Monday, April 25, 2016

A Wake-Up Call to PASSHE Students, Parents and Alumni Donors - Part 10


What PASSHE Politics Defeating PASSHE Economics Looks Like
This heading was the final one in last week’s blog post.  The text beneath that heading cited just one of many key behaviors revealing how PASSHE politics defeats PASSHE economics every day, namely how Governors from both parties have been deciding PASSHE tuition increases for years, despite the fact that the law, Act 188, assigns that decision not to the Governor but to the PASSHE Board of Governors.

PASSHE’s 14 universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester.
 
PASSHE’s “Political” Budget Requests
 
The Act 188-defying setting of PASSHE annual tuition increases by both Democrat and Republican Governors is not the only example of how PASSHE politics defeats PASSHE economics.  PASSHE’s political annual budget request process at the fourteen PASSHE universities is another egregious example.
 
As a PASSHE university president for twenty years (1992-2012) I witnessed the annual budget request process that was dictated to the fourteen presidents by the PASSHE chancellor who, under Act 188, is the chief executive of the PASSHE system, reporting directly to the Board of Governors.  The PASSHE chancellor is also the person to whom each of the 14 university presidents reports on a daily basis.
 
The financial people in the Office of the Chancellor (OOC) would tell the presidents at the 14 PASSHE universities how to prepare their documents so that their budget requests for the following year would show a degree of shortfall that had been predetermined by OOC—without input from the universities.
 
That is, the budget requests from the 14 PASSHE universities during the 20 year period 1992-2002 were political (rather than financial) documents having little or no relationship to the economic realities at the fourteen PASSHE universities.
 
These predetermined university budget requests would then find their way into PASSHE’s official budget request which would be sent by the Chancellor and Board of Governors to the Governor’s Budget Office.
 
Although one might suspect that PASSHE’s predetermined budget requests might be crafted to request more funding than was actually needed to do the job, the exact opposite was actually the case!  Year after year, PASSHE’s budget requests would ask for less funding than was needed to do the job, and year after year, that year’s State appropriation would be even lower than PASSHE’s preset low-ball requests.
 
And to make matters worse, as State Appropriation continued to fall as a share of PASSHE’s total annual revenue, the Board of Governors since 2002 compounded the problem by adopting its Act 188-defying “Low-Tuition-for-all-Policy,” which acted to similarly reduce the amount of funding coming from tuition.
 
One result of these terrible decisions by the Board of Governors was to make achievement of PASSHE’s statutory purpose—“High quality education at the lowest possible cost to the students”—impossible.   Since 2002, political decisions by the Board of Governors have caused the quality of a PASSHE education to plummet while, at the same time, saddling students from less-affluent families with crushing student-loan debt, while foolishly giving unneeded State subsidies to students from more-affluent families!       
 
Budget Request Directive: “We don’t want to embarrass the Governor

At one of the monthly meetings between Chancellor John Cavanaugh and the fourteen PASSHE presidents with budget requests on the agenda, I asked the following question: “Wouldn’t it be better for everyone concerned if we were totally truthful in our university budget requests as to what we really needed to provide high quality education at the lowest possible cost to the students?”  The answer: “We don’t want to embarrass the Governor by asking for more money than the State can afford to give us.”
 
Ironically, at the time that question was asked and answered, the State was providing only 30% of PASSHE’s annual revenue, while the PASSHE students, parents and alumni donors were providing 70%.
 
Even more ironic is the fact that neither of the two examples we have given so far in which PASSHE politics defeats PASSHE economics—the Governor (rather than the Board of Governors) deciding PASSHE tuition increases, and PASSHE’s political (rather than fact-based) budget requests—has any legal basis in Act 188, the enabling legislation that created and ostensibly guides the PASSHE universities.

Malfeasance
 
According to Dictionary.com, “malfeasance” is “the performance by a public official of an act that is legally unjustified, harmful, or contrary to law.”  (Emphasis added.)
 
Both examples above suggest that the PASSHE Board of Governors and the Office of the Chancellor have operated over the years in ways that are contrary to law.  Even more compelling on this score is the fact that since 2002, the Board of Governors has failed to deliver either end of PASSHE’s Act 188 statutory purpose, which is: To provide “High quality education at the lowest possible cost to the students.”
 
