College Enrollments are Down, Tuition Prices are Up & Student-Loan Forgiveness Is on the Way: The Wounded Grizzly Syndrome

 Earlier this week, Inside Higher Education reported that college enrollments have declined for five straight semesters. In the spring 2020 semester--when the COVID epidemic began--the nation's colleges enrolled 17.1 million students. Today, 15.9 million Americans are in postsecondary classes--a decline of 1.2 million students.

Some states saw more significant declines than others, and some saw enrollments grow. California suffered an 8.1 percent decline, the most significant drop among the states.

New Hampshire's student population actually grew after the pandemic hit, mainly due to increased online enrollment. I imagine a lot of that growth can be attributed to the University of Southern New Hampshire, which aggressively markets its online programs.

Businesses operating in a market economy often slash prices when demand falls for their products. But American colleges keep raising their tuition. Boston University--a very pricey institution, will increase undergraduate tuition by 4.25 percent next year. 

BU's tuition rate will be $61,000 for the 2022-2023 academic year. And total cost, including room and board, is almost $80,000. Ouch!

Not to worry, BU tells us on its website. Each year the university awards almost a third of a billion dollars in financial assistance to undergraduates. In other words, BU assures us, most students won't have to pay the sticker price.

Indeed, colleges all over the United States are slashing tuition to lure students through the door. The National Association of College and University Business Officers said that schools are discounting tuition for first-year students by 54 percent on average.

Four out of five undergraduates will get a tuition discount in the coming academic year, NACUBO reported. So if you pay the total price to attend BU, you got suckered.

For more than a quarter of a century, colleges have raised their tuition prices annually above the cost of inflation. But the party is about to end.  

Young people are beginning to wonder if it makes sense to borrow $100,000 or more to get a liberal arts degree from an elite school if their diploma doesn't lead to a good job. 

With inflation running at a 40-year high, most colleges can no longer raise their tuition prices to cover their increased costs. BU's tuition hike of 4.25 percent is below this year's 8 percent inflation rate.

The Biden administration is signaling that it will forgive at least some student debt.  During the election campaign, Mr. Biden promised to grant $10,000 in student debt relief to students from lower-income or middle-income families. According to a recent Washington Post story, Biden will likely keep that promise.

I hate to break the news to you, President Biden. Ten thousand dollars in debt relief ain't nearly enough.  Millions of students have seen their total debt double over the years due to accrued interest. 

Offering to forgive $10,000 in debt to someone who owes $60,000 is like shooting a grizzly bear in the gut. The shot doesn't kill the bear; it just pisses him off.

Ten thousand dollars in student-debt relief won't make anyone happy.

Things are falling apart for American higher education: It is time to be cautious about taking out student loans

Things are falling apart for many American colleges and universities. The signs of stress and turmoil are everywhere.

First, college enrollments are down significantly, putting an enormous strain on colleges that are heavily dependent on tuition revenue. Over the past decade, college enrollment dropped by more than 2 million students, dipping below 18 million students in the fall of 2019.

Second, the for-profit college industry is on the verge of collapse. According to Forbes, the number of for-profit institutions declined by 25 percent between 2010 and 2018, and total enrollment dropped by half.

Third, private nonprofit colleges are closing at an accelerating rate. An analysis in The Chronicle of Higher Education reported that more than 50 small private colleges have closed since 2016.  Already this year, MacMurray College and Nebraska Christian College have announced they are shutting down.  And Notre Dame de Namur University stated that it will not enroll a first-year class this fall. 

Fourth, small liberal arts colleges are slashing tuition for their first-year classes by 50 percent. Although most small colleges post a very high sticker price, in reality, they are giving out financial aid and scholarships like candy. As a result, the average net cost of tuition is only half the posted price.

Fifth, business schools and law schools have rolled out new types of graduate degrees to counteract declining enrollment.  Business schools have introduced one-year MBA degrees because the demand for traditional two-year programs has dropped. And law schools have started offering law-based degrees for people who do not intend to practice law. According to numbers released by the American Bar Association, 14 percent of law school students were in non-JD programs in 2018.

Sixth, the coronavirus crisis has caused some college students to feel less positively about their educational experience.  The COVID-19 pandemic forced the vast majority of colleges to cancel face-to-face classes this spring and replace them with online instruction.  Unfortunately, the quality of online teaching has often not been good.  A recent survey found that 63 percent of undergraduate respondents reported that the quality of their online instruction was "worse" or "a lot worse" than the live teaching they received before the pandemic.

More than 40 percent of the undergraduate respondents said that their view of their college had gotten worse as a result of COVID-19. And one out of 10 high school seniors who had intended to enroll in a 4-year college this fall said their plans will likely change. 

