HESA

Higher Education Strategy Associates

Category Archives: U.S.

August 24

Welcome Back

Morning, all.  August 24th.  Back, as promised.

School starts shortly.  The new crop of frosh were born in 1997, if you can believe that – to them, Princess Diana has never been alive, and Kyoto has always been a synonym for climate change politics (check out the Beloit Mindset List for more of these ).  Stormclouds line the economic horizon.  It’s going to be an interesting year.

In the US, progress on any of the big issues in higher education are likely to be in suspension as the two parties spend months figuring out who their candidates are going to be.  On the Democratic side, the presumptive candidate, Hilary Clinton, has put forward an ambitious plan for higher education, which, barring an absolute sweep at the polls, has almost no chance of passing Congress.  On the Republican side, no one apart from Marco Rubio seems to care much about higher education, except for Scott Walker who seems to want to use higher education as a punching bag, much as his idol Ronald Reagan did fifty years ago.

Overseas, the most consequential potential development is in the UK where – if the government is to be taken at face value – for the first time anywhere, measured quality of teaching might meaningfully affect institutional resources. In the rest of Europe, the ongoing economic slump looks set to create new problems in many countries: in Finland, where GDP contracted for the third year in a row, government funding will be down roughly 8% from where it was last year.  And that’s in one of the countries that thinks of itself as being particularly pro-education.  Germany, Sweden, and (maybe) Poland look like the only countries that might resist the tide.

Here in Canada, the outlook remains that post-secondary education will continue to see below-inflation increases in government funding for the foreseeable future, except in Alberta where the new provincial government intends on giving institutions a big one-time boost, which may or may not be sustainable, depending on how oil and gas prices fare.  This means resources will be scarce, and in-fighting for the spoils will be fierce.  And this, in turn, means a lot of governance, a lot of wailing about “corporatization” (always a good epithet when funding decisions aren’t going your way), and – inevitably, given the recent events at UBC – a lot of arguments about resource allocations, dressed up as arguments about governance.

(In case you’re wondering: I have no idea what happened there, exactly.  I do, however, believe three things: i) in a corporate context, the statements by the Board of Governors and interim President on Gupta’s departure are actually quite easily interpretable, and don’t leave a whole lot to the imagination; ii) if/when the truth comes out, it’ll be a hot mess of grey zones, and some of the wilder conspiracy rhetoric about the departure will seem ludicrous; and, iii) any theory positing that Gupta was fired for a lack of “masculinity” by a Board Chair who not only spent millions of his own dollars to create a dedicated Chair on Diversity in Leadership, but also that replaced said “unmacho” President with Martha Piper of all people, has more than one prima facie credibility problem.)

But behind all this, there’s a broader truth that I think the higher education community is being very slow to acknowledge.  The era of growth is over.  Higher education is not a declining industry, but it is a mature one, and this changes the nature of the game.  In the aughts, Canadian university income increased faster as a proportion of GDP than pretty much any country in the world (Netherlands and Russia aside).  It was a rising tide that raised all boats.   And I mean that literally: as a share of the economy, universities grew by half a percentage point (from 1.4% to 1.9% according to the OECD, which I think is a bit of an underestimate), which is like adding more than the value of the entire fishing industry.

But those boats stopped rising a couple of years ago.  Institutions with smug strategic plans about increasing excellence need to face reality that there’s no new money with which to achieve those goals: funds for new projects are, for the most part, going to have to come out of increased efficiencies, not new money.  It’s tougher sailing from here on out – permanently.  Institutions are going to need to be leaner, better managed, and more focused.  However, the meaning of those terms are hardly uncontested in academia.

This should make for a fun year.  Looking forward to it.

August 12

Summer Updates from Abroad (3): An Intriguing American Student Aid Debate

Why do we give people student loans and grants?  Is it to help them get knowledge, or just credentials?  That question is subject to much debate in Washington right now.  At issue is whether student assistance helps or hinders innovation in higher education; at stake are potentially billions of dollars in public funding.

Let’s rewind a bit here: student aid in the US is governed by something that goes by the name of “Title IV” (meaning, essentially, chapter IV of the Higher Education Act, as amended from time-to-time).  The very first section of title IV states that student loans can only be given to students at “eligible institutions”, which means (among other things) that the institution has to be post-secondary, has to award degrees, has to be accredited, etc.  All sensible things to protect both consumers and the public purse.

