Academic Debt: A Mind-Numbing High-Wire Act

I have been tracking the effects of the financial crisis on institutions of higher education in my post dated Dec. 9, 2008. The other day, I was reading about the struggle for survival of the country's largest lender to small and mid-sized businesses CIT Group Inc. Reuters has reported extensively on this case. The last update was posted on Jul. 24, 2009.  I began to wonder whether CIT's potential bankruptcy may affect academic institutions, about their debt load and their ratings.

Last September Commonfund Short Term Fund, a major investment fund for colleges and universities, was forced to close suddenly. The investors were left scrambling to recoup their money and Moody's issued a report on their credit worthiness in October. This report can be downloaded here. All assessed institutions maintained their excellent ratings.

However, some universities had borrowed enormous amounts of money, using self-liquidity backed VRDO/Commercial Paper. A Variable Rate Demand Obligation (VRDO) constitutes a debt security, such as a bond, with variable interest rates. A Commercial paper (CP) consists of unsecured promissory notes issued to meet short-term obligations, e.g. payroll. Both financial instruments provide the issuer with short-term liquidity.

The University of Michigan led Moody's list with $1,121,300,000.-. Among private research universities, Emory University and Vanderbilt University topped the list with $1,006,451,000.- and $646,135,000.-, respectively. Vanderbilt University kept borrowing heavily in the first half of this year. According to a Reuters report posted Feb. 23, the university issued $250 million in taxable notes. The post also lists $575.8 million in outstanding fixed-rate revenue bonds, $338.2 million in outstanding variable-rate revenue bonds, and $675 million in commercial paper. A Reuters post dated Mar. 9, 2009, reports that the university sought the issue of another $330 million in fixed-rate revenue bonds. Fitch Ratings assigned these issues 'AA'.

According to the Princeton Review, about 6,400 students are currently enrolled at Vanderbilt University. The university would need seven years to fulfill the outstanding financial obligations listed above from enrollment alone, provided all students paid full price, that is approximately $50,000.- per academic year.  This calculation does not include interests. In the face of the economic downturn and the associated losses in endowment, the scale of borrowing appears mind-numbing.

