The higher education business model is changing

Make Me Smart August 1, 2023 Transcript

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Kai Ryssdal 

Okay, let’s go. I got things to do man, things to do. Hi everybody, I’m Kai Ryssdal, welcome back to Make Me Smart, where none of us is as smart as all of us. It is August the 1st.

Kimberly Adams 

And I’m Kimberly Adams, thank you for joining us on our weekly deep dive. Today we’re going to talk about the economics of higher education in this country, because there’s a lot more to it than the ultra-high sticker prices of some of the private schools that our headlines tend to focus on.

Kai Ryssdal 

So we want to talk about what it actually costs to go to college these days. What demographics mean for the changing cost of college and who goes to college and what higher education actually means in this economy. Here to make a smart about all this stuff is Martin Kurzweil. He’s the vice president of educational transformation. And the job title says a whole lot, educational transformation at the education nonprofit of Ithaka S+R. Martin welcome to the show.

Martin Kurzweil

Thank you so much for having me.

Kai Ryssdal

Well, let me get right to this educational transformation thing. So in your day job, when you’re not on random podcast talking about education costs and policy, what does that mean educational transformation?

Martin Kurzweil 

Well, my organization has a mission to improve equitable post-secondary access and success. And with changes in demographics, changes in the business model of higher education that, requires some pretty significant transformation on the part of the institutions that serve our students. So we help them go through those transformations.

Kimberly Adams 

When did college sort of stop becoming affordable for most people?

Martin Kurzweil 

Well, we saw a very substantial increase in tuition fees and other costs at colleges, beginning in the 1990’s. And it really increased rapidly the pace of change the pace at which costs of college, outran inflation increased substantially in the 2000s. But we’ve actually seen a bit of a moderation in that trend over the past 10 years. So it’s a pretty nuanced story.

Kai Ryssdal 

Well, so let’s dig in a little bit. First of all, why did higher education costs go up so much in the ‘90s and 2000’s?

Martin Kurzweil 

Well, at root it’s because of the substantial increase in the number of people attending college that occurred during that period. So we really had an explosion in access to college that began in the 1990s and accelerated in the 2000s. But unfortunately, as the doors to higher education were open to many more students, public financing of higher education did not keep pace. And so the state appropriations in particular, per student enrolled really declined quite a bit during that period. At the same time, federal support for students, mainly the Federal Pell Grant, which goes to lower income students really didn’t keep pace with inflation. And so you had a combination of many more people enrolling and needing that support in order to make it affordable, and less money coming from the government to support them.

Kimberly Adams 

Can you say more about sort of that change in state and federal support for higher education? Because this comes up so much in sort of the generational warfare language, particularly when it comes to sort of student loan forgiveness. And, you know, some people will say, “Oh, well, it’s your fault for taking on the debt. And you know, you should be able to do this on your own.” And then younger people will say, “Well, you all got to go to college for almost nothing.”

Martin Kurzweil 

Yeah, I mean, there really has been a shift in the attitude on the part of a lot of policymakers towards the funding of higher education. You know, as as you described, it used to be conceived of as sort of a public investment that providing affordable, higher education was something that not only benefited the people who attended but benefited society, and there was a shift in the 1980’s 1990’s, you know, along with a lot of other shifts in our perspectives on policy towards a more neoliberal type bent, where the conception shifted to more of a, of a private benefit, and primarily being about the people attending and almost treating them as a consumer of education as opposed to a public benefit. And if you’re a consumer of higher education and the benefit is mostly to you, then it kind of makes sense to shift the burden of paying for it to the consumer as well.

Kai Ryssdal 

How much of the so here’s, here’s my, my going in presumption. And you correct me since you’re the subject matter expert in this conversation, I’m guessing that we’re talking about and I’m pulling this number out of thin air, the the top 20% most competitive colleges and universities in this economy that have become most unaffordable, and the remaining 80% are still reasonably affordable. Is that a fair?

