Robert Kelchen

Wisconsin Higher Education Policy Issues for 2013

2013 marks a potential benchmark year for state higher education policy debates. More tends to happen in odd-numbered years because politicians are farther away from elections and more willing to make difficult budget decisions—and the influx of federal stimulus dollars is rapidly drying up. In Wisconsin, 2013 is a particularly important year as discussions begin on the state’s biennial budget. The American Association of State Colleges and Universities, an association representing primarily non-flagship public four-year schools, has released its list of the top ten state policy issues for 2013. They are the following:

(1) Increasing college performance

(2) Funding for public colleges and universities

(3) Tuition prices and policy

(4) State grant aid programs

(5) Academic preparation for college

(6) Immigration policy

(7) Competency-based education

(8) Concealed carry on campus

(9) Workforce/economic development

(10) For-profit college regulation

Not all of these issues are a major concern in Wisconsin (such as whether to grant in-state concern to illegal immigrants who graduated from a Wisconsin public high school), are particularly relevant to student success (such as concealed carry regulations), or are likely to change much (tuition policy). My take on the five most important issues facing the Wisconsin Legislature in 2013 are the following:

Priority #1: Workforce and economic development

Although many in the academic community might disagree with how I have these key issues ordered, the Legislature is clearly focused on workforce and economic development. I expect a focus on vocational and technical education in 2013, as outlined in an August 2012 report by Tim Sullivan, special consultant on economic, workforce, and education development. I’ve written about this report in a previous blog post; overall, the key points in the proposal are reasonable, as long as the Legislature doesn’t go off on a tangent regarding immigration policy or setting unreasonable expectations.

Priority #2: Increasing college performance

Legislation was passed in the previous session that required colleges to make certain accountability information public. (I analyzed UW-Madison’s 2012 report in a post last August.) This legislation didn’t really have any teeth in terms of changing a university’s funding level. This looks very likely to change in 2013, as performance-based funding is going to be a key point of discussion. As Gov. Walker outlined in a speech last fall, he is pushing for some of the higher education funding to be based on a college’s performance in key areas, such as graduation rates and possibly enrolling Pell Grant recipients. I’ll have much more to say about performance-based funding in future blog posts, but for now I will emphasize the importance of using some sort of value-added measure as part of the performance score. (I’ve written quite a bit on this in the past, as well.)

Priority #3: Competency-based education

Wisconsin has become a leader in competency-based education in specialized degree programs, allowing students to earn credit for prior knowledge in certain areas. Unlike some states, which are contracting with the not-for-profit Western Governors University, Wisconsin is doing their effort in-house through the University of Wisconsin System. This experiment will be watched closely around the nation to see whether students take up the program in meaningful numbers as well as whether it will be cost-effective.

Priority #4: State grant aid programs

In 2012, the Legislature tasked the Higher Education Aids Board, the state’s agency administering need-based and merit-based grant programs, with exploring ways to consolidate and modernize the state’s financial aid system. The report, released in December, failed to suggest any meaningful changes that would help ensure a more reasonable distribution of financial aid to students. I hope that the Legislature will reconsider ways to reduce the number of separate need-based grants in order to have a more streamlined and student-friendly aid system, but I am not terribly optimistic.

Priority #5: Funding for public colleges and universities

After several rough budget cycles, Wisconsin looks to be in reasonable fiscal health entering the 2013-15 biennium. As such, Wisconsin higher education is requesting a funding increase over the 2011-13 cycle. The University of Wisconsin System is requesting a $224 million increase (1.9%), while the Wisconsin Technical College System is requesting an additional $92 million (a 31.6% increase). Most of the requested increases for the UW System are designated for meeting the accountability goals, while most of WTCS’s requested increases are designated for meeting workforce shortages in high-demand occupations. These requested increases show the importance of the top two priorities on my list to Wisconsin legislators.

I expect 2013 to be a much calmer year in Wisconsin politics than the past several years, but no less important to the higher education community. Hopefully, the state will continue to make progress in meeting key performance goals and fostering student success.

Transparency and Teacher Education Programs

I am a firm believer in the public’s right to know nearly everything about government-funded institutions unless there is a clear and compelling reason for privacy. For that reason, I have been following the University of Wisconsin System’s fight against the National Council on Teacher Quality (NCTQ), a group seeking to make information on the standards of teacher education programs public. In conjunction with U.S. News and World Report, NCTQ is compiling course syllabi, textbooks, student handbooks, and other information to rate education schools based on whether they are adequately preparing future K-12 teachers for their professions.