Seventh, student debt has doubled from $750 billion in 2010 to $.15 trillion in 2019. Today, 45 million Americans hold student loan debt.  More than one million people defaulted on their student loans last year. Almost 9 million more are shackled by long-term, income-based repayment plans that can last as long as 20 or 25 years. 

Conclusion: Students should do everything possible to avoid taking out student loans

For three decades, colleges and universities raised tuition on an annual basis at twice the national inflation rate. College students financed the rising cost of their education by taking out larger and larger student loans.

College leaders assured students they were getting good value for their tuition dollars. After all, they purred soothingly, salaries for college graduates vastly exceed the wages of people without college degrees. Taking out student loans to get a college degree seemed like a smart investment.

In fact, inflation-adjusted salaries for American workers have remained flat for the last 40 years. "[T]today's average hourly wage has just about the same purchasing power it did in 1978." The wage gap between college graduates and non-college graduates has widened, but this is mostly because wages for non-college graduates have declined.

In other words, a college degree may be a good investment for most Americans. Still, it may not be as good as the colleges have represented.  People who take on enormous student debt to get liberal arts degrees or graduate degrees will find that their college education was a terrible investment if they do not land a good job.

The coronavirus pandemic has put millions of Americans out of a job. Experts predict an unemployment rate of more than 30 percent—higher than during the Great Depression of the 1930s.  Forty million Americans may be out of a job by the end of this year.

Our economy will bounce back, but who knows when that will be? So if you are thinking about going to college or graduate school, let me give you a little advice:

Now is not the time to take out massive student loans to finance a bachelor's degree in gender studies from an expensive private college.

Now is not the time to finance a luxury apartment with your student loan checks.

And now is not the time to thoughtlessly take out loans to enroll in a master's degree program without a clear sense of how that program will increase your income. 

It is a terrible thing to be unemployed—as millions of Americans will soon be. But it is far worse to be unemployed and burdened with student loans that you will never be able to repay.

The enrollment crash is an existential threat to liberal arts colleges: Bucknell VP Bill Conley's insightful essay

Bill Conley, Vice President for Enrollment Management at Bucknell University, wrote a perceptive essay for Chronicle of Higher Education about the "Great Enrollment Crash" at liberal arts colleges. There has been a huge downturn in undergraduate education at liberal arts colleges, and no turnaround is in sight. As Conley put it:

Higher education has fully entered into a new structural reality. You'd be naïve to believe that most colleges will be able to ride out this unexpected wave [ declining enrollment] as we have the previous swells.

What's going on?

First, as Conley explains, the demographics are bad. Americans are having fewer children. In fact, the birth rate has fallen below replacement levels in the U.S., just as it has in Europe. There are fewer high school graduates who want to go to college.

Secondly, the demand for a liberal arts education has plummeted. As Conley reports, degrees in the humanities dropped from 17 percent of all degrees in 1967 to just 5 percent in 2015.

Moreover, the current crop of college students is more focused than past generations on getting a college degree that will lead to a good job. More and more students are choosing to major in business, biology, or economics, while philosophy majors are becoming an endangered species.

The liberal arts colleges have responded to this threat by slashing tuition prices for incoming first-year students. On average,  the colleges are only collecting half their posted tuition rates. Colleges hoped to attract more students by lowering tuition, but that strategy hasn't worked for many of them.

Of course, the liberal arts colleges aren't the only sector of higher education facing enrollment declines. As Conley pointed out, the Pennsylvania System of Higher Education has seen its public institutions lose 20 percent of their enrollments in less than 10 years.

Increasingly, families are looking to more affordable public universities for their children's college education and eschewing the small, private liberal arts schools. The obscure, non-elite liberal arts colleges are suffering the most, and several have closed in recent years.

"I don't see these trends changing," Conley wrote, "especially when coupled with stagnating income and the resulting pressure on a family's return-on-investment calculus." In short, he summarized, "Disruption is here to stay."

I agree with Mr. Conley's forthright assessment of liberal arts education; and personally, I think it is doomed. Liberal arts colleges were founded to educate students in the humanities, literature, history, and philosophy; but few students appreciate those fields of study. Furthermore, the liberal arts have been balkanized, as faculty obsess on race, class, gender, and sexual orientation so that there is no longer even a broad consensus about what constitutes a liberal arts education.

In my view, I think the small, liberal arts colleges should prepare for a dignified death because they are going to die anyway. They need to develop contingency plans for placing their students in other institutions when they close and they need to make the best provision they can for laid-off faculty members--many of whom will be unable to find new jobs. After all, what university wants to hire a middle-aged philosophy professor?

This is a sad turn of events, and I do not think the liberal arts colleges brought this calamity on themselves. Rather they are like the blacksmiths of the early twentieth century, who were put out of work by Henry Ford's cars.

