Understanding Accumulated Student Debt, Rising Tuition, Public Policy

ASDThe impact of accumulated debt on federal financial aid policy/funding, state financing of higher education, institutional enrollment strategies, and student college going decisions is complex and difficult to unravel. The New York Federal Reserve Bank has released a staff report contributing to the understanding of the complex intertwined dynamics that deserves a thorough read and discussion at the institutional strategy level. I have some issues with causal inference and conclusions but the issue is of paramount importance. There are significant implications and ramifications to their findings. I have selected a couple of resources that help focus the dialog on strategic issues.

Consider the finding “We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent.”

  • What does this actually mean? Does it infer that institutions’ adjusted tuition is based upon aid formulas rather than true labor and compliance costs? How does this play across sectors, types, regions and states? What are the political ramifications of this finding and what will happen in the hands of politicians in a national election cycle?

Consider the data published in the Chronicle of Higher Education that indicates “just 20 universities are responsible for a huge share of graduate-student debt, amounting to more than $6.5 billion in a single year (2013-14).” and goes onto show that Walden University ranked first with $756,336,024 in graduate student debt. (Walden U. Responds to Report on Graduate-Student Debt)

  • Billions spread over 20 institutions gets everyone’s attention. Is this an expose on exploitive strategy or does the data need to be contextualized? Contextualizing the data is something that needs to be done more adroitly by the higher education community. Again what are the implications and political fall out?

Consider the intensifying focus on the earnings to accumulated debt ratios being examined at the programmatic level as examined in the Brookings study included below.

  • The emergence of the relationship between debt, funding and earnings will intensify. The rate of return and schedule of payback, the value to society not just the individual will be asked again and again, and the focus on outcomes will become more intense and more heated.

The New York Federal Reserve Bank in their July 2015 Staff Report examines the

Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs

 When students fund their education through loans, changes in student borrowing and tuition are interlinked. Higher tuition costs raise loan demand, but loan supply also affects equilibrium tuition costs—for example, by relaxing students’ funding constraints. To resolve this simultaneity problem, we exploit detailed student-level financial data and changes in federal student aid programs to identify the impact of increased student loan funding on tuition. We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent. We also find that Pell Grant aid and the unsubsidized federal loan program have pass-through effects on tuition, although these are economically and statistically not as strong. The subsidized loan effect on tuition is most pronounced for expensive, private institutions that are somewhat, but not among the most, selective.

Huffington Post published the Average Student Debt Burden In Each State

Published data from the Department of Education, College Board, and The Institute for College Access & Success bringing student debt burden to the state level.

The Chronicle of Higher Education Reported “As Graduate-Student Debt Booms, Just a Few Colleges Are Largely Responsible

Published data focused upon graduate student debt burden as a separate issue. According to their table just 20 universities are responsible for a huge share of graduate-student debt, amounting to more than $6.5 billion in a single year (2013-14). Walden University ranked first with $756,336,024 in graduate student debt.

Brookings Reported in November 2014 an analysis of Graduates’ Earnings Growth and Debt Repayment

Brookings published an analysis of accumulated debt ratios for students enrolled in specific program types. The report also provides an interactive feature, Undergraduate Student Loan Calculator, to calculate the share of earnings necessary to service traditional loan repayment for 80 majors.

In closing

The relationships between accumulated student debt, graduates earning potential,  the earning to payback cycle alignment, and managing tuition price and discounting ratios, form a major issue stream that weighs heavily on the future of higher education. Institutions who understand this will focus on embedding as much value in their curricula as can be achieved. Then they will create a value narrative to guide implementation and align their institutional effectiveness model to close the loop and provide evidence of value. The context involved in achieving a higher value narrative requires we recognize the paradigm shift now underway. To align with the paradigm shift we must examine ways to future proof strategies within the broader context of how higher education is evolving.

Join us at one or more of our Institutes to more deeply explore critical issues facing higher education and strategies to address them.