Addenda

• According to Stephanie Strom's report with the title "Nonprofits Paying Price for Gamble on Finances" in The New York Times yesterday,  Harvard University and Yale University had issued tax-exempt bonds for 2.5 and 1.6 billion dollars, respectively, already at the end of fiscal year 2007 (09/24/09).
• The accuracy of risk assessments by the major rating agencies has come under severe scrutiny lately. Rachelle Younglai reports in her post with the title "Moody's secretive nature described to Congress" dated Sep. 30, 2009, on Reuters that an investigative congressional committee was less than impressed. It should be noted that the rating agencies rely heavily in their judgment on the financial information provided by the rated entities (10/01/09).
• Compared with Vanderbilt University, Yale University has borrowed substantially more. The university disclosed in its annual report for the fiscal year ending June, 2008, that it possessed 3.1 billion dollars in outstanding bonds and notes. However, the value of Yale's endowment for that year is listed at 23.0 billion dollars, whereas Vanderbilt's endowment hovered around 3 billion dollars at that time (10/16/09).
• According to Dan Wilchins and Elinor Comlay's exhaustive report entitled "CIT bankcruptcy reassigned after recusal" on Reuters today,  CIT Group Inc has filed for bankruptcy. Michael de la Merced provides a detailed chronology of events entitled " CIT to test Speed of Bankruptcy Court" for The New York Times (11/01/09).
• Mega-universities may suffer from huge campuses and high student to teacher ratios. However, some possess a great advantage in the current economic situation. That is, their endowments contribute less to total revenue than the endowments at private colleges and universities. Hence, the losses in revenue they incurred because of the financial crisis rendered their budgets less vulnerable. Similar to numerous private institutions, the endowment of Ohio State University (OSU) in Columbus, Ohio, lost 30 percent of its value since 2007 (OSU endowed funds management brochure). However, the income from endowment at OSU contributes just about as much as student fees and less than a fifth to the total budget of 4.35 billion dollars (OSU statistical summary). The loss in endowment could, therefore, be absorbed with minor disruptions of spending. According to a Reuters business wire release dated  Jan. 7, 2009. Fitch Ratings reports OSU's  outstanding bonds at 753.3 million dollars. The university could repay this amount with one year's income from student fees (11/05/09).
• For-profit healthcare providers apparently did well in the past year. Some flush with cash are prepared to acquire financially distressed not-for-profit hospitals. Listen to yesterday's interview of Columbia/HCA's CEO Richard M. Bracken by National Public Radio's WPLN in a segment entitled "HCA Earnings Soar, Acquiring Struggling Non-Profits Emerges as Growth Option". I recall hearing similar pronouncements a dozen years ago, when then CEO Richard L. Scott unleashed a similar wave of acquisitions. After such take overs, teachers and basic scientists may quickly become an endangered species as the fate of Allegheny University of  Health Sciences, a merger of Hahnemann University and Medical College of Pennsylvania, so aptly illustrates (11/06/09).
• In the wake of the financial crises and the ensuing restructuring of private research universities, leaders of medical schools and teaching hospitals are leaving their posts. Eric Neilson, M.D., the Chairman of the Dept. of Medicine at Vanderbilt University, with roughly 650 faculty members the largest department of the medical school, stepped down a month ago and has been replaced by an in-house successor. Leslie Hast reports on Neilson's achievements in her post entitled "Neilson reflects on tenure as Medicine chair" in the REPORTER on Mar. 26, 2010. Further retirements and departures of division chiefs can be anticipated. The Chairman of the Dept. of Biochemistry, who lauds Neilson's accomplishments in Hast's article, just announced that he will vacate his chair at the end of June according to Bill Snyder's article entitled "Waterman to end 18 fruitful years as Biochemistry chair" in the same issue of the REPORTER (03/30/10).
• The head of Vanderbilt University's Division of Hematology/Oncology David Johnson, M.D., announced his departure. The director of the Blood & Marrow Transplant Program Friedrich Schüning, M.D., will leave his post shortly (04/23/10).
• The chairman of Vanderbilt's Department of Microbiology and Immunology stepped down. In the two years since E. Gordon Gee left his post as chancellor of Vanderbilt University, at least six Medical School directorships and chairs have been relinquished. None were replaced with new hires. As Kathy Whitney reports in her article for the REPORTER with the title "Spring Faculty Meeting provides updates on programs, initiatives" dated May 7, 2010, the vice chancellor for Health Affairs and dean of Vanderbilt University School of Medicine emphasized in his Spring faculty meeting address that the School of Medicine and the Medical Center are faring “very, very well as we rebuild our savings following the recession (05/13/10).”
• According to Elizabeth Latt's post for Vanderbilt News with the title "Vanderbilt Board elects Mark Dalton to succeed Martha Ingram as chairman in 2011" dated Apr. 23, 2010, industrialist Martha Robinson Rivers Ingram is stepping down from her post as chairman of Vanderbilt University's Board of Trust. She will be replaced within a 12-month transition by co-chairman and CEO of Tudor Investment Corp. Mark F. Dalton (07/05/2010).
• According to Jeff Lockridge's report in today's Tennessean entitled ''Vandy coach says it was time to retire", Vanderbilt Commodores' highly-commended Head Football Coach Bobby Johnson stepped down abruptly from his post yesterday, three weeks before the new season begins. He is replaced by Assistant Head Coach Robbie Caldwell, emblematic for a common trend in U.S. higher education. Everywhere these days, long-standing leaders with expensive pay packages are being replaced with less costly in-house promotions (07/15/10).
• In his article for The New York Times with the title "In Case of Emergency: What Not to Do" dated Aug. 21, 2010, Peter S. Goodman quotes the communications strategist Eric Dezenhall observing wisely: "A corporation in crisis is not a corporation. It is a collection of panicked individuals motivated by self-preservation.” We only need to substitute 'corporation' with 'institution of higher learning' to understand the situation in which many universities and colleges find them themselves today (08/22/10).
• According to Getahn Ward's report with the title "Children's Hospital Chief is leaving" posted online in The Tennessean today, the CEO of Vanderbilt University's Monroe Carell Jr. Children's Hospital, Kevin B. Churchwell, is leaving. This is the second senior academic medical officer departing from Vanderbilt University in a bit more than a year. In June of last year, Vice Chancellor of Health Affairs Harry Jacobson stepped down. Like Commodores Coach Johnson, who abruptly took his retirement two months ago, Dr. Churchwell will be replaced by his assistant (09/21/10).
• Jennifer Brooks' report in The Tennessean with the title "Gifts to Vanderbilt endowment soar as other charities struggle" published online today, Vanderbilt University's endowment lost 300 million dollars or 8.6 percent in the past fiscal year. On the other hand, the university succeeded in raising 84 million dollars in donations, an amount approximately equivalent to the anticipated losses in Medicare payments in the coming year (10/21/10).
• According to Lauren Etter's post with the title "More Get $1 Million to Lead Colleges" published online in The Wall Street Journal today, the Chancellor of Vanderbilt University Nick Zeppos was the country's second-highest paid university leader in 2008, earning $2.8 million dollars. He was promoted in-house, after E. Gorden Gee left Vanderbilt University for Ohio State University in 2007 (11/14/10).
• Tamar Lewin reports in her article with the title "Private-College Presidents Getting Higher Salaries" published online Dec. 4, 2011, in The New York Times that according to The Chronicle of Higher Education Vanderbilt University's Chancellor Nick Zeppos garnered $1,843,746.- in 2009. According to a broadcast by Nashville National Public Radio (WPLN) with the title "Zeppos Commits to Cut Pay" on Mar. 12, 2009, the Chancellor had promised to voluntarily accept reduced pay after the sudden, painful loss in endowment investment value of roughly 30 percent in the wake of the financial crisis of 2008 (12/12/2011).
• More than a decade of expansion have come to an end: Vanderbilt University is in the process of eliminating more than 1,000 jobs in mass lay-offs at its medical center this fiscal year. Vice Chancellor of Health Affairs, Dean of the Medical School and CEO Jeffrey Balser chose not to mince words. According to The Tennessean's post with the title "Vanderbilt University Medical Center eliminates 275 jobs of 1,000 to be cut" published online Sep. 20, 2013, Balser noted: “Some have been concerned that VUMC has been ‘too transparent’ about the need to reduce staffing,...” At the end of the day for-profit TriStar Centennial Health may stand ready to absorb Vanderbilt's operation at a good price, while the current leadership will be rewarded with golden parachutes(02/21/2013).

Related Posts

• No Country for Shrinking Violets
• Academic Institutions & Profitability
• The Financial Crisis & Higher Education
• The Departure of the Cranes
• On the Value of Education

Academic Institutions & Profitability

The effects of the unfolding economic crisis on the finances of American academic institutions I have monitored in my post dated Dec. 9, 2008, indicate that a number of non-profit private research universities overextended themselves financially in the past ten years. For example,  Vanderbilt University spent roughly the equivalent of its current endowment on the expansion of its infrastructure. The sudden economic crisis has produced unforeseen, painful shortfalls of funds the institutions had relied upon to cover their daily expenses. Now, these universities are vigorously seeking new avenues to finance operations and contractual obligations.

One solution that research universities seem to embrace entails identifying ventures that show earning potential, insulating them financially from the mother institution, and converting them into university-owned independent enterprises. The mother university is transformed into a holding in private equity. Particularly, ventures in drug development and individualized health care using genomics and proteomics as well as management of electronic medical records lend themselves to this process. The strategy resonates in an interview entitled "Balser looks ahead to role as Medical Center leader" that the incoming Vice-Chancellor of Health Affairs gave to the Vanderbilt University Medical Center Reporter on Apr. 17, 2009.

