Review of “Designing the New American University”

Since Michael Crow became the president of Arizona State University in 2002, he has worked to reorganize and grow the institution into his vision of a `New American University.’ ASU has grown to over 80,000 students during his time as president through a commitment to admit all students who meet a relatively modest set of academic qualifications. At the same time, the university has embarked upon a number of significant academic reorganizations that have gotten rid of many traditional academic departments and replacing them with larger interdisciplinary schools. Crow has also attracted his fair share of criticism over the years, including for alleged micromanaging and his willingness to venture into online education. (I’ve previously critiqued ASU Online’s program with Starbucks, although many of my concerns have since been alleviated.)

Crow partnered with William Dabars, an ASU professor, to write Designing the New American University (Johns Hopkins Press, $34.95 hardcover) to more fully explain how the ASU model works. The first several chapters of the book, although rather verbose, focus on the development of the American research university. A key concept that the authors raise is isomorphism—the tendency of organizations to resemble a leading organization in the market. Crow and Dabars contend that research universities have largely followed the lead of elite private universities such as Harvard and the big Midwestern land-grant universities that developed following the Civil War. Much has changed since then, so they argue that a new structure is needed.

Chapter 7 is the key chapter of the book, in which the authors detail the design of Arizona State as a ‘New American University’ (and make a nice sales pitch for the university in the process). Crow and Dabars celebrate the growth of Arizona State, which has been matched by only a small number of public research universities. They note that a stronger focus on access has hurt them in the U.S. News rankings, a key measure of prestige—while celebrating their ranking as an ‘Up and Coming School.’ (In the Washington Monthly rankings that I compile, ASU is a very respectable 28th.) The scale of ASU allows the possibility for cost-effective operations, something which the university is trying to measure through their Center for Measuring University Performance.

It certainly seems like some elements of the changes at ASU could potentially be adopted at other research universities, but it is worth noting that research universities make up only about 200-300 of the over 7,500 postsecondary institutions in the United States. I am left wondering what the `New American’ model would look like in other sectors of higher education, which is beyond the scope of this book but an important question to answer. Some other questions to consider are the following:

(1) How would a commitment to growth happen at colleges without the prestige or market power to attract significant numbers of out-of-state students?

(2) ASU seems to have done more academic reorganizations in research-intensive departments. How would this work at a more teaching-oriented institution?

(3) How will the continuing growth of ASU Online, as well as the multiple branch campuses in the Phoenix metropolitan area, affect the organizational structure? At what point, if any, does a university reach the maximum optimal size?

(4) Will ASU’s design remain the same once Michael Crow is not president? (And is that a good thing?)

Overall, this is a solid book that is getting a substantial amount of attention for good reason. While the book could have been about 50 pages shorter while still conveying all of the important information, the final chapter is highly recommended reading. I plan to assign that chapter to my organization and governance classes in the future so they can understand how ASU is growing and succeeding through an atypical higher education model.

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Analyzing the Heightened Cash Monitoring Data Release

NOTE: This post was updated April 3 to reflect the Department of Education’s latest release of data on heightened cash monitoring.

In my previous post, I wrote about the U.S. Department of Education’s release of a list of 544 colleges subject to heightened cash monitoring standards due to various academic, financial, and administrative concerns. I constructed a dataset of the 512 U.S. colleges known to be facing heightened cash monitoring (HCM) along with two other key accountability measures: the percentage of students who default on loans within three years (cohort default rates) and an additional measure of private colleges’ financial strength (financial responsibility scores). In this post, I examine the reasons why colleges face heightened cash monitoring, as well as whether HCM correlates with the other accountability metrics.

The table below shows the number of colleges facing HCM-1 (shorter delays in ED’s disbursement of student financial aid dollars, although colleges not facing HCM have no delays) and HCM-2 (longer delays) by type of institution (public, private nonprofit, and for-profit).