This review process has been objected to by many public colleges and universities (the full list is here) on the grounds that the proposed methodology is inadequate for rating colleges. (Yet these same colleges boast about their U.S. News rankings in other aspects, although the rankings are just as flawed.)The University of Wisconsin System has long refused to cooperate with NCTQ on this, as evidenced by their March 2011 letter to NCTQ.

Yet the UW System and many other public universities are failing the public trust by refusing to make important information produced by public employees available at a reasonable cost. The Wisconsin Institute for Law and Liberty, a Milwaukee-based public interest law firm, sued the UW System last January on behalf of NCTQ to get the records turned over. WILL’s suit was ultimately successful in obtaining its objective, as the UW System agreed to turn over the relevant materials and pay WILL nearly $10,000 in damages and fees after obtaining additional privacy assurances.

Wisconsin taxpayers and students will foot the bill for the UW System’s initial refusal to make information public under open records laws. This is a big PR mistake for Wisconsin higher education, as it gives the appearance that universities think they are above accountability—this isn’t a good thing in the current political climate, to say the least.

Now on to the meat of the new rankings, which should come out sometime this year. There are 17 standards which will be a part of the rankings, centered on four areas:

(1) Selectivity of teacher education programs and students’ incoming academic characteristics

(2) Teacher knowledge of subject matter

(3) Classroom management and student teaching skills

(4) Outcomes of graduates’ future classes on state tests

As regular readers of this blog know, I’m not a fan of the selectivity criterion. If a college does a good job of training teachers, who cares about their ACT score? But the other three measures are certainly important; the question is whether the available data will be sufficient to accurately rate programs and provide stakeholders with useful information.

I expect a big fuss when these ratings are released, just like there is a big fuss whenever the U.S. News undergraduate rankings are released every fall. While I’m concerned about the ability to draw conclusions from available data, these ratings will provide information about whether institutions are collecting relevant types of data (such as their graduates’ outcomes) and certainly won’t be any worse than the peer rating part of the undergraduate rankings that has existed for nearly three decades.

Examining Kiplinger’s Best Value Colleges

Not too many articles on higher education feature my alma mater, Truman State University. In spite of a long tradition of internal accountability and doing a good job of graduating students on a shoestring budget, Truman lacks the name recognition of larger universities in most circles. This is why I was surprised to see the article discussing Kiplinger’s Best Values in Public Colleges feature Truman so prominently.

Winter at Truman State University

Kiplinger’s ranks the top 100 public four-year colleges and universities based on a combination of five different measures, with the point values being just as arbitrary as all of the other rankings (including the Washington Monthly rankings that I complied last fall). This is in spite of the claim that “neither our opinion nor anyone else’s affects the calculation.” While this may be true in the strictest sense, someone had to determine the point values!

The methodology is as follows:

(1) Total cost of attendance and net price (after subtracting grant aid)—35%. This is calculated separately for in-state and out-of-state students.

(2) Academic competitiveness (ACT/SAT scores, admit rate, and yield)—22.5%.

(3) Graduation rates (four-year and six-year)—18.75%.

(4) Academic support (retention rates and students per FTE faculty)—13.75%.

(5) Student debt at graduation—10%.

As most college rankings are prone to do, the Kiplinger’s best value list still unnecessarily rewards colleges for being highly selective, both in the academic competitiveness and graduation measures. The focus on cost is very useful, although it does to some extent reward colleges in states which provide more public support (this is good for the student, but not necessarily as good for the taxpayer).

I do have one other gripe with the Kiplinger’s rankings—they are done separately for public and private colleges (the private college list came out last month). The editors should combine the two lists so the information can be more useful for students and their families. With that being said, the information in these lists is certainly useful to a segment of the collegegoing population.

More Data on the Returns to College

Most people consider attending college to be a good bet in the long run, in spite of the rising cost of attendance and increasing levels of student loan debt. While I’m definitely not in the camp that everyone should earn a bachelor’s degree, I do believe that some sort of postsecondary training benefits the majority of adults. A recent report from the State Higher Education Executive Officers (SHEEO) highlights the benefits of graduating with a college degree from public colleges and universities.

