Can Higher Education Solve America’s Economic Crisis?

Part 5: Is There a Disconnect between What America Needs and What Colleges Actually Do?

In my previous essay, I cited an op-ed by Derek Bok, the former president of Harvard University, in which he called for a doubling of the number of college graduates, in order to close the skills gap and produce the educated workers needed by today’s economy. Mr. Bok urged a massive expansion of public institutions (and their funding) to achieve this ambitious goal.

But it’s well known that almost all states have been moving in the opposite direction for many years. State appropriations for higher education have not only failed to keep pace with inflation but have declined significantly in most states, even as many of the public institutions have increased their enrollments.

How, then, can Mr. Bok’s call for many more college graduates be reconciled with the fiscal policy of the individual states — and how have public universities managed their affairs in the face of sharply reduced state appropriations?

It is common knowledge that, as a consequence of reduced state support, public institutions responded by raising their prices substantially. Over the last decade, in-state tuition increases at 50 public flagships, expressed in 2017 dollars, ranged from 3.9 percent (Ohio State) to 113 percent (Louisiana State). [1] Average annual tuition and fees at public four-year colleges and universities now range from just over $5,000 at the University of Wyoming to about $18,000 at Penn State and the University of New Hampshire. The public university with the highest price is the College of William & Mary, at $20,287. Room, board, books, out-of-state fees and incidentals are all in addition to these figures.

The quest for additional revenue

What isn’t as well known is the second strategy employed by public universities to recoup dollars lost from state appropriations and to enhance net income. That strategy involves luring students from other states (or countries) to attend as out-of-state students and charging them a substantial tuition premium. [2]

This quest for additional operating dollars creates a conflict of interest for public universities. Do they see serving the students of their state as their highest priority, or do they prioritize a robust bottom line? Or is it something else, such as national ranking or institutional reputation?

I randomly selected 25 flagship public institutions from all parts of the country and examined their enrollment patterns over the decade between 2006 (just before the Great Recession) and 2016. My analysis shows that most of these institutions prioritized growing revenue over increasing access for in-state students, especially for the vast number of low-income students who continue to be woefully under-served by higher education. Specifically:

  • In 2006, the average undergraduate enrollment at the 25 selected flagships was 22,054, of which 79 percent were in-state, 19 percent were out-of-state and 2 percent were international.
  • By contrast, in 2016, the average undergraduate enrollment at the 25 selected flagships had grown by more than 3,000 students to 25,165, of which 67 percent were in-state, 25 percent were out-of-state and 7 percent were international.
  • Despite overall growth, the lower percentage of in-state students meant that the average number of in-state undergraduates in 2016 actually fell to 16,962 from 17,430 in 2006.
  • Put another way, over the 10-year period, out-of-state students increased by 53 percent, international students by 423 percent and in-state students dropped by 3 percent.
  • Among the 25 universities, the largest increase of in-state students was 2,496 (Missouri); the largest decrease of in-state students was 6,058 (Purdue). Purdue also tripled its percentage of international students, to 18 percent.
  • One university (Alabama) grew by almost 13,000 students, but fewer than 200 of those were in-state. Alabama’s out-of-state population increased from just over 3,000 (20 percent of the total undergraduate population) in 2006 to more than 15,000 (54 percent) in 2016.
  • Only two universities (University of Florida and Florida State) among the 25 had fewer out-of-state students in 2016 than in 2006.
  • Over the decade, while there were some shifts in the national ranking of these 25 universities, as declared by U.S. News, there was no obvious correlation between national ranking and changes in in-state, out-of-state, international or total enrollment growth (or shrinkage).

What are we to conclude? Given the diverse nature of the enrollment changes over the past decade, it is obvious that the governors and legislatures of different states have not been of one mind regarding whether their flagship public universities should have the freedom to determine the size of the incoming class, the home state or country of the students they recruit or the amount of tuition they charge, as the universities considered the options available to them to resolve the budget problems created by reductions in their state allocations.

It is also true that campus leadership — individuals serving as presidents and trustees — inevitably changed during the past decade, so it is difficult to draw defensible conclusions linking actual enrollment outcomes with the motivation behind those outcomes.

Nevertheless, it seems apparent that identifying and securing more revenue was the primary concern for leaders at most public flagships over the past decade — even at the expense of limiting access to their prospective in-state students.

The motivation to prioritize revenue is understandable, but acting on that motivation, as many of the universities did, by very significantly increasing out-of-state enrollments, reinforces cynicism among the state taxpayers about how committed these public institutions really are in serving the public versus prioritizing their own self-interests.

The unintended consequences

Enrollment growth stemming largely from out-of-state students comes at the expense of other institutions, public and private alike. The out-of-state surcharges increase the total cost of attending these public institutions to the same level as that charged by many private institutions. These out-of-state students are not from families new to higher education or from traditionally under-represented groups. These students had always planned to attend college somewhere but were lured to an out-of-state flagship for reasons that one can only hope are educational in nature.

Additionally, in some states (e.g., Pennsylvania) the state colleges have seen significant declines in enrollment even as the flagship campus was growing — one class of state public institutions competing with another class of state public institutions.

Well, you might say, that’s just American free market competition at work. But when the taxpayers are asked to continue supporting a public university with a shrinking enrollment even as they are hearing demands for more support at another public university that is growing, it is easy to understand their skepticism regarding how the leaders of public universities are interpreting their mission.

And it gets worse.