There is precedence for such strategy. Large enterprises have pursued corporate disintegration for the sake of profitability in the recent past. The German chemical conglomerate Hoechst AG that once employed 150,000 people worldwide, was unwound into profitable spinoffs twenty years ago. Profitable businesses within the conglomerate were identified with the help of a world-renowned consulting firm whose representatives wore distinct dress code including bowler hats and umbrellas. Subsequently, the profitable businesses were pared from the conglomerate, reincorporated as independent companies, releasing them from any existing union contracts, and sold. In this country, General Motors and Chrysler have been in a similar process. At not-for-profit academic institutions, the strategy may erode the support for teaching and services to the underinsured and uninsured.

Addenda

• Today, the President nominated the geneticist Francis Collins for the post of Director of the National Institutes of Health (NIH). At the end of Gardiner Harris' report entitled "Pick to Lead Health Agency Draws Praise and some Concern" on the nomination published in The New York Times today, Dr. Alan I. Leshner, now chief executive of the American Association for the Advancement of Science, formerly of the NIH, is quoted saying that it was “an excellent idea to have a very credible geneticist heading N.I.H. at a time when we are pursuing so vigorously the promise of personalized medicine based on genomics." Vanderbilt University's health sciences appear well attuned to the future goals of the federal agency that funds most of biomedical research in this country (07/09/09).
• Today, Janell Ross describes in her front page article for The Tennessean entitled "Medical debts compound pain" the lives of Tennesseans who cannot afford to pay their medical bills (new title in web site archive: "Imagine getting sick, getting bills you can't pay, then being sent to jail"). On page 4A, she notes that in fiscal year 2009 Vanderbilt University was owed 274.3 million dollars in unpaid bills for medical services, of which the institution absorbed 197.9 million dollars. One may wonder who covers the loss (09/27/09). According to Blake Farmer's report entitled "Uncompensated Care Heads to VUMC, Rise Smaller than Predicted" on National Public Radio's WPLN yesterday, Vanderbilt's unrecoverable loss from unpaid medical bills has risen to 228 million dollars (11/12/09).
  
• The idea of personalized medicine entails the sequencing of our individual genomes to uncover differences that may potentially lead to future illness. The results could be used to take preemptive measures. To date, sequencing the human genome has been prohibitively expensive, costing between 5,000.- and 50,000.- dollars. However,  John Markoff reported in his post entitled "I.B.M. Joins Pursuit of $1,000 Personal Genome" for The New York Times yesterday that technological advances in genetic sequencing may  possibly bring down the cost to a thousand dollars in the near future. Even a mere 100.- dollars seem feasible.  In specific cases, e.g. when diseases run in families, personalized genomic sequencing may certainly benefit the concerned. However, whether ubiquitous screening will improve health care remains an open question (10/06/09).
• Perhaps  Columbia/HCA represents an apt partner for converting not-for-profit health care into for-profit enterprises. Listen to yesterday's interview of National Public Radio's WPLN with Columbia/HCA's CEO Richard M. Bracken in a segment entitled "HCA Earnings Soar, Acquiring Struggling Non-Profits Emerges as Growth Option". I recall hearing similar pronouncements a dozen years ago, when then CEO Richard L. Scott unleashed a similar wave of acquisitions. After such take overs, teachers and basic scientists may quickly become an endangered species as the fate of Allegheny University of  Health Sciences, a merger of Hahnemann University and Medical College of Pennsylvania, illustrates (11/06/09).
• The current revenue shortfall will force states to diminish their spending on Medicaid programs in the near future, diminishing income particularly at not-for-profit hospitals. Tennessee considers cuts in its Medicaid program of up to 7 percent, According to Getahn Ward's article entitled "Nashville hospitals' banner year may not tell full story" in The Tennessean today, Vanderbilt University anticipates a loss of 50 to 70 million dollars because of the anticipated reduction in Medicaid payments in the new year. Inevitably, this will only add to the hundreds of millions of dollars in unpaid services that the institution already must absorb (11/29/09).
  
• According to Madison Park's post on CNN entitled "Walgreens postpones plans to sell personal genetic tests" today, Walgreens had planned to offer saliva tests for at risk genes for less than $270.-.

Today, Walgreens halted its plans until further notice after the FDA intervened. I quote from her post: "Many of these markers are not understood, even what genes they are affecting right now," said Dr. Kenneth Offit, chief of clinical genetics service at Memorial Sloan-Kettering Cancer Center in New York. "It's a very, very early stage in this level of genomic research." Affordable personalized medicine for everyone seems still way off in the future (05/13/10).

• The Nobel-laureate and scientific adviser to the U.S. president Harold Varmus, who served as Director of the National Institutes of Health and soon will head the National Cancer Institute, appears to have changed his mind on the immediate promises of personalized medicine. In Nicholas Wade's report for The New York Times with the title "A Decade Later, Genetic Map Yields Few New Cures" dated Jun 10, 2010, Varmus is quoted saying: "Genomics is a way to do science, not medicine" (06/14/10).
• Christina E. Sanchez reports in her article entitled "Vanderbilt takes care personally" in today's Tennessean on the university's recent initiative in personalized medicine. She uses targeted therapies in the treatment of cancer to demonstrate the potential of this new avenue of care. The article does not detail therapies, but particularly mentions new treatments for lung cancer that entail the screening of patients' tumor tissue for modified genes. Recent studies uncovered a modification of the gene ALK in people with non-small cell lung cancer. ALK encodes the enzyme anaplastic lymphoma receptor tyrosine kinase. The fusion of this gene with the gene EML4 renders a tyrosine kinase persistently active that prevents programmed cell death from curtailing neoplastic growth.  Aaron Saenz describes a potential drug treatment using this important finding in his post entitled "Crizotinib Targets Gene To Stop Lung Cancer Tumors in 90% of Treated Patients" on Singularity Hub dated Jun. 9, 2010. No doubt, the development of drugs specifically targeting such cellular malfunction is highly desirable. However, less than four percent of lung cancer patients carry the EML4-ALK fusion, and the drugs tested to date only slow the progress of the disease. Personalized medicine definitely needs more research, time and money to come to fruition (08/04/10).
• More than a decade of expansion have come to an end: Vanderbilt University is in the process of eliminating more than 1,000 jobs in mass lay-offs at its medical center this fiscal year. Vice Chancellor of Health Affairs, Dean of the Medical School and CEO Jeffrey Balser chose not to mince words. According to The Tennessean's post with the title "Vanderbilt University Medical Center eliminates 275 jobs of 1,000 to be cut" published online Sep. 20, 2013, Balser noted: “Some have been concerned that VUMC has been ‘too transparent’ about the need to reduce staffing,...” At the end of the day for-profit TriStar Centennial Health may stand ready to absorb Vanderbilt's operation at a good price, while the current leadership will be rewarded with golden parachutes(02/21/2013).

