Tuesday, April 15, 2014

Congress Recycles Higher Ed Myths

Currently, the US Senate Committee on Health, Education, Labor, and Pensions is holding a series of hearings in anticipation of the reauthorization of the Higher Education Act.  The main underlying theme appears to be that the Democrats want to regulate the for-profit colleges and do something about student debt, while the Republicans would like to deregulate higher education and help the “free market” expand its reaches into public higher education.  In a recent hearing on student debt, this polarized discourse was mediated by a bipartisan set of misconceptions regarding the costs of higher education. 

During his opening statement, ranking Republican member, Lamar Alexander set the stage by arguing that since the average cost for community college was about $3,000 and students receive over $4,000 in aid, some of the money must be going to other things.  In fact, Alexander’s own press release entitled, "College More Affordable than Most Students Think,” argues that, “The average community college student in America is receiving about $1,500 more in grants and scholarships than it costs in tuition and fees” The problem with Alexander’s argument is that he fails to take into account the total cost of education (tuition, fees, room, board, books, and living expenses), and so he can pretend that there is no reason for students to borrow, and if they are borrowing, it is for personal pleasure.


According to Alexander, “An Inspector General’s report from the U.S. Department of Education warns that some students borrow excessively for personal expenses not related to their education.”  However, it is clear that students need a place to live and they have to buy books for their classes, and so these non-educational expenses are actually the main cause for student debt.  The US Department of Education reports that the total annual cost of attendance for a full-time community college student is  $13,237, so if students are receiving on average $4,500 in grant funding, they are still on the hook for close to $9,000 per year. 


Apparently, not only Alexander fails to understand the difference between the cost of tuition and the total cost of attendance, but also James W. Runcie , Chief Operating Officer of Federal Student Aid of the Department of Education, does not understand why students borrow money to go to college.  In response to Alexander’s question about why students are taking out more money than they need, Runcie, (at minute 50) simply says that this is a concern, and the department is looking into possible cases of fraud or abuse.  The underlying message Alexander and others are circulating is college students are going into debt because they are borrowing money to spend on leisure items like fancy cars and clothing. 


This failure to understand the true cost of attending college is also shaping several recent proposals to make community college freeto students in Tennessee, Mississippi, and Oregon.  All of these states are only discussing making tuition free, but most lower- and lower-middle-income students already have their tuition covered by state and federal grants.  This means that only upper-income students will receive the new break, and these tuition-free programs may end up cutting additional funding to the non-wealthy students who need aid to pay for the non-tuition aspects of the total cost of attendance.   Once again, a progressive sounding policy turns out to be welfare for the wealthy as the non-wealthy continue to get stuck with the bill. 

Tuesday, April 1, 2014

Subprime Higher Ed and Washington DC


Like everything else in our nation’s Capitol, higher education has become a deeply polarized issue.  Although the Higher Education Act is supposed to be re-authorized this year, no one thinks that it will get done.  On one side, you have the Republicans in the House who are upset with the Obama administration’s efforts to regulate high-debt, low-peforming for-profit schools, and on the other side, you have some progressive Democrats trying to find ways to reduce and refinance student debt.  While technology is no longer being presented as the solution to all problems, there is little discussion of a comprehensive plan to help higher education.  In fact, most politicians argue that we still have the best system in the world, so all we need to do is just improve access for some excluded groups.

On a more positive note, the United States Student Association’s legislative conference did show that students are very concerned about student debt and the fact that students are paying more and getting less.  There is a new coalition (Higher Ed, Not Debt) that has been formed around the student debt issue, and it has brought together several important groups and progressive political leaders, like Senator Elizabeth Warren.  I am hoping to work with this campaign to tie the issues of student debt, contingent faculty, instructional quality, and higher ed funding together.

