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Higher Education and Career-Ready Graduates: New Surveys Offer Insight into America’s Opinions

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The results of two new surveys released Tuesday reveal some of America’s views on both the future of higher education as well as its role in producing desirable outcomes, particularly career-ready graduates. Under Northeastern University’s sponsorship, FTI Consulting surveyed 263 hiring managers in July as well as 1,000 adult Americans in August.  Here are some of their findings: 

  • Americans continue to see the value in higher education, but are concerned that the system does not adequately prepare graduates for their careers. Respondents ranked “level of education” as the most important factor in determining a job candidate’s success; yet, 62 percent said colleges currently do only a fair to poor job of preparing graduates for the workforce. That said, 79 percent believe their own college education prepared them well.
  • Americans are conflicted about who has the greatest responsibility to train recent graduates for the workplace: employers (36 percent), colleges/universities (29 percent) or the graduates themselves (35 percent). When Americans were asked why U.S. companies are struggling to find good job candidates, the most common response was that companies are not investing enough in training new hires. However, 87 percent of Americans assert that higher education must change in order to maintain an internationally competitive workforce.
  • Americans and business leaders value “soft” skills, like problem-solving and communication, over “hard” industry-specific skills. Most Americans (65 percent) and business leaders (73 percent) believe that, for people on the job market, “being well-rounded with a range of abilities is more important than having industry experience because job-specific skills can be learned at work.”
  • Americans and business leaders agree that experiential learning is highly valuable to students’ careers. Nearly all Americans (89 percent) and business leaders (74 percent) believe that students are more successful in their careers if they have work experience from a field-related internship or job. Both groups agree the most important step the U.S. can take to better prepare colleges students is to broaden the professional work programs available to them.
  • Although most Americans (67 percent) think colleges should adopt new technologies and interactive teaching methods, they have doubts about MOOCs and online degrees. Less than 30 percent of Americans and business leaders believe MOOCs are of the same quality as in-person courses, and only 37 percent of Americans would consider completing a postsecondary degree solely online. However, about half of all respondents believe MOOCs will transform education in the US and that online degrees will be equally accepted by employers within 5 to 7 years.

My take-away from all this, to summarize, is:  Americans and business leaders believe that people on the job market need a college education, some professional work experience, and a well-rounded skill-set and in order to succeed. However, they also believe that colleges, businesses, and the government must play a role in helping students garner those qualifications.

September Revenue Forecast Predicts Continued Gains

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It is tempting to copy and paste our post from June’s revenue forecast into this one, as the September revenue forecast cites many of the same themes: continued federal budget instability, rising house prices in conjunction with possible interest rate hikes, and likely economic losses in Asia could disrupt the slow recovery currently underway. However, modest regional employment gains, an uptick in real estate excise tax revenue, and positive personal income growth propelled collections and revenue projections $345 million higher than June’s forecast for the current, 2013-15 biennium.

Interestingly, the 2011-13 biennium closed with an estimated positive variance, $23 million higher than the June forecast.

The Governor will base his 2013-15 supplemental budget on the November forecast, so continued revenue growth will be critical. As in June, the September
revenue forecast did not include tax collections related to the sale of cannabis.

 

ED Begins Negotiating New Gainful Employment Rule

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On Monday, the U.S. Education Department (ED) began formal negotiationson the draft language of a proposed new  “gainful employment” rule. The rule, originally published in 2011, was designed to enforce a requirement of the Higher Education Act that states career education programs—non-degree programs at all colleges and most degree programs at for-profit colleges—must “prepare students for gainful employment” in order to participate in federal student aid programs. The rule was meant to discourage these programs from misusing federal aid dollars and leaving students with debts burdens they are unable to repay. However, in 2012 a federal judge rejected major provisions of the rule, requiring that ED rethink its strategy.

