Office of Planning and Budgeting

The results of two new surveys released Tuesday reveal some of America’s views on both the future of higher education as well as its role in producing desirable outcomes, particularly career-ready graduates. Under Northeastern University’s sponsorship, FTI Consulting surveyed 263 hiring managers in July as well as 1,000 adult Americans in August.  Here are some of their findings: 

  • Americans continue to see the value in higher education, but are concerned that the system does not adequately prepare graduates for their careers. Respondents ranked “level of education” as the most important factor in determining a job candidate’s success; yet, 62 percent said colleges currently do only a fair to poor job of preparing graduates for the workforce. That said, 79 percent believe their own college education prepared them well.
  • Americans are conflicted about who has the greatest responsibility to train recent graduates for the workplace: employers (36 percent), colleges/universities (29 percent) or the graduates themselves (35 percent). When Americans were asked why U.S. companies are struggling to find good job candidates, the most common response was that companies are not investing enough in training new hires. However, 87 percent of Americans assert that higher education must change in order to maintain an internationally competitive workforce.
  • Americans and business leaders value “soft” skills, like problem-solving and communication, over “hard” industry-specific skills. Most Americans (65 percent) and business leaders (73 percent) believe that, for people on the job market, “being well-rounded with a range of abilities is more important than having industry experience because job-specific skills can be learned at work.”
  • Americans and business leaders agree that experiential learning is highly valuable to students’ careers. Nearly all Americans (89 percent) and business leaders (74 percent) believe that students are more successful in their careers if they have work experience from a field-related internship or job. Both groups agree the most important step the U.S. can take to better prepare colleges students is to broaden the professional work programs available to them.
  • Although most Americans (67 percent) think colleges should adopt new technologies and interactive teaching methods, they have doubts about MOOCs and online degrees. Less than 30 percent of Americans and business leaders believe MOOCs are of the same quality as in-person courses, and only 37 percent of Americans would consider completing a postsecondary degree solely online. However, about half of all respondents believe MOOCs will transform education in the US and that online degrees will be equally accepted by employers within 5 to 7 years.

My take-away from all this, to summarize, is:  Americans and business leaders believe that people on the job market need a college education, some professional work experience, and a well-rounded skill-set and in order to succeed. However, they also believe that colleges, businesses, and the government must play a role in helping students garner those qualifications.

It is tempting to copy and paste our post from June’s revenue forecast into this one, as the September revenue forecast cites many of the same themes: continued federal budget instability, rising house prices in conjunction with possible interest rate hikes, and likely economic losses in Asia could disrupt the slow recovery currently underway. However, modest regional employment gains, an uptick in real estate excise tax revenue, and positive personal income growth propelled collections and revenue projections $345 million higher than June’s forecast for the current, 2013-15 biennium.

Interestingly, the 2011-13 biennium closed with an estimated positive variance, $23 million higher than the June forecast.

The Governor will base his 2013-15 supplemental budget on the November forecast, so continued revenue growth will be critical. As in June, the September
revenue forecast did not include tax collections related to the sale of cannabis.

 

On Monday, the U.S. Education Department (ED) began formal negotiationson the draft language of a proposed new  “gainful employment” rule. The rule, originally published in 2011, was designed to enforce a requirement of the Higher Education Act that states career education programs—non-degree programs at all colleges and most degree programs at for-profit colleges—must “prepare students for gainful employment” in order to participate in federal student aid programs. The rule was meant to discourage these programs from misusing federal aid dollars and leaving students with debts burdens they are unable to repay. However, in 2012 a federal judge rejected major provisions of the rule, requiring that ED rethink its strategy.

Here’s a summary of the changes:

  • The proposed rule applies to programs with as few as 10 students, whereas the old rule counted only career-focused programs with 30 or more students. Because of this change, ED estimates that the new rule could cover 11,359 programs at for-profit and nonprofit colleges—nearly twice as many as the old rule covered—and that 974 of those programs (9 percent) could fail to meet the proposed standards.
  • The draft regulation omits loan-repayment as a criterion for federal student aid eligibility. The old rule severed federal aid to programs where too few students were repaying their loans or where graduates’ debt-to-earnings and debt-to-discretionary-income ratios were too high. The new rule removes the loan repayment standards, which the courts deemed “arbitrary and capricious,” and relies only on the latter two measures.
  • Debt-to-earnings calculations would be based only on students who receive federal aid, rather than students who complete the program. The old calculations were based on all students who completed the program, whereas the proposed calculations are based on any students who receive federal student loans and Pell Grants, regardless of whether they complete the program. As the rule is designed to ensure that federal aid is used effectively, this seems a more appropriate approach. 
  • Schools would have fewer chances to improve their performance before losing federal aid eligibility. Under the previous rule, programs that failed the measures in 3 out of any 4 years would be ineligible for federal student aid. However, the new rule only lets programs fail in 2 out of any 3 years before they lose eligibility.

For details, see a comparison of the two versions prepared by the Education Department.  Please continue to follow our blog as well as the Federal Relations blog for updates on this topic.

(This piece was originally posted on 07/11/2013, however it was lost due to technical issues and is therefore re-posted here.)

Last week, the Oregon legislature passed a bill that, if signed by the governor, will implement a pilot program to study the effects and feasibility of substituting upfront tuition payments with income-based, post-graduation payments. For 24 years after graduating, four-year college students would pay back 3 percent of their income and community college students would pay back 1.5 percent. Students who do not graduate would pay back a smaller percent determined by how long they were in school.

If, after several years of study, Oregon decides to adopt a plan (or some form of it), it would signify a major shift in the funding paradigm for public institutions. But that’s a big IF. The plan has received considerable criticism due to a multitude of unanswered questions that could pose significant logistical barriers. For example:

  • How would institutions and/or the state pay for the plan’s implementation (i.e. the several years of foregone tuition revenue between when a student enters school and when they graduate and start earning pay)?
  • How would the state efficiently collect accurate income data on students who move out-of-state?
  • How would the state go about collecting and enforcing payments?
  • How would the plan account for and apply to part-time students, transfer students, mid-career students, and other non-traditional students?
  • How would the plan work with federal and state financial aid programs? Would low-income students be accommodated so as to avoid creating barriers to entry?
  • How does one pilot a 24-year repayment program in just 2 or 3 years?

Even if Oregon’s higher education commission, which is tasked with implementing the pilot program, can find viable answers to those questions, the plan still has a number of possible (if not likely) negative consequences. For instance, the plan may:

  • Magnify the public’s view of higher education as a private good (only benefiting the individual) rather than a public good (benefits for many) which, in turn, could spur the continuing and problematic trend of replacing state dollars with tuition revenue;
  • Make institutions even more vulnerable to economic variations and recessions as their revenue would be tied to graduates’ earning and unemployment rates; and
  • Create social and economic imbalance between Oregon and other states since students who expect to earn less—e.g. social science and humanities majors—would be incentivized to go to Oregon, and students expecting to earn more—e.g. engineering and medical students—would likely go elsewhere.

Granted, the idea of basing college payments on graduates’ income is not a new one. Some federal student loans are eligible for income-based repayment and a program similar to Oregon’s already exists in Australia. However, Australia’s version is administered at the federal level, meaning many problems inherent in Oregon’s plan (tracking students who move around the country, imbalance between states, etc.) are avoided.

The Economic Opportunity Institute, a liberal think tank in Seattle, proposed a version of the plan for Washington in October 2012; but, unlike Oregon’s version, it has yet to go anywhere.  We’ll keep you posted.