The Slow-Motion Train Wreck Speeds Up

Shrinking enrollments, climbing debt – yet a reluctance to shift the model

For the past 18 months, I have made numerous posts wherein I have described my reactions to seeing the gradual disintegration of both the public and private models of higher education, in a manner akin to watching a slow-motion train wreck.

Well, the rate of disintegration is increasing. The slow-motion train wreck is speeding up. Consider five categories of evidence from the news media in recent weeks:

(1) The gap between the wealthy privates and everyone else is becoming a chasm.

My claim in my blog post of Oct. 15, 2013, that, in some respects, the wealthy colleges and universities seem more like investment companies that do a little teaching on the side now seems more prophetic than ever. Two recent articles make the case.

In “How American Universities Turned into Corporations,” Time, May 22, 2014, documentary film director Andrew Rossi points out that the American model of higher education, from the time of the founding of Harvard in 1636, has depended on “constant improvement and expansion” – and that the resulting educational arms race is no longer sustainable, except for the most affluent of institutions. “As universities succumb to this cost disease, they begin to resemble businesses more than nonprofit schools charged with a public mission. The future of higher learning and, more broadly our society hangs in the balance.”

The second article, “Princeton’s Top Money Managers get 46% Pay Raise in 2013,” Bloomberg, May 20, 2014, underscores both the widening chasm between the wealthy privates and the rest of higher education, and the notion that these institutions have effectively become businesses. The top investment official at Princeton received total compensation of $3.9 million in 2013. (Princeton’s president, by comparison, earned just $979,636.) The top investment official at Harvard was paid $7.9 million, while Harvard’s president earned a “mere” $1.04 million. Whether or not one believes that any college president is worth $1 million, the fact that the chief investment officer is earning between four and seven times as much as the president provides telling testimony regarding how the institutions value the services of the institution’s leader, as compared to those overseeing investment returns. And all this time you thought the most important person on a college campus was the football coach!

(2) Many public institutions continue a downward slide.

Shortfalls in state budgets, often accompanied by enrollment declines, have put many public institutions in significant jeopardy.

The magnitude of the problems of public institutions varies enormously from state to state, but some state colleges and universities are seeing a level of difficulty beyond anything they have experienced in decades – if ever.

The University of Maine system recently approved a budget that not only required spending more than 75 percent of its emergency reserves, but also necessitated eliminating more than 150 positions – and the budget is still not entirely balanced. (The Maine system has been steadily losing enrollment for seven years.) (Bangor Daily News, May 19, 2014)

Although Gov. Jerry Brown of California is proposing an increase in state appropriations for the public universities, the state is currently spending between 35 and 40 percent less per student in inflation-adjusted dollars than it did 10 years ago – and Gov. Brown was quoted as saying “They’re going to have to have a serious conversation with the professors, the staff, of how you lower the cost structure.” (San Jose Mercury News, May 13, 2014)

Vermont’s funding of public institutions amounts to just $2,655 per full-time equivalent student, making the colleges and universities highly susceptible to enrollment declines – and at least two of the colleges have seen drops of five to 10 percent in the past four years. The result has been to cut staff. (Vermont Public Radio, May 14, 2014)

North Carolina has cut per-student funding by more than 20 percent since 2008, resulting in a 35 percent increase in tuition – yet over that same time period the flagship UNC-Chapel Hill campus has had to eliminate almost 500 positions and 16,000 course seats, and has increased class sizes. This year, Gov. Pat McCrory has proposed another $49 million cut for higher education. (Charlotte Observer, May 19, 2014)

(3) Many private institutions have again missed their enrollment targets.

The data are just starting to arrive, but institutions in many regions of the country are facing serious budgetary problems due to enrollment shortfalls.

In the Philadelphia area, many of the private colleges and universities came up short. Widener University, for example, is down almost 10 percent. Almost two dozen others are still accepting students, and many are attempting to lure students who have committed to other institutions by offering very generous aid packages. (One student with a high school GPA of less than 2.5, and a 940 on the SAT, was offered up to an 80 percent discount at several schools – a measure of the desperation felt by some institutions to increase their enrollment.) (Inside Higher Ed, May 21, 2014)

Enrollment at Iowa’s 33 private colleges is collectively down by four percent over the past four years, but a quarter of the schools face declines in excess of nine percent. (The Gazette, May 12, 2014)

(4) The reluctance to consider changes in the model is as strong as ever.

Colleges and universities continue to endorse the “high-cost/high-aid” model, despite overwhelming evidence that the model is no longer effective – and faculty on many campuses are unwilling to consider pedagogical changes.

Despite continued warnings from pundits about the coming impact of online education (“What Lies Ahead for Digital Education,” Forbes, May 7, 2014; “Why MOOCs Are More Like Health Clubs Than Hospitals,” Forbes, May 15, 2014), the great majority of universities continue to resist changing their model (“Rutgers Graduate Faculty Rejects Online Degree Compromise,” Inside Higher Ed, May 9, 2014). It is that attitude that leads to predictions that up to half the colleges in the country will close in the next 15 years, despite the broad acknowledgement that, as a country, we need to educate a larger fraction of our populace at the college level.

(5) Student debt is only going to get worse.

In the face of stagnant family incomes, rising college costs, and increased interest rates on federal student loans, more graduates will be leaving college with even larger debt loads.

A recent study from the Pew Research Center found that the four in 10 households led by people who were under the age of 40 and who had student loans averaged $137,010 in total debt, whereas similar households with no student loans averaged just $73,250 in total debt. (abqjournal, May 15, 2014)

Interest rates on federal student loans for undergraduates are scheduled to jump from 3.86 percent to 4.66 percent, starting July 1, 2014 – a 21 percent rate increase. Graduate loans will increase from 5.41 percent to 6.21 percent – a 15 percent rate increase. Direct PLUS loans will increase from 6.41 percent to 7.21 percent – a 13 percent increase. (Inside Higher Ed, May 8, 2014) Higher interest rates will require higher monthly payments on a loan of the same amount, and will increase the already astronomically high level of overall student debt, even if students do not increase the amount they actually borrow – something they almost surely will do, should colleges continue to increase their tuition.

The consequence to the economy of even the current level of student debt was the subject of a recent article in The New York Times (May 14, 2014). Student debt has grown from $300 billion to $1.1 trillion in just the last decade. In the same time period, the percentage of 27- to 30-year-olds with mortgages has dropped from 30 percent to 22 percent – and much of that drop has been among people with student debt. A similar pattern has occurred with auto loans. The inevitable conclusion? Student loan debt is holding back the economy.

Each of these issues is concerning. Collectively, they are truly frightening. The slow-motion train wreck is picking up speed – and there’s very little evidence that the resulting catastrophe to our young people and to our national economy can be averted.

At the local level, however, those with the will to do so can make a difference – and Roger Williams University intends to try.