Related Posts

• Academic Debt: A Mind-Numbing High-Wire Act
• No Country for Shrinking Violets
• The Financial Crisis & Higher Education
• The Departure of the Cranes
• On the Value of Education

Higher Education & Humanistic Decline

On Jan. 18, 2009, Stanley Fish published an opinion article in The New York Times entitled "The Last Professor", lamenting the decline of Liberal Arts and humanistic education in American colleges and universities. I seconded Professor Fish on his stance and re-post my comment (#449) with added links below:

This editorial informs us about the pedagogic difference between illumination, that is a traditional humanistic education, and academic training of professional skills. The latter has taken precedent during the last century and dominates American higher education today. The author cites Phoenix University as case in point.

In support of a higher education that is more oriented toward learning how to examine complex processes, less focused on the solution of a single issue, and less translational, we may consider fundamental scientific research. The eminent virologists, who shared last year’s Nobel Prize for their breakthrough discoveries in AIDS research, did not start out on their careers with AIDS on their mind. Actually, when they set out, AIDS was not known. They were interested in understanding a certain type of virus, retroviruses. The AIDS virus serendipitously happened to be a retrovirus. The prior knowledge about this type helped to unravel the virus’ secrets. Phoenix University is not going to educate such people.

Professor Fish probably meant University of Phoenix as an example of for-profit institutions of higher learning that offer courses mainly online. On Jan. 25, Colby Sledge of The Tennessean reported in an article entitled "Tennessee could discipline for-profit colleges" on the low in-state completion rates for the student body at private for-profit colleges and universities. The newspaper hosts an informative database on enrollments, completion and placements rates at such institutions in Tennessee. Most offer specialized professional training and report successful in-field placement for more than three quarters of their graduates. According to this database, University of Phoenix at Nashville reports 869 students enrolled. The completion rate is listed at 39.6% without placement.

The Financial Crisis & Higher Education

The recent unraveling of investment portfolios has profoundly affected endowments at institutions of higher education in the U.S. Clair Cain Miller, Geraldine Fabrikant and Stephanie Strom reported in their article for The New York Times on Nov. 25 entitled "Beyond the Ivied Halls, Endowments Suffer" about the consequences of the current economic crisis on the financial situation of well-endowed colleges and universities. The impact of the stock market collapse was portrayed as serious, but the portfolio managers at the universities were confident that they were able to contain the damage.

Today, Jason Szep reports in his post on Reuters entitled "Harvard freezes salaries as recession bites" that Harvard University projects a 30-percent loss in the value of its endowment in the current fiscal year. As immediate response to the ensuing shortfall in funding, the flagship of the Ivy League will institute a freeze on hiring and salaries. The news are not happy, but the disclosure bears at least a frankness that faculty, students and parents have a right to expect.

It is only hoped that other institutions follow suit in laying their financial situation open with such briskness. In order to build the necessary trust needed in these uncertain times, all parties involved must understand precisely where their schools stand financially. No actual figures and vague promises to live frugally from now on shall be counterproductive!

Addenda

• Yale University has followed suit. Read more in Geraldine Fabrikant's post for The New York Times entitled "Yale's Endowment Drops 13.4%". Sic transit gloria mundi (12/17/08)!
• On Jan. 26, Katie Zezima reports in her post for The New York Times entitled "Data Show College Endowments Loss Worst Drop Since '70s" that, according to assessments by the Commonfund Institute and the National Association of College and University Business Officers, the endowments of private not-for-profit colleges and universities lost on average 22 percent in value between July 1 and Nov. 30, 2008, and those of public institutions lost 25 percent; the steepest declines in more than 30 years. Cornell University lost 27 percent in the second half of 2008, and Dartmouth College reports a loss of 18 percent (01/26/09).
• In another article posted Jan. 26 with the title ''Brandeis Says It Plans to Sell Art Collection to Raise Cash",  The New York Times reports that Brandeis University decided to sell pieces from its prestigious modern art collection to cover its budget shortfall. National Public Radio's All Things Considered dedicated an interview by Robert Siegel entitled "Art Collector Irked by Brandeis Museum Closing" to this decision on Jan. 27 (01/27/09).
• Jennifer Brooks reports in her article entitled "Economy batters Vanderbilt University's assets" for The Tennessean today that Vanderbilt University lost roughly 29 percent in the value of its investment portfolio in the past six months, almost could not make payroll last September, and instituted a hiring and building freeze (01/29/09)!
• In stark contrast to financial performance, private research universities paid compensation packages to its top executive officers in excess of 1 million dollars last year. According to Tamar Lewin's report in The New York Times entitled "Many Specialists at Private Universities Earn More than Presidents" on recent findings of The Chronicle of Higher Education, Vanderbilt University leads the list with Vice Chancellor of Health Affairs (~$2.8M), Chancellor (~$1.0M), and Chief Financial Officer (~$1.1M)(02/23/09).
  
