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Forbes examines the “faulty economics” of higher education

October 30th, 2015 | No Comments | Posted in Education

As the presidential primary season goes into full swing, candidates in both parties are championing a number of ideas designed to address the higher education affordability crisis. The proposals run the gamut—from federal measures to impose greater accountability on universities, to income-based repayment of student loans, to community college for free, and to four-year college for free.

But while the proposals differ, their differences are less important than what they share. What they all have in common is a fundamental misunderstanding of what’s driving the crisis that all sides seek to solve.

They fail to understand that the factors composing the dilemma we face—tuition hyperinflation, burdensome student-loan debt, and poor student learning—are to some extent branches of the same tree, whose roots are found in the well-intentioned but what has proved to be catastrophically naïve assumption that virtually all high school graduates should go to college. Charles Murray has written eloquently on this topic in his book, Real Education, which I reviewed here.

We can see the destructive effects of the college-for-all agenda when we look more closely at each of the elements of our higher-education crisis mentioned above—affordability, debt, and poor student learning.

When it comes to the increasing unaffordability of higher education (average tuitions have risen 440 percent in the past quarter century, far outpacing contemporaneous increases in general inflation), there is a growing consensus that the policies of the federal government itself have caused a good deal of the unprecedented spike. How? A recent study by the Federal Reserve Bank has confirmed what former U.S. Secretary of Education saw nearly thirty years ago, when he observed that increases in government subsidies to college students allow colleges and universities “blithely” to hike tuitions. The Federal Reserve Bank has found that every new dollar of Pell Grants or subsidized student loans results in universities raising tuitions between 55 and 65 cents.

What led the federal government to adopt and then repeatedly expand taxpayer subsidies for student loans? Without them, the country could not hope to reach its new goal of ensuring that all who want to go to college could afford to do so. This began as the more reasonable and defensible goal of subsidizing able students who were poor. But the subsequent iterations of the loan-subsidy program have expanded it to include a good number of students from families who are not poor. In time, the flawed premise animating these programs metastasized to such an extent that the results have been no less than scandalous. A recent report on the practices of Georgetown University makes this point. The elite law school counsels its students on how to manipulate the Income-Based Repayment Plan to shift large portions of their student-loan debt onto the backs of taxpayers.

Bearing this in mind, the crisis of crushing student-loan debt comes better into focus as both a cause and an effect of tuition hyperinflation. It exists as an effect because would-be college students and their parents, struggling to keep pace with rising tuitions, have been forced to borrow at historic proportions. Today, for the first time in our history, total student-loan debt, which stands at $1.2 trillion, exceeds total national credit-card debt, and this in a country fairly addicted to credit cards. It exists as a cause for the reasons stated earlier: When more money is in the hands of consumers, they will buy more; when they buy more, sellers will raise prices. Yet this simple fact of economics appears lost on those who have criticized Bennett’s hypothesis for nearly three decades—and appears still lost on those whose “solution” to the debt crisis is to quench the fire by dousing it with ever-greater quantities of inflammable student-loan subsides, paid for by federal taxpayers.

In short, when the national goal became college for virtually everybody, it sent millions more flocking to college campuses than had previously been the case. This increased demand, enabled by federal subsidies, could not help but to produce the sharp increases in tuitions—and with them, a concomitant increase in debt—that students and their parents have suffered under since.

But the drive to make college accessible for virtually all high school graduates has had an even more profound, and more destructive, consequence than the financial quagmire described above. The most tragic effect has been the decline in student learning. Sending millions more students to college has proved to cost more than mere money. As Murray accurately notes, a genuine liberal arts and sciences core curriculum—a staple of higher education institutions up until roughly fifty years ago—is too difficult for more than about 20 percent of high school graduates. What, then, to do when the goal became sending far more than this percentage to college? Inevitably, this could not be accomplished without lowering standards. Today, most universities have abandoned a required core curriculum, replacing it with “cafeteria-style” education—a little of this, a little of that, but nothing by way of a unified vision of the good life at which liberal education had aimed in the past.

The heartbreaking results of this lowering of standards have been documented in Arum and Roksa’s Academically Adrift, which should have stirred higher education more than it did when it revealed that 36 percent of college students nationwide show little or no increase in fundamental academic skills—critical thinking, complex reasoning, and clear writing—after four years invested in college.

Other national, longitudinal studies confirm the dramatic decline in university standards. For example, in the early ‘60s, college students studied an average of 24 hours a week alone. Today, that number has slipped to 14. Equally alarming, these less-diligent students receive historically high grades. Fifty years ago, “A” grades went to 15 percent of college students nationwide. Today, an A is the most common grade given in college (43 percent). Moreover, 73 percent of all grades awarded today are either A’s or B’s. Given these lax standards at universities, it is unsurprising that Arum and Roksa found what they did.

