Friday, March 29, 2013




Popping the Higher Education Bubble

Glenn Harlan Reynolds

The economist Herbert Stein once said that something that can’t go on forever, won’t. That observation, sometimes called Stein’s Law, could well turn out to be the theme for the current decade. But nowhere is it truer than in higher education. American higher education is first in the world, but it can’t go on forever on its current path.

Colleges are raising tuition and fees every year, at a rate of increase that far outpaces any reasonable expectation. One might think this is the kind of thing that couldn’t continue forever, but that’s precisely what has been happening over the past several decades. Prices have gone up, and buyers have poured in anyway, buoyed by a flood of seemingly cheap government money in the form of student loans.

As with any bubble, there are doomsayers who are mostly ignored and cheerleaders who say that this time it’s different. But—as with any bubble—reality is starting to intrude.

Though people have been talking about a bubble in higher education for a while, one major indicator that the swelling is approaching its limit was found in last year’s Occupy protests. While the protesters represented a diverse array of grievances, one common thread was that many had run up huge student loan debts for degrees that weren’t capable of generating sufficient income to make the payments.

At an annual growth rate of 7.45 percent, tuition has vastly outstripped both the consumer price index and health care inflation (see chart). The growth in home prices during the housing bubble looks like a mere bump in the road by comparison. For many years, parents could look to increased home values to make them feel better about paying Junior’s tuition—the so-called “wealth effect,” in which increases in asset values make people more comfortable about spending. Or at least they could borrow tuition costs against the equity in their homes. But that equity is gone now, and tuition marches on.

So where does that leave us? Even students who major in programs shown to increase earnings, such as engineering, face limits to how much debt they can sanely amass. With costs exceeding $60,000 a year for many private schools, and out-of-state costs at many state schools exceeding $40,000 (and often closing in on $30,000 for in-state students), some people are graduating with debt loads of $100,000 or more. Sometimes much more.

That’s dangerous. And the problem is not a small one: According to the Ohio University economist Richard Vedder, writing in the Chronicle of Higher Education, the number of student-loan debtors now actually equals the number of people with college degrees. How is this possible? “First, huge numbers of those borrowing money never graduate from college,” Vedder explains. “Second, many who borrow are not in baccalaureate degree programs. Third, people take forever to pay their loans back.”

Total student loan debt in America has passed the trillion-dollar mark. That’s more than total credit card debt and more than total auto loan debt. Students graduating with heavy burdens of student loan debt must choose (if they can) jobs that pay enough money to cover the payments, often limiting their career choices to an extent they didn’t foresee in their undergraduate days.

Even students who can earn enough to service their debts may find themselves constrained in other ways: It’s hard to get a mortgage, for example, when you’re already effectively paying one in the form of student loans. And unlike other debt, there’s no “fresh start” available, since student loans generally aren’t dischargeable under bankruptcy. The whole thing looks a bit like the debt slavery schemes used by company stores and sharecropping operators during the 19th century.

Now the whole scheme is starting to break down. In my own world of legal education, applications have plummeted over the past few years. According to the ABA Journal, there has been a 22 percent drop this academic year alone, and they’re down almost half from 2007. Business schools, with declining pay and employment prospects for MBA graduates, are experiencing similar declines. Even in undergraduate admissions, colleges are losing the ability to set prices as applicants become more value-conscious. These trends have led the Moody’s rating service to downgrade the outlook for the entire higher education sector to “negative.”

Some in higher education are offended. College should be about improving your mind, they say, not about future salaries. But a recent study of more than 700 schools by the American Council of Trustees and Alumni found that many have virtually no requirements. Perhaps that’s why students, on average, are studying 50 percent less than they were a couple of decades ago.

When higher education was cheap enough that students could pay their own way by working part-time, “study what interests you” was reasonable advice. When the investment runs well into the six figures, students would be crazy not to worry about the return. If there’s no return, it’s not an investment; it’s a consumption item. A six-figure consumption item is well beyond the resources of most college-age Americans; nobody would advise an 18-year-old to purchase a Ferrari on borrowed money. But if a college education is a consumption item, not an investment, then they’re basically doing the same thing.

Higher education needs to be cheaper, more flexible, and better. It’s possible that technology will show the way: With the proliferation of online courses, some offered by major brand-name schools like Harvard, MIT, or Georgia Tech, there’s no reason why students should have to go into massive debt. And while an online degree from MIT (when such becomes available) probably won’t be worth as much as traditional MIT sheepskin, it may well outperform degrees from many less prestigious brick-and-mortar schools.

Alternatively, universities could become leaner. Fueled by the bubble, they’ve piled on staff (mostly non-teaching administrators, who now outnumber faculty in many institutions), constructed buildings and palatial athletic facilities, and paid almost no attention to costs. A few science and engineering courses may have inherently high equipment costs, but there’s no reason why it should cost more in constant dollars to get a degree in English literature today than it did 50 years ago. Schools that get costs under control will have a huge advantage. Those that don’t, will suffer.

Today’s university is a knowledge industry using a 19th-century model in the 21st century. If that doesn’t suggest a need for updating, what does?

