Higher Education Strategy Associates

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November 08

Why I Do This Stuff

It’s Election Day in the America.  It’s a day that always make me think about how I got into this business.

Back in 1992, I was trying to stay out of a godawful job market by doing a Q-year in Economics at McGill (ended disastrously: don’t ask).  On November 2nd, I was sitting with some friends in the Shatner Building reading a New York Times story about the celebrations being planned in Little Rock for the next evening.  It was clearly going to be the biggest party in North America that week.  So we decided to go.

Some local car rental company had unwisely signed a deal with the student’s union offering any club a 3-day rental for $150, so seven of us (mostly from The Tribune) jumped into a Chevy Astrovan at 5 o’clock Monday afternoon and drove 23 hours straight from Montreal to Little Rock.  We had a good time while there (I managed to blag my way into a temporary press pass which – with a little help from a local laminating shop – became my ticket to hang out in the basement of the Excelsior Hotel following Wolf Blitzer around listening to him bullshit with other reporters).  But for me, the real event of that trip happened the next morning.

We left Little Rock at midnight, needing to get home so some of us could take midterms on Thursday. At about 7AM, we pulled into a McDonald’s near Champaign, Illinois.  By this time, none of us had really bathed or slept properly in about 48 hours and six of the seven of us were smokers (a fairly representative percentage in Montreal in the early 90s), so there was a kind of blue haze that followed us out of the van as we trudged into a nearly-empty restaurant for some coffee and McMuffins.

“You all look like crap,” said the woman behind the counter (note: she did not say “crap”, she used a different word).  We gave her the back story on our trek, and told her that we were coming back from Little Rock.

Somewhat to our bemusement, the woman began to cry.  “You saw the President?”  At first I thought this was just an exaggerated expression of royal-like deference American sometimes display towards the Commander-in-Chief.  But no.  She recovered slightly and said “Mr. Clinton is our President and my boy is going to go to college”.

So that was it.  Amidst all the back and forth of the campaign: Gennifer Flowers, The Comeback Kid, Ross Perot jumping in, Sister Souljah, Double Bubba, Ross Perot leaving, Murphy Brown, Dan Quayle’s spelling ability, Ross Perot coming back in again, “it’s the economy, stupid”….the main thing this woman had keyed in on was that Clinton was determined to expand access through a “Domestic G.I. Bill” higher education by letting all students either a) borrow via an income-contingent loan or b) do national service  (that never quite happened, though Clinton did manage to introduce both an income-contingent loan repayment option and Americorps).

The fact that we’d been near the man who was going to make this happen was just a bit overwhelming for her.  And that made a big impression on me.  Among those who have degrees, there’s often a world-weary cynical pose about higher education “not being worth it” – devalued degrees, crippling student debt, etc.  But to a family who’s never had someone attend post-secondary, and that moment when they realise they can go is something magical.  They’re not foolish enough to think that going to university or college means but they do know for sure – rightly – that going to higher education is by far the best way to get step up to the middle class.  And if you aren’t already in the middle class, that’s a Big Deal.  Something worth devoting a career to, anyway.

And that – in part – is how a visit to an Illinois McDonald’s 24 years ago got me studying student aid and from there, higher education generally.  And why every four years I think about that morning, and that woman, and wonder whether her son succeeded in college or not.  I really wonder.

October 24

Why don’t we have private universities in Canada?

Every once in awhile I get asked a question like “why doesn’t Canada have private higher education”?  The answer is complicated, in part because the question isn’t as precise as it seems.

To start, we have a lot of private higher education in Canada, but it’s at the sub-degree level.  Stats on private higher education in Canada aren’t good but the best estimates suggest that there’s something on the order of 150,000 students attending somewhere in the region of 1800 institutions.  Something like a third of these students are in programs of under 3 months in length; most of the rest are in programs between 3-12 months in length.  Close to 2/3 of enrollments are either in health fields (medical assistants and technologists, for the most part) or in some form of IT/media (systems analysts, animation, etc.).  Though the quality of these institutions varies, these programs survive and thrive because they fill a perceived need for employment-oriented courses of less than 12 months in length.  Universities and colleges don’t fill that need, so the market does.  Simple.

