As we had mentioned before, five years ago only a handful elite schools recognized how to utilize data science and analytics to help them in the data-driven (not-data informed) decision making process.  Even higher ed institutions in the US did not know or were only aware recently that professionals with these skills are badly needed to navigate future sea of competition and uncertainties.  As results, there are huge gaps between the demand of IRI/Education Analytics professionals, and those are available in the market.  To be an Education Analytics or IRI professional, one has to have different skill sets from the analytical tools, competitive concepts, ERP or databases, coding skills, managerial accounting, strategic management, marketing research, math programming, applied statistics and others which the Association has shared in the following IRI figure.  With all due respect, it is difficult to find someone with EdD alone is able to manage the IRI Unit who has all these ingredients, except he or she also has unique business, economics, mathematics, databases and IT expertise, skills and higher ed experience at the same time.  After five years, today, we learned how the IRI concept have been confirmed.  There are also clear evidences that many higher education institutions have moved away from the “Old Data-informed way” concept to the IRI mindset.  For example, more colleges or universities, in particular the upper level institutions have changed its IR Department to something analytics or decision science added to it.  The Old mindset has led many colleges going bankrupt, at least going under or stagnant or even declining retention or graduation rate.  So why keep adopting the outdated concept?

In 2013, the Association has shared to the American public US colleges’ rankings in the State of SC and in any other states in the US which can be used by college administrations or even the State representatives to take necessary steps to revitalize their institutions.  Recently, we learned what has happened in the State of South Carolina.  Its colleges have faced severe financial challenges, perhaps more than in any other higher ed institutions in the US.  We, at the Association have known that this is coming and it is a matter of time before its pops.  This is just a friendly reminder how important the research-based strategic information that the Association has done and shared to the public.  Strategic decisions need to be made by data-driven, and not data-informed. The old-way i.e., data-informed only tell/present data to inform the decision makers, with or without taken any actions.  Data-driven decision making processes rely on making or taking strategic decisions/actions, based on the application of Education Analytics (IRI) on institutional historical data captured through various internal data bases, such as Banner, Ellucian, PeopleSoft….etc. Other Colleges may need to check the Association’s rankings and see where they are, and what strategic actions need to be done before it is too late.  The old ways of publishing College’s rankings by various organizations will not tell most US colleges their real situations.  In other words, it is a kind of ceremonial sugar coated information which is less useful for making the institutions more cost-competitive, driving lower tuition and beneficial to the students.  It may, at some point be used by potential international applicants.  However, recent research results show that most domestic applicants make their decisions based on how much out-of-pocket expenses that their need to pay.

Recently, the Association learned that smaller private colleges start making alliances or strategic partnership or even merger in order to survive three mounting pressures: imminent federal higher ed budget cuts, financial woes and students enrollment drop.  This morning we learned that these institutions start pulling their resources together to overcome such challenges.  Had they take advantages of our earlier research result reports, may be their story will be different.  Unfortunately, most institutions do not have the capability to oversee what is coming their ways.  The BAU concepts have blinded them or perhaps, these colleges do not have such leadership team who has the will and capability to do so until it is too late.  Our studies have been published and share to the public about five years ago.  Surely, if institutions take actions based on these scientific research findings and the applications of IRI, then they are now will perhaps be in a better shape.  Asset fixity and operational inefficiency have taken their precious resources away, and nothing can replace them in a very short-time.  These financial issues are even more difficult now to deal with for two important reasons: (1). federal education budget cut is apparent under the new administration (2) Tuition (price) war is imminent.

The Association has addressed the possible of excess supply of higher education in the US as one of the factors which may have caused increasing competition and current wave of college merges and closures.  This morning we have just learned that another online university has been created.  Looking at who behind this institution, one may infer that this newly created institution has the financial backup to sustain from financial dependency on either state and federal financial aids programs, such as student loans.  As of now it will only offer technology related courses.  However, it may expand its courses as time passes by.  Increase competition is a good news for the consumers, but may have further pressures on the supply side.  Especially for institutions that offer similar services.