When people ask me why I think anything might change for the better in higher education, I argue that the student debt issue threatens to affect so many individuals and families that something will have to be done regarding how we fund and regulate universities and colleges.  As Suzanne Mettler stresses in her book Degrees of Inequality, much of this debt is being driven by the rise of for-profit schools who have used their profits to capture Washington regulators and politicians.  These schools now take in collectively a quarter of all Pell grant funding and a large part of the current GI bill. At some point, the failure of profit-colleges to graduate students could push the government to re-invest in public higher education.

Of course the irony of the for-profits is that many of them receive more than 90% of their funding from the federal government; thus instead of being the free market alternative to public higher ed, these institutions embody the rise of corporate welfare within the context of the fall of public welfare.  Mettler documents how the Obama administration’s attempts to regulate this industry has been countered by not only the free market evangelists of the Republic party but also progressive Democrats who believe that for-profits are the only schools catering to low-income African-American and Latino students.  Like the bipartisan push for subprime loans to minority populations, this cashing in on the poor is a bi-partisan affair: the liberals want to do something for disadvantaged people, and the conservatives want to support the corporations seeking to turn public money into private profits.  Let’s hope that when the student loan bubble bursts, the Fed will bail out the students and not the banks.

Wednesday, March 5, 2014

A New Deal for Higher Education


Next week, I will be going to DC to meet with the United States Students Association, AFT higher education leadership, and members of Congress to discuss a new funding model for higher education.  Here are the main talking points:

1.     We need an integrated plan to deal with student debt, higher ed funding, contingent faculty, and quality higher education. This requires a new compact among institutions, students, federal government, and state governments.

2.     The current system is an incoherent combination of institutional aid, state aid, federal aid, student loans, federal tax breaks, and state tax breaks.  We are currently spending enough on higher ed from all sources to make it free to the students, but we need a comprehensive plan.

3.     The proposed plan is to tie state and federal aid to the requirement that each university and college receiving funding generates at least 75% of its student credit hours in classes taught by full-time faculty.  Another possible requirement would be to tie this support to a certain level of direct instructional spending and to demand that at least 75% of the courses be taught in classes of less than 26 students. This policy would not only force schools to put more resources into undergraduate education, but it would also motivate universities and colleges to have more effective learning environments. There would also be a requirement that states maintain their support for higher education. 

4.     Currently, we are spending more per student, but fewer students are earning degrees.  The overall graduation rate for higher education is under 40%.  A major cause for not graduating is the high cost and the need for students to work while in school.

5.     The biggest cost for students is not tuition but related student expenses (room, board, books, etc).  Politicians and school officials only talk about tuition, and this hides the true cause of debt and dropping out.

6.     Students also do not graduate in a timely fashion because some schools spend most of their funds on non-instructional activities. To make up for a loss of funding, schools have increased their use of large lecture classes, decreased their number of courses, and have increased the use of insecure, part-time faculty, which has lowered the quality of education and has decreased graduation rates.

7.     The more students have to finance their own education, the more the public sees higher ed as a private good and not a public good.  Although college does provide preparation for work, if this is seen as the main goal, it becomes a private good without public support.

8.     We need to build a broad collation of students, parents, teachers, faculty, and concerned students.   

Wednesday, February 19, 2014

Understanding Financial Aid in the UC and Beyond


The California Legislative Analyst has a recent report on higher education that clarifies many issues concerning the state of financial aid in the UC system. One of the key findings is that while tuition is being covered by state, federal, and institutional aid for many students, these different sources of support are not keeping up with the other expenses college students encounter: “Living expenses, including food and housing, transportation, and personal expenses, make up the majority of undergraduate student budgets . . . These costs are relatively high in California—about 20 percent higher than the national averages.”  One of the effects of this high cost of living in California is that even though UC has kept tuition flat for the last two years, students continue to graduate with high levels of debt, and while in school, many students are forced to work long hours to pay for their living expenses. 

