College Meltdown at a Turning Point

[Image above: Turning Point USA, a neoconservative student group, has grown to more than 1100 high school and college chapters since its founding in 2012.]

The College Meltdown has been developing for decades. But now, it is at a turning point as the Trump Administration enters office.  Most likely, American colleges are headed toward more racial and ethnic tension, less transparency, and more corruption.  And the Trump Administration's solutions, which include privatization and deregulation, may not only accelerate the College Meltdown, their "hands off" approach to civil rights may increase conflicts on campus.

Donald Trump's selection of Betsy Devos and Jeff Sessions as US Secretary of Education and Attorney General have already sent a loud statement to those who research and analyze organizational effectiveness and institutional corruption in education.

The loud statement is that citizens should keep an eye out for even more discrimination, inequality, and fraud in K-12 education and higher education. Non-Christians and "others" with limited financial resources should be particularly concerned. But don't expect to get much information from the corporate controlled media--it would take too much work and it wouldn't be profitable.

For those interested in how education policy plays out over the next four years, we'll also need to know who will lead the Consumer Financial Protection Bureau, Federal Trade Commission, Securities and Exchange Commission, Federal Communications Commission, and how much those agencies will receive in funding for oversight of the US education industry.

Lack of oversight will accelerate opportunities for cronyism, nepotism, theft, lack of transparency, academic cheating, and intellectual dishonesty at the state and local levels

We also expect this increase in wrongdoing and poor decisions to be met with limited resistance and highly framed media attention.

Over the last two decades, tens of billions of dollars have already poured into charter schools despite lack of evidence about their effectiveness. Charter school enrollment has risen from about 300,000 in 1999 to about 2.5 million children in 2015 (about 5% of all school children).

Government-fed media stories may show structural failure that has been existent for generations and corruption that has cropped up in the age of increasing school choice. But ideological perspectives and power will influence which sides get the most attention, the quantity and quality of background information provided, and which stories (if any) gain the most traction.

"School choice," "empowerment," "opportunity," "religious freedom," "union corruption," "failing schools," "local control," "merit pay," "vouchers,"   "political correctness," "safe spaces," and "micro-aggressions" will be terms widely used to frame stories about US education.

For every action by all of these educational players, there will be a set of reactions from multiple sides. Vested interests include banks, private equity, hedge funds, philanthropies and foundations, for-profit and non-profit education and educational services companies, political parties, teachers union leaders, marketing and advertising companies, construction unions, pension funds, lobbying firms, think tanks, public relations businesses, and media outlets.

   Liberals may secretly like vouchers, so their children can get tuition breaks for private school attendance, or chances to get out of dangerous or failing public schools.   

Much of the action will also be at the state and local level and may not be reported by major news outlets.

The Libertarian Cato Institute has created a public schooling "battle ground" map about various neoconservative conservative social issues that are being fought across the country.

Outside players such as student debt groups, adjunct professors, and teacher resistance groups will also be involved, but will likely be marginalized or silenced.

We cannot predict what will happen exactly, but power, influence, and organizational effectiveness will be large determiners of what unfolds. And deals between power players behind the scenes may be vastly different than what is presented in the media.

• Look for changes in charter school tax credits (including New Markets Tax Credits), and other incentives as well as IPOs in the education business.
• Corporate and private capital flows to K-12 education may follow federal deregulation and block grants. This could result in irrational exuberance at the state and local levels. 

Some people will profit from the direction the nation's educational policy is going. But a larger number will suffer. We don't expect society as a whole to understand the consequences for quite some time. 

• Parents with high hopes will place their children in lotteries for high-demand charter schools. But most will be disappointed.
• About 0.5% of American children are currently enrolled in online charter schools. But this number could expand with deregulation, even if their educational value is in question.

While we construct this article, we suggest that you read three of our previous reports.

• When college choice is a fraud
• The college meltdown is painfully obvious
• Education is a racket

We invite feedback and opinions from all sides with interests in the education business and will respond to every comment we receive. Our email is dahneshaulis@gmail.com

Forecasting the US College Meltdown

Professionals in higher education may deny that a US College Meltdown is occurring, but that doesn't mean it's not here. Arguably, a few variables related to the phenomenon have improved since the economic downturn of 2008-2009, but that's not a return to a healthy situation. That's why I have written more than two dozen articles on corruption, dysfunction, and financial failures in American higher education to document the many facets of the meltdown.

