HESA

Higher Education Strategy Associates

Author Archives: Alex Usher

September 07

Debt Aversion

If there is one trope that keeps coming up in higher education, it’s how student loans are evil because they discriminate against young people from low-income backgrounds, who – it is alleged – are debt-averse.

The problem with this trope is two-fold: the first is that empirical evidence proving that debt aversion is concentrated among the poor, or even that it exists in the first place, is remarkably thin (though, in fairness, it’s a difficult phenomenon to prove).  The second is that there’s no necessary link between debt-aversion and PSE attainment.  Debt-averse students might simply make ends meet by working more and being more frugal.

However, in the last year or so there have been two excellent studies – one published by HEQCO and the other by the World Bank – which have improved our understanding of the phenomenon enormously (hat tip to Anne Motte).  Read them both: they’re the best student aid papers you’ll see all year.

Both use ingenious research methods to examine the question of debt aversion.  The HEQCO paper measured debt aversion by offering students both a grant and a grant plus a small loan and measuring difference in take-up rates.  The World Bank paper offered identical offers for student loans to two randomized groups of students, except that in one group the offer was described as a loan and in the other it was described as a “Human Capital Contract.”

Both studies came to similar conclusions: debt aversion can be demonstrated, but the effect is relatively small.  The HEQCO survey showed students were slightly less likely to accept a grant for education if a loan offer was attached as well; the World Bank survey found an 8% improvement in the take-up rate if the loan offer was framed as a human capital contract.

Good news for the trope-promoters?  Yes and no.  While the HEQCO study found that debt aversion exists, they found no evidence that it was related to family income (the World Bank paper didn’t take up the question). And there remains no evidence that the presence of debt aversion negatively affects participation. Though we used a fairly crude measure, Sean Junor and I showed seven years ago in the Price of Knowledge 2004 (see page 107) that youth who reported extreme education debt aversion were slightly more likely to attend PSE than those who did not.

Verdict: debt aversion exists, but it is still a pretty weak argument against student loans.

September 06

A (Not Very Good) Sign of Things to Come

So, Dalton McGuinty has released the Ontario Liberal Party’s platform and its associated costing document.

What’s drawn everyone’s attention so far is this idea of “30% tuition rebates” – understandably so since the cost of the this one is almost a third of all new proposed spending (the miserly sums are a nod towards the fact that the province is essentially broke and can’t afford any new spending).  I’ll go into more depth about these rebates tomorrow in my Globe blog, globecampus.tumblr.com; suffice for the moment to say that the vagueness of some of the wording suggests that this item was a very last-minute inclusion and that there a lot of potential landmines – really big ones, actually – in implementation.

But ignore that for a moment, and take a gander at page nine of the costing document.  It suggests that if the McGuinty Liberals are re-elected then Ontario post-secondary institutions can expect to see their budgets grow from 7.2 billion to 7.9 billion over the course of the next four years.  Now, if you’re thinking; “10% over four years isn’t bad in tough times,” think again – that $700 million increase includes the $486 million set aside for the tuition grants, which of course doesn’t benefit institutions one bit.  It also presumably needs to cover ongoing funding for the 60,000 new places the government has announced  (capital costs for these students are included in the cost estimates but the ongoing operating funding isn’t).  Assuming a nice round $5,000 subsidy per student per year, that’s another $300 million, at which point we have used up the entire budgeted increase.

So, no rise to account for inflation.  No rise to account for increasing salaries.  No rise for anything, really – it’s a straight nominal freeze for institutions regardless of what’s happening to them on the cost side.  And this is from what is probably the most pro-PSE of the three parties in the current legislature.  Any other deal institutions might get is likely going to be worse.  And there’s no get-out on the tuition side.  If anything, the Liberals look set to reduce the annual 5% increase to something closer to 3%.

That means there’s no getting around the need for some serious belt-tightening.  Administrations at Western and Carleton are almost certainly wishing they could get a do-over on their faculty settlements from last year, and I can guarantee that this is going to make a resolution of the current Ontario colleges support staff strike a lot more difficult.  There simply isn’t money around anymore to fund the kind of settlements to which people have become accustomed.

Expect strikes.  Expect hiring freezes.  Expect an exodus of Ontario talent to better-funded universities further west.  This is what a $15 billion deficit will do to you.

September 02

America – the Exodus

As we watch our southern neighbours slide into seemingly perpetual budget crises and many state universities undergo some brutal austerity, it’s worth thinking about the American crises’ global impacts on higher education.

