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The Perils of Risk-Based Student Loans

Among the few indications of a higher education policy from presumptive Republican presidential nominee Donald Trump is a proposal for “risk based” student loans managed by lenders instead of the colleges.

The concept of risk-based student loans is that students who are more likely to repay their loans would be charged lower interest rates or receive more favorable repayment terms. For college students, their selection and completion of a major would be tied to the likelihood that a student would earn a wage that was more than sufficient to repay their student loans.

For example, a high school senior who is considering a major in computer science or engineering, and checks that major off on their college application, could receive a loan at a lower interest rate than another high school senior who checks off elementary education as their intended major. The lender would make the loan on the basis that the borrower who earned the computer science or engineering degree would earn more than the prospective teacher. This presumes that high school seniors have thoroughly assessed their academic strengths and weaknesses, the colleges that best fit their abilities to address them and are set to finish a degree in their intended major on time.

That is an awful lot to expect of most college-bound high school seniors, even exceptionally bright ones. It also presumes a great deal about the advising that each potential student borrower has received from their parents, teachers, school counselors and others.

Take the risk-based student lending idea a step further. Suppose banks and public policy makers treated all freshmen and sophomores the same.

All freshmen and sophomores would be treated the same with respect to interest rates as well as interest subsidies, regardless of their intended major. The changes would come after each student borrower has decided on a major, beginning in the junior year. Juniors who are in good standing in “target” majors as decided by the Federal Government, and possibly the state government in the student’s home state. Those who are not enrolled in a target major would receive loans on less favorable terms. They might be authorized to borrow less or repay their loans at higher interest rates.

Proponents of risk-based student loans call the more favorable terms incentives to become part of a profession in demand. In a sense that’s true. A college student who is struggling in an engineering or science curriculum could be motivated to try harder in school. That presumes that s/he is headed into the vocation that is their true calling. That’s a lot to presume.

The mere granting of a degree does not automatically mean that the degree holder will have a job waiting after graduation. The most desired employers who seek computer science, engineering and “hard” science graduates will pursue those who have the strongest commitment to their major and the field. That means excellence in the classroom. These employers want to hire new employees who are less likely to struggle in the workplace. If a student found it tough to go to school, when s/he had a more flexible schedule and resources to help, then how would that student fare on the job, when deadlines are firmer, life is less flexible and help less available when everyone else has their own work to complete?

A risk-based program might get more students to complete these degree programs. But it offers no assurances that more of these graduates will excel in the field or that they will finish those degrees on time. Imagine if a student who is struggling in engineering approaches their lender, asking for a student loan for an extra semester or year because s/he fell behind in their program by failing a course or two? Doesn’t the risk of lending to that borrower go up because s/he has a more difficult time doing the work?

Then there is the consideration of the college where the student borrower is enrolled.

Imagine one school where most of the entering freshmen finish their degree on time. It likely has students who excelled in high school and want the traditional college experience, including life on campus away from home. Too many college rankings are heavily based on the “quality” of the students as they came in from high school, with their grades and test scores. The smarter they were coming in, the reasoning goes, the more likely they will come out with a degree.

Then consider a second school, one that offers the target majors, but it less selective. It might be quite inexpensive, relative to the first school, but also might be more commuter oriented. It might be least-cost alternative for many students as well as their families. However, the students who enter, are on average not as bright as the students who enter the first school. The US Department of Education also has data that students who are enrolled at this school are not only far less likely to graduate; they are also far more likely to default on their student loans.

The University of California system has several campuses that follow the first example, the most successful being UC-Berkeley, UCLA, UC-Davis, UD-Santa Barbara and UC-San Diego. The California State University system has a lot of schools like this second example and they offer degrees in many of the likely target majors desired by the Federal Government and the state government.

Now go a step further. We have a prospective community college student who is graduating with honors from a pre-engineering curriculum at Miramar College in San Diego. S/he has the opportunity to transfer to UC-San Diego or San Diego State. They both offer the target engineering major our student wants. San Diego State offers a scholarship that covers a third of the tuition, and has a base rate that is already lower than UC-San Diego charges its undergraduate engineering students.  UC-San Diego offers no money at all, only the opportunity to enter in the major. The internship support at UC-San Diego will be better. But San Diego State can help an engineering student find work that pays no less money.  They both offer student loans, though the interest rate for the loans to attend San Diego State will be higher.

