Rebuilding the American economy

Part 4: Is higher education fulfilling its purpose?

Two quick data points: In comparison to the adult population of Rhode Island, Massachusetts adults are 27 percent more likely to have earned a four-year degree — and the median family income in Massachusetts is 20 percent higher than in Rhode Island. I submit that these are related data: The higher level of education is responsible for greater economic success. So if, as I have postulated, the key to rebuilding the American economy is increasing the attainment of post-secondary education, then it is essential we have an academically effective and economically efficient system of higher education. But to assess how well colleges and universities are doing, we must first agree on the purpose they are intended to serve. Is their purpose to meet the needs and expectations of students? Is it to meet the needs of the individual colleges? Or is it to meet the needs of society? Let’s consider some alternatives.

Purpose from the Standpoint of the Student

  1. The purpose of college is to allow young people to find their passion and role in society.

This was the primary purpose consistently identified by freshmen students until about a decade ago. College was a place to learn facts and knowledge and, in so doing, to hope to gain wisdom; to understand something about the depth and breadth of human experience across the ages; to test one’s beliefs and moral tenets against those of others; in short, to grow and develop as an individual. This purpose is still identified as important by entering freshmen, but only secondarily to their current most important reason for going to college — preparing for a job.

  1. The purpose of college is to acquire the skills necessary to qualify for a well-paying job.

This purpose is the one most endorsed by today’s generation of college students (and their parents). With the labor market continuing to undergo profound changes, and, following several decades during which growth in median family income has not kept pace with increases in the cost of living, students see a college education as an essential prerequisite for having the comfortable middle-class life enjoyed by many of their parents.

But we know that the market value of different majors varies enormously. Students graduating in engineering can expect a starting salary in excess of $60,000, and finance majors may start for even higher sums, but arts and humanities majors might earn less than half that amount. If college is all about securing a well-paying job, shouldn’t students with a burning desire to study music or English literature ignore their passion and choose instead to become accountants or computer scientists? Yet if they do, will they be successful? Will they enjoy their work and their life?

Studies have repeatedly shown that the most important factor in living a great life is to have a purpose (typically in the form of a job) that the individual finds emotionally and intellectually rewarding. Some level of financial success is also very important — but not if it comes at the expense of having to do a job that one hates. As it happens, students most often select majors that interest them, rather than choosing a major on the basis of the level of starting salary. Their stated reason for going to college — preparing for a well-paying job — is belied by their choice of a major based on their personal interest in their selected academic field, not on financial return. Perhaps this generation of college students is not so different from past generations after all.

From the standpoint of many students, the purpose of attending college is being met, whether that purpose is learning more about one’s interests and direction in life or acquiring job skills. But a great many prospective students never have the chance to attend college. Young people from lower socioeconomic levels often find college too expensive and too risky. The national six-year completion rate at public colleges and universities is less than 60 percent, and just 16 percent for those who start at a community college and then transfer to a four-year institution, as many low-income students do. A one-in-six likelihood of graduating — especially if a student must take out a student loan — is unacceptably risky, but there are precious few alternatives for ambitious low-income young people to assure their economic futures.

Viewed in this light, we are forced to conclude that college is only serving the purpose of some students.

Purpose from the standpoint of the college

  1. The purpose of college is to fulfill the campus mission statement.

The individual college or university also has a perspective regarding its purpose, and that purpose may have been amended or rewritten several times since the college was established. Thus, even colleges founded by religious denominations for the express purpose of educating clergy generally have become far more ecumenical — even secular — in the years subsequent to their founding, and today’s mission statement may bear little resemblance to their original mission statement.

Unfortunately, too many colleges have ended up all trying to do the same thing: Recruit outstanding high school students in order to enhance their own reputations. The fallout from this strategy is that too little attention is paid to the educational needs of high school students who are merely “good,” or even “adequate,” but are not “outstanding.” That is, there are very few high quality colleges willing to admit high school students who are in the bottom half of their graduating class. As a consequence, the educational interests of many students are in conflict with the ambitions of individual colleges and universities.