Not surprisingly, their report suggests that there are substantial benefits to graduating from college. Using data from IPEDS and the American Community Survey, they find that the average associate’s degree holder earned 31.2% more (or about $9,200 per year) than the average person with a high school diploma. The premium associated with a bachelor’s degree is even larger, 71.2%–or nearly $21,000 per year. These figures seem to be on the high end (but quite plausible) of the returns to education literature, which suggests that students tend to get an additional 10-15% boost in wages for each year of college completed.

I do have some concerns with the analysis, which does limit its generalizability and/or policy relevance. They are the following:

(1) Given that SHEEO represents public colleges and universities, it is not surprising that they focused on that sector in their analysis. Policymakers who are interested in the overall returns to education (including the private not-for-profit and for-profit sectors) should try to get more data.

(2) This study is in line with the classic returns to education literature, which compares students who completed a degree to those with a high school diploma. The latter group of students who just have a high school diploma may have also completed some college but left without a degree, which results in a different comparison group than students and policymakers would expect. I would like to see studies compare all students who entered college with students who never attended to get a better idea of the average wage premium among those who attempt college.

(3) While the average student benefits from completing a college degree, not all students benefit. For example, welders with a high school diploma may very well make more than a preschool teacher with a bachelor’s degree. A 2011 report by Georgetown University’s Center on Education and the Workforce does a nice job showing that not everyone benefits.

(4) Most reports like this one do a good job estimating the benefits of education (in terms of higher wages), but neglect the costs in terms of forgone earnings and tuition expenses. While most people are still likely to benefit from attending relatively inexpensive public colleges, some students’ expected returns may become negative after this assumption.

(5) Students who complete a certificate degree (generally one-year programs in technical fields) are excluded from the analyses for data reasons, which is truly a shame. Students and policymakers should keep in mind that many of these programs have high completion rates and positive payoffs in the long run.

My gripes notwithstanding, I encourage readers to check out the state-level estimates of the returns to different types of college degrees and majors. It’s worth a read.

(Note: This will likely be my last post of 2012, as I am looking forward to spending some time far away from computer screens and datasets next week. I’ll be back in January…enjoy the holidays and please travel carefully!)

Innovating for Success in Financial Aid

Most education researchers and policymakers would likely agree that the current financial aid distribution system is both inefficient and not as effective as it could be. Under current rules, the vast majority of students do not learn about their eligibility for need-based financial aid until their senior year of high school. While waiting this long can help the federal and state governments make sure their aid dollars are targeted toward students who are currently the most financially needy, waiting that long to notify students of their aid awards makes little sense for students from persistently poor families.

There have been numerous efforts to streamline the financial aid process over the past several years, but they have neglected the importance of timing. If students know their financial aid package well before reaching college age, they can both academically and financially prepare for college should that be a match with their career and personal ambitions. However, most research fails to suggest possible solutions to important informational deficiencies.

Today, I am pleased to release a working paper with my frequent co-author (and political opposite) Sara Goldrick-Rab that seeks to advance the research agenda on the importance of timing in the financial aid process. Under current policy, students whose families receive federal means-tested benefits in grade 12 currently are awarded the maximum Pell Grant (which results in the maximum award for many state and institutional grants). In our paper, we estimate what could happen to both college enrollment rates and government revenue if the aid award would happen in grade 8 instead of grade 12.

Pell Grant program costs would increase under this policy change for two reasons—because some students would likely be induced to attend college by the promise of financial aid and because about 30% of students would likely receive more money than under current law. But the federal government would also see an increase in tax revenue through the additional earnings of these students. Under a fairly conservative set of assumptions in a Monte Carlo simulation (make your own assumptions here and here), the program is fairly likely to result in positive net fiscal benefits over the long run.

Even though the initial results from this study appear to be promising, I still lose sleep at night about whether people will respond in the expected ways and whether any perverse incentives could be in play. As a result, any such policy change should be explored in a demonstration program to see whether the program is cost-effective in real life.

This paper will get a fair amount of media attention, which will hopefully result in useful feedback from smart people in the academic and policy communities. I would also love to hear your thoughts on the paper as well as the fun methodological assumptions.

My College is a Better Value than Yours

It is not surprising that college officials are proud of their institution. But a recent survey released by the Association of Governing Boards, a body representing trustees of four-year colleges and universities, takes this pride a little too far. Trustees were asked several questions about their own institution as well as about higher education in general, and in each case more trustees rated their own college much more favorably.

