The Value of Investing in a Liberal Arts Education

The Value of Investing in a Liberal Arts Education

In the new study, ROI of Liberal Arts Colleges: Values Adds Up Over Time, authors Anthony P. Carnevale, Ban Cheah, and Martin Van Der Werf, report that although the median return on investment of attending college (enhanced earnings less the cost of attendance) for liberal arts college grads ten years out trails all college graduates by $49,000, the forty-year picture is quite different. Over a career, the median return for liberal arts grads is $195,000 greater than all college graduates.

This study is a biproduct of the earlier report, A First Try at ROI, in which Susquehanna ranked among the top 10% of higher education institutions and 24^th among liberal arts colleges.

This new study corroborates a number of other publications that have demonstrated the advantages of a liberal arts education as preparation for a career. Hardwick Day produced a study for the Annapolis Group that demonstrated the advantages of a residential liberal arts education as a preparation for navigating the complexities of life and for developing a career in the evermore dynamic world of work.

In June 2012, I had the opportunity to join a group of educational leaders from throughout Southeast Asia with a handful of American educators at City University of Hong Kong for a conference addressing general education and curricular reform. At the time, higher education institutions in Hong Kong were preparing to move from a three-year to a four-year baccalaureate.

After protests had pushed back an initiative to add Chinese nationalist content, Hong Kong’s educators chose to add elements of American liberal education to their curricula. They had observed too many of their graduates struggling to adapt to changing work environments. I found it ironic that at a time when I had to counter rising opposition at home, these educators were embracing elements of liberal education that have been proven to prepare students for life-long learning, adaptability, problem solving, and leadership.

A series of studies completed by Hart Research Associates for the Association of American Colleges and Universities (AAC&U) have provided compelling data to support the many ways in which a liberal arts education prepares graduates for the long haul.

In these surveys, employers reported the skills that prepared employees to be successful and to achieve leadership positions. These are the same skills that are the focus of a liberal arts education, which were highlighted in It Takes More Than a Major: Employer Priorities for College Learning and Student Success.

That report stated that to prepare for career success, students should:

·      Be able to solve problems with people whose views are different from theirs;

·      Develop skills in critical thinking, clear written and oral communication, and complex problem solving;

·      Have field-specific knowledge and a broad range of skills and knowledge;

·      Emphasize ethics, intercultural skills, and a capacity for professional development (i.e. lifelong learning);

·      Complete a significant project that demonstrates their acquired knowledge and skills; and

·      Engage in community-based projects, internships, and independent research.

It has long been said that while many universities prepare students for their first job, liberal arts colleges prepare students for their last job, and more importantly for the path that gets them there. It is no coincidence that over a third of Fortune 500 CEOs have liberal arts degrees.

This is why it should be no surprise that ROI of Liberal Arts Colleges revealed these long-term earnings advantages. We prepare our students for persistence, promotion, and leadership, which…pays off.

Threat No. 8—Limited Reputation

Top Threats to Higher Ed in 2019

Threat No. 8 — Limited Reputation

The first seven threats to higher education applied to the entire sector, especially private, residential institutions. Limited reputation is especially vexing for Susquehanna.

Following the announcement of my appointment as president of Susquehanna, well-wishers at the meetings of many of the organizations with whom I worked in the Midwest, would say something to the effect of, “Congratulations to Jonathan on being named president at—How do you say the name of your new university?”

An alumnus recently said to me, “Susquehanna is the biggest little university in the world. No matter where I go, if I have on fan wear, someone will know SU, and say ‘What a great school.’” 

Last week, that happened to me on a ship in the middle of the Mediterranean, but I also regularly encounter people in Harrisburg (45 miles from campus) who have no idea where we are much less have an opinion about us.

A few years ago, I was at a conference of college and university leaders. A presenter asked the assembly, “How many of you refer to your institution as a ‘hidden gem.’” All eight hundred attendees raised their hands.

Each of us believes we are under-recognized and over-meritorious. In our case it’s true.

•  Susquehanna is among the top 10% of colleges and universities for financial return on investment (Georgetown University Center on Education and the Workforce, 2019).
• Susquehanna is 1^st in Pennsylvania and 11^th in the U.S. for study abroad (Open Doors 2019, Institute for International Education).
• Susquehanna is among the top 40 national liberal-arts institutions for our contribution to the public good through promotion of social mobility, research, and service (Washington Monthly, 2018).
• Susquehanna is one of the nation’s most environmentally responsible colleges (Princeton Review Guide to 399 Green Colleges, 2018).
• Susquehanna is 20^th in the nation for the best residential summer programs for high school students (Value Colleges, 2018).
• Susquehanna was named the ninth most economically diverse student body in the U.S. (New York Times, 2014).
• Susquehanna is a member of the Annapolis Group, the leading 130 private liberal arts colleges in the nation.
• The Sigmund Weis School of Business is among the top 5% of business programs world-wide and one of only ten U.S. undergraduate-only programs to have earned AACSB accreditation.