Here’s a summary of the changes:

  • The proposed rule applies to programs with as few as 10 students, whereas the old rule counted only career-focused programs with 30 or more students. Because of this change, ED estimates that the new rule could cover 11,359 programs at for-profit and nonprofit colleges—nearly twice as many as the old rule covered—and that 974 of those programs (9 percent) could fail to meet the proposed standards.
  • The draft regulation omits loan-repayment as a criterion for federal student aid eligibility. The old rule severed federal aid to programs where too few students were repaying their loans or where graduates’ debt-to-earnings and debt-to-discretionary-income ratios were too high. The new rule removes the loan repayment standards, which the courts deemed “arbitrary and capricious,” and relies only on the latter two measures.
  • Debt-to-earnings calculations would be based only on students who receive federal aid, rather than students who complete the program. The old calculations were based on all students who completed the program, whereas the proposed calculations are based on any students who receive federal student loans and Pell Grants, regardless of whether they complete the program. As the rule is designed to ensure that federal aid is used effectively, this seems a more appropriate approach. 
  • Schools would have fewer chances to improve their performance before losing federal aid eligibility. Under the previous rule, programs that failed the measures in 3 out of any 4 years would be ineligible for federal student aid. However, the new rule only lets programs fail in 2 out of any 3 years before they lose eligibility.

For details, see a comparison of the two versions prepared by the Education Department.  Please continue to follow our blog as well as the Federal Relations blog for updates on this topic.

Oregon Passes Bill to Implement “Pay Forward, Pay Back” Pilot Program

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(This piece was originally posted on 07/11/2013, however it was lost due to technical issues and is therefore re-posted here.)

Last week, the Oregon legislature passed a bill that, if signed by the governor, will implement a pilot program to study the effects and feasibility of substituting upfront tuition payments with income-based, post-graduation payments. For 24 years after graduating, four-year college students would pay back 3 percent of their income and community college students would pay back 1.5 percent. Students who do not graduate would pay back a smaller percent determined by how long they were in school.

If, after several years of study, Oregon decides to adopt a plan (or some form of it), it would signify a major shift in the funding paradigm for public institutions. But that’s a big IF. The plan has received considerable criticism due to a multitude of unanswered questions that could pose significant logistical barriers. For example:

  • How would institutions and/or the state pay for the plan’s implementation (i.e. the several years of foregone tuition revenue between when a student enters school and when they graduate and start earning pay)?
  • How would the state efficiently collect accurate income data on students who move out-of-state?
  • How would the state go about collecting and enforcing payments?
  • How would the plan account for and apply to part-time students, transfer students, mid-career students, and other non-traditional students?
  • How would the plan work with federal and state financial aid programs? Would low-income students be accommodated so as to avoid creating barriers to entry?
  • How does one pilot a 24-year repayment program in just 2 or 3 years?

Even if Oregon’s higher education commission, which is tasked with implementing the pilot program, can find viable answers to those questions, the plan still has a number of possible (if not likely) negative consequences. For instance, the plan may:

  • Magnify the public’s view of higher education as a private good (only benefiting the individual) rather than a public good (benefits for many) which, in turn, could spur the continuing and problematic trend of replacing state dollars with tuition revenue;
  • Make institutions even more vulnerable to economic variations and recessions as their revenue would be tied to graduates’ earning and unemployment rates; and
  • Create social and economic imbalance between Oregon and other states since students who expect to earn less—e.g. social science and humanities majors—would be incentivized to go to Oregon, and students expecting to earn more—e.g. engineering and medical students—would likely go elsewhere.

Granted, the idea of basing college payments on graduates’ income is not a new one. Some federal student loans are eligible for income-based repayment and a program similar to Oregon’s already exists in Australia. However, Australia’s version is administered at the federal level, meaning many problems inherent in Oregon’s plan (tracking students who move around the country, imbalance between states, etc.) are avoided.

The Economic Opportunity Institute, a liberal think tank in Seattle, proposed a version of the plan for Washington in October 2012; but, unlike Oregon’s version, it has yet to go anywhere.  We’ll keep you posted.