A prime example of this (irrational?) pride is shown in a question asking whether trustees view the cost of attending their college (relative to the value) as being too high, too low, or just about right. While 62% of trustees thought their college cost the right amount and only 17% thought it was too expensive relative to its value, 38% of trustees thought that higher education in general cost the right amount and 55% considered higher education to be too expensive. (Don’t look at my college…the problem is elsewhere!)

The perception that one’s own institution is better than average is not just limited to higher education or Lake Wobegon. National surveys have consistently shown that parents give high marks to their child’s public school, while giving much dimmer reviews to other schools in their district or K-12 education in general. Perhaps Americans should consider that the great unknown as probably not as bad as they think—and that their own school may not be a paragon of excellence.

The Fiscal Cliff and Higher Education

We’re now well into December, and there is a pretty good chance that Congress and the Obama Administration will fail to agree on a set of policies designed to keep America from going over the “fiscal cliff,” or a series of tax increases and reductions in planned increases in domestic and military spending. Much of the attention during the fiscal cliff discussions has been about how to raise additional tax revenues from higher-income individuals. Democrats and the Obama Administration tend to favor raising the marginal tax rates while leaving deductions alone, while Republicans tend to favor keeping marginal tax rates at current levels while capping deductions at a specified amount.

These two proposals would affect higher education in different ways. The Democratic proposal has been better received than the Republican proposal in the higher education community because of the reliance of many colleges on charitable giving, which would be adversely affected by the cap on deductions. (President Obama has proposed similar limits in the past.) Capping deductions would substantially increase the real cost of a donation to higher education, as high-income taxpayers would be unable to receive a deduction equal to as much as 35% of the total gift.

The Democratic proposal would affect charitable donations in a different manner. Their proposal to raise capital gains tax rates (on the sale of stock and other securities) would reduce the payout that colleges would receive if gifts of stock are received. The strong likelihood of increased capital gains rates has led many companies, including those in the for-profit education sector, to issue special dividends before tax rates increase.

The net result of the uncertainty regarding tax rates is likely to be a positive for colleges in the short run. If previous tax increases are any indication, increasing income and capital gains taxes is likely to result in a short-term increase in charitable donations as individuals race to make decisions under more favorable circumstances. Regardless of whose revenue proposal is accepted, gifts to higher education (and government revenues) are going to be higher than they otherwise would in fiscal year 2013. This will also result in lower levels of donations for the following years since planned donations have been shifted forward.

Let’s also not forget the spending side of the fiscal cliff negotiations. Going over the fiscal cliff would result in sequestration of a substantial portion of the Department of Education’s expected budget. Most functions in the Department of Education would see an 8.2 percent cut in expected program funding, including the Institute for Education Sciences, although Pell Grant funds would not be affected. If the mandatory cuts are avoided (or more likely, pushed into the future where they will be ignored), expect a wave of federal spending as agencies spend the money that could have been sequestered.

I’m not optimistic that Congress and the Obama Administration can reach an agreement on the fiscal cliff, especially since the debt ceiling must also be addressed in the next few weeks. But since I hate to end a post on a sour note, I’ll leave you with former Senator (and co-chair of the Bowles-Simpson committee to reach a deficit solution) Alan Simpson (R-WY)’s dance moves. Enjoy!

Streamlining Financial Aid in Wisconsin

The Wisconsin Higher Educational Aids Board, the state’s agency administering need-based and merit-based financial aid programs, was recently tasked with forming a commission on financial aid consolidation and modernization. The commission had two primary charges:

(1) Explore consolidating all state need-based grants into one program.

(2) Study options for providing grants to students attending college less than half-time.

The current system of need-based grants has separate grants for four different sectors of Wisconsin higher education: the University of Wisconsin System (UWS), the Wisconsin Technical College System (WTCS), the state’s tribal colleges, and the private, non-profit sector (WAICU). Sadly, HEAB’s final report, which was recently released, failed to streamline the complicated financial aid system in Wisconsin. Each of the four sectors’ grants currently has separate pools of funding, and the report encourages this practice to continue.

The current system of awarding grants by sector needs to be revamped. Buried on page 42 of the report is the current distribution of funding by sector:

Sector	Num. Eligible	Awarded (%)	Spent ($)	Unfunded ($)	Max Award ($)
UW System	43,808	70.1	58,321,266	32,922,506	2,384
WTCS	74,284	26.2	18,326,312	63,835,738	1,084
Tribal	1,204	26.0	441,963	1,593,276	1,800
Privates	17,935	58.6	26,613,208	23,291,709	2,900
Total	137,231	44.4	103,702,749	121,643,229

This distribution makes absolutely no sense, in both the percent of eligible students awarded grant money (due to budget constraints) and the maximum award. I can’t speak to the needs of students attending the tribal colleges due to my lack of knowledge of these institutions and the students’ other financial aid awards, but it seems logical to have the same percentage of students receive need-based aid across systems. Given the lower cost of tuition for the technical colleges, I can see why they are receiving smaller grants.