When I speak of College Meltdown, I am referring to the slow-moving decline of US colleges and affiliated businesses, which includes the following variables: (1) increased student loan debt, (2) decreased gainful employment of those who matriculate, (3) declines in student returns on investment (ROI), (4) increased student loan non-repayments, (5) increased student defaults, (6) reduced college enrollment numbers, (7) declines in entrance standards, (8) reductions in college revenues and endowments at less than elite schools, (9) increased use of debt (bonds) to fund colleges, (10) reductions in instructional staff and instructional pay, particularly with the use of adjuncts, (11) increases in class size, (12) college program closing, (13) reduced student services (14) selling of institutional assets, (15) accreditation downgrades, (16) college consolidations, (17) institutional closings, and (18) reduced values and ratings of student loan asset-backed securities (SLABS) .

Total college revenues and expenses have continued to climb, to $342B and $314B in 2015. But the number of community colleges peaked in 2003-2004. And total enrollment at all postsecondary schools combined peaked in 2010-2011.   

These College Meltdown Variables are influenced by a variety of macroeconomic and social variables, including: (1) age demographics, particularly the numbers of college age individuals, (2) family size, (3) family wealth, (4) state and local allocations to higher education, (5) federal allocations to higher education, (6) employment participation, (7) median and quintile personal income of Millennials, (8) K-12 preparedness for college, and (9) immigration numbers.

Professionals have acknowledged certain troubling aspects of the meltdown, especially the student loan debt crisis, but additional components of this problem, which many fail to acknowledge, date back several decades.

Bain Capital ( Denneen & Dretler, 2012) and the New America Fund ( Selingo, et al, 2013) argue that colleges are spending beyond their means, using outmoded teaching methods, becoming less accessible to students and their families, and refusing to be accountable for student graduation and default rates and “gainful employment” numbers.

For me, the question is not whether a meltdown is here, but how quickly it is spreading, which type of schools are most vulnerable and what colleges are in the most immanent danger of failing.

According to Neal McCluskey of the Cato Institute, about 300 colleges closed in 2016. While most were for-profit colleges, many other private and public schools are performing poorly and downsizing.

At first glance, the most vulnerable schools are for-profit colleges, HBCUs, community colleges in cash strapped states, small private liberal arts and Christian colleges, tribal colleges, and public "dropout factories." Low enrollments and downgrades in accreditation are variables that suggest huge problems. But factors such as negative Return on Investment (ROI) should also elicit alarm bells.

In developing predictive models, analysts must consider the dynamic, somewhat unpredictable, and seemingly irrational nature of human behavior. For example, as more working class and middle class people recognize that college is a high risk investment for themselves and their families, a greater number should choose to opt out of school or delay college participation, choose community colleges for the first two years of schooling, or select other majors. But this may not always be the case.

Rational Choice Theory has limitations for understanding college choice. Theories of asymmetrical information, time discounting, and sunken investment, illustrate that people can make sub-optimal decisions about choices even as they gain knowledge.

College administrations can also change their behaviors to survive and thrive in a more competitive environment.

What happens to the American Dream during the College Meltdown?

American cultural outlets are slowly recognizing just how unequal society has become.  Traditional images of the American Dream and the values of meritocracy are being challenged by more critical discussions about a dangerously unequal society, including the increasingly corrupt and caste-like nature of  higher education.  The following quotes highlight this slow change in consciousness:

"...Public universities and colleges no longer offer the same degree of opportunity they provided to low and moderate income Americans as recently as a generation ago (Dr. Suzanne Mettler in "Degrees of Inequality").

"...Mergers are a hot topic for all kinds of schools, regardless of race and mission. They are presented by legislators as a way to save taxpayer money, strengthen research and educational opportunities, and to increase visibility in a hyper-competitive rush for student enrollment. But beneath the surface, it is part of a far more dangerous plan to divide the haves and have nots..." (Jarret L. Carter, HBCU Digest).

