Legislation to Improve Graduation Rates Could Have the Opposite Effect

By Watson Scott Swail, President & Senior Scholar, Educational Policy Institute

This is an opinion piece I wrote for the Chronicle Review and published on January 23, 2004. I stumbled upon it the other day and thought it was worth a repost on The Swail Letter. Let me know if you agree, disagree, and whether the same holds true 13 years later.


As Congress tackles the reauthorization of the Higher Education Act, it will undoubtedly tinker with Pell Grants, loan limits, teacher training, and distance education, just as it has in the past. What makes this reauthorization different, however, is the potential for legislators to create new mechanisms to hold colleges, and perhaps states, more accountable for quality, affordability, and student outcomes. One target for government action is institutional graduation rates.

Over the past 50 years, college enrollment has increased about sevenfold, to more than 15 million students. Yet, through much of that time, average graduation rates for four-year colleges have basically held constant, at about 50 percent, and have been as low as 34 percent at two-year institutions. Put another way, at least half of all students who have entered a four-year institution have failed to realize the dreams and aspirations that led them there in the first place. That issue, as part of an overall discussion of accountability, has caught the attention of the Bush administration and members of Congress.

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President Lyndon Johnson signs the Civil Rights Act in the East Room of the White House in Washington, July 2, 1964. The CRA, along with the Social Security Act and Higher Education Act in 1965, were crucial pieces of legislation for the middle class. Johnson used 75 pens to sign the Bill, giving them to participants in the process, including Martin Luther King, Senator Hubert Humphrey, and Senator Everett Dirksen. (AP)

Early last year, the administration floated the idea of creating a grant program to reward institutions that retain students and graduate them on time. While no specific legislation has been proposed, policy makers are considering with interest a model developed by Eugene W. Hickok Jr., U.S. undersecretary of education, when he was Pennsylvania’s secretary of education. He created a $6-million grant program to reward Pennsylvania institutions that graduated at least 40 percent of their in-state students within four years. Unfortunately, not one public college in the state has qualified.

It’s not surprising that government leaders are calling on colleges to graduate many more students — and that some legislators have even suggested tying institutions’ Title IV funds, which are used for student-aid programs, to graduation rates. But unless Congress recognizes that different institutions face different challenges, and unless it provides adequate resources to help increase retention, it will be asking the impossible. In fact, any such legislation could have the opposite effect: reducing access for poor and minority students and creating even greater numbers of dropouts.

In recent years, the problem of keeping students in college has intensified because the basic concept of “going to college” has changed drastically. The nature of the student body and the pathways to and through postsecondary education have become far more heterogeneous and complex. According to the National Center for Education Statistics, which surveyed more than 9,000 students from hundreds of institutions in 1996, with follow-up surveys in 1998 and 2001, one-quarter of freshmen are from low-income backgrounds, almost one-third are nonwhite, and 40 percent are the first in their families to attend college. Such students — often not as academically or socially prepared as others for higher education — are more prone to drop out. Indeed, 45 percent of black students and 39 percent of Hispanic students, on average, leave college within six years without earning degrees, compared with 33 percent of white students and 26 percent of Asian-American students. Similar gaps exist by income.

The survey also revealed that:

  • Students who attended full time or on a continuous basis were much more likely to obtain bachelor’s degrees than other students were.
  • Half of the students who immediately enrolled in public four-year colleges earned their degrees at those institutions, compared with only 27 percent of the students who delayed enrollment.
  • One-fourth of all students who enrolled in college for the first time moved to other institutions before obtaining degrees.
  • Almost half of first-time students who left their initial institutions by the end of the first year have not returned to higher education.

Such data convincingly demonstrate that immediate and continuous enrollment, full-time attendance, and remaining at the initial institution are important factors related to student persistence. Students from higher-income backgrounds are significantly more likely than lower-income students to fit that profile and go on to earn bachelor’s degrees. To help improve the odds that students from all walks of life will stay and get their degrees, colleges must provide additional services and support.

But their ability to provide such services and support varies greatly from one college to another. Last year, while directing a national study on student retention, I visited several institutions that serve a high proportion of low-income students. Half of the colleges had high graduation rates, and half had low graduation rates. We expected to find that those with high graduation rates would have a strong commitment to retaining students, shared by dedicated administrators and faculty members whose teaching strategies helped students from all backgrounds flourish academically and socially. And they did.

However, we were surprised at the extent to which money trumped all other factors in the ability of institutions to engage and retain students. Regardless of the success of any of their other efforts, colleges without the necessary resources could not even come close to those that could invest substantially in retaining students.

Wealthier institutions, like Harvard University and the Massachusetts Institute of Technology, can afford to assign tutors to students, keep class sizes small, and provide extensive support services — and, of course, they graduate almost all of their students. At the other end of the educational spectrum are institutions with limited resources at their disposal. Lacking multibillion-dollar endowments, they are often open-admission colleges that must fight regionally and locally for students with combined SAT scores of 900, not 1450. They are likely to see 75 percent of their students leave before graduation. In fact, as many as 50 percent of their students leave by the end of the freshman year.

Those institutions are doing as well as could be expected given their financial circumstances. We found that their administrators and faculty and staff members were as dedicated, if not more so, as those at other institutions, and that they offered a good-quality education. Yet their missions often differed significantly from those of wealthier colleges. For some, the institutional mission was to provide an educational experience for students who normally would be denied such an opportunity. Other institutions, like historically black colleges and universities, were born to provide a rich cultural experience in parallel with academics. While affluent institutions can pile on resource after resource to make the difference in who comes, who stays, and who completes college, those other institutions settle for what they can muster from stretched budgets.