Scientific talent is not distributed evenly around the world. If there’s one thing that the Shanghai rankings show, it’s how unbelievably deep the scientific talent pool is at American universities. But talent can move. Twice in the twentieth century, countries suffered major exoduses of scientific talent. In 1930s Germany, hundreds of key scholars migrated from Germany to (primarily) America, a process which not only boosted the Allied war effort enormously, but set the stage for a period of dominance of American science that has lasted for over 65 years.

Though not quite on the same scale, the 1990s saw an enormous movement of Russian scholars to new homes in Europe and America in order to escape the economic collapse and concomitant shortages of research funds. What’s about to happen in the U.S. will probably not be on quite the same scale, but you can’t expect universities in California, Illinois, Texas and elsewhere to suck up financial hits of 20 to 40% and not lose talented staff to universities who can make them a better offer. Lucky for them, a lot of OECD universities are getting smacked just as hard by austerity and thus aren’t in a position to outbid them. But that’s not quite true in Canada, Scandinavia, and Asia (where the National University of Singapore, for instance, is hiring aggressively). Here, there is the potential to accommodate refugees from American budget cuts.

The key question is: how best to take advantage of this? If you’re a truly aggressive (and strategic) school, you might take a gamble: front-load your hiring for the next few years and specifically target some promising staff at U.S. schools. Hire your next five years’ worth of profs this year and make sure 90% are from American institutions. Sure, it’ll mean short-term deficits, but hey – credit’s never been cheaper and top academic talent is the very definition of productive capital. This is a once-in-a-generation opportunity.

Memo to provosts: Carpe diem.

September 01

Strategy Matters

Here’s a key truth to understanding the future of academia: the western world hit “Peak Higher Education” sometime in 2009. That is to say, across the OECD, we are unlikely to see public funding at 2009 levels ever again. Between the current global financial crisis and its associated fiscal problems, and the challenges associated with aging societies, there will not be a return to prior levels of public support for higher education for decades to come.

Now peak higher education isn’t hitting everyone equally. Canadian institutions, for instance, are thankfully not facing the 20%+ cuts the University of California system has undergone these last few years, or the 41% decrease in funding for teaching that UK universities are in the midst of experiencing. In some parts of the country, funding might even increase slightly over the next couple of years (though rather clearly, Ontario, Quebec and the three maritime provinces won’t be among the chosen few). But overall, the sector as a whole is going to be in decline.

Which means universities and colleges have four choices:

(1) They can get better at raising resources, through fundraising, charging higher tuition, attracting more international students

(2) They can get bend their cost curves to serve students more cheaply

(3) They can try some combination of the 1 and 2, or

(4) They can shrink.

That’s it. Those are the only alternatives. There’s no silver bullet which gets an institution out of those choices.

This is going to be painful. All those tough decisions which we used to be able to avoid taking when the next round of government funding came in? We actually need to face them now. In turn, what this means is that strategic thinking and strategic planning is going to take on a much more important and central role in higher education.

That’s why we at HESA are pleased to announce the launch of our new quarterly publication, The Global Higher Education Strategy Monitor. It takes a look at how institutions all over the world are using strategy to drive quality improvements and how higher education as a whole is adapting to Peak higher Education. Managing Editor Pamela Marcucci has put together a great first issue, which is available free of charge here. We hope you enjoy it.

August 31

Why is there an “S” in STEM?

Governments love to talk about STEM (science, technology, engineering and mathematics) programs. They were given prominent space in the last Canadian federal budget, and the acronym permeates U.S. educational policy discourse. It’s conventional wisdom that increasing the number of STEM graduates is essential to economic growth. You might think that the chief purpose of the modern post-secondary institution is to churn out graduates in STEM fields – and that as a corollary, arts students are some sort of vestigial leftover from a bygone era, kept around only to avoid the pain of their excision.

The full-court press to jack up STEM graduate production rates overlooks one important detail – the STEM fields are hardly a monolith, and there are some very important differences among them. Indeed, sometimes it’s unclear why these fields are grouped together at all. The issue, in large part, lies with the “S” – an undergraduate science degree is much less likely to get you a job.

Take a look at labour force status of the class of 2005 two years after graduation, courtesy of Statistics Canada’s 2007 National Graduates Survey. For comparison, we’ve left in data for the humanities – a field that is seldom lauded as the ticket to immediate success in the job market.

It becomes quickly apparent that one of the STEM fields is not like the others. Graduates in the physical and life sciences have extremely low employment. Barely half of them have a full-time job, only two-thirds are employed at all, and almost a quarter are not in the labour force – two years after graduating. Moreover, they have the highest rate of unemployment (11%). Students in engineering or math and computer science, by contrast, have full-time employment rates of around 80% and employment rates around 85%, with unemployment under 8%. Based on short-term employment outcomes, the sciences have little in common with the other three. It makes you wonder: if “TEM” sounded half as good as “STEM,” would we be so quick to lump in the sciences with the rest?

