[Originally posted at the Campaign for Free College Tuition.]
President Biden’s free community college tuition proposal in the American Families Plan may be the ultimate middle-class benefit. Americans with some college, more than a high school diploma but less than a bachelor’s degree, are smack in the middle of the education distribution and of the income distribution. In the past this middle spot was held by those whose education stopped at grade 12. If we’ve long thought that getting to that middle position should be free, as in high school being free, it makes sense nowadays to make community college free.
Digression: We’re talking here about economics, asking what would happen if free community college comes to pass. If your interest lies in the how free community college might come to pass—especially if you’re interested in local and state efforts—grab a copy of The Path to Free College, by Michelle Miller-Adams. (Actually, some important economic questions raised there too!)
Biden campaigned on a much broader vision of eliminating tuition, endorsing the Sanders-Jayapal plan for free tuition at all public universities. The current proposal is basically community college only, plus a subsidy for the first two years at four-year, minority serving institutions. Whatever one thinks about including bachelor’s degrees, free tuition at community colleges ought to be a non-partisan no-brainer. There is though, a good argument for extending the community college subsidy to the first two years at all public colleges.
In what sense is community college, or even a year or two at a four-year school, today’s equivalent of the high school of yesteryear? Here is a picture of educational attainment in the United States since the 1950s.
It used to be that school through high school was free and that most of the population had no more than a high school degree. Around 1990, the fraction getting at least some college grew such that today the person right in the middle has gotten some college. That’s the community college sweet spot. In fact, today, colleges in the U.S. graduate a million students from certificate programs, a million students with associate degrees, and two million students with four-year bachelor degrees. Half of college degrees come from community colleges and half from four-year schools. Community college has replaced high school as the middle-class educational attainment.
If some college—but not a four-year degree—is the new middle education level, what education level leads to a middle-income career? Again, the answer is some college.
Back in the ‘50s and ‘60s someone with a grade 12 education made a bit above the middle income in the country. No longer. That position has been taken over by those with some college. While there are good arguments for extending free tuition past just two years of college, students who complete a four-year degree are already rewarded with notable higher average incomes. If funds are limited, it makes sense to concentrate first on helping those in the middle.
While free tuition at community colleges is an idea whose time has come, there is one unintended hole that ought to be patched. The plan aims to pull some students from the “finished grade 12” category into starting college. Making community college tuition-free will do that; one estimate is that it will increase community college enrollment by 18 percent. The hole is that the plan also encourages students to go to community college instead of starting at a four-year school. Miller-Adams reports in The Path to Free College on research that shows that in the first year of a state-wide free community college program in Oregon increased community college enrollment came largely from reduced four-year enrollment. (Fortunately, four-year college enrollment seems to have come close to recovering in the second year of the program, although the statistical evidence is not clear.)
Tuition subsidies should be neutral, letting a student and their family decide on the best college path. This can be accomplished by letting students apply the funding for community college to the first two years at any public college—not paying all the tuition at four-year schools, just the same amount the student would receive at a community college. Because community college tuition is so much lower than tuition at four-year schools, this would not nearly make four-year college tuition-free. It would, however, greatly reduce the government’s incentivizing the choice in one direction or the other. The Biden plan already includes a subsidy for the first two years at HBCUs and other minority serving institutions for students from families earning less than $125,000. Broadening the plan to the first two years at all public four-year schools gets the incentives right and likely broadens the American Families Plan political appeal as well.
Everyone knows that members of disadvantaged groups—which I will oversimplify to say simply Blacks, Hispanics, and women—do far less well in the market than do White males. Are the differences explained by what people choose to study? Do we see big wage differences in students who chose a particular major in college versus those who make a different choice?
The answer is, unsurprisingly, “yes;” wage gaps definitely vary by major. There are some noticeable patterns in that wage gaps tend to be larger in technical fields than in people-oriented fields. Over generalizing is a mistake though. In some tech fields wage gaps are quite large, while in other tech fields wage gaps are barely there. What’s more, the situations faced by members of different disadvantaged groups are not the same. When it comes to examining the role played by different college majors, race is not the same as ethnicity is not the same as gender.
Let’s look at education and economics first.
For people who majored in economics, the gender wage gap is about average. The race and ethnicity gaps are much larger than average though. Education majors fare somewhat better, the gender wage gap is less than average and the Black-White gap is clearly below average. But it’s not that the gaps have disappeared, just that they’re smaller. You’ll see below that to there is something of a pattern where people-oriented fields tend to have smaller gaps than do technically-oriented fields.
While different majors are associated with different wage gaps, it is not true that choice of major somehow “explains away” the gaps we see. One explanation offered for earnings discrepancies is that more men than women choose to study technical fields and that this explains higher earnings. In other words, once one controls for area of study, the wage gap is largely explained. This turns out not to be a very good argument. Wage gaps are quite strong within most areas of study. For example, it isn’t that men study (high-paying) petroleum engineering and that women study (not so high-paying) English. In fact, the gender wage gap exists within both petroleum engineering and English—and it is a lot higher in petroleum engineering (44 versus 31 percent).
In our analysis, we’ve drawn the most recent five years data from the American Community Survey, looking at people with a college degree between ages 22 and 65, who report working and report positive income. The average wage gap comparing Black to White is 19 percent; comparing Hispanic to White is 18 percent; and women to men is 43 percent. When you adjust for which majors students choose, the gender gap narrows a little as can be seen in the next Figure; nothing happens to the race and ethnicity gaps.
In thinking about the role played by choice of college major, care is needed because we don’t know if the wage gaps are due to something done by people running a particular college major, something in the after-college job market, or something about how students choose what to study. In economics jargon, we don’t know if the role played by majors is “causal.” But knowing which majors have particularly large or small gaps is a first step toward thinking about improving the situation. The second step—you will see why below—is to remember that the challenges faced by different disadvantaged group are not all the same.
The existence of a wage gap is nearly universal across majors. In which majors do women earn more than men? None! While Black graduates earn more than White graduates in 10 of our 174 majors, in no case is the difference statistically significant. Similarly, reported earnings are higher for Hispanics than non-Hispanics in four majors, but again none are statistically significant. Given this, there isn’t much point in asking if there is a wage gap following studying a particular major—since there almost always is. Instead, let’s ask which majors have wage gaps much worse than average or better than average. In the pictures that follow, I show the majors with the largest and smallest gaps (but only among those where the gap was significantly different from the average gap). For reference, each graph also has a horizontal line showing the average wage gap; smaller than average gaps are shown in red and larger than average gaps in blue.
While the really big Black/White gaps tend to be in engineering and science areas, that clearly oversimplifies some. One of the largest gaps is in astronomy and astrophysics, while in atmospheric sciences and meteorology and in oceanography Black graduates do well.
The pattern across majors for the Hispanic/White wage gap is broadly similar to what was shown in the previous picture for the Black/White gap. Do notice though, that the gaps for Hispanics are generally less extreme in both the up and down direction than for Black graduates. Thus, the often-needed reminder, that “minorities” is too simple a classification. The challenges faced by diverse groups are, well, diverse.
