Friday, March 08, 2013

The dorm boom: Higher education’s fellow traveler

As universities are reportedly suffering from less revenue from state governments, anyone driving through a college campus is likely to be interrupted by construction traffic. Where I live, much of the campus of the local university has been under construction since I moved here in 2008—when Wall Street was crashing.

Hundreds of millions of dollars are being spent on new facilities nationwide, from dorms to basketball arenas. And yet funding from the State continues to fall.

Creative Destruction amid the Construction

It’s a curious time for a campus construction boom. Alternatives to a traditional college education are growing every day. Millions are signing up to take courses known as MOOCs (massive open online courses). The New York Times reports that dozens of public universities plan to offer free online courses for credit to anyone worldwide with an Internet connection.

The education model that was once strictly for polymaths is becoming mainstream. Even big universities such as Arizona State, the University of Cincinnati, and the University of Arkansas are participating in a new program called MOOC2Degree. “We’re taking the MOOC idea, but now it will be part of a degree program, not a novelty,” said Randy Best, the chairman of Academic Partnerships, a company that helps public universities move their courses online. 

The Times points out that colleges hope the new online program will attract thousands of students to provide a “new revenue stream [that] could be a lifeline for public universities hit hard by declining financial support from states.” 

The Dorm Boom

Amid the change and uncertainty, real estate developers are rushing to build student housing. Major homebuilding companies like Lennar and Toll Brothers that ramped their businesses up in the single-family housing boom have now shifted their focus to another boom: student housing.  

Ironically, these builders see student housing as a port in the storm to smooth out the ups and downs of the housing business. The Wall Street Journal’s Dawn Wotapka explains their rationale.

“During the real estate crash,” writes Wotapka, “as prices of single-family homes declined and apartment landlords reduced rent, many student-housing landlords continued to raise rent, thanks to the generosity of parents and student-loan programs.”

For instance, Kayne Anderson Real Estate Advisors, a private equity investor with 15,000 beds, earned more than 20 percent annually from 2007 to 2012, despite the downturn. 

As evidence of how hot this market is, in 2012, $3.7 billion worth of student housing projects traded hands, a near doubling from the prior year. Landmark Properties, a longtime owner of this type of product, owns units totaling 5,000 beds, but is looking to expand its portfolio by over 50 percent, with another 2,700 under construction.

Landmark’s president, J. Wesley Rogers, told The Wall Street Journal, “A lot of people think our space is hot. You see a lot of new players circling the space right now.” 

Developers believe parents will  continue to send their kids away to university no matter that tuition costs have increased 440 percent in the last 25 years, more than four times the rate of inflation.  


Each year from now until 2022, three million students will graduate from high school and will be looking to head off to college. After all, a college degree is the key to financial success.

Except it hasn’t been lately. Most college graduates cannot find a job requiring a degree. If they can find employment, it is as bartenders or baristas or the like, a phenomenon referred to as “mal-employment.”

In a research brief titled, “The Employment and Mal-Employment Situation for Recent College Graduates: An Update,” produced by the Center for Labor Markets and Policy at Drexel University, the authors note that between 2007 and 2012, there was a sizable change in the proportion of all young college graduates who worked in jobs requiring a college degree. In 2007, 54.1 percent of 20-to-24-year-olds were employed at jobs requiring a college degree. Five years later, that percentage shrank to 43.9 percent.

For 25-to-29-year-olds, the proportion of those employed in college-required jobs fell from 63.9 percent in 2007 to 56.7 percent in 2012. According to the researchers at Drexel, a large part of these declines occurred in the last two years, despite a job recovery for the overall workforce. 

Hard Realities

One of these days students and parents will figure out that college is not the bargain it once was. There is not enough gold at the end of the collegiate rainbow to pay off thousands in student loans.

As with most booms, there is plenty of debt fueling college admissions. The New York Fed reports that student loan debt has nearly tripled since 2004. Repayment isn’t always possible, however; not everyone finishes college. While more than 80 percent of students think they’ll graduate, only half that number actually do.