Obama Releases College Affordability Plan

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Last week, President Obama toured several colleges and universities promoting his plans to make college more accessible and affordable for “middle class” students. As he noted during several stops, achieving a higher education remains one of the most critical means by which citizens achieve job security and financial  stability.

For more detailed information about the central themes of the President’s plans, as well as information about which components require action from Congress, please review a brief on the topic, as well as a blog from Federal Relations. More about the plans are available in the Chronicle of Higher Education and Inside Higher Ed website.

 

Critique of “For Public College, the Best Tuition Is No Tuition”

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In “For Public College, the Best Tuition Is No Tuition,” a recent opinion piece published by The Chronicle, the author describes the merits of Finland’s no-tuition education system. In Finland, “all education became public and free” during the 1960s as part of a multipronged strategy to reform and improve education. The other prongs of the strategy involved strengthening the country’s basic education by providing teachers with better pay and training, ensuring that students have individual attention at a young age, and by making education more interactive and experience-based. Forty years later, the country ranks 1st in Pearson’s Global Index of Cognitive Skills and Educational Attainment, which is based on results from a variety of international tests of cognitive skills as well as measures of literacy and high school graduation rates. The US ranked 17th. Though the accolades go to Finland’s basic education system, the author concludes that the US should model its higher education system after Finland’s. However, a higher percentage of the US’s population has attained tertiary education (42 percent, ranked 5th, versus 39 percent in Finland, ranked 9th) and a higher percentage has entered into higher education (72 percent, ranked 8th, versus 68 percent in Finland, ranked 13th).

Even if the US should model its higher ed system after Finland’s, the no-tuition strategy is not nearly as feasible as the author suggests. To determine whether Finland’s approach would be “affordable” for the US, the author multiplies the number of US public students in 2008-09 by the average cost of public tuition, room, and board in 2009-10. By his calculations, the program would cost $130 billion annually which, he notes, is more or less equivalent to what the federal government spent on Pell grants and student loans in 2010 ($134 billion). His approach, however, has some serious flaws:

  • First, what he is analyzing here is the cost of all public education becoming free, not all education becoming public and free, which is Finland’s model. It is unclear whether the author accidentally left out private non-profits and for-profits—which would be converted to public institutions and made free under Finland’s model.  But if the other sectors are added into the equation, the program costs increase significantly.
  • Second, undergraduate tuition and fees have increased since 2008-09. Between 2009-10 and 2012-13, adjusting for inflation, undergraduate tuition and fees increased by about 5 percent per year at public institutions and by an average of 2 percent per year at private non-profits. During that the same time, federal spending on Pell grants and undergraduate financial aid remained relatively stable after adjusting for inflation, meaning the costs would not be nearly as interchangeable as the author suggests.
  • Lastly, completely eliminating the price of tuition would stimulate demand, which would increase enrollment at public institutions and, thus, the cost to taxpayers. Not only would there be a per-student cost (tuition, room, board, etc.) for each additional student, more students would also require more buildings, classrooms, labs, housing and other capital investments.

Another significant feature inherent in Finland’s system that isn’t contemplated by the author is Finland’s use of a barrier to entry. Finland has limited enrollment spaces and, thus, requires that students pass certain standardized tests at specified levels, depending on the program. This works well in Finland due to their exceptional K-12 system, which ensures that all students are thoroughly prepared for college regardless of personal income or community wealth. The same cannot necessarily be said about our basic education system in the US. Thus, it isn’t clear whether a standardized test could serve as a barrier to entry without significantly and profoundly harming less prepared students.

We’re trying to create a system in which students of all backgrounds and privileges have access to higher education, but substituting price for a proxy barrier like college preparedness may not get us very far. College preparedness would be a preferable barrier in that naturally-talented low-income students would have a better chance of attending college than they currently do; but what would happen to the students who don’t have the resources they need to succeed? Would they be denied access to higher education?