The problem is, what if a new form of education pops up that is valuable, but doesn’t meet these tests?

There’s been a lot of focus recently on a variety of different types of programs called “just-in-time” education, the buzzword du jour that refers to code academies/bootcamps, and the like.  These academies – private educational establishments that often skirt the legal edges of provision of vocational education – are seen in many quarters as being incredibly valuable.  Coders are in short supply, and these bootcamps provide short (usually 8-12 weeks) courses that allow students to get the basics, and apply for jobs.  Some of them also provide training in entrepreneurship, and have mentors on-site to help with start-ups.  Stories about graduates quickly getting well-paying jobs abound, and given the long-standing worries about the youth labour market, a lot of people want to see these things expand further.

But these organizations aren’t charities.  A 12-week course in New York or San Francisco will run a student five figures, and not everyone has that kind of scratch on hand.  Hence, the desire in some quarters to see student loans extended to this sector.

Now you can see the argument here: why are we prevented from giving public support to institutions that provide skills rather than credentials?  Why are we stifling potentially beneficial innovation?  On the other hand, you can also see the opposite argument: who runs these schools, who regulates them, what are their credentials as educators, and what kinds of cranks and shysters will flood into the sector if you start letting students pay for this education using public money rather than their own?

The cranks and shysters problem is a perennial one in American higher education.  Even the vaunted GI Bill attracted them.  Though it’s more famous for putting ex-servicemen though college, the Bill also dealt with vocational training, leading to some rather dubious circumstances; Glenn Altschuler and Stuart Blumin, in their excellent account of the Bill, have a hilarious anecdote about veterans signing up at a school that offered three-month courses in chicken sexing, because they could get their living expenses covered while doing a (sorry, can’t resist) bird course.

Quite simply, when you hand over a lot of your education system to the private sector, *and* you choose to allow students to use public money, you either have to have some very good regulators, or you have to tolerate the fact that there are going to be some dubious folks trying to make a fast buck out of the situation.  As the Harkin Report on for-profit education, and Suzanne Metzler’s excellent book Degrees of Inequality have made clear, that’s exactly what happened in the 00’s when he Department of Education’s rules were too lax.

At the moment, the Obama administration’s preferred solution seems to be to try to get these academies to nestle themselves within existing universities and colleges.  There are some advantages here: universities would love to have these kinds of spaces to help students gain tech/entrepreneurial skills, the academies would gain access to more secure revenue, and the government would be assured of some oversight on quality.  From the perspective of people worried about cost-inflation in higher education, though, this might be a disaster.  Universities would undoubtedly pay for this by charging even higher fees to all students; instead of academies being a force outside the system, competing with universities, and forcing them to get better at producing better employment incomes, they’d be joining the Beast instead.

Complicated stuff.  Personally, I’m glad the Americans go through these debates, so the rest of us can learn from them without actually having to do the difficult and politically dangerous work of experimentation ourselves.

June 01

The Cost of Moving the Needle

One of the things about increasing post-secondary participation is that the cost of improving access increases all of the time – as you get closer to universality, the students you want to attract becoming increasingly marginal, academically, and require greater investments in order for them to succeed.

A really good example of this comes from the City University of New York (CUNY), which recently completed an evaluation of its Accelerated Study in Associate Programs (ASAP), which is meant to encourage completion among students taking Associate (i.e. 2-year) degrees at the school, on a full-time basis.  The program design is pretty much what you’d expect: it tops-up financial aid so that net cost is zero, plus throws in textbooks and a transit pass.  Each student gets a personal advisor/mentor/coach, as well as career counselling.  Participants get grouped together in small classes (25 students, or less), and the classes are block-booked so that students can take all their courses either in the morning, afternoon, or evening (of great assistance to students with work or family responsibilities).

This is not a cheap program.  At the time the program was being evaluated, it cost over $4,000 per student, per year, though the cost later fell towards $3,500 per student as the program ramped-up.  In the context of US 2-year colleges, such as the nine CUNY community colleges at which this program was implemented, and where per-student expenditure is about $8,000 per student, this is a heck of a lot of money.  But it works.  MDRC, one of the world’s top social science research organizations, evaluated the project recently using a random-assignment experiment, and found that ASAP’s effects on a range of outcome measures were “the largest it (had) found in any of its evaluations of community college reforms”.

