student debt bubble

The Affordable, Effective University: Indiana and Mitch Daniels
University of Indiana - logo

University of Indiana – logo

Reason‘s Robby Soave writes about Mitch Daniel’s efforts to reduce administrative bloat at the University of Indiana:

The bottom line is this: Universities can’t have it both ways. They can’t provide an affordable education to middle class and low-income families while also hiring a bajillion more residential advisors, vice presidents of sustainability, diversity coordinators, and other paper pushers who never set foot near a classroom.

Many Democratic politicians who claim to sympathize with the suffering students, such as President Obama and Sen. Elizabeth Warren, believe the best way keep college affordable is to loan students a bunch of money on the taxpayer’s dime and then forgive their debts—so long as they find their way into government service. But that doesn’t actually keep costs down; it merely tricks students into thinking they can manage.

The best method for preventing tuition increases is actually much simpler: University presidents and regents need to stop raising tuition to cover non-educational nonsense. Kudos to Daniels for understanding that, daunting though the challenge may be.

More on education and child development :

Student Loan Debt: Problems in Divorce
Early Child Development: The High Cost of Abuse and Neglect
Child Welfare Ideas: Every Child Gets a Government Guardian!
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
Free Range Kids vs Paranoid Child Welfare Authorities
“Crying It Out” – Parental Malpractice!
Brazilian For-Profit Universities Bring Quality With Quantity
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
“Attachment Parenting” – Good Idea Taken Too Far?
Real Self-Esteem: Trophies for Everyone?
Public Schools in Poor Districts: For Control Not Education
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Steven Pinker on Harvard and Meritocracy
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities

Brazilian For-Profit Universities Bring Quality With Quantity

Bloated Administration, Starved Teachers

Bloated Administration, Starved Teachers

In the United States, for-profit colleges and universities have a bad reputation, since many of them became corrupted by the easy money of government backed student loans and ended up marketing dreams of glamourous careers to the less sophisticated, who often instead became dropouts with big debts.

The future of higher education will see many less prestigious, smaller institutions shut down. Only the prestigious A schools can survive with only minor changes, while the rest will have to modify their cost structures, eliminating administrative overhead and cutting costs using the reverse model (“flipping the classroom”: lectures and online study at home, supplemented by face-to-face counseling and teaching sessions.) People of all ages need a practical way to learn and get new educational credentials as job opportunities ebb and flow, and this new model, minus the expensive campus life and sports programs, fills that need.

Two soon-to-merge for-profit universities in Brazil are leading the way, in a country where public universities are “free” but unavailable to most. The Economist has a good writeup on their successful model:

IN THE United States worries about private, for-profit universities’ high cost and dubious quality abound. A congressional inquiry in 2012 acknowledged that the sector, which trebled enrolment during the previous decade, gave students who were older, poorer and often less well-prepared for further study than those at public or non-profit institutions their best chance of a degree. But it concluded that soaring fees and drop-out rates meant that a majority left with nothing more than extra debt.

Elsewhere in the Americas, though, the story is far more positive. After equally hectic expansion, Brazil’s for-profit institutions have three-quarters of the country’s higher-education market—and fees are low and quality is rising fast. And since a degree boosts wages by a bigger multiple in Brazil than in any other country tracked by the OECD, a club of mostly rich countries, graduates can make back their tuition fees in just a few years.

…

“Quality [in education] is easy,” says Rodrigo Galindo, Kroton’s energetic young boss. “And so is quantity. What’s difficult is combining the two.” The trick, he explains, is to abandon “handcrafted” teaching methods for scalable ones: online course materials and tutors; star teachers’ lessons broadcast by satellite; tightly specified franchise agreements with hundreds of local teaching centres staffed by moderators. The company has invested heavily in “adaptive” learning materials—computerised courses that react to users’ progress by offering further explanation and examples where answers suggest they are struggling, and moving on swiftly where they are not.

Unopar, a university in Londrina, a foggy city in the south-eastern state of Paraná, was bought by Kroton in 2011 and is one of its best-known brands. A decade ago it became the first institution in Brazil to get federal accreditation for the distance-training of teachers. It soon realised that other degrees could be offered with the same combination of high-quality online materials and weekly attendance at seminars at a local centre. It is now Brazil’s biggest provider of distance higher-education, with 150,000 students registered at nearly 500 centres nationwide. The most remote, with 300 students, is in Oriximiná in the Amazonian state of Pará, accessible only by light plane or a 12-hour boat ride from Manaus, the region’s main city.