Unfortunately, that fundamental truth is being ignored on Capitol Hill today. Congress is right to require institutions to do more to keep their students enrolled. Yet colleges can’t improve retention if they don’t have the necessary financial support. Given the current atmosphere in Congress, institutions are more likely to lose resources than to gain them.

Indeed, if colleges continue to struggle for funds, the easiest way for them to improve graduation rates will be to restrict admissions, potentially forcing students out of universities and into community colleges, or out of community colleges and into low-paying jobs or unemployment lines. That could have the very opposite effect of what policy makers are seeking.

Legislators and Bush-administration officials ought to recognize the diversity of higher education: Different types of institutions serve different constituencies and have different missions. Any federal policy crafted to improve student retention should reflect that reality. Government leaders must create a system in which institutions are measured by their improvement rather than simply compared with peer institutions. The many anomalies among institutions make simple comparisons unfair.

In addition, policy makers must provide safety nets so that institutions can try new approaches without being penalized. There is nothing inherently wrong with incentive systems that reward institutions for “making the grade.” But it would be counterproductive if those without adequate resources to start with failed and — in a vicious cycle — lost out on funds that would help them do a better job in serving and retaining students.

Finally, the federal government should support and distribute research on student retention. College administrators need models that work.

Although the states are in poor financial straits, they, too, should adjust their priorities. A lack of resources is starving institutions of the government support they need to develop new retention programs. While it will not be easy, states need to deal with the problem of college dropouts before it becomes an economic debacle within their own borders and beyond.

Nor should institutions simply sit back and wait. As a result of growing financial pressures, presidents have become increasingly preoccupied with fund-raising and development activities unrelated to the academic mission. But they must refocus their attention on students and on keeping them enrolled. Retention starts in the president’s office. Without that leadership, any other campus efforts will be largely in vain.

We must continue the debate about graduation rates and encourage participation by federal and state policy makers, educators, and the public. But unless we recognize the different roles that various institutions play, and provide them with the resources needed to meet the challenge of college dropouts, the problem will only worsen. We must find better ways for policy makers and institutional leaders to work together to create greater opportunities and support for all qualified students.

http://chronicle.com Section: The Chronicle Review Volume 50, Issue 20, Page B16

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Blame Business

By Watson Scott Swail, Ed.D., President, Educational Policy Institute and Principal, SwailLandis

I have a problem with some business leaders. Sometimes they say one thing and mean another. Perhaps this is why we are getting more business types in politics these days. We don’t really know what they mean when they say something, so it always sounds like a pretty good deal. That is, until we find out what they really mean. Then we have a problem.

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For years there have been arguments/discussions about establishing more dialogue between colleges and universities and business/industry about what the skills that graduates should possess. The complaint is that higher education does not produce graduates with the attributes that business and industry really requires in the workforce. Colleges produce degrees and certain skillsets, but does not always produce those skillsets commensurate with those valued in the working world.

In 2015, the Association of American Colleges & Universities (AAC&U) hired Hart Research of Washington, DC to poll employers about college students. Here are some of their findings:

  • Ninety-one percent that career success requires a demonstrated capacity to “think critically, communicate clearly, and solve complex problems.”
  • Ninety-six percent said that college students should have “experiences that teach them how to solve problems with people whose views are different fromtheir own.”
  • Seventy-eight 78 percent agree that “all college students should gain intercultural skills and an understanding of societies and countries outside the United States.”

In addition, employers endorse “broad learning as essential to long-term career success,” and they place the “greatest priority on a demonstrated proficiency in skills and knowledge that cut across majors,” including written and oral communication, teamwork skills, ethical decision making, critical thinking, and the ability to apply knowledge in real-world settings.

It is hard to argue with any of these findings. These are what I want from employees. I want them to think critically, think on their feet, and have a diverse pattern of thought based on diverse experiences. I want intercultural skills. I want cross-cutting skills. As an employer, I simply want it all. To be fair, I don’t usually get all of this. I get some of it; but not all of it. That can be expected, of course. But colleges and universities do not do a very good job preparing people for the workforce. They prepare them to graduate.

What do I mean by that? They teach students the skills to finish coursework, to finish classes, to persevere from year-to-year until they march across the stage to receive their coveted parchment diploma.

My point in this Swail Letter is that I don’t generally buy what business is selling. Business says they want these attributes in their young workers, but their hiring practices illustrate a very different practice. For decades, business has focused almost exclusively on credential and less about competency. The resume provides two important credential items for employers: the degree and the college. The degree tells an employer the focus area of the prospective employee (e.g., business major with accounting). The college tells the employer about the selectivity of the institution, and arguably the quality of the institution.

The “soft skills,” as they like to call them, do not lift off a resume. With monster.com and many other job sites, resumes are mathematically processed to give a generic score of an applicant. The soft skill simply does not lift off the page. What does? The degree. The college. And perhaps the GPA. Here is language from the monster.com website about their “Talent Analytics” software:

Monster Talent Analytics gives you a fast, insightful approach to answering questions that move you forward:

  • Helps save you time and money armed with relevant data before making long-term decisions
  • Measure talent source performance and identify skill strengths, gaps, and trends
  • Access industry data to improve recruitment planning
  • Locate top schools for a major, top employers in a location, or top skills for a position

Sounds good to me. But what are they actually measuring? They say skill strengths, but how are they measuring that? I chatted with monster.com for this Swail Letter, and the reality is that all monster.com does is collect the resume information electronically from job seekers and keep it in a database. They match what is on the resume with what the employer is looking for. Thus, a fairly low bar of analytics. The “skill strengths” that monster boasts are simply self-reported data from job seekers. They can say anything.