These are just of few of the lights under our bushel.

My New Year’s resolution is to “Burn the Bushel.”

Two years ago, we started including a bragging page in Currents, the University’s biennial magazine. Some of the items above came from it.

We need to mobilize our alumni, families, and friends to boast about these highlights. We need to lift the reputation of the University to the level of its merit. Most importantly, we need to be sure that every student who would benefit from a Susquehanna education knows about us and makes an informed decision.

My charge to you is to share these bragging points, and many others, along with your own stories about what Susquehanna means to you. Do this until your friends are exhausted. Then do it some more. Comment on social media stories about SU; better yet, repost them; and best, post your own.

Happy New Year to you all!

LET’S BURN THE BUSHEL IN 2020.

Threat No. 6 — Poor Public Understanding of What We Do

Threat No. 6 — Poor Public Understanding of What We Do

A recent Gallup poll reports that the percentage of U.S. adults who believe college is very important has dropped from 70% in 2013 to 51% this fall. The same survey showed that those who believed it was “fairly important” or “not too important” rose from 13% to 36% in the same time period.

This September, The Wall Street Journal and THE (what the London Times Higher Education Supplement has become) hosted a gathering of university leaders to announce this year’s THE/WSJ rankings. The big unveiling of the top 10 revealed MIT, Stanford, Cal Tech, and seven of the Ivies. Imagine the surprise.

This same event included a presentation on how institutions can hire THE as a consultant to improve their standings in THE’s own rankings—really!

I believe media coverage of the declining public confidence in higher education is a main cause of the decline, but there appears to be little appetite among the press to push in the other direction.

During another panel the THE/WSJ event, Douglas Belkin, one of the principal higher-education writers for the WSJ, stated multiple times that young people are less and less inclined to take the risk of investing in a college education. During the same panel, Joe Barrett, U.S. Midwest and national education editor for the WSJ, stated that the earnings gap between college graduates and non-graduates is at an all-time high. There is a disconnect.

As Louis Menand recently wrote in The New Yorker, “Almost every study concludes that getting a college degree is worth it. What is known as the college wage premium—the difference in lifetime earnings between someone with only a high-school diploma and someone with a college degree—is now, by one calculation, a hundred and sixty-eight per cent. For people with an advanced degree, the wage premium is two hundred and thirteen per cent.”

The earnings advantages of obtaining a college degree didn’t used to be the prime driver for pursuing one. In the 1960s, ~80% of college students stated that the main reason they enrolled was to develop a personal philosophy and ~20% listed the prime reason as increased earning potential. By the 1990s, that ratio had inverted. The focus on earnings now seems even greater, but that may be because the relationship between a college degree and increased income has grown.

The fiscal return on investment is now much greater than 50 years ago, when far fewer good-paying jobs required a college degree.  

In the same article, Menand wrote, “In the nineteen-fifties and sixties, the college wage premium was small or nonexistent. Americans did not have to go to college to enjoy a middle-class standard of living. And the income of Americans who did get a degree, even the most well-remunerated ones, was not exorbitantly greater than the income of the average worker. By 1980, though, it was clear that the economy was changing. The middle class was getting hollowed out, its less advantaged members taking service jobs that reduced their income relative to the top earners’.”

Now even many “blue-collar” jobs require significant technical training.

Like fifty years ago, the greatest benefits of a college education are its potential to expand a student’s world view, to challenge students to appreciate competing value systems, to empower them to value and celebrate difference, and to cultivate generous civility. Higher education in its best form is dedicated to developing humble leaders, engaged citizens, and good neighbors.

The new Gallup data cited above may be an indication that, in the maelstrom of contemporary media, the average U.S. adult does not understand the objective earnings data and has lost an awareness that higher education is dedicated to fostering leadership, citizenship, and civility. A more chilling conclusion is that at this particularly troubling inflection point in our history, fewer respondents believe these qualities are important. Let us hope not.

Threats 5 and 7 - The Demographic Cliff and Geographic Redistribution

Top Threats to Higher Ed in 2019

Threats No. 5— 2026 “Demographic Cliff” and No. 7—Geographic Population Redistribution

Following the Great Recession, birthrates in the U.S. dropped dramatically across the population. These are the children that will enter traditional college age in 2026. As Nathan Grawe reports, “Between 2025 and 2029, the number of college-going students will decline by 15%—that’s over 400,000 fewer students in a span of four years.”