I don't have a solution to this existential crisis among the small, private schools. But I have some advice for students who are choosing a college. Don't enroll at an expensive, obscure, private college. Get your degree from a reputable public institution.

And if you are a newly minted Ph.D. looking for your first academic job, don't go to work at a small liberal-arts college. Even if you get tenure at some out-of-the-way little school in New England or the Midwest, that won't keep you from being laid off. And once you lose that tenured job at a college that was closed, you will find it damned hard to get another one.

Birmingham-Southern cuts tuition in half: Making a virtue of necessity

I'm a Methodist, Methodist 'tis my belief

I'm a Methodist till die

Till old grim death comes a knockin' at the door

I'm a Methodist till I die.

Methodist Pie

sung by Red Foley and others

Birmingham-Southern College, a Methodist school in Alabama, is slashing its tuition price by half.  Current tuition: $35,840. Next year's tuition: $17,650.

Linda Flaherty-Goldsmith, BSC's president, put a positive spin on this development. "The marketplace spoke, and we listened," Flaherty-Goldsmith said in a prepared statement. "Students and families are telling colleges all across the United States--and they're telling us--that encountering a high published price is a real barrier to a high-quality education.  We want to make sure that the best and brightest students have access to the kind of personalized, challenging, hands-on educational experience that BSC provides."

Forgive me for being cynical, but that statement sounds like bullshit from the public relations department. For one thing, BSC isn't really cutting its net tuition rate. Ninety percent of BSC students were already paying less than the sticker price. In fact, college officials admitted that next year's net tuition price will be about what students are paying this year.

Basically, BSC has been doing what almost all small private colleges have been doing--jacking up the posted tuition rate and then cutting the real cost in half by granting scholarships and grants.

As Flaherty-Goldsmith admitted, this strategy isn't working. Families were scared off by BSC's sticker price, a price that only about 10 percent of BSC students were actually paying.

I wish BSC well, but I don't think slashing published tuition rates will bump up enrollment. Small colleges across the United States have tried all sorts of gimmicks to attract more students, but a third of all private institutions with enrollments under 3,000 ran deficits last year.

Colleges have tried advertising campaigns, "signature" academic experiences, study abroad opportunities, and online instruction to lure students through the door, but many are losing the battle to remain solvent.

Let's face facts. How many students are willing to pay $35,000 a year or even $17,000 a year to get a liberal arts degree from an undistinguished small college in Birmingham, Alabama?Apparently not very many.

There was a time when a college's religious affiliation was a draw for some American families. Back in the 1950s, some Methodists sent their children to Methodist schools, and Catholics sent their sons and daughters to Catholic colleges.

But that time is long past.  It is getting harder and harder to articulate what it means to be a Methodist college as opposed to a Catholic college or even a publicly funded institution. 

And it is getting more and more difficult to explain the value of a liberal arts education to a fragmented culture in which all values are relative and Eurocentric values are particularly suspect.

As I say, I wish BSC well. But small liberal arts colleges are becoming increasingly irrelevant, and the high tuition that most of them charge has accelerated their decline.

In my mind, it is too late to ratchet back tuition rates. The small colleges' former clients are drifting toward community colleges, trade schools, and regional public universities. Their customers have departed, and they are not coming back.

And I don't feel sorry for the small colleges that are dying. I feel sorry for the schmucks who took out student loans to pay BSC's sticker price.

BSC president Linda Flaherty-Goldsmith

References

Associated Press. Birmingham-Southern cutting tuition, fees next fall. Seattle Times, September 13, 2017.

Rick Seltzer. Birmingham-Southern Cuts Tuition in Half. Inside Higher Ed, September 13, 2017.

Free tuition for first-time freshmen at good private liberal arts colleges: Why the hell not?

Small liberal arts colleges are in trouble all over the United States. They're having a heck of a time attracting students, as families respond more and more negatively to outrageous tuition prices. Let's face it: not many people want to pay $100,000 to obtain a degree from a nondescript liberal arts college in Nowhereville, Indiana,

In a desperate effort to attract warm bodies, liberal arts colleges have been discounting their tuition drastically for first-time freshmen, behaving more and more like rug sellers in an Arab bazaar.  (I apologize if I made a politically incorrect observation.) For the past several years, the discount rate has gone ever upward; and last year, private liberal arts colleges discounted tuition for first-time freshman by nearly 50 percent! And they discounted tuition for undergraduates as a whole by more than 40 percent.

All commentators agree: this trend can't go on forever.  And colleges can't reverse course by simply lowering their tuition rates because they would be admitting that they've been overbilling their clients. As one observer noted, if you've been selling Toyotas for $30,000 apiece, how can you explain why you now only charge $20,000?

