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September 2013 Archives

Higher Education is Headed for a Shakeout

Facing skeptical customers, declining enrollment, an antiquated financial model that is hemorrhaging money, and new kinds of low-cost competition, some U.S. universities and colleges may be going the way of the music and journalism industries.

Their predicament has become so bad that financial analysts, regulators and bond-rating agencies are beginning to warn that many colleges and universities could close.

"A growing percentage of our colleges and universities are in real financial trouble," the financial consulting firm Bain & Company concluded in a report--one-third of them, to be exact, according to Bain, which found that these institutions' operating costs are rising faster than revenues and investment returns can cover them.

That's because, as enrollments decline and families become more sensitive to price, colleges are cutting deeply into their revenue by giving discounts to attract students. The result is that, even though their sticker prices seem to be ballooning faster than the inflation rate, many of these schools are falling further and further behind.

"As the price keeps going up, within 10 years our price tag will be over $75,000," said Julie Richardson, dean of admissions at Hampshire College in Amherst, Massachusetts. "That's a number that begins to concern a lot of people."

So does Hampshire's discount rate--the proportion of its tuition revenue that goes back out the door in the form of financial aid--which Richardson said is 46 percent.

More than 150 colleges and universities got failing scores on an annual test of their financial stability by the U.S. Department of Education in results, released this year, that date from 2011. Several have closed, including Saint Paul's College in Virginia, Lon Morris College in Texas, Atlantic Union College in Massachusetts, Chester College in New Hampshire, and for-profit Chancellor University in Ohio. A few are in bankruptcy.

This trend has been little noticed outside of higher education. And inside higher education, some critics contend, colleges are not reacting to it quickly enough.

"Change is needed, and it's needed now," the Bain report said. "Still, at the majority of institutions, the pace of change is slower than it needs to be. Plenty of hurdles exist, including the belief that things will return to the way they were. Note: They won't."

Robert Zemsky, chairman of the Learning Alliance for Higher Education and the author of a new book proposing educational reforms called Checklist for Change, said academic faculty are part of the problem. He said many hope things will just get better.

"The faculty aren't convinced that change is necessary," said Zemsky, who also teaches at Penn's Graduate School of Education. "We faculty--and it is we faculty--are encamped north of Armageddon. We can sort of look over the horizon and see the chaos.

We're on the sideline. And that's terrible that the faculty, writ large, are on the sideline."

Another dilemma is that the small colleges in the most trouble--the Saint Paul'ses, Lon Morrises and Atlantic Unions--don't have the clout to reform the system.

"You have a problem, because the top of the industry is doing just fine, thank you," Zemsky said. "And historically it's the top of the industry that has led change. So the real question is, how do you get the top of the industry fully engaged in this? And you can't say, well, you're going to go out of business. Because, you know, I'm at the University of Pennsylvania. Let me tell you, the one thing I don't worry about is, Penn isn't going out of business. Don't frighten me with that one. That's not going to work."

Meanwhile, though the likes of the University of Pennsylvania are also seeing plenty of applicants, college enrollment overall is dropping. It fell 1.8 percent last fall and another 2.3 percent in the spring,according to the National Student Clearinghouse. More than 300 campuses reported that they still had space in their freshman class or for transfer students as recently as July--two months after the close of the admissions season. Private colleges and universities are particularly vulnerable. The bond-rating company Moody's reports that more than 40 percent of them are experiencing enrollment declines.

One institution, Hope College in Michigan, now pays for half the cost of a plane ticket, up to $300, plus transportation from the airport, housing, and meals for prospective applicants who live outside of driving distance just to come and visit.

But most colleges and universities are responding not with airfare, but with deeper and deeper discounts on tuition, which are cutting into their bottom lines. The national average discount rate has swelled to 45 percent, up from 37 percent in 2000, according to the National Association of College and University Business Officers.

This means that, even though tuition has been skyrocketing, families are actually spending 13 percent less on college than they did in 2009, the student-loan company Sallie Mae reports. This may be good news for students and their parents, but, for colleges, the trend is unsustainable, according to the Council of Independent Colleges."The old way of doing business is not going to sustain itself into the future," said Zemsky. "You need somebody who stands up and says, 'We can do better. Let's get started.' Absent that, we're in for some really unpleasant times in higher education."

Reprinted with permission from The Hechinger Report.

By John J. Russell, Ed.D.
Head of The Windward School

Recently, I attended a meeting at the offices of one of New York's premier law firms. I was ushered to the top floor of a skyscraper in Manhattan. The floor was filled with conference rooms, all of them with extraordinary views of Midtown. When I commented on how impressive the space was, my host informed that this was the former location of the law library of the firm. He explained that with the advances in technology a physical library was deemed no longer necessary. In current planning for the construction of new schools, there is invariably a discussion about the necessity of dedicating valuable space for a school library. Kindle, Nook, and other digital reading devices are touted as the inevitable replacements of old fashion books. Many schools are providing students, including very young elementary students, with iPads and laptops. Ubiquitous reports in the media chronicling the exponential growth of digital reading make it seem that any forward thinking educator would have to embrace the new reading technologies. In fact, encouragement is not just coming from media and technology companies, but from the federal government as well. Speaking at a recent conference (2013), Richard Culatta, Director of the Office of Educational Technology for the United States Department of Education, pointedly asked school officials, "How can we leverage tools and technology to completely reimagine, rethink and redesign learning?" While I am not sure that "reimagine" is actually a word, there is nonetheless an Orwellian tone to it and to "redesigning learning." While none of this is particularly surprising, coming as it does from a technologist, it does scream out for caution and closer examination by parents, educators and cognitive scientists.

