A weather eye on the US storm

As graduation rates shrink and tuition fees and student debts soar in the US, experts call on the UK sector to heed lessons from the world's academic powerhouse. Sarah Cunnane reports

February 24, 2011

The US higher education system is often held up as a model of world-class excellence that the rest of the global sector should try to emulate. At first glance, this seems entirely fair: US institutions dominate the Times Higher Education World University Rankings, with 72 institutions in the top 200 in 2010, and the country boasts seven in the top 10 alone. The US is a top draw for international students, as demonstrated by the most recent Organisation for Economic Co-operation and Development study, Education at a Glance, which reported that it is the destination of choice for nearly a fifth of those studying abroad. The OECD report also shows that the country invests a large amount in higher education: 3.1 per cent of gross domestic product, compared with a 1.5 per cent average for all OECD nations and 1.3 per cent for the UK.

However, the recent recession has exposed some deep flaws at the heart of US higher education. In a speech at the University of Texas at Austin in August last year, US president Barack Obama called on the nation's universities to "retake the lead" in global higher education, citing some less than flattering statistics.

He talked about the country's fall from first to 12th place in university graduation rates among developed nations and its unenviable non-completion rates: more than a third of undergraduate students in the US fail to finish their degree after six years. The problem of class stratification is also an issue and more than half of all ethnic minority students fail to complete a degree in the same period.

The OECD figures are telling: although the US remains the top destination for international students, the country has seen its share of the market drop from 26 per cent to 19 per cent between 2000 and 2008.

Private providers of higher education have found themselves in an unflattering spotlight thanks to recent congressional hearings that exposed a raft of bad practices at for-profit institutions, which have been operating in a largely unregulated sector.

Roger Brown, co-director of the Centre of Higher Education Research Development at Liverpool Hope University in the UK, is due to release on 24 February a Higher Education Policy Institute discussion paper, "Lessons from America?", highlighting some of the problems facing the US academy. He suggests that these difficulties should serve as a warning to UK institutions.

"There are striking parallels between the policies of increased competition...and reduced public funding...which are the central thrust of the Coalition Government's higher education policies, and the developments that have produced the current US system. Similar consequences may be anticipated," he writes.

According to Linda Cox Maguire, vice-chair of US consultancy firm Maguire Associates, which advises higher education institutions, "the UK is in a very similar position to where the US was around 15 years ago and that's why it's so interesting for us to watch it. We've seen the storm on the horizon for the UK, and there's so much that can be learned from mistakes and successes we've had in the US."

The issue of tuition fees and value for money is one area that Brown believes the UK sector needs to study closely. The US is more developed than the UK in terms of a market for fees, and costs vary widely between private and public institutions.

Donald E. Heller, director of the Center for the Study of Higher Education at Pennsylvania State University, says that many of the current trends in US public higher education can be traced back to the accelerating shift of the financial burden of higher education from state budgets to students and families. According to a report on US higher education published in November 2010 by the Delta Project on Postsecondary Education Costs, Productivity and Accountability, more than 50 per cent of the institutional average cost of educating an undergraduate student is now paid by student tuition fees. State support for individual universities - such as the University of Michigan and the University of Virginia - can be as little as 7 per cent of their total budgets.

"We're concerned about whether lower-income families can afford to send their children to university," Heller says. "It's not just about the initial decision to go; we're worried about whether families are able to sustain a financial commitment that would enable students to finish their degrees."

Individual US universities offer financial aid schemes, and the federal government assists with both student loans and the Federal Pell Grant Program, which gives students who can demonstrate financial need a non-repayable sum, which for the 2010-11 academic year is set at $5,500 (around £3,400).

But Maguire says that the US system, in which students pay as they study, "increases the pain and immediacy of the problem" for lower-income families who struggle to meet the costs of higher education.

Brown reports that 100 US institutions now charge more than $50,000 a year for fees, room and board, with little indication that year-on-year rises are slowing down.

Mark C. Taylor, chair of the department of religion at Columbia University, has estimated that if current trends continue, the cost of a degree at a leading US institution could reach $330,000 by 2020.

"The most difficult aspect of the problems in American higher education has become the financial (one)," he says. "The economic model of higher education in the US is unsustainable."

