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Is Higher Education the Next Bubble?

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As we continue to experience a very slow recovery from a deep recession, the ideas of long-time critics of modern, inclusive American higher education who question the value of college for many have gained traction and blossomed into widespread public speculation about whether undergraduate education might be the next economic bubble to threaten the US economy. We explore this topic in the latest OPB brief and hold that, in the context of data, the ‘bubble’ metaphor, though effective at capturing public attention in an economic climate characterized by fear and uncertainty, is ultimately inaccurate, misleading, and harmful.

We would love to hear your feedback on this topic!

As Expected, Federal Loan Borrowing Has Increased

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The US Department of Education’s Stats in Brief from October 2011 entitled “Borrowing at the Maximum” investigates the percentage and demographics of students who take out federal subsidized and unsubsidized Stafford loans, and how this has changed over time. The report also seeks to differentiate between those who take out the program maximum loan amount and those who take out their personal maximum amount (adjusted for their financial need and the cost of their education). Some interesting findings include:

  • the proportion of borrowers has increased significantly over time, from 27 percent of students receiving federal Stafford loans averaging $7,200 (inflation adjusted) in 1989/90, to 46 percent borrowing an average of $10,300 by 2007/08.
  • 43 percent of those borrowing in 2007-08 took out the program maximum Stafford loan amount, while 60 percent took out their personal maximum amount (which can equal the maximum amount for some).
  • 30 percent of those taking out Stafford loans also took out private loans, whereas only six percent of students not taking out federal loans did. Furthermore, 16-18 percent of the parents of those students borrowing through the Stafford program also took out Parents PLUS loans.
  • Students taking out Stafford loans to help finance their education were less likely to have full-time jobs.
  • 73 percent of students who took out Stafford loans also received grants.

To read more about the findings or methodology of this report, check out the full report here.

Higher Education Pays Off, If Not Equally

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Georgetown University’s Center on Education and the Workforce has published a report entitled “The College Payoff” which calculates the lifetime median earnings of workers at various levels of educational attainment. As could be expected, the more degrees a worker has, the more they will earn, on average, in their lifetime. This holds true even for workers with different degrees in the same jobs: An accountant with an associate’s degree will make $1,636,000 in their lifetime, while earnings for the same position rise to $2,422,000 for a worker with a bachelor’s degree, and to $3,030,000 for those with a master’s degree. Other notable findings included:

  • Holding a Bachelor’s degree results in a median lifetime income of $2.8 million, 84 percent higher than a worker with a high school diploma
  • Workers with a professional degree make almost four times as much as workers without a high school diploma in their lifetimes ($3,648,000 versus $973,000)
  • Women working full-time, full-year make 25 percent less over their lifetimes than men with the same level of educational attainment. In order to make more than a man with a bachelor’s degree, a woman must hold a doctoral or professional degree.
  • Latinos make on average 34 percent less than white workers, African American workers make 23 percent less, and workers of other races and ethnicities (Native American, Pacific Islander) make 22 percent less. Asian Americans, however, make roughly the same amount as white workers.

To read more about the report, check out Inside Higher Ed’s analysis: “Degrees of Wealth.” Also read our previous blog posts about the Center’s two preceding reports on this same topic: Help Wanted, and The Undereducated American.

A New Measure for College Success?

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Education Sector, an education policy think tank, recently released a report entitled “Debt to Degree,” which measures the ratio of student and parent, government-backed loans taken by students to the number of credentials awarded by an institution per year.  Based on this, the report concludes that:

  • Across all institutions and sectors, for each degree awarded in 2008/2009, $18,102 was borrowed
  • Degree to credential ratios varied considerably across institution types:  On average, families at four-year public institutions borrowed $16,247 per degree, compared to $21,827 at private four-years, and $43,383 at for-profit schools
  • Among elite research universities, Princeton, with its no-loan financial aid policy, had the lowest debt to credential ratio ($2,385), while NYU had the highest ratio ($25,886), due to its small endowment and less wealthy student body
  • Washington state has one of the lowest borrowing to credential ratios in the nation, with debt to degree ratios in the $5,000 to $9,999 range

Note that the study excluded private loans and Perkins loans, which some argue might mask even larger debt burdens, particularly at for-profit schools where institutional financial aid is limited. To read more about the study, including its limitations, check out the Chronicle’s and Inside Higher Ed’s articles.