Research conducted by the National Literacy Trust (2013) reveals that "39% of children and young people read daily using electronic devises including tablets and eReaders, but only 28% read printed materials daily. The number of children reading eBooks has doubled in the last two years (from 6% to 12%)." Despite the enthusiastic reception that reading technology has received, there are ample reasons to pause and look more closely at this phenomenon, especially the use of digital reading in schools and particularly with young students.

In addition to verifying the increased use of digital reading, the research of the National Literacy Trust also examined the effect of technology on students' reading abilities and their enjoyment of reading. Their findings are worth noting: "... those who read daily only on-screen are nearly twice less likely to be above average readers than those who read daily in print or in print and on-screen (15.5% vs. 26%). Those who read only on-screen are also three times less likely to enjoy reading very much (12% vs. 51%)." In the April, 2013 edition of Scientific American, Ferris Jabr reports that, "Before 1992 most studies concluded that people read slower, less accurately and less comprehensively on screens than on paper. Studies published since the early 1990s, however, have produced more inconsistent results: a slight majority has confirmed earlier conclusions, but almost as many have found few significant differences in reading speed or comprehension between paper and screens." These results provide further support for concerns that Maryanne Wolf and her colleagues raised in their article, "The Importance of Deep Reading" (2009). While recognizing the remarkable capability of digital media to provide "... efficient, massive information processing; flexible multitasking; quick, interactive modes of communication...", they also question how well suited digital reading is for deep reading which they define as "... the array of sophisticated processes that propel comprehension and that include inferential and deductive reasoning, analogical skills, critical analysis, reflection and insight." These are the high order thinking skills that correlate closely with academic success.

In addition to these concerns, huge investments in technology have failed to produce the kind of academic improvements that were envisioned by many pundits. Over the last several decades, American schools have spent ever increasing sums on technology, yet reading and math scores on standardized tests such as the National Assessment of Educational Progress (NEAP) have remained dismal. While many factors could contribute to this stubbornly poor performance; there are too many concrete examples of the failure of technology to produce anticipated gains in student achievement to continue blindly investing in it. In a September 2011 article, The New York Times reported that a 2005 investment of $33 million in technology by the Kyrene School District in Arizona failed to produce hoped for results. Between 2005 and 2011 reading and math scores stagnated in Kyrene while statewide scores rose. In the same article, Stanford education professor, Larry Cuban, states that the research does not support these kinds of outsized investments in technology. While other studies have found positive effects of technology for specific uses such as social interaction/communication and entertainment/exploration, research on the effect of technology on student academic outcomes has yet to demonstrate that it has a significant influence on academic performance.

It is worth noting that many Silicon Valley executives send their own children to decidedly low tech schools. A 2011 New York Times article, "A Silicon Valley School That Doesn't Compute," reported the popularity among Silicon Valley technocrats of schools that do not ascribe to the use of technology for elementary students. Alarmingly, schools like these have more and more become outliers despite the lack of research to support the massive infusion of technology into our schools. While digital media and educational technology hold great promise, teachers and parents need to question the hype of technophiles and rely more on solid research from educators and cognitive scientists. This approach maybe too slow for some, but the expenditure of scarce resources (instructional time and money) and the education of our students, especially our youngest ones, demand a careful and reasoned approach to the widespread use of technology in our schools.

Baruch College ranked No. 3 among the list of 349 U.S. colleges in Washington Month's (WM) "Best Bang for the Buck". Washington Monthly launched the new ranking this year based on the economic value students receive per dollar.

The list features the colleges in America that "do the best job of helping non-wealthy students attain marketable degrees at affordable prices." WM looked at 1,572 colleges and universities, but only 349 made the list as "best-bang -for-the-buck" schools because they met four criteria:

1). At least 20 percent of the student population must be receiving Pell Grants, which are awarded to students whose annual household income is below $50,000.

2). Colleges must have a graduation rate of at least 50 percent, also considering that one-fifth of the student body come from lower income families, a demographic that tends to graduate in lower numbers.

3). Each school's actual graduation rate must meet or exceed the rate that would be statistically predicted for that school given the number of lower-income students admitted (among other things, this calculation assures that schools with more than the minimum 20 percent of students who receive Pell Grants are not penalized).

4). Schools must have a student loan default rate of 10 percent or less.

Baruch College was ranked No. 3 with 51% of students receiving Pell Grants; a 63% graduation rate; a 3% default rate on student loans and a Net Price of $3,429. The net price is the average tuition that first-time, full-time students from families with an annual income of $75,000 or less actually pay after subtracting the need-based financial aid they receive.

Visit WashingtonMonthly.com to learn more about the methodology and the "Best Bang for the Buck" ranking.

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