Tuesday, December 17, 2013

A story to watch

As many of you know, the Benster is kicking the tires of colleges right now. He might have a few less tires to kick if certain trends continue:
The softening demand for four-year degrees is prompting schools to rein in tuition increases while increasing scholarships. Those moves are cutting into net tuition revenue—the amount of money a university collects from tuition, minus school aid.

For 44% of public and 42% of private universities included in the survey, net tuition revenue is projected to grow less than the nation's roughly 2% inflation rate this fiscal year, which for most schools ends in June. Net tuition revenue will fall for 28% of public and 19% of private schools.
I've noticed that colleges seem a little more desperate to get the attention of students these days. There's been talk about a higher education bubble for a very long time now and it may be arriving. Based on what we've seen on college visits, it rings true. While that is good news for the Benster -- he'll probably get a better deal than he would have four years ago -- you could see a number of schools get pulled under. Back to the story:
This is the fifth year private schools have endured stagnant net revenue, and the impact has been compounding, as faculty wages are frozen and capital improvements and maintenance are put on hold, said Karen Kedem, the author of the Moody's report that accompanied the survey. The drop is just now hitting public universities, amid falling state aid and research dollars. Public schools are significantly more reliant on tuition revenue than they were a decade ago.

Last year, the same survey found 18% of private schools and 15% of public ones projected a decline in net tuition revenue.

"It's concerning because colleges and universities are mostly dependent on tuition to raise revenue," Ms. Kedem said. "If they're not able to invest in programs, personnel and facilities over time, their ability to attract students, faculty and donors will deteriorate."
And paying the debt service on all the fancy new buildings that so many colleges now have? That could be an issue, too. We're studying it closely, because the last thing you want is to have a degree from Block E University.


Brian said...

For the self-motivated student, it is hard to beat the value of a good state university (especially if you are paying in state tuition.) One of the classes my wife teaches at UNC has 300 students in it, but I would say the 20-30 that take the iniative to speak up in class, ask questions outside of class, and show up for office hours effectively get the private school experience at public school prices (while the majority of their classmates wheedle away class time on Facebook.)

Of course, a private school with a good scholarship is an even better deal...

Either way, Benster (and you) shouldn't worry *too* much (maybe a little) about the macro trends... There may be a bit of a bubble, but it won't burst overnight (far too many institutions rely on the status quo of higher ed, and employers aren't going to just start hiring people without degrees all at once.)

Focus on getting the most value out of the next few years...because they go *very* fast.

And good luck!

R.A. Crankbait said...

My daughter is six credits shy of her BA from an accredited university, and will have these under her belt (or cap and gown) early in 2014. She wil turn 20 shortly after receiving her diploma. Total cost to my wife and I: just under $14,000 for the whole thing (plus an extra $300 for the diploma itself).

We used College Plus's tutoring with the CLEP program, the Minnesota PSEO program (the only educational return we experienced on our tax dollars)and on-line classes from her university and others (her Shakespeare class, for example, is coming from BYU). Despite her "remote" status, she had regular and direct email contact with her professors and participated in on-line discussion forums with her "classmates", plus regular calls with her College Plus coach. She got a perfect score on her 15,000 word capstone (Bachelor's equivalent of a dissertation or thesis). About the only part of the college experience she missed out on is puking her guts out behind a frat house.

As with many other things in our evolving economy, the "bricks and mortarboard" approach is not the necessity it once was. Quality options are available and will continue to grow.(In the future her alma mater will likely ask for contributions to upgrade their servers rather than for a new campus building.)

Oh, and she already has a job offer, should she accept it. It's a research and compliance job that pays only $15/hour, but will help fund her next adventure: going to Prague to teach English as a second language.

Anonymous said...

Costs of Higher Education and Medical Costs have consistently been able to rise above the cost of inflation without much brush back. The world is changing for both fiefdoms.

Many joke about the E Universities, but they have the potential ability to buy out all of the best professor's and beam them to sites throughout the country giving everyone access to the best and brightest.

The brick and mortar university with Union Paid Non Teaching Personnel is already under attack, and when one of these University of Phoenix type places figures things out, the arrogant self aggrandizing intellectual elite and all of their cronies will be left in their tracks. My prediction is that this will take 5 to 10 years tops to pan out, unless of course the government steps in to stifle competition.

R.A. Crankbait said...

True, Anon. Here's a picture of my daughter walking around the "self-aggrandizing, intellectual elite and their cronies."


Mr. D said...

Just to clarify something -- "Block E University" isn't meant as a shot at online universities, which are a separate consideration.

For those of you who aren't Minneapolis-area residents, "Block E" is city block in downtown Minneapolis that the city essentially razed and turned over to developers, who built a wildly unsuccessful project that failed spectacularly over the past decade. From what I've seen, a lot of "brick and mortarboard" colleges have been building somewhat lavish facilities that might be like Block E someday -- a well-appointed ghost town.

R.A. Crankbait said...

True. My daughter's colleges all have bricks and mortar. You can visit them, sit on the quadrangle and get ivy stains on your pants. She went to a community college for some of her "hands on" classes such as French, creative writing, photography and drawing. The on-line courses are from colleges that recognize the necessity for a college education, and also see the opportunity to meet a growing need. As Brian pointed out, employers aren't going to stop asking for a degree.

At the same time, the value proposition is monstrously skewed. It's not a little "bubble", and it's killing the liberal arts and non-professional degrees. Is a BA still valuable? Yes. Is it practical if it costs $100k? Probably not.

Back in the day I went to the local extension campus to get my basic credits, tested out of 30 hours of credit via CLEP, and then moved to the main campus to get my degree from one of the top 3 Journalism schools in the nation (discovering in the process I wanted nothing to do with making my living in journalism). To do that I took out two student loans of $1500 each, and the second one was mainly so I could spend a semester in England before graduation. Today those loans wouldn't cover a year's worth of books.

I, like many others, now make a living doing things I never studied in college, but the process was useful and the experience valuable to my future nonetheless. Markets, like life, always find a way (thank you, Dr. Malcolm). The clever universities are finding a way to fulfill and need, and the public is finding their way to these.