Now, the answer to why we don’t have something more like American private, non-profit universities is a bit trickier.  We actually did, once.  A good chunk of the universities in the Maritimes, Quebec and Ontario started life exactly the way American private universities did: as private, often religiously-focussed institutions making efforts to ensure that local communities would have access to a supply of education teachers and clergymen.  While governments began supporting universities in the 19th century, the assistance was spasmodic, in many places support was not regularized until after the second world war.  Technically, universities like McGill are still private, in the sense that they choose their own Boards of Governors with no interference from government.  They are “public” because they take public money in return for accepting conditions on how the money is spent (observing rules about tuition fees for instance), but there’s nothing to say they couldn’t at some point change their mind about this.

Actually, Canada still has a private system of universities, but they are (with one exception) religious in nature: Trinity Western in BC, King’s, Concordia and St. Mary’s in Alberta, Canadian Mennonite in Manitoba, Redeemer in Ontario, the Atlantic School of Theology – you get the idea.  Quest University in British Columbia, set up a little over a decade ago, is the only secular private institution out there.

And this brings us to the heart of the question: when people ask “why no private higher ed in Canada”, what they really mean is “why aren’t there more Quest Universities out there”?  And it’s a fair question: all over the world,private universities are a major part of national systems of higher education.  Even in free-tuition Germany, over 10% of students choose to study in private fee-charging institutions.  So why not here?

It’s not, for the most part, a legal issue.  Most provinces have legislation which permits private organizations to offer degrees provided they can demonstrate quality of provision (use of the term “university” is a little trickier and usually requires an act of the legislature, but in principle there’s nothing stopping a government from bestowing that term on a private institution).  And yet, despite this we still see few examples of private degree-granting institutions.

To understand why, we need to go back to our observation about why private colleges thrive in Canada at the sub-degree level: because they offer something no one else does.  The way to think about private higher education is that it will thrive where there is a niche that public universities cannot or will not fill.  In most developing countries (as well as in countries like Japan, Korea and Taiwan), private higher education thrives because governments cannot or will not supply higher education in sufficient quantity to meet demand.  In Eastern Europe, private higher education thrived in social sciences in the wake of communism because these faculties in public universities were utterly discredited and/or couldn’t provide education in high-demand subjects like business and commerce.  And as higher education gets more stretched in other countries in Europe one might start to see more private higher education providers (particularly in the UK)

But in Canada, there simply aren’t so many niches.  Our universities are well-funded, cover pretty much the entire spectrum of studies, and compared to most university systems around the world, quite open to covering new and emerging areas of study even if they aren’t “traditional”.  With few niches to fill, there isn’t a lot of room for private providers.  Quest University does its thing by staking out a unique value proposition around pedagogy (the block learning system) and outdoor activities – probably not a niche that could sustain competitors, but enough of one to sustain itself.

Could this change?  Could a new successful university appear in Canada on the scale of Quest, only larger?  Yes.  But it would take someone with deep pockets and a particular eye for strategy.  More on this tomorrow.

October 21

A Prairie Round-up

If you’re a long-time reader of this blog, you’ll know that every spring I put together a little summary of provincial budgets and what they mean for higher education.  A few days ago I decided to put together a slide comparing the cumulative changes in provincial funding since 2011.  Here’s what it looks like, in inflation-adjusted dollars.

Figure 1: Change in real provincial government transfers to institutions, 2011-2 to 2016-17


What should immediately jump out at you (apart from the raging dumpster fire that is Newfoundland’s public fisc these days) is that while public funding for universities is flat or declining in most of the country, in the three prairie provinces increases have been the order of the day.  So what’s going on out there?

The nature of the trend-bucking has differed across the three provinces.  In Saskatchewan and Alberta, high energy prices kept spending buoyant at least until a couple of years ago.  Since then, Alberta’s new NDP government has continued to spend, whereas Saskatchewan’s has started to retrench (but spending is still higher  than it was in 2011).  Manitoba’s never-too-hot, never-too-cold economy hasn’t see the big revenues fluctuations of its neighbours, but until earlier this year had a government that was prepared to engage in deficit spending in part so as to provide significant support to post-secondary education.