The evaluation (executive summary available here) showed that 40.1% of program participants graduated within three years, compared to just 21.8% of students from the control group, and 25.1% had enrolled in a four-year college by semester 6, compared to just 17.3% in the control group (though many American community colleges offer more technical programs, the colleges at which the program was implemented mostly offered arts programs designed as pathways to 4-year colleges, so this metric is actually quite important, because completion without continuation to a 4-year college is of substantially lower value to the student).

Now, that’s a pretty impressive-sounding statistic: for $4,000/year, ASAP can almost double the graduation rate.   But let’s not get ahead of ourselves: in fact, it takes $14,000, spread over 3 years, to achieve this effect.  And even with a doubling, the program is really only affecting one-out-of-five students; one-fifth of students would have graduated anyway, and another three-fifths still don’t graduate.  So to produce one extra graduate, you actually have to spend something in the neighbourhood of $50,000 or so (it’s not actually 5 x $14,000, because you stop spending money once a student drops out).  That’s a lot of money to get one extra graduate, especially for a general Associate degree, where both public and private returns are quite low.

This is by no means a criticism of ASAP: it’s a good program delivering excellent results.  But it does go to show how much money it takes to move the needle on degree completion.  That’s not all going to come from new government sources; it’s going to require changes in institutional business models to reduce costs in order to put more money into things like counselling, advising, and support.

May 28

The 2016 Presidential Race

I’ve been spending a bit of time in the United States the last couple of weeks (Indianapolis, Boston, Washington DC), and one of the things I’m noticing is the extent to which political discourse – which, ludicrously, already centers around the 2016 Presidential Race – is focussed on issues in higher education.  Specifically: issues of tuition and student debt.

This is interesting for a couple of reasons.  First of all, it’s an enormous shift from about ten years ago, when higher education first started to inch into the news.  Back then, it was about competitiveness: how can we use higher education to gain a march on all these various Asian countries (usually India and China) who suddenly  appear to be eating Americans’ lunch.  Back then, higher ed was relishing the attention – finally, a Sputnik moment, to push higher education back to the forefront of the political debate (Sputnik being a positive thing in American higher education, because it brought about a huge burst of spending on university science).  Now, no one is talking about a higher education bonanza.  No one is talking about quality.  To the extent anyone is talking about putting up new public money, it is meant to be used to make education more affordable.

(In Canada, of course, we’re way ahead of them.  This is the feed-the-student-starve-the-campus routine that we’ve seen for the last four years.)

On the Democratic side, it’s President Obama’s proposal for free college tuition that is setting the tone of the debate.  Bernie Sanders, trying to outflank Hillary Clinton to the left, has been an outspoken proponent.  Martin O’Malley (remember Mayor Carcetti, from The Wire?  He’s based on O’Malley), the only other semi-serious contender, talks about “debt-free college”, but his actual policy proposals involve expanding and improving income-based repayment, and allowing college students to refinance their loans at lower rates of interest.  Clinton, meanwhile, has said she supports Obama’s free college plan, but then went on to say that debt is caused by more than tuition, which implies that her thinking actually lies in other areas (most likely: more Pell grants, more tax credits, and tougher regulation of for-profits).

Action on the Democratic side of the ledger isn’t all that surprising: they’ve owned the higher education file since 1992, when Bill Clinton became the first ever candidate to successfully campaign on the issue.  What’s more interesting is the amount of attention being paid to higher education by Republican candidates.

Among currently declared candidates, Marco Rubio has shown the most audacity, backing a relatively serious access and completion agenda.  He has co-sponsored legislation backing so-called “human capital loans”, and has also called for the creation of a national unit-record data base to collect better data on student outcomes.  This has made him something of a darling among centrist wonks who think he might herald a new age of bipartisanship in higher education.

That may be clutching at straws: a number of other Republican candidates seem to be trying to run based on their ability to beat the living crap out of colleges: Governors Jindal (Louisiana) and Walker (Wisconsin) both introduced stonking cuts to higher ed in their budgets this year, mostly to show how tough they are on feckless elites (a Republican meme that goes back to Ronald Reagan’s successful 1966 run for the California Governor’s office).