Table 1: HCM status by institutional type.
Sector HCM-1 HCM-2
Public 68 6
Private nonprofit 97 18
Private for-profit 284 39
Total 449 63

 

While only six of 74 public colleges are facing HCM-2, more than one in ten private nonprofit (18 of 115) and for-profit colleges (39 of 323) are facing this higher standard of oversight. The next table shows the various reasons listed for why colleges are facing HCM.

Table 2: HCM status by reason for additional oversight.
Reason HCM-1 HCM-2
Low financial responsibility score 320 4
Financial statements late 66 9
Program review 1 21
Administrative capability 22 7
Accreditation concerns 1 12
Other 39 10

 

More than two-thirds (320) of the 449 colleges facing HCM-1 are included due to low financial responsibility scores (below a 1.5 on a scale ranging from -1 to 3), but only four colleges are facing HCM-2 for that reason. The next most common reason, affecting 75 colleges, is a delayed submission of required financial statements or audits. This affected 43 public colleges in Minnesota, which are a majority of the public colleges subject to HCM. Program review concerns were a main factor for HCM-2, with 21 colleges in this category (including many newly released institutions) facing HCM-2. Other serious concerns included administrative capability (22 in HCM-1 and 7 in HCM-2), accreditation (2 in HCM-1 and 12 in HCM-2), and a range of other factors (39 in HCM-1 and 10 in HCM-2).

The next table includes three of the most common or serious reasons for facing HCM (low financial responsibility scores, administrative capacity concerns, and accreditation issues) and examines their median financial responsibility scores and cohort default rates.

Table 3: Median outcome values on other accountability metrics.
Reason for inclusion in HCM Financial responsibility score Cohort default rate
Low financial responsibility score 1.2 12.1%
Administrative capability 1.6 20.3%
Accreditation issues 2.0 2.8%

 

Not surprisingly, the typical college subject to HCM for a low financial responsibility score had a financial responsibility score of 1.2 in Fiscal Year 2012, which would require additional federal oversight. Although the median cohort default rate was 12.1%, which is slightly lower than the national default rate of 13.7%, some of these colleges do not participate in the federal student loan program and are thus counted as zeroes. The median college with administrative capability concerns barely passed the financial responsibility test (with a score of 1.6), while 20.3% of students defaulted. Colleges with accreditation issues (either academic or financial) had higher financial responsibility scores (2.0) and lower cohort default rates (2.8%).

What does this release of heightened cash monitoring data tell us? Since most colleges are on the list for known concerns (low financial responsibility scores or accreditation issues) or rather silly errors (forgetting to submit financial statements on time), the value is fairly limited. But there is still some value, particularly in the administrative capability category. These colleges deserve additional scrutiny, and the release of this list will do just that.

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New Data on Heightened Cash Monitoring and Accountability Policies

Earlier this week, I wrote about the U.S. Department of Education’s pending release of a list of colleges that are currently subject to heightened cash monitoring requirements. On Tuesday morning, ED released the list of 556 colleges (updated to 544 on Friday), thanks to dogged reporting by Michael Stratford at Inside Higher Ed (see his take on the release here).

My interest lies in comparing the colleges facing heightened cash monitoring (HCM) to two other key accountability measures: the percentage of students who default on loans within three years (cohort default rates) and an additional measure of private colleges’ financial strength (financial responsibility scores). I have compiled a dataset with all of the domestic colleges known to be facing HCM, their cohort default rates, and their financial responsibility scores.

That dataset is available for download on my site, and I hope it is useful for those interested in examining these new data on federal accountability policies. I will have a follow-up post with a detailed analysis, but at this point it is more important for me to get the data out in a convenient form to researchers, policymakers, and the public.

DOWNLOAD the dataset here.

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Why is it So Difficult to Sanction Colleges for Poor Performance?

The U.S. Department of Education has the ability to sanction colleges for poor performance in several ways. A few weeks ago, I wrote about ED’s most recent release of financial responsibility scores, which require colleges deemed financially unstable to post a bond with the federal government before receiving financial aid dollars. ED can also strip a college’s federal financial aid eligibility if too high of a percentage of students default on their federal loans, if data are not provided on key measures such as graduation rates, or if laws such as Title IX (prohibiting discrimination based on sex) are not followed.

