Tuesday, September 10, 2013

Why Does College Cost So Much in the USA?

John C. Goodman

We spend about twice as much as other developed countries as a fraction of national output. Yet our results are mediocre. Public and private spending is growing much faster than our income ? putting us on a course that is clearly unsustainable. It appears we are buying quantity instead of value. Outcomes vary wildly from state to state. And programs that target the poor seem to be backfiring instead.

I could easily be talking about health care. Instead, I'm speaking about higher education ? making some of the same points that President Obama made the other day. Unfortunately, both fields have the same problem. The entity paying for the service all too often tends to be different from the person who is supposed to be benefiting.

Spending on higher education as a percent of GDP in the United States is about twice the OECD average (3.1% versus 1.5%). Yet our results are far from the top:

The U.S. once led the world in college graduates. As an example of this, Americans age 55-to-64 still lead their peers in other nations in the portion with college degrees (41 percent). But this number has flat-lined for Americans. In 2008, the same percentage of Americans age 25-to-34 and age 55-to-64 were college graduates.

Meanwhile, other nations have caught up, and some have pulled ahead. Among this younger age group, 25- to 34-year-olds, all of the following nations now have a larger percent of college graduates than the U.S.: Australia, Belgium, Canada, Denmark, France, Ireland, Israel, Japan, South Korea, Luxembourg, New Zealand, Norway, Sweden and the United Kingdom.

Our mediocre ranking is not for lack of funds. According to Richard Vedder in the Wall Street Journal on Saturday, the explosion in college costs began about the same time as the cost explosion in health care ? with the Higher Education Act of 1965:

In 1964, federal student aid was a mere $231 million. By 1981, the feds were spending $7 billion on loans alone, an amount that doubled during the 1980s and nearly tripled in each of the following two decades, and is about $105 billion today. Taxpayers now stand behind nearly $1 trillion in student loans.

And the trend is ominous. According to President Obama, over the last three decades, fees at public universities have risen 250%, compared with a 16% rise in average family incomes.

So where is all the money going? Again from Vedder:

* Princeton [University] recently built a resplendent $136 million student residence with leaded glass windows and a cavernous oak dining hall (paid for in part with a $30 million tax-deductible donation by Hewlett-Packard CEO Meg Whitman). The dorm's cost approaches $300,000 per bed.

* Harvard's $31 billion endowment, financed by tax-deductible donations, may be America's largest tax shelter.

* The University of California system employs 2,358 administrative staff in the president's office alone.

* Since 2000, New York University has provided $90 million in loans, many of them zero-interest and forgivable, to administrators and faculty to buy houses and summer homes on Fire Island and the Hamptons.

* Former Ohio State President Gordon Gee (who resigned in June after making defamatory remarks about Catholics) earned nearly $2 million in compensation last year while living in a 9,630 square-foot Tudor mansion on a 1.3-acre estate. This Columbus Camelot includes $673,000 in art decor and a $532 shower curtain in a guest bathroom. Ohio State also paid roughly $23,000 per month for Mr. Gee's soirees and half a million for him to travel the country on a private jet.

So what is all this spending doing for the students? As President Obama pointed out, the average borrower now graduates with more than $26,000 of debt, loan default rates are rising and only about half of those who start college graduate within six years. What about low-income students? We seem to be going backwards: only about 7% of recent college graduates come from the bottom-income quartile, compared with 12% in 1970 when federal aid was scarce.

Reflecting his unquenchable desire to tell everybody what to do, President Obama's solution to all of this is top down all the way. He has already decided law school should be two years instead of three. You can think of his basic approach as pay-for-performance. It didn't work in health care, but what the hell? Why waste all the money we've invested in the idea without first trying it out in a few other fields.

My proposal is similar to what I've recommended for health care: a fixed sum voucher. Give students a bundle of money and let the colleges compete to see what they can provide for that sum. And give all the money to the students. The universities' income will depend exclusively on how well they compete. I would also get rid of all the tax breaks for donors ? but as part of overall tax reform. The money we would save by eliminating those tax breaks is a potential new source of funds for the student voucher.