It is striking how different that the details in this gender-gap figure are from what we saw above in the race/ethnicity figures. It’s more than just that the average gender gap is larger. The first difference is that even the smallest wage gaps are pretty large. The second difference is that the technical-vs-people explanation of where the gaps are large doesn’t seem to hold. Aerospace engineering has a (relatively) small gender gap, while the gap for Black graduates was large. Family and consumer sciences has a large gender gap.
We do not know what part of the school-to-market process is responsible for the gaps we see—we do see considerable variability across majors. At the least though, the people responsible for those majors where the gaps are especially bad should be asking themselves why their majors stand-out in this embarrassing way.
The author is grateful to UCSB undergraduate and Gretler Fellow Victor Huang for research assistance.
 As is common, we define Black as “non-Hispanic Black” and White as “non-Hispanic White.” Our estimates control for age, which probably doesn’t make much difference.
Historically Black colleges and universities (HBCUs) have been supplying leaders to the nation and to communities for nearly 200 years. Martin Luther King Jr. is surely the most famous HBCU alumnus, having entered Morehouse College at age 15 and graduating at 19. And, of course, the next vice president of the United States, Kamala Harris, is a 1986 graduate of Howard University. Brookings has covered HBCU topics a number of times, notably in articlesbyAndrePerry.
Today I want to provide some background on HBCUs by discussing some data about these critical institutions, as I suspect there is much that is not widely known—at least outside the Black community. The simple message in the numbers is that HBCUs work their magic with very little money.
To keep things comparable, I’ll limit my numbers to public and nonprofit HBCUs that offer a four-year degree or more. And as a warning, because accounting definitions vary from one government source to another, definitions of the variables I look at are not perfectly consistent across sources, though any consequent errors should be quite small.
Gallup compared life outcomes for Black college graduates of HBCUs to outcomes for Black alumni of other colleges. (In making the comparisons, Gallup controlled for parents’ education, decade of graduation, and the level of student loans.) While HBCU grads had, on average, better outcomes on all of Gallup’s measures, here are the three where the HBCU advantage was largest.
Percent of Black college graduates who are thriving in elements of well-being
Financial Well-Being (Managing your economic life to reduce stress and increase security)
Purpose Well-Being (Liking what you do each day; being motivated to achieve your goals)
Social Well-Being (Having strong and supportive relationships and love in your life)
In other words, HBCUs really do take care of their students. As another example showing that HBCUs produce successful students, work by Rhonda Vonshay Sharpe shows that HBCUs produce undergraduate science and engineering degrees using fewer NSF grant dollars then do other schools.
The main message in what follows is that the success of HBCUs comes about despite HBCUs having relatively fewer financial resources. Before we start talking about details, I do want to point out that HBCUs don’t serve just Black students. Per the National Postsecondary Student Aid Study, about 13% of HBCU students are not Black (including 4.5% identifying as “more than one race”), while about 13% of students at non-HBCU schools are Black. In other words, while HBCUs are certainly focused on Black students, they are not monolithic.
Any discussion of HBCUs and money must begin with a simple fact: HBCUs have less in the way of financial resources than do colleges in general. Here’s a picture.
HBCUs are able to spend about two-thirds the revenue per student than do colleges in general. Despite this, HBCUs produce about one out of eight bachelor’s degrees earned by Black students.
Part of the reason HBCUs don’t have much money—and something important to know about their mission—is that HBCU students typically come from much lower-income families than do students at non-HBCUs. Below, I’ve put together data from the National Postsecondary Student Aid Study for both Black and non-Black students.
The HBCU bars are a lot lower, indicating that students at HBCUs come from lower-income families. One might think this simply reflects the fact that Black families in America still have much lower incomes than do white families. But compare the heights of the bars above for HBCUs to the bars for non-HBCUs. Parental income of Black students is almost 40% higher at other schools than it is at HBCUs. The gap for non-Black students is even larger.
Central to the financial aid process for colleges is the idea of “expected family contribution” (EFC). The EFC is computed by a formula that takes into account income, assets, family size, and other characteristics. The formula is set by law, so it’s the same at all schools. EFC is much, much lower at HBCUs, which is another way of seeing that HBCUs serve students whose families just don’t have much money. The difference is very large, as this next chart exhibits.
The fraction of families expected to make no contribution is almost twice as high outside HBCUs as it is at HBCUs; about 60% of HBCU families have too little in the way of income and assets to be expected to help pay for college. Similarly, the fraction in the highest contribution level is over three times as high outside HBCUs.
HBCUs receive much less revenue from tuition than do other schools; perhaps this is unsurprising given their service to low-income families. At non-HBCU public schools, tuition revenue per student is about $6,700—as compared to only $4,900 at HBCUs. Similarly, at private non-HBCU schools, the average is $17,000 as compared to $10,400 at private HBCUs.
One might think that, given the elite reputation of some of the HBCUs, at least some of them would have substantial endowments. While a few of the best-known HBCUs have endowments large enough to help, in general their endowments don’t compare to well-off non-HBCUs. Around 100 universities have endowments above $1 billion dollars. No HBCU makes that list. Compare the “HUs”: Harvard University vs. Howard University. (It’s worth noting that Howard is occasionally called the Harvard of HBCUs). Harvard’s endowment is about $42 billion. Howard does have a solid endowment, around $700 million—but that’s less than a 50th of Harvard’s endowment. Dr. King’s alma mater, Morehouse College, has an endowment of $145 million—more than a quarter of that coming from a recent donation from Netflix co-founder Reed Hastings.
While HBCUs work their magic with limited resources, it is worth remembering that the nation has made a modest commitment to support HBCUs—currently a few hundred million dollars a year—as part of the federal government’s Higher Education Act of 1965. The plan for higher education endorsed by President-elect Joe Biden similarly calls out HBCUs for special treatment. The special status of HBCUs acknowledges that, 73 years after Dr. King graduated from Morehouse, HBCUs continue to provide a special contribution to American higher education.
Thanks go to Spelman College professor Angelino Viceisza for advice on this post.
With President-elect Joe Biden’s transition underway, let’s consider what may be in store for higher education. “The Biden Plan for Education Beyond High School” offers a broad proposal for making public higher education accessible to more Americans. The Biden plan has a number of features, but when it comes to free tuition, it draws heavily on the College for All Act of 2017 proposed by Sen. Bernie Sanders (I-Vt.) and Rep. Pramila Jayapal (D-Wash.). The headline news of the proposal is that the government will cover tuition at community colleges for all students and at four-year public universities for students with family incomes below $125,000, with the financial cost split between the federal government (67%) and the states (33%). On net, a very fine plan which will increase educational opportunities and raise national income. Nonetheless, some tweaking may be in order.
The benefit of the plan to students and families and the cost of the plan to taxpayers should be of wide interest. But because there are some potential landmines for how higher education institutions run, I want to focus here on improving the plan. (For a broader picture, I recommend a recent report, “The Dollars and Sense of Free College,” by Anthony Carnevale and his co-authors. It’s both informative and a pleasant read to boot.)