(You can get the gist of recent policy directions by looking at my recent provincial election analyses for Manitoba, Saskatchewan and Alberta).

So what’s in store for those three provinces now?  Well, for the moment they seem headed in quite different directions.  In Alberta, there were a lot of headlines about the NDP government extending its tuition freeze for a third year, but the interesting part of the announcement was that the Government simultaneously launched a review of the tuition policy with a view to a long-term funding solution.  Now, given that this is a government with a heck of a deficit that isn’t going to be solved through rising oil and gas prices any time soon, you’d have to think this “review” is in fact likely to end up twelve months from now with institutions being able to move somewhat on fees.  Because while the provincial government has been compensating institutions for the freeze, that still leaves income growth at around 2%. As we all know, Canadian universities start to seize up whenever the growth rate drops below 4% –  so there’s a gap there that has to be plugged somehow, and higher fees are almost certainly at least part of the solution.

In Saskatchewan, fees aren’t much on the agenda but the level of government support is.  Resource price falls mean that the government is running a $14 billion budget on $13 billion of revenue, so the province is talking very seriously about shrinking the size of government by 7% or so over the next two years. PSE will undoubtedly get its fair share of that cut; and that’s on top of a 7% cut over the last two years.  Yet so fast was expenditure growth in the first couple of years of this decade that even this massive cut will only bring the province back to the level of spending it was at in 2011.  The government speaks of looking for “transformational change” in PSE but the likelier result will be a lot of unpleasant but ultimately non-transformational corner-cutting and muddling through.

Manitoba feels like the place where fireworks are likeliest.  It has a new Conservative government with a mandate to pull back at least somewhat on public finances. Post-secondary education, one of the previous NDP government’s favourite files, seems likely to get hit the worst.  But the new government has some tools to mitigate these losses: tuition (currently 3rd lowest in the country) can rise, and a ghastly, wasteful post-graduation tax credit can be scrapped.  The former seems more likely than the latter, but both are possible.

Meanwhile, the University of Manitoba Faculty Association, the union which sicced CAUT on its own members when an Economics department dispute over curriculum didn’t go the way some people wanted, has decided that now is the PERFECT TIME to hold a strike to support a wage demand of – are you ready for this? – 6.9% over one year.

If UMFA’s serious about this demand, it could be a long strike.  And that’s not because the demand is unaffordable – in theory anything’s affordable if you cut back enough on library budgets or whatever.  It’s simply politics: the new government is not going to go easy on any para-public body which appears to be out of step with the new mood of thrift.  Just imagine the scene at the MB legislature if the institution were to cave on this:

U of M: “We would like some more money please.  We’re kind of strapped on account of having just given the faculty a 6.9% raise”

Conservative Govt: “HAHAHAHAHAHA Come back when you learn to manage your way out of a wet paper bag”

Agreeing to such a rise would be like signing a suicide note.  Unlikely to happen.

Have a good weekend.

October 20

Ideas to Irritate People

The other day I was reading Sydney: The Making of a Public University by Julia Horne and Geoffrey Sherington, when I came across this fantastic idea.

Back in the 1850s, the University of Sydney (which was formed at more or less the same time as our own University of Toronto, and on a very similar model) was trying to figure out how to attract quality academic staff from the mother country.  The problem of course was how to provide them with a decent pay package when they still didn’t really have a good sense of how many students they were going to have (since most income came from student fees, low enrolment meant low income which could be trouble if you over-promised a set salary to a professor).  So they came up with a solution.  Professors were given a low base pay – a few hundred pounds a year – and then given the right to a share (usually 50%) of the fees generated by their lectures.

How awesome is that?

Imagine instituting that rule at universities today.  At a stroke, it wolud reverse all the perverse incentives which currently exist in the way we teach at universities.  Teachers would clamour for undergraduate courses over graduate ones, lower-year courses over upper-year ones, auditoriums over seminars.  In fact, the problem would be that the rewards of the big courses would be so huge that departments would have to make drastic changes to share the wealth.  No more 1000-student courses: to share the wealth properly, we’ll need to make 10 100-person courses, or maybe 20 50-student courses.  Sure, upper-year students might lose out on their small courses, but that’ll be a small price to pay for avoiding the big auditoriums in lower years.

