Defining and Disclosing Financial Health

George Cornelius blogged this morning over at Finding My College about the desirability and need for private colleges to disclose their financial health.

No matter how you look at it, we, the U.S. taxpayers, pay dearly to support our higher ed system. Yet, when it comes to the so-called private institutions (the quasi-public colleges), there isn’t much shared with us or with prospective students about the spending and financial health (or lack thereof) of the institutions.

While I can quibble with the notion of quasi-public, it is a familiar argument. Bob Morse at US News & World Report tried making a similar argument years ago that private institutions should be subject to FOIA based on the large amounts of public money they receive. However, the money technically goes to the students, though it does seem to be a bit of a shell game. The money (student financial aid) can only be used at a qualifying provider and that provider makes the determination of eligibility and award. And controls disbursement.

The U.S. Department of Education, and any state that subsidizes quasi-public colleges, should compel the recipients of this largess to disclose conspicuously on their websites their financial statements for the past five years as well as data and information about student learning and outcomes. In other words, prospective students and their families should be given information with which to distinguish the performing institutions from the underperforming ones, and the ones with a future from the ones that are likely to find themselves in the junkyard of failed institutions before the current restructuring of higher ed has run its course.

The Department, and Congress, already require oodles of disclosures. The conspicuousness of these disclosures tends to leave much to be desired. This is also true for their usability. However, when I read George’s post this morning I was intrigued by the thought of what this might look like. In Virginia, when it comes to student-oriented data, the public and nonprofit institutions have no place to hide at the undergraduate level. We publish an awful lot of data, very detailed, with student outcomes out to 10 years. However, it does not touch the student learning issue, nor the financial stability issue.

I’ve mentioned before that there are two criteria that put a private institution on my at-risk list. A retention rate for the first to second year of less than 60% and fewer than 1500 students at an undergraduate-only, or 2000 at a predominantly undergraduate institution. A significant endowment can compensate these risks, but most institutions with these issues  have little to no endowment.

What can’t compensate is an inability to pay bills if the big checks are late. Such as those from the federal government. This is what happened to Virginia Intermont, despite the president personally loaning nearly a half-million dollars to the college. We could require some kind of disclosure as to the percentage of an institution’s total revenues represented by state and federal sources, including student financial aid.This is similar in nature to the 90/10 rule the Department has established for the for-profit institutions.

Even with five years of such numbers, that is only a minimal warning. It seems to me that a “cash-on-hand” warning trend added to this might be appropriate. Every 90 days the institution reports on its website how many days it can operate with current expenditure commitments and cash available. While this may not be directly meaningful to most families and students, it would certainly tell agencies and accreditors something important about the viability and sustainability of an institution.

I would also add a measure explains how much of tuition revenue is used to fund institutional aid, and on average, what students who have to borrow to pay for their attendance and do not receive gift aid, contribute in debt towards gift aid for other students.

Why?

This excellent article from Forbes describes many of the associated problems.

If the whole idea of jacking up a price and then selectively discounting seems a bit nefarious, Crockett takes issue: “Students on campuses pay all kinds of different price points, just like people sleeping in a hotel or flying on airplanes pay all kinds of different prices.”

Does that make it right? Or ethical for a nonprofit?

Given the distorted model in place, perhaps this kind of distorted solution has merit. So long as obtaining student loans is easy and universities continue to chase rankings by leveraging aid and beefing up campus amenities, published prices will continue to rise along with tuition discounts. Thousands of schools will continue to struggle, and enrollment consultants like Noel-Levitz will be more than happy to lend a helping hand.

Yep. So perhaps the president’s proposed rating system (#PIRS) should focus only financial stability.

