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Trusteeship Magazine

Viewpoint: 12 Inconvenient Truths About American Higher Education

By Richard Vedder
May/June
2012
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On the surface, America has a great higher education system that works beautifully. Our colleges and universities, we are often told, are the best in the world. They consistently dominate the international rankings. A number of Nobel Prize award winners are closely associated with American institutions. Foreign students flock to our country to derive the benefits of those institutions.

But below the surface, one can identify a number of flaws in the system. I would like to address what I call the “inconvenient truths” about American higher education and how they relate to the responsibilities of the boards of colleges and universities.

Inconvenient Truth #1: Tuitions Are Too High.

By any measure, American colleges and universities are expensive and growing more so all the time. Tuition fees have risen at double the rate of inflation—and, most important, faster than family incomes. Adjusting for inflation, Bureau of Labor Statistics (BLS) and National Center for Education Statistics (NCES) data suggest that tuition charges are more than double what they were a generation ago.

The trend—prices increasing faster than family income—is not sustainable over the long haul. For example, according to NCES data, in 1979–80, public four-year institutions had an average tuition of $738, which was 4.5 percent of the median annual household income of $16,461. Thirty years later, in 2009– 10, the average tuition was $6,695, some 13.4 percent of median household income. For independent institutions, tuition absorbed 19.6 percent of a year’s income in 1979, but 45.4 percent 30 years later. The price of college has been partially offset by rapidly growing student aid. But even after allowing for that, costs have jumped significantly for students.

There are a number of reasons for rising tuitions, but boards should not accept at face value conventional explanations of rising costs—such as “utility and healthcare costs are soaring”—which are also true of many private-sector companies that have nonetheless avoided large price hikes for customers. How do they do so? One key way is suggested by BLS data on labor productivity that show they cut other employee costs over time.

Boards might ask: How do our institution’s tuition increases compare with peer institutions and the national average? What are the reasons for the increases? Are we trying to maximize revenues, institutional prestige, or something else? Does “sticker shock” drive good students away? Which costs are increasing, and why?

Inconvenient Truth #2: Colleges Are Not Engines for Growth.

It is an article of faith among politicians, college and university presidents, and other opinion leaders that higher education institutions promote jobs and are engines for economic growth. According to that view, investing in higher education is like investing in highways, power plants, or software development —only the investment is better, with a higher rate of return.

That is a nice theory, and no doubt we are better off having colleges and universities than not having them. Much innovation has been spurred by educated people who understand complex technical and scientific matters. But the evidence does not support the conclusion that more spending on higher education automatically promotes economic development. For instance, as I demonstrate in my book, Going Broke by Degree (AEI Press, 2004), of three Midwestern states, the one that spent the most on higher education from the late 1980s to early 2000s saw the lowest growth rate in per-capita income.

Inconvenient Truth #3: College Degrees Don’t Guarantee Economic Success.

High-school students are told that they will not be successful in life unless they attend college. The unspoken assumption is that possessing a college degree is a ticket to a comfortable middle-class life—if not better.

That assumption historically was largely true, but it is increasingly not the case. We are turning out far more college graduates than the sum total of jobs in the relatively high-paying managerial, technical, and professional vocations where college graduates have been traditionally been employed. Today, we have 19,000 parking-lot attendants with bachelor’s degrees, not to mention 80,000 bartenders and 107,000 janitors— and those numbers can’t all be attributed simply to limited opportunities in the current economy.

Trustees might push for greater data on the post-graduation outcomes of students. What does the average alumnus earn five years after graduation? How do our majors in the humanities (or hard sciences or the business school) fare after college—what do they do? More generally, how does labor-market information affect how we alter our curriculum?

Inconvenient Truth #4: Undergraduate Students Are Often Neglected.

A large proportion of students attend institutions with undergraduate, graduate, and often professional schools. At many of these places, vastly more resources are showered on the graduate students than the undergraduates. Indeed, often a good deal of undergraduate teaching is done by relatively low-paid graduate students or adjunct professors with little enduring commitment to the institution.

