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2014 September 9

Why are students going to for-profit colleges?

Filed under: Uncategorized — gasstationwithoutpumps @ 18:03
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Faculty in public colleges are often mystified why students would choose to take out enormous loans to attend for-profit colleges whose degrees are mostly not respected either by industry or other colleges. In Confessions of a Community College Dean: Corinthian Learner “Dean Dad” explains why for-profit colleges managed to attract students, despite the low quality and ripoff financing:

Put simply, for-profits rushed in to fill the void left by the publics.  Decades of relative neglect of public higher education, combined with a certain (ahem) narcissism within the sector itself, left entire populations underserved.  Perhaps for impure reasons, for-profits figured out how to reach students nobody else bothered to reach.  They pioneered evening, weekend, and online delivery.  They built schedules around student needs.  They focused on a few distinct majors that both students and employers could understand.  And for a while, in some sectors, some of them got decent results.  In the late 90’s, you could do a lot worse than graduating with a degree in CIS.

For-profits filled a void. If you want to prevent the next catastrophe, tend to the void.

That means consciously and aggressively using the public sector—both community colleges and four-year regional campuses—as hedges against future disaster. It means making a dramatic and sustained turn away from the long-term trend of austerity for the publics and an open spigot for for-profits. When you include the cost of bailouts, the “efficient” for-profits wind up inflicting a far greater fiscal burden on the public than more generously funded publics would have. That’s even more true when you factor in student loan debt from students who never graduated, or who graduated but never earned salaries commensurate with their debts.

If dampening demand isn’t really an option, and diverting demand to the private sector leads to financial catastrophe, maybe…stay with me…we could fund the public sector well enough to meet the demand itself. Keep student cost down, get quality up, and learn some valuable lessons from for-profits about meeting students where they actually are. Prevent the next wave of for-profit megagrowth by choking off its air supply.

That means getting away from flat or declining operating budgets supplemented by “targeted” grants that fade away in three years, and instead pouring a fraction of what a for-profit bailout would cost into the public sector. When I was at DeVry, I didn’t see fear of the government or fear of lawyers. I saw fear of the nearby community college. There was a reason for that.

As long as for-profits are considered in isolation, we’ll continue to miss the point. Yes, close loopholes, prosecute liars, and enforce regulations, but those amount to fighting the last war. If you want to prevent the next bailout instead of the last one, you have to address the demand side. Give community and state colleges the resources—and, yes, the flexibility—to flood the zone. It’ll cost some money upfront, but it’s cheaper, more humane, and far more productive than bailouts and legal fees after the next collapse. We don’t have a great record of learning from catastrophes, but this one should be easy.

His post was made in response to the failure of the Corinthian Colleges chain, where the investors had siphoned off all they could get away with and the federal government was not allowing them to be the recipients of student loan money any more.  Other for-profit chains (Anthem Education, for example) are also on the ropes, now that the Federal spigot of infinite loans is being turned back a tiny bit. No attempt is expected to claw back the money from the “investors” who ripped off the students tricking them into taking out enormous loans for a fake education.

I think that his message is indeed correct. It is a lot cheaper to fund public universities well than to clean up the mess left by a completely unregulated for-profit education “industry”.  Students should not need to take out enormous loans to get an education, particularly not the inferior one that the for-profits provided.  Society is better served by having an educated populace that is not hugely in debt.

 

2014 March 4

Get a job! (or maybe not)

Filed under: Uncategorized — gasstationwithoutpumps @ 12:34
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There is an interesting discussion going on in the comment section of a Cost of College blog post. The basic advice of the post was “Advice to college students:  Get a job!  (But don’t slack off on studying.)”

Both CSProfMom and I have been arguing with the author that some jobs are valuable to STEM students, but that others waste their time without providing any benefit to their eventually getting a decent job in their field.