Martin Kurzweil 

That’s fair, in general, the cost of attending a public two-year college or community college or attending a public university is still quite a bit lower, in most cases than the cost of attending a private nonprofit university, or liberal arts college. But but the price during that, that period from the ‘90s, to the 2000’s, when we saw rapid increases, the prices at those public institutions increased at a much faster rate than at the private nonprofit institutions. So, so just to put some concrete numbers on it, between 1992 and ‘93 and 2000 to 2003 academic years, the price, the published price of a public four year institution, increased on average 37% above inflation. Between 2002 and 2012, it increased by 65% above inflation. So the so there was really a huge run up in the costs of the public institutions during that period, even while they remain more affordable in most cases than the private nonprofits.

Kai Ryssdal

Gotcha.

Kimberly Adams 

How does the cost of college here in the US compare to what students are paying in other countries?

Martin Kurzweil 

Well, I don’t have as any personal experience with the cost of college in other countries, but my, my understanding is that the price is much lower. It’s, it’s still in most European countries in in much of the world, there’s still that sort of public investment concept. And so the cost is quite affordable. Another important difference is that we have a sizable share of college students who are paying for room and board and other living expenses on top of their tuition and fees. And and that’s a bit unusual. When you look in a global context, a lot of undergraduate students in other countries are living at home.

Kimberly Adams 

Hmm, that’s interesting.

Kai Ryssdal 

You mentioned demographics, as we’re beginning this conversation, what what effect has this has the, you know, aging of the Baby Boomers and getting out of that population and our Millennials and Gen Z? What’s that doing to the to the education cost calculus?

Martin Kurzweil 

Yeah, so I mentioned earlier that the trend of college costs, outpacing inflation, inflation has really moderated in the past few years. And the demographic changes that we’ve seen over the past decade or so, are really an important reason for that. So, so, demographers will tell us that the generations of young people coming through after the baby boom, have you know, the cohort sizes have decreased over time. And higher education is looking what’s what’s come to be known as a demographic cliff. In some states, they’re already facing it in the Northeast in the Midwest. The cohort sizes for high school graduating classes have have really shrunk quite a bit, but the whole country is really facing that in the coming years. In addition to that, we have the economy of course plays a role in how many how many people attend college if you have an opportunity to get a good job, a well-paying job without going to college, then a lot of people take up that opportunity and defer college or in some cases drop out of college. And we’ve seen that happening as well over the past 5 to 10 years as the labor market has tightened up, what all of that has meant is that from 2012-13, which was really the peak of enrollment, in the U.S. to today, we’ve seen a decrease of about 2 million enrolled students from 19 million to about 17 million. So that’s a that’s a pretty substantial decrease in the number of people enrolled. At the same time, as that’s been happening, public investment in higher education has started to catch up. So really beginning after the trough of the Great Recession, state investment in, in higher education has been ticking up and the Federal Pell Grant has increased, especially in the past few years. And so you’re seeing almost the inverse of the combo trend that I described earlier, the population enrolled in college is shrinking at the same time that the public investments are going up. And so the costs have begun to moderate a bit.

Kai Ryssdal 

Well, let’s continue that hopeful note, do you suppose that that, while while not ever being fixed to the satisfaction of most of the school going public, right, because college is expensive? Do you think the trend continues and it becomes if not more affordable than certainly less unaffordable?

Martin Kurzweil 

I think that trend is likely to continue for some period of time. You know, I do think that we’re seeing at right now. And over the next few years, we’re going to be seeing a pretty substantial shift in the emphasis of higher education. And it kind of comes back to the demographics. So as the pool of prospective college students in high school graduating classes, declines. The colleges that really depend on enrollment for their economic survival, are going to be looking elsewhere for students. And at the same time is that you have a lot of adults of older learners who either never attended college, or attended, but never graduated and don’t have that credential, who are going to be looking to get some kind of higher education credential to boost their careers. Right now, in the US, there are almost 41 million people who have earned some college credits, but don’t have a degree. And a lot of those folks will be looking to get back in the game. So I think the the colleges and universities are going to be responding to that, and what the new population of college students, if you will, are looking for tends to be programs that are more directly career focused, that are shorter, that are more flexible, and that kind of lines up with lower cost as well.