The only possible measure of soft skills comes during an interview. Sure, someone could list community service activities on their resume, but that doesn’t mean that they either did them or that they aren’t just playing the system to plush up a resume. One does not know until they meet a prospective employee what they are like, and to be more truthful, one sometimes does not know until you employ them. Most employers will tell you that the hiring process is one of the worst jobs we do. It is a guestimate that the person you hire will be able to fulfil the work that you have in mind for them. This isn’t simply about entry-level employees, either. I have hired very senior people in the past that just didn’t cut it. I’ve found that there usually is a reason why people are available at certain points in their careers. Sometimes it is downsizing. Sometimes it just didn’t work out. In the end, buyers need to beware.

My point is simple: businesses have done the entire system a disservice by saying they want certain skills only to hire people on a completely different set of criteria: credentials. The degree tells me one thing: that the person has the ability to complete. That’s about it. Did they complete in four years? Five? Six? That really isn’t that relevant. I completed my bachelor’s degree from the University of Manitoba in five years. Not because I was lazy, but rather, because I changed majors after the first year and had to fit in 120 credit hours related to the new major. That decision cost me a year, and it was worth it. It got me here. Because of that decision, I was a better fit after one year of university. But to the employer, the five-year red flag might come across as a negative unless they dig deeper.

A degree doesn’t tell me exactly what the person excelled at in their studies unless they provide specific examples on their resume about what they did. In my line of work, if they say they are skilled in SPSS or SAS and they list the types of analyses they done in the past, I have some comfort in knowing what they can do for me. If they have done certain research and worked on specific projects doing “X,” it is very helpful. But their degree? Extraordinarily limited. Show me your skills!

This is why I have consistently pushed for a move toward competency-based education. As readers may know, this isn’t my first writing about CBE, and I apologize for the continued hyper focus on this issue. However, let us be clear: CBE affords an employer a clue to what skills the job seeker learned or practiced during his or her degree or certificate program. For those out there that say that CBE doesn’t fit everything, there is some truth to that, but only some. We can, through CBE, still measure English Literature and other things. It doesn’t take away important classroom dialogue about the meaning of Dostoevsky’s “one square yard of space” or the real meaning of Macbeth’s “out out, brief candle!” Those dialogues are the basis of intellectual curiosity and higher-order thinking skills. They are important. But the thought behind these things can be measured and attained.

My message to business and industry is simple: if you want these other, softer skill sets, then you need to work with institutions to help them build this into the degree programs and you must simply step away from using only credentials for your hiring practices. Until that happens, the only thing that really matters for a job seeker is if they went to college, where they went to college, and if they finished college. Because businesses don’t really look under the hood.

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Pushing Tin

By Watson Scott Swail, Ed.D.

A new publication Organisation for Economic Co-operation and Development (OECD) report illustrates that the most popular undergraduate programs remain in the arts and humanities, social sciences, and journalism. However, they are also the least employed of college graduates. The best employed are the STEM graduates: those in engineering, manufacturing, and construction. They are employed at a rate of 88 percent compared to only 30 percent of the former group.

What does this tell us?

To be clear, it does not tell us that the liberal arts are bad degrees and a waste of time. That couldn’t be further from the truth. What it does say is that perhaps we feed too many people into programs that do not have a direct link with the work force and gainful employment.

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In the end, this leads to an age-old philosophical dilemma in American higher education: is higher education vocational or avocational?

(ANSWER: It’s both. Even when it isn’t)

It is difficult to simplify such a complex issue, but at the same time it makes sense. We push—literally push—our children out the door into higher education. The obvious reality there is that not everyone has the advantage of the aforesaid “push.” Low-income, first-generation, and other youth, as well as many adults, do not or have not had the same advantages to “go to college.” To them, it is an aspiration more attune to fantasy. It just isn’t for them and society has made that abundantly clear.

For others, college is a right of passage. Even with the constant pressure of college cost and student debt, a truckload of students matriculates to college every year to enter that exciting audition to adulthood.

As you well know, some of these students don’t make it. In fact, half of students who enter higher education leave without a degree. Some of them swiftly, others along the way. Fifty percent. At the university level, a full third of entering students leave without a degree after six years of counting. One-for-three. Good in baseball; less good in college. But that’s what we are dealing with.

The real challenge is in gainful employment, a term that was popularized a few congresses ago on the attack on private, for-profit higher education. The Senate—Tom Harken to be precise—took it upon himself to take on an argument that began in the early 1990s against for-profit higher education. To be fair, it was a pretty solid argument: many of these providers were fleecing students and taxpayers of money: federally-supported money, like Pell Grants and subsidized loans. Without a doubt, this was a big business for for-profit colleges. Congress came down on them in the reauthorization of the Higher Education Act in 1992. And then Harken took a few more swipes at them in 2014. That’s where gainful employment came in.

As data would support, graduates and non-graduates of for-profit programs were under employed. They either were not working or were working much less than was hoped, very often in jobs that had little or anything to do with their degree. These students were typically burdened with student loan debt well beyond what they could afford to pay. For about a quarter of these students, the story ends with loan default and personal bankruptcy. Not a pretty picture for an individual who once thought they were subscribing to the promised land.

Much of the western world outside of the United States has some type of filter for higher education to try and regulate certain professions and higher education programs from being over subscribed. They do this with high-stakes testing and other policies. In the US, we only do that for highly- and moderately highly-selective institutions via SAT and ACT scores, mostly. But our non-selective, open-admissions institutions do very little filtering of students. For the most part—with some exception—students can enter the program that they want, with little or no regard for gainful employment at the end of their career.

For colleges, they are “pushing tin,” a term used by air traffic controllers for pushing aluminum airplanes through takeoff and landing vortex at airports. Our admissions professionals do this, too. It isn’t their fault. This is just how it is done. If there is an error in the system, it is purely at the policy level.