The presence of differences in policy thinking in both parties means it’s sure to be a topic of debate right through the primaries (i.e. for another ten months or so).  Stay tuned.

February 18

Performance-Based Funding (Part 2)

So, as we noted yesterday, there are two schools of thought in the US about performance-based funding (where, it should be noted, about 30 states have some kind of PBF criteria built into their overall funding system, or are planning to do so).  Basically, one side says they work, and the other says they don’t.

Let’s start with the “don’t” camp, led by Nicholas Hillman and David Tandberg, whose key paper can be found here.  To determine whether PBFs affect institutional outcomes, they look mostly at a single output – degree completion.  This makes a certain amount of sense since it’s the one most states try to incentivize, and they use a nice little quasi-experimental research design showing changes in completion rates in states with PBF and those without.  Their findings, briefly, are: 1) no systematic benefits to PBF – in some places, results were better than in non-PBF systems, in other places they were worse; and, 2) where PBF is correlated with positive results, said results can take several years to kick-in.

Given the methodology, there’s no real arguing with the findings here.  Where Hillman & Tandberg can be knocked, however, is that their methodology assumes that all PBF schemes are the same, and are thus assumed to be the same “treatment”.  But as we noted yesterday, the existence of PBF is only one dimension of the issue.  The extent of PBF funding, and the extent to which it drives overall funding, must matter as well.  On this, Hillman and Tandberg are silent.

The HCM paper does in fact give this issue some space.  Turns out that in the 26 states examined, 18 have PBF systems, which account for less than 5% of overall public funding.  Throw in tuition and other revenues, and the amount of total institutional revenue accounted by PBF drops by 50% or more, which suggests there are a lot of PBF states where it would simply be unrealistic to expect much in the way of effects.  Of the remainder, three are under 10%, and then there are five huge outliers: Mississippi at just under 55%, Ohio at just under 70%, Tennessee at 85%, Nevada at 96%, and North Dakota at 100% (note: Nevada essentially has one public university and North Dakota has two: clearly, whatever PBF arrangements are there likely aren’t changing the distribution of funds very much).  The authors then point to a number of advances made in some of these states on a variety of metrics, such as “learning gains” (unclear what that means), greater persistence for at-risk students, shorter times-to-completion, and so forth.

But while the HCM report has a good summary of sensible design principles for performance-based funding, there is little that is scientific about it when it comes to linking policy to outcomes. There’s nothing like Hillman and Tandberg’s experimental design at work here; instead, what you have is an unscientific group of anecdotes about positive things that have occurred in places with PBF.  So as far as advancing the debate about what works in performance-based funding, it’s not up to much.

So what should we believe here?  The Hillman/Tandberg result is solid enough – but if most American PBF systems don’t change funding patterns much, then it shouldn’t be a surprise to anyone that institutional outcomes don’t change much either.  What we need is a much narrower focus on systems where a lot of institutional money is in fact at risk, to see if increasing incentives actually does matter.

Such places do exist – but oddly enough neither of these reports actually looks at them.  That’s because they’re not in the United States, they’re in Europe.  More on that tomorrow.

January 13

Packaging Student Aid

One of the things about student aid that makes it such great fun as a policy area is that it’s as much about framing as it is about actual policy.  For instance, which of the following two policies would you like to have?

a)      A policy where students are asked to bear a huge amount of debt – over $100,000 in some cases for an undergraduate degree – over 25 years, and where three-quarters of students will never repay their loans in full; or:

b)      A policy where graduates are asked to pay a 9% surtax for 25 years, up to a maximum of about $100,000, but much less (possibly even $0) if their earnings are low.

If you’re a regular reader of the Guardian, you’ll probably recognize the first policy as being the one implemented by the Cameron government in 2012, to cover fees in English universities.  That’s the one the progressive types are always pointing at and shouting: “Look!  Students are being horribly indebted AND the government is losing lots of money through the program!  Quelle fiasco!”

But here’s the thing: that second program is also the English loan scheme.  As I’ve explained before, for the three-quarters or so of graduates not expected to pay off their loans in full, the scheme is simply a graduate tax.  It’s not explained that way, but that’s what it is.  It’s a packaging issue.