But even this massive, decades-long, watering-down of college curricula and grading standards has not succeeded in fulfilling the unfulfillable vision of college for all. Consider these facts: Roughly half of all who enroll in college never graduate. Of the half who do, we know from Academically Adrift that 36 percent fail to demonstrate any substantive increase in learning. This means that, of all the students who enroll in college, only 32 percent succeed in acquiring both a degree and the knowledge that a degree is meant to signify.

As bad as these statistics are, they barely communicate the true human toll exacted by our utopian project. Today, those without college degrees feel like second-class citizens. With this has come a denigration of the mechanical and other talents needed to succeed at skilled trades, which, on average, can pay well.

Worse, those students who, contrary to their interests and aptitude, feel compelled by public pressure to attend college, only then to drop out, suffer a double-blow. They are left not only demoralized by their “failure,” but also often find themselves burdened with student-loan debt, which is all the more difficult for them to repay because they do not have a degree.

Higher-education reformers look at this bleak picture and wonder why all the ostensible solutions to the higher-education crisis serve only to double-down on the misguided premise that produced the crisis in the first place. Until and unless we jettison our utopian expectations, increasing numbers of students will continue to pay more and more and learn less and less.

By Tom Lindsay
Aug 29, 2015

Retiring St Clair president speaks out on government funding

October 29th, 2015 | No Comments | Posted in Canada, Education

John Strasser is retiring as President of St Clair College after 15 years in that role. Both the Windsor and Chatham campuses have grown substantially during his tenure, with major construction projects and increases in enrolment. In a final interview with, Strasser spoke out, expressing his frustration that the federal and provincial governments do not fund colleges and universities equally. “Many of the policy makers and decision makers are university trained, and I understand that. But St Clair College produces a higher quality graduate than many, many universities in this country,” said Strasser. “To sit there and make smug decisions that if universities did it then it must be better. It’s incorrect. It’s just taking a status that’s probably 50 years past its prime and recycling it.”

Dr. John Strasser is spending his last day on the job meeting with college officials in both Windsor and Chatham.

Strasser admits he’s had offers from some organizations, but says he’s taking a pause on making any decisions. Instead, he’s looking forward to spending time at his family’s cottage in Cape Breton.

During his tenure, campuses have both grown substantially with the addition of the Ford Centre for Excellence in Manufacturing in Windsor and the Mary Uniac Health Science Education Centre in Chatham. Enrolment also grew to about 7,000 full-time students in Windsor and 1,300 in Chatham this past school year.

In his final interview with, Strasser expresses frustration colleges and universities aren’t funded equally by federal and provincial governments and hopes that changes in the future.

“Many of the policymakers and decision-makers are university trained, and I understand that. But, St. Clair College produces a higher quality graduate than many, many universities in this country,” says Strasser. “To sit there and make smug decisions that if universities did it than it must be better. It’s incorrect. It’s just taking a status that’s probably 50 years past its prime and recycling it. There’s no logic that defends that.”

Should governments ever give colleges and universities equal funding, Strasser suggests equipment would be one good investment.

“There’s no sense in giving a post-secondary institution funding to build a $50 to $100-million building and then have lab equipment that’s from the 1960s.”

On Tuesday, senior vice-president of college operations, Patti France takes over as president.

France is the first female head of the college and climbed up the ladder, starting out in a support staff position in the Registrar’s Office more than 25 years ago.

“She’ll do a terrific job,” said Strasser.

By on August 31, 2015, Blackburn News


College breaks record for undergraduate alumni donations

October 28th, 2015 | No Comments | Posted in Fundraising

Over the past fiscal year, the College of William and Mary broke previous fundraising and alumni giving records, raising a total of $105.8 million with more than 27.1 percent of alumni donating. The 2014 fiscal year marks the fourth time that the College has raised more than $100 million, and the third consecutive year breaking the alumni participation record.

Increasing alumni participation has been a key goal of University Advancement, the group dedicated to boosting support for the College among alumni and other groups and institutions. According to Vice President of Advancement Matthew Lambert ‘99,University Advancement have set a goal of reaching a participation rate of 40 percent, which would give the College the third highest participation rate nationwide among universities, behind only Dartmouth College and Princeton University.

Lambert attributed the rise in alumni participation to various programs University Advancement has initiated to boost alumni giving, including One Tribe One Day, the Class Ambassador Program and others. This increase in giving at the College goes against a national trend of decreasing alumni participation.

“We are not only bucking the national trend which shows decreasing support nationwide, we are actually increasing our participation rate and remind alumni, parents and friends that every gift counts and makes a difference,” Lambert said in an email. “We want every student and alum to make a gift every single year, no matter how much.”

Daniel Frezza, Assistant Vice President of Lifetime Philanthropic Engagement and Annual Giving also attributed the increase in alumni participation to the William and Mary Alumni Association.

“Increasing alumni participation is actually a byproduct of a strong culture of engagement and philanthropy,” Frezza said in an email. “The alumni association has been a critical partner in developing the engagement aspect of that culture. From the support of chapters and volunteers to the concerted effort of our staff, the common goal has been engagement and philanthropy at the College.”

