College Pays Off Despite Recession

Those who graduated from college in 2008 often say it wasn’t the best time to be entering the working world. As graduates were searching for those first jobs, the economy was shedding them and the world was plunging into recession. If those prospects weren’t dire enough, many of those graduates were also carrying debt from student loans.

Those millennials, however unlucky, fared better than their non-college-educated counterparts, though.

A new longitudinal study from the National Center for Education Statistics – the primary collector of student data on the federal level – found these results by taking a sample of students who were high school sophomores in the 2001-02 academic year and tracking them through 2012. The nationally representative sample was measured for a variety of factors – co-habiting, marriage, unemployment, underemployment, student debt carried – but the economic breakdown in those categories between those who attained a postsecondary degree and those who didn’t is especially telling.

Even though the timing of graduating might not have been ideal, attaining a four-year degree was still a good economic move for these millennials, on average, according to the report, which attempted to control for outside factors in its economic modeling. Put simply, even in the face of a recession, going to college still paid off.

“Individuals with less education had higher unemployment rates, while those with more education had higher employment rates and were more likely to be working full-time,” the report stated.

By 2012, 78% of those who had earned a bachelor’s degree were working more than 35 hours a week. Eleven percent were working fewer than 35 hours, 5% were unemployed and 6% were out of the labor force.

Of the members of the cohort who only had high school degrees, 64% were employed 35 hours or more a week, with 12% working fewer than 35 hours – similar to the number of those with a bachelor’s degree – and 14% and 10% were unemployed and out of the labor force, respectively.

In addition to employment, earning power was also differentiated along educational lines. Those surveyed who had a bachelor’s degree earned, on average, $17 an hour. Those surveyed with a high school diploma earned, on average, $13.

The study notes that it’s still early to be drawing overly expansive conclusions from its data.

“It is important to note that this section only addresses cohort members’ early career and labor market outcomes,” it reads. “At age 25-26, many individuals are just starting their careers; some are still enrolled in undergraduate or graduate studies; and others will return to school for additional training later in their careers.”

Still, as the study notes, early labor data is often correlated with later outcomes.

Job Losses Have Lasting Impact

The ripple effects of large-scale job losses linger for years and can keep adolescents from attending college later in life, according to new research carrying significant ramifications for policy makers, college recruiters and counselors.

Poor middle school and high school students who live through major job losses in their region attend college at significantly lower rates when they are 19 years old, according to new research published in the journal Science. A 7% state job loss when a student is an adolescent is tied to a 20% decline in likelihood that the poorest young people will attend college.

Local job losses hurt adolescent mental health, researchers found. Job losses also cut academic performance. The negative impacts are not limited to children from families where parents lost jobs – they extend to those who witness their friends, neighbors and others in the community being affected by layoffs.

Researchers argue that large-scale job losses are not simply economic events touching directly affected families. They are community-level traumas, said Elizabeth O. Ananat, an associate professor of public policy studies and economics at Duke University who is one of the lead authors of the paper appearing in Science.

“Worse mental health and worse test scores, they are all going to be blows to you that knock you off the path,” Ananat said. “That was a difficult path to begin with.”

In the economic theory, a student may have watched their father lose his job when a mine closed. Or they watched a friend’s mother be laid off when the local factory downsized. Those students should then be drawn to a college education because of the promise of larger financial returns and more stable employment in the newly developing knowledge economy.

In other words, economic theory has tended to focus on the idea that a shrinking pool of blue-collar jobs increases the relative return on investment of a college education. But it’s not working that way in the real world.

“Economists tend to think about it as a change in relative prices – the return changes,” Ananat said. “They miss the fact that it’s an emotional blow, like another kind of community trauma would be.”

Mitch Daniels on the Future of Undergrad Education

Purdue University President Mitch Daniels doesn’t shy away from the challenges facing higher education. He embraces the opportunities and shares his insights in this one-on-one interview. Read our full interview in the latest edition of BizVoice (and the story includes a QR code link to more video of the Daniels interview). 

Students: Some Tips for Saving Money While You’re Still in School

87649503College is expensive. There is just no way to sugarcoat that. It’s not just tuition, room and board and textbooks. There are parking fees and printing fees. There’s pizza to buy, events to attend and t-shirts to order. Even with significant help from scholarships, grants and loans, my school bill is still nearly $10,000 a semester. This semester I was told I needed to buy an economics text book that would cost me almost $400! What could possibly make one textbook be worth $400?

