Higher Education Bubble Vexing for Arkansas Institutions


Runaway inflation in the health care sector is obvious to every American family, but when a kid heads to college, this fact hits home: The consumer cost of higher education has inflated even faster over the past quarter-century.

It’s an intractable problem nationwide, and the headwinds in Arkansas are even stronger.

Taxpayers are picking up a smaller portion of the tab, leaving more students to borrow more and take longer to graduate (if they do). Meanwhile, the massive education infrastructure is being supported by a college-going population that has dipped slightly ahead of a looming tumble in the number of high school graduates.

“Demographic trends for higher ed are in all the wrong directions,” Michael Moore, chief academic and operating officer of eVersity, the University of Arkansas System’s new all-online institution, said last week.

Complicating the calculus further is competition for the best students, who expect generous merit scholarships even though their parents are often the most able to pay, shifting the cost to poorer students.

“That’s how I spend most of my day, every day, thinking about how can we change this equation,” Brett Powell, vice president for finance and administration at Henderson State University, said in an interview with Arkansas Business earlier this year.

No one has found a silver bullet, particularly not in Arkansas where the problems are magnified. Arkansans were less likely to go to college when it was cheaper, resulting in cultural and financial barriers to higher education now that it is dramatically more expensive.

Tuition at the state’s 10 public four-year universities increased an average of 24.1 percent between the fall of 2011 and the fall of 2016 to a smidgen more than $7,900 a year.

New data reinforces an old story: Arkansas has invested more tax dollars in higher education than most states and yet has fewer college graduates to show for it. And while there are several programs attempting to make postsecondary education more affordable, even they can only nibble around the edges.

“We haven’t developed a culture in Arkansas of college-going,” Maria Markham, director of the Arkansas Department of Higher Education, said last week. “If your parents went to college, you are much more likely to go to college because that’s what you’ve been taught to expect your whole life.”

But if one’s parents didn’t go to college — and that’s most of them, since only two states have lower college attainment rates than Arkansas — the hurdles involved in just getting enrolled can be daunting, she said.

State Higher Education Executive Officers, a national association of which Markham is a member, released last week its annual report on higher education finance at the state level for fiscal 2016, which ended last June. It underscores every single trend for public institutions:

  • Arkansas’ enrollment (measured in full-time equivalents, not individual headcount) is down by 7.7 percent in the previous five years, a bigger decline than the national average.
  • Adjusted for inflation, Arkansas’ tax appropriations per FTE were down by 5.2 percent between fiscal 2011 and fiscal 2016, much more than the national average of 0.4 percent.
  • Despite that reduction, Arkansas students continue to receive more taxpayer support than in most states by almost any measure: in actual dollars, as a share of total cost, in dollars per statewide resident and as a share of all taxes collected.

Despite the above-average investment — $1.03 billion in fiscal 2014, the most recent included in the SHEEO research — the return has been disappointing:

  • A college-going rate of 50-52 percent while the national average is 65 percent and better.
  • One of the lowest rates of college completion — 39.7 percent after six years, according to the Chronicle of Higher Education. Only Alaska and the District of Columbia have lower six-year completion rates.
  • The number of Arkansans who have a bachelor’s degree or higher remains in the cellar. The U.S. Census Bureau estimates that 21.1 percent of Arkansas residents who are at least 25 years old have a bachelor’s degree (and only 7.5 percent have graduate-level degrees). Only Mississippi and West Virginia have lower rates, and not by much.

Meanwhile, the Census Bureau heralded earlier this month that the national degree-holding rate had reached 33.4 percent last year, the first time in history that a third of Americans had four-year degrees. It’s not just a matter of bragging rights: The Census reported that average earnings (nationally) range from $35,600 for high school graduates to $65,500 for individuals with bachelor’s degrees to $92,500 for people who have advanced degrees.

Degree Completion
Those higher salaries are the reason that Arkansas has looked for ways to up that completion rate, even long after the six-year period that has become the industry standard.

Degree completion was always the primary mission of eVersity, but Moore said a funny thing happened last year when the UA’s newest institution began offering online courses for $165 per credit hour: Most of the applicants had even more college credits under their belts than administrators expected.

“Our average student has been to two schools prior to coming to us, and they are bringing in an average of 70 credit hours,” Moore said. “You have people with junior status at the university who usually don’t even have an associate’s degree. So when they go into the job market, they look like high school graduates.”

Advancing these college dropouts has been delayed while eVersity builds out more upper-level courses, Moore said, but the school’s first three associate degrees have been awarded and the first bachelor’s will be awarded this year — to a student who arrived with 150 hours of college credit, 25 percent more than required for a typical B.A.

