In the past a couple of weeks, the American public was so caught up with the college ranking following the announcement of US NEWS and other similar studies from different organizations.  For a while the public forget about the country $1.3 trillion student loans issues.  Analyzing data made available by the NCES, AAEA looks from different angles on the so-called Top Ten US Universities.  The Association compares net tuition revenue after institutional grant aids and the institution respective total general & education expenses.  For detailed of the variable used in this study, please see footnotes on each figure.  Higher Federal Government Dependency Rate (FGDR) reflects the respective institutions are less independent on the government support.  The graphs below show except for Cal-Tech, it is truly amazing to see that most of these schools’ FGDR deteriorated over time (please click the graph for a larger view).  However, after the 2008, one can see FGRD has increased which could be interpreted as that US colleges are less dependent on federal government financial support which could be caused by less funding availability from the government aids or due to tightening up of federal aids requirements such as SAP.  But dependent more on contributions received from non-government sources such as alumni and other donors.  Decreasing in funding received from private donors was offset by rising the tuition in order for them to operate at the previous year’s level.  This analysis could be one of the many possible explanations why the elite schools such as Harvard launched a capital campaign in September 2013.  Perhaps, this in one of the reasons why after 2008 financial crises, the amount of student loans increased at their fastest rate.

The latest news on student loans can be read here.  All efforts that have been done so far on reducing student loans were great, but they can be characterized as reactions after the facts that little can be done to change them.  What the country needs are preventive actions and not reactive ones.  The results will be more profound if the prescribed medicine is not just for curing the symptoms, but the real cause of such a cancerous disease.  AAEA has shown again and again what some of the real causes of such skyrocketed student loans!  Among them are:

1. Self-centered interests.
2. Over paid college administrators and full professors’ salary.
3. Lack of management and financial integrity which have caused over spending, campus and program expansions.
4. Obsolete system and campus culture such as tenure system, just to name one.
5. Poor implementation of accountability policies in the past.

These are only a short list of what has caused the problem.  Lack of Accountability is the three words that one can use to sum all the factors up.  The student loans problem occur because all the involved parties may have compromised the implementation of such accountability policies.  The regulations may have been written, and good on paper, but never got implemented at the level where it supposed to be.  Compromising, lack of funding, lack of experts and trained personnel to carry out such accountability through rigorous compliance audit which have happened over a long period of time have grown out of control (over 1000 pages pdf file) and caused the $1.3 trillion debts.   AAEA has proposed to have a new governing body, Education Standard and Compliance Commission that will conduct both financial and management audit and relate such findings with college accreditation and federal financial aids before the problems arise; and not after the facts which is more difficult, if not impossible to cure.

The Association is not surprise to learn what is happening in California State University System as recently discussed in the News.  In fact, the direction to only admit and enroll transferred and qualified students from Community Colleges is the new reality and is the future model for 4-year higher education system in the entire US, and not just in CA.  Short in funding is cited as the main reason that triggers the Cal-State system to admit more Community College transferred students in substitution of admitting freshmen.

Many months ago, AAEA has written in its blog on this new model, new direction and new reality that most if not all of 4-year higher education organizations in the US will have to chew and swallow in the near future.  The fact of the matter is that, this may be the most efficient model given the condition that the country is facing the reality where we are leaving in right now.  Repetition of offering the same services, general education (GenEd) courses or classes should be minimized decades ago, and not just now when the budget and resources got squeezed.  In fact, the inefficiency and over expansion (translated into higher college education cost) have finally reaped adverse consumers’ reaction. Potential students and their family are more cautious when making their future investment choices which result on declining first-time full-time (freshmen) student enrollment.  In addition of showing negative buyers’ reaction, reduction in freshmen enrollment and state budget may tell or confirm the following stories:

1. Current US higher education system is obsolete i.e., needs to adapt to the new realities.
2. The state’s legislators are more aware and may not just rubber-stamp on the school administrator’s requested budget.  Rather, and hopefully they studied it thoroughly.
3. Tax payers are getting tired to support school administrators’ reckless decisions i.e., who have abuse the public’s trust.
4. Declining resources to support public institutions with lack of financial accountability and integrity.
5. Future higher education in the US will be grouped just into 2 systems i.e., Community Colleges System (offer freshmen, sophomore and trade classes) and University System (offer upper level classes leading to Masters or PhD degree).
6. Finally, the market system and Adam Smith’s hypotheses are at work to correct the industry inefficiency.
7. The extra money generated from the new and more efficient system can further be channeled to reduce the tuition and fees at 2-year community colleges.  Meaning more economically disadvantaged and talented students can get their higher education at a reasonable price.  Therefore, larger proportion of the  working class family can increase their probability to achieve the Americans’ dream.
8. Performance based funding will be more popular in months to come.

