Business

July 18, 2016 By B. Baylis Leave a Comment

The Business Model of All of Higher Education Is Broken, Part III – Tuition and Fees

In this current post, I return to the discussion of the Business Model of All of Higher Education. In a previous post, The Business Model of All of Higher Education Is Broken, I introduced the five sources of revenue for Institutions of Higher Educations(IHEs): 1) Tuition and fees; 2) Fundraising, advancement and development efforts; 3) Endowment income, appreciation, interest and dividends; 4) Auxiliary enterprises; and 5) Governmental appropriations. In this post, I had originally planned to consider all of those sources of revenue in one post. However as I began to work with that idea, I found the explanations growing too large for one post. In addition, no matter how hard I cranked the revenue generating machine for each revenue source in an attempt to create additional funds, I discovered that increasing the effort in any given area did not produce a commensurate return on investment (ROI). Therefore, I decided that I needed to expend more time and coverage in this series to each source of revenue to give it the analysis I felt it deserved. Thus, I have decided that I will begin to plan to cover each of the revenue sources individually in separate posts. As I get into the ins and outs of the revenue source, I may have to add more posts. I begin this process with the source of revenue with which all students and their families are most familiar, Tuition and Fees . It is also the revenue source that the general public most clearly associates with Institutions of Higher Education (IHEs).

The revenue from tuition and fees obviously depends upon enrollment. This means that there are really only five ways to increase the useable revenue from tuition and fee. These five possibilities are:

increase the tuition and fees, thus increasing the base amount each student pays;
increase the number of students paying the tuition and fees, i.e, increase tuition-paying enrollment;
decrease the discount rate on tuition, thus decreasing the average amount of institutional financial aid given to enrolled students;
change the model of teaching and learning in order to increase the efficiency of the use of this revenue stream;
do a combination of two or more of the above at the same time.

With points 3 and 4 above, I apologize for sneaking the expenditure side of the business model into the conversation. However, much of the general public acts as if it believes that tuition and fees cover the cost of a college education. This is definitely not the case, and has not been the case since the beginning of formal American higher education in the mid-17th century. Since this rabbit trail would take us deep into the expense side of the budgets of IHEs, I will leave the exploration of this topic to another post. I will devote the remainder of this post to just addressing the issue of increasing tuition and fees. I will cover the problems of increasing the number of students, decreasing the discount rate and changing the model of teaching and learning in additional posts. I will also address the four other IHE revenue sources in additional posts.

When IHEs announce tuition increases each spring for the following fall, it is usually met with varying degrees of disdain. Students, parents, the general public, as well as federal and state governments are already enraged at the current level of tuition and fees. The data are clear. Tuition and fees have increased at rates exceeding the annual general inflation rate for years. Just at the suggestion of another increase, the reaction varies. It runs the gamut from a reluctant acceptance to a loud murmur to a campus uproar and rebellion.

The following three charts use the same data extracted from the College Board Pricing Trends, which has the most comprehensive collection of data on college pricing trends. Although the charts are based on the same data, they give us three different pictures of the history of Tuition and Fee Increases over the past 40 years. Why have I chosen to present this information in three ways? It is to try to help my readers understand that there are different ways to look at the same data and that one’s first impression may not be the only or best way to view the subject.

The first chart is a 40-year history of tuition and fee increases in “current dollars,” i.e, the average list price of tuition and fees for all colleges in a given segment weighted by full-time undergraduate enrollment. These list prices are compared against the 40-year average increase in list prices. The current dollar tuition and fees are the prices that students, their parents, and government officials will see first. These are the dollar figures against which everyone reacts. The first impression from the graph is how similar the tuition and fees were for all three segments in 1975. Based on the scale of this graph, it is almost impossible to distinguish the price of the four-year, public institutions and the two-year, public institutions. Although the private, four-year institutions were more expensive, on the scale of this graph, in 1975 they did not appear “that much more expensive.”

CHART 1: History of Tuition and Fee Increases Compared Against 40-Year Average Annual Increases

The second impression that this graph conveys to me relates to how the actual increases fall below the projected increases based upon the 40-year average annual increase. This means that the early increases were less than the average annual increases and it took quite awhile for the actual increases to catch up with the average annual increases. It appears that the sharp increases in both public and private four-year schools occurred in the period from 2000 to 2010. This would coincide with decreased support from government appropriations for financial aid.

This graph clearly gives the impression that the gap between the three segments has grown significantly. This is the feeling that students and their parents get when they start looking at colleges and the tuition prices. The fourth and fifth impressions that this graph gives me revolve around the two-year public institutions. The first of these impressions is how much more affordable this choice seems compared to the other two choices. The second impression is how close to a straight line the actual increases appear. To me, and many other commentators and critics of higher education, this raises the spectre of whether these institutions “know the secret” for holding down tuition increases.