• According to Kate Zernike's report in the New York Times today entitled "Gifts to Colleges Fall after Record Highs", Yale University announced yesterday that the institution may have to lay off employees (02/25/09).
• According to a post by Martha Graybow on Reuters yesterday entitled "Pension, college funds mull damage from WG Trading fraud", Carnegie Mellon University and the University of Pittsburgh invested with fraudulent fund managers (02/26/09).
• Reuters Health and Science Editor Maggie Fox reported in her post today entitled "U.S. hospital profits fall to zero: Thomson Reuters" that according to a recent Thomson Reuters Healthcare survey of more than 400 for-profit and not-for-profit U.S. hospitals the examined institutions were not able to generate surplus revenue for new infrastructure expenditures already in the third quarter of 2008. Because of losses in investment portfolio and slowed medical insurance reimbursements, half of the hospitals were operating at loss. The study was discussed in Janet Babin's segment with the title "Hospitals ailing with financial stress" on National Public Radio's Marketplace on the same day (03/02/09).
• According to a broadcast on Nashville National Public Radio (WPLN) today entitled "Zeppos Commits to Cut Pay", the Chancellor of Vanderbilt University committed to a voluntary pay cut this year (03/12/09).
• Today The Tennessean's Getahn Ward reports in his post entitled "Vanderbilt University Medical Center will get new boss in June" that Vanderbilt University's Vice Chancellor of Health Affairs Dr. Harry Jacobson will retire Jun 1. Last year Dr. Jacobson was among the top ten highest paid chief academic officers in the country. He shared this distinction with the new Chancellor of Vanderbilt University, Nikolas Zeppos, and the Chief Financial Officer of Vanderbilt University, Lauren Brisky, who retired earlier this year. The Chancellor is the only top earner of last year left at Vanderbilt University. A small version of G.M.'s demise may perhaps be in the making (03/30/09)!
• A.G. Sulzberger published a post in The New York Times today entitled "Weill Gives Cornell $170 Million, Well Ahead of Schedule", reporting that Cornell University felt pressed to ask its greatest financial supporter and alumni Sanford I. Weill for the advanced release of a planned donation of 170 million dollars to be able to meet its obligations (04/06/09).
• The financial crisis affects the portfolios of private philanthropic foundations as much as those of private academic institutions. Stephanie Strom reports in her post for The New York Times today entitled "New Leader Overhauls Ford Foundation", that the second-largest philanthropy in the country, the Ford Foundation, lost a third of its portfolio value and is under new leadership (04/14/09).
• Abby Goodnough describes the ubiquitous consequences of stalled growth at Harvard University for its community in this illustrative The New York Times post published May 8, 2009, with the title "Slump Revives Town-Gown Divide Across U.S." (05/12/09).
• Tamar Lewin reported in her post on The New York Times yesterday entitled "Brandeis Halts Retirement Payments" that Brandeis University is joining a growing number of academic institutions that see the need to temporarily suspend their contributions to employee retirement plans in order to meet immediate budget shortfalls (05/22/09).
• Erin Kutz reported in her post on Reuters yesterday entitled "Harvard cuts 275 jobs, cites drop in endowment" that Harvard University will cut 275 jobs because of budget shortfalls. Another 40 are offered furloughs (06/24/09).
• I have not written about public universities to date. The financial crisis affects public universities for different reasons than private institutions of higher education. Private colleges and universities spent extravagantly on ambitious expansion in past years of enormous endowment growth. These institutions are having difficulty of meeting their financial obligations now that the value of their portfolios fell by 30 percent. By contrast, many public university systems have been chronically underfunded in the past and are suffering even more now because of the gaping shortfalls in state revenue owing to a faltering tax base. The University of California is a case in point. Tamar Lewin reports in her post on The New York Times today entitled "University of California Makes Cuts After Reduction in State Financing" that the system will be forced to cut 813 million dollars from its budget in the new fiscal year. Layoffs, furloughs and hiring freezes, as well as the elimination of educational programs and services, are planned to meet this goal (07/11/09).
• CIT Group Inc. is this country's largest lender of short-term loans to small and mid-sized businesses. Pierre Paulden and Caroline Salas report today in their post on Bloomberg entitled "CIT Chapter 11 Filing May Follow August Swap in Plan" that CIT may be forced to file for bankruptcy protection within four weeks. Many private colleges and universities are small and mid-sized enterprises.  The current financial crisis has hit these institutions particularly hard. For example, The COMMERCIAL APPEAL of Memphis, TN, published an AP news release on Apr. 15, 2009, with the title "Lambuth University in Jackson misses payroll", reporting that Lambuth University of Jackson, Tennessee, is unable to meet its financial obligations because of the credit crunch. As a consequence of CIT's troubles, institutions like Lambuth University may find it ever more difficult and expensive to secure short-term financing. Because CIT is also in the business of student loans, students may have to embrace higher fees. CIT's foundering will further aggravate the already dour financial situation of institutions of higher education that are important local employers and are already severely battered by the current economic crises (07/23/09).
  
