Long before Donald Trump or Covid 19, the eerie resemblance of American higher education to the old Habsburg Empire was hard to miss. At the top a handful of vintage institutions continued to glitter. They exercised a magnetic attraction on the rest of the world that even intellectual disasters on the scale of the economics discipline before the 2008 financial crisis hardly dented. But most every institution below the royals was at least fraying around the edges. Long before the pandemic hit, many showed clear signs of distress.
The root of that distress is not hard to identify: It is the pressures arising from the decline of the American middle class and the soaring income inequalities of the New Gilded Age. While a few US colleges have lineages stretching back centuries, they and their less venerable competitors dramatically reconfigured themselves during the long boom that followed World War II. Historically rapid economic growth along with major government funding initiatives, such as the GI Bill, post-Sputnik spending on defense and R&D; and Lyndon Johnson’s Great Society fueled a vast expansion of the whole system.
With college degrees the passport to well-paid, stable employment, going to college became the default expectation of middle-class students and parents and the aspiration of many less affluent households. State supported institutions bulked up, but so did most private colleges and universities. Research institutions, private liberal arts colleges, professional schools, state colleges and universities, and junior colleges nearly all added students and faculty. Many also transformed themselves into conglomerates, branching out into wholly new lines of activity and adding layers of administrators.
The fateful fork in the road came in the nineteen seventies, as economic growth slowed and became far more variable. The declines, along with major campaigns for lower taxes, squeezed both federal and state finances. With direct aid from governments constrained, and advances in biotechnology promising high returns, both Democrats and Republicans encouraged colleges and universities to privatize research performed on their campuses and to spin off products to private industry.
As college costs spiraled upward while middle class incomes stagnated, the market for college education stratified more sharply. A handful of private universities and a very few public ones with deep-pocketed alumni spent big to build internationally competitive programs in science, engineering, and professional schools. In a virtuous circle, those successes attracted further outside funding from both government and industry. A few institutions were so successful at this that student tuition eventually became a secondary factor compared to how their endowments fared in the stock markets.
Over time, the search for outside funding turned increasingly desperate as state support continued falling off, especially after economic downturns. State funding now supplies 21% of the budget – a huge decline from the nineteen seventies —-and has been replaced by net tuition revenues which have grown year after year since 1980.
Permanent faculty are higher education’s institutional memory; they are vital to manage the curriculum in departments and programs, decide who is qualified to teach what in the curriculum, and how students should be assessed. But desperate to save money, colleges and universities steadily chopped back full-time academic positions –from 85% in 1970 to less than 25% today. Instead they filled more and more teaching slots with adjuncts, who are paid much less. Many, according to a new report, live on incomes of $25,000 or less. Because the permanent faculty is less than 25% at institutions outside of the top 150 or so ranked public and private colleges, most instruction is now done by part-timers who are given little or no professional guidance about what or how to teach or how to assess students.
Many colleges, including large numbers of state institutions, also turned to recruiting out-of-state students who could pay full cost. They sought to attract students from abroad, including many from China, for the same reason. In large universities, teaching assistants with an uncertain grasp of English often teach many students.
The nature and amount of student services also changed; many schools, for example, found it necessary to add medical, psychological, and other counseling services for non-traditional students. Rising health costs were a constant problem, especially for part timers. Many institutions also poured scarce resources into sports success, believing that would inspire increased alumni contributions. They also competed for affluent students by offering hotel-like amenities, state of the art gyms, and other expensive facilities. It did not help that many heads of colleges aspired to be paid like corporate CEOs.
In the wake of the 2008 financial crisis, the Obama administration was reluctant to help states out of their budget shortfalls, while national Republicans were openly opposed. State support for higher ed plunged to new lows. In most states, it never really came back. In 2017, for example, the largest governmental source of revenues for public higher education, state general appropriations, amounted to $87 billion – $2.2 billion below the level of 2007.
Throughout this long time of troubles, both governments and universities encouraged students and their parents to make up the revenue shortfall by taking on debt themselves. Student private lenders gleefully helped, often at rates that were astonishing even by the standards of deregulated American finance. After 2008, as interest rates fell to historically low levels, some private lenders still tried to charge double digit interest rates for student loans. The national student loan debt has risen to over $1.6 trillion dollars in 2020.
The result has been a slow motion train wreck. The steady growth of a dual economy in the US has made middle-class jobs increasingly scarce and destroyed many previously well-paid, secure jobs. As the Sanders and Warren campaigns made obvious, many students now carry heavy loads of debt when the graduate – if they graduate. Dropout rates, especially of minority students, have soared and many fewer students – again, especially minority students – find college a practical possibility. Rates of college attendance for Black and Hispanic students run far below that of whites, whose rates have also been declining. Whites and Asians earn a college-level credential at rates about 20% higher than Blacks and Hispanics. At the same time, students with diplomas often cannot find anything resembling an old fashioned entry-level position, because there are so few to be found.