When for-profit college business models were launched years ago, popularized with its on-line offered services, it got cheered by many enthusiasts including the Wall Street. In this opportunity, AAEA will analyze how the adjusted daily stock prices have evolved overtime of the parent companies who run these randomly selected for-profit institutions, without any special interests on AAEA side–this is just another research we are continuing on doing and presenting to the American public.  The stock of these three companies’ are publicly traded at the New York Stock Exchange under the code COCO, EDMC and APOL, respectively for Corinthian Colleges, EDMC (Education Management Corporation) and Apollo Group.  Corinthian Colleges parent company runs several different higher education institutions such as Everest College.  Institute of Arts campuses are under EDMC’s management, while the University of Phoenix is managed by Apollo Group.  Recent dynamic that is happening surrounding for-profit education institutions trigger these analyses.  The question that one might have: Do for-profit college business models become obsolete?  Will the same chaos ever happen on not-for-profit private schools that can not survive the CAR?

Applying a simple education analytics, IRI Intelligence and big data approaches, the Association pulled series of adjusted closing of the respective institution’s stock prices from Yahoo Finance® as shown below.  The sole purpose of these analyses is just to give a simple and general idea on what could happen in the industry to the general public.  The Association never claimed that the results be used in any short or long-term or any other forms of financial investment decisions.  In contrary, through this simple approach, we would like to show the potential power of big data approaches and education analytics applications in the decision making process.  Because the nature of such a short study, rigorous statistical analyses (both econometrics and time-series i.e., unit-root tests are not conducted).  Therefore, readers need to be aware of potential flaws and limitations, such as a lower R-square.  The Association and its researchers never suggested that readers have to take any particular position in any forms in the market nor did we suggest anything beyond what we have stated about the purpose of this particular research project.

Now we know the culprit behind the student loans problem.  The next question would be what are we going to do about it?  Previous research and studies that have been done by the Association is nothing but to diagnose the root of the problems.  To avoid unproductive debate and unnecessary discussions, the Association used NCES Delta Cost published data.  Econometrics and applied statistics have been used to analyze this information and the results have been shared to the American public several months ago.

Using these data, AAEA is able to statistically show positive correlation among student loans; tuition & fees; total administrative cost; full-professor salaries and money spent on public services.  The results of this study, among other evidences pointed out that student loan increases move toward the same direction with education cost increases (positive correlation).  If this nation really wants to keep its future education system to be one of the best in the world, while keeping its price affordable to majority of its citizens, then players in the industry need to cooperate and make every possible efforts to keep the product reachable to its consumers (students) and not artificially affordable through federal student loans.  In the process to reach such goals everyone needs to sacrifice and take their fair share.  Right now, this is not happening.  In contrast, most of the burden has been shifted to the students and their family.

What are the strategic implications of such studies?

1. College tuition needs to be controlled and this has been done by the regulator through the CAR which will be implemented in 2015 academic year.  Several other components as explained below as well as SFT can be added later to expand the CAR or expanded CAR (eCAR).
2. In addition to the planned CAR four components, federal loans could be awarded based on the ratio of money spent on administrative (overhead) expenses and the amount of net revenue generated only from tuition and fees, excluding any other revenues which may be generated from contributions or donations.  This could be the fifth component of the CAR.
3. The six component of the expanded CAR (eCAR) could include the ratio of total administrative expenses to total liabilities in addition to liquidity and solvency ratios.
4. Include the ratio of total administrative expenses to total student drop-out from the program (fall-to-spring or fall-to-fall semester).
5. Includes the ratio of total administrative expenses to total students graduated from the institution within normal completion time plus maximum two extra semesters.
6. The same ratio calculations can be applied on full-professor salary as well.
7. To make sure that every player in the industry will comply with the rule, the country can establish ESCC (Education Standard and Compliance Commission) which has two branches.  Each division concentrates on different areas i.e., (1) audit & financial accountability and (2). Program assessment & accountability. This new structure will energize current regional accreditation entities such as SACS, HLC and other regional accreditation agencies so that they can do a better job.

