A common complaint you hear these days by students and parents is the rising cost of college tuition, in some cases, a dramatic raise in tuitions and other fees. University administrators argue that the increase in tuition and fees is needed to maintain a quality education for their students. In order to maintain a quality education, universities have to attract top notch faculty, which translates into paying these professors high salaries.
Critics of colleges and universities argue that a college education is already overpriced. To add insult to injury, after students and their parents pay exorbitant costs for a college education, graduates can’t find work, as many of the undergraduate majors do not lead to good paying jobs immediately upon graduation.
Students and their parents are now questioning the value of a college education and evidence of this is the leveling of enrollments, or in some cases enrollment decreases, that we have seen recently in higher education institutions. College and university administrators have been heeding this concern and are instituting tuition freezes, tuition leveling and even tuition cutting. Tuition freeze is typically defined as tuition that is kept unchanged for a specified number of years; however, other fees and room and board charges are typically increased each year. Tuition leveling is where tuition is frozen for four or more years for each class, but college increases tuition for each successive incoming class. This is also known as a guaranteed tuition rate or tuition lock. As the name implies, tuition cuts are where the college reduces tuition by a certain percent, 10%, 20%, or more, and is invariably a one-time event. One side effect of tuition cuts is that the college will also cut financial aid at the same time, since financial need will be reduced for all students.
A survey by conducted FastWeb last year indicated that 21 colleges cut tuition by as little as 8% to as much as 50%. Some of these schools were very creative in cutting tuition, for example, cutting in only certain degree programs or only in-state tuition. One of the positive results of cutting tuition is an increase in student enrollments, which can make up for the lost revenue in tuition. One college in the survey cut tuition by 42% and saw an increase of 60% in freshmen students.
In the same survey, 64 colleges were reported to have frozen tuition. Tuition was held constant for a period of four years, but tuition was increased for each new freshman class entering the university in subsequent years. If a student dropped out and returned, they would have to pay the new tuition rate at the time of reentry, typically higher tuition.
Thirty-two colleges reported that they had instituted tuition leveling. This is becoming popular among college students and parents as costs are held constant, which allows them to better plan for the cost of college. Students are now viewing tuition leveling or tuition cutting as a contractual agreement between the college and the student. Tuition freezes are considered more common in community colleges and public four-year colleges and less common in private four-year schools.
However, students much be cautious not to assume that those colleges that have frozen tuition will keep it frozen throughout their entire college education. During times of a recession, as history has demonstrated, college and university administrators raise tuition to make up for the loss of state and/or federal funding. Moreover, the trend during the last several decades has been for states to decrease funding for their colleges and universities. If the trend continues, tuition freezes or cuts may not be possible.
As a former president, I can tell you that freezing or lowering tuition is a very difficult and tricky task. The costs of operating a college or university are typically fixed costs and rarely, if ever, do they decrease. If anything, operating costs like utilities, employee benefits, to name a few, usually raise at rates higher than the cost of living. Employee salaries are another major cost of operating a university and being able to give salary raises when you are freezing or cutting tuition, can be difficult, if not impossible. For most colleges and universities, tuition is the major source of revenue.
I commend the colleges and universities who have frozen or lowered tuition. I hope that other institutions of higher education follow the example set by these colleges. If colleges and universities do not become more cost effective, I fear that future students will begin to vote with their feet. The signs are already there.
Showing posts with label education costs. Show all posts
Showing posts with label education costs. Show all posts
Tuesday, October 21, 2014
Wednesday, October 1, 2014
College Student Loan Default Rates:A Measure of Success of Colleges?
Recently, more criticism is being leveled at colleges and universities for not being more successful at “producing” students. Higher education is being treated like any other business by focusing now on measuring output. Specifically, lawmakers and the public want to know how many students each institution of higher education they advance from one year to the next and ultimately how many they graduate. One measure of that success that has been in the public eye is the college student loan default rate.
The U.S. Department of Education announced this week that loan-default rates had dropped one percent from 14.7% to 13.7% of all colleges and universities in 2011 compared to 2010. The Department of Education looks at individual colleges and places them in categories such as public vs. private, two-year vs. four-year, and non-profit vs. for-profit. The largest drop occurred in the private for-profit sector by 2.7%, even though they continue to have the highest loan default rate of all colleges at 19.1%. The second highest default rate was among public colleges at 12.9%, and the private non-profit colleges had the lowest at 7.2%. In examining the data more closely, the two-year private non- and for-profit colleges had significantly higher default rates (25.0% and 20.6% respectively) than the two-year publics (13.6%). The private for-profit four-year colleges had the highest default rate (18.6%), the public colleges had the next highest (8.9%) and the private non-profits had the lowest rates (7.0%).