Frezza also discussed the importance of philanthropy in helping to support the College and its mission.

“William & Mary is a very special place to all members of the Tribe, we have an amazing story that has existed for over 320 years and it is one that thousands believe in and want to support,” Frezza said. “We must be stewards of that generous support and provide ample opportunity for it to grow.”

In a press release from University Advancement, College President Taylor Reveley praised the recent accomplishments made in both increasing money donated to the College and the increase in number of alumni participating.

“Last fiscal year provides a powerful example of our alumni and friends coming together to support William & Mary. These accomplishments reinforce how the alumni of this 322-year old institution refuse to rest on their laurels but rather continue to make history every day,” Reveley said.

The average donation to the College was over $1700. Donations made to the Fund for William and Mary are used for the College’s highest priorities. The Fund is the College’s largest pool of unrestricted funds used for general upkeep and the most pressing needs. It is also used to enhance the James Monroe Scholars Program offered to the the top admitted to the College. All other gifts are donor-directed and can only be spent on what the donors designate.

Private and corporate donations totalled $7.5 million for varied purposes. The Andrew W. Mellon Foundation awarded the College $2.6 million to establish a program of faculty fellows in honor of Reveley for increased collaboration between disciplines.

Written by August 20, 2015
The Flat Hat – The College of William & Mary

Flat Hat News Editor Amanda Williams contributed to this article.

Acquire, Renew, and Upgrade – Connecting With Donors Raises More Money

October 27th, 2015 | No Comments | Posted in Fundraising

During a webinar I recently attended, one of the participants said, “Isn’t that all there is to fundraising – acquire, renew and upgrade?” On a very simplistic level, he was right.

Acquiring new donors is a necessity. You always want to grow your database with prospective donors and new donors. The reality is that no matter what you do some donors will quit giving. They might move on to other interests or they might move to a different community. Some will even pass away. You want more donors coming into your organization than leaving it. Based upon current research that is not what is happening in most nonprofit organizations across the country.

Connecting with Donors

In order to renew and upgrade donors there is an additional element at play – relationship building. Unless your organization has done something to connect with the newly acquired donor, to build the relationship between the donor and your organization, then renew and upgrade are most likely not going to happen.

Building that relationship, connecting with donors, begins immediately upon receipt of the charitable donation. When you receive the donation and immediately pick up the phone and call the donor to say thank you, you have created the first step towards having a lifetime donor. This action should then be followed by sending a thank you letter. Two very easy steps, that take very little time, and yet, are often the determining factors as to whether that donor will ever give to your organization again.

Research over the past decade by Penelope Burk, Cyrus Research, and Adrian Sargeant, Indiana University, has demonstrated the critical importance of phone calls and thank you letters for donor retention. There are no guarantees that you will retain 100% of your donors, in fact, you probably will not. However, you will have a much greater possibility of beating the 2014 national donor retention rate of 46%.

If you want to raise more money, a suggestion would be to acquire, connect, renew and upgrade.

/in , ,   – Matchmaker Fundraising Software/by

Facebook Adds ‘Donate Now’ Button to Make Giving to Charity Easier

October 26th, 2015 | No Comments | Posted in Fundraising, Social Media

Facebook for Business announced in a post that it has added “Donate Now” as a call-to-action button available for Brand Pages. These buttons can now appear right on a Facebook Brand Page, or directly within an ad on the site.

“Now, it’s easier than ever for nonprofits to connect with people who care about their causes and encourage them to contribute through the website of their choice.”




Facebook introduced the call-to-action button for Brand Pages in December of last year, which are designed to drive a company’s many fans to take further action beyond Liking a page. These buttons include “Book Now,” “Shop Now” and “Contact Us” buttons, and appear right alongside the Like Button at the top of a Page.

This button also seems like a more permanent iteration of the one found when Facebook rallied users to donate to the Nepal earthquake in April of this year. Facebook offered a pop-up to a blog post that had a “Donate” button, and offered to match up to $2 million. In total, the company says that Facebook users raised more than $17 million to help rescue and rebuilding efforts.

These buttons generally link to an off-site page, so nothing is actually done within Facebook proper. This extends to donations — the “Donate Now” button available on the ALS Association Facebook Page (of Ice Bucket Challenge fame) simply redirects to the donation page on the company’s official site, with a referrer tag in the URL.

Facebook also places a disclaimer on that button, advising its users that the donations aren’t affiliated with Facebook.

This new addition is a boon for charities who are looking to use engagement to drum up donations and capitalize on viral moments, as the ALS Association did last year.


by Lauren Hockenson
August 24, 2015
TNW News

YorkU profs publish how-to guide for university life

October 23rd, 2015 | No Comments | Posted in Education

Two York University professors have published a book advising students on almost every aspect of university life, particularly the choice of programs and the job skills they might learn in them. In addition to advice on studying for exams and managing stress, the book contains sections on how to navigate the job market after graduation and an entire chapter on how to use social media to its best advantage when building a career. The authors add that the book covers everything from taking on the day-to-day tasks of university life to stepping back and thinking of higher education as one component of a successful and fulfilling life. The book is available for purchase as a paperback or as a free ebook.