Employers in technical fields want their employees to have the appropriate technical and professional skills, which they generally measure by education and relevant prior work experience. Time spent flipping burgers or making cappuccino does not add anything to an engineering student’s resume, other than a fairly trivial “shows up for work,” which does not distinguish among students who have had the work ethic needed to finish an engineering degree.

What students need is evidence that they can do the work that the company needs done. Technical internships are one excellent way to show this, as are summer research experiences (like the NSF REU program) and senior theses or capstone projects supervised by faculty. Spending 20–30 hours a week at a minimum-wage job, as many students need to do in order to pay tuition, cuts into the ability of students to get into these career-building opportunities, both because they lack the time and because the long hours spent working instead of studying lower their grades and make it harder for them to get into the competitive programs that would benefit them most.

CSProfMom summarized the problem well:

I think “any work at all” is great advice for teens from wealthy leafy suburbs who are heading to Trinity or Oberlin and who have never worked at anything save some babysitting or lifeguarding. A few hours a week of burger flipping is good for those kids and isn’t going to hurt their grades. But when you have kids who are already starting behind because of their background, who are working 30 to 40 hours a week at low-level jobs, often alongside co-workers who are not good influences (and that was very much my experience—my co-workers were doing and selling drugs on the side), for employers who could care less that they have school obligations, you have a problem. And when employers tell us after reviewing student resumes that they are surprised at their lack of technical work experience, as happened last week, then you doubly have a problem. The reality is that technical employers really don’t care about work experience as a gas station attendant. They want students with proven skills in technical areas, who have shown they can work in a technical environment. My students largely do not have that, and thus they are at a severe disadvantage in the job market.

The bottom line is that students should be seeking relevant work experience in their field, not just arbitrary jobs.

CSProfMom also expressed the inherent inequality of the current system:

My students would have a much better shot at the best jobs if they didn’t have to work 30 hours as security guards or shelf stockers. This is a subtle, or maybe even not so subtle, way that inequality is increased.

 I think that there is a very strong case to be made for making public colleges and universities tuition-free, eliminating the high-tuition, high-aid model that leaves middle-class students deep in debt and poor students spending all their time on low-paying jobs instead of studying. The Campaign for the Future of Higher Education has pointers to analyses of what it would cost to provide tuition-free higher education in the US (as California used to do and as Germany has returned to doing after a brief fling with American-style tuition), and a petition to urge politicians and public universities to move to a tuition-free model for public higher education.

 

2013 October 31

More difficulties with the new Common Application

In Difficulties with the new Common Application I talked about how homeschool parents were supposed to become “counselors” to enter the school profile, counselor letter, and transcript.  (No homeschool supplement any more, so any content that would have gone in the supplement now needs to be in those three documents or the student essay.)  The methods described in that post did allow me to become a counselor (which is a special version of a recommender, and requires that the student designate you as such for at least one college).

This week I finally finished all three documents that need to be uploaded.  I had uploaded the school profile and the counselor letter with no difficulty, even replacing one counselor letter with an updated one that fixed some minor writing problems.  But I had enormous difficult with the transcript.  It is a fairly large pdf file (250kB), because it has course descriptions for all the courses my son took, and because I created it with Pages, which uses a very inefficient representation for formatted text (as bad as Microsoft Word’s).  Common App claims to take PDF files up to 500kB, but every time I tried to upload the transcript, I got a spinning wheel icon that lasted forever, and the upload never completed.  I got the same results with both Firefox and Chrome, so the problem was not browser-specific. In one test, I left the upload running and the Common App timed out after an hour, without having uploaded the transcript.

I contacted the Common App help desk, and they seem to have gotten some of the bugs out of that part of the system (it no longer claims that they don’t respond to their e-mail).  They sent me some boilerplate text that duplicated the workaround instructions on the web site, which I had already tried, but then concluded that if all else failed, I should e-mail them the transcript and where it should go, and they would manually upload it.  I sent them the transcript last night, and by this morning they had uploaded it.  I still can’t view it with Firefox, and they still have a bad message telling me to download the PDF, without giving me a button to download with, but I can confirm that it is there with Chrome.