Student debt is already of great concern in the US; in August 2010, a report was published showing that for the first time, debt from student loans had surpassed the nation's credit card debt.

Heller claims that much of this rise is the direct result of the degree of autonomy that US institutions have over the setting of fees. This has resulted, he says, in universities serving themselves rather than serving society by aiding economic development and helping to develop a skilled workforce for the future.

"As US universities raised fees over the past couple of decades, what we've found is that they became more and more focused on their own institutional needs and institutional missions and less on broader societal needs," he says. "I think there is certainly the risk of the same thing happening in the UK."

At the moment, of course, public universities in the UK have limited autonomy over what they can charge; from 2012, annual undergraduate tuition fees have been capped at £9,000. But there is widespread fear that many of the problems associated with the US system - such as the reluctance of lower-income families to commit to paying high tuition fees and increasing levels of student debt - are already set to become a factor. And many observers believe that it is inevitable that tuition fees in the UK will creep upwards, in tandem with the emergence of a much stronger private sector, which would be able to charge unlimited fees. This would lead to a hybrid system similiar to that of the US, with all the associated problems.

However, Maguire argues that there are steps that universities in both countries can take to reassure students from lower- and middle-income families that a degree is a worthwhile, and financially manageable, investment. Essential to achieving this goal, she says, is learning to communicate the value of an institution's degrees more effectively.

"US universities used to be much more inclined to tell their stories by talking about whatever they were proud of - without any awareness of how they were perceived from the outside or what was credible in the minds of students," she says.

Institutions in both countries need to communicate the net costs of degrees early in the enrolment process, and in the US they must also educate families about how the financial aid system works, Maguire observes.

"It's complicated, it's confusing, and many families look at the total price without realising that they can actually pay less."

In the UK, the bursary system is relatively underdeveloped, but it seems likely that as the tuition burden rises, better financial aid programmes and more fee waivers will develop here. Not only will this help to cushion the financial burden for the least well-off, it might allow universities to achieve and even expand their access goals.

Brown also urges UK universities to take on a broader social role, in order to convince the public that they are a public good and therefore worth supporting financially. They should do more to foster what the American Association of State Colleges and Universities terms "stewardship of place", namely the idea that universities have a broader societal remit to help their local communities, he says.

"US universities, particularly the public ones, are already stitched into the local community. They have suffered just as badly financially, so it's certainly not a panacea, but the hysterical isolation of (UK) universities from wider society is still there, and it's a weakness," Brown says.

He adds that public universities in the US have already spent many years confronting the financial difficulties that UK universities are now facing. By mobilising public support for higher education, Brown argues, difficulties in justifying why public money should be spent on the sector could be overcome.

"British vice-chancellors have not shown leadership in this area, and they've continually given the impression that the only thing that really matters is being able to increase the fees," he says.

Maguire urges UK institutions not to automatically charge the highest fees possible, thereby ignoring concerns over value and affordability. If everyone charges the top rate, she says, undergraduate student cohorts will be "composed of the rich and the poor and no one in between".

"It's one of the things that is most concerning about the situation in the UK," she says. "As institutions are straining and there is a lot of angst about government cuts and higher fees, a whole lot of institutions are looking to set the same price. Some can certainly charge that but, realistically, some won't be able to."

In the US, increasing tuition fees is a negative option that many public institutions have been unable to avoid. In California, where state support has fallen dramatically, a rise in tuition fees has been necessary to keep public institutions afloat. In 2011-12, tuition fees in the University of California system, for example, will jump 8 per cent to $11,124 a year for California residents, after a 32 per cent hike the previous year.

"Our state governments realised early on that they could cut funding to the public higher education systems and the universities would turn around and raise fees to make up the difference," Heller says. "Public universities are one of the few parts of government that can charge substantial user fees for their services. So that's been the pattern."

James Palmer, professor of higher education at Illinois State University and editor of the annual Grapevine survey of state support for universities, argues that policymakers are not inherently against providing financial support for the public higher education system. On the contrary, they are keen to support it as a way of stimulating economic growth and providing opportunities for their constituents' children. But they simply cannot afford to do so.

"The question for many policymakers is not: 'shall we increase funding for higher education?', but 'can we increase funding for higher education?'"

In the current financial climate, he says, "It is taking longer for states to dig themselves out of a fiscal hole. This recession has been particularly severe for state budgets."

