Small Colleges Battle Death Spiral

For more on the continuing saga of poorly managed small colleges that are now in a death spiral due, in large part, to bad decisions, see this Bloomberg Businessweek story that posted today (and from which this post’s title was lifted). A quote from the story:

“What we’re concerned about is the death spiral — this continuing downward momentum for some institutions,” said Susan Fitzgerald, an analyst at Moody’s Investors Service in New York. “We will see more closures than in the past.”

This is what happens when you manage institutions for the world that was instead of the world that is and is unfolding.

As a prospective student, your job is to avoid institutions that are in financial distress and enroll at one that is likely to be around once the current restructuring of higher ed has run its course.

P.S. Choosing a College and Major during Times of Structural Unemployment

Here is a graph that should be on the minds of all college graduates:

Part-Time Employment


Yes, I realize I said I was done posting. And, in general, I am. Yet I’ve found it’s much harder to stay quiet in the face of harmful propaganda than I thought it would be. So I’m going to alter my position a tad: I’ll post when I can’t not.

So back to the graph I pulled from the U.S. Department of Labor’s website this morning. What is doesn’t show is that there were only 3.3 million part-timers in our country’s workforce prior to the 2001 recession. We never reverted to those levels after the 2001 recession, and we probably never will. And as you can see from the graph, the number of part-time positions skyrocketed during the Great Recession and remains about 7 million. Many of these positions are held by college graduates.

So what’s the point? It’s this: the mainstream media focuses almost exclusively on the unemployment rate. And there are even some within the financial world who are claiming (wrongly so) that the labor market is tightening to the point the Federal Reserve should raise interest rates. In short, the casual observer could get the impression the labor market is in pretty good shape. But it isn’t.

All you have to do is look at the above chart as well as data on labor participation rates and average hourly wages to know we’re a far cry from normal. As the chief economist for Goldman Sachs recently observed, the labor market is a lot softer than some people think. He’s right.

So what is a person to do? Continue reading

Final Thoughts on Choosing a College

I’ve decided to close out this blog (for the reasons set forth in my last post). In closing, I’ve written a letter that I’d feel comfortable sharing with any high school student (or parent of one) who’s about to embark on his or her search for the “right” college. As a device, I’m writing it to my fictional grandson, which allows me greater freedom in providing context and personal guidance (instead of simply explaining the options, as I’d be more inclined to do if I were in a professional advisor-advisee relationship with the recipient of the letter). In any case, here it goes:

Dear John David,

Choosing a college that’s a good fit for you is important. But keep it in perspective. Your college will not define you. It’s your virtue and values that will define and guide you throughout life. Might your college impact these? Perhaps a little, but not nearly as much as some people think. Your genes, parents, and the community and time in which you were reared play a far greater role. And you’re fortunate: you have wonderful parents and privileges and opportunities that few in the history of the world have had (although there are inherent risks in privileges, too).

As for college, try not to take it for granted. It’s true that some colleges are better than others. But, again, perspective: it’s an incredible privilege to be able to attend any college. And even if you were to attend the nation’s worst college (whatever that might be), you’d still be able to live a happy life and do great things.

You’re fortunate because you have the further opportunity to attend a residential college. Most students don’t. Many are what we call “day students,” living at home and working one or more jobs while taking as many courses as they can sandwich into their overcrowded schedules. Many attend a community college because it’s close to their homes and the least expensive option. It’s a good option if money is tight or you’re unable to leave home for other reasons. But I understand you’re opting for a traditional residential experience. That’s fine.

So where should you go?

The short answer is, enroll at the best college that will admit you and you can comfortably afford. But you know me well enough to know that I won’t stop with the short answer. Even if I wanted to, I realize my answer wasn’t much of an answer. After all, what is the “best” college for you?

The primary differences among traditional residential colleges have nothing to do with their approach to education or their professors. The educational model is basically the same wherever you go. All professors come out of the same doctoral pipeline and pretty much think of education the same way. No, it’s not their approach to education that distinguishes colleges; rather, it’s:

  • the size of the institutions’ and their students’ families’ investment accounts (i.e., institutional and family wealth);
  • the successes of the colleges and their alumni that help drive the reputations of the schools (for instance, the number of Nobel laureates as faculty or alumni; the number and identity of alumni who become presidents, supreme court justices, CEOs and founders of technology companies; and the number and recency of football and basketball championships); and
  • the academic seriousness of their students (which should never be confused with “smarts” or virtue).

Selectivity and Cost Matter

It’s not a level playing field to be sure. But that’s life. The fact of the matter is, employers who have what most kids think are the best jobs recruit at and hire from what they consider to be the best schools, which means the schools that enroll smart, serious students. The result is an academic stratification and hierarchy based primarily on academic achievement and standardized test scores (which also drive college rankings). So, if you want to increase the options that are available to you upon graduation, you’d do well to attend the college that’s hardest to get in, which generally means the one with the highest average SAT or ACT scores for its freshman class.