• Examples for the debt colleges and universities have been accumulating are discussed in my post dated Jul. 27, 2009 (08/12/09).
• According to a report Associated Press published today entitled "Stanford Planning More Layoffs", Stanford University plans to lay off 60 employees in addition to the 484 already sent home in the past year, since the institution anticipates a 30 percent decline in the value of its 12 billion-dollar endowment. Stanford has also eliminated unfilled positions and froze hiring, salaries, and construction (09/03/09).
• According to Svea Herbst-Bayliss' post on Reuters yesterday entitled "Harvard and Yale endowments suffer heavy losses", Harvard University and Yale University announced that their endowments diminished 27.3 and 30.0 percent, respectively, within the past fiscal year. As mentioned in my initial post above, Harvard had anticipated a loss of this magnitude (09/12/09).
• According to Craig Karmin and Peter Lattman's post on the Wall Street Journal today entitled "Stanford Puts $1 Billion in Assets on Block", Stanford University sees the need to sell 1 billion dollars worth of investments, that is between 10 and 20 percent of its endowment portfolio, to stem its current cash crunch (10/02/09).
• According to Abby Goodnough's report in The New York Times today entitled "Leaner Times at Harvard: No Cookies", Harvard University completed the layoffs of 250 staff members during the summer. Harvard Arts and Science has trimmed 75 million dollars from its current budget and anticipates a 130 million dollar deficit in the next two years (10/08/09).
• According to David Lawsky's report on Reuters yesterday entitled "Stanford puts $1 billion of portfolio on market", Stanford University has set its billion dollar asset sale in motion and is cutting 500 jobs (10/10/09).
• According to John Lauerman and Michael McDonald's post on Bloomberg News today entitled "Harvard Paid $500 Million to Exit Backfired Swaps", Harvard University disclosed in its annual report for the last fiscal year that it paid about 500 million dollars to shed investment contracts of losing value known as interest-rate swaps. Interest-rate swaps resemble home owner mortgages with adjustable rates. The cost was covered by bond issues.  Georgetown University (annual report), Rockefeller University, Vanderbilt University (faculty meeting minutes), and Yale University (annual report) also report losses with similar investment instruments (10/16/09).
• In his article entitled "Armageddon in Alabama Proves Parable for Local U.S. Governments", published on Bloomberg News Oct. 19, 2009, Ken Wells reports that Birmingham, Alabama, home to roughly 230,000 inhabitants, using the same investment tool as the private universities cited above, that is interest-rate swaps, to finance a sewage system overhaul, ended up as one of the most indebted municipalities in U.S. history, owing more than half a billion dollars for interest payments in default and more than three billion dollars on the sewage project in total (10/22/09).
• According to Tamar Lewin's report for The New York Times on Dec. 2, 2009, entitled "Harvard Law School Suspends Program Giving Students Free Tuition", Harvard University had to cut back on post-graduate scholarships and is offering faculty voluntary retirement plans. It takes courage and insight to accept such offer, leaving the helm when the time is right. The thieve in Kurosawa's Kagemusha can attest to that (12/05/09).
• According to Abby Goodnough's report for The New York Times today entitled "Slowing Expansion, Harvard Suspends Work on Tower", Harvard University will indefinitely halt construction on its new one billion-dollar life science campus in the Allston neighborhood. The scientists will have to stay in their old quarters (12/10/09).
• Collegiate fund raising saw a historic decline during the fiscal year ending in June, 2009. According to Tamar Lewin's report with the title "Sharp Drop Is Seen in Gifts to Colleges and Universities" published in The New York Times yesterday, donations dropped by on average 12 percent. Stanford University ($640 million), Harvard University ($602 million) and Cornell University ($447 million) were the greatest fundraisers among private academic institutions. According to the Council for Aid to Education which compiled the data, donations to Vanderbilt University increased by 20.3 percent from $133 million in fiscal year 2008 to $160 million in fiscal year 2009 (document released by The Tennessean in Jennifer Brook's article with the title "TN universities see plunge in donations" published on Feb. 14, 2010). Among the public academic institutions, the University of California at Los Angeles ($352 million), the University of Wisconsin-Madison ($342 million) and the University of California at San Francisco ($300 million) ranked at the top (02/03/10).
• Private research universities continue to cut cost through layoffs, early retirement offers, elimination of positions, pay cuts and the trimming of support for educational programs and services. According to Lisa Foderaro's report with the title "Yale, With $150 Million Deficit, Plans Staff and Research Cuts" posted Feb. 3, 2010, this institution is in the process of cutting several hundred positions to close its budget gap. In the past year, Cornell University eliminated 448 posts and Princeton University trimmed 188 positions. Tenure-track candidates should be concerned. Professors with only one federal government research grant will be in peril and those without will become transitory (02/05/10).
• Some private research universities preserved their endowment during the financial crisis with apparent success. The University of Pennsylvania suffered smaller losses in endowment than other members of the Ivy League. According to Gillian Wee's post for Bloomberg News with the title "University of Pennsylvania Endowment Beats Harvard With Stocks" dated Aug. 13, 2009, the university's endowment fell only 16.0 percent and its stock portfolio has continued to produce higher yields than that of other Ivy League schools (03/31/10).
• Similar, but less severe than in the Birmingham sewage crisis, interest rate swap contracts for municipal bonds have recently generated losses for not-for-profit hospitals across the U.S. According to Ianthe Jeanne Dugan's post yesterday for The Wall Street Journal with the title "Hospitals' Wall Street Wounds", Municipal Market Advisors estimate that more than 1 in 6 not-for-profits may be affected (07/08/10).

• According to Jeff Lockridge's report in today's Tennessean entitled ''Vandy coach says it was time to retire", Vanderbilt Commodores' highly-commended Head Football Coach Bobby Johnson stepped down abruptly from his post yesterday, three weeks before the new season begins. He is replaced by Assistant Head Coach Robbie Caldwell, emblematic for a common trend in U.S. higher education. Everywhere these days, long-standing leaders with expensive pay packages are being replaced with less costly in-house promotions (07/15/10).
• According to Lingling Wei and Dinny McMahon's post entitled "CIC Seeks Harvard's U.S. Real-Estate Portfolio" on The Wall Street Journal published online today, Harvard University's 5.4 billion-dollar investment in commercial real estate lost more than half of its value during the fiscal year ending June 2009. Now 500 million dollars-worth may be sold to the Chinese sovereign-wealth fund CIC to raise more cash (08/03/10).
• As a consequence of the financial crisis, the tenure system of higher education will change. Two recent books discuss possible options (09/06/10):