There are costs and tradeoffs associated with every higher education system and reform plan, free tuition is no exception. Free tuition may be a viable option, but it’s not a silver bullet.

States Shift Financial Aid Money toward Need-Based Aid and Grant Aid

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According to an annual survey released on Monday by the National Association of State Student Grant and Aid Programs (NASSGAP), the amount of state dollars going toward financial aid remained relatively stable between 2010-11 and 2011-12. In 2011-12, states awarded about $11.1 billion in state-based financial aid, a slight increase (0.7 percent) over the $11.0 billion awarded in 2010-11. That growth has not kept pace with rising enrollments or the overall increase in students’ financial need; however, it’s encouraging to see growth of any size given that general state appropriations for higher education fell by 7 percent during that same time period.

The state-by-state data show that Washington, New Jersey, New York and California gave out the most need-based aid on a per-student basis. Oregon more than doubled the amount it spent on need-based grants, to nearly $44-million, and Washington increased its need-based grants by 26 percent. However, 23 states cut need-based aid from 2010 to 2011 and four states reported no need based aid programs at all.

What’s most intriguing, in my opinion, is that even though states collectively put only slightly more money toward their financial aid programs, they shifted a larger portion of those aid dollars toward need-based aid and grant aid (see the tables below). This finding suggests that states are attempting to maintain access in the face of rising tuition rates and to reduce the amount of debt their students accumulate.

Of the $11.1 billion in total state-awarded student aid:

  • $9.4 billion (84%) was grant aid—up 1.7% from 2010-11; and
  • $1.7 billion (16%) was non-grant aid (loans, work-study, tuition waivers, etc.)—down 4.2% from the previous year.

Of the $9.4 billion in state-awarded grant aid:

  • $7.0 billion (74%) was need-based—up 6.3% from last year; and
  • $2.4 billion (26%) was non-need-based—down 9.4%.

Of the $10.1 billion in state-awarded undergraduate aid (both grants and non-grants):

  • $4.7 billion (47%) was exclusively need-based—up 6.0%;
  • $2.0 billion (20%) was awarded on a mix of need and merit criteria—up 1.6% and surpassing, for the first time ever, aid awarded solely on merit;
  • $1.9 billion (19%) was exclusively merit-based—down 1.3%; and
  • $1.4 billion (14%) was special purpose awards and uncategorized aid— a 3.0% drop.
Change in Total State-Awarded Student Aid
Percent change from 2010-11 to 2011-12      
Type of Student Aid Dollar amount Portion of total
Grant aid 1.7% 0.8%
Non-grant aid -4.2% -0.8%
Total aid 0.7%  
     
Change in State-Awarded Grant Aid
Percent change from 2010-11 to 2011-12      
Type of Grant Aid Dollar amount Portion of total
Need-based 6.3% 3.0%
Non-need-based -9.4% -3.0%
Total grant aid 1.7%  
     
Change in State-Awarded Undergraduate Aid
Percent change from 2010-11 to 2011-12      
Type of Undergrad Aid Dollar amount Portion of total
Exclusively need-based 6.0% 2.7%
Mixed need & merit-based 8.5% 1.6%
Exclusively merit-based -6.5% -1.3%
Uncategorized & other -17.4% -3.0%
Total undergraduate aid 0.0%  

Federally Subsidized Student Loan Interest Rates Set to Double on July 1

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Thursday night, time ran out for Congress to reach a deal to keep federally subsidized student loan interest rates from doubling. The Senate adjourned for its Fourth of July recess without voting on a plan; thus, the interest rates on new federally subsidized loans will double to 6.8 percent on Monday July 1st (the same rate as unsubsidized federal student loans).

It is possible, however, that students won’t end up paying the increased rates.  There has been a push from some legislators to enact a one-year fix that would temporarily adjust/lower the interest rates after the fact.  As the lender of the student loans, it is within the federal government’s power to apply such a solution retroactively.