The secrets of succeeding at school are a turn of the page away.

Political science Professor Thomas Klassen and humanities Professor Emeritus John Dwyer lay out the secrets to success for university students in their new book, How to Succeed at University (And Get a Great Job!): Mastering the Critical Skills You Need for School, Work and Life.

Their book is aimed at students of all kinds – those entering university straight from high school, mature students returning to school years later and everyone in between. Moreover, it is an ideal resource for anyone concerned with student success, including parents, teachers and counsellors.

“For students who decide to pursue a university education, the years spent on campus are the best training for the rest of life,” says Klassen. “The skills learned in the classroom – communication, problem solving, teamwork and adaptability – are critical to flourishing in the ‘real world.’  In the book, we show how to be smart and strategic about preparing for the job market and translating the skills learned at university into something sought-after after graduation.”

In the book, the authors not only tell students what to do, but show them. Real-world examples and strategies are used to combat the disconnect students feel between the classroom and the outside world. In the chapter titled “University as Preparation for a Great Job,” Klassen and Dwyer break down how to select courses and what job-related skills can be learned from class. When he was a university student, Dwyer says he wishes he had known “how absolutely exciting and life-changing studying with great scholars and teachers could be.

“It was three-and-a-half years before that dawned on me,” Dwyer says. “I initially saw university as an ordeal to be gotten through. When I learned what really counted, everything changed for me.”

Klassen adds that enrolling in the courses for which a student has passion is the best way to ensure success at school and in the workplace.

The book provides practical advice for mastering the day-to-day tasks of being a student, including writing assignments such as essays, lab reports and exams. The authors then focus on developing research strategies and critical skills, which can take students from the classroom to the boardroom and beyond.

Thomas Klassen

Thomas Klassen

With their insider perspective, the authors give tips on preparing for exams, answering multiple-choice questions, running short of time on tests and managing stress. They show that writing an A essay is a process that follows a small number of steps. Klassen and Dwyer also reveal how to avoid the most common mistakes in school work. For example, many students unintentionally sabotage their essays by failing to write a proper conclusion, and there is a simple strategy to avoid doing so.

This book’s usefulness doesn’t end at graduation. The chapter “Finding and Getting the Great Job” outlines the art of getting hired, from the importance of networking to conquering job interviews. In the last chapter, “Success at Work and Beyond,” the authors address transitioning into that first post-graduation job and planning for further success.

John Dwyer

John Dwyer

Dwyer says the book is also relevant to non-university students.

“It’s the new reality that learning is lifelong,” he says. “Moreover, learning has never been exclusive to university. Learning in any situation is a set of attitudes, aptitudes and strategies that can apply to all routes. It is fascinating to me that the book speaks to the parents of students, many of whom never went to university.”

An entire chapter is devoted to managing social media, including how individuals can brand themselves and how to use social media to build relationships. The authors use Internet dating as a metaphor for finding a good match between a potential employee and employer.

“To our knowledge, the chapter about social media – email, Facebook and more – is unique to the book,” says Klassen. “Like any other tool, people need to learn how to best use and manage social media, and how to use it to their advantage, especially at school and when looking for a great job.” A recent York University study reinforced the importance of a job seeker’s online presence in being hired.

How to Succeed at University (And Get a Great Job!) is available in stores, including the York University Bookstore, and from online retailers. Electronic copies are available for free on the publisher’s website.

YorkU | Full Book

Majority of students run out of money before school year ends

October 22nd, 2015 | No Comments | Posted in Education

According to a new poll conducted by CIBC, 51% of postsecondary students turned to their parents for additional financial support last year after running out of money. Furthermore, there was no significant difference between higher-income and lower-income students. 86% of parents surveyed considered themselves good financial role models for their children. “Some children are treating their parents as their personal ATM,” said CIBC’s Sarah Widmeyer. “But they need to understand that mom and dad may not always be willing or able to dispense extra cash. Teaching children basic financial and budgeting skills before they go off to college or university is essential.”

Key findings of the poll include:

  • 51 per cent of parents with children pursuing a post-secondary education say their children have asked for additional financial support or assistance last school year because they ran out of money.
  • 86 per cent of parents believe they are good role models when it comes to financial planning.

“Some children are treating their parents as their personal ATM,” says Sarah Widmeyer, Managing Director and Head of Wealth Advisory Services, CIBC. “But they need to understand that mom and dad may not always be willing or able to dispense extra cash. Teaching children basic financial and budgeting skills before they go off to college or university is essential.”

“Clearly, being a good financial role model doesn’t mean your children will understand how to manage their own finances,” she adds. “That’s why it is so important to teach them the importance of balancing a budget in their early teens because it’s a much a tougher lesson to learn when they are off living on their own for the first time in their lives.”