There have been birthrate declines in the past, including following the Great Depression and the end of the baby boom. In both cases, birthrates picked up again, but that is not yet true this time. Also, following the baby boom, we saw an increase in the percentage of 18-year-olds enrolling in college, which as I wrote a few weeks ago, is also in decline.

These impending deficits are exacerbated by the recent drop in new international students, whom many college  leaders in the U.S. had hoped would fill the impending enrollment gap.

The U.S. population is in the midst of significant geographic redistribution. In the last four decades, the populations of New York and Illinois grew 11% and Pennsylvania grew 8%, while the national population grew 46%. During that same period, California grew 67%, Texas 102%, and Florida 119%.

The rank of the top-10 states by population in 1980, versus estimates for 2020 is:

 

The redistribution of urban populations has been more dynamic. New York City grew 22%, Los Angeles 37%, San Diego 66%, and Phoenix 117%. The population of Philadelphia fell by 7% and Chicago fell by 11%. Detroit plummeted by 45% moving from 6^th place to 26^th in 39 years.

The rank of the top-10 cities by population in 1980, versus estimates for 2019 is:

 

These changes will have a wildly varied impact across higher education. Some institutions will see influxes of new students migrating in their direction; others will need to make adjustments to respond to a declining traditional market share. The most elite institutions are unlikely to experience much impact because their demand curves are so high.

If one looks at where the majority of private, non-profit liberal arts colleges are placed, they are not where the growth of population is occurring. Likewise, the preponderance of these institutions  are where populations are stagnated or declining.

One significant population that may provide a buffer for institutions for whom the demographic cliff looks like a train headed their way is the significant population of non-completers. There are currently over 36 million people in the U.S. who have left college since 1993 without receiving a credential. Rethinking our audience by engaging those students will be an important step in sustaining our missions.

Threat No. 4 — International Student Declines

Top Threats to Higher Ed in 2019

Threat No. 4 — International Student Declines

According to this year’s Open Doors Report (the Institute for International Education’s annual analysis of data and trends), the total number of international students enrolled in the U.S. is at an all-time high, but the number of new first-time international students dropped by 0.9% following a drop of 7% the previous year.

There has been significant coverage of the demographic shifts affecting higher education and the impending steep decline of traditional-aged students beginning in 2026. There has also been ample coverage of the recent drop in new international student enrollments in the United States in the past two years, but the combined impact of these two factors has not been sufficiently recognized.

There are many good reasons to cultivate international student enrollment on our campuses:

·      International students diversify our campuses culturally, intellectually, and experientially;

·      They enrich the global awareness and fluency of our domestic students;

·      We develop advocates of the U.S. abroad as our alumni become leaders in their home nations;

·      We have the opportunity to engage some of the best young minds from around the world in our domestic academic enterprise and during their initial post-graduate employment through OPT (Optional Practical Training); and

·      They provide significant revenue to support the operation of our institutions for all of our students.

International students contributed $44.7 billion to the U.S. economy last year. The majority of that revenue first enters the economy through the colleges and universities they attend. The financial health of American higher education has been significantly buoyed by that tuition income. The benefit is not in the aggregate. In many communities, like ours, the university is a leading economic driver. Our financial strength redounds to our surrounding community in myriad ways. This model is repeated across the country.

Various reports have cited potential causes for the recent decline in international enrollments. These include:

·      Slowing economic growth in some feeder nations;

·      Growing options in their home nations;

·      Students choosing to study in Canada and Australia;

·      Growing concerns about safety in the U.S.;

·      Leaders of some feeder nations threatening to limit visas; and

·      Potential students believing they are unwelcome here because of political rhetoric.

As the population of eighteen-year-olds drops in the coming years, a positive financial outlook will require new sources of enrollment and possibly new types of revenue. Our communities and our nation will be wise to advocate for increased international enrollments as a primary strategy in mediating the effects of our own population decline.

If our institutions undertake these efforts collaboratively with their surrounding communities, we should also strive to share all of the benefits: financial, cultural, intellectual, and experiential. It is a scenario in which everyone wins.

Threat No. 3 — Price Sensitivity

Top Threats to Higher Ed in 2019

Threat No. 3 — Price Sensitivity

Although wealth has grown considerably since the great recession, it has not been evenly distributed. Those with the capacity to invest have seen tremendous gains in the past decade, but many in the working class and the lower middle class have experienced income growth that has not kept pace with inflation. The stress of their increased cost of living has made them more debt averse than in previous decades when it comes to student loans.

Student debt has rightfully become a major focus of the media in recent years; however, some of the debt story is misleading. Here are some important facts that the mainstream media haven’t adequately covered:

·      This week, Inside Higher Ed reported that wealthy students are responsible for “some of the most drastic borrowing increases.”