The lender has already decided that San Diego State is the “lesser” school, even though that school is willing to offer that student an opportunity to pursue essentially the same education at a lower price. In effect the lender is telling that student that s/he should borrow more, and therefore take on more risk.

Risk-based lending might provide an incentive for college students to pursue a more demanding as well as a “more needed” degree program. But it does not offer assurances that industry, non-profits and government would get the best workers for those jobs. Worse, if the risk is applied to the perceived quality of a school, it could lead colleges to discount their costs further than they should and even lead colleges to shutter academic programs that are non-targeted or too difficult to support. It could also lead students to make poorer, and sometimes more expensive, college choices. Of course that would not bother The Donald. He transferred from Fordham to have the opportunity to graduate from Penn.

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First Impressions: University of Pittsburgh

I spent a week in the Pittsburgh area to catch up with a friend as well as visit four schools. The University of Pittsburgh (aka “Pitt”) was the first. I spread my visit to Pitt over two and a half days, taking separate visits to learn more about the business school as well as the engineering school. I have already written about my tour of the Swanson School of Engineering in a prior post. As usual I have written First Impressions of Pitt and collected many pictures to make a Pinterest page. My First Impressions are longer than usual. There was more to write about Pitt than most other universities I have visited.

The University of Pittsburgh is one of the oldest universities in the US, founded in 1787 as the Pittsburgh Academy. It was associated with the University of Pennsylvania at that time. Pitt was a private university that later became state-related. While state government does not subsidize the in-state charges assessed on its students, the university still charges rates that are respectively below those of private universities. However, the university’s in-state charges are the highest in the country.

Pitt’s undergraduate student body, just under 18,000, is of similar size to Boston University as well as the University of Southern California. The University of Pittsburgh also has less than half the number of undergraduates as Penn State and over 10,000 fewer than Temple.  In addition to being considered vs. Penn State and Temple, Pitt is regularly shopped against smaller and larger city-based schools such as the University of Pennsylvania, Boston University, NYU and Northeastern. It is also considered vs. Big Ten schools other than Penn State.

The University of Pittsburgh has many strengths, even beyond academics. The campus is one of the more attractive city settings you will fill, the city ripe with opportunities for students to find internships, co-ops (engineering) as well as part-time and full-time entry-level jobs. The Pitt campus is located in the heart of the Pittsburgh’s cultural district, adjacent to Carnegie Mellon University and within a ten-minute walk from Schenley Park, one of the finest examples of an urban park in the world. Pittsburgh more closely resembles cities such as San Francisco or Seattle than Boston, New York or Philadelphia. The university encourages undergraduates to use the city, arranging discounts at the Carnegie Museum and the Carnegie Music Hall, both in the heart of campus, as well as for Penguins and Pirates games. Students may use the city bus system as well as the incline cars from the downtown up Mount Washington for no charge just by showing their student ID.

With respect to academics, Pitt is one of America’s leading research universities, especially in the health sciences, health professions and medicine. It takes liberal arts more seriously than other large universities. Philosophy as well as Philosophy of Science count among Pitt’s signature academic programs; courses in one of these two subjects are required for a Bachelor’s degree. The very best undergraduate students may earn a Bachelor of Philosophy degree in their major, taking on the requirements for Honors plus a Bachelor’s thesis that must be defended as if it were for a Masters degree.

The Dietrich School of Arts and Sciences, with over 10,000 undergraduates, has almost five times the undergraduate enrollment of Pitt’s excellent business school and nearly four times the enrollment of the Swanson School of Engineering. The University of Pittsburgh also has some of the more comprehensive offerings one would find in the allied health professions as well as information systems. Pitt also does an excellent job at helping students to go abroad as well as in supporting team-based consulting projects in business and engineering. The university is one of the more supportive when it comes to helping students in these programs to find internships.

There is much to like about Pitt as you will see when you read my First Impressions. But there are downsides besides the high in-state tuition and fees. While out-of-state charges are fairly reasonable, Pitt is not one of the more generous schools when it comes to meeting financial need or providing merit-based aid. The university also has an unattractive residence complex, Litchfield Towers, that houses almost a third of the freshman class. The unattractiveness of this complex, which also provides many ground-level student services, was glaring enough to devote space in my writing.

Downsides aside, a very bright student who has their sights set on an exceptionally selective city-based research university such as NYU, Penn or USC will not be disappointed in Pitt, as long as the finances and the housing (choose a learning community) work in their favor.

