Department of Education Bumps up Against its Own Education Policies

Cathy Wagner/All About Special Libraries

Cathy Wagner/All About Special Libraries

Under the rubric of protecting students and their families, politicians in Washington, led by the White House, have been talking about getting tough on higher education by imposing outcomes which must be met in order to be eligible for federal student loans. A variety of possible quality measures have been proposed, including graduation rates to employment rates for graduates. The one policy that has been implemented focuses on default rates for student loans.

According to a Fiscal Times article:

The academic world has been anxiously awaiting the Department of Education’s annual announcement on student loan defaults. As of this year, schools with three consecutive years of default rates above 30 percent (or one year above 40 percent) will risk losing federal financial aid. The review was expected to clobber the for-profit sector, but also to penalize some smaller schools characterized by higher-than-average student borrowing, such as numerous members of Historically Black Colleges and Universities, or HBCU. Last year 14 colleges in that organization had default rates above 30 percent.

When faced with the reality that its proposals to get tough on (or hold accountable) higher education would wind up hurting exactly the kinds of students who most need loans to pursue post-secondary education, the White House and Department of Education apparently lost the courage of their convictions. The Chronicle of Higher Education reported, “In a notice published quietly on Tuesday (10/7), the department told colleges it had ‘adjusted’ the rates of institutions that fell short of the strict new standard that took full effect this year, excluding some defaulters from the colleges’ totals.”

The Fiscal Times article was more explicit about the winners and losers:

Though many schools adopted practices aiming to reduce defaults, some were still expected to fall below the government standard. Education Secretary Arne Duncan, speaking recently at a gathering of HBCU leaders, announced that because of changes to the way the numbers were calculated, none of the black schools would lose federal aid.

Proprietary (for-profit) schools, which have been under attack by the Obama White House for some time, were not so lucky. Twenty-one institutions, typically small for-profits offering beauty and cosmetology programs, were deemed to have default rates above the federal limit; those schools will likely lose their opportunity to offer students federal loans and grants – thus effectively putting them out of business.

For-profit schools enroll almost two million Americans, many of whom are older, are military vets, and minorities – in other words, exactly the population groups the White House should support.

The outcome of using student loan default rates was widely predicted by educators, who have exactly the same concerns about many of the other proposals to regulate higher education using problematic measures like graduation rates.

This is not to suggest that no problems exist. Among other things,  federally guaranteed student loans certainly need to be monitored. The problem is that politicians seem more interested in demagoging these issues rather than working with institutions of higher education to find mutually agreeable solutions. And as this example shows, those most likely to be hurt are not students at the Ivies or even at institutions like CSB or SJU (our student loan default rate is virtually zero) but students  of color, and first-generation college students who are trying to use education to get onto the lower rungs of  the economic ladder.

By |October 27th, 2014|Categories: Economics, Higher Education||0 Comments

Productivity, Self-Discipline and the Residential Experience

CSB-SJU-Autumn-Colors-0432Economists (and all the rest of society) care a lot about productivity at the macro level.  Getting more output for the same set of inputs leads to higher income for individuals and higher GDP in the overall economy.  Most empirical work on productivity is done at the macro level–looking at aggregate labor and capital inputs that produce output measured as GDP.  An interesting recent New York Times article, however, looks at productivity at the micro, that is, individual, level. Economist Sendhil Mullainathan describes the individual challenge of self-control or self-discipline:

In our own lives…we see a personal struggle. Tomorrow we want to finish that memo, review several files and plan that project. We know that some of the work will be tedious, but benefits like career advancement, fulfillment or just sheer survival outweigh the costs. When tomorrow becomes today, though, we may discover that we have all kinds of pressing problems. The tedium we had anticipated suddenly feels very large. It is tempting to take a break and just let our minds wander. In our own lives self-control is a big problem — yet it is largely absent from high-level discussions about worker productivity.

The article presents two interesting pieces of economic research on self-discipline, one from present-day India and one from the Industrial Revolution. Mullainathan and his colleagues studied the choices and productivity of data entry workers in India under different incentive schemes.  What they discovered was that a significant number of workers opted for contractual arrangements that did not provide the opportunity to earn more than their normal wage but that did enforce the discipline to ensure that they did not slack off and earn less than their normal wage. In other words, the workers knew that they were not very self-disciplined and wanted contractual incentives that provided external discipline.

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Reaching a similar conclusion in a very different setting, economic historian Greg Clark has argued that Industrial Revolution was importantly a revolution in self-discipline, the steam engine and spinning jenny notwithstanding.  Textile workers working at home could control their schedules and their own productivity but, Clark argues, most were not very disciplined which affected their output and standard of living. One of the most important innovations of the Industrial Revolution was the factory system, which, from one perspective, provided the discipline and oversight that allowed workers to overcome their lack of discipline. In exchange for the external discipline within the factory, workers saw their standard of living rise and allowed the world to move beyond subsistence living which had been mankind’s lot theretofore.  As Professor Clark puts it, “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”

While all of this is fascinating in and of itself, at least if you are an economist, it also has potentially important implications for higher education. If self-discipline is a challenge for many, if not most, individuals, there may be significant benefits to a residential educational experience, beyond those we typically assume.

While there are certainly many benefits to the residential experience beyond the self-discipline it might encourage, this latter benefit  may be underappreciated. Will students be more likely to go to class if there are officially scheduled class meetings?  Are students more likely to attend class regularly if they have classmates, coaches and faculty that expect them to be there? Do students study harder if their roommate or friends are also studying? Are study groups likely to arise in an environment where studying is the norm?  Are students more likely to complete degrees if advisors or the registrar or parents expect them and the rest of the class of 2018 to be done in four years?  While not all undergraduates need the kind of discipline a residential setting provides, it is certainly plausible that many do.

