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Scrutiny and Economy Taking Toll on For-Profit Higher Ed

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The past few weeks have brought a lot of bad news for the for-profit education sector. Federal and state scrutiny of practices, costs, and outcomes, combined with tightened regulations, high profile lawsuits, and student reaction to high prices in a bad economy, have taken their toll on the sector:

  • A state investigation has been opened to determine whether for-profit institutions have been improperly compelling employees to support the candidate currently opposing Kentucky’s Attorney General, a man who also happens to be leading a 20 state joint investigation into the practices of for-profit institutions.
  • Enrollments have plunged even more deeply than they did last year across the sector as a whole (14.1% on average), and most dramatically across the largest companies, including 47% at Kaplan, 41% at Apollo, and 26% at Corinthian Colleges.
  • As a result of tightening regulations, bad press, and plunging enrollment, stock prices are going down.
  • A journalist at the Atlantic is wondering if, in order to survive, these institutions should get out of the business of educating students and attempt to use their large infrastructure and resources as consultants to more traditional institutions that are needing to scale their online education operations, and increase their ability to serve the non-traditional student population.

To read related OPBlog posts, see:

In Higher Education Press Coverage, the Anecdote is King

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Having just read a frustrating New York Times article, Generation Limbo: Waiting it Out, I was all set to write a blog post about the longstanding failure of higher education press coverage that almost exclusively focuses on unrepresentative and sensational ‘trends’ such as the ‘oversupply’ of college graduates, the ‘epidemic’ of students with six figures in debt for a four year degree in the humanities, the ‘widespread’ single digit admissions rates, and the ‘common’ $50,000 per year price tags.

And then I discovered that Kevin Carey beat me to the punch. After reading Carey’s blog post, follow his link to the piece he wrote for The New Republic, and then check below for some of our previous posts, which detail how actual data clearly show these kinds of stories and predictions to be highly misleading.

Despite Challenges, the Class of 2010 is Optimistic About Higher Ed

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A new survey conducted by Hart Research Associates for the College Board entitled One Year Out asked a representative sample of 1,507 high school graduates of the class of 2010 about their high school experience and their first year out of high school. Of the sample, 43 percent are at a four-year college, 25 percent are at a two-year college, 6 percent are in trade school, and 26 percent are not currently pursuing higher education. Despite increased college costs and the still slow economy, respondents were overwhelmingly optimistic about the value of a college education, with 86 percent asserting that college is worth the time, effort and money and 90 percent claiming that a high school diploma is no longer enough for the demands of today’s work world. Furthermore, 66 percent are very or somewhat optimistic about finding good jobs in the future. Other findings included:

  • The majority of HS graduates enjoyed their high school experience, though most wished they had taken more (or more challenging) math, science and writing classes.
  • 69 percent of HS graduates claimed that high school graduation requirements were very or pretty easy, and 37 percent believe they should be made more stringent.
  • More than half of HS graduates enrolled in higher education found college more challenging than expected, and a quarter of those students needed non-credit remedial courses to catch up. Of respondents enrolled at two-year colleges, 37 percent took remedial classes.
  • The biggest concern by far (20 percentage points above all others) was affordability: 5 in 9 students who attend college find affording higher education pretty or very challenging, and 56 percent of those who aren’t in college claim cost was a big factor in their decision not to enroll.
  • Of students who did not enroll in college this year, 83 percent intend to go in the future.

To read more about this topic, check out the full report or read some of our previous blog posts on similar surveys: Recent Grads Affirm Value of College Education and Americans Struggling Economically, Worried About Affordable Higher Ed.

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.

PELL Grant Program Left Intact For Now.

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If the US House and Senate approve the debt deal that the Obama Administration and Congressional leaders seem to have worked out over the weekend, the Pell Grant Program will remain intact. Although PELL had been targeted for significant cuts, the deal leaves the current maximum grant at $5,550, and retains the in-school interest subsidy for graduate student loans.

Note that future cuts are still possible, especially if the number of eligible students continues to grow, increasing significantly the cost of the program. But, for now, the bipartisan support to leave the program largely untouched is encouraging. Make sure to follow frequent updates on the debt deal, federal budget negotiations and other relevant federal activity on the UW Office of Federal Relations blog.

Is Public Higher Ed in CA Showing Evidence of Strain?

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The Institute for Higher Education Leadership & Policy at California State University, Sacramento recently released a report titled “Consequences of Neglect: Performance Trends in California Higher Education.” The report claims that, although California is considered the world’s leader in public higher education, the state’s college and university system is closer to average—and may be declining.

