Sunday, June 03, 2012
College in 18 Years
Investments aren’t earning anything close to that. Interest rates are historically low, which is great for borrowers but rough on savers. The stock market has returned approximately nothing, before fees, since TB was born in 2001. Bubbles come and go, but by definition, they generally aren’t great long-term investments. Our house is worth less than what we paid for it, though luckily we had enough of a down payment that we aren’t underwater. (Fates willing, I’m hoping to stick around here long enough that the current value won’t matter.) Salary increases aren’t automatic -- I’ve had exactly one since 2008 -- and they’re small when they happen.
A recent report took current costs and extrapolated, using fairly realistic higher-ed inflation figures and basic math. It came up with over $40,000 a year for public, in-state tuition 18 years from now, and over $90,000 for private non-profits. Granted, that’s a little misleading, since it doesn’t account for wage increases, but still; if salaries are going up maybe one percent a year, while tuition is going up five percent per year, the gap will widen quickly. And based on the last few years, I’d have to consider five percent increases a fairly conservative estimate. The public institutions have the same cost drivers as the privates, plus the added burdens of state cuts and unfunded mandates.
(There’s also the annoying disjuncture between percentages and base rates, as anyone in the community college world knows well. If we charge $5,000 a year and go up by $500, that’s a 10% increase -- what the hell are we thinking? If Nearby Private College charges $50,000 a year and goes up $2,000, then it only went up 4% -- what a paragon of fiscal virtue! Except that the paragon of virtue raised costs by four times as much as the wasteful public institution...)
Outside of higher education circles, this is a common topic of discussion. But among academics -- especially those who don’t work in financial aid offices -- it’s largely ignored. If anything, we can’t stop talking about cuts.
We ain’t seen nothin’ yet.
A few predictions:
1. Outside of California, the first major wave of collapses will occur among the small, undistinguished, tuition-driven privates. I can understand paying premium tuition for a premium degree, but $90,000 x 4 for a nothing-special degree? The only way they could survive is with “discount rate” levels that would imperil their survival. I just don’t see it.
2. In California, the publics will start dropping first, and probably very soon. (By “very soon,” I mean within the next two or three years.) I remain hopeful that California is more of an outlier (albeit a huge one) than a harbinger.
3. After the first or second wave of collapses, we’ll start to see massive movement away from the four-year degree as the default model. Instead of the “many paths to one place” model that American higher education offers now, we’ll have a “many paths to many places” model. That will mean certificates and certifications of various sorts, and possibly two-year degrees. Although that will mean wrenching transitions for many of the providers that are built entirely around the four-year degree, on balance, it may not be an entirely bad thing. At least it may help with the burgeoning “dropouts with debt” problem.
4. Many of those alternative credentials will come from providers that don’t exist yet. We may start to see a return to in-house training by corporations, complete with “indentured servitude” provisions that prohibit taking the training and running.
5. People at the elite outposts of higher ed will be the last to know.
I’d love to be wrong on this. I’d love to be able to say, with a straight face, that we’ll get single-payer health care and progressive taxation after the next election, and all will be made right in the world. That would be nifty. But I just don’t see it. And I don’t see the typical American family coming anywhere close to saving up hundreds of thousands per kid, especially when investments are returning approximately nothing. Not. Gonna. Happen.
Trends that can’t be sustained, won’t be. One way or another, the current trend won’t be.
I looked at taking my master's online through a US school and costs started at $40K!
Also, it may be true that more and more prospective students are beginning to feel that higher education isn't really worth all that much nowadays. I remember going to the late, lamented Borders bookstore, and finding one of my former students clerking there. Even with his degree, he couldn't find anything in his field. Maybe a lot of prospective students are hearing stories about graduates finding it hard to get decent jobs, and concluding that a higher degree isn't really worth very much, certainly not worth going into $50,000 of debt.