Kai Ryssdal 

Well, let’s hope so. Martin Kurzweil is the vice president of educational transformation at the education nonprofit, Ithaka S+R. Martin, thanks for your time. I really appreciate it.

Martin Kurzweil 

Thank you so much for having me. Thank you.

Kai Ryssdal 

Yeah, I think, I think less unaffordable is what I’m shooting for. That’s where I’m going.

Kimberly Adams 

You know, it’s almost as if you have a personal stake in this Kai.

Kai Ryssdal 

I’ve got one and a half more personal stakes left to pay for it. That’s all I’m saying.

Kimberly Adams 

You know, my parents told me in high school, that if I got scholarships, I could go to school anywhere I wanted in the world. And if I didn’t, they would pay to send me to any community college in St. Louis. And, you know, yeah, it was and also, you know, I was very upset that I ended up going to school in state and I turned out alright, but I, you know, just the horror stories I’ve heard over the years of people who did end up taking out a lot of student loans. And I almost wonder if you know, some of that cliff of the these declining cohorts that he was talking about, you know, are just people terrified of what they’ve seen of people burdened with student loan debt for life.

Kai Ryssdal 

It is terrifying. It’s just a It’s an insane amount of money. Let us know what you think, would you if you are a parent paying for your kids tuition, or if you are a student doing it on your own, we’d like to hear about your story. Give us a shout, our number is 508-827-6278 or 508-U-B-SMART, or you can email us the old fashioned way at makemesmart@marketplace.org. We will be right back.

Kimberly Adams 

Okay, time for some news. I’ll go first, because mine is also generational, like the conversation that we were just having. I saw the story. Well, actually, it’s some research from the Center for Retirement Research at Boston College, looking at the wealth of late boomers. So Late Boomers being people who apparently were the first generation that their entire retirement was when 401K’s existed. So earlier Boomers, you know, maybe you had a pension or some other defined benefit plan. And late boomers were pretty much all in the defined contribution plans, like, you know, 401K’s. And so they have a lot, significantly less wealth in their retirement than the earlier cohorts. And they would go into all of these, the researchers go into all these reasons why, there’s a couple of reasons. Number one, because of demographics. Again, there’s a declining share, I’m going to read from the brief, brief brief’s key findings. Part of the drop is due to the decline in share of Late Boomers who are white, married and have college degrees. And that’s reflective of just the demographic change in America. And since people who are white, married and have college degrees tend to have more wealth, that that number declining means that therefore the wealth is declining. The main factor, though, is that Late Boomers saw a weakening in the link between work and wealth, due to the Great Recession, which I think is so fascinating, this idea that, you know, back in the day, you could work and work and work and work and see your income increasingly go up. And therefore, what you had to contribute to retirement would go up, but because the Great Recession hit as a lot of the Late Boomers were heading into retirement, they missed out on some of that and therefore, you know, they kind of plateaued with their earnings and maybe didn’t see as much earning growth towards the end. And so that’s affected their long-term wealth. Super interesting paper and we will have a link to it on the show notes.

Kai Ryssdal 

Yeah, demographics are destiny. Is destiny? I guess demographics is destiny anyway. Okay, so here’s mine. It’s it’s somewhat discouraging and a little bit wonky, but it goes like this. There’s a piece in Bloomberg and I’m just going to read you the nut graph here. As the world reels from the mounting impact of heat waves, droughts and fiercer storms, there is growing concern that credit rating analysts are misreading climate risks in the $133 trillion global bond market. So bonds of course, are used what you pay to borrow money, the U.S. government does it, companies do it, sovereignother sovereign nations do it. It is a giant pool of money, if I can coin a phrase. $133 trillion, as I just said, and we are misreading climate risk. We are not understanding how challenging climate risk will be. And I will go back on something I said on this podcast like a week ago. I really hope this summer is going to get people to pay attention, governments, but also credit analysts. Right. How are one’s eyes not opened by what has been going on the last, I don’t know 90 days? Right?