Having the talk: What parents can do to initiate the conversation

The poll results show that overrunning a budget is common with students from all financial backgrounds:

  • Students from families with a household income of less than $75,000 demonstrated a similar lack of budgeting skills (52 per cent asked for money) as those from families with an above-average household income of more than $125,000 (48 per cent asked for money).

Ms. Widmeyer suggests parents be proactive and make time to discuss finances with their children. “It is important that children understand what happens if they run out of money or into other financial problems before they go off to school as opposed to after it happens.”

Parents should make sure their children understand that there may be unforeseen events in life that result in financial challenges, adds Ms. Widmeyer. But they should also raise the expectation that if their kids do call in for more money, they should be prepared to share their expense tracking to demonstrate they can account for their spending.

“If your children ask you for more money, you should sit down with them and create a budget that shows how they plan to use the extra funds and how they plan to manage for the remainder of the school year.”

A great way to ensure children grow up to be financially literate is to involve them in the family’s financial matters early on. This could be planning a vacation budget, paying monthly bills, or reviewing a credit card statement together.

Off to school soon? Five tips for students to successfully manage their finances

For those students either starting or returning to school next month, Ms. Widmeyer offers advice on how to successfully manage their personal finances away from home:

  1. Distinguish between needs and wants: Are you spending your money on things you need – such as food and housing or tuition and textbooks – or on things you want – like pizza, beer, the latest smartphone or tickets to a concert? If your funds are limited, make sure you fully cover your necessary expenses first and prioritize your non-essential expenses.
  2. Draw a budget: Itemize your monthly expenses and add your total monthly income, including any loans, scholarships or money earned from part-time jobs. This will provide you with a clear picture of where your money is going. Make sure your budget is balanced by either reducing expenses or securing additional sources of income. Many financial institutions such as CIBC provide a free student budget calculator that will help you put together a budget.
  3. Manage your cash flow: Simply said – you cannot spend more than you have. Checking expenses against the amounts reserved in your budget and sticking to them will help you avoid overspending and getting into debt.
  4. Borrow responsibly: Using a credit card will give you more payment options and added financial flexibility. However, a credit card isn’t free money and you should charge only what you can afford to pay back. Reduce your credit limit to a low level to keep yourself from spending money you don’t have.
  5. Start building credit: Paying back bills, such as your credit card or cell phone bills, in a timely manner will help you establish a good credit history. A good credit history is important once you apply for any type of loan, such as a car loan or a mortgage.

“Starting school can be an exciting experience, but at times be daunting. Being responsible for your finances for the first time may add extra stress,” says Ms. Widmeyer. “With some basic financial skills and a proper budget, students can manage their finances successfully and get a head start into their adult life.”

Key Poll Findings:

Percentage of Canadian parents who have saved or are currently saving for their children’s post-secondary education:

Yes 70%
No 30%

Percentage of Canadian parents who have been asked by their children for additional financial support last school year:

Yes 51%
No 49%

Household income of those who were asked for more money:

Were asked
for more
Less than
$50,000 to
less than
$75,000 to
less than
$100,000 to
less than
$125,000 or
Yes 55% 49% 53% 52% 48%
No 44% 51% 47% 47% 52%
Don’t know 1% 0% 0% 1% 0%

Percentage of Canadian parents who consider themselves a good role model for their children when it comes to financial planning:

Yes 86%
No 14%

From August 13 to August 17, 2015, an online survey was conducted among 1,001 Canadian parents who are Angus Reid Forum panelists. The margin of error – which measures sampling variability – is +/- 3.1 per cent, 19 times out of 20. Discrepancies in or between totals are due to rounding.
The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population. 


CIBC is a leading Canadian-based global financial institution with 11 million personal banking and business clients. Through our three major business units – Retail and Business Banking, Wealth Management and Wholesale Banking – CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. You can find other news releases and information about CIBC on our corporate website at


Congress must prevent US universities from hoarding money, says law prof

October 21st, 2015 | No Comments | Posted in Education

WHO do you think received more cash from Yale’s endowment last year: Yale students, or the private equity fund managers hired to invest the university’s money?

It’s not even close.

Last year, Yale paid about $480 million to private equity fund managers as compensation — about $137 million in annual management fees, and another $343 million in performance fees, also known as carried interest — to manage about $8 billion, one-third of Yale’s endowment.

In contrast, of the $1 billion the endowment contributed to the university’s operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at four other endowments I researched: Harvard, the University of Texas, Stanford and Princeton.

Endowments are exempt from corporate income tax because universities support the advancement and dissemination of knowledge. But instead of holding down tuition or expanding faculty research, endowments are hoarding money. Private foundations are required to spend at least 5 percent of assets each year. Similarly, we should require universities to spend at least 8 percent of their endowments each year.

University endowments have surged in recent years as markets recovered from the financial crisis. Yale’s endowment now tops $24 billion, up 50 percent from 2009.

Income inequality has left elite endowments heaving with cash. Following the tradition of Gilded Age philanthropists like Rockefeller, Carnegie and Vanderbilt, financiers are steering large charitable gifts to elite universities.