• According Geraldine Fabrikant's post for The New York Times published online today with the title "Increase in Harvard Endowment", Harvard University reported a 11-percent growth of its endowment portfolio value during the past fiscal year. Analysts anticipate endowment increases reported by academic institutions this fall to range between 9 and 14 percent. Recovery happens in small steps (09/09/10).
• Columbia Unversity's investment portfolio gained 17.3 percent in the last fiscal year, Geraldine Fabrikant reports in her sequel entitled "Columbia’s Endowment Posts 17% Return" for The New York Times today. The university had incurred a 16.1-percent loss in the financial crisis, roughly half of what other Ivy League schools lost (09/15/10).
• According to Getahn Ward's report with the title "Children's Hospital Chief is leaving" posted online in The Tennessean today, the CEO of Vanderbilt University's Monroe Carell Jr. Children's Hospital, Kevin B. Churchwell, is leaving. This is the second senior academic medical officer departing from Vanderbilt University in a bit more than a year. In June of last year, Vice Chancellor of Health Affairs Harry Jacobson stepped down  (09/21/10).
• Geraldine Fabrikant reports in her post yesterday entitled "Yale Endowment Gained 8.9% Last Year" for The New York Times that Yale University's endowment investments returned 8.9 percent, i.e. at the low end of expectations, in the past fiscal year. By contrast, University of Pennsylvania gained 13 percent (09/25/10).
• Geraldine Fabrikant reports in her article with the title "Princeton Endowment Posts a 14.7% Return" published online in The New York Times today that Princeton University gained 14.7 percent on investments of its endowment in the last fiscal year. The return constitutes the second highest result among Ivy League schools to date and raised the endowment's value to 14.4 billion dollars. The 1.85 billion-dollar increase is, however, offset by bond issues worth 1 billion dollars earlier this year to raise much needed liquidity. Half of Princeton University's operating budget used to be paid from endowment proceeds (10/15/10).
• Other private research universities did not fare as well as Princeton University last year. According to Jennifer Brooks' report in The Tennessean with the title "Gifts to Vanderbilt endowment soar as other charities struggle" published online today, Vanderbilt University's endowment lost 300 million dollars or 8.6 percent in the past fiscal year. However, the university succeeded in raising 84 million dollars in donations, that is a 20.7 percent increase over the year before (10/21/10).
• According to Tamar Lewin's briefing with the title "Smallest College Endowments Perform Best, Study Finds" posted online today with The New York Times, the endowment investments of institutions of higher learning returned on average 12.6 percent in the last fiscal year, that is roughly the median of the anticipated spread mentioned earlier. The institutions used on average 4.3 percent of their endowments for operations; donations contributed 6.2 percent (11/04/10).
• According to Kelly Nolan's report entitled "Harvard Bonds Have to Adjust" published online in The Wall Street Journal today, Harvard University recently raised $600 million with the passage of costly long term bond issues, $200 million short of expectation (11/09/10).
• According to Ben Levisohn and Eleanor Laise's assessment with the title "How to Play the New Muni Market" published online in The Wall Street Journal today, it has become more difficult and expensive to raise money with tax-exempt bond issues, because investors sense more volatile risk in this market. According to Michael McDonald's report for Bloomberg with the title "Amherst-to-Yale Funding Need Follows Harvard's Crisis Over Cash" published online Sep. 23, 2010, 15 of the wealthiest institutions of higher education had to pass bond issues totaling $7.3 billion to improve liquidity in the past fiscal year. Three private Southeastern universities contributed $1 billion to the total: Vanderbilt University's and Emory University's share was $250 million each and Duke University's was $500 million (11/20/10).
• According to Brian Reisinger's post with the title "Vanderbilt University caught by interest rate swap" published online on NashvilleBusinessJournal Nov. 18, 2010, Bloomberg Businessweek reports in a recent survey that Vanderbilt University needed to spend $87.2 million on backing out of costly interest rate swaps in the last fiscal year (11/22/10).
• Today, the NACUBO-Commonfund Study of Endowments was released. The study reports the percent net change in endowment value of 865 academic institutions in fiscal year 2010. The tabulated results can be downloaded here. On average, university and college endowments gained 7.4 percent. Among the 62 institutions listed with current endowments greater than 1 billion dollars, Yale University gained at 2.0 percent the least and University of Nebraska at 18.5 percent the most. Most endowments still appear roughly 10 percent lower than two years earlier before the financial crisis unfolded (01/27/11).
• In dire times, some private research universities seek liquidity by resorting to peculiar measures for stirring interest in their bond issues. According to Nicole Hong's report with the title "Check back in 100 Years" published online in The Wall Street Journal today, the University of Southern California joined Mexico in offering bonds that will mature in a century. The university hopes to raise 300 million dollars with this bond issue (08/10/2011).
• Today Melinda Dickinson reports in her post with the title "Alabama county files biggest municipal bankruptcy" published online on reuters that Jefferson County, AL, which includes the city of Birmingham, filed for bankruptcy protection over a three billion dollar sewer improvement project financed with municipal bonds proved toxic. This represents the most expensive bankruptcy of its kind. I discussed this case earlier as an example for non-for-profit institution financing gone awry because of the financial crisis of 2008. While Jefferson County will survive, this calamity would mean the end for any private institution of higher learning. No bank would lend a dime (11/10/2011).
• Tamar Lewin reports in her article with the title "Private-College Presidents Getting Higher Salaries" published online Dec. 4, 2011, in The New York Times that according to The Chronicle of Higher Education 36 leaders of private institutions of higher learning in the U.S. earned more than one million dollars in 2009, that is the year after the financial crisis. Vanderbilt University's Chancellor Nick Zeppos garnered $1,843,746.-. As mentioned above, he had promised to accept a pay cut after the sudden, painful loss in endowment investment value of roughly 30 percent (12/05/2011).
• The most recent NACUBO-Commonfund Study of Endowments (NCSE) about to be released reports that the endowment investments of academic institutions of higher education returned roughly 20 percent in fiscal year 2011 in accord with Ken Redd's preliminary report with the title "Preliminary data show endowments returned 19.8 percent in FY 2011", published online Nov. 7, 2011. It is important to note, however, that the endowments of half of the 850 institutions surveyed have not recovered to pre-financial crisis levels (01/31/2012).
• According to Krishnadev Calamur's post with the title "Wealthy Colleges See Spike In Fundraising" published online by National Public Radio's News Blog today, the Council for Aid to Education (CAE) reports that U.S. institutions of higher education achieved to raise 30.3 billion dollars last year, an eight-percent increase compared to the year before. The list was topped by Stanford University ($709 million), Harvard University ($639 million), and Yale University ($580 million). Plenty institutions discussed above that rewarded their leaders with more than a million dollars last year, Vanderbilt University in the lead, did not make the top twenty on CAE's list (02/15/2012).
• According to Norimitsu Onishi's article with the title "Californians Back Taxes to Avoid Education Cuts" published online in the New York Times Nov. 7, 2012, 54 percent of Californians approved Proposition 30 that will provide six billion dollars per year for the state's public education system. The money will be raised with a seven-year increase in income tax on incomes greater than $250,000.- per year and a four-year increase in sales taxes. In response the California State University system will not increase tuition this year, Mary Slosson reports in her post with the title "California universities roll back tuition after tax hike passes" published online by Reuters Nov. 7, 2012 (11/19/2012).

