Value of a College Education and New Goals

By all accounts, partisan and otherwise, the world nearly drifted or exploded into a worldwide depression that would have rivaled the 1930s. Its economic and political ramifications would have changed life as we know it. 

As it turned out, the 2008 economic crisis sparked layoffs in virtually all occupations throughout the world. It was quite devastating. Revered and trusted companies simply went out of business. Unemployment or underemployment rose into the millions.

College Grads Worldwide

But in many nations, including the United States, college graduates were far less likely to lose their jobs than were their less-educated counterparts. Although many highly educated college-trained individuals were not immune from the economic hardship, they suffered less as a group.
This and other interesting statistics on the effects of the economic downturn have been compiled by the Organisation for Economic Co-operation and Development (OECD).
It reports that the unemployment rate among college graduates was between “two and four times lower than among workers with only a high school diploma.”
The report, Education at a Glance 2010: OECD Indicators, is the latest in an annual series that analyzes data among the 31 member countries, which represent the world’s largest capitalist economies, and five non-OECD members, including Brazil and Russia. For the first time this year, the report also included a significant amount of data from China, India and Indonesia.
Using data from 2008 and 2009, researchers were able to draw conclusions about the impact of the economic crisis and the relationship between employment and education.
“In some countries, people with higher education were almost unaffected by the crisis, whereas the crisis really hit hard the people in the lower end of the spectrum,” said Andreas Schleicher, head of the unit that produces the Education at a Glance series.
“That’s telling you something, that in a moment of crisis, in a high-wage economy, people who don’t really live up to those economies’ needs have a really hard time.”
Younger workers were particularly affected. In Hungary, the unemployment rate among 15- to 29-year-olds with a college degree was about 2 percent, compared with about 12 percent among workers without a high school diploma. In Ireland, 7 percent of college graduates ages 15 to 29 were out of work, compared with 15 percent of those without a high school diploma, the report says.

Shifts in Study-Abroad Destinations

The study also examines trends in the internationalization of higher education. While the absolute number of students opting to study abroad continues to go up, their destination choices are shifting. The United States has witnessed by far the biggest drop in its market share. It fell more than seven percentage points, from 26 percent to 18.7 percent, between 2000 and 2008.
Meanwhile, Australia increased its share by one percentage point, to reach 6.9 percent in 2008, the latest year for which figures were available, and Russia, a relative newcomer to internationalization, increased its share by two percentage points to reach 4.9 percent in 2008.
A mixture of foreign students has long been recognized as beneficial to the intellectual mix on a college campus. Australia has by far the largest proportion of foreign students among its college enrollments, a high 22 percent. By contrast, only 3 percent of students attending American colleges come from abroad. That is a significant decline and a disturbing one.
Australia is way ahead because of its aggressive strategies to attract foreign students, both on the part of government and individual institutions. Many universities see those goals as an integral and important part of their agenda.
The trend is not universal. Some countries are turning more inward. Following a huge increase in government support to create new universities in China, fewer Chinese students are studying abroad.
Most countries recognize the personal and societal benefits of higher education. But some are beginning to ask, is there a limit? When is this going to level off? Will we see declining returns on educating so many?
The report suggests that countries with historically high college enrollment, such as the United States, will have to invest in expanding enrollment if they don’t want to fall behind. In 1995, the United States had the world’s highest level of college enrollment. Now it is No. 14.
As a result, “what many Americans consider high is now just average.” A bit chilling.
Statistics indicate that many other nations are investing a greater percent-age of their national budgets in higher education than we are. Clearly, many American states have cut back their investment. Classes have been cut, and programs of study have been eliminated while tuition and fees continue to rise much faster than the rate of inflation. Many students have been forced to attend part time since they have to work full time to afford to go to college. Others borrow far more than they should be expected to. And so it goes.
Nonetheless, nationally and internationally, there is abundant proof that a college education is a good investment – for the person and for the nation. As noted above, graduates also suffered less than others during the recession. That is why it is so ironic to read that in state after state as well as in nation after nation, the cost of going to college is rising, and state funding is being reduced.
We saw the British government try to triple tuition a few months ago with resultant street riots in placid London. Other European and Latin American countries have pursued similar courses of action. In Puerto Rico, students have been locked in a battle with the government’s attempt to raise tuition from $1,300 a year to $2,100. Forget that most students receive commonwealth and federal assistance that would cover the increase; it is still a volatile issue.
Concurrent tuition increases and program reductions have occurred in most states in the United States. The tempo has intensified in the past two years. It will not abate.
All of that has led some scholars to recommend that students be charged tuition based on their ability to pay. A novel idea that is welcomed by some and scorned by others. Others suggest that if students could once again move along in a timely fashion and graduate in four years, millions of dollars could be saved. Nationwide, half of all college graduates take more than six years to graduate. Some observers contend that higher tuition and fees encourage students to graduate more quickly. That is seriously challenged by others.
West Virginia, not usually considered a leader in higher education, has established a scholarship incentive that only rewards those students who pursue enough courses to graduate “on time.” It has been successful, with more students graduating within a four-year timeframe.
For more on these issues and potential solutions, see Matthew Chingos et al., Crossing the Finish Line: Completing College at America’s Public Universities.