As I have pointed out before, most politicians and higher ed officials only talk about the cost of tuition when they discuss student debt, but the biggest reason for student indebtedness is not tuition.  For example, Tennessee, Mississippi, and Oregon have received a lot of press coverage for proposing that community college should be free; however, this proposal would in reality increase student debt for low- and middle-income student as it would funnel money to wealthier students.  Since most of the lower-income students are already paying no tuition because of need-based institutional and federal aid, it is only the wealthier students who will be the major benefactors of eliminating tuition; meanwhile, the money spent on giving free tuition to wealthy students will prevent the state from giving aid to the lower income students to pay for books, room, board, and other living expenses.  Not only will the low-income students have to borrow more money to stay in school, but they will also have to work more to support their education, and this combination of increased debt and increased student work is a recipe for students dropping out of higher education. So if we want to stop a generation of students from being plagued by life-crippling debt, and if we want to increase our graduation rates, we need to find a way to pay for the total cost of attendance. 

I have recently updated my calculation of how much it would cost to pay for the total cost of attendance for each undergraduate student at a public university and college in America.   In 2011-12, there were 6.7 million full-time-equivalent undergraduate students enrolled in public universities and 4.2 million enrolled in community colleges. Since the average cost of tuition, room, board, books, and living expenses for undergraduates at public four-year institutions was $20,612, and at two-year public colleges, it was $13,237, the total cost was $195 billion. 

Of course $195 billion is a lot of money, but if we look at how much the U.S. spent in 2011 on financial aid and higher ed tax breaks, we come up with $201 billion:

$35 Billion  Pell Grants
$10 Billion  State Financial Aid
$27 Billion  Student Loan Subsidization
$40 Billion  Federal Tax Breaks
$12 billion Veteran Higher Ed Benefits
@$17 Billion  529 College Savings Plans
@$10 Billion  State Tax Breaks (estimated)
@$40 Billion  Institutional Aid and Tuition Discounting
@$10 Billion   Federal and State Work Study Funding

We are therefore spending enough to make public undergraduate higher education free; however, we are not allocating these resources in an organized and coherent manner.  For example, the federal government is currently spending $25 billion on low-performing for-profit colleges that have very low graduation rates and generate high student loan default rates.  Moreover, colleges and universities inflate their tuition price in order to pay for financial aid at the same time more schools are moving from need-based aid to merit-based aid, which privileges the wealthiest students. 

It should be clear that we need a national solution to a national problem, and his would entail a new compact among schools, state governments, and the federal government.  While some may say that this is a new role for the federal government, we must remember that the government already has strict requirements related to research grants and financial aid; what we need to do now is to tie aid to the institutions and force them to make the right decisions regarding access, affordability, and quality.  

Tuesday, January 28, 2014

Congress Notices the Loss of Tenure


The US Congress has released an important study on the use and abuse of contingent faculty at American institutions of higher education. Although many people inside and outside of higher ed are starting to know something about this issue, this report places the loss of tenure and the use of part-time faculty on the national political agenda. 

The introduction to the report locates the growth of non-tenure-track faculty within a historical perspective: “The post-secondary academic workforce has undergone a remarkable change over the last several decades. The tenure-track college professor with a stable salary, firmly grounded in the middle or upper-middle class, is becoming rare. Taking her place is the contingent faculty: non-tenure-track teachers, such as part-time adjuncts or graduate instructors, with no job security from one semester to the next, working at a piece rate with few or no benefits across multiple workplaces, and far too often struggling to make ends meet.”  Just as so many other professional middle-class jobs are being downsized and casualized, the government is beginning to see how higher education has also been reshaped by neo-liberal policies.

The report highlights the contradiction of relying on colleges to prepare people for good jobs, while the people teaching at these institutions have bad jobs: “Increasing the number of Americans who obtain a college degree or other post-secondary credentials is a key to growing and strengthening the middle class and ensuring the country’s global competitiveness. Yet the expanding use of contingent faculty to achieve this goal presents a paradox. These instructors are highly educated workers who overwhelmingly have post-graduate degrees. They perform work critical to our national efforts to lift the next generation’s economic prospects. In 2009, CNN Money ranked college professor as the third best job in America, citing increasing job growth prospects. The Bureau of Labor Statistics predicts post-secondary teachers as having faster than average employment growth over the next decade. Having played by the rules and obtained employment in a highly skilled, in-demand field, these workers should be living middle-class lives.”