Discussions continue on possible steps that the states, colleges and other entities could take to improve the broken US education system.  Previous post has discussed one of many possibilities.  How can policy makers implement such approaches?  The sub-optimal system can be amended faster through public policies if they have the enforcing power and corrective ability.  Voluntarily changes may not occur, and if they do, it may take forever to improve the system back to the right tract.

Not just federal and state funding can be based on core competence.  Other funding agencies, such as charities and foundations could use core-competence assessments and more stringent requirements in making their research award decision.  This policy will promote further professionalism and specialization toward new horizon of teaching, research and community outreach which never been explored before.  For example, if Emory Medical School and Hospital have done research and successfully producing the cure of Ebola virus then more funding should be awarded to Emory.  There is no doubt that other institutions will try to develop another version of ZMapp.  Rather than funding an institution to start from zero, as the front runner Emory should be given bigger portions or all Ebola research money.

Specialization will certainly eliminate redundancy and inefficiencies which have caused colleges’ annual budget to balloon in the past decades.  It is the right time for college administrators to redirect their strategic plan and for the federal and state agencies to see different angles before approving state colleges proposed budget or student loans applications.  The rubber-stamped era has passed and it may not be back, at least for awhile. The new dynamic and realities have to be dealt differently.  This may not be an easy task to do.  However, it will benefit the society and the country in the long-run.  Set aside the politics and use the common sense and integrity in making important decisions.

Under the new reality, federal student loans may not automatically be awarded to any applicants who cannot pass the minimum tests (AAEA calls it success & failure test [SFT]).  SFT helps the funding agencies to access loans applicants’ default risk (AAEA has developed such model) in addition to factors that have been asked in FAFSA.

A couple of weeks ago we read about Corinthian Colleges closure, and today we learned yet another story on for-profit colleges’ continued financial struggle.  If you think this is worse, you need to wait until the real waves of colleges’ closures or mergers yet may happen in the near future. It won’t take a rocket scientist to figure out how aged the industry is and how critical structural changes in the US higher education are happening right at this moment and how Adam Smith’s invisible hand is working to restructure the industry.  Again and again, the Association has published so many research findings, based on NCES data that showed the possibility of colleges’ closures are imminent.  American public should not be surprise that such college closures are happening right now.  If Harvard University with $32.7 billion endowment is seeking public support to raise $6.5 billion on top what it already had, what does Harvard’s capital campaign mean? What are the reasons that motivate the campaign in September 2013? And what kind of challenges that other US higher education institutions with less than $100 million endowment are facing in the midst of decreasing student enrollment, low student retention, graduation rate and the possibility of CAR implementation in 2015 academic year?

Please let us know what do you guys think?

In a relatively short period of time, IRI or education analytics has been regarded as the future paradigms and tools by US higher education institutions to survive the sea of uncertainty and competition.  These paradigms considered as the ultimate approaches to answer recent phenomenal structural changes that are happening in the industry.  The new mindsets and the need of education analytics are flourished as evidence from recent job postings.  The question that one may have is what kind of tools that an institution could apply such new mindsets in her or his organization?  We will focus on three available tools in this blog.  Short comparisons will be given below on either to invest in SPSS, Tableau or SAS?