The argument of liberal arts makes this issue very complex. We certainly understand that if you plan to be an accountant, you will go to business school. If you want to go into engineering, you go to engineering school. But what jobs do liberal arts programs prepare for? Probably the majority of jobs that are filled by college graduates are filled by liberal arts majors. They are the writers. The thinkers. But the line from liberal arts degree to job is less linear than the “professions.” I always thought my brothers had it made: one became an engineer and the other a chartered accountant (the Canadian/British equivalent to a CPA in the US). From day one, their pathway was extremely well articulated. But for others, that pathway is a long and winding road that can divert in many directions.

There clearly exists a problem when 70 percent of graduates in the humanities and related degree programs are un or underemployed, as reported by OECD. And conversely, we aren’t putting enough students through STEM degrees for jobs that are currently available and will increase in the next decade. Adding some insult to injury, the OECD report also found that women enter STEM degrees at half the rate as men.

What do we do? Policy makers can make incentives for certain programs through grants and deductions. I don’t always think those programs work very well, but they could help. For colleges and universities, it really comes to them, to a degree, to retool their programs. Gainful employment became a rallying cry against for-profit higher education. The reality is that all higher education institutions should be held to a similarly high standard. All colleges and universities should be able to accurately describe how their graduates (and non graduates) fare in the workforce. Most institutions can use the Wage Record Interchange System (WRIS) to get information on employment and earnings on their students, but not many do it. Each state has its own regulations on who can access this information, but, for example, all institutions in California can access the system to find out this information.

Wouldn’t it be great if could see the gainful employment for colleges and programs? Just a thought. Otherwise, we’re just pushing tin.

 

 

 

 

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The Challenges of Grade Inflation

by Watson Scott Swail, President & CEO, Educational Policy Institute

According to a new study to be released in January of next year, the proportion of high school seniors earning an A average in school is increasing even as their SAT score is decreasing. One may suspect that teachers are passing on higher grades to students due to a variety of issues, not the least of which is the pressure to provide higher grades for both student and teacher promotion.

There are two avenues for this trend. First is that more states are looking more seriously at teacher proficiency as a means of performance pay, measured in part by the academic outcomes of their students. The second is that students increasingly need better grades to get into college, especially selective colleges, and also to receive scholarships and grants. So, both stakeholders in this play have something to be gained by higher grades.

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A separate finding in a separate study by researchers from Harvard University also found that the modal high school grade is now an A, meaning that more As are given out than any other grade in high school.

While the first question to mind is how this could happen, the real question is why should this matter.

In truth, grades are only remotely useful. Sure, they can tell someone about the proficiency of a student in terms of their knowledge of a subject. But they can also mask that proficiency, too. In many courses, grades can be very subjective when the learning and assessment plans are not collinear.

There is a solution to the grade inflation issue, whether real or perceived: move all high school learning to a competency-based system where students must learn the concepts and skills associated with particular tasks or sections of academic material.

There are a number of positive features of competency-based learning. First, it focuses students on learning and mastery rather than efficiency of time. Students move forward when they obtain a certain level of mastery of a subject area or task. They do not pass on to the next section, or next course, until they have achieved the necessary mastery of these units. The assessment of these skills and knowledge are much easier to produce with accuracy, rather than “sampling” learning by asking particular questions at random that doesn’t effectively cover the material.

Second, teachers find they have a different role in the classroom and become facilitators of learning rather than sages of knowledge. This should be empowering to students and teachers because the roles are very clearly defined. As well, technology can be harnessed in a much more definitive and efficient manner with competency-based learning. Currently, technology is inefficiently used in schools and colleges, even 30-plus years removed from the introduction of PCs began in our K-12 classrooms.

Some states who are actively pursuing competency-based education reforms, including New Hampshire and Ohio. The US Department of Education also showcases school districts around the country who are utilizing this form of teaching and learning.

The argument of grade inflation has been around for a long time. This latest study only fuels more of the inflation fire. We can take care of this in a large way by moving to better teaching and better assessments. Competency-based education: in high school and in college, can help us get there.

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Moving Student Loans from the US Department of Education

by Dr. Watson Scott Swail, President & CEO, Educational Policy Institute

There is an interesting piece in the Chronicle of Higher Education today on federal student loans. The piece argues whether FSA should be taken out of the US Department of Education and moved to the Treasury Department. What would be the value in doing such a thing?

There is some value in this argument. First, it would allow the Trump Administration to significantly reduce the size of the US Department of Education and its budget. Yes, I know. Wouldn’t it be a simple movement of dollars and not really shrink anything? Yes, mostly. The cost of serving loans is costly and the Treasury would surely have to expend those dollars. But it is possible that the Treasury Department could do so in a more efficient manner. That is not a guarantee that they would be more efficient: only a possibility. Thus, let us assume that there will be a slight savings in moving FSA to the Treasury.

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The worry of doing this, as Bob Shireman and others point out, is that the Treasury has little interest in servicing student loans. The FSA, and previously private banks before the Direct Loan process, provide some assistance to universities and borrowers to ensure smooth lending processes as well as help in repayment issues, including forbearance and default. The thought is that the Treasury Department will be more steadfast on enforcing repayment while not necessarily providing the same level of service to assist students who are having difficulties.

But shouldn’t students be treated just like other borrowers in the economy? No, they shouldn’t, mostly because most non-educational loan borrowers are not within the 18-24-year age bracket. Research clearly shows that many students have a limited understanding of the loan process and are even less clear on the repayment process. Therefore, students are different than the average borrower, resulting in a program cost in terms of services required to loaning monies to youth. If the FSA were to move to Treasury, they would have to deal with these issues. It wouldn’t be as clean as they would want it to be, because loaning to young students is not a clean business. So that is a concern to be sure.