36% of colleges with endowments under $25 million are spending more than 5% per year from their endowment. It's unsustainable. (Dr. Robert Kelchen, Seton Hall University)

"If current trends continue over the next few decades, most state university systems would soon lose all funding from their states....In 2025 Colorado would become the first state to allocate zero funding to higher ed; Iowa would follow in 2029, then Michigan (2030), then Arizona (2032).  Most states wouldn't appropriate any university funding by 2050." (Alia Wong, The Atlantic)   

"You just have to walk through the Yale campus to see what money will buy you, which is a country club, right?...But we have to look at this in the big picture: There are tons and tons of other students at other colleges who are carrying enormous debt loads through their 20s and even into their 30s because school has gotten so expensive." (Malcolm Gladwell, NPR's Weekend Edition)

"...with the higher education industry growing faster than nearly any other industry in the world, we can probably expect its corruption and cronyism to grow just as fast." (Jesse Nickles, College Times)

There is also a growing body of literature critical of US higher education and specifically its institutional financing, service delivery (including the exploitation of adjuncts), student access, student outcomes, and accreditation.

The US college meltdown is deeper than most critics know.   How many people are examining Student Loan Asset-Backed Securities (SLABS) and higher education construction bonds?   

How many citizens really know how their local university and college endowments are getting consistent double digit returns?  Has your school received a valid stress test (NACUBO, 2015)?   

Powerful critics such as Bain Capital (Denneen & Dretler, 2012) and the New America Fund (Selingo, et al, 2013) argue that colleges are spending beyond their means, using outmoded teaching methods, becoming less accessible to students and their families, and refusing to be accountable for student graduation and default rates and “gainful employment” numbers.

Other sources have called the US higher education system's ancillary student loan businesses and accrediting agencies as either criminal or immoral.   For decades now, the student loan industry has been a racket: a scheme between corporations and government resulting in debt peonage for millions of working Americans.   

These harsh judgments are coming at at time of increasing government austerity towards higher education and college tuition costs that are out of reach for many students and their families.

While some may invite the US college crash as a form of “creative destruction” (Johnson, 2014, Economist, 2014), working families are discovering that higher education is an expensive if not risky proposition, sewing “seeds of discontent” among students as well as teachers (Frey, 2013, Chomsky, 2014, Mettler 2014, Lawler, 2015).

Knowing the perils that colleges, students, and families face, this briefing is a starting point to

• Identify whether your school is “at risk” (stress testing)
• Identify where changes can be made, and
• Discuss the importance of being personally and socially involved in making changes

Truthfully, most major "elite" schools are growing in power in wealth.  But this is education for the few.  My purpose here is to educate and agitate people about the college meltdown which is now underway at for-profit colleges, community colleges, Historically Black Colleges and Universities (HBCUs), tribal colleges, schools with endowments below $50 million, and academic programs, such as law schools, at public colleges and universities facing state budget issues.

"For decades, bad actors in this (for-profit) industry have engaged in awful abuses, and for five years we’ve seen steady revelations of such misdeeds, including blatant deceptions by for-profit colleges to students and government overseers." (David Halperin)

"After reviewing the data compiled by several researchers...community colleges are pretty much a mess.  They get far too few of their students on the road to good jobs or four-year college degrees.   Many of their classes are poorly taught.  many of their programs are poorly organized.  Even their best effort are poorly funded."  (Jay Matthews, Washington Post)

"The problem (with community colleges) isn't tuition.  It's guidance and teaching.  Students are turned off not by the cost of community college but the frustrating entrance standards and classes that do not take them in the directions they want to go.  They are given little assistance in navigating the confusing requirements." (Jay Matthews) 

According to Johnny C. Taylor, president & CEO of the Thurgood Marshall College Fund, 50 to 60 percent of HBCUs don’t have a long-term optimistic outlook and about 10 percent are in imminent trouble.

"HBCU dorms have fallen into serious disrepair. Classrooms are in need of updating, and academic programs have suffered. Some schools have had to reduce faculty and staff. To be blunt, it’s the result of years and years of financial neglect. Some of these schools are in need of a major infusion of cash." (Lynette Holloway in The Root).

"These (tribal) colleges not only have high costs per graduate, but also weak educational results. The reasons are complex, but they start with the fact that many reservations are places of despair with levels of alcoholism, drug use, suicide, out-of-wedlock childbearing, violence, and unemployment that would shock the average American. Despondency rules."  (Tom Burnett)

"Law schools face real business challenges. Demand has declined every year since 2010—not just a little but by nearly 40 percent. The same number of law schools have 33,000 fewer prospective customers than they had five years ago."

Those who are sufficiently concerned need to read more about this issue and must follow up with their own homework and social action.

Elite private schools and State Flagship Universities that possess multi-billion dollar endowments, perpetual tax breaks, and renewing government grants promise to get wealthier and more powerful, leaving hundreds of poorer schools in peril.