The Department of Education can also sanction colleges by placing them on Heightened Cash Monitoring (HCM), requiring additional documentation and a hold on funds before student financial aid dollars are released. Corinthian Colleges, which partially collapsed last summer, blames suddenly imposed HCM requirements for its collapse as they were left short on cash. Notably, ED has the authority to determine which colleges should face HCM without relying upon a fixed and transparent formula.

In spite of the power of the HCM designation, ED has previously refused to release a list of which colleges are subject to HCM. The outstanding Michael Stratford at Inside Higher Ed tried to get the list for nearly a year through a Freedom of Information Act request (which was mainly denied due to concerns about hurting colleges’ market positions), finally making this dispute public in an article last week. This sunlight proved to be a powerful disinfectant, as ED relinquished late Friday and will publish a list of the names this week.

The concerns about releasing HCM scores is but one of many difficulties the Department of Education has had in sanctioning colleges for poor performance across different dimensions. Last fall, the cohort default rate measures were tweaked at the last minute, which had the effect of allowing more colleges to pass and retain access to federal aid. Financial responsibility scores have been challenged over concerns that ED’s calculations are incorrect. Gainful employment metrics are still tied up in court, and tying any federal aid dollars to college ratings appears to have no chance of passing Congress at this point. Notably, these sanctions are rarely due to direct concerns about academics, as academic matters are left to accreditors.

Why is it so difficult to sanction poorly-performing colleges, and why is the Department of Education so hesitant to release performance data? I suggest three reasons below, and I would love to hear your thoughts in the comments section.

(1) The first reason is the classic political science axiom of concentrated benefits (to colleges) and diffuse costs (to students and the general public). Since there is a college in every Congressional district (Andrew Kelly at AEI shows the median district had 11 colleges in 2011-12), colleges and their professional associations can put forth a fight whenever they feel threatened.

(2) Some of these accountability measures are either all-or-nothing in nature (such as default rates) or incredibly costly for financially struggling colleges (HCM or posting a letter of credit for a low financial responsibility score). More nuanced systems with a sliding scale might make some sanctions possible, and this is a possible reform under Higher Education Act reauthorization.

(3) The complex relationship between accrediting bodies and the Department of Education leaves ED unable to directly sanction colleges for poor academic performance. A 2014 GAO report suggested accrediting bodies also focus more on finances than academics and called for a greater federal role in accreditation, something that will not sit well with colleges.

I look forward to seeing the list of colleges facing Heightened Cash Monitoring be released later this week (please, not Friday afternoon!) and will share my thoughts on the list in a future piece.

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The 2015 Net Price Madness Bracket

Every year, I take the 68 teams in the 2015 NCAA Division I men’s basketball tournament and fill out a bracket based on colleges with the lowest net price of attendance (defined as the total cost of attendance less all grant aid received). My 2014 and 2013 brackets are preserved for posterity, with Louisiana-Lafayette and North Carolina A&T emerging victorious for having the lowest net price without having won a single game.

In 2015, the final four teams standing (based on net price) are:

MIDWEST REGION: Wichita State [WINNER] (net price of $9,039*, 46% graduation rate, 36% Pell)

WEST REGION: North Carolina (net price of $11,994, 90% graduation rate, 21% Pell)

[An earlier version of this post incorrectly had BYU beating North Carolina. My apologies for that error, which has been corrected.]

EAST REGION: Wyoming (net price of $11,484, 54% graduation rate, 24% Pell)

SOUTH REGION: San Diego State (net price of $9,856, 66% graduation rate, 40% Pell)

netprice

All data for the bracket can be found here.

*NOTE: Wichita State has a reported net price of $9,039, but the net prices for each household income bracket are higher than $9,039. Something isn’t right here, but what would March Madness be without any controversy?