Kenneth C. Griffin, a hedge fund manager, gave Harvard $150 million in 2014. In May of this year, Stephen A. Schwarzman, the chairman and co-founder of the private equity giant Blackstone, pledged $150 million to Yale toward a new student center. John A. Paulson, another hedge fund manager, topped them both when he gave Harvard $400 million in June.

While nobody has suggested that quid pro quos were involved in these cases, these gifts highlight the symbiotic relationship between university endowments and the world of hedge funds and private equity funds.

Investors compensate fund managers through an arrangement known as “2 and 20,” referring to a 2 percent annual management fee and a 20 percent share of the investment profits, or carried interest.

The arrangement is doubly beneficial, from a tax perspective: Many institutional investors, including universities, are tax-exempt, and fund managers’ carried interest is taxed at lower capital gains rates instead of ordinary income rates.

Universities won’t disclose the amount of carried interest paid to fund managers. But one can estimate the amount by hand-collecting data from annual reports, financial statements and tax forms, as I did for the Yale figures above.

Despite the success of its endowment, in 2014 Yale charged its students $291 million, net of scholarships, for tuition, room and board.

In 2012, Harvard spent about $242 million from its endowment on tuition assistance; in 2014, it paid $362 million in private-equity fees, and nearly $1 billion in total investment management fees.

Smaller institutions aren’t any better. The University of San Diego, where I teach, spent about $2 million from the endowment on tuition assistance in 2012, compared with $5 million in private-equity fees in 2014 and $13 million in overall investment management fees.



Endowment managers argue that premium fees offer premium performance. It’s true that, over the past 20 years, under the brilliant guidance of its chief investment officer, David F. Swensen, Yale’s private-equity portfolio earned an astounding 36 percent per year. It’s also true that Yale’s financial aid policy is generous, and that Yale spends money from its endowment on things that benefit students indirectly, like buildings, faculty salaries and research. In the 2014 fiscal year, Yale’s endowment provided $830 million for expenses including funding professorships, subsidizing research and maintenance.

But the amount universities pay to private equity reveals the deeper problem: We’ve lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university’s endowment. The private-equity folks get cash; students take out loans.

As part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal.

Eight percent is not as scary as it might sound. Remember that endowments benefit from new gifts as well as investment returns. The average endowment, small or large, has grown by 9.2 percent per year over the last 20 years, even after accounting for annual spending of about 4 percent. Last year, only 14 of the 447 university endowments with assets over $100 million failed to net at least 8 percent growth.

Under my proposal, endowments would grow, only at a slower pace. They would shrink when markets crash, but recover, and then some, when the market rebounds.

Think about it this way. In 1990, Yale’s endowment was worth about $3 billion. If my suggested spending rule had been in place, it would be worth about $10 billion today, instead of $24 billion.

But under my proposal, the sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities. Donors would see the tangible benefits of philanthropy. Only fund managers would be worse off.


Microcredentials could pave the way forward for online education providers

October 20th, 2015 | No Comments | Posted in Education

Udacity and Coursera have both recently announced industry partnerships to develop microcredentials—termed “nanodegrees” and “microdegrees” in each respective organization’s parlance. In both cases, the online education provider works with an industry partner, such as Google or Instagram, to create a narrowly tailored series of courses designed to develop a particular career skill. The credentials respond directly to a perceived industry need and serve as proof that the holder has demonstrated competence in skills identified as necessary to success by the industry partner. A recent Brookings Institution report said that offerings like these are part of a trend that could result in “a radical shakeup of higher education.”

Udacity created quite a buzz at the annual Google I/O conference this year when the for-profit online education provider unveiled its new Android Developer Nanodegree program. Created in close cooperation with Google, which owns the popular mobile operating system, the program is designed to provide software developers with the skills they need to build Android applications and a credential to prove to potential employers that they have those skills. Udacity later made the headline-grabbing announcement that it will refund half the tuition ($200 per month) for students completing the program in 12 months.

The Android nanodegree is the sixth member of Udacity’s young lineup of industry-led, career-oriented, online certification programs, but it’s not surprising that the launch of this one would draw so much attention. There are about a billion active Android users worldwide, and consequently, something approaching urgent demand for Android developers. But this high-profile launch also raises again the question of where these kinds of programs fit in the post-secondary educational landscape, and whether such focused learning programs might finally emerge as a disruptive force in higher education.

Udacity has trademarked the term “nanodegree,” but the concept of an institution-agnostic microcredential isn’t new and the company isn’t the only cutting-edge provider — it’s not even the first to work directly with Google. Earlier this year, Coursera announced partnerships with Google, Instagram and others to provide a series of “microdegrees.”

“Certificates have been around for a long time,” said Alexander Halavais, associate professor in the School of Social and Behavioral Sciences at Arizona State University, “offered either on the industry/trade side, or in conjunction with university extension programs. In fact, the push of ‘university extension’ is well over a century old, and it was intended to break down some of the medieval structures of university education and make them more widely available.”