 Institutions at Risk (“Stress Test”)

If higher education administrators, accrediting agencies, and teachers union officials refuse to be transparent and accountable to students and former students, alumni, adjuncts, and communities, the US college meltdown promises to be more cataclysmic.

Denneen and Dretler (2012) identify at least 13 metrics to identify whether your school is in financial trouble. If your school is not an elite private or public university with a large endowment, you might be at risk if your school is experiencing:

1. Falling admissions
2. Median salaries of graduates are flat
3. Reductions in funding
4. Taking on more debt
5. Tuition increases
6. Reducing faculty head count
7. Cut backs on financial aid

Best and Best (2014) argue that public universities that rely on out-of-state and international students may also be taking on risk that is not readily apparent.

Where to Make Changes
Daneen and Dretler (2012) outline four major areas to make changes.

1. Developing a clear strategy focused on the core of the institution (places that clearly add value)
2. Reducing support and administrative costs (fragmentation, redundancy, unneeded hierarchy, need to outsource some functions—caution reducing instruction costs)
3. Freeing up capital in non-core assets (real estate, physical assets, intellectual property)
4. Strategically investing on innovative models (flexibility for students)

Selingo, et al (2013) mention similar strategies and add several more options in reforming colleges, including:

• Stronger partnerships with community colleges
• Online offerings, hybrid courses
• Data driven student advising system
• More flexible and effective learning systems (online tutorials more effective than lecturing, personalized systems)
• Targeted financial aid
• Peer tutors and supplemental instruction
• Forging partnerships with business and government
• Make transferability more accessible
• Performance based funding

Exemplars of Innovation
No one can tell a community and its colleges what they must do to save resources and generate long-term resources. But there are exemplars of schools doing the right thing for their communities and their student bodies.

Coops are innovative partnerships that allow students to gain work experience before graduating. While coops have been an integral part of wealthy schools such as Drexel University, they can also be used to provide people with needed skills to serve a community. In another briefing, I highlight the growth and success of training at Working Class Accupuncture.

In Rockville, Maryland, nine public colleges and universities are housed in one campus--called the Universities at Shady Grove.  The program began 16 years ago  to "produce an educated workforce and encourage college completion among populations that traditionally struggle to get their ­degrees."

Innovative projects may require some pain, but may lead to even stronger and more mindful and sustainable programs.

Spelman College, for example, saved money by removing interscholastic sports, but replaced them with wellness programs that are an incubator for a "wellness revolution."

Social Involvement
Getting institutions to cut administrative fat, reduce cronyism and “dead wood”, and become more innovative will often result in resistance, even as other schools become more innovatative (Lederman, 2013). According to Daneen and Drettler (2012), in order for change to occur, an institution must

• Bring in key stakeholders to make needed change
• Acknowledge that change is necessary throughout the institution
• Address not only cost cutting, but adding value (e.g. consolidation can improve efficiency)
• Be clear about roles and accountability (functional accountability)

Conclusions
People in the US are living in times of increasing government austerity and declining percentages of traditional college-age students. These are political and social realities that are not going away soon. These realities make it vital that students, families, teachers, educational support staff, administrators, business people, taxpayers, alumni, and community members be actively involved in making colleges accessible, accountable, and responsive to society.

Strategic plans require informed input from an array of stakeholders who must be willing to sacrifice and to innovate. Without this, communities should be prepared for their schools to fail financially. Colleges should pay attention to their core missions, be wary of fads, and be able to adapt as their communities and their economies change. I hope that some of the ideas have prompted readers to think about what they can do to promote change in their colleges.

If you are not a member of an elite institution, how will your local school or alma mater listen and respond? Will they keep their heads buried in the sand, or will all stakeholders work together to be more socially responsive and responsible? If administrators and political leaders are unwilling to offer substantive changes, will students, teachers, and communities take a much larger and more active role in governing institutions, as they appear to be starting to do?

Epilogue: A Sincere Effort from Everyone
There is no shortage of knowledge about what works in US higher education. However, politics and power often get in the way of change (Habley, Bloom & Robbins, 2012, Mettler, 2014).

Those in power hoping to keep critics at bay by offering stakeholders a voice--but not actually considering any of their substantive or "radical" ideas--put themselves and their institutions and communities in peril (Hogan, 2003). It may give breathing room for those on the way out, but it doesn't ensure that the institution can survive for the longer run.

