The New Reality for Higher Education

After my recent posts on university enrollments and affordability (see Enrollment Drops at Private Colleges and The Future of U.S. Higher Education), I received an email from Marc Scheer, author of No Sucker Left Behind: Avoiding the Great College Ripoff. On his site I found a link to a recent Wall Street Journal article (see Weighing Price and Value when Picking a College) that describes some of the very same effects that I anticipated in my earlier posts.

According to the Wall Street Journal:

Facing shrunken savings and borrowing options, parents and students are making some tough trade-offs in choosing and paying for college, suggesting some shifting attitudes toward higher education may endure beyond the recession.

Old dreams of adult children earning degrees from elite, door-opening colleges or “legacy” schools attended by relatives are falling away in some families, in favor of a new pragmatism. Other parents and students are doing a tougher cost-benefit analysis of the true value of a pricey undergraduate degree.

…Joseph Losco, an expert on the history of education, calls “one of the strange things” about the economics of higher education: “Universities and colleges don’t compete on price.” In fact, some college administrators fear lowering their sticker price will hurt their image…

Consumers have been complicit, largely because…“the baby-boomer notion that parents should give it all up for the kids.” In a May 2008 survey of 720 parents of college students by Gallup and Sallie Mae, a student-loan company, 46% said they had never, at any point, ruled out any colleges for their kids based on costs.

But now, “families are much more price-conscious and value-conscious,” Dr. Losco says. A soon-to-be-released Sallie Mae-Gallup study of 1,600 college students and their parents, conducted in March and April, says parents are increasingly anxious about tuition—and students are more skeptical about the value of a degree, compared with the survey from a year earlier.

Such thinking bucks the cultural view that an elite college degree is “the gold standard for both parents and students … validating their worth in society,” Dr. Losco says. Now, more “parents are saying, ‘I don’t have the money to get you where you want to go,’ ” he says.

Even when the economy picks up, some of this new price-consciousness is likely to endure. The engines that have enabled college costs to soar—easy credit, home-equity loans and growth in savings—have stalled. Total college costs are already up 67% in the past decade at private colleges and 84% at public four-year universities, based on College Board data, and graduates’ wages haven’t kept pace.

The percentage of students from middle-income households who are attending state schools is rising, and more lower-income students are enrolling at community colleges, the study shows. “We would expect to see an even greater shift” next year, a Sallie Mae spokeswoman says.

Interesting stuff! Check out the full article.

Disclosure: No positions

Comments

[Dirk McCoy:]

As I tell my children, before your dreams drive your reality, make sure reality is driving your dreams.

Jul 24 02:30 AM

[relaplan1:]

There are so many "mickey mouse" areas of study at the university that prospective students must carefully choose a major to develop marketplace skills. Nearly all of the recent college graduates I know have "mickey mouse" degrees and none of them have jobs. One, an accounting major, has a job.

Jul 24 09:52 AM

[ChickenLips:]

It's unfortunate that America doesn't value a broad based education in the arts & sciences any longer. Right now the "real world" of business enterprise could use a little dose of insightfulness and creativity that business and engineering majors lack in their decision making. Not everything, especially higher education, has to revolve around profits and expenses.


On Jul 24 09:52 AM relaplan1 wrote:

> There are so many "mickey mouse" areas of study at the university
> that prospective students must carefully choose a major to develop
> marketplace skills. Nearly all of the recent college graduates I
> know have "mickey mouse" degrees and none of them have jobs. One,
> an accounting major, has a job.

Jul 24 10:31 AM

[raising4dau...:]

The problem is that Americans have been placing TOO MUCH value on all degrees. Higher education is in the same boat as real estate....buyers leveraged themselves to hilt to buy the product (home or degree) and then realized they couldn't pay the note.

In 1972, a private school grad could easily get a starting salary equal to all 4 years of tuition, and that starting salary would buy a luxury car.

In 2009, that same grad (if s/he can get a job) will have a salary equal to the cost of a luxury car (say $30-40k), but that only buys 1 year of tuition at the same private school.

The greedy bankers, the ever greedier public sector, and "no price is too high" NPOs in healthcare and education are squeezing every last nickel from Joe Lunchbucket and Sally Bookkeeper, and that's why we're in such a mess. Throw in a couple wasteful wars and the treasure chest in gone, kaput.




On Jul 24 10:31 AM ChickenLips wrote:

> It's unfortunate that America doesn't value a broad based education
> in the arts & sciences any longer.

Jul 24 01:35 PM

[Mr Gadget:]

The community college here in Las Vegas has upgraded itself to a full college. That just ups the "prestige" not to mention salarys. The function of a community college should be to provide specialized training needed by local industry. It should also project coming needs like "solar technicians and installers" and set up programs to provide additional knowledge for people to survive in the workplace. It has to be flexible and aware of what's going on. It should also provide the math, science and english remediation needed for students to enter 4-year colleges and suceed. It's a terrible waste to have college professors spending their time doing this.

Jul 24 06:59 PM

[Teutonic Kn...:]

My mind leads me to the 1951 black and white move "The Man In The White Suit" where Sir Alec Guinness plays Sidney Stratton, a brilliant and obsessed young researcher working in a textile mill. He invents an incredibly strong fibre which repels dirt and never wears out.

Stratton was unhappy because as the lady janitor one night joking said to him "...you haven't got that tie..." What she meant was that even Stratton graduated with First Class Honors from Oxbridge (supposedly can then walk on water), he did not attend one of those feeder schools of the power elites, and therefore, although he had the talents, he did not have the connections to move up fast in the corporate ladder.

The fact of the matter is that we humans like to create ghettos, be it the inner city slum, or the most exclusive prep schools.

The present situation with our colleges are about the same. The grad schools produce tons and tons of master's and PhD, but when you look closely of what they indulgences, most are "solutions looking for a problem".

They are the de facto ghettos.

Jul 24 07:53 PM

[David Tsao:]

What Mr.Salomon is eluding too is a possible shift and serious consideration for what was once the trade school circuit (The DeVry's, ITT, and Corinthian's of the world). If the value/price conscious parent/student continues to remain after an economic recovery, these outfits may continue to see strong enrollments... At last check most of these companies are fully valued and have discounted the strength of this sector for the remainder of this year and next.

Jul 29 12:43 AM

[bminfo247:]

America should see a large increase in post-secodary education if market predictions prove to be correct. Check out Yahoo Finance for details on that information:
finance.yahoo.com/news...

Sep 11 10:18 AM