The two primary conclusions that many will draw from this graph are: 1) the two-year, public institutions are the most affordable choice for an education; and 2) the four-year, private institutions have had uncontrollable tuition increases over the past 40 years.

The second graph, entitled Growth Factors of Tuition and Fees from 1975 to 2015 Across College Segments, Selected Academic Years, portrays the same data that the first graph did, but gives a very different slant to that data. This chart tells us how fast tuition and fees grew. Surprisingly, it says that the time to double has been relatively constant. In rough terms throughout the 40 years from 1975 to 2015, it has generally taken 15 years for tuition in any of the college segments to double.

CHART 2: 40 Years of Tuition and Fee Growth Factors

SInce the blue bars representing the public, two-year institutions increase in height the most consistently, this is another verification of the steady, almost constant rate of growth of tuition and fees for the colleges in this segment. During the first 20 years, I find it very interesting to note that the public, two-year institutions increased their tuition and fees at the fastest rate, while public, four-year institutions at the slowest rate. In the second half of the 40-year period, the growth rate of public and private four-year institutions shot up, far out stripping the two-year public institutions. Does this represent a shift in public funding priorities for higher education?

Although the growth factors were very close since the private four-year institutions started out with higher tuition and fees, doubling the higher rate increased the differential. Thus, the actual dollar spread in tuition did indeed produce growth.Two different graphs give you two different pictures.

The third graph is entitled the Five-Year Percentage Changes in Tuition and Fees Across College Segments, From 1975 to 2015. This graph plots the percentage change in tuition and fees over five-year periods from 1975 to 2015. This graph gives one a very different picture of tuition and fee increases over these 40 years. The overall trend of data points in this graph are actually decreasing. This doesn’t say that tuition and fees are decreasing. What it says is that the rate of change is slowing.

CHART 3: Five-Year Percentage Change in Tuitions and Fees, 1975 to 2015

Looking at the three different sets of points and lines joining those points, it is not surprising that the blue points representing the two-year, public institutions show the least variation. That confirms what we have seen in the other two graphs. The red points show the most variation away from a straight, decreasing line. The four-year, public institutions have been the institutions most affected by the whims of state legislatures or governors. Again, even though the rate of increase for private, four-year institutions is slowing down, don’t look for the public, four-year institutions to catch them in list price anytime in the near future.

Chart 1 hit me right between the eyes. To those who can remember, I challenge you to go back to your college days and put your tuition and fees into an appropriate year in the chart. For some of us we will have to add lines at the beginning of the chart. My experience would extend the chart another 10 years to the left. In the early sixties at the flagship university in a small state, I never paid more than $175.00 annual tuition plus $10 lab fees per science course, which usually added $20 or $30 per semester. Since computers were just coming into use, as a mathematics and physics major I had to pay a $25 per semester technology fee for the right to put my card decks in the hopper each night and come back the next morning to get the print out from the pin-fed line printer. In addition, as a commuter, I had to pay $50 per semester for a “hunting license” to try to find a parking space in an on-campus parking lot. Thus, my total annual tuition and fees bills were less than $550. My textbooks and supplies were less than $150 per semester. I lived at home, and my mother never charged me anything for room and board, because I took care of everything around the house since my father died during my freshmen year in college. Gasoline averaged about $0.30 per gallon, and I spent maybe $10.00 per week to keep my car in gas, and $25 per week for coffee and lunches. Thus, my total out-of-pocket expenses to go to college were less than $2000 per year, or $8000 for my entire undergraduate education. If you subtract the $6000 in scholarships that I won or was awarded, my B.S. degree in mathematics cost me less than $2000 out of pocket. Even in early 1960 dollars, that was entirely possible to pay for out of summer or part-time school year earnings. For my four years in graduate school, I had a fellowship that paid tuition and living expenses. I didn’t pay one nickel out of pocket for my Ph.D. I graduated in eight years of schooling, with a B.S. and a Ph.D.in mathematics, with a wife, a child, a house, two cars, money in the bank, NO DEBT, and an offer of a tenure track job! In today’s world that would be definitely an anomaly. According to CNN, for the most recent year for which data is available, the undergraduates of the class of 2013 walked off the commencement stage with an average debt of $35,200, while Ph.D. graduates “stumbled” off the platform with an average debt of $57,600. Among Ph.D.s, more than 28% had debts of more than $100,000. The average J.D. and M.D. graduating from Law School and Medical School respectively, had a debt of more than $140,000. Much has been written and debated about the debt bubble that has overtaken or is overtaking American higher education. It looks like I have created at least one more blog post on the Debt Bubble.