Now on to some of the rough edges in the plan.
TUITION VS. STATE CONTRIBUTIONS
Here’s the issue: States differ in both tuition rates and in their financial support for higher ed. Because the plan brings in federal support for tuition, states that have kept tuition high get a bigger federal subsidy than states that have kept tuition low. For example, three states already have some type of free college program for eligible students at public four-year colleges, and 12 states have free community college programs. Here’s a picture for proposed federal subsidies for tuition at four-year schools:
Are we sure that we want to give Florida students and colleges only a fraction of the federal payments that we send to Vermont?
What’s more, some states have chosen to make relatively large appropriations to public higher education. As you can see in the next picture, states with low tuition tend to be the states with high (combined state and local) appropriations.
Penalizing states where the taxpayers have already stepped up to help keep down tuition doesn’t seem right. One solution would be for the federal government to send money to the states to partially offset state and local appropriations, on top of covering part of tuition. That would raise the cost of the program to the federal government, but with an equal reduction in cost to state taxpayers. Due to COVID-19, this may be a good time for the federal government to send extra money to the states. Alternatively, the feds could reduce their portion of the tuition-sharing rule and use the funds for sharing the cost of state appropriations.
TENURE-TRACK FACULTY VS. ADJUNCTS
The College for All Act requires that at least 75% of instruction be from tenured or tenure-track faculty within five years of enactment. The requirement is across each state, not within each institution, and each state has five years to meet the goal. Thus, there is some amount of flexibility.
If you follow trends in higher education, you know that one of the big changes has been the substitution of cheap adjunct positions for tenure-track positions, and that adjuncts are not treated well in many institutions. One report says that about a third of adjuncts make under $25,000 a year. In and of itself, shifting back toward tenure-track faculty would be a big and desirable change. Currently, very roughly 63% of full-time faculty are tenured or tenure-track. (However, the difference between 63% and the 75% target likely underestimates the size of the required change; there are almost as many part-time faculty as full-time faculty, and few part-time faculty are on a tenure track.)
There is a cheap and very bad way to comply with the new rule: just give tenure to a bunch of adjunct faculty in their current titles. No raises, no real change except better job security. Presumably, this is not what the drafters of College for All intend. Rather, the more likely intention is to shift back toward more tenure-track faculty. Since tenure-track faculty are more expensive than adjuncts, increasing the number of tenure-track faculty is going to cost money. Where is the money going to come from?
TUITION FREEZE AND OTHER COST CONTROLS
As parents of college-age students know, college has gotten a lot more expensive. For those who haven’t been faced with writing big checks, here’s a picture of the inflation-adjusted cost of tuition and fees at public universities. For comparison purposes, I include inflation-adjusted current expenditures per student in K-12.
While the rate of increase has slowed in recent years, the real cost of a college education is still going up. Not surprisingly, part of the Biden plan is to freeze tuition at current levels (except for adjustments for inflation) in order to hold down costs. If the feds pick up a big part of the tuition tab, it’s reasonable to ask what the incentives will be to keep “tuition” under control. Historically, there have been two elements limiting tuition increases: (1) the market and the willingness of families to pay, and (2) political control by state governments. Under Biden’s plan, the effectiveness of the first of these controls will be reduced; the second isn’t as clear.
Once tuition is free to students and families, there will no longer be so much of a market incentive to hold down on tuition. However, higher-income students don’t get tuition coverage, so there will still be a significant minority of students who will be price sensitive. In this way, the College for All Act does maintain some partial market incentives.
State legislatures currently have considerable influence over tuition rates and face political pressure to keep rates low. Political pressure would mostly disappear when tuition mostly disappears. On the other hand, because states would have to kick in one dollar out of three to cover tuition, they would have incentive to keep tuition low. It’s hard to know which of these two changes would dominate.
But isn’t low tuition clearly a good thing? Well, no. As any economist will tell you, putting on price controls leads to undesirable changes in the quality of the product that gets delivered. Universities are no different. In fact, there is a specific reason to expect that maintaining the quality of a college education will continue to become gradually more expensive. Higher ed is a labor-intensive industry, and people don’t get cheaper over time. (Economists call this “Baumol’s disease.”) In some ways, the closest comparison for thinking about long-term trends in the cost of higher education is the cost of K-12. Spending on K-12 is decided almost entirely by a combination of state governments and local voters. You can see in the figure above that the per-student cost of K-12 has increased in pretty much the same way as the cost of higher-ed tuition. Apparently, voters and political leaders have thought it worthwhile.
In addition to realizing that higher-ed costs will gradually rise because “people costs” will rise, there is also a cross-state argument. Some states have developed better colleges than other states. Some of this development followed from higher state spending and some from allowing for higher tuition. Historically, we’ve let each state decide on the trade-off between quality and cost. Freezing tuition will make it very hard for any state in the future to decide to increase quality. That’s probably not what we want.
Drawing a balance between preventing a free-for-all of colleges raising tuition versus the likely drop in quality as costs outrun current tuition levels isn’t easy. But an essentially complete freeze on tuition is probably a step too far in one direction.
The College for All Act contains a couple of other provisions that are intended to control costs but are ill-thought out.
First, the proposed plan bans use of any of the federal or state tuition replacement money “to pay the salaries or benefits of school administrators” or “for capital outlays or deferred maintenance.” Really? Colleges do need administrators. Who do they think is going to do the paperwork required to comply with the College for All Act? And no capital outlays? Does that mean my university doesn’t get the new classroom building that’s being planned for, even though an express purpose of the plan is to make college affordable for more people?
In the same spirit, the bill forbids charging “out of state students an amount that exceeds the marginal cost of attending.” Something like a quarter of students attend school out of state. Out-of-state tuition is typically much higher than in-state tuition. Presumably, students who go out of state, and their parents, find the extra tuition worthwhile. The truth is that out-of-state students often pay sufficiently higher tuition that they significantly subsidize in-state students.
What’s more, somewhat oddly, the College for All Act puts price controls on out-of-state tuition even though students going out of state are not eligible to have their tuition covered. This certainly means there will be fewer students going out of state. While I can understand limiting an out-of-state subsidy to the amount of in-state tuition, it’s hard to understand a rationale for eliminating out-of-state coverage entirely.
Finally, the most “out of state” you can get is, of course, the significant number of international students who currently bring large amounts of money into American universities and the surrounding communities. In fact, higher education is one of America’s most successful exports. In what is likely a completely unintended consequence, the bill as written forces universities to hold down the price charged to international students—thus managing to simultaneously reduce a source of subsidy to American students while also hurting our balance of trade.
The College for All Act would cut back on out-of-state tuition and out-of-state attendance. What would make up for the missing money in colleges’ budgets?