Chart 9 provides powerful evidence¹ for the huge drop in the educational quality of a PASSHE education since 2002, while Chart 20 provides compelling evidence² for the fact that the Board of Governors has not been providing a PASSHE education at anything like the “lowest possible cost to the students.”
 
In this case, the malfeasance by PASSHE’s elected and appointed officials is easy to document because their flawed actions violate not just the spirit but the letter of the law.
 
As shown above, the Act 188 statutory purpose of the fourteen PASSHE universities “High quality education at the lowest possible cost to the students,” has not been provided to Pennsylvania’s students since 2002, reducing the promise of Act 188 to empty words for those students and alumni.
 
This is not a failure of law, but rather a failure of Pennsylvania public officials to obey the law.
 
To be continued.

² https://www.keepandshare.com/doc/6802256/privatization-without-a-plan-chart-20-and-caption-january-29-2014-pdf-390k.

Monday, April 18, 2016

A Wake-Up Call to PASSHE Students, Parents and Alumni Donors - Part 9


PASSHE:  Where Politics Defeats Economics Every Day
The final paragraph of last week’s blog post included the following sentence:

“The sad truth about PASSHE’s tuition levels in recent years is that they were decided upon not by economic but by purely political considerations.”  (Emphasis added.)
PASSHE’s 14 universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester.
 
In the above quote, I was asserting the critical importance of basing PASSHE tuition levels on economic rather than political considerations.  In support of that assertion, it is very helpful to define those terms.

The Definition of Economics
 
According to Merriam-Webster, “economics” is “a science concerned with the process or system by which goods and services are produced, sold, and bought.”
 
The Definition of Politics

According to Merriam-Webster, “politics” involves “activities that relate to influencing the actions and policies of a government or getting and keeping power in a government.” (Emphasis added.)
PASSHE Economics

In the case of PASSHE, the economics of tuition levels should serve the financial needs of both the seller of education (the PASSHE universities) and the consumers of education (PASSHE students and parents).  
The Universities: From the point of view of the fourteen PASSHE universities, a reasonable tuition level is one enabling the universities to cover the actual costs of providing that education or, more precisely, one that allows the PASSHE universities to deliver their statutory purpose—“High quality education at the lowest possible cost to the students”—while remaining financially solvent in the process.  

The Students and Parents: From the point of view of PASSHE students and parents, a reasonable tuition is one that enables the family to acquire a high quality education at a purchase price—i.e., bottom line cost—that falls within their financial capabilities, and where the “bottom line cost” to a given student is defined as the university “tuition sticker price” minus the “tuition discount” to that particular student.   
For students from families with limited financial resources, the actual university tuition sticker price is totally irrelevant.  Such families can either afford the bottom line cost of attendance, or not.  And if they can’t afford the bottom line cost, they certainly can’t afford the tuition sticker price which is always higher and in many cases much higher.

So although the economics of PASSHE tuition levels should serve the financial needs of both the seller of education (the universities) and the purchaser (students and parents), there is compelling evidence that the financial needs of both the PASSHE universities and the PASSHE students are being ignored by the PASSHE Board of Governors.  That is, PASSHE economics has been taking a back seat to PASSHE politics.  More on this subject next time.
PASSHE Politics

As to the kinds of activities that fall under the umbrella of “PASSHE Politics,” the Merriam-Webster definition specifies two very different kinds: 1) Activities that relate to influencing the actions and policies of government; and 2) Activities in regards to getting and keeping power in government.
It is clear that the first activity just cited—influencing the actions and polices of government— includes actions that would generally be taken by the citizenry in an attempt to help shape the actions and policies of government that affect them and their families.  In the case of PASSHE, this aspect of politics could manifest itself in a grass roots effort on the part of PASSHE students, parents and alumni to shape public policy so as to make the PASSHE educational experience more aligned with their best interests.