One thing is certain: Reward systems strongly favor faculty members who emphasize research over teaching. Average salaries for full professors at top research institutions are higher and have risen more than for those at colleges and universities that emphasize teaching, according to data from the Integrated Postsecondary Education Data System (IPEDS). Salaries at fouryear institutions have gone up more than those at two-year institutions where there is no research expectation.

Trustees might ask: What percent of instructional resources go for undergraduate versus graduation instruction? How have faculty teaching loads changed over time, and why? Do undergraduate students feel neglected, as indicated on the National Survey of Student Engagement (NSSE) surveys or other data? Do we compensate faculty members for undergraduate advising? Do researchers get better pay than those dedicated to undergraduate teaching? If so, why?

Inconvenient Truth #5: Students Aren’t Necessarily Learning Much.

One of the dirty little secrets about higher education is that a lot of people don’t work terribly hard. Surveys of college students, like the Time Use Survey of the BLS, show that, on average, fulltime students spend less than 30 hours weekly attending class, doing reading assignments, writing papers, or preparing for exams. Since the typical student is in college about 32 weeks a year, that means she or he is spending about 960 hours per year on studies. Add in the time she or he works a job, maybe 400 or 500 hours, the typical student is working or studying perhaps 1,400 hours a year—at the same time data from the Organisation for Economic Co-operation and Development (OECD) suggest that their parents are on average working 1,778 hours per year.

Meanwhile, perhaps partially as a consequence, a large portion of college students appear to be learning little. In their book Academically Adrift (University of Chicago Press, 2011), Richard Arum, a professor of sociology at New York University, and Josipa Roksa, an assistant professor of sociology at the University of Virginia, give evidence that many graduating seniors have gained little in the way of critical-learning skills while in college. The 2003 National Assessment of Adult Literacy, the most recent data we have, has shown a worrisome drop in literacy among college graduates since the early 1990s. All of that is happening partly because of declining academic standards. In 1960, the average grade was between a B- and C+; now it is between a B and B+.

In order to fulfill its fiduciary responsibilities effectively, the board must understand, monitor, evaluate, and exercise responsibility for the institution’s academic programs and policies.

Trustees might ask: Do we administer the National Survey of Student Engagement (NSSE) and Collegiate Learning Assessment (CLA) to students, and what do they say about our college’s students relative to peer institutions or national averages? Do we publish the results? What is the grade distribution by major subject area, how has it changed over time, and does it contribute to a lack of rigor and low levels of student academic engagement?

Inconvenient Truth #6: Most Students Do Not Graduate on Time.

The bachelor’s degree is almost universally advertised in America as being a four-year degree. In financial planning for college, most people assume the student will graduate in that amount of time.

The reality, however, is different. In fact, according to the NCES, of the students entering college in 2002, only 36.4 percent graduated in four years, while only 57.3 percent graduated within six years. In other words, more than 40 percent have not received a degree even after six years. The reasons for low graduation rates include inadequate initial academic preparation, financial pressures, poor choice of field, and insufficient study, to name a few. The trend has been exacerbated by the fact that a growing proportion of students are nontraditional— balancing work and school. In addition, more institutions have been cutting back on the courses they offer for budgetary reasons.

Trustees might ask: How have our institution’s graduation rates changed over time? How do they compare with peer institutions? What are the characteristics of the students who drop out? Can we incentivize administrators and faculty members to pursue a more aggressive policy to raise graduation rates? What strategies are most likely to reduce the problem—such as mentoring students or providing needed financial aid?

Inconvenient Truth #7: Freedom of Expression Is Often Curtailed.

Colleges and universities are supposed to be citadels for academic freedom and the free expression of ideas. Yet many institutions, allegedly in the interest of promoting tolerance and diversity, restrict constitutionally protected forms of behavior, especially free speech. Many campuses quarantine free speech to remote areas, called “free speech zones.” Speech codes often masquerade as policies on discrimination, harassment, diversity, or the like.