I also don’t see a compelling reason for the state to give more aid to students attending private colleges than those attending public colleges. It is true that the state saves money if a student attends a private college (by being able to appropriate less money for the public sector), but I seriously doubt that students will change their decision to attend a private college if their grant aid is cut by about $500. This is especially the case since some students attending private colleges can receive need-based aid even if they are ineligible for the federal Pell Grant, which is not the case for public colleges.

The report also called for the status quo regarding the lack of eligibility for state grants if a student attended college less than half-time (five or fewer credits per semester). This would only be reversed if each sector supported changing the eligibility rules, sufficient funding became available, and HEAB had additional staff to monitor the additional students, conditions which are unlikely to be met anytime soon.

In my view, the commission completely failed to respond to its charge as little was done to streamline financial aid in Wisconsin or fix persistent inequities in the funding system. The Legislature should seriously consider combining all need-based grant programs into one pot even though the stakeholders on the committee disagree.

Making the College Scorecard More Student Friendly

The Obama Administration and the U.S. Department of Education have spent a great deal of time and effort in developing a simple one-page “college scorecard.” The goal of this scorecard is to provide information about the cost of attending college, average graduation rates, and information regarding student debt. The Department of Education has followed suit with a College Affordability and Transparency Center, which seeks to highlight colleges with unusually high or low costs to students.

Although I have no doubt that the Administration shares my goal of facilitating the availability of useful information to prospective students and their families, I doubt the current measures are having any effect. The college scorecard is difficult to understand, with technical language that is second nature to higher education professionals but is completely foreign to many prospective students. Because of this, I was happy to see a new report from the Center for American Progress, a liberal think tank, suggesting improvements to the measures. (As a side note, liberal and conservative think tanks work together quite a bit on issues of higher education. Transparency and information provision are nearly universal principles, and partisan concerns such as state-level teachers’ unions and charter schools just aren’t as present in higher ed.)

The authors of the report took the federal government’s scorecard and their own version to groups of high school students, where they tested the two versions and suggested improvements. The key points aren’t terribly surprising—focusing on a few important measures with simple language is critical—but it appears that the Department of Education has not yet done adequate testing of their measure. I am also not surprised that students prefer to see four-year graduation rates instead of six-year rates, as everyone thinks they will graduate on time—even though we know that is far from the case.

The changes to the college scorecard are generally a good idea, but I remain concerned about students’ ability to access the information. Even if the scorecard is required to be posted on a college website (like certain outcome measures currently are), it does not mean that it will be easy to access. For example, the graduation rate for first-time, full-time students who received a Pell Grant during their first year of college must be posted on the college’s website, but actually finding this information is difficult. I hope outside groups (such as CAP) will continue to publicize the information, as greater use of the data is the best way to influence colleges’ behavior.

Am I On the Wrong Job Market?

In light of being on the academic job market this year, I was amused to get the following mailing from the local branch of Globe University. (Even though the mailing was addressed to me, it was also addressed to “Or Current Resident.”)

The message is quite simple: graduates of this university get jobs. The mailing advertises that 100% of graduates with a bachelor’s degree in business administration get employment, although the fine print does mention that “employment is not guaranteed.” However, not much can be said about the graduation rates of students attending any of the Globe campuses, both because very few students attending Globe are first-time, full-time students (which are the only students counted in federal graduation rate calculations) and because many campuses (including Madison) have not been open long enough to have a graduation rate cohort.

To get an idea of graduation rates, I looked at the oldest Globe campus, in Brooklyn Center, MN. The reported graduation rate is 23%, with an overall career placement rate of 72%. Meanwhile, tuition is over $5,000 per quarter before mandatory course fees. I’m not saying that Globe University is a bad bet for students, but some students are likely to benefit more by attending the local technical college.

Moral of the story: Don’t believe colleges which imply that everyone gets a job. This isn’t even true at the most prestigious colleges, let alone for relatively unknown for-profit institutions. (Now, I do hope that my UW-Madison PhD helps me get a great job!)