Report Card: University of Pittsburgh

  • Four-Year/Six-Year Graduation Rates: A
  • Freshman Retention: A
  • Costs: C resident/B non-resident
  • Curriculum:A
  • Community: A
  • Comforts: B+
  • Connections: A

 

Check out my First Impressions of the University of Pittsburgh!

Check out my Pitt Pinterest Page!

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What Could Happen If Colleges Closed Down Fraternities and Sororities?

I did not participate in Greek life in college though I knew many people who did. Those people told me that fraternities and sororities were fun. They were groups that could live together largely unsupervised by the university. Brothers and sisters could meet others (usually the opposite sex) more easily, especially at a larger school. I would never argue either point. But I did not want to go through a pledge process to make new friends. I have to presume that many other college students do not. Fraternities and sororities do not comprise the majority of the undergraduate student body at many colleges.

If you often come to EducatedQuest you are likely aware of the less attractive aspects of fraternities and sororities that have been raised in the media. These include exclusionary practices, hazing, incidents of defamatory postings on campus buildings and online, underage drinking and more seriously injury and sexual assault. The compilation of incidents, combined with the wealth and legal resources of the national organizations, makes me want to consider what might happen if fraternities and sororities were to simply disappear. That’s somewhat unrealistic at many schools.

Fraternities and sororities provide housing, often for fairly large groups of students. Individually and collectively, they are socially important at many schools. They can run many activities for the benefit of a larger student body than a college’s student affairs office has the time to run. Further, the act of decertifying a social fraternity or sorority has costs and possibly legal consequences for a college when the organization has no record of doing anything in violation of a college’s policies or local and state laws.

But suppose a college could change its policies and state in print that fraternities and sororities would not be recognized student organizations on campus. Would their community see fewer incidents of exclusion, bad behavior, crime, injury and sexual assault on campus?

It depends. Here are some reasons why:

Fraternities and sororities do not always need to be national or be recognized by a college. I am aware of incidents–the outcome of the Duke Lacrosse case was one example–where local fraternities have been established in housing off campus. A college’s disciplinary authority, as well as its protection, does not usually go beyond the campus. If an unrecognized local Greek organization living off campus caused trouble, their consequences of their actions fall under the local police. The college, like it or not, goes along for the ride, sharing the embarrassment with the police and local government. Not to mention that the parents will blame the college for not preventing incidents before they happened.

Larger groups that share a house do not need to be fraternities and sororities. There is nothing stopping any group, when a college permits students to live off campus, from forming a “house,” as long as there is a landlord willing to provide a home and the local zoning permits group occupancy. Visit Miami University in Oxford, Ohio and you will see how this works. The authority of college administrators does not extend beyond “consumer and consumer protection information” for off-campus dwellings. And, as is the case with locally established fraternities and sororities, The college, like it or not, goes along for the ride when there are problems, sharing the embarrassment with the police and local government. Not to mention that the parents will blame the college for not preventing incidents before they happened.

College administrations would need to take more responsibility for housing their students. Many college towns limit the number of “unrelated people” who can share an apartment or a house. These ordinances are intended to help local governments avoid the problems that colleges experience with large-group housing situations, including fraternities and sororities. These ordinances actually help to keep fraternities and sororities on campus in communities where students want an alternative to a residence hall but cannot afford to share apartments or homes off campus. If a college, especially a very large university, wanted to close down all of its fraternities and sororities, it will still need to offer housing to replace them, and it would need to maintain those buildings. It would be irresponsible for a college administration to throw students into a local housing market that might be too expensive or have too many unscrupulous landlords.

College administrations would need to work harder to deal with restlessness. Imagine a college that is located in an isolated place. It has neither fraternities nor sororities. It cannot allow all of the students to have cars, not that all of the students could afford them. The college town offers little for students to do when they want to take breaks from studying, and the college cannot expect its students to study for every waking minute they are on campus. The student affairs professionals, especially those who work in residence life, cannot work every second of their lives. They have to study, if they are still in school, and they have to sleep. A college culture that is more similar to a military academy works only when the students enter prepared to accept it. Given all of these issues, a college administration would need to create a culture of student leadership and offer a wider choice of on-campus living and social options for its students. The easiest way to manage a very large group–and the population of even a liberal arts college qualifies as one–is to divide it into smaller groups, much like active and reserve duty military personnel are organized. In order to do this better a college will need to collect more money in student fees from parents and students. Substitute that fee for the dues charged by fraternities and sororities and assess it on every student on campus. However, fee increases are quite unpopular on the financially strapped.