Healthy intellectual diversity is also often limited by the strong left-wing political perspective in many academic departments where public-policy issues arise, and sometimes there is evidence hinting that more-conservative professors are discriminated against in hiring decisions. A study by Christopher Cardiff and Daniel Klein at 13 California institutions, for example, found that for every registered Republican faculty member, there were five registered Democrats, with the disparity much greater in the social sciences.

Trustees should not try to influence what should be said or not said, or taught or not taught, but they might ask: What protections does our institution offer to members of the campus community to guarantee that many perspectives are represented in our discourse? How does the administration ensure that no faculty members are being discriminated against for their political views?

Inconvenient Truth #8: Colleges Have Not Been a Force for Greater Economic Equality.

One of the major justifications of governmental support of higher education is that such subsidies are needed to encourage low-income students’ participation in college, which in turn supposedly increases income equality and promotes the American Dream. It is an article of faith that state universities, given such support, accomplish these goals.

But, in 1965, when the Higher Education Act passed, and before we had much of a federal student-loan program or Pell Grants even existed, larger proportions of college students were from lower-income backgrounds than today. According to the Statistical Abstract of the U.S., we then spent 2 percent of the GDP on higher education. Yet the most comprehensive measure of household-income inequality, the Gini coefficient, was a low .367 in 1967, the first year data were available. By contrast, in 2010, the Gini coefficient had risen dramatically (to .469) denoting more inequality, while higher education spending had climbed to 3 percent of GDP. In other words, more higher education has been increasingly associated with less, not more, income equality.

Moreover, within higher education, the gap between the haves and have-nots among institutions has grown. The elite private colleges that draw lots of affluent students have had greater increases in spending per student than the public institutions, and not a single state institution is in the top 20 on either the U.S. News & World Report or Forbes list of top American colleges today. That said, even some state universities are becoming elitist havens for the rich—Department of Education data show that the proportion of students receiving Pell Grants at one top public institution is lower in some years than it is at Harvard University, for example.

Trustees might ask: What is the average income of parents of incoming students? What percent are on Pell Grants? What proportion of our student aid is need-based, and what proportion is meritbased? What would be the consequences of abandoning merit-based aid or aggressively recruiting low-income students?

Inconvenient Truth #9: Federal Student Aid Doesn’t Work.

Federal student-aid programs began to either help economically disadvantaged students or to promote study in certain fields, such as math and science. Yet the evidence is that they have done little to achieve either of those objectives. For example, Postsecondary Education Opportunity, an Iowa-based organization, has used federal data to show that the proportion of recent college graduates from the bottom income quartile has actually fallen from about 12 percent around 1970 to 7.2 percent today. This is during a period when, adjusting for inflation, federal financial aid to students nearly tripled, going from $53.5 billion in 1970 to $155.1 billion.

Moreover, financial-aid programs are Byzantine in their complexity. Until recently, the mere application for assistance has involved completing a form of more than 100 questions that scared off many potential low-income students. Why not move to just two federal programs, the Pell Grants and a single student-loan program, and essentially base aid eligibility on data that students and their families already provide to the IRS?

Inconvenient Truth #10: Trustees Sometimes Fail to Get Vital Information.

Did your institution have a good year in 2011? Do you know whether its seniors have more knowledge of basic facts than its freshmen? Do you know whether students’ critical-thinking skills improved? Do you know how many hours students were engaged in academic pursuits or partying, or whether they liked their college experience? Do you have any idea what the typical earnings of a graduate are five years after graduation?

Sometimes trustees do not get full information on campus issues. Was Professor X’s firing for allegedly questionable conduct justified, or was he a really a courageous whistleblower trying to curb dubious campus behavior?

Trustees should ask tough questions and request the kind of information that gives them a better picture of what is actually taking place at their institution. For instance, they should require that their institution conduct surveys on student needs, attitudes, and activities, as well as those on student learning and engagement. They should also spend time informally on the campus—in the student union, library, dining hall— chatting with students, faculty members, and others.

Inconvenient Truth #11: Intercollegiate Athletics Is Costly and Corrupt.