Wait, I have more!

What if you used a similar idea with doctoral students?  Not with respect to enrolments, but completions.  In the Netherlands for instance, the government pays universities something like 80,000 euros per doctorate, but only for doctorates that are actually awarded. Universities, in turn, sometimes charge a fee to a doctoral students but return part or all of it when s/he completes the degree, just to make sure the student has skin in the game.  Why not attach similar kinds of carrots and sticks to timely completion of a doctoral degree?  Not at an individual level – some delayed/failed doctoral degrees have more to do with the student than the supervisor – but collectively.  So if department X fell below a 60% timely completion rate (for instance) the Dean or the Provost could stop approving requests for conference travel.  Below 40%?  Start denying requests for sabbaticals.  I think the short-term effect would be to concentrate departmental-level thinking about how best to collectively ensure better doctoral-level supervision sharp.

OK, now I don’t really believe institutions should do either of these things.  But I do think that incentives matter.  And there are too few incentives within institutions to put student outcomes first.  And the question really is: why is that?  And what can be done to align staff incentives with student needs?

October 17

Universal co-op, Minister? You first.

Back in June here in Ontario, the Premier’s Highly Skilled Workforce Expert Panel released its final report. One of the recommendations was that every Ontario high school and university student should have at least one mandatory co-op experience (i.e., once in high school, once in university college).  In a statement in the provincial legislature, the Minister of Advanced Education and Skills Development Deb Matthews essentially said she liked the recommendation and would be working in the coming months to figure out how to put it into effect.

Now, I am in favour of greater experiential learning opportunities, but there are some problems with this recommendation.  The good folks at HEQCO have already written about some of these; my concern is basically that good co-op and good internships cost a lot of money.  Students in placements need to be overseen, taught, and mentored.  They need to be given tasks which are both meaningful and correspond to actual student abilities (not easy to achieve for high school students in many workplaces).  And they need to be paid – not just because it’s the law, but because business simply won’t put in the time on students unless they have skin in the game.

Simply put, the degree of culture shift required in business to provide these kinds of meaningful work-integrated learning experiences on a universal basis is massive.  Depending on the expected length of these experiences, we could be talking about increasing opportunities by anything from tenfold to fifty-fold – we’re talking between 250,000 and 300,000 students per year having to be accommodated here.  Not impossible, but not something that will happen overnight.  If the government tries to rush into this – and by rush I mean anything on a shorter timescale than a decade or so – were going to have a real mess on our hands.  Both businesses and educational institutions are going to need a lot of time to figure out how to make this work.

In this respect I would like to make a modest proposal to government: you first.

Seriously, if this is such a great idea, then the first to pioneer it should be the Government of Ontario to pioneer it.  It’s the largest employer in the province, with something like 85,000 employees (or about 1.5% of the entire provincial workforce).  If it can’t be a success at that level, why should it be a success anywhere else?

So here’s my idea.  Since the Government of Ontario represents 1.5% of the workforce, it should immediately commit to bringing in at least 1.5% of the necessary cohort on work-integrated learning experiences next year.  By my back-of-the-envelope reckoning, that’s 4,000 students or so (call it 145 students per ministry), half of which should be from high schools and half from post-secondary institutions.

Employers everywhere are going to need to know how a big, knowledge-intensive enterprise like the Government of Ontario can crafts meaningful paid experiences for that many individuals, and provides them with the necessary support, feedback and evaluation, with minimal loss of institutional productivity or adverse effects on institutional budgets.  By being a pioneer, the Government can provide invaluable real-life advice to private and para-public sector employers about how to make this program work for everyone.

No?  You don’t think it’ll happen?

Me neither.  But it would dispel a lot of cynicism about this initiative.