It is equally clear that the second activity just cited— getting and keeping power in a government—includes actions most likely to be taken by PASSHE’s elected and appointed officials who control the PASSHE system office in Harrisburg and the fourteen PASSHE universities.  Evidence shows these officials engaging in activities in support of the never-ending quest of getting and keeping power in government.  
An Enthusiasm Mismatch

Historically, PASSHE’s Majority Financial Stakeholders—the hundreds of thousands of PASSHE students, parents, alumni donors and their families, who provide 75% of PASSHE’s annual revenue—have  not yet been motivated to organize themselves politically to undo the PASSHE policies that are harming them.  
But unfortunately, the elected and appointed officials who control PASSHE are very organized in seeing to it that their efforts to get and keep power within PASSHE remain both successful and unchallenged.  So as long as this enthusiasm mismatch continues, PASSHE politics will continue to defeat PASSHE economics.

What PASSHE Politics Defeating PASSHE Economics Looks Like
In simple terms Act 188 says—when it comes to funding—that: 1) the Governor and the Legislature get to decide how much State support the Commonwealth can afford to provide to PASSHE in any given year; and 2) The Board of Governors then gets to decide how high the tuition rates must be set in order “To do and perform generally all of those things necessary and required to accomplish the role and objectives of the System,” as the BOG is legally required to do by Section 20-2006-A(a)(15) of Act 188.¹  And, presumably, accomplishing the Act 188 statutory purpose of the PASSHE universities: To provide “High quality education at the lowest possible cost to the students,” would be one of the first “things necessary and required to accomplish the role and objectives of the System.”

But although the Board of Governors has the legal authority, from Section 20-2006-A(a)(11) of Act 188, “To fix the levels of tuition fees,” and despite the fact that the law does not require or even mention any role for the Governor of the State in the tuition-setting process, the Board of Governors has during a recent 20-year period anxiously awaited—together with the 14 PASSHE university presidents, I included—the sitting Governor’s word as to the maximum allowable tuition rate increase for that year! 
Why would 20 different Boards of Governors with slightly varying membership defer every year for 20 years to five different governors, both Democrat and Republican—when it came to one of their most important sworn duties—to set tuition rates in such a way as to provide “high quality education at the lowest possible cost to the students?”  Why would they let the Governor decide that when the law, Act 188, explicitly gives that responsibility not to the Governor of the State, but to the Board of Governors?

While the reason must clearly be political—since it always involved the Governor—it is just as clearly not partisan—since it involved governors from both parties serving roughly equal time in office in the 20-year period between 1992 and 2012.
To be continued.

Monday, April 11, 2016

A Wake-Up Call to PASSHE Students, Parents and Alumni Donors - Part 8


Sticker Price vs. Bottom Line

Act 188 sets a clear limit on the student costs of a PASSHE university education; PASSHE is required by law to provide a high quality education “at the lowest possible cost (i.e., lowest bottom line) to the students.”

The 14 PASSHE universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester.

 A careful reading of Act 188 also reveals¹ that the law imposes no restriction whatsoever on “tuition,” i.e. “sticker price,” but only on the bottom line “cost to the students.”

In view of this Act 188 mandate, it is disappointing that PASSHE’s Board of Governors has been ignoring the statutory purpose of the fourteen PASSHE universities since 2002, by limiting annual tuition increases.  PASSHE tuition increases are announced each year at the June/July meeting of the Board of Governors.

In PASSHE’s Own Words

(From PASSHE’s News Release² of June 30, 2011): “Despite the severe fiscal challenges we face, we are committed to offering high quality, affordable education to our students,” said Board of Governors Chairman Guido M. Pichini.” (Emphasis added.)

Note: “affordable education to our students” is not the same as “lowest possible cost to the students.”
 
(From PASSHE’s News Release³ of July 9, 2012): “This action demonstrates our ongoing commitment to our students and their families, and to the Commonwealth,” said PASSHE Board of Governors Chairman Guido M. Pichini. “PASSHE universities will continue to offer high-quality education at the most affordable cost possible.”  (Emphasis added.)
 
Note: “The most affordable cost possible” is not the same as “the lowest possible cost to the students.”
 
(From PASSHE’s News Release⁴ of July 9, 2013):  “It is very important to our students and their families that we keep our tuition affordable,” said Board of Governors Chairman Guido M. Pichini. “With this action today, PASSHE universities will continue to provide outstanding value, combining high-quality educational opportunities with the most affordable cost available.”  (Emphasis added.)
 