Bottom line:  don’t get close to deadlines on submitting anything to the Common App—the software is still so buggy that manual intervention is needed even for routine tasks, and that takes time.

My son has started requesting letters of recommendation.  He has four people he is asking: two professors he took math classes from at the university, a theater teacher he has had acting classes with for about 12 years, and a history teacher he had last year.  So far, three have responded to his e-mail request agreeing to write the letters, and he has registered them with the Common App.  One has even managed to upload her letter already.

He’s decided to try for Early Decision at Harvey Mudd.  It is his first-choice school, and having an early deadline will help him get his essays for at least one college done.  He will have to apply the University of California before hearing from Harvey Mudd, because UC has an earlier regular application deadline than any school that participates in the Common Application (the UC application forms have to be submitted in the month of November, while the standard deadline for almost all other schools is Jan 1).  The UC schools are not as high on his list as Stanford and Brown, but he is almost certain to get into some of the UCs, and they are the only “safety” schools on his list.

I just looked up the most recent common data sets on the university web sites for admission rates for male freshmen: HMC 12.7%, Stanford 6.8%, Brown 11.3%, MIT 7.2%, CMU 23.8%, UCB 17.1%, Caltech 9.0%, Olin 8.6%, UCSD 38.0%, UCSB 43.2%, … . Gender matters, since most of the tech schools admit similar numbers of males and females, but have far more male applicants. Note: the MIT figure is from 2011–12, the rest are from 2012–13, but I guess MIT is slow about updating their web site.  I was a little surprised to see that CMU is less selective than UCB, since they are roughly in the same equivalence class for computer science (both great schools for grad students, but perhaps a bit impersonal for the undergrads).

My son’s chances of getting in to a school are a little bit higher than the overall admission rates at that school, as he has good test scores (National Merit Semifinalist), an impressive transcript (I’m impressed, and I wrote the transcript!), and good letters of recommendation (I hope—the only one I’ve seen is the counselor’s letter, which I wrote).  But even with all that, his probability of getting in to each of the really selective schools probably only goes up to 20–25%.  For the less selective UCs, it probably goes up to 90%—hence our considering them safety schools.  I think he’ll get into at least one of his top six choices, if the essay writing doesn’t drive him crazy.  I think he’ll also do well at any of the schools, but that they’ll shape him in different ways.  I’m hoping that one of Harvey Mudd, Stanford, or Brown accepts him (which I estimate as having a probability of 40–50%), as I think those three are the best fits of any colleges we’ve considered.

One consequence of his choosing to try for early decision at Harvey Mudd is that I have to fill out the CSS Financial Aid forms using 2012 data and estimates for 2013. To fill out the form, you need all your financial records in order, since they want to know all the information from your tax forms and every penny of your assets. I finally got around to doing my 2012 taxes last week (even later than usual for me), but the tax forms turned out to be easier than I expected.  For the first time in decades, I was able to fill out the 1040A form instead of needing a 1040 with Schedules A, B, C, and D.  Of course, part of this was because I didn’t have any interest income, business income, or capital gains—just my salary and my wife’s salary.  I didn’t even try to compute itemized deductions this year, since they have come out almost exactly the standard deduction for the past couple of years, and I’ve not substantially upped my charitable contributions.

Based on the Harvey Mudd net price calculator and all the data I collected for the CSS form, our net price there would be about $55k/year—it’s a good thing we’ve been saving for it since the day he was born.  The other private schools would be similar, though the real net price would be higher for the East Coast schools, since the net-price calculator does not include the price of getting to and from the colleges, which would add a few thousand a year—only Stanford and UCB are close enough for public transit to be a viable option for getting to and from the college.  One thing that irks me a little bit about the way that financial aid is computed is that saving for college is penalized—for every dollar you save for college you get almost a dollar less in financial aid, so which I think is a perverse incentive for people not to save for college.