·      A recent article in Business Insider reports that 40% of student debt is for graduate school. Also, as of 2016, 51% of the households with student-loan debt are those of advanced-degree holders.

·      For-profit institutions are the secondary-education sector with the highest percentage of baccalaureate students taking on $50,000 or more in debt (32%) compared to 11% overall.

·      A new study produced by AICUP (The Association of Independent Colleges and University of Pennsylvania) shows that the net tuition (the amount paid after financial aid is awarded) among Pennsylvania’s independent colleges has increased at a rate lower than inflation for nearly a decade.

·      The Federal Reserve reported that as of 2016, 10% of household debt was student loans, and 9% was auto loans, 6% was credit-card debt, and 67% was mortgage debt.

The return on investment of a college education remains high, as long as students persist through graduation. According to a report published by the Center for American Progress this summer, the median student-loan debt of defaulters is $9,625 because two-thirds of the people who default on student loans are those that didn’t earn a degree.

The average debt upon graduation from a four-year institution is $29,650. A recent Newsweek article clarifies the details of that figure:

“That ‘average’ is heavily skewed by large balances held by a minority of students—most likely, older, independent students who are allowed to borrow more—and probably doesn't reflect the typical college student's experience. In fact, three-quarters of students at four-year public colleges and two-thirds of students at private schools graduate with less than $30,000 in debt; about half have borrowed less than $20,000 and four in 10 come in under $10,000. Three in 10 undergraduates have no debt at all.”

This year we reached a new high in discount rates nationally, which means that colleges and universities are charging smaller percentages of their published tuition rates than ever before. To quote a wise colleague, “The market is dictating the cost of a college degree.”

Some of that discount is covered by funded scholarships, but most of it is tuition these institutions forego. This has been made possible primarily through careful budget management and under-publicized cost reductions, but at some institutions it is resulting in unsustainable operating deficits.

The result of rising discounts is that even though total student debt has reached an all-time high, according to the aforementioned Newsweek article “In recent years, students collectively have been borrowing less, not more, for college. In fact, new borrowing­—and new is the critical word here—has fallen in each of the past seven years.”

The public narrative is that a degree has become financially unattainable, but the truth is that on average, it has become more affordable.

Threat No. 2 — National Association for College Admission Counseling (NACAC) Changes

Threat No. 2 — National Association for College Admission Counseling (NACAC) Changes

At their annual meeting this fall, NACAC (The National Association for College Admission Counseling) voted to suspend their Code of Ethics and Professional Practices (CEPP). This action was in response to a challenge from the Department of Justice, which had determined that the CEPP amounted to collusion on the part of colleges and universities because it limited student choice.

For decades NACAC members had agreed not to:

1. Provide incentives for Early Decision;
2. Recruit students who had committed elsewhere;
3. Pursue students after 1 May (with the exception of wait lists); or
4. Recruit students enrolled elsewhere, unless the student initiated the process.

The DOJ averred that families were not benefitting from a truly open and competitive market. Many NACAC members, especially high-school guidance counselors, believed that the CEPP helped them to place students in institutions where they would be most successful. Both sides have valid points.

Given the recent meteoric rise in discount rates, it is hard to imagine families will see significant savings, but bidding wars may become common practice.

A number of colleges had worked outside the CEPP guidelines before the recent suspension. This was especially true regarding incentives for Early Decision.

The changes of practice that are receiving the most attention on campuses this fall are  the new allowances for institutions to continue recruiting students who have already committed to another university and to initiate the recruitment of students who are enrolled elsewhere.

In an October survey of enrollment professionals conducted by EAB, a larger portion of institutions were implementing new efforts to retain recruited students than were planning to “poach” from others.

A third were allotting additional strategic financial aid, and a similar portion was planning to significantly increase the amount of their deposits to make it less attractive to switch to another institution. A ninth were considering pursing applicants who had enrolled at a competitor, and about twice that many were considering continuing to recruit students who had deposited at another institution.

Four out of five institutions surveyed, said they were stepping up summer communication with deposited students. Many indicated that they were accelerating housing and roommate assignments and course schedules.

In our era of instant delivery, these are meaningful gestures to prospective students and their families. Many of them are aware of the thousands of students who take more than four years to graduate because of a shortage of required classes, but this a typically a symptom of large public schools. Among nearly all private liberal arts colleges, that doesn’t happen. A hallmark of our institutions has been an onboarding process that included multiple interactions between students and faculty advisors before selecting a bespoke set of courses for that students.

I am glad that many of the changes that are taking place will streamline the enrollment process for our students, but I fear more and more of them will be entranced by bidding wars and perks rather than fit and return on investment.

I hope in this new “wild west” of enrollment practices that, like Susquehanna, our sister institutions stay focused on their missions and the best interests of the students we were all founded to serve.