This month, the University of Nevada, Las Vegas announced to staff that managers would be taking the first steps towards declaring financial exigency in response to a possible $47.5 million shortfall, revealed in the proposed budget of the state of Nevada. Exigency, which is the term used for the declaration of bankruptcy for an academic institution, is explained by the Faculty Alliance of UNLV as "the legal basis for dissolving rights and protections enshrined in the System Code, institution by-laws and faculty/staff contracts". At present, the president of UNLV, Neal J. Smatresk, has gone only so far as to ask his senior management to consider the "possibility of elimination or condensation of colleges and schools...along with departmental eliminations and reorganizations".

The risk is that the costs faced by universities and students will spiral completely out of control. Both Brown and Palmer draw parallels between the higher education sector and recent debates in the US on healthcare. Brown writes that the current US healthcare system is "unduly expensive and inefficient as well as grossly unfair" and warns that higher education in the US could head the same way.

Palmer is more cautious: "We want to increase access to healthcare but to do that we need to look at cost. A similar realisation is causing a serious, sober look at the costs within higher education. I think that if we are going to meet our goals for increased access and achievement in higher education, we will have to look at costs."

One of the side effects of the universities' funding pressure, notes Brown, is that institutions too often lose sight of their core mission. They are increasingly focusing on tradition and history in order to drive up their prestige (and hence their ability to charge) and to increase students' loyalty to the institutions (and hence, later, their ability to fundraise), sometimes at the expense of academic endeavours and even common sense.

He cites the example of a US university that discovered that its original football field was under the current staff car park. The administration chose to bulldoze the car park in order to restore the football field, to the consternation of the many staff who were left without anywhere to park.

Tom Palaima, Raymond F. Dickson professor of Classics at the University of Texas (UT) at Austin, agrees with Brown's assertion that there is "large and often wasteful" expenditure on endeavours such as sports.

"There is a long-standing resentment in the US against those who are educated," he claims. "One of the ways this all comes together is in this long-standing idea that the university can offer sports to anybody who comes on to campus; it's something everyone can rally around. There are a lot of people involved in these sports who don't care one bit for the academic mission of a university."

At his own institution, Palaima notes, Mack Brown, the head coach of the men's American football team, was given a $2 million raise for the 2010 fiscal year that brought his annual salary to $5 million. At the same time, public colleges and universities in Texas had their state funding slashed by 5 per cent, with another 10 per cent reduction proposed over the next two years by Texas governor Rick Perry. "UT can afford that," Palaima says, "but other institutions have to keep up, and they drive themselves further and further into debt doing so."

One local university whose American football team played in a lower division "desperately wanted to be playing in the big leagues", he recounts. "So they charged extra student fees in order to fund the expansion of their stadium and hire a (more expensive) head coach. It's all because they feel that if they have a bigger-time sports team, they'll attract better students and wealthier donors."

But those donors may not be benefiting the university's academic mission, despite the claims of many advocates of university athletics.

"The most frequent response given to the alumni association when a request for a donation is turned down is that the person in question has already given to the sports fund," Palaima claims. "Although sports donors occasionally give to the academic side of things, in many cases we're missing out, so the argument that sports benefits the whole university financially doesn't hold up."

The UK higher education system does not have sports leagues of a stature comparable to those in the US, but Palaima says that UK institutions can still learn a broader lesson: be wary of US institutions' preoccupation with building a brand.

"Institutions think that the easiest way to build yourself up is not to develop an excellent Classics faculty or a degree in petroleum engineering, but via sports teams," he says.

"Far more people read the sports section of the newspaper than read the culture section, and that is assuming academics even make it to the culture section. Everyone here can remember that UT won the national championship in 2006, and the time they won it in the 1970s, and doesn't that create great tradition? It's easy to remember. But you don't get people reminiscing about the year the Nobel prizewinner was appointed to the faculty."

Taylor agrees, but says that it is an "insane sense of ranking" that is causing the universities to lose their focus on what matters. He also warns that this preoccupation is having an effect on US universities' finances.

"Everybody's trying to be number one all the time," he complains. "Some institutions borrowed far too much money and in the 1990s went on a building spree to try to attract students. They didn't build classrooms, they built fancy dorms and recreational sports facilities instead, and now their assets are down because the market has collapsed and these institutions are carrying a lot of debt."