Although in the popular imagination, professors still represent one of the most attractive careers, the reality of this labor market is far from ideal: “More than one million people are now working as contingent faculty and instructors at U.S. institutions of higher education, providing a cheap labor source even while students’ tuition has skyrocketed. Traditionally, adjuncts were experienced professionals who were still working in or recently retired from their industry outside of academia, with time on their hands to teach a class or two at the university or community college. Adjunct work supplemented their income; teaching was not their main job. Such adjuncts still exist. But national trends indicate that schools are increasingly relying on adjuncts and other contingent faculty members, rather than full-time, tenure-track professors, to do the bulk of the work of educating students. Today, being a part-time adjunct at several schools is the way many instructors cobble together full-time employment in higher education.” Part-time and contingent faculty are thus a symptom of the more general dismantling of the middle-class professions.

The congressional report also ties the casualization of the academic labor force to the question of educational quality:  “contingent faculty earn low salaries with few or no benefits, are forced to carry on harried schedules to make ends meet, have no clear path for career growth, and enjoy little to no job security. The contingent faculty trend appears to mirror trends in the general labor market toward a flexible, “just-in-time” workforce, with lower compensation and unpredictable schedules for what were once considered middle-class jobs. The trend should be of concern to policymakers both because of what it means for the living standards and work lives of those individuals we expect to educate the next generation of scientists, entrepreneurs, and other highly skilled workers, and what it may mean for the quality of higher education itself.”  While the report does argue that many non-tenure-track faculty bend over backwards to provide the best education possible, their working conditions often prevent them from performing to their full potential.

This report grew out of an open online forum at the behest of Rep. George Miller.  He asked contingent faculty to write in and respond to a series of questions, and then his staff analyzed some of the trends.  For instance, they found that the average annual salary of the people responding was $24,926 and that 75% did not have benefits. One respondent added the following: “Considering that students pay $565 per course, and that there are approximately 20 students per class, adjuncts are paid approximately 4% of what the university takes in even though we execute the core requirements of the university. As an open enrollment university with 86% Title IV students, dedicated adjuncts must provide extensive, time-consuming feedback frequently up to 20 hours per week, which averages a wage of less than $10 per hour.” As my own research has consistently shown, higher tuition often results in less money going into instructors’ salaries; instead undergraduates are forced to secretly subsidize administrative growth, sponsored research, graduate and professional education, and expensive extra-curricular activities.

To its credit, the report does acknowledge some of the reasons why undergrads are paying more for lees as faculty are forced to work for poverty wages: “In today’s lean era, schools have often chosen to balance their budgets on the backs of adjuncts. Outsized administrator salaries, marketing operations, and campus frills recently have received significant attention. Increased budget transparency for institutions of higher education would be a critical step in understanding the nature and necessity of this now-pervasive labor practice and whether and how it may be changed.”

Let us hope that this report forces the government to look seriously at my plan to tie full funding for public higher education to a requirement that 75% of the faculty are full-time and at least 50% of the state and federal funding goes to direct instructional spending.  Although we can make some improvements on the campus level, we need a national solution to a national problem.  

Tuesday, January 21, 2014

The High Cost of Research


In response to state budget cuts for higher education and new laws regulating the selling of academic patents, universities since 1980 have increased their spending on research.  Although many people believe that research brings extra revenue to these institutions, a recent study reveals how research activities rarely cover their true costs. In Understandingthe high Cost of Success in University Research,"Karen Holbrook and Paul Sanberg show how in the case of two university systems, “the findings demonstrated that 40 cents was spent from university funds for each one dollar of external funding received.” If we apply this same math to the University of California’s research budget of $5.2 billion, we can assume that UC had to find an additional $2 billion from other sources to make up for the additional costs. 

