Showing posts with label discounted tuition. Show all posts
Showing posts with label discounted tuition. Show all posts

Thursday, May 18, 2017

Private liberal arts colleges are discounting tuition by an average of 44 percent--undercutting the credibility of their sticker prices

Rouses Supermarkets, a Louisiana food chain, advertised a wine and spirits sale a few days ago. Three Olives root beer vodka--normally priced at $20 a bottle, was on sale--4 bottles for ten bucks!

Did I rush to my nearest Rouses grocery store to stock up on root beer vodka? No, I did not. Instead I formed a negative opinion of the stuff. I concluded that any vodka that can be purchased on sale for two dollars and fifty cents a bottle is probably not worth $20 a bottle.

Private liberal art colleges are risking their long term viability by slashing their posted tuition prices drastically. Last year, the colleges discounted freshman tuition by an average of 49 percent; and tuition for students as a whole were slashed by an average of 44 percent.

In an informative article for Inside Higher Ed, Rick Seltzer identified  two trends that are driving colleges to heavily discount their tuition prices.  First, students' families need increased levels of financial aid in the wake of the 2008 recession. Second, colleges are heavily competing for students due to a downward demographic trend of fewer college-age students in the population. Ken Redd, research director for the National Association of College and University Business Officers (NACUBO) was quoted as saying he saw nothing on the horizon that would dissipate those trends.

Not surprisingly, small colleges are discounting tuition more heavily than large comprehensive universities.  At the small schools, freshman tuition is being discounted by more than 50 percent.

According to NACUBO's report, tuition discounting is happening even as colleges raise their sticker prices. Unfortunately, for many colleges, this tactic has not increased net revenue. “If you adjust for inflation, many schools are actually seeing real decreases in net tuition revenue,” Mr. Redd said.

Increased tuition discounts is just another sign that private liberal arts colleges are under an existential threat. Several have closed already, and others are taking drastic action to cut their costs.

Holy Cross College in Indiana sold 75 acres of real estate to Notre Dame to bolster its financial picture even as it struggled to quell rumors that it will soon be closing. Wheeling Jesuit University is encouraging faculty members to retire early.  Mills College, a small women's college in California, is laying of faculty members. Mills is running a $9 million deficit on a $57 million operating budget--clearly not sustainable.

At some colleges, administrators are finding that a smaller and smaller percentage of applicants who are admitted actually show up as students.  Mills for example, admitted 1,242 applicants in 2013-2014; and only 217 applicants actually enrolled. In 2015, the enrollment picture was even bleaker: 639 applicants were admitted and only 139 students actually enrolled.

Some small private colleges will survive in spite of the bleak financial picture. Those that have real estate to sell, like Holy Cross, can keep the wolf from the door for a few more years. Colleges that have large endowments can draw down those funds to meet their budgets.

But ultimately, a lot of small liberal arts colleges are going to close. Their target customers won't be hurt by this trend; they will simply enroll at public institutions. But faculty and staff  from closed colleges are going to find it very difficult to find new jobs.




References

Scott Jaschik. 'Financial Emergency' at Mills. Inside Higher Ed, May 17, 2017.

Rick Seltzer. Discounting Keeps Climbing. Inside Higher Ed, May 15, 2017.

Rick Seltzer. Holy Cross College to Sell Land to Notre Dame. Inside Higher Ed, May 15, 2017.

Rick Seltzer. Early Retirements at Wheeling Jesuit. Inside Higher Ed, May 10, 2017.

Saturday, April 15, 2017

Governor Cuomo's plan to offer free public college education for New Yorkers will wreck private colleges in the Empire State

Like Bernie Sanders, I buy my clothes at Joseph A. Banks, where almost everything Banks sells is on sale almost all the time. For example, Joseph A. Banks sells very good men's dress shirts for $89, but this week they are on sale for 2 for $89. 

The on-sale-all-the-time business model works well for Joseph A. Banks, but it is not working that well for private liberal arts colleges--particularly the nondescript little colleges that are so common in the Northeast and upper Midwest.  These colleges are now discounting freshman tuition by  an average of 48.6 percent, the same discount rate that Joseph A. Banks sells its shirts. For undergraduates as a whole, the average discount is 42 percent. 

Basically, more and more people are buying a liberal arts education at wholesale prices. And even with steep discounts, private colleges are having trouble luring new students to their campuses.

And now New York's private colleges face a new threat. Governor Andrew Cuomo launched a plan to provide a free college education at New York's public colleges and universities to families with annual incomes of $125,000 a year or less.  This may pose a mortal blow to many private liberal arts colleges in the Empire State.

Charles L. Flynn Jr., president of the College of Mount Saint Vincent, said Governor Andrew Cuomo's plan has thrown the New York marketplace for higher education" into confusion." Indeed, private schools in New York compete with New York's public universities for students, and Cuomo's free-college-education scheme will definitely hurt private institutions. A report prepared by the Commission on Independent Colleges and Universities in New York estimates that  Cuomo's plan will cause enrollments to decline at New York private colleges by 7 to 15 percent. 

What can the private liberal arts colleges do to meet this threat? Not much. As President Flynn told Inside Higher Ed, his college already discounts freshman tuition by 50 percent. “How can I go above that?” he said. “We don’t have a lot more aid to throw.”