One more weakness in the College for All Act is quite glaring. A student is eligible for tuition coverage if their parents earn $125,000 or less in adjusted gross income. In 2018, that was, on average, worth about $7,250 a year. According to the bill, if her parents’ income goes to $125,001, her tuition subsidy disappears entirely! This knife-edge cut off must surely be an oversight; almost all subsidy programs have a fade-out rule. One would expect to see something more like full tuition coverage for incomes up to $125,000, with coverage being reduced proportionately as income rose to some ceiling level, perhaps $175,000. As written, the College for All Act proposes a more than 100% effective tax on the first dollar above $125,000. Using $175,000 as a ceiling, just as an example, would reduce the extra effective tax to $7,250 out of $50,000, or 14.5%.
A BETTER WAY TO ACHIEVE COLLEGE ACCESS FOR ALL
Make no mistake, Biden’s adoption of the College for All Act offers a major improvement on the status quo. Looking at the details though, there is room for improvement. While some of the issues discussed above may sound esoteric, they do matter if we are to improve access for all to high-quality higher education.
Due to the pandemic, the number of international students receiving visas to come study in the United States has collapsed. I want to begin with a look at the timing of the collapse. I follow this with a look at the cumulative effect. Next, I’ll share some numbers about how different the effect has been across different countries. Finally, I’ll suggest that the shock could have been much mitigated.
First, giving credit where due, the existence of the collapse was first revealed by journalist Catherine Rampell in a tweet. Here is my version of Rampell’s picture. (All data is publicly available from the State Department.)
The picture gives the number of student (F1) visas granted in each month of the government’s fiscal year. You can see that this year and last year were running about even—until Covid-19 hit. Starting in March, the number of new student visas plummeted compared to the previous year. The deterioration worsened during the Spring. By late summer more visas were being issued, but the number being issued was still tiny compared to last year.
Where were we left at the start of the school year? The next figure shows the cumulative number of visas across the fiscal year.
Over the 2020 fiscal year, the U.S. issued fewer than a third the number of student visas than we had in 2019, the total dropping by approximately 250,000. (Note that for the most part only students just starting their studies in the U.S. need visas issued. F-1 visas are usually valid for the duration of the student’s academic program, therefore international students already studying pre-pandemic can generally remain without a new visa.) There are some perhaps obvious reasons why this is bad, but there are also some factors that mitigate damages.
The usual estimates place the dollars brought to the American economy at between $40,000 and $50,000 per student annually. And higher education is—or has been—one of America’s most successful exports. $40,000 times 250,000 missing international students is ten billion dollars. That’s a lot of money lost.
But this might exaggerate the damage. Some of the international students who didn’t get visas have enrolled for online classes. Online international students are paying tuition, although not paying for room and board nor buying slices at the neighborhood pizza joint.
Alternatively, we could lose more. What happens going forward? Let’s hope that Covid gets conquered and that things will be back to normal by the next academic year. If the students who couldn’t get here this year all come in 2021-22, then we face only one year of economic loss. On the other hand, a lot of those students may have found an alternative to attending college here in the States. To the extent that happens—which will be very hard to predict—losses will continue for the length of a college career, about three additional years.
Perhaps surprisingly, the fraction of “missing student visas” is very uneven across students’ countries of origin. The overall 2020 rate was 31 percent of 2019 issuances. Here’s a sample of the 2020 to 2019 rate for selected countries.
What you see here is that the pattern in the collapse seems random, or at least not just due to Covid. China got hit first, of course. But China also recovered fairly early. Why was the collapse less bad in Spain—which was hit very hard—than in Taiwan, where the pandemic was better controlled? The worst death rates across the globe have been in Belgium, which saw a relatively modest drop in visas, while Saudi Arabia has reported relatively low death rates but had a huge drop in visas. The pattern appears more to be haphazard than it appears to be from a rational response to the pandemic.
Was the student visa collapse inevitable? Clearly, there was going to be some loss both because some travel lockdowns were necessary and because some families were going to choose to keep their students outside the not-too-healthy United States. Nonetheless, we could have done better—and we can do better going forward. The proximate cause of the collapse is that the U.S. shut most consular offices, making applying for a visa impossible. Fundamentally, there’s no good reason that student visas should require an in-person visit to a consulate in the student’s home country.
Let me tell you a quick story and then show a little suggestive data.
I have a doctoral student who is still stuck in his home country and cannot get into the U.S. because he cannot get a visa. When my university admitted the student, he was working for an international agency in the United States and held an appropriate visa. Unfortunately, on becoming a student the law requires the student to go home in order to apply for a student visa instead of the valid visa he already held. Getting home wasn’t easy due to travel restrictions. But my student got home, where he’s now stuck waiting for an appointment at the consulate. This makes no sense.
Now for a little more data. Businesses recruit foreign workers with an H-1B visa, many of which go to workers who are physically present in the United States. H-1B applications are mailed to a service center in California, Vermont, Nebraska, or Texas. No need to go to a home-country consulate. This next picture shows that while H-1B visas took a dip, there was not nearly the collapse seen for student visas.
There is just no reason that students should have to visit a home-country consulate in person. A good portion of their application is already submitted over the internet. Final processing could surely be done at the port of entry for most cases. Right now our student visa system is so screwy that students who need to renew a visa while continuing their studies (mostly graduate students) are required to leave the country to apply for a renewal. (In yet another oddity, these same students are generally legally allowed to remain in the U.S. with an expired visa so long as they stay enrolled in a university—they just can’t travel home to see their family and then re-enter.)
Some part of the loss of international students was inevitable in light of the pandemic. But we could make the system a lot more user-friendly by eliminating most in-person consulate visits. Looking to the future we should do just that.
COVID-19 puts higher-ed finances at risk. For some universities, revenue shortfalls are going to be a pain—for other universities the shortfall may be a disaster. Public universities face three major sources of revenue risk: hospital revenues, tuition (both from overall enrollment and with special attention to enrollment of out-of-state students), and state funding. The bottom line here is going to be that the exposure of different schools to these risks is extremely variable. When it comes to the financial consequences of COVID-19, there’s no one-size-fits-all impact.
To get a picture of the financial landscape, I use publicly available IPEDS data that gives a snapshot of finances for most American universities. This has two implications: First, you can grab a useful report about any school you are interested in; second, the data is not nearly as good as the information institutions have internally. Because of the latter, we’ll look at overall patterns across universities—but not name names. Note that I am leaving out two-year schools, which have different patterns than four-year schools, and private schools, which use an entirely different set of accounting standards. Public institutions grant two-thirds of all bachelor’s degrees; my data covers institutions with about two-thirds of public university undergraduates.
In what follows, we look at the variability in university exposure to specific financial risks.
HOSPITAL REVENUE RISK
Hospital revenues fell dramatically as elective procedures ground to a halt. This matters for higher-ed finances because many of the country’s top hospitals are affiliated with universities. Hospitals churn through huge amounts of money; that doesn’t mean that they make a profit, but it does mean that hospitals are sometimes the big financial gorilla on campus. (In some universities, medical center finances are tied into overall finances; at other schools, the medical side finances are kept pretty segregated.) In aggregate, hospital revenues are about 15% of total college revenues. However, what’s really going on is that major medical centers are an enormous fraction of the budget at a few schools, while most public universities don’t have a hospital at all. Only 35 of the 491 schools for which I have data have hospitals, but the schools with hospitals are also relatively large—accounting for 10% of the students.