Others argue that this could be taken care of the Internal Revenue Service (IRS). It may be fair to say that most people do not have a lovey relationship with the IRS. But let us be clear: the IRS is exceptional at what they do. Let us not blame IRS policies on them—Congress makes the rules. But the IRS does a more-than-respectable job collecting tax dollars from taxpayers. Given that there are programs within the federal government that require the IRS to provide education tax credits, it also stands within reason that the IRS could take on the task of running a loan program, too.

Is there a downside to leaving the student aid program within the US Department of Education? Not necessarily, other than the fact that the US Department of Education tends to be overly bureaucratic and not always well staffed. As well, there is some resonance to the issue of keeping the dollars and cents issues within the government sectors that are better served to dishing out and collecting funds.

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What Impact do the Trump Tax Cuts Have on Education?

by Dr. Watson Scott Swail, President & Senior Research Scientist

Yesterday the Trump Administration, through the auspices of Steve Mnuchin and Gary Cohn, released a trial balloon to test their tax plan in the media and Congress. True to Trump’s word, this is potentially the biggest change in the tax system in generations, starting with the reduction of corporate tax from 35 to 15 percent and continuing through the elimination of the death tax, the doubling of the standard individual deduction, and the elimination of all but two tax deductions from the code for individuals and families.

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Not many people like the tax code, so the thought of changing the system doesn’t really produce the same ill-will that the health care discussion does. People don’t like taxes. Everyone wants to pay less.

But, in the end, someone has to pay for any tax cut. George Bush provided a large tax cut in his early years in the White House. The problem was that it wasn’t balanced with cuts in spending and federal spending and the deficit went through the roof.  The early reviews on Trump’s plan is that it could cost the government (e.g., taxpayers) $2 trillion in revenue over the next decade. The Administration says that the trickle down from the corporate cuts will boost the economy which, in turn, will pay for the tax plan. Certainly there will be some effect from cutting the corporate tax, but not likely anywhere near $2 trillion worth. To put this in perspective, the entire federal budget totals $3.65 trillion. A reduction of the corporate tax rate will not make up that gap in revenue.

It isn’t necessarily that people don’t agree with cutting the corporate tax and eliminating the death tax, or even reducing the number of tax brackets from 7 to 3 (although that is relatively meaningless in the end, whether it be 3 or 23; it is a graduated rate). People do care about the cost of it and whether it can be revenue neutral. This plan is not revenue neutral.

An important part of the plan is the simplification of the tax system, in part, by eliminating many of the standard deductions that are currently in place. Two major deductions have been left alone, including the mortgage deduction and deductions for charitable giving. President Trump said on the campaign trail that he would eliminate the mortgage deduction. However, 32 million people used this deduction in 2016 and the political reality is that people would have a conniption if it were to be removed. Therein lies the tricky trail for retooling the tax code: taxpayers want it simplified, but only if you leave their deductions alone.

There are several potential impacts to education in this tax plan. The first is the student loan interest deduction. This allows borrowers with incomes under $80,000 to deduct up to $2,500 of their loan interest from their taxes. This would be gone. Second, taxpayers who receive educational benefits from their employers are allowed up to $5,250 in tax-free benefits to help with their higher education. This would go away and those benefits would be fully taxable. The American Opportunity Tax Credit (AOTC), an annual credit of $2,500, would also disappear. And as a colleague mentioned to me yesterday, the elimination of deductions for state and local taxes paid could have a serious impact on K12 and higher education funding at the local and state level, forcing higher taxes at those levels. He also mentioned that even teachers would get hurt since they get to deduct classroom supplies that they personally purchase. All gone.

Finally, what does the federal government do with student loan forgiveness? There is currently a plan in place to allow students to have their student loans eliminated after 20 years if they work in the non-profit world during that time. There are many stipulations, but the Administration has talked about removing this program which would have a huge income on people who plan their careers around this benefit. Regardless, there is the issue whether this is a taxable benefit.

As with all public policies, there are ramifications attached to the Administration’s tax plan and people should be well aware. Few details, other than those mentioned, were provided yesterday. Mnuchin said they were working to get more details negotiated with Congress. At some point, the Congressional Budget Office (CBO) will score these policy positions and provide estimates of the cost and benefit of the plan. Until then, we don’t really know the impact of the Trump Administration’s proposal.

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New York Takes the First Dive into Free Tuition

by Watson Scott Swail, President & CEO, Educational Policy Institute

On Friday, the State of New York announced that it would provide free tuition to families earning less than $125,000. The cost of the program is budgeted at $163 million/year in today’s dollars, noting that those costs will escalate in the coming years beyond the cost of tuition.

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For those who support tuition-free policies, this is a big win in their column. Student debt is often crushing for students, and the risk of going to college sometimes outweighs the benefits in the minds of students, especially first-generation, low-income students. The Excelsior Scholarship is expected to cover 940,000 New Yorkers each year. This is not insignificant.

However, there are challenges with tuition-free programs, and I have been vocal against them for several years for some very real reasons. Here is my take on New York’s Excelsior Scholarship Program, knowing that some of the details are vague at this point.

First, while Excelsior provides tuition funding for students at two- and four-year public institutions, it does not cover cost of attendance. At public institutions of higher education, the cost of room, board, books, and other fees outweigh the cost of tuition. So students and families will still be stuck with at least 50 percent of the cost of attendance (unless they are commuter students). Students will still take on loans to cover their actual cost. Funds will be set aside for e-books, but the $8 million budgeted will unlikely cover all students. Let us not negate this: covering the tuition is a hefty burden to remove from students, but they still have to cover their other costs. In the final analysis, I believe it is good to have students bear part of the responsibility for a lifelong, personal benefit. But I agree that debt must be reduced.