Despite the drop in default rates, the major concern among critics of colleges is that the Department of Education lowered its standards and is letting underperforming colleges “off the hook.” However, college administrators point to the weak economy as a major cause of higher loan default rates. The weak economy has caused more student to borrow money to attend college, which in turn has caused the loan default rate to increase.
Last year, the Department changed its standards, so rather than measuring default rates for two years, they are now using three years. And the default rate must not exceed 30% of the total number of student loans for three years in a row or 40% in a single year. Another interesting, but controversial, change the Department made was to exclude in its calculations multiple loans whether students were in “repayment, deferment, or forbearance status for at least 60 consecutive days,” based on a statement issued by Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid, U.S. Department of Education.
The penalty for not meeting the standards is the potential loss of federal student aid and possibly other federal funding. This is a major concern about administrators at colleges as federal student aid funds can be a significant part of the budget of many colleges especially at the private for-profits. Moreover, administrators in community colleges and minority serving institutions expressed the greatest concern since they typically enroll a significantly larger number of first-generation, low-income students. These are the students who rely heavily on loans and other types of financial aid since their parents can’t afford to pay for college.
In a speech this week, Secretary of Education Arne Duncan told leaders of historically black colleges and universities that none of their institutions would be penalized. This was welcome news for them and for college administrators at other minority-serving institutions and community colleges.
However, should minority-serving institutions and community colleges be penalized because they serve a disproportionately larger share of low-income students? I don’t think so, if anything these colleges should be rewarded for taking on a very difficult task. But, in an environment where legislators and the public are calling for more accountability and where colleges and universities are now being treated like a business that produces a product, I don’t think these institutions of higher education will be rewarded. My guess is that we will see more pressure on these types of colleges to do a better job or close their doors.
On the other hand, it is not clear to me that state legislators will have the intestinal fortitude in the future to close public community colleges and minority-serving institutions in their legislative districts. After all, institutions of higher education are economic engines for the communities they reside in. They tend to hire a large number of employees and a subset of their employees (professors and administrators) earn significantly higher wages than the average wage earner in those communities. Additionally, these colleges and universities are educating the future workforce of our country: the first-generation, low-income, minority and immigrant population that is increasing exponentially in this country. I suspect that if a legislator proposed or voted to close an institution of higher education in his or her community, they would not remain a legislator through the next election.
Secretary Duncan took a bold and brave step, in my opinion, in adjusting the default rates of community colleges and minority serving institutions. Our country needs these types of institutions of higher education to not only survive, but thrive. After all, they play an important role in shaping the future of our country by educating a significant subgroup of our workforce and our future leaders.
The U.S. Department of Education announced this week that loan-default rates had dropped one percent from 14.7% to 13.7% of all colleges and universities in 2011 compared to 2010. The Department of Education looks at individual colleges and places them in categories such as public vs. private, two-year vs. four-year, and non-profit vs. for-profit. The largest drop occurred in the private for-profit sector by 2.7%, even though they continue to have the highest loan default rate of all colleges at 19.1%. The second highest default rate was among public colleges at 12.9%, and the private non-profit colleges had the lowest at 7.2%. In examining the data more closely, the two-year private non- and for-profit colleges had significantly higher default rates (25.0% and 20.6% respectively) than the two-year publics (13.6%). The private for-profit four-year colleges had the highest default rate (18.6%), the public colleges had the next highest (8.9%) and the private non-profits had the lowest rates (7.0%).
Despite the drop in default rates, the major concern among critics of colleges is that the Department of Education lowered its standards and is letting underperforming colleges “off the hook.” However, college administrators point to the weak economy as a major cause of higher loan default rates. The weak economy has caused more student to borrow money to attend college, which in turn has caused the loan default rate to increase.
Last year, the Department changed its standards, so rather than measuring default rates for two years, they are now using three years. And the default rate must not exceed 30% of the total number of student loans for three years in a row or 40% in a single year. Another interesting, but controversial, change the Department made was to exclude in its calculations multiple loans whether students were in “repayment, deferment, or forbearance status for at least 60 consecutive days,” based on a statement issued by Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid, U.S. Department of Education.
The penalty for not meeting the standards is the potential loss of federal student aid and possibly other federal funding. This is a major concern about administrators at colleges as federal student aid funds can be a significant part of the budget of many colleges especially at the private for-profits. Moreover, administrators in community colleges and minority serving institutions expressed the greatest concern since they typically enroll a significantly larger number of first-generation, low-income students. These are the students who rely heavily on loans and other types of financial aid since their parents can’t afford to pay for college.