In this past week the Association has discussed again the potential of the state’s budget shortfall in higher ed and how the new administration policy on student loans may negatively affect higher learning institutions in the US. Based on extensive used of data and analytical analyses, AAEA has hypothesized that structural changes occurred on both demand and supply sides, the BAU mindset along with the new policy development on higher ed will add the risk of US colleges to go under.  This morning, we learned that, one of the oldest systems in the state higher ed has announced its plan to merge institutions that offer the 2-year programs or Associate degrees with 4-year higher learning institutions in the State.  In the past years, the Association has discussed this potential, and now one can see the many predictions based on IRI Education Analytics have become a reality.  The WI’s plan to merge the institutions under its system is significant for 2 main reasons.  One, the institutions are belong to the state which theoretically will have more resource/financial support from the tax payers’ money.  Two, the merger occurs at the state level, and not at the B2B level., i.e., between or among certain institutions, but state-wide.

If this has happened in the state of WI, it could happen in any other states.  Let us do some analytical thoughts here.  What kind of symptoms that have happened in WI preceded the merger plan?  WI is one of the States in the country that has more higher ed organizations than in some other states.  Therefore, there will be a clear excess supply for higher ed services, where demand cannot grow fast enough to keep up with it.  There is a disequilibrium in the whole system of higher learning in this state (actually in the whole US).  With this hint, the Association hopes that the readers can do their own analyses and come out with the answers on their own questions.  Otherwise, contact us for more info.

On October 5th, the Association has written in its blog of potential tuition price war among the desperate colleges as a result of the new administration student loans policy.  Today we learned, the war has begun.  What can one learn from this new development?  The Association has hypothesized that if the US colleges keep increasing their tuition as they have done it in the past, it will at one point negatively effect its business/existence/going-concern.  But, as usual, no-one believe that it is going to happen, until it is too late.

1. Students had overpaid the tuition in the past.  They are the heroes who have prevented the US colleges from collapsing many years ago, and unknowingly support their inefficient or over spending institutions.
2. The new administration’s policy to reduce the federal student aids has a positive impact on the demand side, but the reverse is true in the supply side of the equation.
3. The public will see more college merger and closures in the US.  There will also be a merger for state owned institutions, especially for those organizations that do not show improvement year-after-year under the PBFM.
4. Definitely, the structural changes in the US higher ed have happened as it has been written in this blog.

Do you have enough arsenals to be in the war?

Let us make sense how will decreasing of federal student loans impact the public universities and colleges.  In the optimization or mathematical programming world, putting one more constraint will reduce the objective function optimal solutions, assuming that this additional condition, i.e., reduction on student loans is bounded.  Having said that, there are two possibilities:

1. If the impacted institutions find other resources to off-set the holes left out by declining loans from other sources, rather than from the tuition hikes, then the effects will be minimal.
2. Otherwise, each institution will increase the tuition, especially for the out-of state enrollees.  However, there is a limit before the consumers are totally back off from enrolling at one institution and choose to go somewhere else.  Have your institution calculated where is your “tuition shadow price or stoppage” yet?  Click here for help.  This is another reason why you need to be a member of AAEA.  The old ways where you cannot get the optimal benefits or to increase your professional skill sets or only just to attend ceremonial annual meetings have passed many years ago.  You need to boost your professionalism by joining this Association for free.

It does not matter which scenarios will be taken, competition will surely increase for getting the state funding.  Therefore, each state will adopt some sort or undisputable and fair ways to slice the pie.  Some states have adopted the Performance Base Funding Model (PBFM) as we have discussed a couple of weeks ago.  For sure, more States in the country will start looking at PBFM.  Even if the size of the pie is the same over the years PBFM will be applied.  However, the pie size may not be constant from time to time.

Right at this moment, the following measurable elements are available and therefore, they will be used as the yardstick.  These elements are:

1. Core elements–Student learning outcomes: Retention and graduation rate.
2. Supplemental elements:
   1. Gainful employment.
   2. Student loans: Default and Average.
   3. Charged tuition: Average and percent of annual increase.
   4. Local contents unique to the state.