The graph below shows the number of students in those schools that do operate hospitals against the ratio of hospital to total operating revenue. On this graph—and on the graphs that follow—universities on the left are at relatively low risk while universities on the right are at high risk. From the horizontal axis, it’s clear that a major fraction of revenues comes from hospitals at these schools, generally over 40%. From the vertical axis, we learn that the schools with hospitals are large, generally with over 10,000 students. The bottom line is that hospital revenues are a concern only at a handful of schools—but those are big schools facing a potentially big problem.
ENROLLMENT REVENUE RISK
Right now, every university is worried about enrollment, both how many students decide to enroll now and whether there will be unusual “bleed” over the summer. How much of total operating revenue comes from tuition? It’s all over the map. Different kinds of universities face different risk profiles. To see this, we’ll separate universities according to the highest degree they offer (doctorate, master’s, bachelor’s). Because they are of special interest, I also look at historically Black colleges and universities (HBCUs).
At the big-picture level, tuition revenue is a very large chunk of total operating revenue; thus, a significant drop in enrollment would be quite bad. Bachelor’s-level and master’s-level universities are noticeably more exposed to enrollment risk than are doctoral-level universities. HBCUs are somewhat less exposed than bachelor’s- and master’s-level universities in general.
The real news, though, is that there is great heterogeneity in exposure within every category. There are doctoral-level universities with hardly any revenue from tuition (the ones underlying the bars to the left)—so they face little risk from enrollment fluctuations—and there are doctoral universities where operating revenue mostly comes from tuition dollars (the ones underlying the bars to the right). The same high level of heterogeneity is true for the other three university categories.
What the graph doesn’t show (because the federal government doesn’t collect the data) is the incredible heterogeneity within universities. For example, there are master’s programs in STEM and business that rely almost entirely on tuition revenue from international students. If international students don’t enroll—visa offices are still closed and the appeal of online courses under current circumstances is unknown—such programs may be at great risk. There are going to be some very interesting internal discussions inside universities about who’s subsidizing whom.
OUT-OF-STATE STUDENT ENROLLMENT REVENUE RISK
On top of worries about enrollments in general, many public universities are really, really worried about a drop-off in out-of-state students. There are two, maybe three, issues here. First, out-of-state tuition is generally higher (a lot higher) than in-state tuition. Out-of-state students subsidize in-state students; if they don’t come, there’s a special financial hit. Classes at many universities will remain online (at least partially) through the fall. For example, the largest state-university system, California State University, has said nearly all classes will be online. So, the second issue is that no one knows whether out-of-state students will be willing to pay premium tuition for online classes. Maybe they will, but no one knows. Finally, it’s starting to look like international students who are not already in the U.S. won’t be able to get here by fall. This might—or might not—mean a huge drop in the number of high-tuition-paying international students attending American universities.
The following chart gives the fraction of tuition that comes from out-of-state students, based on undergraduate tuition only. (And with a few behind-the-scenes assumptions, because the data isn’t perfect.)
Here too, there is enormous heterogeneity. Most of the students at bachelor’s-level institutions are at schools that are at most modestly dependent on out-of-state tuition. In contrast, many doctoral-level schools are very dependent on out-of-state tuition. (At some doctoral-level schools, the majority of students are from out of state.) Master’s-level schools are somewhere between bachelor’s- and doctoral-level schools in this respect. The HBCUs are rather like the doctoral-level schools. I suspect this reflects the fact that many doctoral schools and HBCUs are national draws, while others are less so.
STATE SUPPORT RISK
One reason some public universities rely so heavily on out-of-state students is that states made deep higher-education funding cuts in the wake of the Great Recession. Whether there will be even further cuts depends in part on what happens in the future with federal stimulus money, but universities are certainly anticipating there will be further serious cuts in state support. The next chart shows state support as a fraction of total revenues. (I’ve used total rather than operating revenues because states provide support for costs other than operations.)
When it comes to state support, doctoral universities are somewhat less vulnerable than other schools on average; although “somewhat less” is somewhat less than reassuring, since state support is still pretty important. And again, we see great heterogeneity within each class of school. Some schools can manage even with significant cuts in state support. Others will be out of business—literally.
Are there universities where hospital revenue, tuition revenue, and state support—even taken together—don’t make up a large enough fraction of total revenue to put the institution at much risk? As the next chart shows, unfortunately no.
The overall picture suggests there are very few students whose universities do not face significant financial risk. Universities in the bachelor’s and master’s categories are even worse off than doctoral universities and the HBCUs. As the charts above show, the sources of risk do vary across categories: For example, bachelor’s- and master’s-level institutions are typically less vulnerable to drop offs in out-of-state students than are doctoral institutions and HBCUs, but bachelor’s and master’s-level universities face greater risk from overall enrollment declines and are somewhat greater risk from state budget cuts.
What’s the bottom line? In one sense, we don’t know. We don’t know the future course of the pandemic. We don’t know how adjusting instruction in the face of the pandemic will affect student enrollment. We don’t know where state budgets will land.
But there are two things we do know. First, nearly every school is at least at some risk of significant financial losses. Second, the risks are incredibly different at different schools. Many schools face difficulties. If things turn out really bad, some schools face closures.
I am grateful to UCSB undergraduate and Gretler Fellow Dylan Schmerer for research assistanceand to my accounting colleague, Susan Grover, for explaining the intricacies of university financial reports.
Universities around the country are dealing with health concerns as their first priority, and keeping instruction going—even if imperfectly—as the second priority. After dealing with these immediate issues, the next concern is fear of collapsing revenue. Health and instruction deserve every bit of effort going into them. The extent of worry about collapsing revenue isn’t justified, at least not yet, though it could be soon. If lockdowns end before the fall, the financial hit will be somewhat painful. On the other hand, if the health crisis is not resolved by fall, university finances could be in real jeopardy.D
Let’s start with the first message, which should be encouraging if things end relatively quickly. COVID-19 hit partway through the spring semester for schools on the semester system, which most schools are on, and just before the beginning of spring quarter for schools on the quarter system. Almost all revenues for the term are already in. Schools may have a small number of students dropping the current term and not making payments. I have seen several reports for quarter-system schools of enrollment drops on the order of 1%. Also, some schools are refunding small amounts of fees. Some are giving partial rebates or credits for student housing. New Jersey has cut current state funding to public universities, as has Missouri. All these are revenue hits, but as of right now, they’re mostly pretty small.
Perhaps the largest immediate risk to universities is the impact on summer school enrollments. Institutions offering summer programs can’t wait until the end of spring for more clarity on the pandemic to decide on how they move forward, and many will likely be smaller than otherwise. Though only a minority of students usually stay on campus during summer, The Chronicle of Higher Education reports that colleges could still lose several hundred million dollars this summer.