October 14

Stuff And Nonsense About Coding

We seem to be passing through a period of heavy stupidity with respect to “coding”.  To wit:

  1. On Wednesday our Minister of Innovation, Navdeep Bains, took the stage at the Public Policy Forum’s Growth Summit and mused about the importance of coding, why it should be taught in schools, and how it is “as important as reading and writing”.
  2. On Thursday , Melissa Sariffodeen, the co-founder and CEO of something called “Ladies Learning Code” managed to get an op-ed published in the Globe, saying as how “in the coming years, it will be difficult to find a single professional field or vocation untouched by increasingly sophisticated technology”, Canada needs to teach 10 million people (that is, slightly more than half the labour force) to code or “our ability to prosper socially and economically will undoubtedly be compromised”.

This is all as dumb as a bag of hammers.  We need to stop this nonsense right now.

The ubiquity of a given technology does not mean that everyone needs to be experts in its nuts and bolts.  Pretty much no job is untouched by, say, electricity, or indoor plumbing.  Yet the economy works fine without 10 million people knowing how to do preventive maintenance on electrical wiring or install a toilet.  Nearly all office jobs involve coming into contact with a ballpoint pen at some point, yet we all remain blissfully unaware of what kinds of tungsten carbide alloys make ink flow more smoothly.  We all use refrigerators, but almost none of us understand the vapor-compression cycle.  And that’s a good thing.  Ever since the stone age, we make have made economic progress through specialization.  New technologies become ubiquitous precisely BECAUSE they become so simple you don’t need to think about them a lot.

Coding is a valuable skill – for maybe 2% of the labour force.  What the rest of us need is digital literacy and proficiency.  Being able to write software is not the issue: rather, it is the ability to apply and use software productively that is the issue.  Ten million people who understand how to input data into software correctly, 10 million who can use and analyze the data software provides us: *that* is something we should shoot for.  It would have enormous effects on productivity and health (if you doubt the latter, spend some time talking to hospital administrators and their frustration with newly-trained medical staff who can work smart phone perfectly well but can’t use fill in Microsoft Access forms).  But ten million coders?  Mostly, that just pushes down wages in the tech sector.

Now, the Globe op-ed by a tech-sector entrepreneur probably looking for some government grants to expand her tech training business I can deal with.  Sariffodeen, as someone who teaches coding, is mostly talking her own book.  But Minister Bains?  That’s much more serious.  OK, we can all be thankful that as a federal minister he has no actual say over anything involving an actual education system.  Saying coding is “as important as reading and writing” is fatuous nonsense.  It’s the kind of thing you say when your fondest wish in life is to be admired by tech executives.  Reading and writing are foundational skills for literally anything in life.  Coding is a way for specialized experts to make software so the rest of us don’t have to.

Should we have more opportunities to learn how to code?  Sure.  Should we aim for much deeper knowledge ability to manipulate and use data/information?  Golly, yes.  Teach 10M people to code?  Treat coding as equivalent to reading and writing?  Get a grip.  No serious person should utter those words.

October 13

Pedagogical Change: Why Waterloo and not McMaster?

In the field of higher education, Canada has two genuine claims to having been (at least at one-time) at the forefront of innovation: co-op education, which primarily stems from Waterloo’s Faculty of Engineering, and Problem-based Learning as practiced at McMaster’s School of Medicine.   This is a big deal: most universities never pioneer innovative pedagogical techniques, and here Canada has two of them.  Yet only one of these universities really gets credit for it.  Waterloo is known nationally (and to some degree internationally) for its’ pedagogy, and McMaster…isn’t.  Not really.  And understanding why is key to understanding how innovation spreads (or doesn’t) in higher education.

So, let’s start with McMaster.  Shortly after the School of Medicine was founded in the mid-1960s, the staff there decide to adopt a pedagogy that had been experimented with at Case Western in the 1950s. Namely, switching from a system of more or less rote system of learning information to a system with a much greater emphasis on problem-solving skills.  What McMaster added to the Case Western system was a focus on tutorials and small-group learning.  Within the world of medical education this method was a smash success, spreading over the space of three decades to fifty-odd medical schools in North America, Europe and Australia.  In a couple of instances, it even jumped the disciplinary boundary into fields like business education and architecture. Significantly, it never made the jump to any other part of the institution at McMaster itself.  And though PBL still exists, McMaster is no longer really thought of as the leader.