By the way, speaking of #PIRS, since no one else has picked up on this, Valerie Strauss published this tidbit on her blog entry regarding 50 Virginia presidents signing on to a letter opposing PIRS:

Education Department spokeswoman Dorie Nolt issued this comment about the letter:

I noticed you wrote about the letter from the Virginia college presidents. Here is a statement from me (Dorie Nolt, no Turner necessary) on it:

“We have received the letter and look forward to responding. As a nation, we have to make college more accessible and affordable and assure that students graduate with an education of real value, which is the goal of the College Rating System. In an effort to build this system thoughtfully and wisely, we are listening actively to recommendations and concerns, which includes national listening tour of 80-plus meetings with 4,000 participants. We hear over and over — from students and families, college presidents and high school counselors, low-income students, business people and researchers – that, done right, a ratings system will push innovations and systems changes that will benefit students and we look forward to delivering a proposal that will help more Americans attain a college education.”

She also said there was more information about the development of the rating system on the Education Department website here.

“College Rating System” as opposed to “Postsecondary Institution Ratings System” – this seems like two changes to me: one rating system and only colleges and universities – not the thousands of other postsecondary institutions.

 

Net Price isn’t always

If one is going to write about how net price for college enrollment, it might be useful to really understand how it works. And to understand the College Board is less interested in reality and fact, than supporting its business models.

Taking into account financial aid — some of which comes from the colleges themselves, some of which comes from the government — the average tuition and fees were $12,460 at private colleges last year and $3,120 for in-state students at public four-year colleges, according to the College Board. At those prices, college is an investment with an excellent return for the vast majority of students who graduate.  from How the Government Exaggerates the Cost of College

Putting aside that these figures include tax benefits that don’t show up until the college year is almost done, there are two very practical problems with how they are presented here.

1) The author leaves out the $9500 in room and board, and thus the net price at a four-year public for most students is $12,620. Like it or not, this is a real cost for all students, whether on-campus or not.

2) More importantly, all of the grant aid the student receives (some of which comes from other students, including those have to borrow their full cost of attendance), is based on the total cost of attendance – which includes room and board. Without this consideration, their grants would be far less.

From the College Board report:

The calculations of average net price for full-time undergraduates in Figures 10 and 11, as well as the calculations in online Tables 7 and 8, are a best approximation and are based on the aggregate amounts of each type of aid reported in Trends in Student Aid 2013 and on the allocation of each type of aid across institution types and between part-time and full-time students reported in 1993, 1996, 2000, 2004, 2008, and 2012 National Postsecondary Student Aid Study (NPSAS) data. 

There is no way to use these data to allocate aid intended for tuition and mandatory fees v. non-mandatory fees and other expenses. I’m not sure what value the College Board report has, other than to make people feel good about a myth. I find it terribly misleading, much like their test scores.

The basic issue is this. Living, eating, and having a safe place to sleep are part of the costs of attending college. There is no real net price that excludes those costs, save for students that are fortunate to be able to attend a local college and live with their parents rent-free. To ignore these costs as part of net price is to ignore the realities of most students – especially those attending institutions, public and private, requiring students to live on campus at least the first year. And those students that don’t live near a four-year institution.

 

 

 

There Ain’t No Such Thing As A Free Lunch

There Ain’t No Such Thing As A Free Lunch – TANSTAAFL

When I talk about TANSTAAFL, I am generally referring to the reality of costs, not the social construct the Heinlein described in many of his stories. Society has simply gotten too complex, with far too many structural inequalities not to have a safety net. Instead, I use a TANSTAAFL as a reminder that everything has a price, everything has to be paid for, that you simply can’t get something for nothing. This is even natural law, described by the laws of thermodynamics.

I read something like this excellent blog post  and I am reminded again of TANSTAAFL and the potential costs of Big Data and analytics. When faced with large numbers of people to sort and choose, it makes sense to use screening tools to reduce costs. It’s that you simply can’t get something for nothing. There are trade-offs, some of which are not apparent, some of which have societal impacts. One of these is reliance on math scores for rankings and admission decisions.

I like math and use it heavily most every day. But that is me. Not everyone uses more than arithmetic. This includes a lot of college graduates….and non-graduates that are forced into a college algebra track as preparation for calculus. Non-graduates who are non-graduates in part because of that match track. There is a growing body of support for the idea that students not going into STEM fields need college algebra, let alone calculus, and thus statistics or business math is a better option. Given the continued use and misuse of statistics in the media (and as poor justification for such blog posts as Peter Greene takes on), statistics seems a much better choice.