Another proxy for selectivity is four-year graduation rate. The top schools have rates over 90%. In general, public universities have lower rates than the top private colleges because they’re larger and serve a wider socioeconomic population. Some of the intensive technology schools have somewhat lower rates, too, attributable to the rigor of their programs or their inability (or refusal) to offer enough sections of courses so students can graduate in a timely manner.

You’re a good student so, as a rule of thumb, you should look for a public university or technology institute (public or private) with a four-year graduation rate of at least 60%. And you probably shouldn’t consider a private college (unless it’s a technology institute) with a rate less than 75% (although higher would be better).

If you have to dip too far into the selectivity pool (either because of cost or admission barriers), you really should ask yourself whether it might make sense to attend a lower-priced community college for a year or two, do well academically and then transfer to a well-regarded four-year school to complete your degree. All and all, community colleges can be a great value and have some of the best teachers in higher ed.

Of course, you may be admitted to certain schools that are simply beyond your financial means yet are highly attractive to you. Be careful about being lured by a costly “dream” school (a concept that, frankly, I find a bit weird). Make sure you can afford the school. If you can’t, then strike it from your list.

Beware of Student-Loan Debt

This may be the most common mistake kids make when choosing a college. The majority of college freshmen never graduate from their first college, and one of the reasons is that they overextend themselves financially. Then, of course, there are those students who stick it out at their first school only to graduate with excessive debt. Neither path is a good one. Both are full of regrets (and possibly worse consequences).

I could go on at length about the insidious nature of debt. Whether it’s a student loan or other debt, it’s the one thing that is sure to create problems for you in life if you let it get out of control. It fractures relationships, ruins lives and saps the potential from many others. I urge you to be really cautious about going into debt.

If you’re intending to pursue a career that doesn’t pay much, you should try hard to get through college without any debt. If you’re pursuing a career with strong earning potential, then some debt is acceptable, but keep it reasonable. If you incur more than you can repay with 10 percent of your salary over the five years following graduation, you’re probably overextending yourself. Of course, less would be better.

So, that’s my semi-short answer to the question, where should you attend college? Go to the one that’s hardest to get in and that you can comfortably afford. But, of course, there are other considerations. I’ll list just a few of the most important ones: Continue reading

My Penultimate Post

Next week I’ll be sharing my final post. It will take the form of a letter to my fictional grandson John David, who will soon be commencing his search for the “right” college. Basically, it will be a summary of the college-selection criteria I’ve come to believe are important, although with a personal albeit subjective slant (since, hypothetically, I’ll be writing to family).

I’ll be discontinuing this blog for two reasons. First, I don’t think I have anything left to say on the subject. Second, I think there is already too much being said and written about it and far too little action. I’m starting to feel complicit in the delaying tactics so skillfully employed by our entrenched system of higher education.

We are fortunate in America: we have some of the best universities in the world. We have some of the best colleges, too, although that number is far smaller than most people think. The reality is, we have a lot of crap in the system. Most of our colleges and universities are short-changing our students, and most of our state governments are short-changing our students, too.

We could be doing so much better. But for that to happen, enough people need to want it to happen. That’s not the case today. Whether it will ever be the case, I don’t know. Americans have a high tolerance for underperforming systems. Just look at our health care system and local, state and federal governments with a critical, objective eye if you don’t believe me. But, of course, as we are often reminded by the guardians of our myths, we’re the best in everything. So let’s embrace the status quo. Meanwhile, kids are starting their careers up to their eyeballs in debt and, in many cases, ill-prepared for the challenges and opportunities of a modern workplace and global, technology driven economy.

The generations of debt-enslaved students we’re helping to create should be a national scandal (and by “we”  I mean our college and university trustees and administrators and our elected officials who are facilitating and, indeed, promoting this mess). Yet we don’t seem to mind all that much. I really don’t get it.

I also don’t understand why we’re not more concerned with the quality of many of our colleges and universities. Each year we graduate many students who can’t write, lack an understanding the world, are technologically and financially illiterate, can’t handle ambiguity or analyze problems deeply, can’t develop practical, workable solutions and, in general, lack the skills and ability to contribute much to any organization or enterprise. At many of our institutions of higher learning, standards are so low it’s silly to call them standards at all. Excellence is first and foremost a tagline.

That said, we have some incredibly smart and motivated students in this country. And by “smart” I don’t simply mean book smart, as judged by GPAs and standardized testing scores. Each and every individual has something that he or she can be good at and excites them. Helping them uncover what that is should be one of the primary goals of our educational system. But it isn’t.

My hope is that each and every young person will connect with that which interests and energizes him or her and that our educational institutions will help that person develop and will stoke the fire that burns within him or her—or, as my Quaker friends say, “awaken the teacher within.” It happens today, but not nearly as much as it could and should.

But my last post won’t deal with reform or critique. Rather, it will be my parting words to those young people who are about to embark on their search for the “right” college.