Indiana deserves special plaudits for having a net price for the lowest-income students of just $4,632—although the 19% Pell enrollment rate is quite low.

Also, thanks to Andy Saultz for catching an error in the VCU/Ohio State game. Much appreciated!

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Do Financial Responsibility Scores Reflect Colleges’ Financial Strength?

In spite of the vast majority of federal government operations being closed on Thursday due to snow (it’s been a rough end to winter in this part of the country), the U.S. Department of Education released financial responsibility scores for private nonprofit and for-profit colleges and universities based on 2012-2013 data. These scores are based on calculations designed to measure a college’s financial strength in three key areas: primary reserve ratio (liquidity), equity ratio (ability to borrow additional funds) and net income (profitability or excess revenue).

A college can score between -1 and 3, and colleges that score over 1.5 are considered financially responsible without any qualifications and can access federal funds. Colleges scoring between 1.0 and 1.4 are considered financially responsible and can access federal funds for up to three years, but are subject to additional Department of Education oversight of its financial aid programs. If a college does not improve its score within three years, it will not be considered financially responsible. Colleges scoring 0.9 or below are not considered financially responsible and must submit a letter of credit and be subject to additional oversight to get access to funds. A college can submit a letter of credit equal to 50% of all federal student aid funds received in the prior year and be deemed financially responsible, or it can submit a letter equal to 10% of all funds received and gain access to funds but still not be fully considered financially responsible.

As Goldie Blumenstyk (who knows more about the topic than any other journalist) and Joshua Hatch of The Chronicle of Higher Education discover in their snap analysis of the data, 158 private degree-granting colleges (108 nonprofit and 50 for-profit) failed to pass the test in 2012-13, down ten colleges from last year. Looking at all colleges eligible to receive federal financial aid, 192 failed outright in 2012-13 by scoring 0.9 or lower and an additional 128 faced additional oversight by scoring between 1.0 and 1.4.

But, as Blumenstyk and Hatch note in their piece, private colleges have repeatedly questioned how financial responsibility scores are determined and whether they are accurate measures of a college’s financial health. I’m working on an article examining whether and how colleges and other stakeholders respond to financial responsibility scores and therefore have a bunch of data at the ready to look at this topic.

Thanks to the help of my sharp research assistant Michelle Magno, I have a dataset of 270 private nonprofit colleges with financial responsibility scores and their Moody’s credit ratings in the 2010-11 academic year. (Colleges only have Moody’s ratings if they seek additional capital, which explains the smaller sample size and why few colleges with low financial responsibility scores are included.) The below scatterplot shows the relationship between Moody’s ratings and financial responsibility scores, with credit ratings observed between Caa and Aaa and financial responsibility scores observed between 1.3 and 3.0.

credit_rating

The correlation between the two measures of fiscal health was just 0.038, which is not significantly different from zero. Of the 57 colleges with the maximum financial responsibility score of 3.0, only three colleges (Northwestern, Stanford, and Swarthmore) had the highest possible credit rating of Aaa. Twenty-five colleges with financial responsibility scores of 3.0 had credit ratings of Baa, seven to nine grades lower than Aaa. On the other hand, six of the 15 colleges with Aaa credit ratings (including Harvard and Yale) had financial responsibility scores of 2.2, well below the maximum possible score.

This suggests that the federal government and private credit agencies measure colleges’ financial health in different ways—at least among colleges with the ability to access credit. Financial responsibility scores can certainly have the potential to affect how colleges structure their finances, but it is unclear whether they accurately reflect a college’s ability to operate going forward.

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Why ASAP Could Harm Some Students

The City University of New York’s Accelerated Study in Associate Programs (ASAP) has gotten a great deal of positive attention in the last few years, and for good reason. The program provides much-needed additional economic, advising, and social supports to community college students from low-income families, and a new evaluation of a randomized trial from MDRC found that ASAP increased three-year associate’s degree completion rates from 22% in the control group to 40% in the treatment group. I’m glad to see that the program will be expanded to three community colleges in Ohio, as this will help address concerns about the feasibility of scaling up the program to cover more students.