I am confused though, probably because I don’t have enough data to know whether or not our college graduates score better in math than other countries. On the other hand, I feel pretty confident that our graduation rates would improve if we re-thought our approach to college math. This is a core strategy of the Complete College America Kool-Aid. Thinking back to my time as a math tutor for non-traditional students, I can’t help but think this to be something to consider.

Of course, such a change might have other consequences. We could lose students to that pathway that we really want or need to be exposed to more advanced math. There are other potential costs, I am sure, including the cost of designing the curricula. There (simply) ain’t no such thing as a free lunch.

I could go on, but it is time for the best news show ever – Last Week Tonight.

 

Free parking in the Jungle

Uh-huh, 85 comments about parking; 57 comments about a “more nuanced Bill Gates” and 26 comments on a suggested reading list for Mr. Gates.

Parking still wins 85-83.

For those that may question my suggestion in the last post of “The Once and Future King” as appropriate reading material for Bill Gates, I offer the following:

1) If one can’t defend the liberal arts (and sciences) with liberal arts reading, we should probably give up trying.

2) I’m afraid that Gates, and most others, would overlook the simple and practical lessons about education and life in “The Jungle Books” by Rudyard Kipling.

3) The same folks are likely to miss the point of suggesting Richard Adams’ “Shardik.”

So, while you are perhaps dismayed by my cavalier attitude and dismissal of your ability to comprehend my thinking, I offer this: the current approaches intended to disrupt and improve education are the equivalent of a one-legged man auditioning for the role of Tarzan. By the way, I was called out by my teachers, many, many times for disrupting the education process, and not once did anyone seem to imply that it was a good thing. Just as it takes more than a copy of Easy Rider to be a rebel, it takes more than well-intentioned, well-designed technology to replace, let alone improve upon, high-touch teaching and learning.

Although, I am not a teacher/professor/instructor, so I should probably stay out of the debate about what is good teaching and the appropriate role of technology. I should stick to counting things and analyzing the process and outcomes.

I note tonight that 50 of Virginia’s college and university presidents, public and private, have signed a letter of concern to Secretary Duncan and Virginia’s congressional delegation. I welcome them to the party. I haven’t seen the letter, but this quoted in the article:

“In our judgment, it would be a serious error for students to receive a message that their success in life is evaluated solely, or even primarily, by their earnings, and especially so in the period shortly after earning their degrees.”

Well, not even I think that aspect is about evaluating student success in life, as far as PIRS is concerned. How about ability to repay their loans? Have a family? It is hard to live and enjoy the life of the mind if you spend so much time working to just get by that you never have time to think.

Fortunately, we in Virginia are not limited to short-term wage outcomes. We are about to publicly release data out to  19 years (and shortly after that, 20 years since we just got the data for 2013). I presented the preliminary report to Council on Monday.

Free Parking and the Once and Future King

Sometimes, the higher education community amazes me. In a good way.

But not today.

This morning, as I occasionally do, only today was much later than usual, I sent out a list of articles for colleagues to at least be aware of. This snippet was part of that:

And…it is 10:35 am EDT and this article has received 36 comments already:

http://www.insidehighered.com/news/2014/07/23/rockstar-parking-heavily-subsidized-and-often-lucky-about-get-more-expensive-college

To this point, yesterday’s article on a more nuanced Bill Gates has received only 47 comments….. I am not sure I need say anything more about the values of the readers of InsideHigherEd

There was also a blog post from John Warner about a recommended reading list for Mr. Gates to become better informed about higher education.

It is now 9:48 pm and Warner’s post has received 18 comments, primarily reading suggestions. The parking article is now up to 73. This tells me that if Gates wants higher education to support the Common Core, all he has to do is buy parking spaces for every faculty, staff, and administrator. However, if  indeed the average cost of a parking space is $18,000, that is roughly $72B to cover four million college and university employees. I’m sure he could get a deal to buy existing spaces for a small fraction though.