2012 August 18

Student debt

Filed under: Uncategorized — gasstationwithoutpumps @ 11:44
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My son will be a high school junior this year, so I’ve started paying closer attention to college costs. I’m not talking about the real cost of education at public schools, which has been remarkably stable, but about the share of it that parents and students are expected to pay, which has been soaring.

I’ve been saving since my son was born and have accumulated about 130% of our current household annual gross income in a 529 college savings plan—I’m hoping that will be enough for us to avoid having to take out loans, even if he spends many years in grad school as I did.  Most families do not live as far within their means as we do (not having a car helps, as does having scrimped for years to pay off the mortgage on a small house bought before the housing bubble), and most do not put such a high value on education, so few families will have saved as much of their income as we have for college expenses.  But low-cost college options are disappearing as states defund public colleges (which some see as a successful attempt kill off universities and turn them into training mills and job security for middle managers), so more families are going into debt to pay for college.

For the past 3 months I’ve been collecting articles about student debt, starting with a story from the NY Times by Andrew Martin and Andrew W. Lehren: Student Loans Weighing Down a Generation With Heavy Debt – NYTimes.com and Cost of College’s commentary on that article.  The story can be boiled down to a sentence: Student debt has gotten huge and will be a major economic problem in coming years.

Student loan debt is not just a problem for youngsters just out of college. More and more older people are still paying off student loans for themselves or their children, interfering with saving for retirement (which will affect a lot of baby boomers, as pension funds were often woefully underfunded, relying on the huge investment returns of the 1990s that have now evaporated). Some people are even having their Social Security payments reduced to pay off student debt, making retirement even more precarious.

Much has been made of student debt now having gotten larger than credit card debt. The crossover happened around the beginning of 2010, as credit-card debt dropped from its peak around the beginning of 2009 to still high, but more rational levels of 2003. The article Student Debt bubble delinquencies surge shows graphs of the linear growth of total student debt from $200 billion in 2003 to $900 billion in 2012.  It also shows increases in the dropout rate and particularly high dropout rates in the for-profit colleges, which are the main pushers of enormous student debt.  It also plots delinquencies, which have been edging upward, though still not as high as for credit cards.

The NY Fed has some very nice graphs of Household debt by type, including some that show differences in per capita debt for different states.  California stands out as having the highest per capita debt, but that is almost entirely due to the high mortgages and home equity loans in California.  Student loan debt is much higher in states that defunded public universities sooner (like Michigan and Pennsylvania).  Auto loan and credit card debts are more uniform across states (except Texas, where car loans per capita are double elsewhere, being even bigger than student loans). Collateral-backed debt (mortgages, home equity loans, and automobile loans) are still vast majority of consumer debt in the US, but student loan debt has been growing from a negligible amount to more important than credit card debt.

The Consumer Financial Protection Bureau issued a 132-page report on private student loans on 2012 July 20, though the private student loan bubble seems to have already collapsed along with the subprime mortgage market (both were fueled by the same securitization of low-quality debt). The market was $5 billion in 2001, $20 billion in 2008, $6 billion in 2011—that refers to loan origination, though, and most of the debt has been accumulating.  The private student loan market has been particularly lucrative for the for-profit colleges, but private student loans make up less then 15% of outstanding student debt, which is dominated by Federal student loans. One interesting observation is that many students taking out private student loans had not exhausted the Federal loans (particularly unsubsidized Stafford loans) available to them, despite the generally better terms of the Federal loans.  The report attributes this in part to marketing by the lenders that blurred the distinction between Federal and private loans, despite some major differences (like fixed interest rates for Federal loans but adjustable rates for most private loans—or fixed rates that are much higher than the rates for Federal loans).  Fixed rates for private student loans varied from 3.4% to 14% and variable rates from 3% to 19%, while Federal Stafford loans had a fixed 3.4% rate for subsidized and 6.8% for unsubsidized loans.  For the past couple of years, the unusually low interest rate environment has made the average adjustable rate loan slightly cheaper than the Stafford unsubsidized loan, though looking over a longer time period, only the most creditworthy borrowers could have gotten an adjustable rate that was better than the fixed Federal rate.  I’ve not read the entire report, but it seems to be implying that the private student loan market is predatory and needs some consumer-protection regulation, particularly for the vulnerable students at for-profit colleges (who I would argue have already been selected for extreme gullibility by the fact that they registered at a for-profit college).  The for-profit colleges are a growing part of college enrollment, though, as public colleges get slashed by legislators (thanks in part to lobbyists for for-profit colleges) and larger fractions of college-age students enroll in college.