But it is important to recognize that ASAP, as currently constituted, is limited to students who are able and willing to attend college full-time. Full-time students are the minority at community colleges, and full-time students tend to be more economically and socially advantaged than their part-time peers. As currently constructed, ASAP would direct a higher percentage of resources to full-time students, even though part-time students likely need support more than full-time students. (However, it’s worth noting that although part-time students count in some states’ performance-based funding systems, they are currently not counted in federal graduation rate metrics.)

Students in ASAP also get priority registration privileges, which can certainly contribute to on-time degree completion. But it is not uncommon for classes (at least at desirable times) to have waiting lists, meaning that ASAP students get access to courses while other students do not. If a part-time student cannot get access to a course that he or she needs, it could mean that the student is forced to stop out of college for a semester—a substantial risk factor for degree completion.

ASAP has many promising aspects, but further study is needed to see if the degree completion gains for full-time students are coming at the expense of part-time students. Some of the ASAP services should be extended to all students, and priority registration should be reconsidered to benefit students who are truly in need to getting into a course instead of those who are able to attend full-time.

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Why I’m Conflicted About College Athletics

As a college professor doing research in higher education finance and accountability policy, there are many times when my enjoyment of college athletics leaves me conflicted. I enjoy watching my beloved Wisconsin Badgers get the best of (most of) their Big Ten opponents on a regular basis, but I also recognize that at all but the few dozen wealthiest universities, college athletics are heavily subsidized by student fees. (Answering whether athletics programs are actually profitable is very difficult due to concerns with cost allocations, assumptions about whether students are induced to attend because of athletics, and how revenue is disbursed.)

In the past year, colleges in the “Power Five” athletic conferences (Big Ten, Big 12, Atlantic Coast, Pacific-12, and Southeastern Conferences) gained additional autonomy from the rest of the NCAA. They then voted to increase athletic scholarships by $2,000-$4,000 per year per athlete to cover the full cost of attendance, which is definitely a good thing for those athletes. Other Division I colleges can choose to also increase scholarships, but not without significant budgetary implications. For a college with 250 scholarship athletes (not an unrealistic number for a college with football), the cost could approach one million dollars per year. My concern is that those increases are likely to be funded out of the pockets of students and/or by cutting non-revenue sports like wrestling and track and field.

Other things that college athletic programs do are unambiguously bad for athletes. A recent example of this is with national letters of intent, which bind athletes to a college at the end of the recruiting process. Earlier this month, prized linebacker recruit Roquan Smith made news by accepting a football scholarship from the University of Georgia (switching from UCLA) without signing the letter of intent. Once a letter is signed, a student cannot transfer without losing eligibility unless the college decides to let the student out. In the meantime, coaches often leave for other jobs without facing any employment restrictions.

As a professor, I also worry about the increased number of televised weeknight games long distances from campus that cause athletes difficulties attending class. It’s great to get exposure for your college on national television (and get serious television dollars), but this places a burden on athletes and faculty who work with those students. But if I’m not teaching one evening and a good game is on, will I watch it? Quite possibly. Should I? No.

I’m curious to get readers’ thoughts about how they manage the pros and cons of big-time college athletics. Even when the game is going on, I can’t help think about the students and the dollar signs behind them.

[NOTE: A previous version of the post incorrectly noted that Mr. Smith was intending to enroll at UCLA instead of the University of Georgia. Thanks to Ed Kilgore for pointing out this error.]

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The FY 2016 Obama Budget: A Few Surprises

The Obama Administration released their $3.999 trillion budget proposal for Fiscal Year 2016, and the higher education portion of the budget was largely as expected. Some proposals, such as increasing research funding, providing a bonus pool of funds for colleges with high graduation rates, and reallocating the Supplemental Educational Opportunity Grant to be based on current financial need instead of an antiquated formula, were repeats from previous years. Others, such as the idea of tuition-free community college, had already been sketched out. And one controversial proposal—the plan to tax new 529 college savings plans—had already been nixed, but remained in the budget document due to a “printing deadline.”

