Given all the mess that is happening in the current US higher education industry, the Association has asked how could this situation even occur in the first place?  Given all kind of supervision agencies around both at the state & federal level, different associations and accrediting agencies how then this problem ever started? The logical question one will have is that have these agencies done their homework well?  The logical answer is “NO“.  If they did, then the American society does not need to wait until the student loans hit $1.2 trillion and that college closures become a daily news reported in the media. The logic tells us that the current problem occurs because these agencies have not done enough.  For example, a recent senate committee hearing shows how poor one of these agencies has done its job. The current mindset and culture of patting-on-the-back are no longer relevant (it never will) and it has proved to have caused financial disasters to average American families.  The mentality of “it-is-not-my-problem” and the attitude of “ignorance” or “I do not care” and “play-it-safe” have no place if people want to serve this country and the American public wholeheartedly. The Association has proposed many months ago to create ESCC (Education Standard and Compliance Commission) that has the integrity to conduct the “real audit roles” on US higher institutions (Title IV) who have received some forms of federal government financial aids or taxpayers’ money such as Pell, SEOG or Stafford Loans (subsidized or unsubsidized), just to name a few of them.  This country will be able to minimize the possibility of making the same mistakes in the future had this agency exists.  That said, without ESCC, there will be a great chance that cheaters and marginal performers will comeback.  Find and elect those individuals who have the quality, integrity, energy, mindset, enthusiasm, sincerity and long-term commitment to the American education which will make this country strives and regains its competitiveness again in the world.

After Corinthian Colleges closure, it was recently reported that another for-profit organization has to deal with an unfavorable situation because of declining student enrollment.  It does not need an Albert Einstein’s brain to analyze what will happen with this type of business model.  On August 30th, 2014 AAEA has published partial analyses on the future outlook of for-profit U.S. colleges.  Consumers are rational.  When their utility function is declining or becoming negative then they surely will discontinue to acquire the services or good.  This is a simple explanation to this seemingly difficult issue facing by the policy makers in this country.

There were many articles written and published on the US higher education on July 1, 2015. One of the shared articles was written by the US Secretary of Education, Mr. Duncan. The regulator seems to seriously work to address the students’ loans & skyrocketed college cost and tuition, for-profit colleges business model, college accountability, gainful employment and college operational efficiency. All of these topics are related and cannot be seen partially if one needs to improve and revitalize the education system in the US. The Association has made a bold prediction on the coming of new regulations and the topics above have also been discussed frequently in the past a couple of years. We are glad to know that finally the regulator has moved forward and more policy makers saw the merits of our research findings as evident from increasing number of traffics and visitors to the Association’s website. We are hoping that this momentum will continue in the future and it is not just an issue of the current administration, but will be carried on as the national agenda regardless of who will lead this country beyond 2016.

One of the elements that has caused skyrocketed of the US college education cost and student loans is the continuation of old paradigm application in managing the organizations such as the tenure system.  About two years ago the Association has mentioned the culprits behind college cost increases and the source of college operational inefficiency.  More tax payers in the US realize that they have supported the unproductive system for many years and finally they listened to what it takes to reduce the burdens of the society.  Recently, it was announced that the Lawmakers in Wisconsin moving closer to cut the education budget and the tenure system.  In addition to Wisconsin, the state of Tennessee has planned to De-Tenure the faculty members at the state university.  Several other states plan to move forward to the same direction.  As the tax payers demand more accountability, there is no question of potential budget cut will occur in the near future.

On May 16, 2015 there were many articles written on the last graduating class at Sweet Briar College. Basically there are two sides, the pros and cons of the closure. Most of those who opposed the closing based their reasoning on emotional factors, while the pros applied past institutional metrics to support such an unpopular decision. What the data show, is that given its present facts about enrollment and the availability of resources then the continuation of the college operation is impossible.