Set against the revenue loss, there are some small savings from not running a physical facility. The savings are generally not large. In addition, the federal stimulus package includes $14 billion in aid for higher education. Total university revenues are on the order of $700 billion, meaning the stimulus package will replace roughly 2% of total revenue. That’s enough to help, but it isn’t likely to cover all losses.
In other words: If COVID-19 is just a nasty memory at the end of spring, then university budgets will be okay. On the other hand, if COVID-19 continues through the summer and into the fall, finances could get much worse. Maybe even much, much worse.
It is useful to think through which revenue streams are at risk. A reminder that while we can get ballpark estimates for universities in aggregate, each individual university will face somewhat different circumstances.
Where are the big risks? Which is to say, which are the big sources of revenue that might be vulnerable? I’ve isolated the major revenue sources for public and private (nonprofit) universities. In both cases, I’ve eliminated revenues from university hospitals on the grounds that hospital budgets are basically separate from the rest of the academy, even though hospital revenues are significant (approximately 11-13% of revenue) and hospitals are currently undergoing major revenue losses due to postponement of elective procedures.
The figure below shows the four major revenue sources for public universities, with smaller categories combined into the “all other sources” category.
Together, these four categories account for 72% of total public university revenue. The analogous breakdown for private universities is a bit different, with five factors accounting for 87% of revenues.
For both publics and privates, the largest single revenue source is tuition. The slice marked “auxiliary enterprises” is also student-linked because it includes student housing and dining. If campuses are still physically closed next fall, revenue from auxiliary enterprises will take a big hit.
What about enrollment and the tuition payments linked to enrollment? The Chronicle of Higher Education reports on a survey of university presidents, “The vast majority of presidents, 84 percent, anticipate a drop in enrollments, both for new and returning students.” This may be true, as online education just is not the same as in-person instruction. And if we continue to be in a recession, money will be short. On the other hand, when unemployment goes up, young people may choose to continue their schooling rather than look for a non-existent job. (One suspects there isn’t much hiring in the retail and service sectors at the moment—delivery gigs excepted.)
An enrollment surge was certainly noticeable during and immediately after the Great Recession. To get a ballpark estimate, I regressed college enrollments (in logs) on the unemployment rate and a time trend. A one-point increase in the unemployment rate is associated with a 1.6% increase in enrollment. If we continue to be in a recession, past data suggests a big increase in enrollment. However, historical data like this did not come with closed campuses due to pandemics, so history may be an unreliable guide. But it is at least possible that enrollment will actually increase.
Federal grants and appropriations are important for both public and private schools. These do not seem to be in danger of being cut. In fact, the stimulus package includes $1.25 billion in additional research money, much of which is likely to end up in universities. (Although most of the research money will probably go to research universities that are not in the greatest financial danger.)
The other important revenue categories are different for publics and privates such as Wasserstoff ETFs kaufen. For private universities, current gifts and return on endowment are especially important. While thinking about what will happen to philanthropy is tough at the moment and thinking about what will happen to the stock market is always close to hopeless, universities usually smooth out fluctuations in endowment revenue. Being concerned about the stock market is reasonable, but despite the recent wild ride, panicking is not called for. To put it differently, on the day I write this the S&P 500 is up 18% over the last three years. Most universities survived quite nicely with their endowment levels three years ago. Moreover, the truth is that most universities don’t rely much on their endowments; the ones that do are generally the universities that are well enough off to weather any storm. Three-quarters of all endowment dollars are in just 120 institutions. In fact, 20% of all endowments are held by the eight Ivy League schools.
At public universities—like the one I teach at—state support is a critical issue. (This is also true at the K-12 level, as demonstrated by a recent Chalkboard post from Marguerite Roza.) Cuts in state funding could be really serious. Here’s a picture of state appropriations (which is most, but not all, of state support), combined with the unemployment rate and with the Great Recession shaded. During and following the Great Recession, it’s clear that state appropriations dropped precipitously. Higher unemployment means lower state tax revenues and higher demands on state spending.
I did a quick regression on state appropriations against the unemployment rate going back to 1995. It suggests that when the unemployment rate goes up, nothing much happens that year, but that appropriations the following year fall dramatically—something like 2.8% for each point of unemployment. Some caution is called for here because state appropriations are a political decision, rather than an economic decision. This time might be different.
In summary, nothing terrible has happened to finances yet. But it could, and that depends critically on how long campus closures persist. The biggest risks come from cuts in state funding and a potential drop in enrollment. And it’s going to be a while before we know where finances are going to land.
The author is grateful to UCSB undergraduate and Gretler Fellow Dylan Schmerer for research assistance.
With the growing outbreak of COVID-19, also known as the coronavirus, universities around the U.S. are canceling in-person classes, clamping down on travel, and sending students home. Protecting the health of students and staff, and limiting community transmission, is the most important priority.
After taking care of emergency measures, universities need to be making administrative and financial decisions over the next few weeks that depend on projections about what’s going to be happening three to six months from now. Economists call this “dynamic programming,” but that’s just a fancy name for thinking ahead. While there are many issues that require thinking ahead, here I’m going to focus specifically on issues involving international students, and the complications that arise due to international travel restrictions imposed indefinitely to counter the further spread of the coronavirus.
Before we begin, where are the international students?
The chart shows the number of international students—college students who are neither American citizens nor resident aliens studying in the United States—as a fraction of total enrollment. The figures here are based on undergraduate, full-time enrollment for fall 2018, and reflect approximations rather than exact numbers. While there are some a few states with few international students, international students make up a substantial part of total enrollment in much of America. They constitute over 5% of enrollment in the majority of states, and that share is especially high in D.C. and Massachusetts.
Let’s now look ahead to the beginning of the upcoming fall term, about six months from now. Will the coronavirus be under control? Will international travel restrictions be lifted? We all hope so, but there’s no real way to know. Will COVID-19 be over by the beginning of the summer term? Hopefully yes, but probably no. What are the time-critical decisions that need to be made in advance of resolution of the pandemic?
Graduate admission reply date (April 15): Graduate schools in the U.S. nearly uniformly require students to reply to acceptance letters by April 15. (Some professional schools are earlier.) It might be wise to offer students a later commit date, but because graduate admissions generally do not involve a financial deposit, this is probably not that important.
Undergraduate admission reply date (May 1): Colleges almost always require undergraduates to commit to a school by May 1. Some financial deposit often is required, and students make a psychological commitment as well. By May 1, there is virtually no chance that students in other countries will know whether they will be able to come to the United States in the fall. (For example, American consular services in China are shut down. No one knows when applications for student visas will be accepted.) It might be very wise to make an upfront offer to refund student deposits if travel is still restricted in the future. Colleges could also provide other options, such as online classes until students can safely come to the U.S., or a promise that admissions can be deferred.