As it is now, according to TransUnion, “more than half of student loan accounts are in deferred status, where the repayment of the principal and interest of the loan is temporarily delayed. Deferred loans now represent 43.5 percent of all student loan balances.” 


In Austrian business cycle parlance, students and their parents are investing in the higher-order good of a college degree, believing that skills-required, higher-paying jobs await college students after they have spent four to six years honing their skill sets. However, time preferences haven't changed. The demand for consumer goods remains, and that's where the jobs are.

The boom in government bureaucrats, barristers, and bankers is over. JPMorgan Chase just announced it is getting rid of 19,000 jobs. At the end of last year, banks in the United States had 2.1 million full time employees. That’s 100,000 less than at the end of 2007. Since the end of the recession, government has shed 580,000 jobs, and James Huffman writes in the Wall Street Journal that law schools are in trouble, with applications down by half since 2004. The reason? Only about 65 percent of 2011 law graduates had law-related employment within nine months of graduation. And even those with work aren’t necessarily set: Starting pay has crashed.

All of these facts would seem to fly in the face of the logic of the student-housing industry, but developers appear undaunted. Reportedly there is a shortage of between 1.5 and 2.15 million beds. Universities lack the funds to build and are counting on the private sector.

While Freddie Mac, a large purchaser of student housing loans, is a bit cautious after purchasing $1.7 billion in loans last year, the private sector is ready to build. Kayne Anderson’s managing partner Al Rabil isn’t worried about oversupply. “In most all cases, you’re looking at a situation where development is just catching up in creating supply to keep up with demand.”     

Bricks-and-mortar higher education is a bubble searching for a pin. Now it’s not alone. Student housing is going along for the ride.


Choosing A-levels: 'A new social divide in British education'

Many government schools still encouraging pupils to study junk subjects

Universities want students with core academic A-levels. We need to give schools – particularly in the state sector – an incentive to teach them, says Chris Skidmore.

Like it or loathe it, it is undeniable that the EBacc – the measure of performance at GCSE that tracks the proportion of pupils gaining passes in core academic subjects – is slowly transforming the educational landscape.

In 1997, just under 50 per cent of pupils entered GCSEs in English, maths, two sciences, a language and either history or geography. By 2010, this figure had more than halved, with only 22 per cent of pupils sitting these subjects. Enter the EBacc, and an IPSOS-MORI survey suggests the percentage of pupils taking the full EBacc will be back up to 49 per cent as soon as 2014.

Over the same period, the percentage of pupils taking GCSEs in history will go up from 31 per cent to 41 per cent, geography from 26 per cent to 36 per cent, a language from 43 per cent to 54 per cent, and triple science from 16 to 34 per cent. It is hard to think of a more influential policy that has had such an immediate effect.

But what about A-levels? It is clear that leading universities are being increasingly explicit about which A-level courses they will look kindly on. In a booklet called Informed Choices, the Russell Group of 24 leading universities list ‘facilitating subjects’ which will keep many doors open for students. These include Maths, English Literature, the sciences, Geography, History and foreign languages.

Yet when we look at what is happening on the ground, students are sadly being failed by schools who are not properly advising students which courses will give them the best chances and the widest choices when they get to applying for higher education.

More worryingly, a new social divide in education is emerging between state and independent schools.

Take a breakdown of the numbers taking A-levels in 2011/12: 22,005 pupils studied media studies, yet just 474 of these were taken in the independent sector. It is the same story across the board: 1,881 pupils studied communication studies, 32 in independent schools; 6,206 studied film studies, 143 in independent schools; and 1044 pupils took performance studies, of which only 21 pupils in independent schools thought the qualification worth taking.