Of course, the sciences still offer great value to their students and society – even if that value doesn’t pay off as employment in the short term. And should science’s showing on these graphs make it feel lonely, there’s another field that might be its friend. As the data shows, a science student’s employment prospects are rather similar to those of a humanities graduate. And that’s something we shouldn’t hide behind an acronym.

August 30

Anticipating Demographic Shifts

I was in Regina last week speaking to the university’s senior management team about challenges in Canadian post-secondary education, when someone asked a really intriguing question.

“Given the changing demographics of Canada, with fewer traditional-aged students, are there any examples of good practice of universities altering their programming serving non-traditional students instead”?

I have to admit, I was stumped.

You’d think, for instance, that maritime universities, who have been facing demographic decline for quite some time, would have some experience of this, but they don’t, really. Think about it: when Memorial started hurting for students because of Newfoundland’s awful demographics, the main response was to lower tuition fees and begin raiding other nearby provinces for traditional-aged students. In the rest of the maritimes, they’ve been sucking traditional-aged students out of Ontario for a couple of decades now, and the primary solution to any shortfall now is to go looking for traditional-aged students in other parts of the world.

From Statistics Canada

There have, admittedly, been some advances recently in attracting non-traditional-aged students in Northern Ontario and the Prairies – specifically, Aboriginal students, who tend to arrive at university in their mid- to late-20s (often after having had children). But even here, what they are doing for the most part is trying to put in as many supports as possible so that they can be taught as if they were traditional, full-time students. One might conclude that universities are going to great lengths to avoid re-engineering themselves to serve older populations.

Taking demographics seriously means that some universities are going to have to move towards much more modular delivery of courses, more e-learning alternatives, and more evening courses. There are pockets of this, of course, but it hardly constitutes a major trend. Generally speaking, community colleges and polytechnics have been doing much better on this front than universities.

As the demographic shift continues, what happens if governments conclude that they should put more resources on lifelong learning and less on traditional-aged students? That possibility may open up some big opportunities for those institutions (mostly colleges) who have already invested heavily in this kind of delivery, and leave those institutions (mostly universities) who have not politically quite vulnerable.

August 29

Market Opportunities – A Blue Ocean Strategy in Doctoral Education

The economics of higher education are pointing inexorably towards a two-tier faculty system; one in which research is rewarded, and one in which teaching is rewarded. If this wasn’t plain over the last fifteen years or so, it certainly should be by now.

So why haven’t Ph.D. programs shifted to adapt to this reality? If we’re looking at a future where there are at least as many graduates whose careers will depend upon their pedagogical prowess as upon research excellence, why aren’t their programs that cater to people heading down that career path?

The answer, of course, is because teaching remains a low-prestige endeavour and universities tend not to deliberately choose lower-prestige paths when they are already on a higher one. But that doesn’t preclude newer graduate programs from heading down this route. If I were president of a young, growing, mid-size university that was just starting to build significant doctoral programs (e.g., Lethbridge, University of Winnipeg, University of Northern British Columbia), I’d be sorely tempted to to follow this pathway.

Think about it: if you’ve got no chance of duking it out with the big boys and girls of the U-15 for major research dollars, why not create your own strategy and your own market? Target people who want to teach. Provide them not just with doctoral-level training but also with a full set of courses in pedagogical theory. For bonus marks, make sure they understand how pedagogy works in e-learning and give them the skills to develop their own course-ware. It would give students an enormous advantage in landing a job.

We’re all used to colleges advertising their success rates in placing their graduates. Given how coming budget cuts are likely to make it even more difficult to land academic jobs, we shouldn’t be surprised if grad schools soon start adopting that same strategy. The institution that gets out in front on a teaching-oriented Ph.D. will likely do exceedingly well on that metric.

August 28

HESA in the Montreal Gazette

On Saturday, the Montreal Gazette’s Karen Seidman talked to HESA President Alex Usher and others about student engagement in campus life:

Alex Usher is the president of Higher Education Strategy Associates, a Toronto think-tank that helps universities and governments measure and improve education strategies, and he doesn’t believe the learning experience changes much for commuter students.

“A lot of the research showing that commuter campuses have higher dropout rates comes out of the U.S.,” he said. “It’s not necessarily true in Canada.”