In a speech this week, Secretary of Education Arne Duncan told leaders of historically black colleges and universities that none of their institutions would be penalized. This was welcome news for them and for college administrators at other minority-serving institutions and community colleges.
However, should minority-serving institutions and community colleges be penalized because they serve a disproportionately larger share of low-income students? I don’t think so, if anything these colleges should be rewarded for taking on a very difficult task. But, in an environment where legislators and the public are calling for more accountability and where colleges and universities are now being treated like a business that produces a product, I don’t think these institutions of higher education will be rewarded. My guess is that we will see more pressure on these types of colleges to do a better job or close their doors.
On the other hand, it is not clear to me that state legislators will have the intestinal fortitude in the future to close public community colleges and minority-serving institutions in their legislative districts. After all, institutions of higher education are economic engines for the communities they reside in. They tend to hire a large number of employees and a subset of their employees (professors and administrators) earn significantly higher wages than the average wage earner in those communities. Additionally, these colleges and universities are educating the future workforce of our country: the first-generation, low-income, minority and immigrant population that is increasing exponentially in this country. I suspect that if a legislator proposed or voted to close an institution of higher education in his or her community, they would not remain a legislator through the next election.
Secretary Duncan took a bold and brave step, in my opinion, in adjusting the default rates of community colleges and minority serving institutions. Our country needs these types of institutions of higher education to not only survive, but thrive. After all, they play an important role in shaping the future of our country by educating a significant subgroup of our workforce and our future leaders.
Thursday, September 11, 2014
The Cost of College Textbooks
My last blog focused on the millions of college students who have started college classes this fall. One of the daunting tasks facing college students across America is the purchase of college textbooks. For students and parents who, in many cases, pay for the textbooks, the cost is very high, actually outrageous in some cases.
The College Board reported the average cost for books and supplies for the 2013–2014 school year was $1,207 at public colleges and $1,253 at private colleges. But the cost can vary dramatically between the public and private schools. For example, Harvard University lists on their official website the average cost of books as $3,643 per year, three times the national average. I also looked at a typical public university, Humboldt State University, in northern California and their average cost of books is $1,612, or 56% less than the average cost of books at Harvard and 33% higher than the national average. For additional comparison, I examined the cost of attendance at St. Louis Community College and their website lists the cost of books as $1,000.
The Huffington Post reported that the cost of college textbooks has risen 812% since 1978, compared to medical services at 575%, new home prices at 325%, or the Consumer Price Index at 250% over the same period. Like tuition, the cost of college textbooks has outpaced all other consumer goods.
An important variable that impacts the cost of college textbooks is the discipline. College textbooks for mathematics, the hard sciences, medicine, or law will be much more expensive than books in other disciplines. In other words, a college calculus book will cost a lot more than an introduction to psychology book. For example, a new college calculus book by James Stewart, 7th edition, touted as the world’s best-seller, will cost $285.50 on textbooks.com or less for a used version of the book, depending on the condition of the book. An introduction to psychology book will cost $170.75 new on textbook.com and as little as $25 for a used copy.
Part of what drives up the price of college textbooks is the publisher bundling the books with supplemental material such as work books, study guides or CD’s and access to websites. When textbooks are bundled, a student cannot buy just the text book. Another strategy textbook publishers use to jack up the price is to issue newer editions of the book. It is estimated that new editions of textbooks are released on average every 3.9 years.
I have some solutions to the high cost of textbooks. I have always told my students to buy used books as they will be much less expensive. I have also informed student to buy books from students who took the class previously, assuming the professor is using the same book. I have also suggested to buy a book with a classmate and share it. However, sharing can have it drawbacks, like not having access to the book when you need it. Another option to consider would be to buy the books on-line via textbook.com, eBay, or Amazon. They typically are cheaper than college bookstores. Other options include renting a text book or buying an e-book or electronic version of the book, but you will need to have an e-reader or a computer. However, renting a book may not always be cheaper, as you lose money if you don’t take special care of the rental book when you have to return it. And e-books aren’t always that much cheaper than buying a new book.
I suggest, before renting a book, you should consider the cost of a used book and the money you will recoup when you re-sell it to the bookstore, versus the cost of renting the same textbook. My students, and most students in the different universities with which I have been associated, have preferred used books over rentals or e-books. At the bookstore of one university where I worked, 65% of the books stocked and sold were used, and, as a result, the students at that school wanted more used text books.