Excelsior also requires students to enroll in 30 credits a year or equivalent full-time status. This is a big problem because many students have trouble handling 30 credits per year, especially historically-disadvantaged students. As well, what happens when a student drops a course? Does it take them out of eligibility? Do they get left holding the burden when the state says, “sorry, but you dropped and are only at 27 credit hours. You owe us.” The program does say there is flexibility in the program, but we do not know what that looks like at this stage.

The program also has a requirement that two-year students stay in the state for at least two years following their degree and four years for four-year students. Great in theory but problematic from a program issue. The state will have to track students (perhaps through taxation system) to determine whether they are in state or out of state during that time. EPI currently conducts tracking for the US Department of Education on a Special Education program, and trust us: it is not easy tracking students after the fact. New York will need to track millions of students each year to determine whether they need to repay. Then they need to determine what needs to be repaid and how that repayment will occur. What happens if a student lives in NY but works in NJ? Does that matter? Or vis-versa? If your spouse gets a good job in a different state, do you split the family until the time period is up, or do you just pay it and move? Remember, these students will likely still have debt from cost of attendance, so they are only repaying the tuition portion.

And what happens to students that drop out regardless? What do they pay? Anything? Or not?

There are two other economic pieces to this. First, as Art Hauptman said years ago, these economic stimuli have an impact on tuition pricing and cost of attendance. What has the state done to ensure that the cost of attendance doesn’t spike up, which, in turn, would drive up the cost of the program? Do colleges now add special fees to cost of attendance to make the difference, where the COA will increase by 2-3 times inflation while tuition sits idle? And second, this stimuli will likely result in more students going to college and university. Is that actually a good thing for society? One can easily make the argument that too many students go to university-level education. How many BAs do we need? Not as many as we have, I can assure you. The true need of our society is more certificates and less-than-two-year learning opportunities, as well as more associates degrees. But not more BAs.

In the end, the Excelsior Scholarship is a last-dollar scholarship, meaning that all other grants and scholarships are put into the financial aid package before the state dollars. This is fine, expect there are a lot of private scholarship programs that also claim to be a last-dollar scholarship. So, who wins this battle of last dollar? The Gates Foundation? Rotary Club? Who?

It will be interesting to see what pressure this program puts on other states. New York did have Bernie Sanders at the unveiling, who campaigned on free tuition during his campaign. Almost two years ago I wrote a Swail Letter about Bernie’s plan. Bernie was wrong then; he remains wrong today.

Taking the bite out of student debt is not a bad thing. But New York will likely find out, much like Ireland did in the 90s and 00s, that once you have free tuition, the budgetary cost becomes a massive anchor to legislatures for eons to come. And no politician will ever be able to suggest a repeal without getting thrown out of office.

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The Federal Government and Public Education (A Budget Analysis)

by Watson Scott Swail, President & CEO, Educational Policy Institute

I’ve written lately on the issues related to the Trump Administration and Education Secretary Betsy DeVos. There are certainly red flags about the direction of the Administration, but these issues will take a while to play out, even though many of us have concerns about recent changes to student loans and the federal budget. But let us take a step back to look at the role that the US Department of Education, as well as other Departments, means for education nationally.

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Without a history lesson, the US Department of Education has played an important role in public education by using both bully pulpit and directed funds to protect the needs of low-income, minority, and disabled students. The official funding of the US Department of Education is $67 billion per year, but other estimates suggest that total education funding across the entire federal budget accounts for $108 billion (see here for more information). This last number represents approximately three percent of total federal spending.

Exhibit 1. Federal Education Spending, Fiscal year 2012 (in billions)

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As illustrated in the graphic above, $15 billion of funding for nutritional programs (e.g., school lunch) comes from the US Department of Agriculture and $8 billion in Head Start funding comes from the Department of Health and Human Services (HHS). Understand that these calculations can get very cranky because many funds occur through refundable and other forms of tax credits.

I have taken a fair bit of time to compile the US Department of Education budget for 2017 (the current budget, not the President’s budget, which is for FY 2018). This is a challenging budget because of the sheer complexity of a massive department with countless idiosyncrasies and programs. But, alas, I was able to make some sense of it and provided a few graphics as well as a downloadable excel sheet for readers who have further interest. (Download the Excel here).

The graphic below (Exhibit 2) illustrates the US Department of Education budget without those other important add-ons from other federal departments. A second illustration, Exhibit 3, simply aggregates these line items into grand categories.

Exhibit 2. US Department of Education Spending 2017 Budget

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The Trump Administration has said that it plans to shrink the US Department of Education. Some people want the entire department eliminated. The latter item is untenable; there are simply too many important aspects to the Department’s work that need to happen, regardless of political ideology. The former is difficult due to the way budget funding is distributed. From Exhibit 3, note that almost half of all Department funding goes towards financial aid via grants (e.g., Pell, SEOG) and student loans. Student loans are a special category because they are what we refer to as “revolving” funds. That is, the government pays out student loan funding to students who in turn pay it to institutions (seamlessly due to Title IV provisions), but they also collect it when the loan becomes due. Thus they “revolve.” The Department does spend money on servicing the loans (although there are fees to help with those costs) and they also spend money to subsidize loans via zero interest during school for low-income students. These numbers add up significantly.

Exhibit 3. US Department of Education Spending 2017 Budget (aggregated)

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Readers can also see that over $32 billion, or 37 percent of funds, go towards programs and services for students with disabilities. This is arguably one of the most moral and ethical services that the federal government provides: providing assistance in research and services to those with significant handicaps. These funds pass through the Office of Special Education and Rehabilitation Services (OSERS), which also houses the Office of Special Education Programs (OSEP). One interesting funding piece is that the Department funds Gallaudet University in Washington, DC, the worlds’ only university designed to be barrier free for people with hearing disabilities. Without an annual appropriation of $121 million, Gallaudet ceases to be.