If there are clear benefits from being educated in a residential setting, that might explain at least a couple of interesting observations about MOOCs. First, it might explain the very low completion rates we see with MOOCs. Some studies  find as few as 4% of students that begin such courses actually complete them. This empirical observation may say less about the educational quality of the experience than about the challenges of self-discipline for the students enrolled.

Second, a number of observers, including some of our alumni, have reported great experiences with MOOCs and other kinds of online learning. They then naturally wonder and worry about how such learning might threaten traditional models such as the College of Saint Benedict and  Saint John’s University.  The success and staying power of traditional models in the face of new alternatives may be less about the quality of the online experience than it is about how much self-discipline and motivation the typical 18 year old has.

We do not tend to think of educational Institutions as factories, unless you are Pink Floyd, but there may be more similarities than we might first think as we reflect on the challenges of self-discipline for individuals.

The factory analogy is probably a bit too simplistic.  The educational experience at its best is surely more nuanced than making the proverbial widget, but the residential experience of undergraduates contributes to education in important ways that are more subtle and complex than we normally consider.

 

By |October 20th, 2014|Categories: Economics, Higher Education||0 Comments

Paying for Public Education: Students versus Taxpayers

716944_43164281The University of Minnesota and Minnesota State Colleges and Universities system both recently announced proposals to continue the current tuition freeze for two years, but in return they are asking the state to provide $65 and $72 million respectively to cover rising costs.  The state of New Jersey is considering a bill that would freeze tuition at both public and private universities.  (Though it is not clear whether the latter freeze would be enforceable.)

These budget proposals provide a clear public policy choice that is at the heart of all state funding of higher education. While public institutions have begun fund-raising efforts in recent years, the basic sources of revenue for most public institutions are tuition dollars and tax dollars. This budgeting model raises a very clear question.  Should students and their families pay for higher education or should taxpayers?  There are two dimensions to this question: equity and positive externalities.

Equity.  If the benefits of higher education accrue exclusively to the student, the basic issue here is one of equity, namely should taxpayers subsidize the education of young people even as they will have higher earnings as a result?  Is it appropriate to transfer income from taxpayers to students and their families by substituting tax dollars for tuition dollars?

Positive externalities.  If, on the other hand, positive externalities exist in higher education, meaning some of the benefits of education accrue to the public and not just the student, then there is a case to be made for subsidization.  The taxpaying public gets some benefits from more higher education in their state, in addition to the individual student.

The case for such positive externalities is pretty clear at the primary and secondary school levels. An educated populace is necessary for the functioning of a democracy and basic skills like literacy and numeracy typically allow individuals to function in the economic system without required financial support from society. For these reasons, primary and secondary education are typically available free to students–most often funded by property taxes.

The issue gets more complicated at the post-secondary level.  While a highly educated populace will raise GDP and economic activity, which has benefits for all of society, most of the benefits of higher education are received by the individual who gets the education. Society may benefit from the taxes paid by that individual, but their ability to function in a democracy or stay out of jail or off of welfare are not significantly enhanced by a bachelor’s degree.  So the positive externalities of higher education are significantly smaller than for primary and secondary education.

Beyond a bachelor’s degree, the case for subsidies is even harder to make.  The University of Minnesota plan proposes to freeze tuition for most graduate students, including medical students.  There may be a case for public support of some graduate students, but physicians are among the most highly paid professionals in the United States’ economy–not investment bankers maybe, but quite highly rewarded nonetheless.  The argument that their education provides significant positive externalities to society is a stretch.  They certainly provide great benefits to their patients, but they are well-compensated for those efforts.

So policymakers and the public must consider two issues as they make decisions about paying for public education.  The equity question: to what degree are students deserving of public subsidies?  The externality issue: does the education in question generate benefits to the public beyond the gains that accrue to the individual student?

Europe provides an interesting, maybe extreme, example of this same policy question, but where the debate is currently more muted.  Most countries in Europe provide tuition-free higher education, either believing that students (and their families) deserve to be subsidized and/or that the positive externalities of higher education are very high.  Regardless of the reasoning, it is very hard to make the case that some significant benefits from education are not received by the individual student in the form of higher earnings over a lifetime, and therefore tuition should be something greater than zero.

Over the years, I have had a debate with a British friend about the pricing of education.  She argues that a price of zero is necessary to induce the least well-off in society to go to University.  I have argued that to have her working class family pay taxes to subsidize the education of Cambridge and Oxford students, among others, seems inequitable.

Interestingly, budgetary pressures, if not economic reasoning, have moved the argument in my favor in the England where students currently pay about 9000  pounds (about $14,500) in tuition each year.

In the United States, the same budgetary pressures are at the heart of this policy debate.  Most states have cut back significantly on taxpayer support for higher education in the past decade, a trend that is likely to continue.  This will  change the model of public higher education into one that is sometimes called “high tuition, high financial aid.”  Of course this model already exists in private higher education where sticker prices are high but students and families are offered both means tested financial aid to ensure access and often merit based aid to enhance student quality.  One can debate how well private higher education balances equity, externalities and efficiency, but it seems to have served students quite well over the years.

 

 

By |October 13th, 2014|Categories: Economics, Higher Education||0 Comments