Note: The “most affordable cost available” is not the same as “the lowest possible cost to the students.”
 
(From PASSHE’s News Release⁵ of July 8, 2014): “PASSHE universities offer tremendous value to students and their families, providing a unique combination of high-quality educational opportunities and the most affordable cost available, said Board of Governors Chairman Guido M. Pichini.”  (Emphasis added.)
 
Note: The “most affordable cost available” is not the same as “the lowest possible cost to the students.”

(From PASSHE’s News Release⁶  of July 9, 2015): “Our university leadership, especially our presidents, should be commended for everything they have done to control costs and to continue to ensure their institutions are providing a high-quality, high-value education to students,” Mr. Pichini said.      

Note: “High value education” is not the same as “lowest possible cost to the students.”

Also note that all of the above PASSHE Board of Governors’ News Releases employ “weasel words”* such as “affordable” to characterize their tuition-increase decisions while often avoiding the word “tuition,” and while never mentioning the relevant Act 188 mandate: “at the lowest possible cost to the students.”   
 
Insight into the intentions of the PASSHE Board of Governors with regard to keeping tuition low—rather than bottom line cost to students low—may be found in the headline of the July 8, 2014 News Release:
 
“Board of Governors approves modest tuition increase, assuring State System universities will remain lowest-cost in Pennsylvania.”  (Emphasis added.) 
 
Even more revealing of their true intentions is the sub-headline of the July 8, 2014 PASSHE News Release:
 
$198-a-year increase matches inflation rate for eighth time in 10 years
 
By PASSHE’s own admission, in writing and as part of a public news release, the obvious goal of the PASSHE Board of Governors on tuition is to keep PASSHE tuition increases at or about the annual rate of inflation.

This sounds, at least superficially, like an intelligent policy decision until one realizes: 1) That PASSHE’s personnel cost structure includes salaries, pensions and health-care costs that have all been known to  increase faster than inflation; and 2) That keeping down PASSHE tuition rates for political reasons is not only inconsistent with Act 188, it is a direct violation of Act 188 in that it makes tuition-discounting impossible— which in turn makes the Act 188 mandate of “lowest possible cost to the students” impossible as well!

The Failure of PASSHE’s “Low Tuition for All” Policy

 As shown in last week’s blog post, the fourteen PASSHE universities are steadily becoming more and more “gentrified” in the following sense:  PASSHE enrollments by students from more-affluent families are rising while, at the same time, PASSHE enrollments by students from less-affluent families are falling.  

The “displacement” of the less affluent in favor of the more affluent is a key aspect of CDC’s definition of “gentrification,” and such displacement is occurring with PASSHE’s public higher education gentrification. 
 
And both the incentive for more-affluent students to attend—and the incentive for less-affluent students to not attend—stem from the Board of Governors’ blatant, Act 188-defying policy of Low Tuition for All.
 
The sad truth about PASSHE’s tuition levels in recent years is that they were decided upon not by economic but by purely political considerations.  Although clearly a “weasel -word,“ the term “affordable tuition” has become a perfect sound bite for elected and appointed State officials focused on their reelection or reappointment, rather than on their responsibilities to PASSHE’s majority financial stakeholders—the PASSHE students, parents and alumni donors who now provide 75% of PASSHE’s annual operating revenue.
 
To be continued.

² https://www.keepandshare.com/doc/7490737/passhe-news-release-june-30-2011-pdf-129k.
³ https://www.keepandshare.com/doc/7490738/passhe-news-release-july-9-2012-pdf-133k.
https://www.keepandshare.com/doc/7490739/passhe-news-release-july-9-2013-pdf-133k.
https://www.keepandshare.com/doc/7490740/passhe-news-release-july-8-2014-pdf-147k.
https://www.keepandshare.com/doc/8041072/passhe-news-release-july-9-2015-pdf-284k.
*According to Wikipedia, “A weasel word is an informal term for words and phrases aimed at creating an impression that a specific and/or meaningful statement has been made, when only a vague or ambiguous claim has been communicated, enabling the specific meaning to be denied if the statement is challenged.”