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Investigation launched after British teachers hand a special needs student razor blades so they could self-harm 'safely'

Teachers were ordered to hand razor blades to a vulnerable youngster as part of a controversial 'controlled self-harm' policy at a specialist school, it has emerged.

An investigation is underway after a child at Unsted Park School - which offers education to boys and girls aged between seven and 19 years who have Asperger's Syndrome and higher-functioning autism - was given access to blade kits.

Staff were told to give the pupil access to the sterilised disposable razor and sterile wipes and escort the child to a bathroom where they would be allowed to self-harm in a 'safe and controlled manner'.

Teachers were ordered to wait outside the bathroom while the child was inside, checking on them every two minutes, before the wounds were dressed and cleaned by staff.

The policy was introduced and abandoned within six days at the school in Munstead Park, Godalming, Surrey, and is understood to have sparked protests from staff.

Principal Steve Dempsey and headteacher Laura Blair now face the possibility of being hauled before a Teaching Agency hearing over allegations of unacceptable professional conduct in connection with the policy.

Members of school staff are understood to have raised fears with Surrey County Council's Local Authority Designated Officer over the procedure.

Following the Teaching Agency investigation, a panel from the regulator will decide whether any further action will be taken.

The regulator could decide to refer the case to a professional conduct panel.

A spokesman for the Priory Group, responsible for running the school, said: 'We are always willing to review cases with the Teaching Agency.

'This was a short-term, local procedure introduced by the headteacher and school principal who genuinely believed it was in the best interests of the pupil.

'However, they accept that the procedure should not have been implemented without further approvals having been obtained from key stakeholders and senior management prior to its introduction.'

It is believed the pupil's parents were aware of the policy.

Unsted School was ranked good with outstanding features in its last Ofsted inspection, published in February.

The report stated: 'There are robust risk assessments and health and safety processes which protect young people from harm.

'The behaviour management system at the school is outstanding. Boarders have individual behaviour plans which operate on a traffic light system and clearly identify triggers and strategies for addressing these.

'They also include work with the boarders on them developing the skills to control their own behaviour.'

A spokesman for the Teaching Agency said they were unable to comment on ongoing investigations.

A Surrey Police spokesman said the force was made aware of the policy in January 2012 by Social Services.

The spokesman said: 'A senior strategy meeting, which was attended by Surrey Police, was held on January 19, 2012, to ensure that safeguarding practices were put in place. This was done to ensure that the practice did not continue at the school and was not put into practice at any other school.

'Surrey Police has thoroughly reviewed the matter and is satisfied that there are no criminal offences to investigate.'

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Ratbag Australian head-teacher out for good



Former Kew Primary principal Kim Dray, who stood down in 2011 amid controversy over a radical toileting policy, will not return to the school next term despite being exonerated after a 19-month inquiry.

Dr Dray, who was slated to resume as principal next term, changed her mind late last night after staff unanimously voted they did not support her return and parents bombarded the government with complaints.

Australian Principals Federation president Chris Cotching said Dr Dray felt "pretty gutted" by the whole thing, but it would be very difficult for her to return to Kew Primary next term given the hostility.

"I think the department needs to provide a lot more support to her to enable that re-entry to occur," he said.

Dr Dray came under fire from parents after she trialled a "whole class approach" to toilet breaks, in which the entire class would go to the toilets if one child needed to go.

Parents said they were not consulted over the trial and it led to children wetting themselves and girls being too embarrassed to go to school if they had their periods.

In August 2011 Dr Dray asked to be temporarily reassigned while the Education Department investigated because she was concerned about the effect of the media coverage on the school community.

But parents and teachers raised concerns when it was announced Dr Dray had chosen to return to Kew Primary in term two, after she was exonerated following a 19 month investigation conducted by Lander & Rogers Lawyers on behalf of the department.

At a full staff meeting on March 20, Kew Primary staff unanimously voted they did not support the return of Dr Dray.

"Staff made it aware that it was a very toxic environment under Kim’s leadership and staff were divided, vulnerable and damaged," according to the minutes seen by Fairfax Media.

"It is unanimously felt by staff that Kim’s style of leadership does not fit with Kew Primary School and that her return is not in the best interests of the school."

Parents had also met with Kew MP Andrew McIntosh on Friday to express their concerns and an extraordinary council meeting had been scheduled for Wednesday.

But Mr Cotching said Dr Dray had been completely exonerated by an Education Department investigation and should be allowed to resume as principal.

He blasted the department’s decision to investigate Dr Dray under division 10 – misconduct and inefficiency – of part 2.4 of the Education and Training Reform Act, saying it was a "gargantuan stuff-up" and an investigation that should have taken a month had dragged on for 19 months.

"It should never have got to this stage," Mr Cotching said. "It’s the grossest mismanagement of a complaints process I’ve seen in my experience as a principal.

The investigation is understood to have called 20 witnesses, collected three folders of information, and examined every area of Kew Primary’s operation, including school finances, security and Dr Dray’s dealings with the school council, before recommending that no action be taken.

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