Let me provide a specific example.  Last year, the 20 private colleges and universities having the greatest success in fund-raising (new money, not endowment earnings) all raised more than $200 million each (one raised more than $1 billion). Put another way, the least successful of these 20 institutions raised 2-½ times more money in one year than the entire endowment of my own campus, Roger Williams University.

And in response to this remarkable success in fund-raising, they also all raised their prices — not because they needed the revenue but because they felt the need to keep pace with the price increases of their institutional peers. The list price of tuition, fees, room and board at 19 of these 20 institutions is now well over $60,000 per year — and the 20th institution costs more than $70,000 per year. Although all of these campuses are generous to the students they admit who have financial need, the number of low-income students on these campuses is not large, and about half of their students are paying the full price, meaning that they come from exceptionally wealthy families.

So why, in the face of great fund-raising success, don’t they lower their prices, encouraging more students to apply? The answer is that they don’t need to: They are attracting record numbers of applicants, and currently only accept between one in five and one in 20 applicants, depending on the particular institution. They are answerable only to themselves, and they compete with each other not for the best students (they all have “best” students), but on measures such as which institution raised the most money, or which had the greatest return on its endowment investments, or which has the largest endowment. Aren’t these criteria more suited to a Fortune 500 company than for institutions of higher education? Some commentators have, unkindly but perhaps accurately, described these universities as “hedge funds that do some teaching on the side.” When our most prestigious universities are mocked in this manner, is it any wonder that the American public has become increasingly more cynical about the value of college in general?

So as measured by the need every college has to meet its enrollment and net revenue targets, the very wealthy institutions are doing exceptionally well. The colleges and universities with endowments in excess of $1 billion, and with acceptance rates below 20 percent, are more successful today than at any time in their history.

Institutions (both public and private) in a second group are surviving, but not prospering. They are faced with a shrinking pool of high school graduates and a decades-long period of flat or declining median family income. The choice these institutions face is to increase financial aid to bring in the class (but risk not meeting their net revenue needs), or to meet their net revenue needs by holding the line on financial aid (and risk not bringing in a full class of freshmen). The institutions in this group are getting by, but each year brings new challenges.

Finally, there is a group of institutions that is struggling. A growing number of both private and public colleges are not consistently meeting their enrollment and/or revenue targets. In many parts of the country, the supply of college seats currently exceeds demand, and unless these struggling colleges can find a way to increase demand (such as by expanding educational opportunities to groups historically denied access to higher education), they will be forced to close.

Collectively, colleges and universities are finding that the economic opportunities and threats they face today are moving them away from their mission statements, and toward much greater attention to their business model. Wealthy universities are highly focused on accumulating more wealth, if only to keep pace with their institutional peers that are equally focused on wealth accumulation. “Surviving” and “struggling” campuses are doing whatever they feel they must in order to make it through another academic year (see, for example, “Cut to the Core,” an analysis of pending—and highly controversial—reductions in the core curriculum at Long Island University, Inside Higher Ed, 3 March 2017).  In many instances, the campus mission is in direct conflict with today’s economic realities, and, when that happens, economic realities win every time.

In light of what is actually happening at the moment, we may reasonably conclude:

  1. The purpose of college is to create a business plan that sustains the institution.

Purpose from the standpoint of society

  1. The purpose of college is to facilitate the transfer of knowledge from one generation to another; to generate new knowledge; and to prepare future leaders.

As colleges that were established in the Colonial era to educate ministers in the faith of the founders later became secular, they nevertheless retained a strong sense of serving the public good, and not the whims of individual students. Additionally, public universities, most notably the land grant institutions, were formed to educate engineers and agriculturalists, professions that would enhance the economic competitiveness of the state and nation. Later, with the advent of graduate education and the professions, public and many private universities have become places where funded research is undertaken, and where doctors, lawyers and other professionals are educated, all with an eye to building a stronger and more competent society.

So, from the perspective of society, the purpose of college is much less about conferring a benefit to an individual, and much more about creating a well-educated citizenry, invested in the continuing success of American society and democracy. Over the past 40 years, however, the American public, through its elected leaders, has significantly reduced funds supporting public higher education, implicitly (and sometimes explicitly) accepting the notion that the benefit (and therefore the purpose) of higher education accrues to the individual, and only secondarily (if at all) to society.