Monday, April 4, 2016

A Wake-Up Call to PASSHE Students, Parents and Alumni Donors - Part 7


The “Gentrification” of Pennsylvania’s Fourteen PASSHE Universities

The 14 PASSHE universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester.

By way of clarification, the Centers for Disease Control and Prevention (CDC) offer the following definition¹ of “gentrification” as it applies to the challenge of providing health care to various communities:

“Gentrification is often defined as the transformation of neighborhoods from low value to high value. This change has the potential to cause displacement of long-time residents and businesses. Displacement happens when long-time or original neighborhood residents move from a gentrified area because of higher rents, mortgages, and property taxes.”

Although the term “gentrification” is not often applied to public higher education, there is compelling evidence to show that a definition similar to the CDC definition applies to Pennsylvania’s fourteen PASSHE universities—as far as Pennsylvania’s challenge of providing public higher education to its communities.

The conspicuous affluence of Pennsylvania families that are increasingly sending their sons and daughters to PASSHE universities reveals gentrification tendencies similar to those outlined in the CDC definition.  

As our data will show, PASSHE’s gentrification now poses obstacles to students from Pennsylvania’s least affluent families being able to receive the opportunities and benefits of a public higher education—and these are the very students for whom public higher was created in Pennsylvania, and across America.   

In making the case for this assertion, recall Chart 21 and its caption² referenced in last week’s blog post: 

“Chart 21.  Family Income Distributions of Financial Aid Recipients at Cal U.  These data show that the family income data for Cal U students shifted substantially between 2002 and 2011.  The percentage of students from families with incomes over $100,000 per year almost tripled (2.86) during that time.  The percentage of students from families making between $70,000 and $99,999 grew by 21%.  At the same time, the percentage of students from families making between $40,000 and $69,999 fell by 22%.  And the percentage of students from families making less than $40,000 fell by 13%.”

These data demonstrate a huge shift to students from wealthier families.”
 
While the above paragraph recounts a shocking ten-year shift from less affluent families to more affluent families sending their sons and daughters to PASSHE universities, it is even more striking when one looks at the average family incomes associated with the four income quartile ranges just cited.  As shown³ in Chart 17, the average family income for those families earning less than $40,000 per year was $17,863; the average family income for those families earning between $40,000 and $69,999 per year was $54,817; the average family income for those families earning between $70,000 and $99,999 per year was $83,816; and the average family income for those families earning more than $100,000 per year was $135,677!
 
In 2014, Pennsylvania ranked 23rd nationally in terms of its median household income ($50,228).  The U.S. average that year was slightly higher at $50,502.

PASSHE students from the most affluent families have incomes almost three times larger than PA median family income, and their share of enrollment tripled (5.4% to 15.5%) in a recent ten-year period.         

Price is what you pay and value is what you get.”
                                           Warren Buffett

At its most basic level, the purchase of a public higher education is a voluntary transaction involving both the “price” and perceived “value” of the education received.
 
As noted last week, most students and parents looking at colleges today quickly become aware of the critical difference between tuition, i.e., the sticker price, and bottom line, i.e. the actual cost to them.
 
How Private Colleges Handle Sticker Price vs. Bottom Line

Private colleges and universities have been practicing income distribution for years by means of a tool known as “tuition discounting,” touted to the best applicants (e.g., students with higher SAT scores but lower family income) not as a “discount” but as a “scholarship” or “institutional grant.”
 
Call it what you will, but it remains a tuition discount since it is only offered to those academically qualified students needing a financial inducement to attend a school whose tuition is otherwise totally out of reach.
 
One consequence of this admissions policy, familiar at most private colleges and universities in America, is that qualified students from more affluent families are expected, and needed, to pay the full sticker price. 
 
In order for a tuition-discount policy to work without bankrupting the institution, the sticker price paid by students not receiving a discount must be high enough to compensate for the discounts to be provided.
 
Therefore the annual sticker price must be higher—and in some cases much higher—than the actual average cost of one-year’s attendance for one student.
 
How Public Universities Handle Sticker Price and Bottom Line
 
Public universities in America have tended to pursue two different policy directions, with the choice determined by the level of taxpayer-subsidy each state is willing to provide to “public higher education.” 
 
As shown previously in national data⁴ from the State Higher Education Executive Officers Association (SHEEO), some states provide as much as 85% of the cost of public higher education (with net tuition providing 15%), while other states provide as little as 15% of the cost, with net tuition providing 85%.
 
The average net tuition across the fifty states in 2014 was 47.1%, a figure that has been growing by one percent per year for the last twenty-five years!  If this trend continues, public higher education, i.e., highly State-subsidized higher education in America, will disappear entirely in one or at most two generations.
 
How Pennsylvania Handles Sticker Price and Bottom Line
 
As shown in previous blog posts, PASSHE policy makers have focused on maintaining the lowest possible tuition—i.e., sticker price—rather than the “lowest possible cost to the students,”—i.e., bottom line, as mandated by Act 188.  When combined with three decades of steadily shrinking State Appropriation to the fourteen PASSHE universities, the political focus on lowest possible tuition means that there is little or no money left over to provide tuition discounts to students from Pennsylvania’s least affluent families.
 
The Displacement of PASSHE Students from Pennsylvania’s Least-Affluent Families
 
For students from Pennsylvania’s less affluent families, PASSHE tuition—without a large discount—is seen as incredibly high!  This causes their share of PASSHE’s enrollment to trend sharply downward.
 
But for students from Pennsylvania’s more affluent families, PASSHE’s tuition is seen as incredibly low, even without a discount.  To them, PASSHE’s sticker price is an incredible, State-subsidized bargain!
 
By welcoming more affluent students while discouraging less affluent students, PASSHE’s gentrification policy is reflecting disgraceful decisions by the PASSHE Board of Governors that are in direct violation of the statutory purpose of the PASSHE universities as mandated by its Act 188 enabling legislation.
 
To be continued.
 
¹ http://www.cdc.gov/healthyplaces/healthtopics/gentrification.htm.
² https://www.keepandshare.com/doc/7971151/privatization-without-a-plan-chart-21-and-caption-march-26-2016-pdf-191k.
³ https://www.keepandshare.com/doc/8008009/privatization-without-a-plan-chart-17-and-caption-april-3-2016-pdf-193k.
http://www.sheeo.org/sites/default/files/Figure%209.jpg.

Monday, March 28, 2016

A Wake-Up Call to PASSHE Students, Parents and Alumni Donors - Part 6


College Affordability and Student Loan Debt

Last week’s blog post focused on the changing “ends” and “means” of public higher education over the last two centuries.  But it concluded with references to “college affordability” and “student loan debt,” two issues that generate ongoing intense media coverage today at the local, regional and national levels.

Although “college affordability” was a conscious goal of American public higher education in the early 19th century, the idea of “student loan debt” remained unthinkable until the late 20th and early 21st centuries.

“College Affordability”

The word “affordability” according to Dictionary.com, refers to “that which is believed to be within one’s financial means.”

The essence of this definition is that affordability varies with the individual rather than the group—except on the average.  “One’s financial means” clearly differs from individual to individual within any group.

This also means that there can be no single answer to the question “Is College affordable?”  The actual answer to that question depends on both the college, and on the student (or parent) asking the question.

“The Myth of “Affordable Tuition”

Another consequence of the above definition of affordability is that, except for deceptive marketing tag- lines, there can be no such thing as an “affordable tuition;” there is only an “affordable bottom line,” or more precisely, a multitude of different “affordable bottom lines,” one for each member of the group.

This means that the tag-line “affordable tuition” can only be true “on the average,” an average based on a distribution of individuals.  And every distribution has individuals below as well as above the average.

So an “affordable tuition” will only seem affordable to a tiny number of individuals whose actual financial means happens to coincide exactly with the average financial means of the distribution! 

The bottom line to all of this is inescapable:  For any “tuition-setting policy” based on the myth of an “affordable tuition,” three different outcomes will be delivered to the actual members of the distribution:

1)      A negligible number of members for whom an “affordable tuition” will be exactly affordable to them;

2)      Two thirds of the distribution members for whom “affordable tuition” will not be affordable to them;

3)      One third of the of the distribution members for whom “affordable tuition” puts money in their bank!

The above two-thirds and one-third shares are taken from official PASSHE data and refer to the family income distribution trends of financial aid recipients at a typical PASSHE University.¹

Student Loan Debt

According to a January 19, 2016 article² in Market Watch by Jillian Berman entitled “America’s growing student-loan-debt crisis,” the following figures are worth noting:   

·         “The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages. Most of that is loans held by the federal government.

·         About 40 million Americans hold student loans and about 70% of bachelor’s degree recipients graduate with debt.

·         The class of 2015 graduated with $35,051 in student debt on average, according to Edvisors, a financial aid website, the most in history.

·         One in four student loan borrowers are either in delinquency or default on their student loans, according the Consumer Financial Protection Bureau.”

Sticker Price vs. Bottom Line and the Rise of “Tuition Discounting”

Most students and their parents looking at colleges and universities today quickly become aware of the critical difference between tuition, i.e., the sticker price, and bottom line, i.e. the actual cost to them!

And at virtually all colleges and universities, the difference between sticker price (which is usually high) and the bottom line (which may be quite lower) is made up for by “scholarships” and various “grants.”

Don’t tell the children, but private colleges and universities have been practicing income distribution for years by means of a tool called “tuition discounting,” touted to the best applicants (e.g., students with higher SAT scores but lower family income) not as a discount but as a “scholarship” or “institutional grant.

To see how “tuition discounting” works in America, check out the College Board article³ entitled “Tuition Discounting: Not Just a Private College Practice.  As seen there, tuition discounting, once practiced only by private colleges and universities has more recently spread to some, but not all, public universities as well!

Here is a direct quote from the College Board article:

“The most recent data … reveal that the (unweighted) average discount rate is 12.5 percent for public two-year colleges and 14.7 percent for public four-year institutions.  In other words, these colleges and universities are spending a significant portion of their revenues creating different net prices for different students. The average discount rate for private nonprofit four-year colleges and universities is 33.5 percent. This discount rate matches the 34 percent average rate for all undergraduates emerging from NACUBO’s survey of estimated 2004-05 data.”

Note that the above tuition discount figures are for FY 2005, and back then four-year public universities had average discount rates of 14.7% compared to a rate of 33.5% for private nonprofit four-year colleges and universities. 
 
But according to an August 25, 2015 NACUBO study⁴ entitled “Private College and University Tuition Discount Rates Hit All-Time High,” the average tuition discount rates across America for private universities grew from  34.3% in FY 2005 to 41.6% in FY 2014.
 
If average discount rates for public universities grew at about the same rate as for private universities, the average discount rate for public universities would have grown to about 18.0% by FY 2014.  
 
But “average” discount rates, by definition, are averages over many universities and, once again, that average will be shaped by the discount rates of the individual universities in a distribution of universities. 
 
According to the Association of State Higher Education Executive Officers (SHEEO), the net tuition dollars (from the private checkbooks of students and parents) funding “public” universities across America vary from 15%—in the most generous States providing up to 85% of the annual funding, to 85%—in the least generous States providing as little as 15% of the annual funding to “public” higher education.⁵
 
According to the SHEEO data, the five most generous states to public higher education in America include Wyoming, California, Alaska, New Mexico and North Carolina, while the five least generous states include Vermont, New Hampshire, Delaware, Colorado and Pennsylvania.
 
Specifically, while the average tuition discount rate for public universities across America in 2014 was 18%, the average tuition-discount rate for the fourteen PASSHE universities was less than 1%.

PASSHE students have one of the highest average bottom line costs of attendance in America!   

To be continued.
 
¹ https://www.keepandshare.com/doc/7971151/privatization-without-a-plan-chart-21-and-caption-march-26-2016-pdf-191k.
² http://www.marketwatch.com/story/americas-growing-student-loan-debt-crisis-2016-01-15.
³ http://www.collegeboard.com/prod_downloads/press/tuition-discounting.pdf.
https://www.keepandshare.com/doc/7902722/nacubo-tuition-discount-study-2014-tds-pressrelease-march-13-2016-pdf-218k.
http://www.sheeo.org/sites/default/files/Figure%209.jpg.