“These courses aren’t easy,” says Elisa Assis, Unopar’s director for distance education. “What they are is flexible.” Web-only courses often have high drop-out rates, she explains. One reason for the weekly get-togethers, during which students watch a class broadcast from headquarters followed by a moderated discussion, is to keep students engaged and on track. Their questions give the university instant feedback on how each lesson went, allowing it to improve the course.

Anhanguera is better known for on-campus tuition, generally in the evenings to fit around students’ work. At its campus in Vila Mariana, a middle-class district of São Paulo, it has a media centre with a dozen studios, from which hour-long lessons are broadcast to other university centres across Brazil. Teachers who could work well on screen are talent-spotted and given media training. “It’s like running a pay-TV network with 39 channels,” says Luciano Possani, the company’s chief information officer, who used to work for the Brazilian arm of America’s DirecTV.

Huge purchasing power means big discounts for learning materials. Anhanguera negotiates with publishers to provide textbooks for as little as a fifth of the standard price. Its customers, like Kroton’s, are mostly first-time buyers: from working-class families with parents who never finished, or in some cases even started, school. Monthly fees are around 400 reais for courses taught on campus; 250-300 reais for those taught at a distance.

Public institutions are constitutionally barred from charging fees; they are therefore harder to get into and largely colonised by the well-off. But in the future even those who currently turn up their noses at the private sector may turn to it, argues Mr Possani. Lecturers at Brazil’s public universities are often on strike and courses rarely have much to do with the world of work. With no need to serve the customer, quality is hit-and-miss. “Traditional lectures can be good or bad, depending on the lecturer, or the day,” he says. “It’s like the difference between live television and film.”

…

Most of those studying for a degree in Brazil take a standard exam set by the federal education ministry, which publishes the average grade for each course. Good evaluations feature prominently in marketing materials. And, crucially, students are only eligible for subsidised government loans to study on courses that come out well. That gives firms a big incentive not to admit those who are likely to struggle. A separate government scheme offers tax breaks for institutions that admit around a tenth of their students on scholarships. Since only school-leavers with good grades are eligible, that pushes standards up too.

Neither Kroton nor Anhanguera is thinking about expanding abroad, at least for now. That all their teaching materials are in Portuguese is one reason; another is that the pickings at home are still so juicy. Of every 100 Brazilian children who start primary school, only 57 go on to finish secondary school—and just 14 enroll in higher education. More than 12m of those aged 25 to 34 finished secondary school but neither possess nor are studying for a higher-level qualification. With so much room left to grow, Brazil seems to have hit on for-profit education’s winning recipe.

More on education and child development :

Student Loan Debt: Problems in Divorce
Early Child Development: The High Cost of Abuse and Neglect
Child Welfare Ideas: Every Child Gets a Government Guardian!
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
Free Range Kids vs Paranoid Child Welfare Authorities
“Crying It Out” – Parental Malpractice!
The Affordable, Effective University: Indiana and Mitch Daniels
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
“Attachment Parenting” – Good Idea Taken Too Far?
Real Self-Esteem: Trophies for Everyone?
Public Schools in Poor Districts: For Control Not Education
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Steven Pinker on Harvard and Meritocracy
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities

Tuitions Inflated, Product Degraded, Student Debts Unsustainable
Bloated Administration, Starved Teachers

Bloated Administration, Starved Teachers

Explained well by analogy in this post by Omid Malekan (via ZeroHedge):

Imagine for a moment that you are the owner of a popular restaurant located on a street with many restaurants. You do your best to provide the best experience to your customers while staying ahead of the competition by keeping your prices down. You try to avoid spending too much on labor, and do as much of the work yourself as you can, often putting in long hours. Although there is a good wholesale market nearby, you drive an extra hour to another market just to get your ingredients a little cheaper.

One day a wealthy patron who is a big fan of your cooking announces a new idea. Because he wants as many people as possible to enjoy your food, he is going to pick up the tab for most of your customers. You can just go on doing what you always do, but when the check arrives for many tables, this wealthy patron will pay the tab. The next day, your waitress complains that there are too many tables and you should hire more help. What would you do?

Normally, you would try to find a way to avoid hiring another person as it would eat into what little profits you make. But now you realize there is another solution. You can just raise prices. Since most of your patrons are not paying for their meals, your place will still stay popular and you won’t have to worry about losing business to your competition. So why not hire another waitress? While you are at it, why not hire a manger so you don’t have to be there all time, and stop driving to the further market?. Whatever increase in costs you suffer you can make up for by raising prices more and more.