And it’s not just a binary divide between the independent sector and state schools that is alarming: out of 25,806 pupils eligible for free school meals, just 236 took further maths. 5.5 per cent of FSM pupils took history A-level, compared to 11 per cent of non-FSM pupils.

These disparities will leave many poorer pupils disappointed when it comes to applying for universities, as they will find their possible choices have been limited in a way that could have been avoided.

If we are to tackle this glaring social divide we will need to radically rethink our approach. An Advanced Baccalaureate, or ABacc, which provided a solid core in the subjects that count, while allowing for specialisation beyond that, would go a long way to dealing with the problem.

Extending knowledge in key facilitating subjects beyond GCSE level for all students would widen degree options, particularly for students from lower-income backgrounds, while at the same time improving the academic rigour of post-16 education.

The benefits of a broader post-16 curriculum are such that many schools have already embraced alternative qualifications such as the IB and Cambridge Pre-U. This has spread particularly widely in the independent sector, once again putting pupils from better off backgrounds at an advantage. It is time we closed this divide and made it available to everyone, not just the fortunate few.


Australia: Most trainee teachers fail benchmark

Fewer than one in three of school leavers starting teaching degrees this year would meet the O'Farrell government's new benchmark for teachers, part of a suite of reforms designed to lift the standard and status of teaching in NSW.

Teaching students will have to pass new literacy and numeracy exams to gain their degrees, while new teachers will be supported by mentoring and support initiatives to strengthen their skills.

Education Minister Adrian Piccoli described the plans as the "most significant reforms around quality teaching ever undertaken in Australia by any jurisdiction".

While he admitted that some of the reforms would incur "significant" cost, he did not commit new funding nor suggest any reversal of the recent $1.7 billion cut to the education budget.

High-school leavers who hoped to do a teaching degree would have to score a minimum of "Band 5", or 80 per cent, in at least three of their HSC subjects, one of which had to be English. Of this year's intake of teaching students who were high-school leavers, only 30 per cent achieved that standard.

Premier Barry O'Farrell said he did not believe the new requirements would discourage people from entering teaching.

"Quite the reverse," he said. "I think the fact that we're seeking to raise standards, to raise the status of teaching, will encourage more people to enter the profession."

Board of Studies president Tom Alegounarias said the new standards did not translate to an exact ATAR cut-off, but he said 70 was a rough estimate.

Under the proposed reforms, all teachers would also have to register and be accredited by the NSW Institute of Teachers, and those who had been out of the profession for more than five years would have to do a refresher course, which would be available by 2014.

Unions and the non-government school sector welcomed the reforms on Wednesday but stressed financial support would be crucial to their success.

"I'm confident and hopeful the government realises how resource-intensive this is," the executive director of the Association of Independent Schools of NSW, Geoff Newcombe, said.

But the universities said the stricter benchmark could lead to a teacher shortage.

"Introducing entry requirements such as this ignore the well-documented fact that input measures are very poor predictors of graduate success and teacher quality," chief executive of Universities Australia Belinda Robinson said.

The Australian Council of Deans of Education warned the moves could add "significant layers of complexity, review and costs" to initial teacher education courses.

New measures would also be put in place to remove more quickly and de-register teachers who did not meet the professional teaching standards.

Mr Piccoli said the government's response had not been prescriptive about how this would take place, as different sectors had different industrial-relations arrangements.

"Within the government sector I can say it is something of a difficult and cumbersome process for principals so there are things we need to do to make the process shorter and more predictable," he said.

Laura Robinson, a primary teacher at Croydon Public, did not rely on HSC marks to become a teacher, but studied a master of teaching as a mature-age student.

She said raising the bar for high-school graduates entering teacher education "can't be a bad thing". But, she said, it was not the solution to lifting education standards. "Funding is the answer. We need to raise the bar within schools before we focus on graduates," she said.

The year 3 teacher was in her fourth year in the job and said it was a balancing act. "You're trying to do your best but, if you've got a budget of $150 a year for your class, that doesn't really work."


No comments: