Why does it take students six years to complete a four-year degree?

 In the early 90s, I was program director for a specially-designed higher education institute at Louisiana State University. I designed the program for senior-level Chinese college administrators. In my hubris, I wanted to introduce my Asian audience to American higher education--the envy of the world.

One of the LSU presenters, an enrollment-management specialist, said that LSU's six-year graduation rate for bachelor's degrees was about fifty percent. The university had a plan, the speaker told the audience, to get the six-year rate up to 60 percent.

I'll never forget the collective gasp that came from the Chinese administrators. One of them spoke up. In China, he said, the four-year graduation rate was 95 percent--about twice as high as LSU's four-year rate. I realized right then that LSU had nothing valuable to teach the Chinese. And I also knew that the Chinese had discovered that too. 

Why the hell does it take so many American college students six years to get a four-year college degree? After all, that's not their expectation. As a Hechinger Report article pointed out, ninety percent of college freshmen believe they will finish college in four years. The reality, however, is that less than half of college students will get their bachelor's degree in four years.

Some commentators speculate that colleges are moving the finish line for graduation to collect more tuition. There may be some truth to that. After all, American universities now measure their completion rates based on six years of enrollment, not four. By adding more course requirements and bureaucratic red tape, the colleges have made it more difficult for students to plan a schedule that will get them a bachelor's degree in four years.

Nevertheless, other factors are in play that help explain why it takes millions of Americans six years to get a bachelor's degree. Thanks to the federal student-loan program, students can finance not only their tuition with borrowed money but they can also pay their living expenses as well.

Low-income students qualify for Pell grants--up to almost $6,500 a year.  Louisiana also doles out so-called TOPS awards to students with good high school GPAs and ACT scores. However, the qualifications are meager; a kid with a 2.5 GPA and an ACT score of only 20 qualifies for a TOPS scholarship.

And a college student may pick up additional scholarships or grant money. In case you haven't heard, universities are emphasizing diversity, equity, and inclusion, and students of color and students from disadvantaged backgrounds might qualify for targeted financial assistance.

In fact, many young people can put together financial packages that allow them to live quite comfortably as college students--perhaps better than they lived at home when they were in high school.  

Using student-loan funds, Pell Grant money, and other financial aid, students can move into luxury student apartments, dine out in restaurants, and maybe even put a downpayment down on a car.

In short, many students are "living their best lives" while in college. If so, why would they want to leave a campus environment, go to work, and start paying off their student loans? Why not stretch out their college career from four years to six?

Luxury student housing: Why graduate and go to work?

Luxury Student Housing and the Slumification of American College Towns

 In the nineteenth and early twentieth centuries, cotton production was a staple of America's Southern economy.  Even today, the United States is one of the world's largest exporters of cotton.

But cotton has some problems. Grown year after year, cotton depletes the soil.  Before commercial fertilizers became available, cotton growers simply grew cotton on a plot of land until the ground was exhausted and then moved on to places where the land was still fertile.

Something similar is happening in the luxury student-housing market. All over the country, college towns are seeing a boom in student-oriented apartment developments.  Developers buy relatively cheap land near college campuses, build so-called luxury apartments, rent them to college students and then sell the units to new investors--often pension funds and private-equity funds.

Is this a good thing? From an investor's standpoint, luxury student housing is profitable. According to one source, students pay a higher rate per square foot of space than other tenants, and students can take out student loans to pay the rent.

Even better, there is a never-ending supply of new students to keep the apartment buildings full.

But, just as cotton exhausts farmland, student housing gets run down over time, causing maintenance costs to go up. Moreover, college students are famously fickle renters, and they tend to search out newer apartments and offer more amenities than their old digs.

As newer and more luxurious apartment complexes come on the market, older apartment buildings become harder to fill. Rent prices go down, maintenance gets deferred, and then the luxury student apartment complexes of yesteryear become the slum districts of today.

We see this happening in the college town where I live. As the Baton Rouge Advocate noted in a recent news story, the Tigerland neighborhood south of Louisiana State University is "the storied college bar district and surrounding housing options once considered some of the most luxurious for LSU students. . . ."

But most of the Tigerland student apartments were built in the 1960s and 1970s, and they have seriously deteriorated. Several have been converted into so-called "Section 8 housing," housing for low-income households who receive public assistance.

This is no problem for the present generation of college students. They have their pick among hundreds of newer apartments that offer more amenities--fitness centers, swimming pools, recreation rooms, etc. 

Meanwhile, Tigerland has become notorious for crime, including murder. The Sandpiper Apartments on Tigerland Avenue are so infamous that Hillar Moore, the local district attorney, attempted to shut the place down as a "legal nuisance."

According to a 2021 newspaper article, Moore said the police had received 195 calls at the Sandpiper since 2016, an apartment complex with only 14 units!

The Sandpiper's owner asked the judge and prosecutors to be more sympathetic:

"If they shut me down, they should shut down the whole place," he said after the hearing. "The entire neighborhood needs to be condemned, to be honest. You would be appalled to know some of the crimes that are happening there." [As quoted in the Baton Rouge Advocate]

On the bright side, Tigerland is only a short walk to the LSU campus, and the rents are reasonable.  

Why should I care whether the neighborhoods around LSU are becoming slums? After all, I'm a retired professor, not a college student.

But I live in College Town, an old subdivision near the LSU campus. The Sandpiper, which the district attorney tried to shut down, is located only 1.3 miles from my home. 

Tigerland--only a short walk to the LSU campus

 

College students: Don't Take Out Student Loans to Pay for a Luxury Apartment

 When I was a child, my parents were poor. That was OK because almost everyone in my little Oklahoma town was poor, and we all told each other that we were in the middle class.

By the time I graduated high school, my parents had clawed their way into the actual middle class, and they sent me off to Oklahoma State University to be "educated."

I moved my stuff (a few clothes and an electric popcorn popper) into Cordell Hall, an enormous and depressing men's dorm. I could have signed up to live in a newer dorm--one that had air conditioning, but that would have cost my parents more money.

Reflecting back on that experience, Cordell Hall wasn't so bad. My roommate and I installed a window fan that kept our dorm room temperature down to a comfortable 85 degrees, and I became friends with dozens of guys who were sweating it out with me in Cordell Hall.

Today, college kids have more housing options. They can live in a university dormitory or move into a "luxury" student apartment complex.

What is a luxury apartment complex? Based on the advertising, it is an apartment building with a "resort-style" swimming pool, a fitness gym, in-unit clothes washers and driers, granite kitchen counters, and big televisions. 

What does that cost? A lot. A one-bedroom apartment with a bath can cost $1100 a month or more. Older apartment complexes are cheaper, and students can always cut their costs a bit by sharing a unit.  In Baton Rouge, the luxury apartment complexes have lots of five-bedroom apartments for rent.

Millions of young people from low-income families arrive on their college campuses with access to more cash than they've ever seen before--cash in the form of federal student loans.  If they use some of that loan money to rent a luxury apartment, they can live better than their parents.

What does it matter how much an apartment costs if students take out student loans to pay the rent? And if they max out on the amount of federal loan money they need, they can get their parents or grandparents to take out Parent PLUS loans.

But hear these words of caution. Students should not take on more college debt just to live in a luxury apartment complex with a swimming pool and a fitness gym.  

Why? Because it is easy to get used to so-called luxury living while in college. And students who take out loans to pay for a classy address may graduate to find they can't get a job that pays enough to support their upscale lifestyle.

If that happens, these hapless students will wake up to the shock of seeing their standard of living go down after they graduate.  They may wind up having to vacate their luxury apartment to move into a dump on the wrong side of town--the dump where they should have lived while they were in college.

The Vue: Another Luxury Student Apartment Complex is Coming to Baton Rouge

COVID-19 is disrupting American higher education: That's a good thing

The coronavirus pandemic hit American higher education like a Cat 5 hurricane.   Virtually all colleges and universities shut their campuses down and switched from face-to-face instruction to a distance-learning format.

Many students didn't like the change and didn't like paying full tuition for a watered-down learning experience.  Lawsuits were filed. I myself was skeptical about the quality of online instruction.

However, I am teaching my second class as an adjunct professor using Zoom, and Zoom works great for me.   I can see my students on my computer screen and can talk to them directly, just as if we all were in the same room. To my surprise, I can teach via Zoom with no loss of quality.

In fact, I am beginning to think COVID-19 may be a blessing in disguise for American higher education. Here's why I take that view.

First, the latest generation of distance-learning technology (Zoom, Microsoft Teams, etc.) closes the gap between distance learning and live instruction. Colleges now have a good strategy for dealing with this pandemic and any future pandemic.

Second, COVID-19 has caused many college students to skip the dorm experience, and this shift has been a wakeup call to colleges that went on dormitory-building sprees. The change also put the brake on privately-financed, so-called luxury student housing. Privately and publicly financed student housing was out of control. All across the United States, universities are now surrounded by massive, block-housing units, which are a dispiriting blight on the landscape.

 Now that students are shying away from multiple-occupancy apartments and dorms, this speculative overbuilding has slowed down.  That is a very good thing.

Third, the massive shift of public universities to online learning has undercut the for-profit college industry, and that is also a good thing. The for-profits distinguished themselves by offering online education for working adults who could not attend classes on college campuses.  Often the quality of for-profit instruction was inferior, and for-profit colleges were almost always a lot more expensive than public colleges.

Now that the public colleges and universities have embraced distance learning, there is absolutely no reason for someone to enroll in the University of Phoenix or any other for-profit school that offers online instruction.  The for-profits are losing students and revenues, which (I hope) will force them to shut down. 

Finally, COVID-19 will stop the arms race among colleges to offer expensive recreational facilities, which have become a public embarrassment. LSU's "Lazy River" seemed like a cutting-edge innovation when it was built, but what college would install one now?

COVID-19 will force many small liberal arts colleges to close, which is unfortunate. But this country has too many colleges, and we are long overdue for a pruning process.

American universities are discovering that they can offer instruction in a distance-learning format, and those fancy recreational facilities and "luxury" student dorms are not essential. Maybe high-quality online learning will help higher education can get back to its real mission--which is to offer worthwhile educational experiences that prepare young people to become intelligent, civic-minded, productive citizens.  Wouldn't that be a good thing?

What? No Lazy River?

Harvard University will go online this fall but will charge full tuition: $49,000 a year to take courses on your home computer

In response to the coronavirus pandemic, Harvard University announced that all undergraduate classes will be taught online this fall. Harvard will allow only 40 percent of its undergraduates to live on campus, including all of its first-year students.

As several people have pointed out, Harvard's decision to teach students online this fall will prompt other universities to reassess their own teaching plans for the fall semester. After all, if mighty Harvard, with its $40 billion endowment, has thrown in the towel regarding face-to-face instruction, then many other colleges will surely follow suit.

Who are we--mere mortals--to question Harvard? Nevertheless, I don't understand the point of bringing first-year students on campus if they are going to be huddled over computers in their dorm rooms when taking classes. Why not let Harvard students stay home with mom and dad if they are not going to see their professors?

Harvard and other elite universities will weather the pandemic if it doesn't stretch on too long.  People who get admitted to Harvard will gladly accept any inconvenience to put Harvard University on their resumes. And, for a short time at least, Harvard can get away with teaching its courses online while charging full tuition--$49,000 a year!

But experts predict that the second- and third-tier colleges will see fewer students this fall. And those students will likely take price into account when choosing their schools.  After all, if students are going to be denied a traditional college experience—student clubs, dorm life, opportunities to develop romantic relationships—why not enroll in the cheapest school?

Without a doubt, most universities will have a lot of empty dorm rooms on their hands this fall, which means a significant loss in revenue. Privately owned student-housing complexes will also have vacant units, and many of these complexes were built with borrowed money.  The savvy cats who expected to make tidy profits on so-called luxury student housing may have trouble making their mortgage payments.

The coronavirus pandemic makes a lot of recent university projects look silly. Louisiana State University, for example, spent $85 million on a student recreation center that includes a climbing wall and a "Lazy River" water feature shaped like the university's initials. It looked like a smart move at the time, and the center was financed with student fees.

Now the Lazy River no longer seems so attractive.  Instead, it just looks like a great place to contract COVID-19.

Wigglesworth Hall at Harvard: Be sure to bring your home computer

Overbuilt "luxury" student housing: Speculators are turning university towns into slums

The Commercial Observer ran a story a few days ago about a financial crisis in the so-called luxury student-housing market. As reported by Matt Grossman, the default rate in this niche of the securitized real-estate market has gone up dramatically in recent years and now stands at15.3 percent. That's 60 percent higher than the default rate just eight months ago when it was 9 percent.