1. Many of our readers and registered members asked which one of the tree tools mentioned above can be used to accomplish their IR/IE jobs more efficiently.  The Association answer, in general, it depends on what one tries to accomplish.  The most important reason why we such three tools in the market is because each tool has a unique feature that none of the other has SPSS has been used and very popular in the past because it is more user friendly.  For those who do not know how to write codes and less knowledge about statistical theories prefer this tool than others.  The danger of using such tool without knowing exactly how the programs work and the underlying statistical theory behind it is imminent.  SPSS will give you answers, but are they the right and correct answers?  Many institutions have posted the results of their students’ satisfaction survey or end of semester course survey based on Likert scale.  Sadly, these colleges take the statistical mean (average) on the Likert scale type of questions (Starting on page 8, as examples).  These mistakes were made because of the poor statistical knowledge of the researchers.  When using SPSS to upload the data, it automatically changes the respondents’ answers into numerical values.  However, the software also explains the variable in a different tab.  If the researcher do not know the concept (the type) of data, she or he will surely make this important mistake.  Committed such flaws are not unique and only can be found in higher education profession.  The most respected consultant in the industry was found to commit the same errors.  If these mistakes found in the consultant’s report, one only can imagine what kind of effects they have and how they might impact its clients.
2. Tableau is easy to use–just point and click.  Therefore, it is gaining popularity in more recent years, especially to help the IE tasks get completed.  This software produces different trend reports in graph format which are easy and pleasing the eyes of the readers.  As we may all know, administrators and college decisions makers alike love to see colorful reports.  Most of these campus decision makers are busy and may not have the statistical rigor to digest all the numbers.  Therefore, they love to see the graphs.  One needs to be aware that the stories behind the graphs still need to be interpreted correctly.  Some of them can be very difficult to digest and may tell many stories and different strategic implications.  One may not be able to conduct hypotheses tests to basically answer the fundamental questions that the administrators are looking for. The IRI Office can capitalize Tableau’s nice features in such a case.
3. SAS is the way to go in the future for statistical analyses as well as to generate different reports.  However, one needs to have proper training to write codes that produce the results.  Generating one graph could take the researcher to write 10 to 20 lines of codes.  However, once it is done, she or he can apply the same codes and with proper modifications one can generate other graphs as well.  If we look around, professionals with the SAS skills are more incline to work in non-education industry such as finance and banking, pharmaceutical companies or manufacturing.  Education industry may not be able to compete with other industries in term of compensation.  The person with SAS experience, however may not have previous experience working with higher ed data.  The one that has both experience and other elements of the IRI, also known as education analytics is the best fit to be employed.  However, they are not many around right now yet.

As we have mentioned, different tools may have different applications.  One thing that we do know, that recent dynamic changes have pushed and therefore added the intelligence dimension which has never existed before into the IR/IE profession.  This is another one clear reason why IRI or education analytics is the way to go in the future.

AAEA has noticed sudden spikes on hiring professionals to fill both IR and IE positions.  At the same time, the job requirements as spelled out in the advertisement are more rigorous and demanding compared to what they were in the past.  However, some of the job postings still stress so heavily on the reporting (old IR), instead of IRI (Institutional Research Intelligence).

It surely shows that some of the US higher learning institutions have finally realized that BAU will no longer relevant to cope with recent dynamic changes in the economy, federal government policy, consumers’ preferences, availability of resources and global market.  But for some, they still try to learn how to cope with the new developments.  Federal financial aids regulations and less favorable reactions of the American public on skyrocketed college cost increases have played important roles that may have caused negative effects on higher learning institutions’ operating revenue and their budget situation.  Therefore, one may witness more possible future merger and college closures in the US.

When resources are declining, the institutions are forced to find ways to reduce operating cost, then they turn to the IR professionals to help them to find the answers.  However, traditional IR professionals are not specifically trained in financial management, budgeting or accounting.  If the person who is holding the position never learned about these new skills in the past, then one will see big gaps and problems to find the right person who has all the IRI elements.

In other words, the traditional IR Office which commonly works with VP for Academic Affairs is now also required to work closely with VP for Finance and Administration (VPFA).  Likewise, the VPFA will not be able get the job done efficiently without collaborating with the IRI (New IR) Office.  But, there are not enough people out there who have both the IRI skills and experiences.  It is hard enough to find professionals who understand the concept of categorical data, statistical modeling and who have both SAS programming and Education Analytics skills.  And now, the same professionals need to understand Financial Ratios and how to read the Balance Sheet and P/L Statement correctly, Managerial Accounting, Strategic Management and Budgeting as well.

It is truly an exciting moment to witness such big changes that are happening in the education industry.  When the CAR (College Affordability Rating) and other performance based funding are implemented by both the federal and state agencies, one will notice other such big waves.  This wave of changes will not that far from where we are now.  If the CAR will be implemented as it was planned in 2015 academic year (a good chance it will), then one will notice even greater corrective and policy changes made within the institutions.  This is especially true, if the institution’s rating (AAEA’s version of CAR) is only BBB.