This is a critically important point, because, as I noted earlier, it is imperative that we agree on the purpose of college if we are to measure its effectiveness. If our collective view today is that colleges exist primarily to serve the individual, then clearly we have no obligation to invest public funds in the process: The individual and his or her family should personally cover the costs of a college education. Of course, reciprocally, college graduates, having paid for the cost of college themselves, have no obligation to “give back” to society, beyond paying more taxes as a consequence of the fact that their college degrees assure them salaries that are almost always higher than those of non-graduates.

The problem with this view is that it ignores those who lack the financial capacity to pay for a college education, meaning that this model minimizes social mobility of talented individuals from families with modest incomes. Yet, interestingly, even as the states have reduced their per-student support at public universities, the federal government has — through the Pell Grant program, federal work study and subsidized federal loans — created opportunity for at least some low-income students to attend college.

So, too, have the private colleges, especially those with sizeable endowments. The federal programs and the efforts of private colleges, however, are together far short of meeting full need of all prospective students, and do not begin to make up for reductions by the states in the level of financial support of public institutions.

What does it all mean? By now, it should be clear that there is no consensus on whether the purpose of college is for the individual, for the college itself or for society at large. Consequently, it is very difficult to measure the effectiveness of the current model because it is trying to achieve three very different outcomes simultaneously. As long as we cling to this multipurpose expectation of college, we will continue to have sub-optimal results. College is too expensive for low-income students and is therefore inaccessible for most of them. Collectively, even as a relative handful of institutions has become fabulously wealthy, most colleges are having mixed success surviving as they continue to rely on a business model that no longer meets the needs of America today. Society is not being well-served by an insufficient supply of new college graduates to fill the jobs needed by a knowledge-based economy, in which a significant majority of the jobs require a college degree.

Purpose Based on Today’s Reality:  Choosing Winners and Losers

  1. The purpose of college is to select those exceptionally talented individuals who will make their mark and improve the world around them.

We could certainly make the case that, if only by default, this is the true purpose of college in 21st century America. Today’s college students are disproportionately from families of at least some wealth, where typically one or both parents are themselves college graduates. They come from affluent neighborhoods and have attended very good K-12 schools. Indeed, well over 70 percent of the children of families in the top quarter of family income will become college graduates.

If the purpose of college has degenerated to a process of predetermining winners and losers, we are playing a high-risk game. The students who attend the top 100 private colleges and universities represent less than 3 percent of all the students enrolled in college, and that figure does not include those high school graduates who were unable to continue their education, often for financial reasons. We are gambling that offering a superb college education to a tiny fraction of college-age individuals (and letting the rest struggle to get by under sub-optimal circumstances) will ensure a talent pool for the next generation of sufficient size to allow America’s economic hegemony to continue in a world where many countries are investing heavily in their systems of higher education in an effort to overtake us economically.

Such a system is not just dangerous; it is also spectacularly unfair because it largely preordains the outcome (who gets to attend top colleges and who doesn’t) not on the basis of innate abilities or personal drive, but on the basis of one’s zip code. It does not foster social mobility, as evidenced by the fact that young people in families in the top quarter of family income are seven times more likely to earn a college degree than are the children of families in the bottom quarter of family income — and that ratio has not improved in the last 40 years.

So where are we? What is the purpose of college?

We are forced to conclude that the purpose of college is to preserve the status quo at a time when we desperately need to change the status quo. The educational playing field is sharply tilted in favor of young people from higher socioeconomic levels. We pretend everyone has an equal chance, that everyone can choose a major based on their passion or on their desire to make a good living, but we know the system is rigged: The likelihood of success is directly linked to the quality of the college at which the student is enrolled, and top schools preferentially choose students who have already proven themselves in high-quality K-12 schools.

Is there no hope of reform, or even of better outcomes? To the contrary, the fact that our current model of higher education serves so few interests well creates the opportunity to make major changes in the model. But before we start considering solutions, we will return to the problem of the leaky pipeline in Part 5: Can We Reduce the Number of Students Who Leak from the Pipeline?