But in a recent report, Stuart Butler, a senior fellow in economic studies at the Brookings Institution, a nonprofit public policy organization based in Washington, DC, pointed to the Udacity and Coursera certificate programs as examples of a trend that could result in “a radical shakeup of higher education.” In particular, he wrote, the companies’ partnerships with industry and potential employers could represent “a game-changer.”

Udacity COO Vish Makhijani couldn’t agree more. “That’s what makes these programs different,” he said. “For our Web Front-End Developer program, for example, we worked directly with AT&T, which was trying to hire a ton of entry-level front-end Web developers. They knew exactly what kind of person they needed, so we knew exactly how to build a curriculum to generate those competencies. For the Data Analyst program, we worked with industry innovators dealing with big data, companies like Facebook, Twitter and MongoDB. Google spent thousands of hours working with us to develop the Android program; we worked directly with the source.”

Makhijani said partnering with potential employers effectively answers what was considered a critical question raised by the advent of massive open online courses (MOOCs): Will employers take these certifications seriously? The challenge to providers of online micro-certifications, he said, is twofold: earning the trust of students and maintaining a relevant curriculum.

“We boil things down to their essence,” he said. “That’s kind of what a nanodegree is. We’re telling students, this is exactly what you need to know to be in that job. And we absolutely have to deliver that. And students have to see a clear linkage between us and real job opportunities. Relevancy matters most to us.”

Udacitiy’s nascent nanodegree curriculum is the result of a strategic pivot by CEO and co-founder Sebastian Thrun, whose company had been one of the leading providers of MOOCs for higher education. In 2013 Thrun abandoned the MOOC, declaring that his company had “a lousy product,” and announced plans to shift its focus from higher ed to corporate training.

“Sebastian made a quick move from MOOCs to something that had a business model behind it,” said Cathy Sandeen, chancellor of the University of Wisconsin Colleges and University of Wisconsin-Extension and a former vice president at the American Council on Education. “I don’t see [the nanodegree programs] as a new or unique type of education, but he’s doing to it in a high-quality way, and he’s positioning himself to move quickly and with great agility into new areas. He focused on the professional development market and high-end IT computer science area, where there’s rapid innovation, which was smart. So was his decision to partner with other entities to develop curricula.”

Thrun also entered a market that is increasingly open to the idea of hiring certifiably skilled people who lack four-year degrees, Sandeen said.

“A growing number of industries are open to the idea of employing people with portfolio backgrounds — that is, people without four-year degrees who have done different things and can show you what they’ve done,” she said. “We see it in tech industries, especially software development, but also in creative industries — Web design, graphic design, screen writing — jobs that have traditionally been open to people who have followed different sorts of educational pathways other than the traditional four-year degree. I think we’ll see more and more certification programs that may appeal to those industries.”

Makhijani doesn’t expect Udacity’s nanodegree curriculum to have much of an impact on higher education, given the kinds of students the programs are attracting. “The bulk of our students today are people who are switching lanes,” he said. “Say, you’re a marketing person and you want to become a developer because you see better career prospects. That’s more typical of our students today.”

In other words, even people who earn a degree are going to be adding to it with additional certifications throughout their lifetimes, Sandeen said.

But Halavais sees micro-certifications seeping into the higher ed process even earlier. “It used to be that certificates were mainly meant for those who had already completed a bachelors degree and needed either continuing education for professional licensure or, often later in life, to pursue new intellectual challenges,” he said. “That’s changed. Now we see undergrads seeking out certificates while they are completing their degree, or — as in the case of ASU — completing the equivalent of ‘pre-bachelors’ programs to try out the university before continuing on.”

And that portfolio model may be influencing how higher ed approaches transcripts. The University of Wisconsin Colleges and Wisconsin Extension, for example, are participating in the Lumina Foundation’s Extended Transcript Project, which aims to build and test a first-of-its kind “credential registry.”

“We’re looking at a new form of transcript that will validate learning through life experience,” Sandeen said. “It’s part of a larger trend to capture students’ experience, college degrees and industry certifications for a richer transcript.” The registry will use a Web-based system with information provided directly by the institutions issuing the credentials, she said.

“Right now, universities generally lack interoperability,” Halavais said. “They are like old-fashioned Macs losing out to the openness of Windows and other platforms that made it easier to ‘plug-and-play.’ Folks are coming to realize that the transcript of the future has to be plug-and-play.”

“But this doesn’t mean that we are going to lose the four-year bachelors any time soon,” he added. “It just means that those four-year programs that are best able to integrate with ‘nano-,’ ‘micro-,’ and ‘meso-’ certificate programs will be more likely to thrive.”