If one looks at these components, they are nothing but the CAR (College Affordable Rating) which has been introduced by the past administration.  There are cons and pros on the ways how the college ratings should be done and what elements needs to be used.  This debate will not bring anyone to anywhere.  However, the limited funding is still there.  Rather than to worry on it, better yet for colleges to prepare themselves to embrace the new reality.  Making continuous improvements on each of those mentioned elements are in deed a strategic move.

There is another alternative how a state can distribute the education budget among the State Colleges and Universities.  This concept never been applied before, and it has been written in the CAR book about four years ago.  This concept is an original work from the author and first introduced to the public on June 17, 2016.  Please cite appropriately.

About four years ago, the Association has discussed the future of student loans in the US.  Our assessment based on simple hypothesis in that future resources may not always increase parallel with time (Adam Smith, Malthus).  Uncle Sam may not have the resources to keep up with increasing demand for student loans.  However, some of these loans can be minimized, if US colleges are managed professionally, effectively efficiently and guidance by data-driven strategic information.  Our analytical analyses have shown that demand for student loans is affected by the following factors (please click here).   Today, we learned how the new administration will cut some of these loans in their budget plan.  If the law makers pass it, then demand for higher education services will decrease, at least in economic theory as shown below.  We have mentioned that such a change will have more negative effects on non-state owned higher ed institutions.  It could well be the final blow to the for-profit universities and colleges as well.  In particular, small Liberal Arts colleges or for those private institutions where their operating cost exceeds revenue.

The dire picture of private higher ed organizations in the US will even more gloomy due to the market forces.  When federal funding got chopped, less demand for higher ed will occur.  Tuition-dependent institutions such as non-state owned higher learning institutions will try to increase student enrollment to boost their tuition revenue by reducing the price.  This policy will be followed by others, for sure.  As results, tuition or price war.  The bad news is that, even after the tuition got chopped, demand may either slightly increase, constant or possibly decrease–depending on the elasticity of demand facing each institution.  The end results, as has been predicted by AAEA analytical model are that college closures and mergers will increase which are happening, right at this moment.  Limited resources, but need help?:  Click here.

Many years ago, the Association has discussed what the future of public Colleges in the US funding/annual budget will be based on.  Though, decision makers in certain states are hesitate to fully implement the model, it is just a matter of time before it got adopted.  PBFM is nothing, but a way to distribute more limited resources.  So long there is plenty for everyone, PBFM may not be needed.  Otherwise, it is a fair and one of the approaches which can be quantified to slice the pie.

Opponents of PBFM think this model works only in theory.  However, their opinion is not based on data or facts, rather theoretical personal’s view in nature.  If it is good in theory, there is a good chance that it is also good in realty.  For example, the axiom of 1+1=2.  It does not mean in reality this self-evident truth will not equal to 2, unless one can mathematically prove that the standard deviation is not equal to zero.  However, the axiom itself, and by definition is beyond proof.  Furthermore, the PBFM is a new concept and it has only been around in the last two years.  Are there enough observations to test the maintained hypothesis that PBFM does not work in reality without doing an empirical study/research?  We don’t think so.

The Model does not solely focus on students learning outcomes.  But these institutional metrics are the most measurable yardstick that can be used to slice the pie fairly.  It just happens that retention and graduation rate, among others can be quantified such that unnecessary arguments can be minimized.

These outcomes are affected by the core-competence of an institution, and it cannot be built in one academic year, but years.  Sadly. many higher ed in the US, big or small in particular Liberal Arts and smaller colleges may not know what their core competence is?.  Several contributing factors to such disadvantages are:

1. Leaderships & staff may lack of training, experience or vision.
2. Institutions are managed by BAU’s mindset i.e., follow what others are doing.
3. Failures of higher learning institutions in the US to imbed these concepts in their curricula that prepare “mature, critical and tactful” person who can be an agent of change and a true leader, instead of a faithful follower, a copycat.
4. Over confident that the future (demand for higher ed services) will not change, and that the state or federal money will always be available forever in the future, regardless of performances.
5. Management’s lack of interest on learning outcomes because it does not effect their compensation.
6. Colleges’ focus on other areas than students’ learning.