In many ways, there is no avoiding the financial blows that college life will inflict, but I have compiled a list of eight really easy ways to save that might help ease the pain:

  1. Cool it on the Chipotle. I love the deliciousness of a burrito bowl as much as the next girl, but all of those fast food runs start to add up. Set a limit on the number of times you will eat fast food each week and then stick to it. Keep a few simple groceries in your room so that you will have the ability to avoid temptation when it strikes.
  2. Don’t buy your books from the bookstore. I totally get the convenience of it. I mean it’s right there within walking distance. But like I said, my bookstore tried to get me to buy an econ book for $400. Not cool. With just a little time management and advance preparation you can save HUGE amounts by buying your textbooks online. And that brings me to number three …
  3. It may not have to be the exact edition your professor is using. I am taking a constitutional law class this semester. The required text was the most current edition and it was over $200. I got on Amazon and bought the same book just a few editions removed for only $5. I mean, let’s be real, when was the last time the constitution changed? For the most part, “new” editions of text books are the same material just moved around a little.
  4. No more Starbucks. I love Starbucks. I mean, I love it a lot. The frothy goodness of a latte is good for the soul, but it’s also $5. Just like with the fast food runs, those pumpkin spice lattes will sneak up on you and before you know it you’ve spent $250 in one semester. (True story from my life – and no I am not proud of that.) During this season of your life, you may need to forget you ever heard of Starbucks. The lattes will still be there later when you can actually afford them.
  5. Find out where you can get a student discount. Local businesses love college students. Many places will give discounts or even free things if you just flash your student ID. Ask around your school and keep your eyes open in the local shopping venues. In addition, many national brands offer discounts to students — especially in the areas of electronics and software. And don’t forget to check into good student discounts for your automobile insurance!
  6. Don’t fall into the trap of online shopping. I know, it is so easy. You don’t even have to get out of bed. They’ll deliver it right to your door. Essentially online shopping is the greatest invention since, well, Starbucks lattes. Because it is so easy, online shopping has cost me big bucks in the past. Set a budget, tell your roommates, have someone tackle you when you pull up the Macy’s web site. Whatever you need to do, do it. Shopping therapy is not the way to get through the stress of college.
  7. Take advantage of the campus facilities. My school just built a big, beautiful recreational center and it is totally free to students. I mean kind of free… we do pay for it in our tuition. That’s the point, though; part of what we pay for in our school tuition are the great facilities and activities that our school offers. Take advantage of those rather than going out and spending more.
  8. Go to class. Okay, technically this doesn’t save you money. But it keeps you from wasting the money you are already spending. And mentally, going to class helps you learn to assign value to the investment you are making. You are paying for this class. Skipping it is like setting fire to money.

Most importantly, enjoy your time in school. Life is expensive, and college is kind of like a trial run on life. Learn how to budget now and “real life” will be much easier when the days of ramen noodles and wearing leggings as pants are gone.

Paige Ferise, a sophomore at Butler University, is interning in the Indiana Chamber communications department this fall.

Timeless Tips: I’ll Never Outgrow This Advice for College Grads

It was May 2000, I was graduating from college and I was scared to death about the future.

That period in my life was the best of times and the worst of times, as they say.

While an exciting new chapter was ahead, a painful one was underway. My dad recently had been diagnosed with cancer. There was a chance he wouldn’t be able to attend my graduation ceremony – the person who, along with my mom, had encouraged and supported me every step of the way. They cultivated from childhood a passion for learning.

Just when I thought there would be an empty chair in the crowd when I accepted my diploma, things started to look up.

My dad, weak from chemotherapy and radiation but beaming with pride, watched me graduate after all. And the following month, a phone call I made to the Indiana Chamber would change my life forever.

I inquired if there were open positions. There was one. And on June 26, I began my 14-year journey.

What a ride! I’ve honed my craft. I’ve learned from peers about the business world and – equally as important – about friendship. Beyond these doors, I’ve relished my role as a mentor to my nephews and niece as they’ve grown and now to my children.

So when I read an article today titled Five Mistakes College Grads Make When Starting Careers, it inspired me. I didn’t expect it to. After all, it was written to guide workforce rookies. But this veteran gleaned wisdom from each tip.

Do you tend to stay in your comfort zone? Do you always follow the rules? Are you intimidated by senior management? Don’t be, says the author. His anecdotes add a personal touch.

I for one will try to stop worrying so much about failing (mistake No. 5) whether it’s at work or at home (you never know, I could be the next Master Chef). It’s never too late to put fear in its place.

Complete College on Time with 15 Credits Per Semester

On-time graduation rates at public Indiana colleges and universities are staggeringly low. Only one in 10 students at two-year colleges finish a degree on time, and only three in 10 students finish a four-year degree on time, according to the Indiana Commission for Higher Education’s 2014 College Completion Reports.

The reports provide a robust, comprehensive picture of student success at each public college and university in Indiana. They include data on transfer and part-time students and disaggregated data by race, ethnicity, and socioeconomic status to focus attention on persistent achievement gaps.

