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U.S. Higher Education Confronts Historic Financial Challenges, Part II

WASHINGTON — Despite a nascent economic recovery, education advocates, policymakers and other leaders continue to sound concerns over U.S. higher education’s long-term viability and productivity.

Foremost among current worries is the financial stability of colleges and universities, particularly now that federal stimulus support has dried up.

Even while President Obama talks about boosting U.S. college completion rates to increase the nation’s global competitiveness, private and public institutions continue to struggle economically.

On March 18, Diverse: Issues in Higher Education convened an expert panel to answer the question “How Can Higher Education Solve Its Financial Problems?” Diverse co-founder Frank Matthews and former Diverse editor Toni Coleman moderated a nearly two-hour roundtable discussion among seven panelists held at the headquarters of the Association of Public and Land-grant Universities (APLU) in downtown Washington, D.C.

While its theme centered on higher education’s financial health, the wide-ranging conversation touched upon issues as varied as the institution accountability movement, federal involvement in higher education and the future of minority serving institutions.

Participants were Lezli Baskerville, president and CEO, National Association for Equal Opportunity in Higher Education; Kevin Carey, policy director, Education Sector; Dr. Lorenzo Esters, vice president, Office for Access and the Advancement of Public Black Universities, APLU; Steve Graubart, managing director of finance, University of the District of Columbia; Dr. Marshall Grigsby, president, Grigsby and Associates, LLC; Cheryl Hitchcock, vice president of institutional advancement, Morgan State University; and Jane Wellman, executive director, Delta Project on Postsecondary Costs, Productivity and Accountability. The following are highlights from the second half of the discussion:

Diverse: What are some of the major areas of waste, or areas for cost savings, that exist in higher education?

STEVE GRAUBART: Well, I can focus mostly on UDC. I’m relatively new to the higher education sector, having spent most of my work in entrepreneurial ventures or technology companies, managing and consulting, so it’s kind of interesting coming to this environment from a very different world and coming into UDC, which is going through a rapid transformation. We looked at all the studies, then we created a database of 150 potential ideas of things that we could improve in every area: academic affairs, procurement, student affairs. Coming from the private world, where you have a $150 million, $160 million business, you’d have three to four product lines. At the university, it’s 50 product lines. So we’re trying to work through efficiencies of that.

LEZLI BASKERVILLE: There are a large number of areas in which universities can engage in collaborative purchases that would reduce significantly their costs. Most HCBUs are smaller institutions, and so by aggregating their (buying power) we’re able to purchase more books at a lower cost and purchase only those sections of a book that the student will use. We’ve got collaborative purchasing in technology, in food services, in health and retirement benefits.

CHERYL HITCHCOCK: It seems like every recommendation that I make involves spending money, but you’ve got to spend money to raise money. You’ve got to spend money to try to save money. We have to invest in technology. We’re trying to go where our potential students are, and they’re on their phones and on their computers. We’re looking to do a number of things through social networking, through apps. We’re proud to say we have an iPhone/iPad app and an Android one soon to come. It’s allowing us to contact more of our younger alumni who respond to electronic communications more so than writing a letter or picking up the phone. It’s a way to reach more alumni, to reach more potential students, to market the university in a more positive light and tell our story.

JANE WELLMAN: One has to look at both efficiencies and effectiveness, and I think the standard needs to be whether the resources are going into those areas that pay off in teaching, learning, student access. We need to be thinking about academic performance and not just how we balance budgets. The budget balancing mentality has been part of the problem in fiscal management. We need to be spending probably more money in some areas to increase performance and taking some money out of other areas.

MARSHALL GRIGSBY: I strongly agree with Jane’s and Steve’s emphasis on looking at data and making decisions based on hard data. In a couple of years we are going to a whole new way of calculating student loan default rates. Based on the preliminary data, nearly 50 percent of all HCBUs are at 15 percent or higher; a full quarter of them are above 25 percent. They’re right on the threshold of creating real problems because the new ticking clock is 30 percent, and 40 percent is the automatic trigger. We also are looking at some hard data with respect to graduation rates. President Obama is talking about greatly expanding the college graduation rate, becoming number one again. And the reason for that is enhanced competitiveness in a global environment, enhanced strengthening of the economy by virtue of greater tax revenue and enhancing the strength of the military because we would have a more educated populace. Those are public benefits. Those aren’t private benefits.

Diverse: If governments establish college graduation rates as an institution’s accountability benchmark measure, can they do so in a way that’s fair to the wide variety of U.S. higher education institutions? In other words, can governments be fair to minority-serving schools, which enroll disproportionately higher numbers of low-income students?

KEVIN CAREY: I think it can. Graduation rates have to be accurate. They have to be looked at in context, and there are ways to do that. Every institution has a set of peer institutions that it competes with that it benchmarks itself against. We can look at change over time and look at how institutions are able to improve based on their own past performance. I think a smart thing to do from a policy standpoint is to set goals for institutions to graduate a certain number of students who come in needing Pell Grants or from a place of economic diversity because that means you can’t just raise your rate by not admitting students like that. We don’t want to create incentives for the institutions to shut their doors to the students who most need that access.

JANE WELLMAN: I think presidents, leaders of governing boards — the people who are responsible for trying to set higher education policy — know that they’ve got to do things differently. Are we doing it differently? We’re not. The polls tell us that the public values higher education and actually has a fairly high degree of trust in the institutions. The public gets it. They get that higher education is increasingly required for a decent life. But they’re increasingly critical of the values of the institutions. They see the institutions as being more willing to protect their own bottom lines than to pay attention to student access and success. They assume that the reason the tuitions are going up is because the institutions are spending a lot of money, and they don’t see the value of that. We do a pretty bad job of being transparent about where the money comes from, where the money goes, and what we buy with it. We’ve got to be much more evidentiary. We’ve got to be smarter about how we deal with legitimate public perceptions rather than say, ‘The public doesn’t get it.’ The public gets it fine.

LORENZO ESTERS: APLU has been working with our member institutions and partnering with the Association of State Colleges and Universities to develop our own voluntary system of accountability. Institutions volunteer to be accountable for certain outcomes and to make those transparent to the public. One of the things we have to do is a better job of telling our story.

Diverse: The possibility of HBCU mergers and closures seems to be an ongoing issue for these institutions. In this economy, are closures or mergers inevitable?

LORENZO ESTERS: Well, I think that in this economic downturn the conversation centers on HCBUs when you talk about mergers. I believe that we have to protect the mission of historically Black colleges and universities as well as other minority-serving institutions because of the unique demographic that they continue to serve. We have seen continued attacks, in my opinion, on the mission of HCBUs, and I think that’s primarily centered around underperformance. There is no reason why the conversation should be centered on HCBUs. We’re not hearing about mergers of other types of institutions.

JANE WELLMAN: And on that point, I think that looking at mergers, looking at program closures, looking at consolidations is inevitable, and it shouldn’t by any means be about underperformance as it’s perceived to be only in one sector. The Minnesota state college system is a perfect example of a place where there’s a whole lot of colleges that have high-cost centers because they don’t have critical mass. They’re small, and they’re never going to grow. So it’s a legitimate conversation and an inevitable one. The issue should never be on academic performance only. It’s got to be about institutional viability and whether the structure is there.

MARSHALL GRIGSBY: And as Jane points out, it’s not new. There have been mergers. UDC is a merger. Clark-Atlanta University is a merger. There have been lots of mergers that have taken place and will take place in the future. The real question is how do the two, three, or whatever number that got merged in fact end up being a stronger institution and keep the focus on the mission of the institution. I think those are important factors. It’s not just that merger is a bad word per se.

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