Now imagine all your competitors also have wealthy benefactors picking up the check for many of their customers. You can all raise prices constantly without losing any sleep – or business.

This scenario is effectively what America’s higher education financing system has turned into. There are many reasons why college tuition is rising faster than virtually anything else, from more applicants than ever to state budget cuts for public universities, but all of those factors are allowed to persist because often times the person getting the degree is not the person paying the tab – not for today anyway.

Presently over 60% of all undergraduate students receive some sort of Federal aid for their education, and the amount of money the government has shelled out for student loans is now over a trillion dollars, double what it was just 7 years ago. Like the hypothetical wealthy patron in the example above, the government doesn’t ask for much when it gives out the money – neither from the student nor the University. If our wealthy patron had said “I will pick up the tab so long as you keep your low prices” then we would have a reason to keep prices down. But by fully removing the value of what customers get from the equation, all incentives point towards inflation.

…

This is exactly what’s happening at America’s major colleges and universities. As shown by the chart below, which was put together by the American Association of University Professors, since the 1970s positions for non-faculty professionals have seen the highest growth for jobs at American Universities.

Number College Employees

Number College Employees

Meanwhile, University Presidents and other executives have been giving themselves big raises while leaving the professors and their assistants in the dust.

College Salaries

College Salaries

The peculiar places tuition money has been flowing to is further discussed in this fascinating paper by the Delta Cost Project.

We could debate all we want about how much a University should spend on professors, secretaries, sports facilities or free unlimited Nutella, but that would be a waste of our time, just as it would be for the patrons of a restaurant to debate how many waitresses there should be.

Imagine if suddenly our wealthy restaurant benefactor declares he’s going to stop paying for peoples meals. Given our now sky-high prices, our tables would be empty and given all these new expenses, like more waitresses and shopping at the closer market, we’d go out of business. To survive, we’d have no choice but to get leaner and enter the murky waters of business uncertainty, where every decision is complicated and viewed through the lens of “what can I get away with?”

As long as the majority of the cost of college education is not born directly by students but rather by Government loans and grants, our institutions of higher learning will not be forced to adapt and find innovative ways of delivering quality education to more students at a decent price. They will go on keeping supply low, tuition higher and expenses growing. If we care about our children and want them to stop taking on more and more debt to get a degree for a tougher and tougher job market we need to break the current cycle.

The kindest thing our government might do for our kids is to stop throwing money at inefficient Universities in their name, or at least demanding more from those institution in return for that money. Imagine for a second if college loans were given to the school and not the student, and tied to metrics of success, like whether the student graduates and how good a job they land afterwords. Much like our restaurant, in such a world the school’s focus would then shift to keeping prices down while offering good value.

Students in recent years have been shafted by this easy-financing debt scheme, and student loan debt is now a staggering $1 Trillion in the US, mostly held by Uncle Sam, and the debt per student debtor has risen to $27,000 on average. Students who have graduated into careers in high-paid fields like medicine and business have manageable if burdensome debt, but millions of people were induced by financing to start college and fail, or to get degrees in fields with low salaries and minimal demand. College administrators have expanded their empires and salaries while the student debt burden prevents many former students from buying homes and starting families. Currently about half of Federal student loans are 90+ days delinquent or in deferment or grace periods. Some politicians promise to make the problem worse by increasing student loans and lowering rates, meaning even more Federal subsidies will flow to bloated college budgets. None of these schemes get at the underlying problem: only stopping the subsidies will open up space for innovation to bring quality higher education to more people at lower cost.

Addendum: Reason discusses the harm easy access to loans without evaluating credit risk of the proposed program does to poor or easily-misled students, as well as the colleges that have marketed to them.

Also, read this Atlantic article on why less privileged students take so long to graduate, if they graduate at all, and how this fact makes their spending on even community colleges almost as high as a 4-year degree in the Ivy League.

Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 

More on education and child development :

Student Loan Debt: Problems in Divorce
Early Child Development: The High Cost of Abuse and Neglect
Child Welfare Ideas: Every Child Gets a Government Guardian!
Free Range Kids vs Paranoid Child Welfare Authorities
“Crying It Out” – Parental Malpractice!
Brazilian For-Profit Universities Bring Quality With Quantity
The Affordable, Effective University: Indiana and Mitch Daniels
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
“Attachment Parenting” – Good Idea Taken Too Far?
Real Self-Esteem: Trophies for Everyone?
Public Schools in Poor Districts: For Control Not Education
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Steven Pinker on Harvard and Meritocracy
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities