A Case Study in Government Hurting Working Class Students

December 17, 2012

By Thomas Lindsay

I’ve written here before about the rise of the $10,000 degree-programs in Texas and how the initiative has drawn the admiring attention of Florida, Wisconsin, and Oklahoma. This is good news for cash-strapped students and their families.

At the same time, we should not forget that the $10,000-degree initiative is not the first to address the college-affordability crisis. Students can receive comparable discounts at the private nonprofit, Excelsior College, a distance and online learning institution with headquarters in New York. Equally important, while the Texas initiative succeeds in reducing the cost to students to $10,000, it still carries an additional cost to taxpayers in the form of state subsidies. But Excelsior, as a private institution, costs its home state’s taxpayers in New York next to nothing, and zero to taxpayers in the other 49 states.

State support for public institutions varies widely. A recent study by the Federal Reserve Bank of New York provides a national perspective. It finds that state and local appropriations constituted 57.1 percent of total revenues for America’s public institutions of higher education in 2011. In Texas, in 2011, according to the Texas Higher Education Coordinating Board, state tax dollars levied to support public colleges and universities totaled $2.476 billion, or 22 percent of operating sources. This works out to $5,213 of taxpayer support per full-time student per year, or nearly $21,000 over four years contributed by taxpayers in addition to the tuition and fees paid by students and their parents.

In contrast, Excelsior, an independent nonprofit, costs state taxpayers in 49 of the 50 states nothing. Consulting the Integrated Postsecondary Education Data System data, Excelsior’s average revenue per student, per year is a very low $1,600. Excelsior’s programs are delivered at a distance and online; so, it need not maintain the extensive infrastructure of campus-based programs. In addition, its 36,000 students are primarily working adults who bring with them prior earned credit, mostly as transfer credit from other colleges. Completing their degrees on a part-time basis, they use Excelsior’s online courses and its credit-by-examination program to fulfill degree requirements, the latter of which is a lower-cost alternative means to earn credit. Combined, these factors account for its low, average annual revenue per student.

To be sure, Excelsior is not for everyone, certainly not for “traditional” college students—those aged 18-22 who attend a residential college full time. But “traditional” students are no longer the norm. The majority seeking postsecondary education consists of those over 25, who are already working fulltime, and who often have families of their own. The average Excelsior student is 39 and comes from across the U.S., bringing an average of five transcripts from previous academic work, including from community colleges. Excelsior accepts up to 90 transfer units from community colleges, and more from four-year institutions.

To help students reduce their expenses further, many are advised by Excelsior to complete their General Education requirements at community colleges. Students also can satisfy many requirements through successful completion of one of the “Excelsior College Examinations.” Excelsior has a sufficient number of such competency assessments to award an entire bachelor’s degree in liberal arts or business. These constitute an essentially tuition-free option.

As a result, it costs roughly $17,000 for the typical Excelsior candidate for a Bachelor of Liberal Arts degree. If the competency-based-exam-only path is taken, the cost would be approximately $3,500. The average student’s total cost is somewhere between these two sums.

But does Excelsior’s affordability come at the price of quality? Consider the following. As a degree-completion institution, it is often ranked the number one transfer institution in the nation by U.S. News & World Report. Accredited by both New York and the Middle States Commission on Higher Education, it has been named a “Center of Excellence in Nursing Education” three consecutive times by the National League for Nursing. Overall, its greatest strength comes from its 40 years of assessing knowledge wherever gained and helping adult students get the course credit they deserve, whether from a classroom, in corporate or military training, or as an independent student.

Nearly 90 percent of Excelsior’s students are already employed, either in health care or the military. A ranking conducted by the firm payscale.com shows it to have the second highest “starting median salary” ($52,500) out of a field of 12 online institutions, including Western Governors University. This is primarily due to the hefty wage increase that its nursing students realize after they have earned their degree and have obtained RN licensure.

Government as Obstacle

Given that college tuitions nationally have risen 440 percent in the past quarter-century, resulting in students taking on an historically high $1 trillion in student-loan debt, you would think that the federal government, which has a $16 trillion debt problem of its own, would do everything possible to help a school like Excelsior expand its reach to more low- and middle-class students, right?

Wrong. Fulfilling the maxim that no good deed goes unpunished, Excelsior is suffering increased intrusion by the federal government. This interference is in fact adding to the cost of delivery for all institutions of higher education, not only post-traditional ones like Excelsior. Two examples suffice to indicate the extent of the problem.

First, the U.S. Department of Education introduced last year its “Program Integrity” regulations, which, though intended to correct abuses by a handful of online for-profit schools, now affect some 3000 accredited institutions offering online programs. The Department of Education is unwilling or unable to discern that “online” and “for profit” are not synonymous. Its new regulations require all providers of Title IV-eligible online education to seek “authorization” in 54 jurisdictions, or face losing their Title IV status, which means that their students would be unable to receive federal education loans and other federal support. Of course, this cannot help but add significantly to Excelsior’s operating costs, to the tune of over $300,000 annually for additional staffing, legal support to deal with the bureaucracy in some states, registration fees (that are rising exponentially) and general overhead.

Worse, when you multiply Excelsior’s annual cost of compliance by the 3,000 institutions now affected by this new federal regulation, you arrive at a daunting sum. Who will pay for all of this? Students, their families, and federal taxpayers, of course. Who else?

Second, U.S. Senator Patty Murray (D-WA) has used her post as chair of the Senate Veterans Affairs Committee to champion Senate Bill 2241, which combines legislation proposed by Senators James Webb (D-VA) and Frank Lautenberg (D-NJ) aimed at “protecting” active and veteran military from the predatory practices of for-profit schools. Recall that some very high-pressure recruiting on the part of a few for-profit providers of higher education attracted the attention of the president last spring, in response to which he issued an executive orderrequiring colleges to publish more information about their financial aid and graduation rates. It also requires the Department of Defense to set strict rules for recruiting at military installations. Although the executive order applies to all colleges, its target is for-profit institutions.

Apparently, Senators Murray, Webb, and Lautenberg do not regard President Obama’s actions as sufficient. To address the misdeeds of a few (about five) institutions, Senator Murray et al. want to make compliance with SB 2241 a condition for all 4,600 accredited institutions if any should seek to offer enrollment under the GI Bills.

SB 2241 is an administrative nightmare. It requires collecting and reporting data in 35 separate areas, saddling the Secretary of Veterans Affairs with duties that duplicate those of the Secretaries of Education and Defense. It mandates training for faculty and staff at all participating colleges and universities. It requires dedicated staff for career and financial aid counseling. More egregious, it seeks to ban institutions from offering any discount to military students (!) for fear that this might induce them to enroll in a program that is not purported to be in their best interest.

Excelsior’s preliminary estimates place the cost of compliance with this new regulation, if passed, at over $200,000 per annum. When multiplied by 4,600 institutions of higher learning, and added to the other costs listed above, the number approaches $2 billion dollars in new costs. Again, students, their families, and federal taxpayers will foot the bill. In acknowledging that the “protections” duplicate those already in place at Defense and Education, SB 2241 calls for Veterans Affairs to reimburse the other departments for “costs in consulting or cooperating” with the VA – taking money away from other VA budget items. And it requires the VA to employ “personnel dedicated to assisting personnel of educational institutions” that are required to submit data on those 35 areas. So, costs not only increase for higher education, they also increase at the VA to administer requirements that only duplicate those at Defense and Education.

Working Class Affected the Most

In the final count, these misguided federal interventions serve only to reduce working-class students’ access to higher education and, in the case of Excelsior’s nursing programs, to a high-demand profession. Excelsior’s students, who come largely from modest economic backgrounds, need to work and support families while completing a degree, and need the flexibility made possible by distance and online learning and part-time study.

Consider the irony: President Obama calls for more graduates, greater access, reduced cost, and greater innovation in higher education. How does his Department of Education respond? By imposing costly regulations in response to almost every problem, even when other remedies already exist. As a result, costs have increased, access has decreased (as online programs have withdrawn or folded because of the onerous cost of compliance) and the risk of pursuing innovation has heightened in light of the growing specter of disapproval by the Department or regional accreditors.

These are the obstacles faced by Excelsior, and by every other institution created specifically to help working adults earn a degree.

As frustrating as all this is, there are grounds for optimism. Excelsior may well have hit on a model of what the post-traditional institution of the 21st century should look like: affordable, flexible, innovative, and student-centered. Again, the model is not for everyone, nor is it intended to be. While the flexibility of distance and online learning forms a great fit for the working adult, there will and should always be a place for a campus experience for 18-22-year-olds. Nevertheless, and again, the majority of students seeking postsecondary degrees and certificates do not fit the traditional model. Here Excelsior fills a vital societal need.

Moreover, Excelsior is not alone. There are others like it—to name a few, Empire State (New York), Charter Oak State (Connecticut), Thomas Edison State (New Jersey) and, of course, the ubiquitous Western Governors University. These institutions likewise challenge higher education with their focus on outcomes—student learning and workforce readiness—over the traditional focus on inputs.

Given the resistance they face from the higher-education establishment, as well as from state and federal government agencies, the post-traditional models of higher education might expect still more punishment for their good deeds for some time to come. But the undeniable reality is that they fill a pressing need for working-class adults in a way that the education status quo will not and perhaps cannot.

In the end, reality will prevail, and with it, the upward aspirations of working-class adults and their families.

 

Thomas K. Lindsay, Ph.D., is Director of the Center for Higher Education at the Texas Public Policy Foundation and former Deputy Chairman of the National Endowment for the Humanities. His book, Investigating American Democracy (with Gary D. Glenn) was published in June by Oxford University Press.

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