Study Shows Slight Decrease in Student Enrollment Post-Recession

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A new study, released by the National Student Clearinghouse Research Center sheds light on enrollment patterns before, during, and after the Great Recession. According to the report, enrollment increased steadily from 2006 to 2009, and then decreased by 1.6 percent in 2010. The authors attribute this finding largely to a decrease in state funding for institutions, which led to significant tuition increases at many public colleges causing some middle-income families reevaluate their higher education plans.

In the West specifically, where 90 percent of students are enrolled at public colleges and universities, enrollment dropped from 467,000 students in 2009 to 455,000 in 2010. Interestingly, the West has the highest proportion of students at community colleges, with 50.8 percent attending public two-years. Furthermore, Western public four-year universities had the highest rates of retention and persistence in their region (retention being the percentage of freshmen that return to the institution the next fall, and persistence the percentage that continue their education at some higher education institution the next year), with rates of 73 percent and 85 percent, respectively.

For a more detailed discussion of the findings and limitations of the study, the Inside Higher Ed website has more information.

College Not Only ‘Worth it’, but a Key to Higher GDP and Lower Inequality

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The Georgetown University Center on Education and the Workforce has released another report projecting an increasing need for college graduates in the US workforce. Like last year’s report, the new report, “The Undereducated American”, argues that there is an existing under-supply of college educated workers, evidenced by the very high college wage premium, and projects an increasing need for workers with a college education in the future, which will exacerbate this wage imbalance, as well as stunt economic growth.

The report predicts that the demand for college educated workers (including those with ‘some college’ as well as those with AA, BA and graduate degrees) will increase by about 2 percent per year between now and 2025, while the US is currently on track to increase the supply of college educated workers by only 1 percent per year. They recommend that the US produce 2.6 percent more college educated workers per year, another 20 million students total between now and 2025, to not only meet the increased demand, but to increase supply enough to bring the college wage premium down significantly (but still in line with other developed nations) and reduce overall income inequality in the US.

Most importantly, this report provides ample evidence that there is not an oversupply of college educated workers in the US economy, despite it being fashionable to assert that college might ‘no longer be worth it’ given the combination of economic distress and the rising cost of college. In fact, the college wage premium (the difference between what the average college educated worker is paid compared to a non-college educated worker) remains sky high in the US at 74 percent, contributing to growing income inequality in the US. The data show that not only do college educated workers dominate the highest paid positions in the US, but they make significantly more money than non college educated workers even within the same types of jobs.

Read the report to discover more about why they settle on the recommendation of producing 20 million more college educated workers (and a projected college wage premium closer to 46 percent), and to see detailed data on wage and employment trends by occupation and education.

Importance of Need-Based Aid for Achieving Attainment Goals

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A recent Pell Institute Report proposed a new way to think about reaching President Obama’s goal of increasing the proportion of adults with a college degree to 60 percent by 2020. The Institute suggests that income inequality creates a two-tier educational system in which 25-34 year-olds in the top half of the income distribution have degree attainment rates of 58.8 percent, while individuals in the bottom half of the income distribution exhibit attainment rates of 12 percent. The Pell Institute claims that, by focusing on funding and supporting disadvantaged students, higher education can make progress towards achieving President Obama’s goal.  Specifically, the Institute recommends:

  • Improving access to four-year institutions for disadvantaged students
  • Provide data, disaggregated by family income or Pell receipt status, more readily and widely
  • Focus on changing the eligibility requirements for the Pell grant (such as GPA in high school or increased credit hour requirements), instead of cutting the maximum Pell amount
  • Bolster programs like TRIO and GEAR UP that support students academically and improve retention rates

The University of Washington’s commitment to disadvantaged students, through Husky Promise and other forms of need-based aid, are key institutional efforts to provide access to quality higher education for low-income students. In light of potential double digit tuition increases for resident undergraduate students in 2011-12, Husky Promise, as well as the State Need Grant and federal Pell Grant are critical programs for our students.