Colleges that Froze Tuition

The following colleges are to be commended for freezing tuition this coming academic year: Alderson Broaddus University (W. Va.) (also froze room and board); Assumption College (Mass.); Bethany College (W. Va.); College of St. Elizabeth (N.J.); Davis & Elkins College (W. Va.); Eureka College (Ill.) (also froze room and board); Geneva College (Pa.) (with no reduction in financial aid); Hiram College (Ohio); Lincoln Christian University (Ill.); Lincoln College (Ill.); Mount Marty College (S.D.); Sage College (N.Y.); St. Mary’s College of Maryland; University of Missouri; and Woldorf College (Iowa).

Now, I’m not naive: I realize some of these colleges may not be freezing net tuition, that is, the tuition that’s actually charged the students as opposed to the published tuition. Nonetheless, the freeze benefits current students who otherwise would be facing stiff increases. (For the way tuition increases impact current students disproportionately, see this post.) So, the tuition freezes are very good news for the vast majority of students at these schools even if the impact on new students is negligible.

I also realize that colleges don’t freeze tuition unless they have to do so. I strongly suspect each of the schools listed above is under tremendous enrollment pressures. Yet I still give them credit for their decisions to freeze tuition because many schools in similar straits increase tuition if for no other reason than to reap increased revenue from current students.

Initially, I planned on keeping track of colleges that were increasing tuition at a higher rate than the increase in the consumer price index (CPI) or median wages. I gave up because the list was getting too long. Continue reading

A Sound Plan for Any College Student

By now it should be clear that (with few exceptions) a bachelor’s degree doesn’t guarantee you anything. You’d also think it would be clear that Millennials’ path to financial security may look different from their parents and grandparents’. So what would be my advice to an 18-year-old today (beyond choosing the right college and major)? Here are 3 points I’d make:

  1. Have something valuable to contribute, whether it be a skill, talent or simply your wisdom and sound judgment in the pursuit of getting something done that others value. Ideally, find something you’re good at doing and you enjoy. There is probably more than one thing that fits the bill. Many will require a college degree but perhaps not all will. If you have no idea and aren’t even sure college is for you, consider spending some time in the work force or Armed Forces or volunteering while you explore your options. Be mindful, however, that merely having a bachelor’s degree guarantees you nothing. You’d better have a purpose and be able to demonstrate you’re reliable and can contribute in a meaningful way. To that end, you should have a concrete goal in mind and a strategy for successfully entering the workforce. And, of course, you’ll need to execute that strategy well.
  2. Stay out of debt. A reasonable home mortgage may be appropriate, provided you have it paid off (or easily could pay it off if it were in your financial interest to do so) before retirement age. Reasonable debt to finance income-producing investments and businesses may be appropriate too. Debt to fund consumption should be avoided at all costs. (My views on what is reasonable levels of student-loan debt have been shared on numerous occasions in earlier posts.)
  3. Build up and smartly invest some significant financial assets (in other words, save!). In case you haven’t noticed, people who are living comfortably more often than not have significant financial assets, either via savings or inheritance. If you can’t count on a hefty inheritance, then you’d better start saving and investing your money wisely. Otherwise, there is a good chance you’ll never enjoy the financial freedom to which so many aspire. You might be shocked at the number of people with large incomes who are hostage to their jobs. Many have lived beyond their means their entire lives. The time may come in your life when you want to stop working for someone else and do some things that bring enjoyment and fulfillment yet don’t pay much (or anything for that matter). If you want that kind of freedom, absent a big inheritance you’d better start saving and investing and there is no time like the present (meaning twenty somethings should be saving, too).

Will this plan guarantee happiness? Of course not. But if you’re engaged in work that is meaningful and fulfilling to you and have acquired financial freedom, that counts for a lot.

In Higher Ed, There Are Bulls and Bears, Good Decisions and Not-So-Good Ones

Last week I read in this BloombergBusinessweek story that Richard Lyons, dean of the highly regarded Haas School of Business at the University of California, Berkeley, opined that “half of the business schools in this country could be out of business in 10 years—or five.” Lower-ranked schools are most at risk.

Last week I also learned that nearby University of Northern Colorado (UNC), a much lower-ranked school, is starting an MBA program this fall.

Who’s right, the bear at Berkeley, California, or the bulls at Greeley, Colorado?

It shouldn’t come as a surprise to anyone that people can look at the same evidence and arrive at different conclusions. It happens all the time, perhaps no more so than in the stock market.

The juxtaposition of UNC’s strategic move against the market dynamics observed and forecasted by Dean Lyons yields stark lines that are hard to reconcile. Time will tell who has assessed the situation better, although, if I had to put a marker down, I’d side with the dean. I fear UNC is succumbing to the tempting yet false conceptual lure that more is better. It would be interesting to see their market analysis and strategic plan to better understand their thinking. Hopefully, they’ll be proved right, but I have my doubts.

In any case, this is just one example of the way highly educated people reach different conclusions from the same body of evidence. Or do they? Perhaps the evidence doesn’t play as large a role in the decision-making process as one would assume. Continue reading


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