Special Education and Student Financial Assistance account for 86 percent of the US Department of Education budget. It is hardly likely that any real cuts can be made in these two areas unless the Administration chooses to provide less financial aid to students and lowers its support to those who have extraordinarily special needs. Surely, a  hard fight in Congress and in the public arena. The other 14 percent of the budget provides many other important programs, including Title I programs for low-income students in elementary schools (e.g., Early Reading and Readiness programs), TRIO and GEAR UP programs for low-income students, and school improvement programs, such as Investing in Innovation (i3) and Race to the Top grants to school districts and states. A critical piece of funding is in the research and development in education through the Institute for Education Sciences (IES) and the National Center for Education Statistics (NCES). Our critical studies of student pathways, college affordability, and student learning come from IES. It is one component of the US federal government that really differentiates itself from the rest of the world: world class research with free and available data for researchers and policymakers. I use these data consistently for our EPIGraphs and for other projects. Without such data, we would have great difficulty determining the purpose and utility of our public policies.

Simply put, there isn’t a lot of waste in the US Department of Education. Remember: only three percent of the entire federal budget is devoted to education. In contrast, the Military accounts for 16 percent of the total federal budget, Social Security 25 percent, and Health and Human Services 28 percent (which includes Medicare and Medicaid). Some programs can be cut to save money, and some probably should be. But it could similarly be argued that the Department could be enlarged to provide more support in research and programming to aid states, districts, and colleges.

We will continue to watch and learn.

 

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The Rubber Hits the Road

by Watson Scott Swail, Ed.D., President & CEO, Educational Policy Institute

In February, I wrote about what a Betsy DeVos Education Department might look like. Last night, the proverbial rubber hit the proverbial road when the Trump White House released “America First: A Budget Blueprint to Make America Great Again.” Basically, a fancy title for the President’s FY 2018 federal budget.

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If there is one thing to hand to President Trump, it is that he has done to the budget what he said he would do on the campaign trail. This draft significantly increases military spending and dramatically cuts almost everything else, with some exceptions. Total military spending will increase by $54 billion in FY 2018. That number, by the way, is far below what the congressional Republicans want for defense. But even with Trump’s increase, the share of discretionary spending allotted to military will account for more than the 54 percent in FY 2017. These military increases will be based on an ever-increasing foundation that increased during the Bush II Administration by 70 percent.

The Administration education is budgeted to shrink by 13 percent, or $9 billion, to help account for these large increases in military expenditures. This budget includes a $1.4 billion increase in school choice (totaling $20 billion), targeting charter schools and school choice. As well, it requires Title I funds to be used for open enrollment programs for school choice. Many programs are either eliminated or significantly reduced. The budget eliminates $2.4 billion teacher training grants and $1.2 billion for summer- and after-school programs. The 21st Century Community Learning Centers program ($1.2 billion) is eliminated, and the federal GEAR UP program is reduced from $323 billion (FY 2017) to $219 billion (32 percent). TRIO programs are reduced $82 million to a total of $808 million. The Supplemental Educational Opportunity Grant (SEOG) program for low-income students is eliminated ($732 million), and work-study programs are promised to be reduced “significantly,” although the numbers were not provided. Currently, $1.1 billion is provided to work-study programs to more than 670,000 college students averaging $1,600/year/student.

While plenty of people are getting hung up on these reductions to mainstream programs, it seems that people are missing the real point of this budget: it is a starting point not for this year, but for future years. That is, the FY 2018 Presidential Budget Request hints at future program eliminations, such as TRIO and GEAR UP. Are these cuts appropriate? Prudent? It depends on who one asks. Both TRIO and GEAR UP have been targeted by Republicans for decades due to a lack of clear evidence of program effectiveness. This conclusion is not necessarily incorrect. TRIO and GEAR UP programs vary greatly in impact, and the data to determine future effectiveness is largely absent. But this is the point: there needs to be a process for elimination and reduction, not just a tree-cutting swatch that is neither democratic nor scientific.

I expect a strong backlash by Democrats AND Republicans against these cuts, including those against the Corporation for Public Broadcasting, Meals on Wheels, and the EPA, to name only a few. But if military funding, through rhetoric based on fear rather than data, becomes the primary focus on budget issues, then something has to go somewhere. These softer programs become the true target of budget reductions, as will Medicare, Medicaid, and Social Security. The federal government has a historical role to protect and provide safety net programs for low-income persons and those with cognitive and physical disabilities. If the federal government turns away from these students, then what?

The “then” will result in a serious dilemma which will likely result in even more catastrophic cuts in FY 2019 and FY 2020. Unless, of course, the mid-term elections in 2018 take away enough of the GOP lead in the House and return the Senate to Democrats. Even then, the Democrats will have to fight the third rail of federal politics: tax the rich and reduce the military. The right thing to do, but the type of politics they really don’t want to play. Bernie Sanders campaigned to do just this, but it is why he was never electable in America. To all Berners out there, it was never going to happen.

It can certainly be argued that cuts to federal spending—not necessarily cuts to federal taxation and revenues—are in order. Despite what many Democrats say, the federal government is bloated. Perhaps we are better establishing a BRAC (Base Realignment & Closure)-like Commission in each of the federal departments to reduce the size, scope, and spending of the federal government. Not many people like BRAC, which is used to determine which military bases to close, but it at least provides a vehicle for open discussion to determine where and how cuts happen.