Why does this picture look so bleak? I believe it looks bleak because we could be on the verge of very bleak times for higher education. American higher education is heading for a perfect storm, unless it changes course or one or more components of the storm change direction. A perfect storm is the confluence of events which individually may not necessarily be dangerous, but the combination of these events creates a potentially disastrous situation. Here, too, I am taking you to the suspenseful edge, and leaving you to dangle. The perfect storm will be another post in this series on the broken business model of American Higher Education.

http://www.hamiltonproject.org/assets/legacy/images/uploads/thp_image_uploads/charts/college_cost_large.png#college%20cost%20chart%20520×520

April 11, 2016 By B. Baylis Leave a Comment

Today is April 11! This is no April Fools’ Joke. We’re Back in Business

Can you believe it? Today is Monday, April 11, 2016. Winter and the month of March are officially over. We are ten days past the traditional April Fools’ Day of April 1. So this post and the four announcements contained in it are no April Fools’ Joke. You can trust them. They are for real! Some of the announcements are not as positive as I would have liked. However, they definitely represent a positive movement that was much in doubt through most of the past year. So without further ado, let’s get right to the announcements.

This first announcement concerns my health. It is a positive announcement since we made it past March and I didn’t have any new health setbacks. In previous posts I have explained that in each March since March 2009, I have spent at least one week in a hospital with some major medical problem.

However, since last Thanksgiving, I don’t think that I have fully explained to my blog audience my current experiences. In the week before Thanksgiving, I started feeling sets of two or three, very quick 120-volt, low-amperage electric shocks in many different areas of my body. After the shocks stopped, I would then feel a burning sensation at the location of the shocks which would last from a few seconds to almost a minute. The burning sensation would then take off, traveling a nerve path to another spot in my body. The burning sensation would settle in that spot and then morph into a normal type of pain for that location. For example, I would get three shocks, followed by a burning sensation in my left shoulder blade. After a short period of time, the burning sensation would travel up through my shoulder, down my arm, past my wrist and the back of my hand, before settling in the large knuckle of my left index finger. At this point, the burning sensation would change into an arthritic pain, which would last until I could work it out by massaging my knuckle.

The electric shocks are not a new experience for me. In January 2013, I began feeling electric shocks and burning sensations like this is my left pectoral muscle. They started slowly with one or two daily. However, by mid-March, the shocks increased in frequency and intensity to such an extent that my doctors were afraid I was having a heart attack. I was rushed to the hospital. After extensive testing, it was determined that I wasn’t having heart problems. I was having a gall bladder attack. My gall bladder was completely blocked with stones and so full of infection that it was playing havoc with other parts of my body. They laparoscopically removed my gall bladder and the electric shocks immediately stopped. My neurologists suggested that the electric shocks I experienced were what is called referred pain. This suggests the pain is originating in one location, but exhibits itself elsewhere. With that history in mind, my doctors began looking for any type of problem that they could find elsewhere in my body. After many tests, they couldn’t find anything seriously wrong with me.

The pattern of six or more shocking episodes continued daily for two weeks. Then one day during the first week of December, I woke up to a new experience. After the first episode of electric shocks and the associated burning sensation traveled a nerve path to settle into its final resting place, I started feeling severe paresthesia (the sensation of numbness or pins and needles) in that limb or area of my body. When I called my GP, he asked what my blood pressure was. When I told him it was unusually high, he told me to get to the ER. Of course, it had snowed the previous evening and our car was snowed in. Thus, my wife called the local ambulance service. When the EMTs arrived my blood pressure was 210/140 with a pulse of 110, and my A-fib was making my heart do flip-flops that weren’t being controlled by my pacemaker. My whole side was also numb and tingling like pins and needles. The EMTs wrapped me and immediately loaded me into the ambulance for a ride to the ER.

I spent the next seven hours in the ER undergoing extensive testing. I had EEGs, EKGs, CAT-scans and x-rays. The ER doctor wanted to do an MRI. Although I have an MRI-compatible pacemaker, it can take days to arrange to have everyone necessary in the MRI imaging lab to conduct the MRI on me. You know you could be in trouble when the ER doctor says “You’re the most complicated and interesting patient, I have ever seen in ER.” When the ER finally got my BP and heart palpitations under control with medications, but couldn’t control the electric shocks with additional pain and seizure medications, they sent me home with strict instructions to schedule an appointment with my neurologist and cardiologist as soon as possible. When I did see them, they increased my heart, pain and seizure medication dosages slightly again. When those changes produced only marginal results, the doctors began practicing medicine. They ordered more tests. Since two one-hour EEGs provided no useful information, my neurologist ordered a 48-hr EEG. The results of that test definitely suggested that I had brain activity when the electric shocks and burning sensations hit. The problem was that the activity was not located where the neurologists expected it be. This could have been due to the injuries my brain suffered during the several traumatic brain incidents that I have had, or to the plasticity of my brain in attempting to rewire itself to answer the demands that I keep placing on it.