I think that there is a big bust coming in education in general. First, the whole student loan bubble will collapse, and students will start staying away in droves. Next, a lot of faculty (even tenured faculty) will end up out on the street. Finally, most of education will be entirely online, being taught by remotely located part-time instructors and being supported by call centers in Bangalore. A face-to-face course taught by a human instructor in a bricks-and-mortar classroom will become as rare as an eight-track stereo or an analog film camera.
Here are some possibilities:
1. The need to support high technology. In most businesses, computers are supposedly there to help increase the productivity of the workforce--with computers, one can often do more work with fewer numbers of employees. However, in schools and colleges all of those computers don't really increase anyone's productivity and are little more than extra cost. They have to be there because computers have become an indispensible part of education, and, of course, because all other schools have them as well. The cost of constantly replacing the hardware, the cost of maintenance, and the cost of proprietary software all add to the cost of education in general.
2. All of those federally-mandated and state-mandated rules and regulations add to the cost. These regulations include mandates about privacy, transparency, careful record keeping, as well as the blizzard of paperwork surrounding financial aid. Colleges have to maintain staff to show that they are in compliance with this regulation and that regulation. These rules are generally unfunded mandates, and require a lot of administrative support. A lot of the so-called "administrative bloat" that many readers complain about can be blamed on the need to show compliance with this thicket of rules and regulations.
3. The requirements of accreditation. A lot of effort must be expended in order to keep the accrediting agencies happy. Here at Proprietary Art School, a lot of our time and effort is taken up in outcomes assessment, the latest educational fad. Driven primarily by requirments imposed by our accrediting agency, we must spend a lot of time organizing and reorganizing our assessment effort. Just as soon as we have an assessment program in place, it seems that we have to change it. This constant assessment churn adds to cost.
4. Baumol's cost disease. It still requires 4 musicians to play a Brahms string quartet, just as it did nearly 200 years ago. Not much productivity increase there. In education, it still requires one instructor to teach 20 kids, just as it did a century ago. Not much productivity increase there either. In order to keep from losing these instructors to other, more productive enterprises, one must pay them more.
When I was an undergraduate back in the 1960s, the administration was fairly small. We had a President, whose main job was to raise funds. We had a Dean of the College, a Dean of Men, a Dean of Women, a director of placement, and that was about it. All of them were in the same office, and about the only employee there was a secretary. I suppose if I went back there today, I would find a whole bunch of assistant and associate deans of this or that, plus a whole bunch of employees to support them.
1. Unless your kid has gotten a full ride (tuition and housing), don't pay for them to go wherever they want. It's your money, put some limits on how it's spent.
2. If dream college is affordable and close, then why on earth are you paying for housing (and in many cases a meal plan that doesn't get used)? If it's a drivable distance and a car is available, keep them at home. If they want to live on campus, they can cough up the money.
3. Go half-ies on that all that debt.
And as an aside, make sure that if you have more than one kid, you try and keep your monetary support of college as equal as possible. If your oldest child, who is very bright and manages through smarts and shouldering the bulk of his ugrad tuition for you not to have to give much for his college, make sure you do the same for the sister who barely made it in. (my hubby basically paid for all of his ugrad and then got his double master's at Hopkins. Younger sis barely made it into private SLAC and did okay. The rents paid for all of hers and housing. Very visible disparity that children will remember.)
I think #1 is very true; I have no idea about #2; I have my serious doubts about #3 and #4, though I see the reasoning here; and he's likely right about #5, though the most elite outposts of higher education will have nothing to worry about. In my view, it's the "lower half" of the higher education market that have the most to lose if there really is a "collapse" in higher education, much in the same way that the richest of the rich have gotten even richer during the Great Recession.
Faculty and staff salaries were frozen for a couple years and then have increased with inflation. Before the freeze the increases stayed up with inflation. Not exactly what one would expect with Baumol's cost disease.
The cost of attending (tuition plus room & board) has gone up each year about 1-2 percentage points greater than core inflation.