End of spring term: What happens to the visa status of international students who graduate this spring? The issue is that it may not be wise—or safe—for students to return to their home countries this summer. Given travel restrictions, it might not even be possible. (You may have read about the Italian tourists in Ethiopia whose visas have expired and who are refusing to leave Ethiopia—which they feel is now safer than Italy. Now multiply that problem by hundreds of thousands of international students.) The general rule is that students must leave the country within 60 days after graduation (with some exceptions for students doing Optional Practical Training, or OPT). Universities cannot extend visas. But they should be intermediaries asking the federal government for extensions and keeping students informed. If extensions are not forthcoming, maybe universities need to be offering options for students to retain student status by continuing to take courses and delaying graduation.
Summer school: This one cuts both ways. Most years, summer programs are very attractive to international students who want to try out the United States temporarily. Schools had better be planning for no students showing up from abroad this summer. On the flip side, there may be many current international students who would ordinarily go home during the summer who will be staying here this year. That might increase attendance, and perhaps the need for dorm space. And for that matter, universities may want to provide housing for international students who can’t go home this summer irrespective of whether they are taking summer courses.
Finally, there’s one more important consideration: What happens to university budgets if international students all stay home? Unlike the issues above, there are not many decisions to be made before we have an idea if international enrollments are going to plummet. Nonetheless, it is worth knowing how exposed budgets are to the downside risk of these travel restrictions.
All international students disappearing is a worst-case, very unlikely scenario. But just as a baseline, I’ve put together approximate numbers on how exposed colleges are in each state.
Nationwide, the amount of tuition plus required fees from international students tops $2.5 billion. California has over $400 million at risk; New York over $300 million; Massachusetts over $200 million. Only Alaska and Wyoming appear to have under $1 million dollars at risk, and even in those states the risk is just barely under $1 million.
One way to look at which states have major exposure is to look at the fraction of total tuition payments coming from international students. The next chart shows the percentages.
Tuition from international students is above 5% of total tuition in every state. In Massachusetts, New York, California, and Washington, D.C., the fraction is about 20%. This is not just an issue for coastal locations, though, as this share is above 10% in 30 states.
The high fraction of tuition coming from international students reflects both the fact that there are many international students and the fact that, at least in public universities, international students pay nonresident tuition rates. Nonresident tuition rates at the University of California, for example, are two-and-a-half times the rate paid by Californians. What’s more, most schools offer far less financial aid to international students than to domestic students. In that sense, the numbers reported here understate the true impact on net tuition.
I offer two suggestions for policymakers outside colleges. First, if the federal government is going to be making bailout loans, include universities on the list. Second, state lawmakers should add helping out campuses to their COVID-19 response to-do list.
The majority of any lost tuition revenue will be at public colleges. And I can tell you that, at least at the University of California, administrators are taking whatever steps are needed to protect the health of the campus and the surrounding communities—even if so doing raises costs and cuts revenue. Help is going to be needed to minimize the financial damage to higher education programs in the coming months.
“In elementary schools, Negroes lag one to three years behind whites, and their segregated schools received substantially less money per student than do the white schools.” – Dr. Martin Luther King, 1967
“[W]hite students score an average of 1.5 to 2 grade levels higher than black students in the average district.” – Reardon, et al., 2019
Dr. Martin Luther King is celebrated today as a civil rights leader and one of the great orators of the 20th century. He was also a keen commentator on social issues—one who believed in bringing scientific research to bear on such issues. King linked questions of race and class as well. In this light, I want to discuss new research about the impact of segregation on today’s education achievement gaps. Surprisingly, this evidence strongly suggests segregation’s effect on current racial gaps are largely due to segregation by poverty, rather than segregation by race. There is some complexity to this finding that requires some explanation, but first, some reminders of history.
King fought first to eliminate de jure racial school segregation, which at the time was largely a Southern phenomenon. Before and during the civil rights movement, the “equal” part of “separate but equal” was essentially a fraud. As an example, a study by the NAACP that examined Georgia school spending in the 1920s reported per pupil spending of $4.59 for Black students as compared to $36.29 for white students. In the Northern states, racial disparities in school funding were also common. In the 1960s, King wrote:
“Statistical evidence revealed in 1964 that Chicago spent an average of $366 a year per pupil in predominantly white schools and from $450 to $900 a year per pupil for suburban white neighborhoods, but the Negro neighborhoods received only $266 per year per pupil.”
Times have changed. Times have improved. De jure segregation is gone, although schools remain de facto segregated to a large extent. According to a new study by Reardon, Weathers, Fahle, Jang, and Kalogrides on segregation’s effects on racial achievement gaps, segregation reached its peak in 1968, declined through about 1980, and has remained more or less stable since then. In other words, it has been four decades since progress toward more integrated schools flat-lined. There has also been much progress toward equalized spending. This finding comes from a current study on racial spending differences: “Black … total per pupil expenditures exceed White total per pupil expenditures by $229.53.”
However, care is required in interpreting “equal spending” for two reasons. First, we mostly know about spending at the district level and not how the spending is divided up among schools within a district. Second, as Reardon, et al., write, “[H]igh-poverty schools typically have greater financial needs, given their larger shares of students identified as needing special education services and their often larger shares of English Learner students.”
So, as indicated in the opening quotes, while racial achievement gaps have been reduced since the days of King’s campaigns, the remaining gaps are still large. There are many reasons for persistence in the achievement gap, including that the legacy of separate and unequal may cause segregation in the past to have continued effects today. Looking directly at today’s situation—how important is today’s segregation per se? Black students mostly go to school with other Black students. Black students also mostly go to school with low-income students. Do either of these forms of segregation contribute to the racial achievement gap? The new work by Reardon, et al., “Is Separate Still Unequal? New Evidence on School Segregation and Racial Academic Achievement Gaps,” suggests that it is primarily poverty segregation rather than race segregation that accounts for segregation’s effect on the achievement gap.
The authors use a massive dataset that covers achievement in grades 3-8 in about half the school districts in the United States; notably, these districts include 96% of all Black public school students. The outcome variable studied is the Black/white achievement gap on test scores in math and English language achievement. (The results discussed below are for third graders.) The central question studied is the extent to which the achievement gap is explained by four differences in the average experience of Black versus white children measured by exposure to: minority schoolmates; poor schoolmates; minority neighbors; and poor neighbors.
The authors control for the usual measures that help explain the achievement gaps, and then focus on segregation per se. So the authors are telling us how much segregation matters over and above other differences that explain achievement.
The authors’ first result is that differences in exposure to minority schoolmates appears to matter a lot—if taken alone. According to my calculations using the authors’ reported outcomes, a one standard deviation increase in this measure accounts for about 9% of the total achievement gap. If exposure to minority neighbors is accounted for, the effect is even a bit larger, with the effect of schoolmates being about twice as large as the effect of neighbors. In other words, the apparent effects of racial segregation are pretty much what you’d expect.
But the authors point out that schools are also highly segregated by income level, specifically by the fraction of students living in poverty. And measures of racial segregation and “poverty segregation” are highly correlated. (Depending on the exact measures used, the reported correlation coefficients are between 0.82 and 0.93.) Is the apparent effect of race really an effect of poverty? According to the authors’ work, yes.