Colleges would have to get more students off campus for their education. As I mentioned before, the best way to work with a large community is to divide it into smaller ones. Colleges become more effective at doing this when they can send more of their students away for study abroad, cooperative education and internships, and study away at other colleges or US-based programs. College students have to be more responsible for themselves when they go away from campus.

College administrations would still need to consider their judicial process vs. due process. Students who commit crimes in this country are innocent until proven guilty. College administrations cannot be expected to prevail in court rooms if they rush to judgement or deny due process rights to their students. They can, for example, separate an alleged student criminal, from the student body through a suspension, even to the point of keeping that student out of the classroom as long as there is a means for the student to keep up with their work. But the college administration must also be prepared to either make restitution or face legal challenges if the student is proven innocent.

Given these points I could argue that the disappearance of fraternities and sororities on college campuses could make colleges more expensive for all students, not just those who were members of Greek organizations. I could also argue that the problems that fraternities and sororities have caused on college campuses would not completely go away. They would only happen elsewhere.

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What is an Open Curriculum?

Last week I paid a visit to Wesleyan University (CT) one of a small number of colleges that offers an Open Curriculum. An Open Curriculum is one where there are:

  • Very few (maybe one or two) or no specific individual course requirements. You choose your courses (with some limits) and they all count towards your degree. This makes it easier for a student in good academic standing to graduate on time.
  • No distribution requirements. Most colleges require one, two, sometimes three semesters of Math, Science, Foreign Language and Social Studies much like high schools require these subjects to earn a diploma. There are ways to work distribution requirements to advantage. For example, a Biology major who wants to go to medical school would take Statistics and a semester of Calculus to fulfill pre-med and math requirements and a year of Psychology to fulfill the Social Studies requirement. But not all college freshmen learn this from the get go.
  • No requirements to have a major. Students who want to self-design an academic program do not need to commit to a major offered by the college; an Open Curriculum makes it very easy to design your own major.
  • Advanced placement might be unnecessary in some academic departments. Suppose a student is quite schooled and skilled in a subject through extracurricular activities and pursuits outside of a college or high school classroom. That student would only need the permission of the professor to take an advanced course. No test scores would be required to prove that s/he belongs in the class.

Most of the schools that are known to offer an Open Curriculum are, like Wesleyan, quite selective. These schools include Amherst College (MA), Brown University (RI) and Smith College (MA). Those who attend Wake Forest University (NC) can apply to tackle an Open Curriculum instead of the university’s distribution requirements. NYU’s Gallatin Division offers this option, though it is a very small (around 1,200 students) unit within a very large (over 21,000 students) university. Hamilton College, Vassar College and the University of Rochester, all in New York State, also offer some variations on the Open Curriculum. Perhaps the least selective school where the Open Curriculum rules is Hampshire College (MA). But Hampshire’s office works really hard at reviewing applications.

What are the issues to an Open Curriculum?

  • It still requires academic direction. Colleges that offer an Open Curriculum also make major investments in academic advising. Their leadership and faculty do not want their students to graduate with a “degree in nothing.” Academic advisors help students choose courses around a professional goal such as a business career or medical school, or to help them build an academic background around a very personal interest such as a cause for which a student might want to start a business or non-profit, raise money, solve a program or influence public policy. The academic advisors need to know the full college catalog as well as the options that might be available are partner colleges in the US and abroad. Students who choose courses with no direction in mind may still earn a degree. But it may not be a terribly useful one other than to provide a satisfaction of “being educated.”
  • Pre-requisites still drive course selection. Faculty who teach beyond the introductory courses at colleges that offer an Open Curriculum still have the say over who may be “in” and who may be “out” in their courses. An incoming freshman, for example, will not usually be expected to step into the second year or third year of Biology or Chemistry at most colleges unless s/he can prove to the professor that s/he has the background to hold their own in the class. If the college is small, the professor might want to keep the class small. In those cases the freshman will still take a lower-level class as s/he would at any other college.
  • A “shorter ride” through college is rare, and quite possibly non-existent. Students who enter college having taken college-level courses in high school could receive advanced placement or transfer credit for these courses, depending on the college’s policies and practices. Advanced placement means that a student can skip the introductory course and move into a more advanced one. This is still the case at a school that has an Open Curriculum. However, schools that have an Open Curriculum do not combine it with transfer credits. If you attend a four-year college that offers an Open Curriculum it is quite likely that, unless you go to school during summers and winter breaks, you will be there for four years. Those who want to bring a year’s worth of college credits earned through AP exams or summers at a community college and use them to graduate in three years might want to consider other educational options.
  • It requires more explanation when seeking employment in a more traditional corporate setting. Such employers are more used to recruiting for interns or entry-level professionals with specific courses and/or degrees. A student’s decision to design their own degree program can make for a very interesting, and sometimes effective conversation with an interviewer. But that student has to work harder to convince a human resources professional who spends only seconds reading student resumes to grant the interview. The more that larger employers automate their search processes, the more difficult it becomes for an “interesting person” to become noticed.