Making College Affordable

So what are the feds doing to address these problems? Actually, quite a bit. On Feb. 24, 2009, President Obama pledged, “We will provide the sup-port necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world.”
One of the vehicles utilized to try and reach that laudable goal was the Health Care and Education Reconciliation Act. It was to expand “educational opportunity for America’s students and families.”
The legislation also strengthened the Pell Grant program, promised investments in community colleges and extended support for Minority-Serving Institutions, primarily Black and Hispanic-Serving Institutions.
Very importantly, it established guidelines so student borrowers could manage their student loan debt more effectively.
A few years ago, it was thought it was less expensive to use existing banks and other institutions to coordinate student loans. But times change, and as Obama eloquently put it, “elections have consequences.”
Guidelines have been developed to end government subsidies given to financial institutions that made guaranteed federal student loans.
It is hoped that these new investments will be paid for by reducing the federal deficit.

So what does the overall plan include?

Larger Pell Grants

The act invests more than $40 billion in Pell Grants “to ensure that all eligible students receive an award and that these awards are increased in future years to keep pace with the rising cost of college.”
President Obama has promised to more than double Pell Grant funding. Pell Grant maximum awards are estimated to raise the award from$5,550 to $5,975 from 2013 through 2017.
By the 2020-21 academic years, more than 820,000 additional Pell Grant awards are expected to be made.
More Stable Funding for Pell Grants
The budgeting process for Pell Grants has often led to funding short-falls. The current shortfall is particularly severe because of the large number of students that have enrolled. It is hoped Pell will be placed on more secure footing in the years ahead.

Investments in Community Colleges

As the largest part of the nation’s higher education system and long ignored, community colleges enroll more than six million students. They feature affordable tuition, open admission policies, flexible course schedules and convenient locations. Community colleges work with businesses, industry and government to provide programs that meet societal needs such as nursing, health information technology, advanced manufacturing and green jobs.
The Reconciliation Act included $2 billion over four years for community colleges. These resources will help them develop, improve and provide education and career-training programs suitable for workers who are eligible for trade adjustment assistance.

Increased Support for Minority-Serving Institutions

While many colleges and universities are facing a host of challenges –shrinking endowments, decreasing state appropriations, deteriorating facilities and increasing costs – America’s Minority-Serving Institutions have been particularly hard hit.
They account for nearly one-third of all degree-granting institutions and enroll nearly 60 percent of the 4.7 million minority undergraduates in our nation. They have done more with less and enroll higher proportions of low- and middle-income students. The act will provide $2.55 billion in funding for these institutions. Dollars that will hopefully be used to renew, reform and expand programs to help students rise to their full potential.

Expanded Income-Based Repayment

About two-thirds of college students take out loans; the average student debt rises to over $23,000. This debt is particularly burdensome for graduates who enter lower-paying public service jobs. Others who suffer unemployment or serious illness setbacks or fail to complete their degree are still saddled with sizeable debts. To ensure that Americans can afford their student loan payments, the act expands the existing income-based student loan repayment program.
New borrowers who assume loans after July 1, 2014, will be able to cap their student loan repayments at 10 percent of their discretionary income and, if they keep up with their payments over time, will have the balance forgiven after 20 years.
Public service workers, teachers, nurses and military service persons will have their remaining debt forgiven after just 10 years.
More than 1.2 million new borrowers are projected to qualify for this program.

Student Loans

It is anticipated these education initiatives will be fully paid for by ending the government subsidies currently given to financial institutions that make guaranteed federal student loans. All new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the Department of Education. It is estimated that “ending wasteful subsidies will free up nearly $68 billion” over the next 11 years.

These are bold new ideas. Hopefully they will work.