He recommends that universities save more money by collaborating on programmes and sharing assets. Instead, however, they compete. UK institutions should spend less time chasing success in national and international rankings, and focus on their core mission, Taylor says.

He says that improving department and institutional standings in rankings such as the annual US News & World Report Best College rankings have skewed the priorities of many US institutions. "A lot of educational policy is geared towards improving standings in the national rankings rather than what students and institutions might need," he says.

Along similar lines, Palaima says that US universities are losing sight of their academic mission because they are focusing on finance, and the UK could be heading the same way: "Just because universities are being run like businesses, it doesn't mean that they should be. When people talk about universities as businesses, it's a sad comment on what people are thinking about as meaningful."

With this in mind, the degree of government involvement in UK higher education, Heller says, is something that should be welcomed.

"The fact that the UK does have a system that is controlled by the government means that there is some glimmer of hope that some of the bad things that have happened in the US won't happen to UK higher education."

Brown does not think that universities can avoid rankings, business models or branding. He argues that higher education is now a market and, although the idea may be unpalatable to many academics, the UK academy needs to adapt to the pressures this brings without losing sight of what he calls the "clear danger" of minimising the academic mission of universities at the cost of quality.

"We have to think about the sector in market terms now, to be brutally realistic," Brown says.

"This is the schizophrenic position we're in: we're all engaged in a market at the same time as trying to provide education. You have to compromise, but you have to make those compromises without the loss of the educational side. Otherwise it's impossible to justify the privileges universities have such as relative autonomy and tax breaks and so on."

While Brown does not agree with the concept of rankings, he admits that they are a necessary evil in the current climate.

"You can't ignore rankings, because you're in a market. If you're going to organise things along market lines then consumers have to have information about products. The fact that the information isn't worth the paper it's printed on doesn't matter."

The number of differences in funding, public attitude and fee structure in the UK higher education system means it is, and will probably remain, very different from the structure of universities and colleges in the US.

Nevertheless, there are certainly pitfalls that US higher education has experienced that the UK system should take heed of in the future. As the saying goes, those who cannot remember the past are doomed to repeat it.

Generosity returns: US donations start to rise again as economy recovers

With the recession hitting hard, US universities have found it difficult to sustain previous levels of fundraising income. But the 2010 Voluntary Support of Education (VSE) survey from the Council for Aid to Education suggests that some green shoots of recovery are beginning to appear for the sector: charitable contributions to colleges and universities in the US increased 0.5 per cent in 2010.

However, the sector raised only $28 billion (£17.4 billion) - the same amount achieved in 2006. Adjusting for inflation, this means that the sector raised 8 per cent less than in 2006 and 0.6 per cent less than in 2009.

The figures for 2009 represented a particularly poor year for donations. The total amount raised by the 996 institutions examined in the VSE survey fell 11.9 per cent.

The survey also shows the large disparity between top institutions and the rest of the sector. The top 20 institutions in the survey, representing just 2 per cent of the total number of institutions covered by the report, accounted for 25.5 per cent of all gifts to higher education institutions.

Nevertheless, there is evidence that the biggest fundraisers may be the hardest hit as the US economy struggles to recover. The top 20 institutions in 2010 raised $130 million less than the top 20 raised in 2009, with 13 of the 20 unable to match the amount they raised in 2009.

Cornell University received the worst blow, with a 31 per cent decrease in gifts between 2009 and 2010, causing it to fall from third to 13th place in the table.

Despite the financial gloom, there were some causes for celebration in the sector. Indiana University saw an increase of 38.4 per cent, allowing it to enter the top 10. It was ranked 21st in 2009.

Ann E. Kaplan, director of the VSE survey, said: "We're still not out of the woods. Charitable contributions to education are recovering very slowly. Still, historical patterns show that the pace of the recovery in charitable giving usually reflects overall economic recovery. As long as the economy continues to improve, we can expect further improvement in giving, even if it is small at first."

But statistics released by the Council for Advancement and Support of Education in January show that the US is lagging behind when it comes to growth in gifts to universities.

Globally, giving to higher education institutions rose by an estimated 2.9 per cent in 2010.

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