The Chronicle of Higher Education summarized the report and subsequent Congressional hearings as calling for making the private student loan market more consumer friendly.  Undoubtedly a good idea, but kind of closing the barn door after the horses have been stolen.

In order to get grant aid or student loans (often misleading called “financial aid” though the loans more often hurt the students than help them, by encouraging them to pay more for college than they can afford), students’ families usually need to fill out the Free Application for Federal Student Aid form.  All students going to college are advised to fill out this form, unless their families are multi-millionaires (Mitt Romney probably wouldn’t fill out the form, since it requires disclosing information from income tax returns).  Even if students aren’t eligible for federal aid, many colleges use “Expected Family Contribution” computed from FAFSA data to figure out how much other aid to give—even so-called “merit aid” is usually based in part on whether the college thinks that the student can afford to attend.  About 80% of families with dependent undergrad students fill out the FAFSA (and probably 95% or more should do so). Different high schools have very different fractions of their students completing FAFSA forms, either from differences in fraction of students going on to college or differences in the quality of college guidance at the high schools.  The US Department of Education provides summary information about FAFSA completion by high school—you can look up the high school your student attends, or do whatever computations you can convince spreadsheet programs to do, since the data is released as spreadsheets.

Too many parents, though, are urging their kids to “think big” and are not paying enough attention to the real price. One approach to making college financial aid less confusing (and students less likely to fall victim to predatory lenders) is to simplify and standardize the statements colleges make about their prices.  The Obama administration has proposed a standardized “shopping sheet” that most colleges will probably use (since they have to for students with military benefits).  These may make college financing a little less confusing, though the high-tuition/high-aid model being pushed for the past decade or two and rapidly rising tuition rates have made it almost impossible for a parent to know how much a student’s education is going to cost at any given school.

The Cost of College blog post The twin problems of rising debt and falling wages for college graduates discusses the further problem that students with large debts are not finding jobs good enough to pay off the debt.  The problem is no limited to those students bilked by for-profit colleges into borrowing huge amounts for low-quality education in useless “business” or “communications” programs—even students with high-quality degrees in STEM (Science, Technology, Engineering, and Math) fields from good universities have difficulty.

The problem of finding jobs for STEM students has been discussed in various forums read by scientists: Helping students turn degrees into jobs — ScienceMag and The Commission on Pathways through Graduate School and into Careers. A big part of the problem is that industry stopped hiring (indeed laid off) many scientists, and the pipeline for production of PhDs and postdocs is set to produce many more scientists than the remaining job market can absorb.  This is particularly a problem in biology, as NIH has favored funding postdocs and temporary soft-money research positions for decades, destabilizing academic and research employment for biologists and creating a huge cadre of trained biologists with no permanent positions for them to be employed in.  (The pharmaceutical and biotech industry has not helped by rapidly reducing their investment in research and development.)

One bright spot is that my son is thinking of majoring in computer science and their graduates are still in demand both in industry and academia, though computer science seems to go through roller coaster rides in popularity, with more extreme fluctuations than almost any other field.  If we are near a peak in popularity now, we’ll probably be at a trough when my son get out of grad school.  He’s doing it for the intellectual interest, not the job market, though, so that is not a concern for him.  Also,  I suspect he’ll be among the top 1% of CS students, so I’m not too worried about his employment opportunities even if the job market is down.