Now, suddenly, with the Covid 19 pandemic, the long running financial squeeze threatens to turn overnight into genuine insolvency as institutions struggle to figure out how to safely run instructional systems dependent on in-person activities and support systems all too reminiscent of cruise ships. Duke University’s President Vincent Price recently sent the board, faculty, and staff a memo stating that Duke would need to find an additional $150 million to $200 million to get through the upcoming academic year. University of Michigan and Stanford University administrators project losses on a similar scale. Endowments have likely also taken a hit, though the massive Federal Reserve interventions in financial markets has supported portfolios, if not working Americans.
Duke, Michigan, and Stanford, though, are wealthy institutions with established reputations. Many of these, if they must, can operate online for a good while, if not comfortably, and relatively few students will likely fail to show eventually. By contrast, it is painfully obvious that many less well-endowed institutions are grasping at straws to find ways to reopen in person. They fear that students and parents simply will not pay for online instruction at home from less renowned institutions and many need the tuition to survive. In addition, colleges and universities often garner important revenues from student payments for dorm and meal services. More than a few have substantial debts to service. (...)
Many education leaders are pressing for much larger packages in the next CARES legislative package. Figures of $47 billion or more are being tossed around by groups representing only part of American higher education. There is also discussion of measures protecting universities from at least some liability suits.
Not everyone is on board. A celebrated former president of Harvard known, if guardedly, to be close to the Biden campaign, has proposed that institutions should take advantage of the crisis to accelerate changes that were in train anyway. In his view, that might lead to wider use of online instruction by a few institutions with strong worldwide brand names. Some of his colleagues are more cautious: they recommend that for only courses in some fields.
By contrast, the outgoing President of the University of California system recently stated flatly that Massive Open Online Courses (MOOCs) have not worked well. That is our view, with the important qualification that for highly motivated students, in some sharply defined contexts, well designed MOOCs or videotapes can be effective. Absent those, we think that the experience of Princeton and other institutions, where students enrolled in MOOCs stayed away in droves, is likely to be repeated.
by Roger Benjamin and Thomas Ferguson, INET| Read more:
Image: uncredited
[ed. Personally, I'd select a state school with reasonable tuition, then transfer later if a "name" college is important to you.]
The root of that distress is not hard to identify: It is the pressures arising from the decline of the American middle class and the soaring income inequalities of the New Gilded Age. While a few US colleges have lineages stretching back centuries, they and their less venerable competitors dramatically reconfigured themselves during the long boom that followed World War II. Historically rapid economic growth along with major government funding initiatives, such as the GI Bill, post-Sputnik spending on defense and R&D; and Lyndon Johnson’s Great Society fueled a vast expansion of the whole system.
With college degrees the passport to well-paid, stable employment, going to college became the default expectation of middle-class students and parents and the aspiration of many less affluent households. State supported institutions bulked up, but so did most private colleges and universities. Research institutions, private liberal arts colleges, professional schools, state colleges and universities, and junior colleges nearly all added students and faculty. Many also transformed themselves into conglomerates, branching out into wholly new lines of activity and adding layers of administrators.The fateful fork in the road came in the nineteen seventies, as economic growth slowed and became far more variable. The declines, along with major campaigns for lower taxes, squeezed both federal and state finances. With direct aid from governments constrained, and advances in biotechnology promising high returns, both Democrats and Republicans encouraged colleges and universities to privatize research performed on their campuses and to spin off products to private industry.
As college costs spiraled upward while middle class incomes stagnated, the market for college education stratified more sharply. A handful of private universities and a very few public ones with deep-pocketed alumni spent big to build internationally competitive programs in science, engineering, and professional schools. In a virtuous circle, those successes attracted further outside funding from both government and industry. A few institutions were so successful at this that student tuition eventually became a secondary factor compared to how their endowments fared in the stock markets.
Over time, the search for outside funding turned increasingly desperate as state support continued falling off, especially after economic downturns. State funding now supplies 21% of the budget – a huge decline from the nineteen seventies —-and has been replaced by net tuition revenues which have grown year after year since 1980.