I would also insist on some pretty strict standards for the voucher. It appears that we are sending too many people to college these days. (There are 115,520 janitors in the United States with bachelor's degrees?)

As for the pricing of the voucher, I would look carefully at fees charged for high quality, online courses. We certainly want the students to be able to afford those. Maybe we don't have to spend much more, however. And with technological improvements, the value of the voucher may not need to increase over time.


2,000 British schools are coasting, says watchdog as it cracks down on educational mediocrity

Thousands of coasting schools across the country have fallen foul of a tougher inspection regime, figures out today show.  In a crackdown on mediocrity, the schools watchdog Ofsted is ordering them to improve.

The move follows the introduction of hard-hitting inspections to rout out poor performance.

In a major speech today, Ofsted’s chief inspector, Sir Michael Wilshaw, will praise schools that strive to raise standards.  But he will warn that those only doing the minimum to get by will have to raise their game or face severe sanctions.

Since September 2012, all schools have been required to achieve at least a ‘good’ rating.

Before then, schools were rated as outstanding, good, satisfactory or inadequate. However, the satisfactory rating was scrapped and replaced by ‘requires improvement’ to highlight continuing weaknesses.

Schools are now rated on the four-point scale of outstanding, good, requires improvement and inadequate.

Ofsted figures released today will reveal that more than 7,000 state schools in England were inspected between September 1, 2012, and June 30 this year. Of these, almost a third – around 2,000 – fall into the ‘requires improvement’ category.

They will be inspected more regularly, with Ofsted monitoring progress and checking action plans, and will be subject to a full re-inspection within two years.

Schools judged to require improvement at three consecutive inspections are likely to be placed in special measures, which means they face the sacking of the head and other staff, the replacement of the governors and even the closure of the school.

Schools judged ‘satisfactory’ before September last year did not automatically fall into the ‘requires improvement’ category, but they are expected to improve before their next inspection. The changed ratings also mean that to be judged ‘outstanding’, a school must have outstanding teaching.

In addition, they face inspections at short notice, with the head only being notified at lunchtime the day before.

Speaking in Manchester, Sir Michael will insist that the overhaul is leading to improved standards across the country, with more schools moving into the ‘good’ category after rising to the challenge.

The former head teacher will be addressing an audience of outstanding head teachers and urging them to share their expertise.  He is expected to reiterate his view that the new inspection regime is having a ‘galvanising effect’ on head teachers and making them prioritise improvements.

Earlier this year, he said: ‘Heads and governing boards have a much greater focus on tackling the central issues of school improvement.’

Professor Alan Smithers, director of the Centre for Education and Employment Research, said yesterday: ‘Prior to the new category, we’d actually been fooling ourselves about how well our schools were doing.

‘We were marking them as satisfactory whereas this new category shows a lot of them weren’t satisfactory at all but needing improvement. Ofsted has raised the bar, so – rightly – it’s expecting more of schools. It’s giving us a clearer picture of how well schools are doing.  ‘It’s bringing things which need to be addressed to our attention.’

Chris McGovern, a former head teacher and chairman of the Campaign for Real Education, added: ‘It’s right there should be a more rigorous inspection as we obviously want the best for the children.  ‘For too long, schools have been prepared to accept a satisfactory grading as a green light to coast.’

Ofsted has already introduced a tougher framework to stop weak head teachers bumping up their overall ratings by concentrating on areas such as pupil wellbeing, spiritual development and community cohesion. Since last January, schools have been judged on four key areas – teaching, pupil results, behaviour and leadership.


British Higher education is in an expensive muddle with too many useless degrees

By businessman Roger Bootle

I have found myself reflecting on higher education. This isn't just idle speculation. Education is an important part of modern economies and has a major bearing on how they perform. This is an area in which Britain both excels and does appallingly badly – in different parts, of course.