The tragic scandal at Penn State is probably the most outrageous, but by no means the only, example of college sports run amok. Incidents of “improper benefits,” illegal payments, gambling, and all sorts of other infractions make headlines far too frequently. To be sure, many sports—track, lacrosse, soccer, and so on—involve healthy athletic competition at reasonable costs. Those programs offer positive experiences for participants and others, such as improved health, discipline, leadership skills, and campus esprit de corps. But the commercialization of Division I football and basketball has had a corrupting influence. Iconic programs at a number of universities have been sanctioned for major violations of rules, and some critics argue that is just the tip of the iceberg.

The fact is that only a handful of college athletic programs cover their costs. At Division II and III institutions, costs are rising faster than the revenues, and National Collegiate Athletic Association data show that fewer than 20 of the 120 or so top Bowl Championship Series (BCS) institutions break even financially.

Trustees might ask: What do our intercollegiate athletic programs cost? How do athletes perform academically relative to non-athletes? Does the athletic director report to an academic officer, or does he or she operate largely semi-independently of other parts of the university? How are we working with peer institutions to reduce costs?

Inconvenient Truth #12: Colleges Frequently Aren’t Run to Benefit Students.

A good case can be made that much of what goes on at colleges these days is designed to make life easier and more prosperous for employees and, at times, alumni, than for the students. We are in an era not only of multimillion-dollar football coaches, but also of million-dollar presidents and professors whose salaries can approach $200,000. College and university presidents frequently succeed by raising money that is distributed to various constituent groups—faculty members, administrators, alumni, and others—to make them happy instead of to improve student learning.

For example, a good bit of the research conducted at colleges and universities focuses on esoteric explorations of minor issues of little interest to anyone else, even fellow academics. Faculty members often teach what they want, when they want, and even sometimes to whom they want, rather than teach fundamental material that students most need to learn.

In response, trustees should put renewed emphasis on their responsibility to ensure that they are appropriately engaged on issues of academic quality— an engagement that respects the prerogatives of faculty members and academic administrators, but that helps also to assure students and other stakeholders that the education offered by the institution is of the highest possible quality. They might ask: Does the institution say what and how much students should learn? What kinds of evidence does the institution collect about student learning? Is the institution benchmarking performance against external standards as well as tracking institutional performance over time? How are assessment results used?

The Key Role of Trustees

Stagnation in the traditional college-age population pool, limited public resources, and other factors will put serious strains on American higher education in coming years. Additionally, enrollment growth from non-traditional students—older returning students, veterans, and others— is likely. Reform is vital.

That reform will come from two sources. First, although markets in higher education are subdued in their role in enforcing efficient behavior, they will have growing influence as colleges and universities are increasingly financed by paying students rather than government appropriations. The rise in tuition is clearly unsustainable, and changes will be forced on the academy. To reduce costs, institutions will need to consider such moves as higher teaching loads, reduced administrative bureaucracy, more intelli intelligent use of technology, the use of facilities throughout the year, the re-evaluation of library-book acquisition policies, an end to faculty tenure, and many other reforms.

Pressure to make higher education more efficient is also now coming from the for-profit sector, which has an intense interest in improving the academic experience of students and a market orientation that incentivizes institutions to operate efficiently. While students at a number of those institutions perform relatively poorly on some outcome measures, the growing market share of the for-profits suggests that such institutions are popular, creating new challenges for traditional colleges and universities.

In addition, alternative forms of certifying vocational competency are evolving. The Massachusetts Institute of Technology is starting to certify students who successfully master some of its open-source course materials. Straighter- Line is offering the Collegiate Learning Assessment online so individuals can demonstrate their competency on this popular examination. Expensive private institutions with modest reputations and endowments are highly vulnerable, as are perhaps some of the less highly regarded public institutions. If such institutions are to survive, trustees will be vital agents of the big changes required to remain competitive.

Colleges and universities are inherently conservative, and change will be resisted. Thus, boards will play an increasingly important role in helping their institutions remain successful and relevant in the future. One thing is certain: American colleges and universities are going to change—a lot—in the next generation, and boards must help guide them.

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