Overlapping the decision by many flagship publics to emphasize the enrollment of high-paying out-of-state and international students (often with the consequence of reducing enrollment of lower-paying in-state students) is a general shift toward more affluent families and away from less affluent families. New America recently released a study [3] showing a significant enrollment increase at selective public universities over the past 20 years of students from the top 20 percent of family income —  and a corresponding drop in students from the bottom 40 percent of family income.

Consider the case of the College of William & Mary, the second-oldest higher education institution in the country (and a public university since 1906). More than half of its students are from families in the top 10 percent of income, and more than a third from the top 5 percent of family income. Conversely, only 12 percent are from families earning less than $65,000.

Or the University of Alabama, which, as we learned, added almost 13,000 undergraduates over the past decade, with fewer than 200 coming from in-state. Their merit scholarship program of more than $100 million (the largest of any public university in the country) allowed the institution to increase its share of students from families in the top 20 percent of income to 59 percent (up 13 percentage points in just 10 years) — and the University of Alabama is only one of a dozen public flagships that spends in excess of half its financial assistance dollars on non-need-based aid. Among all 50 states, Alabama ranks 44th in both educational level and per capita income. Wouldn’t you expect that Alabama’s flagship public university would be focused on improving the state’s economy by helping more state residents obtain a college degree and thereby earn a higher income?

In 1879, then-president James Angell said that the role of the University of Michigan would be to provide “an uncommon education for the common man” and thus be “an antidote to aristocracy.” But now more than 10 percent of its undergraduates are from families in the top 1 percent of family incomes, and only 16 percent are from the bottom 60 percent of all earners. The median income of the parents of students at Michigan is roughly three times the median income of Michigan families in general. [4]

What happened to “the common man?”

The University of Michigan successfully preserved its U.S. News top five national ranking among all public universities, but although it added almost 3,000 undergraduates between 2006 and 2016, it is actually serving fewer Michigan residents today than in 2006. You might have thought that, in a decade when the city of Detroit was struggling for survival, the focus of the state flagship public university would have been on the state’s needs. The state’s major newspaper certainly takes that view. [5]

Should a focus on the bottom line be deemed inappropriate?

Is a shift by certain well-known universities to serving more affluent families really a problem? Should we limit the opportunity these universities have to compensate for significant declines in state appropriations, or to compete with other institutions for status and rankings? Won’t the students who are being passed over enroll at other, albeit lower-ranked, universities and still complete their undergraduate degrees? Why shouldn’t these elite publics set a high bar for admission, if they can still meet their enrollment objectives?

These questions raise the critical question of the purpose of a public university. Is its purpose to become as “good” (meaning famous for its quality) as it can possibly be, or is its purpose to serve the public in its state to the best of its ability?

Three points:

  1. Public universities exist first and foremost to serve as “engines of mobility” — that is, to serve as the ladder up which climb those members of each generation with the requisite will and ability in order that they may reach their full potential. If we believe at all in social justice, then we must ensure that no student is denied a robust future because the ZIP code of his or her family created an insurmountable handicap. But we are failing to live up to our ideals. One recent commentator called our elite institutions “engines of inequality” because of how little they are currently doing to “cultivate our fabled American can-do spirit” by providing support for low-income students. [6]

 

  1. In the past, many universities established enviable records in effecting social mobility. Over half of the students from low-income families who attended an Ivy League school found themselves in the top 20 percent of all earners by the age of 32. [7] Public flagships have done almost as well — over a third of their low-income students moved to the top 20 percent. But the problem is the number of such students is tiny. Students from the top 1 percent of family incomes are 77 times more likely to attend an Ivy League school than are students from the bottom 20 percent of family incomes, and now the numbers of such students at flagship publics are declining when they should be rising.

 

  1. High-achieving, low-income students are almost as successful at top schools, be they public or private, as are students from wealthy families. Forcing them to attend less selective schools has a correspondingly negative effect on their graduation rates. Students are best served if their abilities roughly match those of their classmates — an argument for increasing, not decreasing, their numbers at elite universities.

In conclusion, in the absence of any coherent policy at either the federal or state level, both public and private universities act on their perceived need for increasing revenue (in part to make up for the loss of state appropriations, in the case of the public universities, and in part to be able to compete with their peers), and, to a lesser degree, to maintain (or improve) their national rankings. [8]

Regrettably, lost in their focus on revenue is their obligation to serve the public by making room for talented low-income students at their institutions.

It is unreasonable to assume that this situation will change for the better, absent state or federal policy designed to ensure greater opportunities for talented, low-income students.

But before we take up a consideration of possible initiatives at the state or federal level, we should consider the outcomes we most need to achieve. By starting with outcomes, we can work back to the policies we must create to achieve those outcomes.

Next week: Working backward from desired outcomes.

[1] “Flagship Universities with the Lowest Percentage Tuition Increases, 2007-17,” The Chronicle of Higher Education, Nov. 17, 2017

[2] Interestingly, some of the elite private institutions followed a similar strategy, but for a different reason. Three Boston-area universities increased student diversity on campus by recruiting and admitting (presumably wealthy) international students, rather than by creating access for (presumably mostly low-income) minority students born in the USA. “Lost on Campus, as Colleges Look Abroad,” Boston Globe, Dec. 13, 2017

[3] Moving on Up? October 2017

[4] “In Trump country, a university confronts its skeptics,” Politico, Nov. 9, 2017

[5] “U-M socks away millions in endowment as families face rising tuition,” Detroit Free Press, Feb. 5, 2018

[6] “Poison Ivies,” The Baffler, Nov. 13, 2017

[7] Moving on Up? Ibid.

[8] “How U.S. News college rankings promote economic inequality on campus,” Politico, Sept. 13, 2017

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