Remember this: the Trump budget, even though it will not go as stated, is only the start of an austerity-like situation in America. If the Administration doesn’t play it accurately, it could reduce the GDP in the United States and increase the welfare state. With the cuts designed by the Trump Administration, that would be an unwarranted and perhaps unsustainable situation.

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What Betsy DeVos Means as Secretary of Education

by Watson Scott Swail, Ed.D., President & CEO, Educational Policy Institute

A little later today, the education world will find out if billionaire Betsy DeVos will take the reins of the U.S. Department of Education. Much has been said about DeVos, the husband of former Amway CEO Dick DeVos and brother of former Blackwater founder and CEO Erik Prince. I only mention those two relatives because it illustrates where the money came from and how. DeVos is an extraordinarily affluent person who has used her wealth to support charter schools and Republicans over the decades. You can judge whether that is good or bad. In the end, it isn’t necessarily a meaningful piece of information. There are plenty of affluent people who give millions to Democrats and support mission-based purposes, too. The difference is that those people have never been appointed to a Cabinet-level position before.

As of this morning, there are two Republicans who say they will vote against DeVos (Senators Collins and Murkowski). Even so, it is likely that DeVos will meet the threshold with the tie-breaking vote from Vice President Pence.

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With DeVos at the helm, what will happen at the U.S. Department of Education? This is always difficult to say, but there have been some red flag warnings given her background. Overall, we know that President Trump could push the US into some type of austerity package, with significant if not severe cuts in the size, scope, and budget of the federal government, with some exception for the Department of Defense. Here are some thoughts:

  1. The U.S. Department of Education will undergo a massive (some say, “HUUUUGE”) SWAT analysis to determine what programs to cut. I expect cuts in the 20+ percent range by the end of four years, but it could be even larger. I don’t expect them to get rid of the Department, but they could even cut it by half if they mean what they say. What will get cut? Expect programs like TRiO and GEAR UP to get hit, although many GOP governors and representatives will argue against cutting any programs that give their states funding. Expect Race to the Top and I3 programs to take either a large hit or be fully eliminated. Other competitive programs will likely be defunded.
  2. Part of the large cuts will happen because the Department will move toward transfer payments back to the states to do the job of the Feds. How will this look? Programs like Special Education and Title I will be transferred to the states in the millions and millions of dollars and the states will be required to do the work—however they want to. I dare say, part of me likes that and part of me hates it. I do not trust the states to do the right thing most of the time, which is the problem. There are way too many politics at the state level that change way too often, leaving a very unstable system. Also understand that states control almost all of education funding. The feds funding and programs have always been a way of tinkering with new methods or strategies and ensuring that children with the greatest needs are supported regardless of those political changes. Now, all that changes with a few strokes of the pen. Good states will use the funds better, and less-good states will not. If I live in the traditionally poorly run southern states, I would be worried. Can you imagine what would happen in Texas? Or Arizona?
  3. Research budgets will be reduced significantly. Besides protecting the rights of poor and disabled students, the U.S. Department of Education provides world-class, if not world-best, research services to help determine what works in the education arena. The many surveys conducted by ED, including NPSAS, B&B, BPS, IPEDS, ECLS, CCD, and PISA, provide us with critical knowledge of the impact of public policies as well as tell data-based stories of students and teachers in our education system. Unfortunately, I believe the ED research budget through NCES will be ripped to shreds. I hope not. The research done there should be a national, non-partisan priority.
  4. The federal student loan programs will likely begin to shift from a Direct Loan (i.e., government operated) to a market-based loan program (guaranteed by the government but operated by private banks). The Direct loan began under Clinton as a healthy competitor to the banks (FFEL) and then, under Obama, become the only government-subsidized loan program. We’ll either be back to two systems again or the Trump Administration will completely implode the Direct Loan system. The FFEL program was a subsidy-based free market system, and the GOP and Trump will aggressively push for free market, with the exception, of course, of NAFTA. That type of free trade is not apparently liked by the free traders in the White House.
  5. A massive amount of money will be steered towards both charters and vouchers. That is DeVos’ thing. This is what she has spent millions on with her wealth in the past and now has the pulpit and the budget to do it on a massive scale. Expect large transfer funding and/or matching programs with the states to double or triple charter schools.
  6. The Department will have NOTHING to do with the Common Core. I would strongly encourage the new Schedule Cs at the U.S. Department of Education to do their research very carefully: the Common Core is not a federal program. It is a grassroots program that started with leadership from, at the time, the GOP-led National Governors Association and the Council for Chief State School Officers (CCSSO), among several other non-profit organizations. It developed that way it was supposed to be done: by teachers and other stakeholders from across the country. The only thing the Department did was tie some program funding to help support the Common Core (see Race to the Top, which is why it is gone). The Core couldn’t have come out in a better manner, but it became a hotly contested political football when it shouldn’t have. Anyone who thinks a form of national standards—created from the ground up—is a bad idea should get their head examined.
  7. And finally, restrictions and regulations on private higher education will be largely exorcised from the system. The Senate took on private, for-profit higher education with gainful employment legislation to rid the sector of fly-by-nights and other even more mainstream institutions from overcharging people for degrees that do not result in jobs let alone careers. This, in addition to the large reliance on Pell Grant funds and federal student loans, caused the Senate to take action. But the new administration largely wants to get rid of these regulations. This will become a problem for Pell Grant funding and other programs.

These are my initial thoughts. It is hard to say exactly what will come, but these are very likely. The $87 billion in FY2015 expenditures will be cut drastically. The 4,400 staff at ED will also be cut significantly. Consultants around the country should be jumping with joy, because work of the 1,000+ staffers who get laid off from the Department will be replaced by consultants who will receive state-funds via the transfer payments to the Department.

By this afternoon, we’ll at least know who if Betsy DeVos is the new Secretary of Education.

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