The situation at the Cal States and CCs is worse, especially the latter where they traditionally charged essentially zero tuition. However, when push come to shove, I'm sure they'll start charging real money for tuition rather than close their doors.
Of course, this drop in state funding is a very bad thing, should be reversed, etc., etc., but it's hardly going to result in the complete collapse of the system.
As for the CSU, some campuses are and will be fine. Others...that's where the chill comes in.
As for your policy point:
What I like about your analysis is the personal aspect of it: what would a prudent person in the upper middle class do that includes a reasonable plan for their retirement as well as their children's education. That is why I agree with your analysis in item #1, every time you post it, which is pretty often. Private School I've Never Heard Of will be in trouble it if isn't already.
Your prediction #2 hinges on one thing, the detail that makes political science a social science. Will Californians come to their senses in time? You can't live forever off of your seed corn. At some point you will have to pay taxes for the services you get. I suspect it might take at least one collapse to get that idea across, so you have a good chance of being right.
Number 3 is already happening in my state, with a CC providing one of those paths. What you might describe as "high end" students (HS students taking a full load of calculus and physics rather than just one "gen ed" class, or freshmen entering with AP calculus credit) are no longer unusual on my campus and others.
I don't get #4, because all of those things already exist from a wide variety of providers and on-going evolution (like a CC offering select 4-year degrees in career areas like elementary education or nursing) is already being seen. The barrier for entry is high if existing public, private non-profit, and for-profit schools are awake.
Here in Arizona, where public institutions are very limited both in number and, overall, in quality, many students willingly pay exorbitant tuition to attend proprietary schools, much of whose content is delivered online and whose quality is about on a par with the community colleges here. No offense intended by that...but a good 30% of my CC students are not competent for college-level studies; another 30% to 40% are good enough for government work but unlucky graduates of a 48th-rate K-12 system -- it's not easy to deliver elite instruction under those circumstances.
Even before the Great Recession, college graduates often found themselves stocking bookshelves, waiting tables, and bagging groceries. Today the same is true of graduates of law schools and MBA programs. That trend has been noticed by the present generation, and no, young people don't see a lot of sense in paying for a four-year program that will do little or nothing to improve their prospects. Quite a few students are opting for shorter or easier programs that will get them jobs, so I'd say that #3 is already under way.
As for #4, programs like that are in place now. My son has taken the equivalent of a master's degree in courses on insurance and personal injury law offered by the company where he has a miserable job as a claims adjuster -- along with holders of high-school diplomas who decidedly did not spend the $130,000 on a private liberal arts degree that his father kindly put into his education. Similarly, the Social Security Administration puts new hires through a paid, six-month training program.
When students come out of college barely able to spell their own names and incapable of figuring what percentage of, say, $140,000 is represented by $18,000, employers have little option but to try to train employees themselves.
Tuition has risen faster than inflation in part because "tuition" now includes amounts that will be redistributed to the students whose parents took vacations and bought new cars instead of saving for college. Once you've spent the money, you don't have to include in the FAFSA.
I wonder if some college will try to lower the sticker price for everyone by dropping the financial aid rigamarole? Could be a promising route for mid-level colleges.
Turns out they pay the schools something slightly North of €10.000 a student each year. The students themselves pay for books, food and housing, although universities seem to also receive a separate subsidy to provide cheap housing to students from low-income families.
Students themselves pay anywhere between €60 and €600 a year in tuition, depending on income again. Some students also receive government stipends intended to cover their cost of living, again depending on family income.
Of course, here we are talking about a political context where, despite an ongoing recession, education represents 50% of local government expenses, and nobody is asking for cuts in that department. But if you want 'a figure', well, here's one possible answer: according to the Flemish government, about €11.000 per year per student should cover operational expenses (teaching staff, physical plant, libraries, admin, etc.).
Of course, we also have single-payer health care. Sigh.
The real question is: Will the value of the knowledge you gain from college be greater than its cost?
It guess it really depends...