Luxury student-housing became a hot new investment sector a few years ago. Speculators built thousands of student-housing units in college towns all over the United States.  These units included features to attract college students--swimming pools, basketball courts, tanning beds, and fitness centers. Rents were high--over $1,000 a month. But parents often co-signed the leases, and many students paid their rent with student-loan money.

After the new complexes were rented up and began showing positive cash flow, the speculators packaged them into mortgage-backed securities and sold them to investment pools--pension funds, hedge funds, and other institutional investors.

But the speculators built too many luxury student apartments. College students--a notoriously fickle bunch--tended to move out of older units to take up residence in swankier new digs. Vacancy rates spiked upward in the older buildings, the new owners found themselves unable to service their mortgages, and now many of these so-called luxury apartment buildings are going into default.

How did this happen? First, as I have said, these luxury apartments were overbuilt by speculators; and the speculators simply did not care. They had no local ties to the college towns. Their plan was to sell the units quickly while they were still new, take their profits, and move on to the next investment.

Moreover, most of this so-called luxury student housing is not luxury housing at all. It's just new housing. If you go inside one of these apartments, you will likely find plastic interior doors, cabinets made out of particle board rather than wood, and cheap appliances and amenities.

And now--in the space of just a few years--universities all over America are ringed by aging apartment complexes, many of which have gone into default. As the buildings decay, rents are slashed, maintenance is deferred, and before long these so-called luxury apartment buildings become slums.

I see this tragedy unfolding in my own neighborhood, where thousands of apartment buildings have been thrown up in the flood plain near Louisiana State University. But you can see this phenomenon in almost any town with a major university.

Everybody knows that the federal student-loan program has created millions of paupers, people who have amassed so much student debt that they will never pay it off. Even Education Secretary Betsy DeVos has acknowledged this calamity.

But the federal student-loan program has also contributed to an environmental crisis--the emergence of slum housing around America's colleges and universities. The glut in student housing is at least partly attributable to the federal student loan program, which allowed students to rent luxury apartments with borrowed money

 If you want to see an example of this crisis, drive through the Tigerland neighborhood, a jumble of old apartment buildings originally built for students near LSU in Baton Rouge.

Parts of Tigerland are now a serious slum where you would not want to live if you were a college student.  And not far away, new apartments are still being built--Tigerlands in the making in just a few years.

"Luxury" apartments for college students: How will the kids pay the rent?

Bloomberg Businessweek carried a story recently about the emergence of luxury housing for college students. In recent years, real estate developers have been building "amenity-rich luxury apartments" near universities. These new apartment complexes are very attractive to students, especially when compared to the often run-down dormitories that the universities operate.

But these so-called luxury apartments are expensive, and they've contributed to the rising cost of student housing. As Bloomberg writer Ali Breland reported, "the estimated cost of on- and off-campus room and board at a four-year public university climbed by more than 82 percent, adjusted for inflation." During the same time period, rents across the nation as a whole only rose 19 percent.

How are students paying for their fancy digs? Many of them are paying the rent with student loans. The average college graduate now leaves school with $35,000 in student debt, and for many students, a significant chunk of that money was spent on housing.

So what's the problem?

First of all, a lot of students are taking out student loans for housing they really can't afford. When their student-loan bills come due, a lot of them will wish they had lived more modestly while they were working on their degrees in medieval literature.

Second, by borrowing money to pay for "luxury" living, students are living a lifestyle they can't sustain after they finish their studies and go looking for a job. It is hard for college students to accept the reality that their standard of living will go down once they've obtained their college degrees.

The upscale student-housing boom imposes a cost on college communities as well.  A lot of this so-called luxury student housing isn't luxurious at all.  Student-housing complexes may have swimming pools, clubhouses, and shiny appliances, but many of them are shoddily constructed, with plastic interior doors and particle-board cabinets.

I live just a few blocks from some of these student-oriented apartment complexes, and even the newer ones are beginning to look the worse for wear.  The day is fast approaching when these faux-luxury apartment buildings will just be slums.

But the real estate developers don't care. These complexes are being packaged and sold to investors as commercial real-estate-backed securities--very similar to the mortgage-backed securities that were being peddled before the housing crisis of 2008.

In my view, the luxury student-housing boom is a bubble. Too many of them are being built. No wonder the default rate on student-oriented housing mortgages has rocketed up to 9 percent!

Luxury student housing: Living the good life while still in college