International Students in Contemporary Context Insight from the U.K.

UK ImmigrationThe British public do not see international students as “immigrants” and are opposed to reducing the number coming here, even if this would make it harder to reduce immigration numbers, according to new research released today by Universities UK and think-tank British Future.

The government should instead remove international students from the net migration target and support and challenge universities to attract more international students to study here, the report argues.

The new research poses a challenge to the government as it seeks to keep its promise to reduce net migration to “tens of thousands”.  International students are the largest group of migrants from outside the EU counted in the government’s net migration figures, representing around a third of all people coming into Britain.

Yet only a fifth (22%) of people think of international students as “immigrants” at all.

Other findings include:

  • When people are told that students are part of the target, “the most common reaction is surprise and even bafflement that international students are classified as immigrants at all,” the report says.
  • New ICM polling conducted for the organisations finds that targeting international students would be unpopular and would fail to address public concerns about immigration. Six out of ten (59%) people say the government should not reduce the number of international students, even if this makes it harder to reduce immigration numbers. Only 22 per cent would support a reduction in international student numbers.
  • Among Conservative voters, the figure was even higher, with two-thirds (66%) of Tories opposed to a reduction in international student numbers, compared to just 23 per cent who would reduce international student numbers so as to get immigration numbers down.
  • The majority of people (75%) are in favour of allowing international students to stay on and work after they finish their degree. Support rises to 81% for Conservative voters.
  • Sixty per cent think international students bring money into the local economy, compared to only 12 per cent who think they are a net drain on the local economy.  Support rises to two-thirds (66%) of people living in university towns and nearly three quarters (72%) of Conservative voters.
  • Sixty-one per cent agree that Britain’s universities would have less funding to invest in top-quality facilities and teaching without the higher fees paid by international students. Only seven per cent disagree.

Download the study here.

“University of the Future” a Global Survey of Students


Laureate International Universities is the world’s largest network of higher education institutions with 75 members located in 29 countries and enrolling more than 850,000 students worldwide. In an effort to look forward and develop a vision for the future of their members over the next 15 years they commissioned a large scale survey of their students.

They commissioned Zogby Analytics to survey their students and 20,876 learners responded. The survey asked students about their vision of the optimum university  model 15 years in the future.

  • 52 percent of students who participated said most courses would be offered any time of day or night and 44 percent said most courses would have no fixed schedule
  • 41 percent of respondents said students would be able to earn specialized certificates to allow them to manage the pace of their academic career, rather than concentrating it into a two- or four-year span with a degree at the end
  • 54 percent said that collaborative courses focused on group projects will be offered, and 61 percent said that most courses will be designed by industry experts
  • 64 percent said courses will be offered in multiple languages Students will be able to access personalized instruction or tutoring online, according to 43 percent of those surveyed
  • 71 percent of survey respondents told researchers they think “career-oriented skills (not just subject matter) will be taught in future universities,” according to a summary of the findings
  • 43 percent of surveyed students said “their courses will include free content on the Internet to unlimited numbers of students,” according to the survey summary. That number increased slightly among students aged 18-24 and those in developing countries, to 45 and 44 percent, respectively
  • 55 percent saying that changes to how students take courses will benefit them, Asian students were both the most likely to tell researchers that future universities will be dominated by online content, and to say they think that’s a good thing
  • 44 percent of respondents said they think future instructors will be “part-time industry experts instead of full-time instructors,” according to the summary
  • 21 of respondents said they believe that grades will be based purely on academic performance and 64 percent said they would reflect a combination of academic performance and how much students contributed to teams

This is a must read. The study can be retrieved here.

An interview with John Zogby, Pollster and Founder, Zogby Analytics; Jonathan Zogby, President and CEO, Zogby Analytics; and Doug Becker, Chairman and CEO, Laureate Education, Inc. (Washington, DC June 9, 2014).