Let's get real. Political officials, regents, board members, and administrators know about lucrative and shady business deals, crony administrative positions, and high-priced pet projects. Teachers and teachers unions know about boring, uncaring, and unprofessional teachers who should be fired. Students know about ill-prepared disinterested peers and those who are cheating their way through school. Citizens know about the lack of access for particular people in their neighborhood and the maldistribution of resources. But it takes courage (and outstanding organization) to get everyone working, and struggling together, before a college fails in its mission.

While those with power may argue that others are at fault, they cannot disregard their own duties to facilitate the education and betterment of their communities.

[First edition posted as "The US College Meltdown," April 13, 2015.]

     

When college choice is a fraud

Students are targeted and lied to by subprime colleges and they are often treated with indifference by public education.

In 2014, USC graduate student Constance Iloh and her advisor Dr. William Tierney examined the "rational choices" behind college choice. Their subjects were more than 130 students who had chosen either a community college or for-profit college for a vocational nursing or surgical technician associate’s degree.

Rational choice, a common theory in mainstream economics, refers to the theory that individuals make decisions to maximize their benefits and minimize their costs. By talking to focus groups, the researchers hoped to find out why students chose a $30,000 for-profit education lasting 13 months or a $5,000 public program taking two years to finish. Both schools had graduation rates of about 30%.

In the Iloh and Tierney study, students who chose for-profit colleges said that community colleges presented too many barriers and that their schools offered more convenience and accessibility in scheduling and location. With accelerated schedules, for-profit students thought they could graduate earlier than if they attended a community college--which was important as they weighed important family obligations.

Some for-profit college students also believed their education was superior to a community college because it offered more "hands on" opportunities. The researchers did not dig deeper though, to investigate how the students came up with their ideas.

Although most of the students were probably women, and many were working-class people and people of color, the researchers did not discuss important race, class, and gender issues. The researchers also ignored examining cross-culturally: what other nations have done to make higher education more effective, socially just, and democratic, or even how various states in the United States have made college free or low cost to its citizens.

"Rational choice" in US education, however, must be examined in a society affected by deindustrialization and deskilling of work, government austerity and the defunding of public education, neoliberalism, structural racism, increasing economic inequality and reduced intergenerational social mobility, social myths perpetuated by predatory marketing, and ultimately--difficult choices caused by "the injuries of class."

The truth is, millions of hard working low-wage workers (including single mothers, disabled military veterans, struggling immigrants, people with learning challenges or those who have had fewer educational opportunities) may be looking for the most obvious way to achieve the American Dream, whether it's from a message in their email inbox or a friendly voice at the other end of the telephone.

But that's the essence of the for-profit con--something that Iloh and Tierney downplay.  There are subprime schools regularly trolling for the most vulnerable people.

The researchers also fail to recognize that some for-profit students continue along the more financially expensive route, even after realizing they've made a bad choice, believing they have sunk too much into their investment to quit--and knowing that their credits won't transfer.

Theories of Sunken Investment, Time Discounting, and Asymmetric Information may be useful in understanding the difficult personal choices that working class people face--but theories of justice must also be utilized.

Sadly, this study really shows the dysfunctional nature of US education in general. Whether a working class student chooses a for-profit college, community college, or public or private university, he or she is taking on significant risks of either not graduating, taking on enormous debt, subjecting family members to debt obligations, or being taken away from important family interests.

Dr. Tierney is not an objective researcher (no researcher is). He is a tenured professor at an elite university who believes for-profit colleges have a role in American neoliberal society. And he has colleagues who have profited from this line of thinking. Tierney believes for-profit schools have problems, but that they can be reformed. With the poor state of many subprime for-profit colleges and community colleges, it's difficult to imagine how educational reform is possible.

To make better informed choices, working-class people surely need to learn about the myths of college and the sales pitches that are used to hook unsuspecting prospects. But even that is not enough. Without social justice, fairness, and access in society, people will be compelled to pray and make the best of unjust and limited "rational" choices.

"If we expect to increase the rate of degree completion, we must invest in early childhood education and enhance the quality of precollegiate education, especially for students who are African American, Hispanic, and low income" --Diane Ravitch

An earlier version of this article is available at https://www.linkedin.com/pulse/college-choice-rational-dahn-shaulis?trk=mp-author-card