2012 May 31

Merit scholarships

Filed under: Uncategorized — gasstationwithoutpumps @ 10:09
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My son is just finishing his sophomore year of high school, so I’m spending some of my time thinking about getting him into college.  The two main concerns at this point are finding a college that is a good fit for him and paying for it.  We’ve been saving for college since he was born, and he is an only child, so we’re in better shape financially than most.  Still, we had been counting on the public universities as a reasonably priced option, and that has been getting gradually less realistic as the state support for higher education collapses around the country. Because our savings mean that we are not likely to get much need-based aid (except at very expensive schools), we’ve been hoping that he could get some merit-based aid, which is gradually coming back into favor after a few decades of schools only providing need-based aid and athletic scholarships.

One blog that I’ve been reading recently is Cost of College, which collects news items about college finances and discusses them.  Sometimes the author (Grace) is a little too easily swayed by propaganda pieces (like the misleading statistics in ‘changes in tuition were not driven by changes in state appropriations’), but she often finds interesting news items and web pages.

One item she pointed to was a CBS news article from August 2011 about merit scholarships: University Reveals the Secrets of Winning Merit Scholarships, a report by Lynn O’Shaughnessy on analysis by the University of Rochester’s dean of undergraduate admissions and financial aid of the merit aid given to the incoming class in Fall 2011.  This was not a policy statement or guidelines, but a post hoc analysis of what differences various factors made in the final award amounts.  Following journalistic tradition, Ms. O’Shaughnessy quoted her source as if she had done an interview, but did not point to the real source document that had more information.  It appears to have been from a blog post by Dean Jonathan Burdick: “What kind of scholarship can I get?” posted 1 June 2011.

There were a few surprises, like that having serious conversations with the admissions and financial aid counselors were worth about $3000 in financial aid, but each A on a report card was worth only $62 and each 10 points on total SAT was worth about $115, for a max of about $4100.   Note that the recommended pre-admissions interview was only worth about $250—so the $3000 comes from going well beyond the normal level of discussion. It seems that negotiation skills are as important as academic ability in getting merit aid.

Interestingly, challenging courses were more valuable than high grades (though this might be because only those students with high grades were considered for admission—if everyone has nearly all As, the small differences in grades might not have much predictive value for amount of merit aid).

Letters of recommendation were important (having excellent letters added $1800).  Timeliness in completing the application was worth $400.  Filling out both FAFSA and CSS/Financial Aid Profile was worth $2500 (it is not clear from the CBS reporting whether this was an average of all recipients or a regression coefficient, but the original blog post made it clear that there was $2500 more merit aid for those filling out the forms).  The FAFSA form is free, but the CSS/Financial Aid Profile costs $25 plus $16/college (though some colleges provide a “fee payment code” to cover the $16 reporting fee).  Still, if filling out the form ups the merit-based aid by $800 as Dean Burdick reports, it would be worthwhile (unless it also resulted in decreases in need-based aid).

Of course, Rochester is a high-price institution with a sticker price of $54k, so their typical merit aid of $10k–$12k still leaves the price at a high $42k–$44k.  It is not clear whether other universities have merit aid policies that favor the same students that Rochester favors, and lower-priced public universities generally have little merit-based aid.  I suspect that we should be planning on a minimum of $30k per year, after need-based and merit-based aid, and possibly as high as $45k.  So we’d need savings of $120k–$180k to avoid taking out loans. It seems that a bachelor’s degree now costs the student about a year or two of  faculty salary—it makes me wonder at what point it will become cheaper and more effective to cut out the university administration and hire top-notch tutors directly.

What is clear is that reference letters and direct contact with the admissions and financial aid officers are worth more than I would have expected, and grades worth less than I thought.  It may be worthwhile for my son to cultivate some adult contacts who could write him good recommendation letters (his theater teachers, science fair mentors, …).

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