Permanent faculty are higher education’s institutional memory; they are vital to manage the curriculum in departments and programs, decide who is qualified to teach what in the curriculum, and how students should be assessed. But desperate to save money, colleges and universities steadily chopped back full-time academic positions –from 85% in 1970 to less than 25% today. Instead they filled more and more teaching slots with adjuncts, who are paid much less. Many, according to a new report, live on incomes of $25,000 or less. Because the permanent faculty is less than 25% at institutions outside of the top 150 or so ranked public and private colleges, most instruction is now done by part-timers who are given little or no professional guidance about what or how to teach or how to assess students.
Many colleges, including large numbers of state institutions, also turned to recruiting out-of-state students who could pay full cost. They sought to attract students from abroad, including many from China, for the same reason. In large universities, teaching assistants with an uncertain grasp of English often teach many students.
The nature and amount of student services also changed; many schools, for example, found it necessary to add medical, psychological, and other counseling services for non-traditional students. Rising health costs were a constant problem, especially for part timers. Many institutions also poured scarce resources into sports success, believing that would inspire increased alumni contributions. They also competed for affluent students by offering hotel-like amenities, state of the art gyms, and other expensive facilities. It did not help that many heads of colleges aspired to be paid like corporate CEOs.
In the wake of the 2008 financial crisis, the Obama administration was reluctant to help states out of their budget shortfalls, while national Republicans were openly opposed. State support for higher ed plunged to new lows. In most states, it never really came back. In 2017, for example, the largest governmental source of revenues for public higher education, state general appropriations, amounted to $87 billion – $2.2 billion below the level of 2007.
Throughout this long time of troubles, both governments and universities encouraged students and their parents to make up the revenue shortfall by taking on debt themselves. Student private lenders gleefully helped, often at rates that were astonishing even by the standards of deregulated American finance. After 2008, as interest rates fell to historically low levels, some private lenders still tried to charge double digit interest rates for student loans. The national student loan debt has risen to over $1.6 trillion dollars in 2020.
The result has been a slow motion train wreck. The steady growth of a dual economy in the US has made middle-class jobs increasingly scarce and destroyed many previously well-paid, secure jobs. As the Sanders and Warren campaigns made obvious, many students now carry heavy loads of debt when the graduate – if they graduate. Dropout rates, especially of minority students, have soared and many fewer students – again, especially minority students – find college a practical possibility. Rates of college attendance for Black and Hispanic students run far below that of whites, whose rates have also been declining. Whites and Asians earn a college-level credential at rates about 20% higher than Blacks and Hispanics. At the same time, students with diplomas often cannot find anything resembling an old fashioned entry-level position, because there are so few to be found.
Now, suddenly, with the Covid 19 pandemic, the long running financial squeeze threatens to turn overnight into genuine insolvency as institutions struggle to figure out how to safely run instructional systems dependent on in-person activities and support systems all too reminiscent of cruise ships. Duke University’s President Vincent Price recently sent the board, faculty, and staff a memo stating that Duke would need to find an additional $150 million to $200 million to get through the upcoming academic year. University of Michigan and Stanford University administrators project losses on a similar scale. Endowments have likely also taken a hit, though the massive Federal Reserve interventions in financial markets has supported portfolios, if not working Americans.
Duke, Michigan, and Stanford, though, are wealthy institutions with established reputations. Many of these, if they must, can operate online for a good while, if not comfortably, and relatively few students will likely fail to show eventually. By contrast, it is painfully obvious that many less well-endowed institutions are grasping at straws to find ways to reopen in person. They fear that students and parents simply will not pay for online instruction at home from less renowned institutions and many need the tuition to survive. In addition, colleges and universities often garner important revenues from student payments for dorm and meal services. More than a few have substantial debts to service. (...)
Many education leaders are pressing for much larger packages in the next CARES legislative package. Figures of $47 billion or more are being tossed around by groups representing only part of American higher education. There is also discussion of measures protecting universities from at least some liability suits.
Not everyone is on board. A celebrated former president of Harvard known, if guardedly, to be close to the Biden campaign, has proposed that institutions should take advantage of the crisis to accelerate changes that were in train anyway. In his view, that might lead to wider use of online instruction by a few institutions with strong worldwide brand names. Some of his colleagues are more cautious: they recommend that for only courses in some fields.
By contrast, the outgoing President of the University of California system recently stated flatly that Massive Open Online Courses (MOOCs) have not worked well. That is our view, with the important qualification that for highly motivated students, in some sharply defined contexts, well designed MOOCs or videotapes can be effective. Absent those, we think that the experience of Princeton and other institutions, where students enrolled in MOOCs stayed away in droves, is likely to be repeated.
by Roger Benjamin and Thomas Ferguson, INET| Read more:
Image: uncredited
[ed. Personally, I'd select a state school with reasonable tuition, then transfer later if a "name" college is important to you.]