New York has more than 100 private colleges and universities, many of them obscure: institutions like Daemen College, Houghton College, Saint  John Fisher College, Hilbert College, Medaille College, Trocaire College, Canisius College, Molloy College, Cazenovia College,and Roberts Wesleyan College. Most of these schools draw the bulk of their students from families residing inside the state. 

Unless private New York colleges have elite status--Hamilton College, Barnard College, Sarah Lawrence College, etc.--they have little to offer that cannot be obtained at a SUNY institution for less money.  And thanks to Governor Cuomo, many New York families can now choose between a small liberal arts college that offers discounted tuition and a public university they can attend for free. 

The wolf is now at the door for New York's small liberal arts colleges.



References

Rick Seltzer. A Marketplace in ConfusionInsider Higher Ed, April 13, 2017.

Tuition Discounts at Private Colleges Continue to Climb (Press Release). National Association of College and University Business Officers, May 16, 2016.

Report: Effects and Consequences of the Excelsior Scholarship Program On Private, Not-for-Profit Colleges and Universities. Commission on Independent Colleges and Universities in New York, March 2017.

Monday, May 23, 2016

A liberal arts degree is not worth much: Don't borrow a lot of money to pay for one

Christ. Seven years of college down the drain. Might as well join the f-cking Peace Corps."

Bluto (played by John Belushi)
Animal House

Americans cling to the touchingly pathetic belief that a college degree will improve their lives. And it is true that people who graduate from college make more money over their lifetimes than people who only have high school diplomas.

But in many instances, a college degree represents nothing more than an individual's dogged tenacity and willingness to sit through four years of meaningless classes--traits that make college graduates adaptable to the sterility and boredom of the American workplace.

That's not always true, of course. I feel quite sure that people who get degrees in engineering, journalism, and the health professions often learn valuable skills.  

But a degree in the liberal arts or the social sciences is highly overrated as a ticket to a good job. Reflecting back more than 40 years from my time at Oklahoma State University ("the Princeton of the Prairies"), I realize I learned more about how to make my way in the world from delivering newspapers as a 12-year-old for the Anadarko Daily News than I did from any of my college courses.

And I received much more vocational guidance from my father than from any college professor. Not that my father gave a damn about what I would do for a living when I left home. But after holding down several hundred bull calves while he castrated them with his Schrade pocket knife, I came to the firm conviction that I would never make it as a cattleman.

At one time, going to college was a relatively harmless activity. Rattling around a campus for four (or five, or six) years didn't do young people much harm other than delay their entrance into remunerative employment. And no question about it--studying for exams improves people's short-term memory.

But things have changed. Today, making the wrong choices about going to college can lead to a lifetime of economic hardship, at least for people who borrow too much money to pay for their college education.

What can go wrong about obtaining a liberal arts education, you might ask?  Here are some mistakes that many people make:

1) Getting a liberal arts degree from a for-profit college. By and large, for-profit colleges are more expensive than public schools; so if you attend a for-profit college you will probably borrow more money than if you attended a public institution. And the for-profits have high default rates. According to a Brookings Institution report, almost half of the people in  a recent cohort who borrowed to attend a for-profit school defaulted on their loans within five years. Thus, attending a for-profit college increases the risk of default.

So if you want to get a degree in sociology, history, literature, or women's studies, you should probably get it at a public university--even a mediocre one--rather than pursue a liberal arts degree at a for-profit institution.

2) Paying the sticker price to attend a prestigious private college.  Private colleges are more expensive than public colleges, but they are now discounting their tuition drastically. In fact, the average institutional discount rate at private colleges was 48.6 percent for first-time freshmen in 2015-2016. And the discount rate for all students attending private schools was 42.5 percent.

So don't pay the sticker price to attend a fancy private college. Keep in mind that many private schools are scrambling to keep their enrollments up, and they need you more than you need them.

3) Doubling down by going to graduate school without a clear idea how a graduate degree will improve your earning potential. About 40 percent of all outstanding student-loan debt was acquired by people who went to graduate school. Graduate education in some fields has become outrageously expensive--especially for law degrees and MBAs. But graduate degrees in the liberal arts are also pricey.

There was a time when graduate school was a reasonable default option for people with no clear vocational goal. Graduate school was a respectful place for people to park themselves while they decided what they wanted to do with their lives. And opportunity costs were relatively low because tuition was often low--particularly at public colleges.

But the game has changed. Individuals who borrow money to get a liberal arts education and then borrow more money to go to graduate school are playing Russian Roulette with their financial futures; and they're playing with three bullets in their revolvers. Don't go to graduate school unless you have a clear idea about how a graduate degree will lead to a job that pays well enough to make the investment worthwhile.

Beware: A liberal arts degree is no sure path to a middle-class lifestyle

In sum, a liberal arts degree provides no sure path to making a living, and borrowing a lot of money to get a liberal arts education can lead to financial disaster. It is a fine thing to know a little Shakespeare and to be able to identify the causes of Thirty Years' War; and it's nice to talk literature with the swells. But if you leave college with a hundred grand in student loans, you will find that the liberal arts degree you acquired didn't enhance your life; in fact, it might have destroyed it.

Image result for bluto in animal house
"Seven years of college down the drain . . . ."

References

Rick Seltzer. Discount rates rise yet again at private colleges and universities. Inside Higher Ed, May 16, 2016. Accessible at https://www.insidehighered.com/news/2016/05/16/discount-rates-rise-yet-again-private-colleges-and-universities