The increase was originally scheduled to occur a year ago.  But, thanks to an election-year alliance of student advocates and the Obama administration, the rate increase was delayed by a year.

For more information, see the Inside Higher Ed article and please stay tuned to the Federal Relations website for updates.

Supreme Court Decision on Fisher v. University of Texas

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On Monday, the Supreme Court ruled that Fisher v. University of Texas (UT), the case on UT Austin’s race-conscious admissions policy, be sent back to an appeals court for further scrutiny. The case stemmed from a lawsuit by Abigail Fisher, a white applicant to the university who claimed she was unfairly rejected due to UT Austin’s affirmative action admissions program. For more background on this case, please see our previous two posts, found here and here.

The court’s 7-to-1 decision did not provide a direct answer about the constitutionality of UT Austin’s admissions practices. Instead, it ordered the U.S. Court of Appeals for the Fifth Circuit to reconsider the case on the grounds that the appeals court had failed to apply “strict scrutiny” (a rigorous standard requiring that both an important goal and a close fit between means and ends be identified) in its review of the case and subsequent ruling in favor of UT. Justice Ruth Bader Ginsburg was the only dissenting voice; she argued that the appeals court was right to support UT’s policies.

According to the NY Times, Justice Kennedy wrote for the majority that courts reviewing affirmative action programs must, “verify that it is necessary for a university to use race to achieve the educational benefits of diversity.” This necessitates, he said, “a careful judicial inquiry into whether a university could achieve sufficient diversity without using racial classifications.”

The Supreme Court’s ruling did not displace its 2003 decision in Grutter v. Bollinger, which found educational diversity to be of sufficient importance to overcome the government’s standard ban on racial consideration. However, as Inside Higher Ed reports, legal experts believe the court’s demanding “strict scrutiny” requirements will make it difficult for UT and many other institutions to successfully defend their use of race in admissions.

The debates surrounding Fisher v. UT and affirmative action in higher education as a whole are far from over. Many expect the Texas case to return to the Supreme Court after a new review by the appeals court.  We will keep you posted with any updates.

Washington’s June Revenue Forecast Shows Small Improvements

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On Tuesday, June 18, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of General Fund-State (GFS) revenues. Compared with the March forecast, expected GFS revenues are up $110 million for the current biennium (2011-13) and $121 million for the next biennium (2013-15), meaning legislators have an additional $231 million to factor into their budget negotiations.

While these changes are positive, they represent very minor adjustments. Under the updated forecast, the state is expected to take in $30.65 billion in the current biennium and $32.66 billion in the next, thus the increases represent adjustments of less than 0.5 percent each.

Most of the positive variance came from increases in forecasted housing construction, taxable real estate activity, and Revenue Act taxes. Real estate excise taxes came in $34 million (34 percent) higher than forecasted and Revenue Act taxes came in $54 million (2 percent) higher—exceeding the January 2008 pre-recession peak. Lower than expected inflation and employment worked against these gains, but weren’t enough to negate them.  Although Washington employment has been slowly increasing in most sectors (especially construction), aerospace and government employment are in decline.

It is important to note that much uncertainty surrounds the council’s 2013-15 baseline forecast due to the Federal sequester, Europe’s recession, and China’s slowing economic growth. The ERFC gives its baseline a 50 percent probability and its optimistic and pessimistic alternative forecasts 20 percent and 30 percent respectively. The optimistic forecast is $2.5 billion above the baseline and the pessimistic forecast is $2.5 billion below.

In addition, it should be noted that, like the March forecast, the June update did not assume any revenue from taxable marijuana sales as the Federal Government’s response to Initiative 502 is still unclear.

Some state lawmakers are optimistic that the new forecast will expedite their budget negotiations; however, the two sides’ have a ways to go before the end of the fiscal year on June 30th (12 days from now). “We’ll get closer as a result of this,” said Representative Ross Hunter during a press conference Tuesday morning.