Another suggestion is to purchase an older edition of a college textbook since they tend to be cheaper, but one has to be careful that the material has not changed significantly. Also, if it is a mathematics book, the end of each chapter can be different. But that can easily be solved by borrowing the new textbook from a classmate and copying the new problem sets.
One final suggestion and a little known fact that most students on college campuses may not be aware of is that most colleges and universities will place a textbook for their courses on reserve in the library. This is great for students who can’t afford to buy textbooks, but there is a downside. Typically, college libraries will not allow students to check out books on reserve or, if they do allow check-out, it will be for a very short period to time, in some cases only a couple of hours.
I talked to my son, who is a senior majoring in mechanical engineering, and he does not buy e-books, but rather prefers used books and re-sells them to the bookstore if he decides not the keep the book. An informal survey of his friends confirms that e-books are not a common choice. They too prefer used books.
It is worth the effort to do the research and consider all options available before purchasing a college textbook. It will pay off in the short term and may save you lots of money over the course of four… or five….years of buying textbooks.
The College Board reported the average cost for books and supplies for the 2013–2014 school year was $1,207 at public colleges and $1,253 at private colleges. But the cost can vary dramatically between the public and private schools. For example, Harvard University lists on their official website the average cost of books as $3,643 per year, three times the national average. I also looked at a typical public university, Humboldt State University, in northern California and their average cost of books is $1,612, or 56% less than the average cost of books at Harvard and 33% higher than the national average. For additional comparison, I examined the cost of attendance at St. Louis Community College and their website lists the cost of books as $1,000.
The Huffington Post reported that the cost of college textbooks has risen 812% since 1978, compared to medical services at 575%, new home prices at 325%, or the Consumer Price Index at 250% over the same period. Like tuition, the cost of college textbooks has outpaced all other consumer goods.
An important variable that impacts the cost of college textbooks is the discipline. College textbooks for mathematics, the hard sciences, medicine, or law will be much more expensive than books in other disciplines. In other words, a college calculus book will cost a lot more than an introduction to psychology book. For example, a new college calculus book by James Stewart, 7th edition, touted as the world’s best-seller, will cost $285.50 on textbooks.com or less for a used version of the book, depending on the condition of the book. An introduction to psychology book will cost $170.75 new on textbook.com and as little as $25 for a used copy.
Part of what drives up the price of college textbooks is the publisher bundling the books with supplemental material such as work books, study guides or CD’s and access to websites. When textbooks are bundled, a student cannot buy just the text book. Another strategy textbook publishers use to jack up the price is to issue newer editions of the book. It is estimated that new editions of textbooks are released on average every 3.9 years.
I have some solutions to the high cost of textbooks. I have always told my students to buy used books as they will be much less expensive. I have also informed student to buy books from students who took the class previously, assuming the professor is using the same book. I have also suggested to buy a book with a classmate and share it. However, sharing can have it drawbacks, like not having access to the book when you need it. Another option to consider would be to buy the books on-line via textbook.com, eBay, or Amazon. They typically are cheaper than college bookstores. Other options include renting a text book or buying an e-book or electronic version of the book, but you will need to have an e-reader or a computer. However, renting a book may not always be cheaper, as you lose money if you don’t take special care of the rental book when you have to return it. And e-books aren’t always that much cheaper than buying a new book.
I suggest, before renting a book, you should consider the cost of a used book and the money you will recoup when you re-sell it to the bookstore, versus the cost of renting the same textbook. My students, and most students in the different universities with which I have been associated, have preferred used books over rentals or e-books. At the bookstore of one university where I worked, 65% of the books stocked and sold were used, and, as a result, the students at that school wanted more used text books.
Another suggestion is to purchase an older edition of a college textbook since they tend to be cheaper, but one has to be careful that the material has not changed significantly. Also, if it is a mathematics book, the end of each chapter can be different. But that can easily be solved by borrowing the new textbook from a classmate and copying the new problem sets.
One final suggestion and a little known fact that most students on college campuses may not be aware of is that most colleges and universities will place a textbook for their courses on reserve in the library. This is great for students who can’t afford to buy textbooks, but there is a downside. Typically, college libraries will not allow students to check out books on reserve or, if they do allow check-out, it will be for a very short period to time, in some cases only a couple of hours.
I talked to my son, who is a senior majoring in mechanical engineering, and he does not buy e-books, but rather prefers used books and re-sells them to the bookstore if he decides not the keep the book. An informal survey of his friends confirms that e-books are not a common choice. They too prefer used books.
It is worth the effort to do the research and consider all options available before purchasing a college textbook. It will pay off in the short term and may save you lots of money over the course of four… or five….years of buying textbooks.
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