Now, compare that to Waterloo, an institution that began life as a satellite campus of the (then) University of Western Ontario, teaching engineering to serve tire-making factories in the region.  The professors at Waterloo were intrigued by the model of co-op education that had been developed at the University of Cincinnati in the United States and wanted to introduce it at Waterloo College.  Western’s Engineering faculty thought this was simply too déclassé an idea for a real university and said no.  Since the Government of Ontario was in the business of setting up new universities at that time, Waterloo College essentially flipped Western off and started their own university, with co-op as a kind of founding mission.   Within Waterloo co-op spread to all its faculties, including Arts and last I heard was placing over 17,000 student per year in co-op programs.  Co-op is now  the norm in Canadian Engineering schools, and people all over the world recognize Waterloo as the pre-eminent institution in co-op education.

So what’s the difference?  Why did co-op at Waterloo turn out one way and PBL at McMaster another?

I think the simplest take on it is this: Waterloo had co-op embedded in its DNA.  The school’s trimester schedule, which was a necessary complement to co-op, was adopted across the institution.  Professors are hired based on their willingness to work in the trimester system and their willingness to update classes frequently based on feedback from students on how in-touch curricula really are with industry practices.  It’s not isolated to one faculty, or to the senior administration: the whole institution really is invested in it.  Compare that to McMaster, where no other faculty (so far as I can tell) ever really took the idea of PBL seriously. Even the School of Medicine itself wasn’t founded on PBL principles.   It was a success, for a time.  But it wasn’t in the DNA.

There is an important lesson here.  Universities, even when presented with fabulous ideas for reform, are very reluctant to change on a systematic basis.  It’s not that individual professors never do anything new; it’s that systemic change requires everyone going in a more or less similar direction at the same time, that that is very difficult for institutions to achieve.  It’s why real university reform often happens not by getting universities to change but by setting up new institutions.  Napoleon knew this: it was why he shut down universities and created the Grandes Écoles.  It’s why in the United States it took a new institution like Johns Hopkins to pioneer the PhD, or why it took the arrival of ANU in Australia to really make universities take research and graduate work seriously.

Left to themselves, universities will always tend to be conservative, fearful and change-averse.  History shows that new institutions pursuing new missions with all their might and leading by example can, eventually, drive real change.

October 12

The Fractured Chinese Higher Education Market

We often casually refer to China as being a single higher education market, but that’s really not true.  It’s probably more accurate to say that it is 32 different markets (34 if you want to include Macau and Hong Kong), one for each of the 23 provinces, 5 autonomous regions, and 4 major municipalities (Beijing, Shanghai, Chongqing and Tianjin).  That’s not just because most higher education funding is local rather than national; it’s also because student mobility is significantly restricted, especially among top universities.

Let’s start with economics.  Broadly speaking, the coastal provinces  Inner Mongolia are fairly rich (on par with Greece and the Baltics by GDP per capita), the middle provinces such as Hubei, Heinan and Shanxi have GDP/capita roughly half that of coastal ones, and then further west GDP per capita drops by another 50% when you get to Yunnan, Sichuan, and Gansu.  It’s not quite as simple as that – Anhui and Jangxi are close to the coast but relatively poor, Xianjing is as far west as you can go and yet is part of the middle-band, Shanghai and Beijing are relatively wealthy, etc.  But the rule of thumb is: coastal provinces are rich, inner provinces are poor.

This matters to higher education for a couple of reasons, the main one being that for the most part, higher education is funded provincially.  There are, however, a few dozen universities which are primarily  administered and  funded from Beijing, most of which report to the Ministry of Education but some to other ministries (e.g. the Telecoms Ministry or the Army).  The 38 research-intensive “985” universities (so named because the policy which governs them dates from May 1998) receive massive amounts of central government funding. The 110-odd “211” universities (apparently a reference to having 100 21st Century universities…21-1(00)…no, I don’t get it either) also get some central funding despite being largely dependent on local funding.