By John K. Waters
Campus Technology

Millennials should move home to get ahead, says financial expert

October 19th, 2015 | No Comments | Posted in Education, Student Loan Debt

Christine Romans, Chief Business Correspondent for CNN and author of the new book Smart Is the New Rich: Money Guide for Millennials, is saying that the best economic move cash-strapped young people can make is to move back home with their parents. She disputes the stigma surrounding this decision as a “failure to launch,” disagreeing with financial commentator Kevin O’Leary’s assertion that moving home deprives young adults of the “chance to realize [their] potential.” According to StatCan, 25.2% of young adults aged 25 to 29 were living at home in 2011, more than twice the proportion from 30 years earlier. She cautions, however, that the decision to move home needs to be part of a long-term plan to realize concrete financial goals.

Millennials have gotten a bad rap for their habit of moving in with their parents after post-secondary school. There’s even a disparaging term for the phenomenon — ”failure to launch syndrome.”

But some financial experts say we’ve got it all wrong. In an era of sky-high tuition and soaring housing costs, they argue the group known as Generation Screwed can help unscrew themselves by moving home to pay off debt.

“For these graduates, the biggest financial advantage they have is living at home and taking the rent part off of the table,” argues Christine Romans, chief business correspondent for CNN in New York.

In her new book, Smart Is the New Rich: Money Guide for Millennials, she advises cash-strapped young people that retreating home is the best economic move they can make.

A shameful move?

The vote of confidence would have helped Katelynn Langer when she moved home in October to pay off her student debt and get her life in order. At the time, the 25-year-old worried that other people would judge her. So she referred to her mother as her “roommate” in conversations.

“I always tried to tiptoe around the fact that I lived back at home with my mom,” says Langer, who shares an apartment in New Hamburg, Ont., with her 50-year-old mother, Marjorie.

Langer was embarrassed because of the bad press surrounding the boomerang generation. According to Statistics Canada’s 2011 census, 25.2 per cent of young adults between the ages of 25 and 29 were living at home, more than twice the percentage in 1981.

In a recent blog, financial commentator and TV personality Kevin O’Leary told young adults, “Bunking in with your folks when the going gets tough deprives you of the chance to realize your potential.”

Just weeks ago, a commentary in the Chicago Tribune informed millennials that living at home was hurting the economy, because it cut down on their spending.

Moving home to get ahead

It’s all nonsense, according to Romans. “If they move out, they don’t have the money to move the economy forward anyway,” she argues.

In her new book, Smart is the New Rich: Money Guide for Millennials, CNN’s Christine Romans says moving home is the smartest financial move many young people can make.

She contends it’s better for the economy and for debt-plagued millennials if they move home and save up. She says, typically, new grads don’t have the cash to invest and are working low-paying jobs because they haven’t launched their careers yet. So, “the only lever they have is the housing lever. It’s the only thing they really have to move forward.”

Langer believes moving home has definitely helped her move forward.

She lived on her own for a year after getting two diplomas, in recreation and leisure and drug and alcohol addiction counselling. Even though she was working two waitressing jobs, she found she could barely make a dent in her approximately $28,000 in student loans.

Despondent about her future and looming debt, she moved in with her mother.

“[My loan] was too big not to make the decision to move back home,” says Langer. She continued working two jobs and, without the burden of big rent bills, managed to cut down her debt by $8,500.

Speaking from experience

Langer’s positive experience has led her to stop feeling ashamed about her living situation. “Now, I just kind of own it. It’s helped me, it’s helped my happiness and I feel like I was able from October to now make a huge dent in my student loan.”

Financial writer Krystal Yee in Vancouver is also a fan of exercising the home advantage. “That sacrifice to move home and kind of swallow your pride is worth it,” she says.

The 32-year-old is speaking from experience. After finishing her studies at age 24, she found herself saddled with just over $20,000 in student loans and other debt.

“I was really scared,” she says. “I thought, how could I start my life as an adult if I’ve got all this debt hanging over me?”

So Yee stayed home with her folks for a year after school and worked doggedly to become debt-free. “For me, it worked out perfectly,” she says.

Let’s make a deal

But she cautions that the move home must involve careful planning. She says young people have to recognize that this is a temporary living arrangement where they need to meet concrete financial goals.

“You’re not there to mooch off your parents. You’re there to become a better adult, get yourself on your feet.”

Romans recommends two years at home. She advises millennials to sign a two-year contract with their parents that includes a mutual one-year out if anyone isn’t keeping up his or her end of the deal.

Of course, there’s another party involved in that deal — the parents. O’Leary told millennials in his commentary that moving back home is “crippling your parents financially.”

Yee says that problem is easily solved by contributing to household expenses. While she isn’t charged market value, Langer pays her mother $200 in rent and helps with household bills.

So her mother Marjorie says her daughter is actually a financial help rather than a strain. “Being able to share food expenses and household [costs] is great,” she says.

The only problem with Langer’s living situation may be that both she and her mother are so content with it. Langer admits she has no exit strategy yet. But she promises it will happen soon, perhaps when more than one-third of her student loan is paid off.

“I’ve moved back home to get my financial state in order and I think the taste of freedom is too fresh not to have the aspiration to move out again,” she says.

By Sophia Harris, CBC News
Posted: Aug 11, 2015