One of the main reasons why research grants rarely cover their full costs is that the federal government only allows 26% of the indirect costs to go to administration, but this amount rarely covers the full administrative cost: “In 1991, the administrative component of the F&A rate was capped at 26% for universities only. Now, more than 20 years later, the 26% remains as a cap even though virtually every research university can easily document the real cost of administration at a significantly higher level.” As we know from the UC system, over the last thirty years the salaries and number of administrators has grown significantly.

Another reason why grants do not pay for their own activities is that universities, like the UC system, tend to receive much of their funding from sources that do not pay even the average federal rate of 52%: “A significant consequence of accepting a large number of awards with low F&A rates of reimbursement is that the effective F&A rate for universities is nowhere close to their federally negotiated rate. The effective rate for top research universities nationally is in the range of 20–25% of awards.”  In fact, in a study of UC research, it was found that state and corporate grants bring the average UC indirect cost recovery rate to 26%.

Research also loses money because of the need for new technology and increased regulation: “the costs continue to escalate with more federal and state mandates for compliance with new regulations and with the general rising costs of facilities and equipment, personnel support, and the need to turn over high-tech equipment that is rapidly outdated.” Due to the arcane nature of university budgeting, these escalating costs are rarely acknowledged.

Another related issue is the question of what is considered to be the direct costs versus the indirect costs of a grant: “many of the activities that are necessary to support research (such as administrative and clerical support, computers, postage, subscriptions, telephone service, and office supplies), once covered among the direct costs of a research grant budget, can no longer be considered direct charges and must be paid for by the overhead dollars (indirect costs) that accompany a grant award or by some institutional source.” Thus, as the definition of what can be called a direct cost changed, universities were forced to spend more of their money on indirect costs, but these indirect charges were unable to keep up with the real costs. 

Meanwhile, as states cut their funding for higher education, money that was formely used to support research has disappeared: “A survey conducted by the Association of Public and Land-grant Universities (APLU) (5) revealed that reduced state appropriations impact several areas of the research enterprise: loss of faculty and staff, diminished ability to maintain campus infrastructure, limited support for graduate students, reduced support for public/private partnerships, and cuts in externally supported research, as well as ongoing research projects.” In a perverse feedback loop, the more states cut their funding for research, the more universities look for funding from outside sources, which results in the research mission losing even more money.

The conclusion from this study should not be that we abandon the research mission of research universities, but we need to find ways of paying for it, and non-transparent budgeting does not help the process.  Some possible solutions are to negotiate a much better indirect cost recovery rate for all grants.  Another needed reform is to reduce the number of highly paid administrators attached to the research mission.

Tuesday, January 14, 2014

Student Debt, Free Public Higher Ed, and Federal Loan Sharks

As I go around the country talking to different groups about my book on how to make public higher education free, I continue to encounter student debt horror stories, but there is perhaps no story more horrible than the recent Congressional Budget Office report on how the federal government raked in over $50 billion last year in profits from student loans. It turns out that after the feds took over the destructive private loan industry, the result was not to give students the best deal possible, but to cash in on the fact that the government can borrow money at virtually no interest and lend it to students at a much higher rate (of course the government profits go up much higher when students default or are penalized for late payments).  In fact, the average student loan defaulter pays a penalty of over 100% of the principal, and the federal government is very good at collecting these debts.  

Although I do not think it was the intention of the Obama administration to turn indebted students into cash cows, a systemic analysis tells us that the federal government is profiting from the state reduction of funding for public higher education, which in turn has helped to cause the increase in student tuition at public institutions, which increases student debt, and at the same time, increases in the number of students going to high-cost, low-performing for-profit colleges. 

I recently had the opportunity to talk to the new UC president Janet Napolitano about the fact that what we need is a new compact among the federal government, state governments, and public institutions of higher education. I believe she is dedicated to working on this issue, but it is hard to imagine the feds walking away from their new profit center – indebted students.   

If there was ever a sign that we need a totally new model for funding public higher education, we now have it in the extraction of profit from indebted students.