The report uses six measures of higher education quality and access—preparation, affordability, participation, completion, benefits, and finance—to measure California’s performance in relation to other states. Their findings, if correct, are troubling:

  • Preparation: The report uses graduation rates, standardized test scores, and the percentage of students taking college preparatory classes to measure preparation for college. According to the report, college preparation in California is worse than most states, particularly in rural and inland areas and for black and Latino students. However, these measures have been steadily improving over the past seven years.
  • Affordability: Without taking into account room and board, the California system ranks high in affordability (largely due to the very low tuition at California community colleges), however, because of the high cost of living in California, affordability is significantly compromised. Furthermore, tuition and fees have been increasing dramatically at UC, CSU, and CCC, which will negatively impact affordability.
  • Participation: One of the highlights for California is that participation in public higher education remains high (California ranks 6th in the percentage of 18-24 year old enrolled in college), though the trend is declining as tuition and fees increase.
  • Completion: Although California ranks 12th in the nation in the number of associate degrees awarded per 100 high school graduates, it ranks only 41st in the number of bachelor’s degrees awarded per 100 high school grads. The report suggests focusing efforts on improving the transfer process from California’s two-to four-year institutions.
  • Benefits: The report lists benefits from education in California as average, with high personal income tempered by low proportions of citizens with bachelor’s degrees and very low voter turnout.
  • Finance: State appropriations per student FTE in California are slightly lower than the national average, and local and state funding has been steadily decreasing during and after the Great Recession.

The report urges California’s government to protect their investment in colleges and universities, long considered the best public higher education system in the world. Furthermore, it cautions policymakers not to be blinded by the stand-out performances of a select few California universities, while ignoring the vast majority of California’s higher education institutions that may be struggling.

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.

Survey of College CFO’s Shows Moderate Optimism

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A survey carried out by The Chronicle in conjunction with Moody’s Investor Service shows college CFO’s are cautiously optimistic about future economic prospects for their institutions. The survey included 480 responses from CFO’s of public and private four-year and public two-year, nonprofit institutions. In the face of slow economic recovery from the recession, 32 percent of all CFO’s reported being more optimistic about the general U.S. economy, and 39 percent felt more optimistic about the financial prospects of their own institutions than they did a year ago.  Among  public four-year CFO’s, these percentages were markedly higher, with 42 percent more optimistic in general and 45 percent more optimistic for their specific institution. Further highlights from the report included:

  • Overall, 60 percent of CFO’s claimed further layoffs in 2011/12 were “very unlikely,” though 19 percent of public four-year CFO’s said layoffs were still “very likely”
  • Very few CFO’s are considering furloughs to cut costs, with 79 percent claiming they are “very unlikely”
  • Public four-year CFO’s are about evenly split about salary freezes, with 45 percent planning to implement them, and 43 percent not planning to use this cost-cutting measure
  • 18 percent of public-four year institutions reported increasing tuition by 10 percent or more in the face of steep cuts in state support

Despite the slow growth of the economy and high unemployment, some economic indicators are proving encouraging to higher education institutions—low interest rates facilitate borrowing, the stock market is up, and demand is higher than ever (83 percent of public-four years reported meeting or exceeding their enrollment targets this year). Additionally, philanthropic support is still a major component of university budgets, and most institutions plan to keep it that way, with only 12 percent of CFO’s planning to lower their annual giving goals.

Another survey by Inside Higher Ed showed college business officers a bit more optimistic.  52 percent of the business officers surveyed claimed their institutions were in good financial health, and 17 percent asserted they were in excellent health. Though most see no immediate financial emergency, 66 percent believe that potential cuts in core state funding or operating support would have a major impact on their institution’s quality. As in the Chronicle’s survey, most cited securing higher enrollment and more philanthropic support as being integral to future funding. Interestingly, 27 percent claimed they would have to lay off employees in the coming year—as opposed to 19 percent in the Chronicle’s survey.

Please follow the hyperlinks to read the full Chronicle and IHE reports, as well as the Chronicle’s and IHE’s analysis of their results.

Spending on Financial Aid Increases in Most States

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The National Association of State Student Grant and Aid Programs (NASSGAP) has published their Annual Survey Report on State-Sponsored Student Financial Aid.

The new report, based on 2009-10 survey data, shows that while state support for institutions has fallen rapidly for several years, many states have increased their commitment to students via financial aid. On average, state spending on financial aid increased 3.8 percent between 2008-09 and 2009-10. For many states, increases in financial aid were necessary to help maintain student access as steep budget cuts for institutions necessitated significant increases in tuition.

Note that the survey does not contextualize increases in spending on financial aid with tuition increases, nor does it specifically address changes in financial need for students during the Great Recession. Inside Higher Ed addresses some of these issues in their report on the survey.

The survey also shows that while most state spending on financial aid continues to be in the form of need-based grants ($8.9 of $10.8 billion was spent in the form of grants), state spending on merit-based or mixed merit and need based financial aid programs continues to increase. The survey shows that 47 percent of all state aid to undergraduates is need-based, while 18 percent is merit-based, and 35 percent is tied to programs with both need and merit-based components.

UC Likely to Raise Tuition Again

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Having already increased tuition by 8 percent for the upcoming academic year, UC Regents are expected to consider an additional 10 percent increase due to the Governor’s failure to win extension of various temporary tax measures in California. As a result, the overall cut to the University of California has been increased from $500 million to $650 million (equaling a 21 percent cut in state funding for UC), which is expected to increase further if an agreement on revenue measures is not reached.

The latest talk of another tuition increase for resident students comes as the UC system has been increasing nonresident enrollment to help make up for state funding cuts.