It takes a very motivated student to succeed at a school that operates an Open Curriculum. While the lack of structure makes it supposedly easier to earn a degree and empowers a student to manage their education, greater empowerment also comes with a greater amount of responsibility.

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When Does It Pay to Consider Bachelors-Masters Programs?

I recently posted my First Impressions about Arcadia University, school that, among others, offers several options to earn a Bachelors degree and a Masters degree together within five years. These Bachelors-Masters programs in areas such as business, education, international studies and more are quite common in higher education.

It is sometimes difficult for me to comprehend the thought of a 17 or 18-year old high school student considering Bachelors-Masters programs. But there are circumstances where considering them might be a good idea.

Different colleges have differing philosophies towards AP and IB courses taken in high school as well as classes that high school students take at a community college that are also counted towards a high school diploma. Colleges may treat the credits earned as “transfer credits,” meaning that they may be credited towards a college degree. Or they may treat them as “advanced standing,” where you do not receive credit but you are invited to take a more advanced course in the subject. There are also, of course, colleges that consider the advanced courses for admissions purposes although their faculty do not grant either advanced standing or transfer credit for them.

In the cases where advanced standing or transfer credit can be awarded, Bachelors-Masters programs might be worthwhile. A Masters degree that usually takes two years to complete could be finished in a single year at a significant savings. For those who choose to attend Clark University (MA) or Lehigh University (PA), students who earn excellent grades would be able to pursue that Masters degree tuition free.

If the Bachelors-Masters program is an accelerated program–it treats a senior as a first-year graduate or professional school student instead of as an undergraduate–it will be possible to borrow more money, if necessary, as a graduate student for the last two years. The costs for the additional amount borrowed would be less than the costs of going to school full-time for a sixth year.

In which other circumstances would a Bachelors-Masters program be worthwhile?

Professional requirements. More and more professionals that have accepted a Bachelors degree in the past  require additional credits beyond that degree. For example, the State of New York expects teachers to have completed a Masters degree to remain in their field and requires that Certified Public Accountants complete 150 credits, mainly business and accounting courses, to practice in their field. An extra year, especially if a scholarship is available, might easier to complete than an attempt to earn the Masters degree over several semesters of evening and/or online classes.

The reputation of your undergraduate school.  Students who are already enrolled in a school that has strong undergraduate as well as graduate programs in their major could save on the costs of earning both degrees. This is especially true of schools such as Georgia Tech that are among the best science and engineering schools in the country. In these cases the masters degree will be helpful for career advancement. Those who are already enrolled for the bachelor’s degree at a school such as Georgia Tech and are doing well in their degree program will have fewer worries about being admitted as a graduate student.

The feeling that “its over.” This applies most to business professionals as well as elementary and secondary school teachers who know that they will need to pursue a masters degree if they plan to remain then advance in their careers. Pursuing a masters degree at night, especially at personal expense can be a long grind, taking time away from work and a personal life. A college student who is single, unobligated to a marriage or family and accustomed to schoolwork might prefer to go right into the masters degree and get it done rather than take time off, become reacquainted with coursework, and finish it later.

Possibility of further study towards a doctorate. This is probably more relevant for scientists and engineers than other professionals. They enter careers in government, industry and sometimes higher education unsure of a long-term career path, but are open to the possibility of pursuing a doctorate in the future if they want to become a professor or research professional. Pursuing the masters is a preview towards doctoral study as well as research and teaching careers.

The Bachelors-Masters program options are not heavily talked up when you visit college campuses. Admissions officers are marketing first to high school students who have yet to experience college life. High school students often have a general goal in mind (“I want to be an engineer,” for example). But they have little to no experience taking college-level classes in a college setting or working day to day with people in a field that they might want to work in after they complete a college degree. Admissions officers are there to sell a college experience first, though they also hope that a rewarding career experience comes to those who choose their school.