But the budget proposal (the vast majority of which is dead on arrival in a GOP Congress thanks to differences in viewpoints and preferred budget levels) did have some surprising details. The three most interesting higher education-related details are below.

(1) “Universal” free community college isn’t exactly universal. Pages 59 and 60 of the education budget proposal noted that students with a family Adjusted Gross Income of over $200,000 would be ineligible for tuition-free community college. Although this detail was apparently decided before the program was announced, the Obama Administration for some reason chose to hide that detail from the public until Monday. As the picture shows below, only 2.7% of dependent community college students had family incomes above $200,000 in 2011-12 (data from the National Postsecondary Student Aid Study).

income

But in order to get family income, students have to file the FAFSA. Research by Lyle McKinney and Heather Novak suggests that 42% of low-income community college students didn’t file the FAFSA in 2007-08, meaning that something big needs to be done to get these students to file. Requiring the FAFSA also means that noncitizens typically would not qualify for free community college, something that is likely to upset advocates for “dreamer” students (but make many on the Right happy).

Additionally, as Susan Dynarski at the University of Michigan pointed out, the GPA requirements (a 2.5 instead of a 2.0) make a big difference. In 2011-12, 15.9% of Pell recipients had GPAs between a 2.0 and 2.49, meaning they would not qualify for free community college.

gpa

 

(2) Asset questions may be off the FAFSA. The budget document called for the following changes to the FAFSA, including the elimination of assets (thanks to Ben Miller at New America for the screenshot):

fafsa

 

Getting rid of assets won’t affect most families, as research by Susan Dynarski and Judith Scott-Clayton shows. But it does matter more to selective colleges, more of which might turn to additional financial aid forms like the CSS/PROFILE to get the information they want. Policymakers should take the benefits of FAFSA simplicity as well as the potential costs to students of additional forms into account.

(3) Mum’s the word on college ratings. After last year’s budget featured $10 million for the development of the Postsecondary Institution Ratings System (PIRS), this year’s budget had no mention. Inside Higher Ed reported that ratings will be developed using existing funds and using existing personnel. Will that slow down the development of ratings? Given the slow progress at this point, it’s hard to argue otherwise.

Finally, the budget document also contained details about the “true” default rate for student loans, using the life of the loan instead of the 3-year default window used for accountability purposes. The results aren’t pretty for undergraduate students, with default rates pushing 23% on undergraduate Stafford loans. But default rates for graduate loans hover around 6%-7%, which is roughly the interest rates many of these students face.

default

 

What are your thoughts on the President’s budget proposal for higher education? Please share them in the comments section.

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What Should Count as “Financial Aid?”

Financial aid has taken center stage in federal policy discussions recently, including President Obama’s plan to provide many students with two years of tuition-free community college and changes to the Byzantine system of higher education tax credits, deductions, and tax-preferred savings plans. (I’ve written about the two topics here and here.) But these discussions hint at a broader question—what should be considered “financial aid?” In some respects, financial aid is a little bit like pornography, as everyone knows it when they see it.

But definitions of “financial aid” vary quite a bit across individuals. This is evidenced by Jordan Weissman of Slate, who tweeted his thoughts on financial aid policy:

His definition includes grants, loans, and tax credits—the broadest possible definition. Libby Nelson at Vox agreed:

But she also noted the difficulty in determining what financial aid is:

I’m a little skeptical about whether tax credits should truly be considered aid, as they come so far after the tuition bill coming due:

Others weighed in, noting that loans often aren’t considered financial aid:

It’s worth noting here that all grants, loans, and work-study are included as financial aid that students can receive up to the total cost of attendance, but only grants are included in the calculation of the net price.

So, wise readers, what would you consider to be financial aid? Take the poll below and feel free to leave additional thoughts in the comments section.

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