Encouraging News About Educational Attainment

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The U.S. Census Bureau recently reported new, encouraging numbers about educational attainment in the United States for the 2010 Census year. According to the report, the percentage of people 25 and older who held a bachelor’s degree or higher increased to 30 percent in 2010 from 26 percent in 2000. Additionally, the percentage earning a high school diploma or higher was 87 percent, up from 84 percent ten years earlier. Interestingly, women are earning more bachelor’s degrees than men in the 25-29 age group—36 percent of women earned a BA or higher, compared to 28 percent of men.

While the Census Bureau has not yet released disaggregated data that lists educational attainment by state, a few sites have interesting information about Washington degree attainment from the 2000 Census, as well as predictions from surveys since then. According to these numbers, Washington was ahead of the national average in 2000, with 87 percent of the population 25 and over holding at least a high school degree, and 27.7 percent holding at least a bachelor’s degree.

To see more interesting information about the 2010 Census, check out the Seattle Times’ maps and interactive features or visit the Census website directly.

A Master Plan for Higher Ed in the Midwest?

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Earlier this week, the Chicago Council on Global Affairs released a new report authored by current professor and former  University of Michigan President James Duderstadt. The report, A Master Plan for Higher Education in the Midwest: A Roadmap to the Future of the Nation’s Heartland, chronicles the overall failure of the Midwest to transform itself from economic engine of the industrial age to being at the forefront of the knowledge economy.

Duderstadt identifies what he calls lifelong and lifewide education as the key to succeeding in today’s economy and in the future. Like many, he argues that more Americans will  increasingly need to access different forms and levels of education throughout their lifetimes if they are to succeed in a rapidly and continually changing economic landscape. The report lays out a roadmap for a newly imagined, highly collaborative, mission-diverse and better funded regional higher education system.

Duderstadt’s proposals include:

  • Broadening boundaries beyond the state, increasing collaboration between institutions and governments, and creating a more systemic perspective that integrates all of the entities that comprise a ‘knowledge ecology’.
  • Increasing higher education engagement with the K-12 system to increase educational performance and transition.
  • Facilitating movement between institutions in the region, but also emphasizing the importance of mission differentiation.
  • Adopting best practices from other countries, specifically highly successful European models including polytechnic universities and alternative ways of dealing with the transitional years of grades 11-14.
  • Shifting the funding paradigm for public higher education including a high tuition, high financial aid model, and  implementing differential taxing of future earnings as Britain currently does.
  • Expanding higher education, including the creation of new institutions focused on non-traditional students.
  • Increasing regional investment in R&D, strengthened focus on tech transfer activities, and investment  in cyberinfrastructure.
  • Rebuilding the perception that education is a critical public good that requires healthy investment and support.

Overall, Duderstadt imagines more autonomous institutions that can react quickly to a changing environment, are accountable to the public through specific and measurable performance targets, are adequately funded through higher tuition levels and increased public investment, are differentiated strongly by mission, and serve a much larger and diverse population of students.  He imagines that both public, independent, for-profit and new kinds of institutions will all have an important role to play in this system.

Duderstadt acknowledges the large influence of both the California Master Plan and the Bologna Process in the creation of his roadmap. He lays out next steps for a more detailed study and creation of an implementation plan, and also also allows his inner futurologist to to come out in the last chapter where he envisions how these system changes will  prepare the region to succeed in a longer-term future that will be transformed again and again by technological discovery and development.

Read at least the executive summary if you get the chance. And if you are interested in other imaginative proposals that have been put forward in the last year, check out a few of our previous posts:

Harvard Report Challenges Goal of ‘BA for All’

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Earlier this month the Pathways to Prosperity Project, based at the Harvard Graduate School of Education, released a final report: Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans for the 21st Century.

The report lauds the current goal to increase college participation and attainment in the US, but cautions against a ‘one size fits all’ model of higher education. The authors note that the US currently has the highest college dropout rate in the industrialized world, and they call for a renewed focus on career oriented programs and occupational credentials for the large number of American youth who are not currently served or even ill-served by the traditional two or four-year academic system.

The report provides best practices from around the world, highlights robust programs across the US, and provides a blueprint for greater government and employer engagement in preparing American youth better by developing stronger links between education and employment. The report does not question the value or role of traditional higher education but instead wonders whether we are asking it to be all things to all people and thereby failing a large number of Americans as well as straining institutions.