I’m sure few people think that Gates care what us higher ed folk think about him and what he knows. I suspect though, that if enough people make a point of commenting on a regular basis, word will get to him.

So, I have a reading suggestion. I made it to Warner, but I don’t think he took me seriously. Few enough people do so. My suggestion is T.H. White’s, The Once and Future King.  It was my first reaction to Warner’s tweet for suggestions and 30 hours later I stand by it. To me the story has always been primarily the education of boy and king. Education is about observation, experience, gaining knowledge, and translating those things into understanding and the ability to improve one’s condition. With Merlin’s guidance, Arthur learns that Might does not make Right and that even as king, and to the end of life, Arthur was still learning.

“He would go to war, if King Uther declared one. Do you know that Homo sapiens is almost
the only animal which wages war?”

“Ants do.”

“Don’t say ‘Ants do’ in that sweeping way, dear boy. There are more than four thousand
different sorts of them, and from all those kinds I can only think of five which are belligerent.
There are the five ants, one termite that I know of, and Man.”

“But the packs of wolves from the Forest Sauvage attack our flocks of sheep every winter.”

“Wolves and sheep belong to different species, my friend. True warfare is what happens
between bands of the same species. Out of the hundreds of thousands of species, I can only
think of seven which are belligerent. Even Man has a few varieties like the Esquimaux and
the Gypsies and the Lapps and certain Nomads in Arabia, who do not do it, because they do
not claim boundaries. True warfare is rarer in Nature than cannibalism. Don’t you think that is
a little unfortunate?”

“Personally,” said the Wart, “I should have liked to go to war, if I could have been made a
knight. I should have liked the banners and the trumpets, the flashing armour and the glorious
charges. And oh, I should have liked to do great deeds, and be brave, and conquer my own
fears. Don’t you have courage in warfare, Badger, and endurance, and comrades whom you
love?”

The learned animal thought for a long time, gazing into the fire.

In the end, he seemed to change the subject.

“Which did you like best,” he asked, “the ants or the wild geese?”

****

Sisters, mothers, grandmothers: everything was rooted in the past! Actions of any sort in one
generation might have incalculable consequences in another, so that merely to sneeze was a
pebble thrown into a pond, whose circles might lap the furthest shores. It seemed as if the
only hope was not to act at all, to draw no swords for anything, to hold oneself still, like a
pebble not thrown. But that would be hateful.

What was Right, what was Wrong? What distinguished Doing from Not Doing? If I were to
have my time again, the old King thought, I would bury myself in a monastery, for fear of a
Doing which might lead to woe.

****

“Listen, then. Sit for a minute and I will tell you a story. I am a very old man, Tom, and you
are young. When you are old, you will be able to tell what I have told tonight, and I want you
to do that. Do you understand this want?”

“Yes, sir. I think so.”

“Put it like this. There was a king once, called King Arthur. That is me. When he came to the
throne of England, he found that all the kings and barons were fighting against each other like
madmen, and, as they could afford to fight in expensive suits of armour, there was practically
nothing which could stop them from doing what they pleased. They did a lot of bad things,
because they lived by force. Now this king had an idea, and the idea was that force ought to
be used, if it were used at all, on behalf of justice, not on its own account. Follow this, young
boy. He thought that if he could get his barons fighting for truth, and to help weak people,
and to redress wrongs, then their fighting might not be such a bad thing as once it used to be.
So he gathered together all the true and kindly people that he knew, and he dressed them in
armour, and he made them knights, and taught them his idea, and set them down, at a Round
Table. There were a hundred and fifty of them in the happy days, and King Arthur loved his
Table with all his heart. He was prouder of it than he was of his own dear wife, and for many
years his new knights went about killing ogres, and rescuing damsels and saving poor
prisoners, and trying to set the world to rights. That was the King’s idea.”

“I think it was a good idea, my lord.”

“It was, and it was not. God knows.”

“What happened to the King in the end?” asked the child, when the story seemed to have
dried up.