Statewide, there’s a 24-point completion gap at two-year colleges between the highest-performing racial/ethnic group and the lowest-performing group. At four-year colleges, the gap is 31 points. Additionally, less than 4% of Pell grant recipients graduate on time from two-year colleges. About 17% of students receiving this need-based grant graduate on time from four-year colleges.

Why do these low graduation rates matter? First, graduating on time yields greater returns for students by lowering their cost per degree. The estimated cost of an additional year of schooling to a student is $50,000 in tuition, fees and lost potential income. What’s more: Indiana college graduates borrow over $27,000 for a four-year degree. As loan default rates rise, so does the importance of cutting college costs. The surest way to lower a student’s cost per degree is to finish sooner.

Second, institutions and the state bear significant costs for extra semesters as well, in lost productivity and additional financial aid awards. According to the College Completion Reports, four-year schools spend about $62,000 for each degree produced. About 30% of students don’t complete a four-year degree within eight years, adding to productivity losses for institutions.

Of course, for many students who are working or raising families, attending part-time may be the best option. Unfortunately, as students take additional semesters and hit state and federal financial aid limits, their probability of completing the degree declines. In fact, full-time students are six times more likely to graduate with a four-year degree than part-time students. And students who invest in their education but do not receive a diploma bear the greatest lost, reaping nearly zero return on their investment, according to the Indiana Commission for Higher Education’s Return on Investment Reports.

Fortunately, the state has made great strides on both policy and institutional levels to improve completion rates. For instance, thanks to recent reforms, state financial aid now funds completed credits rather than attempted credits to incentivize completion.

Additionally, credit creep legislation cut the number of credits per degree to 120 for four-year degrees and 60 for two-year degrees. This means students who take 15 credit hours per semester set themselves up to finish on time.

As we work to combat student loan default rates and the rising costs of college, we must continue to ask how we can use dollars more efficiently. Tackling graduation rates, and ensuring those who invest in their education complete it in the shortest time possible, is imperative to minimizing those costs.

To read institution-specific data in the 2014 College Completion Reports, visit the Indiana Commission for Higher Education’s web site.

Hannah Rozow is a senior at Indiana University – Bloomington and a student representative on the Indiana Commission for Higher Education.

Higher Ed: Putting a Dollar on Degrees Off to a Slow Start

College costs are the theme today. We've written before about the desired $10,000 degrees in Florida. The options appear to be limited with few takers thus far at the 23 state colleges (formerly known as community colleges). The savings for students would typically come at the end of their academic experience. The Sun-Sentinel reports:

A highly touted program to offer $10,000 college degrees is off to a slow start in South Florida.

The region's three state colleges accepted a challenge from Gov. Rick Scott in January to offer low-cost degrees this school year in fields where there is high job demand. But the degree options are limited, the eligibility requirements are often tough and the marketing efforts have been light.

Broward College opened the program up a month ago, but so far no one has signed up for any of the 80 open slots.

"We've gotten some interest. We haven't gotten any applications," said Linda Howdyshell, Broward College's provost. "We just started getting the word out.''

Palm Beach State hasn't started accepting applications yet. The college is still determining eligibility requirements and only plans to offer the $10,000 degree in one field, information management.

Both colleges have decided against offering discounts in nursing, one of the most popular high-demand degree fields.

"We only offer three bachelor's degrees, and the nursing one is extremely expensive," said Grace Truman, spokeswoman for Palm Beach State. "We felt the information management degree was the most workable."

Randy Hanna, chancellor for the state college system, said it's too early to measure the success of the program. He and a spokeswoman for Scott said they were pleased all 23 community colleges that offer bachelor's degrees agreed to designate at least one $10,000 degree.

"You have to have time to structure programs that meet the needs of students and the local workforce," Hanna said.

The $10,000 price tag is about $3,000 cheaper than the normal cost of tuition and fees for a bachelor's degree at state colleges, formerly known as community colleges. It's less than half of what four-year public universities charge.

Each college determines how to derive the $10,000 cost. Some schools, including Indian River State College, require students to take dual enrollment classes in high school to qualify.

At Broward College, students can sign up now, but they won't see any savings until their final year. Students must pay full tuition for their first three years, which totals about $10,000, and then they get their fourth year free.

Attainment Goals Aim to Bridge Skills Gap

Jamie Merisotis of the Lumina Foundation recently spoke with the Indiana Chamber Foundation Board of Directors. He discussed Lumina’s main goal – to increase the proportion of Americans with high-quality degrees, certifications and other credentials to 60% by the year 2025.

In the projections of what the U.S. will need in reaching the 60% goal, the number of degrees that would need to be produced between now and then is 23 million. Of those 23 million, estimates are that 10 million are credentials below the Associate's degree level.

Fifty-five percent of all Indiana jobs will require a post-secondary credential by 2018; right now, only 34% of working-age Hoosiers hold an Associate’s degree or higher. Between now and 2025, Indiana will need to produce about 600,000 more credentials than we are on the path to producing to reach the 60% goal.