My neurologist also ordered a two-test combination consisting of an NVC (Nerve Conduction Velocity) test and an EMG (Electromyogram), which provide information about abnormal conditions in one’s nervous system. In the NVC test nerves are stimulated with small impulses at one electrode while other electrodes detect the electrical impulses “down-stream” from the first electrode. If the impulses do not travel at the expected speed, then there is nerve damage in that area. In the EMG, needles are inserted in muscles in specific locations. By stimulating the muscles via these needles and measuring the response, any nerve damage can be spotted. Both tests were completely “normal.” This is good news and bad news. The good news is that I have no small or large nerve damage. The bad news is that this means my problems are most likely in my head.

As we progressed through February and March into April, I noticed one large improvement in my condition. I began having more extended periods of lucidity, when I could think and write. The shocks, burning sensations and pain have not gone away. However, I am becoming accustomed to them. After banging your head against a wall for so long, eventually you don’t feel it any more.

Thus, I am in a position to attack the large backlog of blog posts that I have accumulated, as well as the multitude of book-length manuscripts that I have outlined waiting for an opportunity to work on them. To readers of this blog, I covet your prayers and thoughts for continued long periods of clear thinking and a bountiful stream of meaningful words.

Announcement No. 2 concerns the future of this blog By’s Musings. This is the first posting for five months. At that time, I indicated that I intended to publish posts regularly. However, I wasn’t counting on the difficulties that I outlined in Announcement #1 above. This time when I say I intend to publish posts regularly, I have taken additional steps to make sure that occurs. One of those steps is to invite a number of my friends and former colleagues to share guest posts. Later this week, the first guest post will be published. It has been written by Professor Erik Benson, from Cornerstone University. When I hired Erik in 2005, he immediately impressed me as a teacher who brought history to life in the classroom. You didn’t want to go to sleep in his classes because you never knew what you might miss. To Erik, history was not restricted to the classroom. He brought the field into the classroom and took history and the students out into the field. Over the intervening years, he has also impressed students, who voted him “Professor of the Year” in 2013. In addition, he has also impressed his colleagues as an integral part of the leadership team for the CU CELT, the Cornerstone University Center for Excellence in Learning and Teaching, since 2006.

The title of Erik’s guest post is “The Value of the Liberal Arts to the University.” It is already in the queue, ready to published at 5:30 am on Wednesday, April 13, while I am, hopefully, sound asleep. During my periods of lucidity noted above, I have completed the first draft of post that I have titled, “Education: A Public Good or a Private Good?” I believe the answer to this seemingly innocuous question has deep ramifications that impact the control and cost of education in America. This refers not only to higher education, but to elementary and secondary education. I hope it will engender much discussion. It is in the queue to be published next Monday, April 18, at 5:30 am. This is an appropriate day for this posting since April 18 this year is TAX DAY! (This is a public service announcement to remind all my readers of the source of funds for public education.)

To keep the blog publication ball rolling, I have two draft posts, entitled “My Life in an Amusement Park: Living on a Carousel and the Unit Circle Parts I and II”, in the queue, scheduled to be published respectively on Monday, April 25 and May 2, at 5:30 am. The formula, x² + y² = 1, for the unit circle is the basis for much of mathematics. Surprisingly, it is also the basis for many aspects associated with a majority of amusement park rides. Who else but a mathematician would see the similarities between amusement park rides and the mathematics of the unit circle, and find them fascinating? In Part I of this post, I will explore many of the connections between the rides and the mathematics. In Part II, I will discuss why they are important in my life. Stay tuned to find out what carousels, roller coasters, tunnels of love, Tea Cup rides and the swing rides have in common, and why they are built on mutations and perturbations to the familiar formula for the unit circle.

OOPS, I am so sorry readers, but we’ve gone far beyond the maximum number of words blogger gurus suggest for posts. For the remainder of the announcements, you will have to stay turned for the post, “We’re Back in Business, Part II.” which is in the queue to published on Friday, April 15, at 5:30 am. In that post I will cover Announcement No. 3, which concerns my coaching/consulting practice, Higher Ed By Baylis LLC, and Announcement No. 4, which deals with my website Higher Ed By Baylis. Thanks for staying with me and please come back for more.