The second reason this matters is that these “top-tier” universities (especially the 985s) are unevenly distributed around the country.  Beijing has seven of them, Shanghai 4, and Tianjin and Chongqing another 3 between them – meaning that nearly half of the top universities are in just four cities.  Indeed, fourteen provinces and regions have no 985 universities at all, and Tibet has neither a 211 nor a 985 university.  That wouldn’t be a major issue if it weren’t for a second important factor: student mobility in china is strictly limited.

Because universities are mostly funded locally, the local government gets to determine the number of spots at each university.  Unsurprisingly, poorer provinces have fewer spots than richer ones.  Which means cut-offs have to be higher; and since every state has control of its own gaokao exam, it’s become the case that different provinces have different levels of gaokao difficulty (there is a helpful service which compares them all and ranks them on difficulty – for the last couple of years it has been Jiangsu).

But despite regional differences in the difficulty  of the gaokao, universities treat all the provincial scores as equal.  This matters enormously because each province reserves spaces for local students – and limits spaces for out-of-province students.  Pretty much everyone in the country wants to get into one of the top Beijing universities, and yet these policies keep these institutions largely the preserve of locals.  Which is absolutely fine for the privileged few who live in Beijing (mainly public servants and party apparatchiks) but not so good for anyone else.  A student from Jiangsu not only takes a tougher gaokao than one from Beijing, but s/he has to obtain a much higher score in order to get into Tsinghua or Peking.  It’s considered a truism in those schools that the students from outside Beijing are of a much higher calibre than the locals.

This problem isn’t going away any time soon.  As Damian Ma and William Adams say in their excellent book In Line Behind a Billion People, this policy of reserving little educational plums for Beijing parents is one of those things that keeps the elite population behind the regime: in a democratic system there is simply no way that benefits would be concentrated this tightly (their chapter on education is called “Give me Equality: But Not Until After My Son Gets Into Tsinghua”).  So even as the central government tries to open spaces at top-tier (i.e. 985 or 211) universities for people from provinces where top-tier universities are scarce or non-existent, they are doing their level best not to put that burden anywhere other than Beijing or Shanghai.  This year, most of the growth in spaces for students from the western provinces fell on Hubei and Jiangsu, much to the anger of local residents who feared their own children would lose out as a result.

There is a lesson here for people interested in recruiting students in China, and it is this: ignore the coastal provinces.  Find the provinces with the hardest gaokaos and the fewest 985/211 institutions (Jiangxi is not a bad place to start).  There are a lot of frustrated families there.  Go talk to them.  They will be more price-conscious than the students on the coasts, but they will also probably be of higher quality.

October 06

Does the Canada Student Loans Program Make Money?

You’ll remember a couple of weeks ago I took the Ontario NDP to task for an absurd meme about the provincial government “profiting” from student loans. But it occurred to me later than though there is no way the charge sticks against the provincial government, it arguably might about the federal government’s Canada Student Loans Program (CSLP), which both borrows more cheaply and lends more dearly than the provincial government. So I decided to find out.

The data I am using in this blog comes from the latest CSLP Actuarial Report, which was published in 2012 (and hence presumably written in 2011). This is done periodically by the Chief Actuary of Canada (the same guy who makes sure the Canada Pension Plan is solvent). I suspect a lot of his data after 2011-12 is off because of the large jump in loan program usage after Ontario introduced the 30% tuition rebate midway through that year. The Actuary also assumed interest rates were going to rise throughout the decade (they haven’t), and more controversially, assumed enrollments would fall substantially over the same period (which they have in certain regions but not nationally). So to avoid these and other issues, I am simply going to use the 2011-12 projections, which have the least doubt about them as they are the least contaminated by dubious projections.

Here’s a quick summary of the estimated cost of the program: In-school (Class A) interest – that is, the interest government pays on student loans while students are in school and hence paying no interest – is $128 Million (which is *tiny* considering that there are 400,000 borrowers per year – credit here to prolonged slow growth and the lowest interest rates in living memory). The Repayment Assistance Program, which subsidizes repayments for low-income borrowers in repayment, is another $169 Million. Then on top of that is the provision for bad debt. Based on long-term trends, the government puts aside 12.4% of every dollar lent on the assumption some people will default. That, plus the interest on the loans left outstanding comes to $376.2 million. Grand total: $673.2 million.