The authors repeat their analysis including both exposure to minority schoolmates and exposure to poor schoolmates. The effect of exposure to minority schoolmates completely disappears, while a one standard deviation increase in the Black/white gap in exposure to poor schoolmates explains about 10% of the total achievement gap. The evidence, then, is that differences in exposure to poor schoolmates rather than differences in exposure to minority schoolmates are what matters.
Finally, a horse race is run in which all four factors are included. Having minority schoolmates still doesn’t matter and having poor schoolmates still does matter. There is a small effect of exposure to minority neighbors and no effect of exposure to poor neighbors.
In summary, the authors find that the role of segregation in explaining today’s racial achievement gap comes from the fact that Black students are much more likely to go to schools with impoverished classmates, and not from the fact that they go to largely Black schools.
To be clear, this does not mean that poverty is the only thing that matters, and that race is now inconsequential. Notice that about 90% of the racial achievement gap is still unexplained in the authors’ model, meaning there’s still plenty of room for race to be impacting gaps through other policy differences both inside and outside of the classroom. Even more important, integrating by income can significantly reduce achievement gaps—and this will also mean integration by race, due to the strong relationship between the two.
If King were still alive today, would he agree that the consequences of segregation, in part, have more to do with poverty than with race per se? We can’t know, of course, where King would have come down on the question of race versus income segregation. But there is no doubt that he believed the problems were inextricably linked. (In fact, King linked solving the problems of racism to societal changes that uplifted all people.) Take this quote from a talk King gave in 1967:
“Let us turn first to the evil of racism. There can be no gainsaying of the fact that racism is still alive all over America. … The second evil that I want to deal with is the evil of poverty. Like a monstrous octopus it spreads its nagging prehensile tentacles into cities and hamlets and villages all over our nation. Some 40 million of our brothers and sisters are poverty stricken, unable to gain the basic necessities of life. And so often we allow them to become invisible because our society’s so affluent that we don’t see the poor. Some of them are Mexican Americans. Some of them are Indians. Some are Puerto Ricans. Some are Appalachian whites. The vast majority are Negroes in proportion to their size in the population.”
Note: Most quotes attributed to Dr. Martin Luther King Jr. throughout this post are from King’s book, “Where Do We Go From Here: Chaos or Community,” originally published in 1967 by Harper & Row.
Academics and policymakers are actively looking at creative ways to help college students succeed. While increasing college access and enrollment is an important first stage, too many students matriculate but fail to thrive. Bluntly, too many never graduate.
Like most faculty, I have many informal “advising conversations” with undergraduates. I like to think these conversations do some good. I’d never thought much about whether formal advising systems do much and whether they can contribute to overall student success. But there is now some solid evidence that good advising makes a real difference.
Authors Serena Canaan, Antoine Deeb, and Pierre Mouganie offer a very nice piece of work in “Advisor Value-Added and Student Outcomes: Evidence from Randomly Assigned College Advisors.” (In the interest of full disclosure, I like to brag about have a slight conflict of interest regarding two of the authors: Canaan is a UCSB alumna and I’m currently a member of Deeb’s dissertation committee.) The authors use data from a natural experiment at one university to show that good advising can really matter.
First, a little background about college advising offers some context. About half of U.S. colleges have freshman advised by full-time faculty, accounting for more than three-quarters of all new undergraduates. Interestingly, the use of faculty as advisers varies among type of institutions. Most baccalaureate-granting institutions use faculty, but research universities tend to have a professional advising staff. (Faculty serve as official advisers at only about a fifth of research universities.)
Before looking at the papers’ details, here are some of the headline results (see Figure 1 below). A one standard deviation increase in the estimated value-added of the freshman-year adviser:
Increases freshman GPA by 5.7 percent of a standard deviation.
Increases 4-year graduation rates by 2.5 percentage points.
Increases the probability of high-ability students enrolling in and graduating from a STEM major by 4 percentage points.
These effects of having a good adviser are meaningful; not huge, but remarkable considering the relatively few interactions that most advisers have with undergraduates.
What makes these estimates so convincing is that the data comes from a natural experiment that eliminates a common weakness seen in many value-added studies. The data is sourced from a university in which students are randomly assigned to advisers; thus, the estimated relationship here is causal, which is a high bar for most other studies to clear. (The administrative assignment process is intentionally random, and the authors ran statistical checks that show the randomization worked.) In most studies of student outcomes, we worry that we are missing some unobservable factor that is correlated with what we’re studying; a teacher having a class in which more parents than usual buy outside tutoring for their child would be an example that could compromise estimates. Random assignment eliminates such concerns.
The university involved in the study was the American University of Beirut (AUB), which raises a question of what scientists call “external validity;” in other words, do we think the results are relevant to the typical American college? The answer is “yes.” A little background about AUB explains why. AUB was founded by American missionaries in 1866. Classes are taught in English and AUB degrees are registered with the New York State Board of Regents. Enrollment is around 7,000 students and admissions depend mostly on SATs and grades—average SAT scores look a lot like average American SAT scores. As the authors put it, “AUB is comparable to an average private nonprofit 4-year college in the United States.”
The results cited above demonstrate that, on average, good advising is valuable. The researchers then delve deeper and find is that the results are heterogeneous—having a good adviser is more important for some students than for others and who benefits most is situational. Improvements in freshman-year GPA are larger for high-ability students than for low-ability students, though both groups gain. There is not a noticeable difference by student gender.
Also, top advisers are more likely than others to guide their students into selective majors (STEM and business). This is especially true for high-ability students, defined as students entering with SAT scores in the top quartile. It appears that these results reflect pointing top students to STEM majors and a smaller effect for students being pointed to business, where the increase in entering a business major is also true for students with lower SAT scores.
The authors investigate the mechanism for the various improvements. What they tease out from the data suggests that freshman-year advisers are particularly good at helping students get good freshman-year grades. (By the way, good advisers don’t steer students into easy courses—the authors checked.) These higher grades likely increase student confidence, leading to better performance later on, and directly increase the chances of making it into a selective major.
Improving college student achievement and graduation rates has become a major concern. In the U.S., only about a third of college students complete their four-year degree within four years at public institutions, and about half do so at private nonprofits. The results from this study suggest that more or better faculty advising might be a promising avenue to improve these numbers, although it’s obviously important to ask where the needed resources will come from. It’s worth noting in this regard that AUB had a student/faculty ratio of 11, while the U.S. ratios are about 15.5 at public institutions and 10.2 at private nonprofits. Arranging more and better faculty advising would be beneficial, as this study shows, but would be especially challenging at large public universities. In light of the numbers above showing that large universities rely on staff rather than faculty for advising, it’s worth remembering that the authors of this study don’t make comparisons between faculty and staff as advisers. So, while we’ve learned that having a good faculty adviser makes a big difference, more research will be needed to know if having a good staff adviser would have the same effect.