“For some reason, things went wrong. The Table split into factions, a bitter war began, and
all were killed.”

The boy interrupted confidently. “No,” he said, “not all. The King won. We shall win.”

Arthur smiled vaguely and shook bis head. He would have nothing but the truth.

****

Arthur learned too late the folly of easy answers. Chivalry, a common core of standards for behavior, was not enough, was never going to be enough. If White had written this today, perhaps the quest for the Grail would have been a quest for better standards. As for Arthur, if he had perhaps loved his people more than he loved his idea, things would have turned out okay in the end.

For me, I suspect I will never forget the badger’s question and the answer will always be “the wild geese.”

 

Feedback

A conversation started this morning with John Warner (@biblioracle) about remediation, learning, standards, and writing.

I keep thinking about this exchange, in part because my morning involved a heart-to-heart discussion with the oldest (12) grandelf about the necessity of learning to accept feedback and criticism as part of learning. And that this never really stops, or at least it shouldn’t.

I struggle with what I sometimes consider a lack of feedback (certain amount of insecurity revealed in that statement, I know). I don’t have a lot of people tell me “you really should do/say it this way” or “this should change” etc. I do get the occasional “you do good work” or referred to as the “data guru,” which are very much appreciated but don’t tell me much. I also don’t get much feedback on this or the other blog, but I get enough to keep on keeping on.

So, the feedback I rely on, work-wise, falls into four categories:

  1. My employment agreement gets renewed each year. I’m on an annual agreement and they don’t have to keep me around if I get too obnoxious, troublesome, or produce poor work. (This is really important to me – I like working.)
  2. People keep asking me to do stuff. There are some that are getting a bit carried away with this, but if they value my work enough to ask me to do it, that is valuable feedback.
  3. Institutional leaders use my work to support their arguments even when my work is not strictly flattering of their institution. (I am always watching for any citation of SCHEV Research data.)
  4. Legislators push bills that either require me(us) to do something, or that others use my(our) work.

Of course, I am looking what I have just written and thinking, “Didn’t this really start as a conversation about feedback in writing, you know, communication?”

Uhh, yes. But that is what I do. It just happens to be predominantly numerically-based. I’ve always thought of what I do as essentially an art form because of the Web. Until now, I don’t think I have really thought of it as primarily communication. (Sorry, Dad!) Many times over the last 23 years I have described institutional research as a process of teaching people to count to one. That is the foundational practice, but it certainly doesn’t end there because we have to communicate not only the meaning of one, but all the stories and meanings of the stories of every sum and difference of one. (If you have never seen it, The Story of 1 is a nice little documentary.)

So I am wondering how we teach young people what feedback is, how to recognize it, and how to respond to it. Probably need to teach the difference between good and bad feedback. We need to also model this behavior, because I don’t think everyone is.

About this whole “paying for college” thing

I keep trying to figure out this whole idea behind paying for college. I seem to be missing something.

Most everyone agrees that higher education is a private good. Most people, although not always the same people, agree that higher education is private good.

The first question is how much of either?

But does level matter? Yep, fewer states directly subsidize graduate and professional programs. Less financial aid is available to those students than a decade ago.

Despite the fact community colleges serve a greater number of students who are less than fully prepared for college, they typically receive a fraction of the support of four-year colleges. Fortunately, there are fewer frills (like full-time faculty) at community colleges, and despite lass financial support, they cost much less to the student. (Yes, the state spends less, but since the colleges are supported to a level that matches the needs of their students, attrition is high and completion is something other than timely, and so I would argue the cost is higher. Too many opportunity costs from subsidizing students with little hope of completing given the circumstances.)

So, if we just look at a traditional four-year student at a public institution, we see something like this:

One year of residential college: $24,000 (after a $7,000 subsidy from the state).

Four years, after increases, call it $100,000 for an on-time completion.

If the student came from a relatively poor family, the federal government might have kicked in as much as $21,000 and change. The state may have added $16-20,000, with another $12,000 from institutional aid (which if it does not come from a large endowment, it probably comes from tuition dollars of other students.) So, let’s call it a four-year net price of $50,000, roughly $12,500/year.)