There’s something similar going on in student aid policy in the United States; namely, the interest in something called “Income Share Agreements”.  It’s been kicking around for awhile (the American Enterprise Institute wrote about it a year ago), but is getting more of a hearing these days because Florida Senator, and potential Presidential candidate, Marco Rubio is now backing it.  It’s basically a Human Capital Contract – someone gives you money today, and you agree to give them a set portion of your income for a set number of years.

If that sounds like a Graduate Tax, that’s because it’s exactly how a graduate tax works – the difference in this case simply being that you’re not giving that money to government, but rather to an individual who has chosen to “invest” in you.  The beneficiary is different, but the flow of funds is precisely the same.  But that difference is enough to get the idea some love from a Tea Party favourite.

And that is to say nothing of our experience in Canada where the CFS, which absolutely hates income-contingent loans, and has done so for years, applauded the introduction of the Repayment Assistance Program (RAP) – which basically makes the Canada Student Loans Program fully income-contingent – because the government simply chose not to call the program “income contingent”.

This all goes to show: in student aid, few people actually look at substance.  The real debate is about the packaging.

January 12

That Obama Free Community College Proposal

I was going to start on a series about growth in non-academic staff numbers today, but the news out of Washington late last week was too spectacular, so I’m bumping it.  Did Obama really say he wanted to make community college free?

Well, yes he did.  But he might not have meant it the way we all heard it.  And whatever happens, it’s unlikely to occur any time soon.

Let’s start with what he actually said (White House fact sheet, here).  He said he would make tuition free for “responsible students” (read: on course to graduate on-time, with a 2.5 GPA) attending community colleges and taking courses towards a 4-year degree, or an occupational training course in an “in-demand” field.  But there were some catches.  Only institutions that adopt “promising and evidence-based” programs to improve graduation rates will qualify.  States also have to agree to participate, kick-in 25% (or thereabouts) of the funding without cutting any other higher education programs, plus adopt a new outcome-based formula-funding system that funds completions rather than enrolments.  It’s not clear how many states will agree to this (nor, indeed, is there much likelihood that a republican congress would agree to those kind of state spending mandates).

There are obviously a whole bunch of questions that weren’t answered in the initial announcement.  The main one was whether Obama meant “free”, or if he actually meant “government would cover the cost”.  That makes a big difference; Pell grants already cover the cost of tuition for nearly half of all community college students.  If that were the standard, it would imply that all of the new money would be going to students currently considered wealthy enough not to need grants.  That would make the new program very similar in distributional consequences to the notionally universal $1,500 refundable tax credit that Bill Clinton introduced in his second term, but which in fact was only available to those receiving less than $1,500 in Pell.

Another question, not raised much in the US, is: if the initiative is in fact successful at increasing the number of students at 2-year institutions (some of whom, to be fair, could simply be people switching from 4-year to 2-year), where are they all going to study?  In many states – California, for example – the systems are already at breaking point.  Who funds the growth required to make this system successful?

A lot of people seem to think that the President really did mean “free tuition” (i.e. no displacement of Pell grants, which are income-based), based on a comment made last week by his spokesman.  But on the other hand, the spokesman also said the program had been costed at $60/billion over ten years, or $6 billion per year, or about $666 per community college student.  Given that average tuition is about $3,800, it’s hard to see how this plan makes sense unless the administration: a) doesn’t expect most states to participate; b) doesn’t think many students will qualify; and, c) doesn’t in fact mean free tuition, but rather just “cover the cost”.  Or maybe the administration threw together a bunch of nonsense numbers that don’t matter.  Regardless, the likelihood of this becoming policy anytime soon is pretty low; it’s value is mainly rhetorical and as a marker for future policy initiatives by future Presidents.

As I said a last year, free tuition in community colleges makes a fair bit of sense.  The main rationale for fees is that: a) there are substantial private benefits, and, b) the clientele is mainly better-off and don’t need all the subsidies.  But those don’t hold true in community colleges the way they do in universities.   So while there might be some better ways to use that amount of money, this is still a generally worthwhile and positive initiative.  Would that a Canadian government could be so bold.