And while he “respects” the fact that American research shows students have more success if they’re involved in university life, he doesn’t believe the negative impacts are anywhere near as bad as that research shows.

“You have to keep in mind that the big commuter schools in the U.S. tend to get more students who are less academically inclined,” he said. “Our schools may look like big American commuter schools, but they still retain their students.”

For example, 90 per cent of students in Canada who start a four-year degree are still in school or have graduated within five years.

 

 

August 26

Trust

It’s a big day at HESA, as it’s release day for our final report on the Consultation on the Expansion of Degree-granting in Saskatchewan that we’ve been working on for a few months (available here). I can’t tell you what it says before it comes out – but I would like to talk about one of the key themes of the report: trust.

If you issue degrees, people need to be able to trust that the degree means something. In particular, students need to know that a degree from a given institution will be seen as a mark of quality by employers; otherwise, the degree is worthless. Worldwide, the function of quality assurance agencies – third-parties giving seals of approval either to individual programs or to institutions generally (either by looking directly at quality or by looking at an institution’s internal quality control mechanisms) – is to assure the public that degrees are trustworthy.

In Canada, many people have looked askance at these bodies, seeing them as unnecessary bureaucratic intrusions. “We never needed these before,” people grumble. “Why do we need them now?”

To an extent, the grumblers have a point. Trust is usually earned through relationships. People in, say, Fredericton, trust UNB not because some agency tells them to trust it but because it’s been granting degrees for going on 200 years now; they’ve seen the graduates and can gauge the quality for themselves. This is true across most universities in Canada; they’re old, solid and hardly fly-by-night and people know who they are. And there tend not to be more than four in any given urban area, so pretty much everyone knows someone who went to school “X” and can thus gauge an institution’s quality directly.

But what happens when you let new players, like private universities or community colleges, into the degree-granting game? What happens when universities start having to look abroad for students? How can employers in Canada trust new players? How can employers in Turkey or Vietnam trust any Canadian university they’ve never heard of?

Canada was able to get away without quality assurance for so long mainly because our system of giving a relatively small number of large public universities a monopoly over degree-granting was well-suited to engendering trust – especially when 90% of their students were local. But open up degree-provision, or widen the scope of your student base, and suddenly trust isn’t automatic anymore. You need a third-party to give a seal of approval to replace the trust that used to come naturally.

Quality assurance isn’t anyone’s idea of fun. But it isn’t the frivolous, makework bureaucracy the grumblers criticize, either. Rather, it’s a rational response to changing patterns in the provision and consumption of higher education.

August 25

Why Angela Merkel Matters to the University of Windsor

I was interested to see the coverage in the Windsor Star of President Alan Wildeman’s recent note to staff about the 2012-2013 budget.

The Star focused on the gap between $12 million increase in new costs and the $6 million increase in revenue as a reason for a coming round of tuition hikes. To me, though, this misses the real story:  namely, crappy pension fund returns.

Windsor, like many Ontario universities, is in a bit of a pickle about staff pensions.  The fundamental assumption behind defined-benefit pensions in the 1990s and 2000s was that one could expect pension-funds invested in the market to make serious money.  This meant that one didn’t need to fully pay for one’s pension obligations – the magic of economic growth and compounding interest would do part of the work for you.

But the Dow has been going sideways for a decade now and bonds yields are tinier than Brazilian bikinis – meaning that most pension funds haven’t been meeting their targets.  At Windsor the gap between pension plan liabilities and the current market value of pension plan assets is about $50 million (could be worse: at U of T it’s $1 billion), meaning it has a “going concern” solvency issue which needs to be addressed by a $5 million annual payment starting this year.

There’s most of your tuition increase right there.

To put the pension problem another way, as you can see in UWindsor’s admirably concise and transparent budget documentation, institutional pension spending has had to rise by 78% over the past four years and now takes up almost 8% of institutional spending.  Just to put that into perspective, the library only makes up 5% of spending. To put it yet another way, over the past four years the university has essentially has to reallocate a sum larger than the school’s entire IT budget just to deal with the pensions issue.

To repeat: this isn’t Windsor’s problem alone.  Pretty much every university with a defined benefits pension scheme is going through something similar.  And it could get a lot worse: if Eurozone bank problems cause credit markets seize up again this fall, equity markets will take another Lehman-like beating and university  pension funds will be headed for serious solvency problems that will require more than cosmetic tuition fee increases to solve.

So when you see all those stories about Angela Merkel, Nicolas Sarkozy and Euro bailouts, don’t think of them as a foreign issue.  Think of them as being possibly the cause of the next big Canadian university financial crisis.

 

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