I realise that what I have to say may tread on a few toes, because I am no professional expert in the field. Still, I do have some basis for comment. Many moons ago, I taught economics at various levels. I now consume large amounts of the output of the educational establishment, in the shape of applicants for jobs at my company. Above all, I am the parent of teenage children and, like so many other parents, am anxious about their prospects.

I think there is too much higher education. Roughly 50pc of youngsters now go to university to get a degree. In my day, the proportion was more like 5pc. (The policemen are getting younger too.) Now doubtless 5pc was too low but I am pretty sure that 50pc is too high.

Things are as they are primarily because education is a part of society where market forces have played little role. Now, regular readers will know that I am not a free market fundamentalist: I recognise market failure and I believe in some forms of government intervention. But when a whole segment of economic activity is scarcely touched by market forces then all sorts of peculiar things happen.

Thousands upon thousands of young Britons have been going to universities to get worthless degrees, which they have somehow thought would help them to progress in their careers. But many have been sold a pup or, rather, until recently anyway, they have been given one.

Now don't get me wrong. I am not an educational Luddite. I was very fortunate to be the beneficiary of an extremely good grammar school education which took me on to two Oxford degrees, for which neither I nor my parents paid a penny.

I am immensely grateful and I am appalled by the financial burdens that so many youngsters are saddled with today. But, that said, I approve of the way that finally some sort of market principles are making their way into the educational world and that youngsters and their parents are beginning to ask themselves whether it is actually worth going to university if this is what it costs.

For many students the rewards are paltry – or even non-existent. You regularly hear about the so-called graduate premium, that is to say the extra earnings that someone can command if they have a degree. This is often of questionable relevance in many thousands of marginal cases.

The average premium may be so many thousands of pounds per annum, including all the super-bright graduates, but of what relevance is this to our nice but dim Jason who is considering a degree in Beckham Studies at the University of Boothill?

Although having a university degree now confers much less status than it did, still so many of the old attitudes linger on. Parents are proud that little Johnny is now "a graduate", in the way that they never were. So Johnny is proud and, of course, the educational factories that pour out little graduate Johnnies are proud to be producing them.

Even so, we have reached the point where a lot of parents and their children have realised that the worth of many degrees is low but they fear that without one, umpteen activities are blocked because they admit only graduate level entries. And they are right to be worried. But these restrictions need to be radically relaxed.

The truth of the matter is that there are all sorts of things in life for which a higher academic training is extremely useful – and some for which it is positively useless or even disadvantageous. On the whole, academic studies do not teach you much about how to get on with work colleagues, to be decisive, to value timeliness, to realise what to prioritise and, of course, they do not teach energy.

As part of my job, I see umpteen CVs and I interview many young people. A lot of them suffer from what I call "qualificationitis", that is to say they study for one academic qualification after another without ever seeming to practice whatever it is that they have become qualified for.

Frequently, when they come for interview with me, they ask if there is scope at Capital Economics for them to acquire another qualification. A qualification for what I wonder?

"What is the learning method at Capital Economics?" they ask. The reply I give them, I am sure, frequently appals.

"Essentially, you are apprenticed to a master of their trade and you sit by him or her being given small tasks and absorbing what he or she does. As you become more proficient you are given bigger tasks under less supervision. Eventually you get to do stuff under essentially no supervision and at some later point you are given someone else to supervise."

Getting education right really matters. Michael Gove has made some real impact with secondary education and there has been an advance too in higher education.

The system of charging students a maximum of £9,000 per annum may not be perfect but the important thing is to get some sense of market value into the process. Not because education is all about money. It isn't, and it ought not to be.

There should be plenty of scope for some people to study ancient Egypt even though this will bring them no pecuniary reward. Equally, as the pace of technological change is incessant, we need people who have the ability to be able to acquire new skills as things change. This may argue for more general and less specific skill-focused education but does not excuse the disastrous and expensive muddle we have got into about higher education.

Too many people study too many useless degrees and too many resources are taken up in the teaching of them. We need to recognise that there are many worthwhile things that a youngster can work at which do not require a degree to be able to undertake them successfully. There is much more to life and learning than getting a degree.


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