(There are also $650-odd million in grants plus $280 or so million in alternative payments to Quebec, Nunavut and NWT and $140 M in administration fees, which brings the total cost to a little over $1.7 billion or so, but put that aside for the moment.)

So to go back to our example from last week, the question is whether or not CSLP meets the Elizabeth Warren test for “profiting from students”: that is, does net income from the interest paid by students more than cover the cost of interest subsidies and defaults? Income from loans comes from the spread between the rate at which the government of Canada borrows (currently hovering around 1% on ten-year bonds) and the rate at which it lends to students (prime +2.5%, or currently 5.2%). The rates were slightly different in in 2011-12 but the 420 basis point spread has stayed pretty consistent. Which is a whole lotta basis points – it’s over three times the spread Ontario gets on its loans – and quite a lot of room in which to “make money”.

A lot, but not quite enough. The projection for revenue on interest paid for 2011-12 was $521.4 million. The cost of borrowing was $166 million, meaning that “net” revenue – that is, earning on the spread between loan costs and loan revenues – was $355 million. So the huge spread the federal government has on student loans more or less covers the cost of defaults, but still leaves the government’s Consolidated Revenue Fund to pay nearly $300 million for loan costs such as Class A interest and RAP, not to speak of another billion or so for the Canada Student Grants, the alternative payments and administration.

The lesson to be learned from all this is that student loan programs are expensive. Even if you charge stonkingly high rates of interest with huge spreads, loan losses from defaults and interest subsidies will eat those up and more. There are no profits to be seen here.

September 30

Athletics Scholarships in Canada

Time was, about twenty years ago, Canadian universities didn’t spend money on university athletic scholarships.  Then things changed and universities turned on the taps.  Today we ask the question: “how’s that going for everyone”?

Well, it’s not going too badly, if you’re an athlete.  Just under 5,830 students received athletic scholarships totalling $15,981,189 in 2013-14 – that’s a little over $3,000 a pop.  CIS officially recognizes twenty-one sports, nine of which have teams for both genders (eighteen total), plus football which is male-only and rugby and field-hockey which are female-only.  However, roughly 85% of the scholarship dollars are concentrated in just nine sports, as shown below in Figure 1.  Some have almost no scholarships at all: inter-collegiate curling, for instance, has only 16 scholarships nationally for both sexes.

Figure 1: Top Sports by Scholarship Expenditure, 2013-14


What’s interesting here is that over time, the amount of money spent on Athletics scholarship has been rising quickly and steadily.  Even after accounting for inflation, Canadian universities spent nearly three times as much on athletics scholarships ($16 million vs. $5.8 million) in 2013-14 as they did ten years earlier.  It’s an interesting choice of expenditure by allegedly cash-strapped institutions.

Figure 2: Total Athletics Scholarships by Gender, 2003-4 vs 2013-4, in constant $2014


I suspect most institutions would probably defend it as a kind of strategic enrolment investment, much the way they defend other kinds of tuition discounting.  I mean, does it really matter if you give someone a $5,000 academic entrance scholarship or a $5,000 athletic scholarship?  They’re both forms of tuition discounting.  And of course, the absolute amounts are trivial.  $16 million is only 1% of the total amount of funding given by universities to students (if you include funding to graduate students).  And if you want into get into truly ludicrous comparisons, it’s less than what the University of Michigan spends on salaries for its football coaching staff.

A final point to make here is around gender equity.  Male and female athletes receive awards at roughly the same rate (45% of athletes of each gender receive an award), which is good.  However, imbalances remain in terms of the number of athletics spots for men than women (53% of all athletic team spots are male, compared to about 41% of undergraduates as a whole), and in terms of the size of the average award ($3,286 vs. $2,737).  Those results are better than they were a decade ago, and they appear to be slightly better than they are in the US, where actual legislation exists in the form of Title IX to enforce equity in sports, but they are still some ways from equal.

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