Kimberly Adams 

I think that it’s when they’re willfully shut.

Kai Ryssdal 

Yeah, maybe. Maybe.

Kimberly Adams 

I was looking up trying to find the article. You know, Yellen, Treasury Secretary Janet Yellen was saying last week about, that she expects more insurance companies to be thinking very carefully about what what they will and will not pay. The headline in Insurance Journal, “Yellen says extreme weather exposes gaps in insurance protection,” and that it’s going to, you know, harm Americans seeking insurance against property losses. And so yeah, it’s going to be, continue to be an issue is an issue. Okay, that’s it for the news. Let’s do the mailbag.

Mailbag

Hi Kai and Kimberly. This is Godfrey from San Francisco. Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kai Ryssdal 

Alright, I have been or was last week. I don’t know if I’ve been lately, but I certainly was last week, a little ranty. Little, you know, disgruntled old manish about how the news has been, how not great the news has been and how important it is to unplug if you can, and that got some comments here is Ryan.

Ryan

Hey Kai and Kimberly. So I’m listening to Kai’s rant. I’m coming back from the camp shower at the State Recreation Area in northern Minnesota, where I happened to have been escaping my life for the last what so far day and a half. Anyway. I just want to let you know that yes, absolutely. Okay, you weren’t 100% Spot on. We all need to walk away and disconnect for some time. getting 200 miles away from home and wandering around a section of the state where you live that you haven’t explored. This is a bit of a good idea. So yeah, Kai, you’re spot on. And thank you both for making us smarter.

Kai Ryssdal 

I’m just gonna say, I’m just gonna say the best part of that all is the sound effects. The the shower shoes, the shower shoes. Yes, flop, flop, flop, flop, flop, man.

Kimberly Adams 

And I think it sticks with our theme that you know, getting into nature is really such a great way to reset. And give your mind a little rest. Yeah. All right. And here’s one more about coping with news fatigue.

Lee

Lee here in Austin, Texas. And as you can keep on my accent, I’m a born and bred Texan. Now your recent discussion on the news feeling overwhelming is something I’ve felt for a while. So these days I have a happy medium of only catching up on news websites over coffee on Sunday. But supplementing this with one or two daily podcasts are hosted by friendly folks with a sense of humor who can explain why things are the way they are. And honestly, that’s the reason why I listen to make me smart. As a side note, you would be amazed at the new stories that trickle through from your coworkers and even more amazed at the ones that don’t

Kimberly Adams 

Oh my gosh, the Marketplace Slack channels are certainly certainly proof of that. But we got to get out here.

Kai Ryssdal 

All right, so before you go, we’re gonna leave you as we always do with this week’s answer to the Make Me Smart question. What is something you thought you knew, but later found out you were wrong about? Today’s answer comes from Adriana in San Antonio, Texas.

Adriana

The one thing that I always thought I knew, and it turned out that I was wrong was that it truly doesn’t matter where you get your bachelor’s degree from, I was under the impression that in order for you to be respected, that needs to come from Harvard, or we’re in Texas, here at UT, Austin, Now that I’m older, and I’m working for a company, I’ve been able to get them to pay for it. So pretty good, right? I think so.

Kimberly Adams 

I mean, I think that’s, that’s true to a certain extent. I mean, I think it matters for some fields where you go if there’s like particular expertise in something, but yeah, for the most part, you know, go where you gotta go. We’re gonna pick up the skills in the workplace anyway. But anyway, we want to hear your answer to the Make Me Smart question. Our number is 508-827-6278, also known as 508-U-B-SMART.

Kai Ryssdal 

Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Today’s program was engineered by the one the only Jay Siebold, Bekah Wineman is going to mix it down later. Our intern is Niloufar Shahbandi.

Kimberly Adams 

Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital and Marketplaces Vice President and General Manager is Neal Scarbrough.