resources, planning and institutional effectiveness.”
There are many lessons to be learned from the financial failure of St. Joseph’s College. There are also strong views about the failure of the Board and administrators to demonstrate transparency even if the signs were there after the accreditation actions last November. The finger pointing will likely begin, especially directed to the Board of Trustees, but there’s undoubtedly plenty of blame to go around. The cold fact is that no one expects a college to close even when the signs point to it.
Much of the reporting on the closure focused on the sense of loss felt by students and alumni, who invested their sense of self – psychologically and emotionally – in the place. Students are now scrambling to find a way to complete their education affordably. Alumni feel strongly about their alma mater and wonder if their degrees will continue to hold value.
Impact of College’s Closure on Local Community Cannot Be Ignored
The story of loss that is more often ignored, however, is the impact the closing of a college has on its community. In college communities affected by closures, the economic impact of a college’s business operations suddenly becomes important. In the case of St. Joseph’s, the College employed more than 200 individuals, making it a major employer in a town of 6,000 people in a largely agricultural region. These soon-to-be former employees will face limited options as they begin to think about future employment.
There are also secondary effects on a community when larger employers like St. Joseph’s close. The college is the town’s third largest utility customer after the local hospital and the school district, spending $640,000 last year, according to its Mayor. The ripple effect on local businesses will spread across the region as the employment base shrinks and 900 students spend their consumer dollars elsewhere.
As Melissa Shultz, a local businesswoman and lifelong resident lamented to a Chicago Tribune reporter: “I just don’t want this to become a ghost town.”
The loss to a community is comparable to an auto plant shutting down or a mine closure except for an important distinction. The business of higher education is a public good whose benefits extend well beyond employment. America’s colleges – of whatever size – prepare citizens for the workforce. They are also among the principal economic engines in their region. They bring visitors to Main Street, anchor the quality of life, and provide continuous stable employment in a way that the much touted reopening of the Carrier plant in Indianapolis cannot do.
America can continue to let its Rust Belt deteriorate as demographic shifts depopulate its rural stretches. Or, policy makers can see the impact that inattention has had well beyond the slogans and the politics of nationalism that will delay but not stop globalization. That boat sailed before this century began.
Instead, what is most needed is a kind of Tennessee Valley Authority approach to re-imagining the towns that America’s post-industrial economy will otherwise leave behind.
The closing of St. Joseph’s College is a warning shot to America about the loss of bedrock institutions that defined entire towns.
It was like a death in the family. The solution to solving the problems of the Rust Belt is not simply to find more manufacturing jobs for unemployed workers in new Toyota plants.
Last week, National Association of College and University Business Officers (NACUBO) and Commonfund released their report on the endowment performance of the 805 colleges and universities who responded to their survey. The outlook was fairly dismal and sheds light on the precarious foundation on which American higher education’s financial model is based.
Endowment Returns Fall to Average Return of -1.9%
According to the report, net return on endowments has continued to decline for the second year, returning on average -1.9% in fiscal 2016. The returns dropped the 10-year average annual returns to 5 percent, down from 6.3 percent in the previous fiscal year. Last year’s average return lowered the five-year average rate to 5.4 percent, down from 9.8 percent a year ago.
Both numbers are lower than the 7.4 percent median annual return that most colleges and universities believe are necessary to maintain their purchasing power – supporting “student financial aid, research, and other vital programs” — over time.
College and University Expenses Increase Even As Endowment Returns Fall
As endowment returns fall, expenses on college and university campuses continue to rise. It is not surprising, therefore, that most respondents reported increasing the money that they spent from their endowments, boosting spending at an average of eight percent which took most colleges above the rate of inflation.
There are a couple of ways to look at this anemic endowment growth. Colleges and universities hold endowments over the long-term. If endowment performance is cyclical, then historical trends suggest that the problem will self-correct over time. The second possibility is more troubling.
The plain facts are that the world has become a less comfortable place with rules and protocols that are uncertain. While some aspects of the market continue to do well, general global and national volatility and growing income inequality – among numerous other factors — may affect the complexity that impacts endowment earnings.
Should the courts decide against lifting the immigration ban, the impact on labor and enrollment in college and university settings alone could be dramatic and disruptive.
Further, most colleges and universities do not have the $34.5 billion in endowment that Harvard enjoys, even when Harvard has also slashed the number of its employees in its endowment office.
Colleges and Universities with Smaller Endowments at Greater Risk
Small institutions are particularly at risk, noted John G. Walda, NACUBO’s president and CEO, in an interview with Inside Higher Ed: “…if we have another couple of years of stagnant returns…they’re going to have to seriously consider cutting back on the amount of dollars that are spent at their institutions….” The question that logically arises is from where will this money come?
Can Schools Make Up Endowment Losses with Debt?
One possibility is that colleges and universities with some level of endowments could borrow to cover lean times, especially to replace depreciated facilities or build new ones. Yet the picture on institutional debt was not particularly encouraging either.
Almost 75 percent of the colleges and universities surveyed carried long-term debt. Among these institutions, the average total debt was $230.2 million as of June 30, 2016, up from $219.1 million in the previous fiscal year. Median debt also rose to $61.5 million from $58.2 million. Two-thirds of those surveyed reported decreasing their overall debt; however, indicating a reluctance to make new investments in areas like infrastructure.
Raising Tuition or Fees is Risky Proposition in Current Climate
Another source of income is, of course, the comprehensive fee that consists of revenue generated by tuition, fees, room and board. Political and consumer voices make large tuition spikes impractical and even dangerous.
It is unlikely that many colleges will package comprehensive fee increases much above the rate of inflation, presuming that they are competently managed institutions. Next year’s tuition numbers will begin to be posted after board meetings over the next few months.
Cold Truth: Higher Ed’s Financial Model is Unsustainable
American higher education must face up to the cold truth that it is operating on an unsustainable financial model, one developed in an era of different demographics, political and consumer concerns, and funding options that originated in the post-Vietnam era of rapid enrollment growth.
The world has changed even if the way that we imagine college and university finances has not.
But there is a more pressing, immediate question for American higher education to address. Some Congressional leaders are working to link endowment spending to student scholarship and debt levels, the danger of which is aptly demonstrated by the fiscal 2016 endowment returns.
Consumers who vote with their feet to reject the historic value proposition of high sticker priced four-year colleges will also affect this brave new world. And the Trump Administration is casting a heightened level of uncertainty with its first actions on immigration and the possible appointment of special groups to look at “higher education reforms.”
We live in interesting times. Now is the time to prepare for them.
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