But what about this? Why don't small private liberal arts colleges--the ones that still have good reputations--offer applicants free tuition for the first year to everyone who enrolls?

Think about it. Colleges have already cut tuition by 50 percent on average for freshmen, and they're still having trouble meeting their enrollment targets. And once they get the little rascals in the door, they still have to discount tuition by more than 40 percent.

If a college offered free tuition for freshman, there would be two good consequences. First, the college would get more applicants and a higher percentage of applicants who are accepted would actually enroll. And second, the college could be more selective because the overall quality of the applicant pool would improve.

Of course, such a move would have to be planned carefully. Here's how I would do it:

1) The college making the  offer would promise to admit students based on published academic criteria--without regard to race, class, gender, or sexual orientation. Applicants would know that their credentials were being judged transparently based solely on academic considerations.

2) Students who accept the offer would agree to attend the college a second year and pay the full tuition price if the college didn't offer a sophomore-year discount.

3) Colleges making this offer would assign their best faculty members to teach freshmen so that students who enrolled would have a top-notch freshman year and thus would be more likely return as sophomores. No more crowding a couple of hundred freshmen into theatre-style classrooms to be taught by an inexperienced graduate assistant or a burned-out gas bag who should have never gotten tenure.

This is a risky strategy I know. But colleges are already charging freshmen half price, and many are still seeing their enrollments decline. If offering a free year led to a 50 percent bump in freshman enrollment, that would absorb a good deal of the cost of this strategy if those students could be retained as sophomores, juniors and seniors.

One thing for sure--college administrators are playing a losing game right now. They can't go on giving big tuition discounts to favored students using secret criteria that families don't understand. They can't rely on public relations firms, perky recruiters, and billboard advertising to juice their enrollments.

The public has figured out that a liberal arts degree from an obscure private college is overpriced. To bring back the paying customers, the colleges must offer value. What better way to communicate value than by giving new students a year of free tuition and then offering a first-class educational experience?

Or is that too simplistic?

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.

Going out of Business Sale!! Prices Slashed!! Everything Must Go!! Colleges that heavily discount student tuition are teetering on the brink of closure

According to a survey conducted by the National Association of College and University Business Officers, private colleges discounted their tuition prices for first year students by an average of 48 percent in 2014. Think of it: on average, a private college now charges only about half its tuition sticker price to its freshman class.

And the discount rate is going up. Inside Higher Ed reported that the discount rate has risen 20 percent in just seven years: from 39 percent in 2007 to 48 percent last year.

Moreover, at many schools, nearly everyone gets a discount. As explained by Inside Higher Ed, 69 percent of the colleges surveyed by NACUBO offered discounts to 90 percent or more of their students last year.

As many experts have pointed out, heavily discounting tuition rates is not sustainable. In fact, heavy discount rates are a sure sign that a college is in trouble. Sweetbriar College, for example, which closed (and then reopened) last year, was discounting its tuition price by 62 percent, but still couldn't attract enough students to keep its doors open.

 NACUBO's survey determined that almost 10 percent of private colleges discounted their tuition prices by an astounding 60 percent, surely a bad sign for all the colleges that discount at that level. “If your discount rate is at 60 percent, that's a very dangerous warning sign,” observed David Breneman, former Dean of the University of Virginia's school of education (as quoted in Inside Higher Ed).  “If you were any other business of any other sort [you wouldn’t] think you were in a very good position.”

What does this mean for higher education in general? At least three things:

1) First, a liberal arts education at a non-elite private college is not worth what colleges have been charging, and everyone knows it.

2) Second, heavy discounts are destroying colleges' credibility.  When 90 percent of students are getting a discount and when discount rates average nearly 50 percent, everyone know that colleges have posted deceptive sticker prices for their tuition. They've become like Texas fireworks peddlers: "Buy 1 and get 6 free!"

3) Third, a lot of small, nondescript private colleges will close in the coming years. A Moody's report on colleges' financial viability predicted that college closures will triple by 2015, which would mean about 15 colleges will close that year. But surely that figure is too conservative.

Personally, I think we will see many private liberal arts schools closing in the coming years. The economics of getting a liberal arts degree from an obscure private college just don't make sense anymore. In fact, if it weren't for the federal student loan program, which is propping up the private-college sector, half of them would be closed already.

Discounting college tuition prices: Buy 1, Get 6 free!

References

Kelly Woodhouse. (2015, November 25). Discount Much? Inside Higher Ed. Accessible at: https://www.insidehighered.com/news/2015/11/25/what-it-might-mean-when-colleges-discount-rate-tops-60-percent?utm_source=Inside+Higher+Ed&utm_campaign=389f6fe14e-DNU20151125&utm_medium=email&utm_term=0_1fcbc04421-389f6fe14e-198565653