December 10

The History of the Smorgasbord

One of the things that clouds mutual understanding of higher education systems across the Atlantic is the nature of the Arts curriculum.  And in particular, the degree to which they actually have them in Europe, and don’t over here.

When students enroll in a higher education program in Europe, they have a pretty good idea of the classes they’ll be taking for the next three years.  Electives are rare; when you enter a program, the required classes are in large part already laid out.  Departments simply don’t think very much in terms of individual courses – they think in terms of whole programs, and share the teaching duties required to get students through the necessary sequence of courses.

If you really want to confuse a European-trained prof just starting her/his career in Canada, ask: “what courses do you want to teach?”  This is bewildering to them, as they assume there is a set curriculum, and they’re there to teach part of it.  As often as not, they will answer: “shouldn’t you be telling me what courses to teach”?  But over here, the right to design your own courses, and have absolute sovereignty over what happens within those courses, is the very definition of academic freedom.

And it’s not just professors who have freedom.  Students do too, in that they can choose their courses to an extent absolutely unknown in Europe. Basically, we have a smorgasbord approach to Arts and Sciences (more the former than the latter) – take a bunch of courses that add up to X credits in this area, and we’ll hand you a degree.  This has huge advantages in that it makes programs flexible and infinitely customizable.  It has a disadvantage in that it’s costly and sacrifices an awful lot of – what most people would call – curricular consistency.

So why do we do this?  Because of Harvard.  Go back to the 1870s, when German universities were the envy of the world.  The top American schools were trying to figure out what was so great about them – and one of the things they found really useful was this idea called “academic freedom”.  But at Harvard, they thought they would go one better: they wouldn’t just give it to profs, they’d give it to students, too. This was the birth of the elective system.  And because Harvard did it, it had to be right, so eventually everyone else did it too.

There was a brief attempt at some of the big eastern colleges to try and put a more standard curriculum in place after World War II, so as to train their budding elites for the global leadership roles they were expected to assume.  It was meant to be a kind of Great Books/Western Civ curriculum, but profs basically circumvented these attempts by arguing for what amounted to a system of credit “baskets”.  Where the university wanted a single course on “drama and film in modern communication” (say), profs argued for giving students a choice between four or five courses on roughly that theme.  Thus, the institution could require students to take a drama/film credit, but the profs could continue to teach specialist courses on Norwegian Noir rather than suffer the indignity of having to teach a survey course (not that they made their case this way – “student choice” was the rallying call, natch).

Canadian universities absorbed almost none of this before WWII – until then, our universities were much closer to the European model.  But afterwards, with the need to get our students into American graduate schools, and so many American professors being hired thereafter (where else could we find so many qualified people to teach our burgeoning undergrad population?), Canadian universities gradually fell into line.  By the 1970s, our two systems had coalesced into their present form.

And that, friends, is how Arts faculties got their smorgasbords and, to a large extent, jettisoned a coherent curriculum.

November 21

Variation in Tuition in the United States

One of the things foreigners always get wrong about the American higher education system is tuition fees.  The external perception of tuition is driven by what’s happening at the famous private institutions, mainly in the country’s northeast.  But that’s not even close to being the whole story.

Figure 1: Tuition by Type of Institution, United States, 2014-15

unnamed

 

 

 

 

 

 

 

 

 

 

 

 

It is true that tuition at private non-profits is pretty high – $31,231, on average; though it goes much higher than that (one-sixth of these colleges charge over $45,000/year for tuition alone).  Of course, discounts are rife, and few actually pay the sticker price.  Net tuition and fees in this sector are actually only about $12,500.  And more to the point, only 2.7 million undergraduates (i.e. fewer than 20% of the total) attend schools in this sector.  In contrast, 6.6 million students attend public 4-year colleges, where the average sticker price is only $9,139 (avg. net tuition = $3,000), and 7.1 million attend public 2-year colleges (i.e. community colleges), where fees are just $3,347 (avg. net tuition = -$1,900).

But the differences aren’t simply by sector, they’re also geographic.  In-state tuition at 4-year publics varies widely from one state to another.  In Wyoming, tuition is $4,646; in Vermont, it’s $14,419.  There are some broad regional trends you can see in the data, but they aren’t quite as stark: in New England (i.e. Maine, New Hampshire, Vermont, Rhode Island, Connecticut, and Massachusetts), average tuition at public four-year institutions is $11,436; in the South and Southwest, it’s about $8,300.