That is $50,000 for the student and their family to cover. Since we assumed earlier the student got a full Pell grant, we probably should assume her family was unable to contribute anything and that the entire $50,000 is in loans.

So, the student borrows $50,000 for a solid degree in English with a 3.4% interest rate overall (which is probably lower than reality). But, she gets a job right after graduation at the median wage for English majors, about $32,000.

So, let’s make a whole host of assumptions.

She enrolls under Pay As You Earn (PAYE) right away.

PAYE remains unchanged structurally and legally for the next 25 years.

The poverty level for an individual grows about 2% annually over time. (Discretionary income under PAYE is household income – 150% of the poverty level for the household based on size.)

She stays single with no dependents.

She gets a good job at the median wage (in Virginia) for BA English majors at $32,000/year.

She stays at the medium wage which increases at 4% per year  (it was 6% for the median wage of English grads of 1992-93. I can tell you more about that next week.) but I don’t see that growth continuing, but it may.

She makes no payments the first year because her income the year she was in school was less than $20,000. Her payments the first year after are about $98. At the median wage for a in BA English in a single household, she just barely exceeds the first discretionary income cap to require payments.

If all goes well in that she has an unblemished employment history and no health problems, and makes only the minimum required payments, then it looks like she will have made just about $60,000 in total payments over 25 years. The remaining value of the loan will be about $34,000 and will be forgiven.

(This is far too much like General Physics 101 – assume five billiard balls on a frictionless surface with the cue ball traveling ……)

In any event, this looks like a relatively good deal for the student. She gets what is really a very low-cost loan with an effective interest rate for 25 years of three-quarters of a percent, I think.

In the end, the federal government writes off $34k in debt that was spent. (Doesn’t this become a back-end tax on everyone? That money is no longer available for other purposes.)

Meanwhile, we have built and maintained an entire servicing industry to manage this process…or expanded the IRS to handle it as some new legislative proposals suggest. I guess this is job creation and is thus a “good thing,” but I prefer more useful jobs.

Of course, if she had gone into engineering, enrolling in PAYE probably would have been unnecessary, and even if she had, unless she expanded her household significantly right away, she would likely have paid off all her debt well before the end of 25 years.

But I am using the non-gendered median wages. Oops. Women made less in both areas, and the annual growth rates for women were a bit less. But that’s based on graduates of 20 years ago, all that pay inequity stuff is resolved now, right?

Another oops…speaking of 20, PAYE actually has forgiveness after 20 years, not 25. IBR has forgiveness of the unpaid balance after 25 years.  So, really, she gets an even better by deal paying only $39,000 with forgiveness of $46,000.

I guess this why the GAO is planning a study on all this. It seems a pretty crazy way to run a railroad. It just seems to me it would be more cost-effective and less confusing to pay for everything upfront. In the end, there There Just Ain’t No Such Thing As A Free Lunch – we are going to pay the cost one way or another.

Students and families can only be expected to pay so much, no matter how of a private benefit higher education is. Other than the fact that 18-24 year-olds have no money, I don’t understand why families are expected to pay the college expenses of adult children. We don’t require that anywhere else. Unfortunately, we have always done it that way and we have created a marketplace where the targeted consumer is uniquely unable to afford the marketed service.

It also seems to me that this is a system designed to hide the true cost of higher education. Except that is cobbled together more than designed.

The example I used, approximates maybe 8% of borrowers in Virginia in terms of a debt being around $50k without getting into the extremes. It also represents the lower-income category net price of one of our small public colleges. However, as I have written before, if current trends continue, the class of students entering now may well have an average debt of $42-47K for those borrowers that graduate. That makes this discussion more applicable.

What am I missing? What have I got wrong? It looks to me like the states are ducking their responsibilities and spreading the cost around through federal tax base….which means we all pay in the end, what we would have paid in the first place, and probably quite a bit more. I think a more rational approach is probably in our best interests.

But that requires rationality, difficult conversations, making commitments, and living to those commitments.