IndianaSkills.com is committed to sharing current labor market data, and one main goal is to show job seekers what jobs are in demand in order to begin bridging this “skills gap.” These attainment goals are achievable with the good work of organizations like Lumina, the Indiana Chamber of Commerce, state workforce agencies and many others.

Caution Required in College Ratings Plan

Yes, the explanation gets a bit technical. But the point – although changes in the current system are needed, getting a valid set of measures in place is not going to be easy — is valid in this Brookings analysis of President Obama's announced college ratings plan. Current data gaps are only one part of the challenge.

The President’s plan, which he is touting on a two-day bus tour through New York and Pennsylvania, proposes that the Department of Education develop a new rating system that will judge colleges based on accessibility for low-income students, affordability, and outcomes, including employment and earnings.  The ratings will be developed over the next year and will ultimately be made available to students shopping for college on the White House’s College Scorecard.
 
There is clearly a need for more and better information on college quality. The current lack of transparency has created a highly dysfunctional market for higher education in which students can choose from a wide variety of institutions but often have access to better information about the amenities colleges offer than the quality of their academic programs.  Consequently, colleges compete on measures that factor into popular rankings such as average SAT scores and student-faculty ratios rather than quality and price.
 
Expanding the College Scorecard is a worthy strategy on its own, but President Obama has proposed to go a giant step further and eventually tie the availability of financial aid to the new ratings.  Students attending highly rated institutions would receive larger Pell grants and more generous terms for federal student loans. Institutions would receive a bonus grant based on the number of Pell-eligible students they enroll and graduate.  As a result, institutions would have an incentive to recruit and graduate more low-income students, and low-income students would have an incentive to attend higher quality institutions.
 
If the problem in the market for higher education is a lack of information, why does more information need to be accompanied by top-down accountability from Washington rather than the bottom-up, market-based accountability produced by the information itself?  Congressional Republicans have reacted to the president’s plan with fears of “price controls” and “standards set by Washington bureaucrats.”  But these objections miss an important point about higher education: because taxpayers are footing the bill for a significant fraction of the nation’s investment in higher education, we cannot rely entirely on consumers to incentivize institutions to operate efficiently, innovate, and generate good student outcomes.
 
But getting from a laudable set of principles to a workable set of policies is going to be hard work.  The first task is for the Obama administration to develop a set of measures of college quality that will ultimately be accurate enough to use for accountability purposes.  This is not possible with existing data, with notable shortcomings including the fact that graduation rates are only calculated for first-time, full-time freshmen (who comprise a small share of students at many institutions) and a federal law banning the government from connecting education and earnings data in order to examine graduates’ success in the labor market.  These problems are fixable, but will take significant effort and, absent a back door to earnings data, Congressional action.

States Turning Tuition World Upside Down

Recently, Oregon was the first state to propose a "Pay it Forward" college tuition plan. While many questions remain on whether the dramatic proposal is valid, that isn't stopping a legislative leader from another part of the country from recommending further study of the concept. NJ.com reports:

Under the plan, New Jersey public colleges could waive tuition and fees for students who pledge to give the state a portion of their salaries after graduation.

In theory, the idea would reduce the amount of loans students take out to go to college.

"When kids are getting out of college, they’re buried in debt," Sweeney said. "It gives another pathway to higher education. As someone who didn’t go to college and recognizes how fortunate I am that things worked out for me, you don’t want to leave things up to luck."

New Jersey’s public colleges have some of the highest tuitions in the nation. For example, the average in-state Rutgers University undergraduate will pay $13,499 in tuition and fees for the 2013-14 school year. Once room and board are added in, the total cost of attending Rutgers will be $25,077 for students living on campus.

New Jersey would not be the first state to explore the idea of delaying tuition payments.

On July 29, the governor of Oregon signed a bill to appoint a commission to study a "Pay it Forward" plan and recommend whether the state should institute a trial program.

Although details have not been finalized, proponents of Oregon’s plan have called for the state to waive tuition for students who agree to pay 3 percent of their incomes over 24 years.

Supporters say the program will help alleviate the nation’s growing student loan problem since many graduates leave college encumbered with tens of thousands of dollars of debt before they ever find their first job.

But critics say the "Pay it Forward" idea has too many holes.

While students would get free tuition and fees while they are in school, they will still have to take out loans to cover the cost of living on or off campus, buying books, paying for transportation and other costs that often account for more than half of the expense of attending college.

It is also unclear if asking students in Oregon to repay 3 percent of their income for a quarter century would cover the cost of running a college or if the schools would have enough cash to operate in the first few years of the program. Critics also questioned whether the state would be able to keep track of the incomes of students who move out of state or out of the country.