American universities will soon have to be more open about tuition charges and student retention rates. Many fear that the push to provide consumer-oriented information will lead to even greater cuts in gover nment subsidies. Jon Marcus reports

March 11, 2010

Americans who buy new cars are famously exasperated by the routine in which slippery dealers do everything they can to dance around giving them a firm price.

But while car dealers persist with this practice, US universities no longer can.

Universities that have resisted revealing the average net price of a degree - an amount that factors in additional expenses but also grant aid received - will soon be required to provide this figure on a government website. They will also have to publish a history of increases in their annual tuition fees and other financial data, under the new rules set to take effect this summer. The universities don't like this because it means that some students will find out that they are paying more than others, depending on their income or a university's estimation of their merit.

And if students and their families want to know what they're getting for their money, the universities will have to report that, too. From July, some will also be required, for the first time, to publish information about the success of their graduates in finding jobs, along with student retention and completion rates.

American universities of all types, which have got by with little formal requirement to show that they provide value for money, are suddenly faced with a raft of measures designed to make them prove it. The US government has also proposed unexpectedly strict regulations for private for-profit universities - which will cover things such as their controversial recruiting policies. And an association of universities has called for tightened restrictions on conflicts of interest among boards of regents and trustees.

US universities' recent history of spiralling prices and falling graduation rates seems to have come home to roost, especially as there is a growing fear that America's once-vaunted higher education system has begun to lag behind its foreign counterparts, and at a time when a dramatic shortage is projected in the supply of university-educated workers.

And a government higher education official is warning that more scrutiny is ahead. "We're going to have to get at productivity increases," says Robert Shireman, deputy undersecretary at the US Department of Education. "Whether these come quickly enough given the economic situation remains to be seen."

One way of improving outcomes is to make them public, Shireman argues. "We are doing all we can to put more information out there," he says of the requirement that data such as job-placement rates be listed on a government website from July. But he adds: "The traditional higher education institutions opposed it."

The website already lists the proportion of applicants admitted to an institution, the average amount of the student loans they take out, the percentage of first-year students who return for a second year, and the percentage who graduate. It also includes student loan default rates, which can be an indication of how many have dropped out and left loans unpaid. From July, universities that promote their career-placement services will have to report how many of their students get jobs.

"As a parent, don't you want to know whether your kid is going to get a job after spending all that money?" one government official says, requesting anonymity. "It's consumer information."

The site includes a "net price" calculator that shows how much a student will likely pay to get an undergraduate degree, including the cost of books, room and board - an amount that is growing as it takes longer to graduate, and can differ from one student to another, causing headaches for university administrators.

This has not been the only call for transparency. The Association of Governing Boards of Universities and Colleges has recommended much tighter rules to avoid conflicts of interest among university regents and trustees after several high-profile scandals - including one in which Bernie Madoff convinced his fellow trustees at Yeshiva University to pour millions of the university's money into his fraudulent investment fund and another in which trustees at the public University of Illinois helped politically well-connected students win admission over equally or better-qualified applicants.

Universities concede that the push for information may be a result of frustration among politicians and the public. "To some extent, it is," says John Hammang, director of development for the American Association of State Colleges and Universities.

The move began under the George W. Bush Administration, whose secretary of education, Margaret Spellings, convened a commission on the future of higher education. One of its strongest recommendations was that universities were made accountable for their success or failure in a number of areas other than simply the size of their enrolment.

"One of the criticisms coming out of the Spellings Commission was that higher education doesn't report well on outcomes," Hammang says. "Unfortunately, that's true."

But he and others say that the statistics universities are being required to provide are not necessarily accurate or helpful to prospective students and their families.

Student completion rates, for instance, which universities have been required to report since last May, are based on the proportion of undergraduates who enrol at a university and graduate within six years. Many students transfer to other institutions, yet they are counted at neither the original campus nor the one to which they've moved. By this calculation, President Barack Obama, who transferred from Occidental College to Columbia University, is considered a dropout. And job placement rates depend largely on voluntary surveys of alumni. Often, says Hammang, "the alumni who are doing well answer the surveys. The alumni who aren't, don't."

Terry Hartle, senior vice-president of the American Council on Education (ACE), the nation's largest higher-education association, adds: "We can't implant a computer chip in a student who leaves the campus to figure out where they've gone and what they're doing."

Either way, says Hammang, families may not care about such data. Many pick a university based primarily on things such as its location.

"There are a number of us in the higher education community who have become somewhat cynical about the accountability reporting," he says. "There is a lot of evidence that parents and students don't pay attention to that information."

But universities care deeply. They fear their budgets may soon be dependent on their graduation rates and moderating their tuition fees. Already, some states, notably Oregon, have moved to change the way they underwrite their public universities from a formula based on how many students they enrol, to one based on how many finish.

"Accountability is becoming the excuse of the day as to why we're not going to give you money," Hammang says. "That really has been problematic. It's going to be a big shift and it will take some doing to get from an enrolment basis to an outcomes basis. From a public-policy point of view it probably makes sense, but it isn't going to be easy."

Meanwhile, Hartle says, although transparency creates public attention, which can improve performance, "one of the most basic rules of public policy is that we get what we ask for. So if you want higher graduation rates you will probably get them. But you'll get other things as well. Just about every college and university in the country can improve their graduation rate by taking fewer underprepared students, or fewer low-income students. Are these reasonable and appropriate questions for the public and policymakers to ask? You bet. But beware the unanticipated consequence."

This debate comes as fears grow about a looming shortage of educated workers. Many of the nation's biggest public universities are reducing, rather than increasing, their enrolments in response to huge budget cuts forced by the recession - even as economic rivals China and India are vastly increasing investment in their higher education sectors. The cutbacks also mean that it is taking longer for students to graduate because there are not enough places on required courses, or because increased tuition fees force more students to work part time.

As a result, for the first time, the youngest generation has less, rather than more, education than the generation before it, and the nation will be 3 million educated workers short by 2015, according to some forecasts.

"We are looking down the barrel of a pretty significant supply problem in the United States," says Molly Corbett Broad, ACE's president. Deep budget cuts in higher education, she says, represent "a lot of short-term thinking in our entire political process".

According to ACE figures, state budgets for public higher education have fallen by an average of 7.5 per cent for the current academic year, and half of public universities have had their public funding slashed by 10 per cent or more. Broad says universities are not expected to return to their 2007 funding levels until as late as 2016.

Private universities, meanwhile, are becoming more dependent on tuition fees for their operating costs, rather than investment income and other sources. This change is likely to push costs even higher and exclude low-income minorities and other fast-growing segments of the population that employers need to fill knowledge-economy jobs.

And that problem is about more than higher education, says Larry Isaak, president of the Midwestern Higher Education Compact, a statutorily created body that aims to increase student access to higher education in its 12 member states. "What it's about is having an educated citizenry so we can have a successful economy."

Yet US universities are not only reducing enrolments in the face of budget cuts. They're eliminating programmes.

"While the rest of the world is opening up," says Isaak, "we are starting to shut down."

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