What one can learn from this case is that fundamental changes on the conditions and environments where a college operates need to be taken into account very seriously when managing a higher ed. However, making policy changes to adapt with the new conditions are not always easy, especially when the change will create personal conflicts of those who do not want to go beyond their comfort zone. Had the College made unconventional decision many years ago such as to merge with other peer colleges in the areas, the closure may not need to happen. What does it take to be able to take that route? Set aside the ego, pride, emotion, history and personal interests. Look at what is the best for the students, members of the society, institution and the country. In short, be realistic! Think about the emotional and financial impacts of such a closure to those who are affected. The closure of the College may not be the last that one will hear. Other colleges might be able to learn from such a case and reinvented ways to save their own institution.  The invention cannot be accomplished effectively through a BAU approach.  Rather, by unconventional ways.

On September 18, 2014 the Association has written on its Blog the reasons behind college cost increases.  It applied statistical analyses and econometric on publicly available data in the study.  The results were written in an article and it has been shared to the American public.  The New York Times has published an article today, April 14, 2015 which further confirmed our study.

About two years ago, the Association has shared to the American public the list of trouble colleges in the US. Today, on March 31, 2015, the DOE unveiled partial list of selected colleges (560) of which their federal aid has been restricted due to their financial condition and the institutions’ practices to comply with government aids requirements. The Association compares the government list and AAEA’s list (519 Higher Ed institutions) that has been shared to the public where DER (Debt to Equity Ratio) approach was utilized. While our results are not exactly the same with those institutions listed on the government’s list (different data sets and approaches.  AAEA applied ten-year 2006-2011 average), we are glad to learn that the regulator finally took a step further to integrate financial aspects as the Association has long suggested as one of the elements in its accountability evaluation which has not been done very effectively in the past. The regulator action is surely consistent with the core objectives of the establishment of AAEA. So far, two core objectives of AAEA has been achieved. The announcement confirmed what the Association has hypothesized and its research results.

The Association has achieved one of its core objectives. Since the launch of its website two years ago, the American public is more aware on what has happened with the cost of education, increasing student loans and skyrocketed college tuition. We did not claim all the credits for broader and increasing society awareness on the issues. However, we are unique in our approach. We did our homework and analyzed real data by applying regression, multivariate as well as categorical statistical approaches and econometric analyses before making any inference on a particular issue. We are independent and objective in our studies and we only have one motivation to do what we did, in that to make the US a stronger country by improving its higher education system. We did rigorous analyses based on publicly available data provided by the DOE. Higher education institutions in the US have to be more responsible in managing its organization because its success or failure has huge direct impacts on the welfare of the society as a whole. The era of easy money was the thing of the past. Recently, selected few institutions were forced to make important changes to control its operational cost, but some still do not believe that they have to operate with a new mindset. Others simply do not know what to do which surely a good news for the Big Four.

A couple days ago, the Association has written in its blog on state university budget cuts.  Today we learned another fact of college closures.  If one analyzes the timeline, all that is happening now starts with skyrocketing tuition (due to inefficiency and applying an out-dated mindset) followed by gigantic student loans accumulation.  Now one will see the negative and direct impacts for not controlling the operational inefficiency when these colleges are still have time to do so many years ago.  When the consumers no longer able to pay the price, it will negatively affect student enrollment.  As we have mentioned on our previous blogs, the new dynamics in the industry will first affect the private Liberal Arts Colleges for they are the most vulnerable institutions with limited support from the tax payers’ money.  The longer the marginal institutions wait, the more probable that they can be wiped out from the competition.  This structural changes will not stop until some of the most inefficient organizations close their doors until an equilibrium level is reached and Pareto Improvement is met.  It could take many years, and once it settled, there will only be big and the most efficient players are staying in the industry.

The Association celebrated its second year in March with more than 125k viewers. This shows what we have discussed in the blog is the interest of many people and the American public. Recently we read, the State of Tennessee Board of Region has discussed the possibility to “De-tenure” the faculty members within its system. Simply put, due to budget constraint, the tenure system may no longer relevant. On March 18, 2013—exactly about two years ago, the Association has written an article on the topic to remind the players in the industry what are coming their ways. Nothing wrong with the tenure policy, so long the money is available to support it. Budget limitation does not just happen in TN, but in all other places as we have mentioned on February 11, 2015.  Those who are negatively impacted by the policy changes could be very well disappointed, but the new reality has come and the policy makers are under pressure to deal with it.