Moore said 136 students are currently enrolled in eVersity, and that pace has picked up as more of the online courses have been rolled out. The school has received almost 1,000 applications, he said, many of them ready for the higher-level courses that are being added as quickly as possible.

And while the per-hour price is rock-bottom and Moore champions Open Education Resources — free online material in place of expensive textbooks — three-quarters of eVersity students still have some kind of financial aid, often including loans he wishes they would find ways to avoid.

“It’s a hard conversation” he said, to convince a student not to take out a loan “because at the time it looks like free money.”

The state’s newest program to try to generate more complete degrees is ARFuture, a grant program signed into law by Gov. Asa Hutchinson last month.

By diverting a few million dollars from grant programs that had not achieved their goals, the state will begin filling any unmet tuition needs in order for a student to pursue a two-year program in specific “high-demand” fields at any state community college at no out-of-pocket cost.

For many of the students, those who are eligible for other grants or scholarships, the state’s investment may be as little as $500. But removing the issue of money from the equation may be the push some students need to pursue computer science or nursing — skills for which there is demonstrated demand.

“We have a big job to do to communicate with students that it doesn’t matter how much money their parents make. If they are breathing in Arkansas, we can help them,” she said.

Disruption
Higher education, with costs inflating far faster than its market’s ability to pay, looks for all the world like an asset bubble ripe for disruption by a competitor unburdened with the legacy infrastructure of a traditional college campus.

The Western Interstate Commission on Higher Education projects flat or declining college enrollment from high school graduates until about 2025 followed by a period of decline. That is expected to create a scramble for traditional students and new attention to the adult student market.

“I do think it is fair to refer to this as a bubble,” said Moore, whose textbook-free eVersity is one kind of disruptor aimed at older students.

But that’s not all college is, said Powell, the HSU administrator who preceded Markham as director of ADHE.

“I think it’s a very realistic and viable option to have a no-frills version of higher ed,” he said. “But for the traditional college student, it’s about more than just going to get a degree so I can get a job. There’s the whole college experience, which is why [a student] lives on campus, because you don’t get that experience living with mom.”

EVersity, Powell said, is the most obvious kind of alternative. But online learning — for all its ease of access and flexible scheduling — does not fit all students or all courses of study.

“I’ve not heard of any idea along these lines, but I think you could probably translate that [eVersity] model into a physical campus, where the only thing that happens there is teaching and learning. But to make that a viable model, I think it has to be built on the back of an existing university,” Powell said.

Moore praised the employability of students who obtain certificates of proficiency from community colleges — “you can go out and get a good job in welding or HVAC” — but he’s less impressed with low-cost “microcredentials” offered by, for example, intensive coding academies and the like.

“I don’t see the employers stepping up and saying, ‘Yeah, that’s my job requirement,’” Moore said. “There has to be a match, right? When you talk to employers, there’s something about the college degree. It’s often not about what you’ve learned. It’s about sticking to something.”

Meanwhile, Markham said the most disruptive thing may be to think differently about the definition of higher ed.

“Part of the communication we need to get out to students and parents is not that everyone needs to go out and get a doctorate ... but I feel like everyone needs some kind of postsecondary education,” she said.

“I do think everyone needs college. I just don’t think college needs to have the same traditional definition that everyone is familiar with.”

Tuition Trends at Arkansas’ Public Four-Year Universities

Annual full-time undergraduate tuition and mandatory fees, 2011-12 through 2016-17

Institution 2011-12 2016-17 5-Year
Increase
Average
Annual Increase
Arkansas State University, Jonesboro $6,934 $8,200 18.30% 3.40%
Arkansas Tech University, Russellville $6,258 $8,280 32.30% 5.80%
Henderson State University, Arkadelphia $6,714 $8,116 20.90% 3.90%
Southern Arkansas University, Magnolia $6,786 $8,196 20.80% 3.90%
University of Arkansas, Fayetteville $7,173 $8,819 23.00% 4.20%
University of Arkansas at Fort Smith $5,267 $6,701 27.20% 4.90%
University of Arkansas at Little Rock $7,040 $8,633 22.60% 4.20%
University of Arkansas at Monticello $5,290 $7,210 36.30% 6.40%
University of Arkansas at Pine Bluff $5,330 $6,676 25.30% 4.60%
University of Central Arkansas, Conway $7,183 $8,224 14.50% 2.80%
Averages $6,398 $7,906 24.10% 4.40%

Source: Arkansas Department of Higher Education