This often makes people stop and think: why is it that tuition in the liberal, blue-state northeast is higher, while in the conservative red-state south and Midwest it’s cheaper?  Well, the answer is that politics in the US didn’t always break down the way it does today.  Back in the 1890s when the big Land-Grant universities were starting to grow, most of today’s low-tuition states were run by governments heavily influenced by the Populist movement.

Populists were suspicious of universities because they served such an elite section of the population.  They wanted them opened up to the children of farmers, and to make sure that they taught “practical arts” as much as the liberal ones.  These being the days before student aid really existed, the way populists gave effect to this was to order institutions to keep tuition low, a tradition that in most states remains true today.

In fact, one way to predict state tuition levels in the US today is simply to look at vote totals from the 1896 election.  That was the “Cross of Gold” election, which pitted the Democratic/Populist William Jennings Bryan against the Republican William McKinley.  Figure 2, below, plots today’s in-state tuition rates against Bryan’s share of the vote in that election.

Figure 2: Current-Day In-State Tuition Versus William Jennings Bryan’s Vote Share in 1896

unnamed

 

 

 

 

 

 

 

 

 

 

 

 

Rather amazingly, there is still a relationship between political patterns of 120 years ago and tuition policy today.  It’s not a perfect fit, of course – South Carolina, in particular, was a Bryan stronghold, and yet now has tuition of nearly $12,000 – but the pattern is clearly there.

America is large, and contains multitudes.  Generalizations about its higher education system need to be treated with much caution.

March 17

Oregon’s “Pay It Forward” Scheme and the ICR vs. Graduate Tax Problem

You may have heard some rumblings from south of the border over the past few months with respect to a program called Pay It Forward (PIF).  The brainchild of a student group called Students for Educational Debt Reform, this idea was picked up by the Oregon assembly last summer; within a few months, over a dozen state governments were examining similar draft legislation.

The basics of the program are these: instead of paying tuition, students agree to pay a percentage of their future income (the percentages vary by state – in Oregon it’s 0.75% per year of study) for 20 years after graduation.  Some people mistook this for a version of income-contingent loans because it emphasized paying for school after-the-fact rather than up-front, and also because repayments were to be made as a function of income.  But there’s one key difference.  Loans have a limited liability: once you pay off the principal and interest, you’re done.  With PIF, there is no principal – once you start paying into a hypothecated fund, destined for the state’s higher education institutions, you keep on paying for 20 years no matter what.  This is formally known as a “graduate tax”.

Graduate taxes tend to be more progressive than income-contingent loans.  If you’re at the bottom of the income scale, you probably come out better off – you simply never pay anything.  If you’re at the top of the income scale, you’re likely going to pay a lot more because a portion of your income will go into public coffers long after you’d likely have paid off a loan.  Interestingly, the famous Yale Tuition Postponement Option of the early 1970s (designed by Nobellist James Tobin, and used by Bill Clinton when he attended law school there) went off the rails for precisely this reason – the richer students got tired of paying for the poorer ones, and started making a fuss.

One downside to a graduate tax is that it’s harder to collect than a loan.  In the US, for instance, it’s hard to imagine enforcing something like PIF, unless it was instituted nationally (if someone moved from Portland to Chicago, would Illinois be responsible for collecting the PIF contribution?).  A graduate tax was in fact examined relatively thoroughly not once but twice in England (the 1997 Dearing Report and the 2005 fee reform), and was rejected precisely because of concerns about grads evading repayment through emigration.

Another downside is: where exactly does the money come from while you’re waiting for graduates to start earning money?  If tuition is covering 40% of institutional expenditure, someone has to make that income good over the 20 or so years before the grad tax makes up the difference.  It’s not clear who that might be; if the state had money to do this, it probably wouldn’t be faffing around with ideas like PIF.  You could securitize the revenue stream, of course, but that also might get tricky.  Income-contingent loans lack graduate taxes’ most potentially progressive features, but they do have the advantage of: a) being collectable, and b) producing income for institutions in the short term.

There is of course one country that is trying very hard to merge the ideas of ICR and graduate taxes, with some really odd results.  More on the English experiment tomorrow.

Page 1 of 3123