Related Posts

• Academic Debt: A Mind-Numbing Hire Wire Act
• No Country for Shrinking Violets
• Academic Institutions & Profitability
• The Departure of the Cranes
• On the Value of Education

-->

Value & Cost of Higher Education

I just returned from a trip to my birth place. On the last leg of this journey, I overheard a conversation between a grandmother of a high school student and a gentleman attending a highly-ranked private elite university at our flight's destination. Below I recount this exchange to the best of my recollection.

Lady: “You are attending college?”

Gentleman: “Yeah, I am a senior at ... University.”

Lady: “Oh, how exciting! What great place to go to college. We hope that our grandson will be able to attend a school like this. Do you like it?”

Gentleman: “Yes! It has been a great experience. My dad is a doctor, which is not for me. I am majoring in business and accounting to keep my options open. I do not yet exactly know what I want to do. Perhaps, I go on to Business School after I graduate.”

This gentleman's reflections are commonplace. Choices about future directions have preoccupied the minds of students of all ages. Only few know precisely what goals they wish to pursue at the age of twenty. However, this uncertainty starkly contrasts with the stiff price tag attached to education at private institutions of higher learning these days. Undergraduate studies at the college the above gentleman is attending cost about $50,000.- annually with living expenses. At graduation time, the gentleman's family will have spent a minimum of $200,000.-.

In the face of such substantial investment, clear academic goals seem highly commendable. Even the best institutions cannot hand careers to their students. Their reputation may be of limited help. It is only prudent that the prospective student and all parties involved reach a realistic understanding of the expectations and hopes that can be reasonably placed in such investment. Sometimes, more may be achieved with less.

The Departure of the Cranes

“Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers. The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present — and is gravely to be regarded.” President Dwight D. Eisenhower in his 1961 farewell address (added 01/17/2011).

Grus grus.

I used to live near a region that was once known for its cranes (Grus grus). They were so abundant that the region took its name from them, and the lords who ruled this land adopted them as central theme in their coat of arms which today adorns the local pottery. The landscape is bucolic. Small villages and towns dot green rolling foothills rising toward distant altitude above the timberline. Modernity and history are interwoven here in natural growth. Below the picturesque castle of the ancient lords and attached medival town, the visitor may be surprised to find the facilities of a contemporary college with American accreditation.

The cranes have become a rare sight today and the region is better known for its cheese. Only the patient may notice a lonesome bird early in the morning standing tall and motionless in the shallow water near the reedy banks of a quiet pond. Over time, the observant develops a keen eye for these graceful creatures and may be able to spot them on occasion in passing from the window of a commuter train carrying people off to work. I have not been on that train in two decades. But according to the most recent check list, the cranes are still about.

The pottery.

Ever since I left that land, I have become familiar with a different kind of crane on my visits to academic institutions in this country. You can spot them easily from afar. These cranes are usually clustered around tall stately buildings under construction. In the past eight years, endowment portfolios at private research universities and medical schools accrued with solid gains. Intense fund raising swelled donations. Credit for new construction was cheap. The institutions embarked on a building spree.

A number of these edifices with facades of blue glass, white columns and brown stone tile are going to house academic medical centers. With the aging of the baby boomers, the demand on health care will amplify profoundly. According to the Health Work Force Institute, 2.5 million registered nurses will be needed in 2020. At present, new degree programs in affiliated health sciences are being created in great numbers across the U.S. In my area, nursing schools have doubled in two years. Local universities as Belmont University are expanding their health science programs. Doubtlessly, new health care facilities are necessary.

On the other end of the spectrum, I saw many construction projects that were slated for biomedical research laboratories. Despite the current funding crunch that I discussed in my post dated Oct. 1, universities and medical schools look fondly upon biomedical research because of its prestige and the money that it attracts. Research grants from federal agencies do not only cover laboratory supplies and equipment, but also a significant portion of faculty and staff salaries. That is why, medical schools can afford to maintain large faculties in excess of the demand of clinical service. For example, I counted 81 faculty members in Neurology at the University of Pennsylvania.

In addition to the direct cost for research, the federal agencies provide host institutions with a percentage of direct cost to help defray overhead expenses for infrastructure, administration and basic services like utilities and plant operations. The indirect cost recovery rate is negotiated with each institution. For example, the rate of the University of Pennsylvania was 59.5 percent in 1999, but could be 100 percent and more in other cases. Some institutions charged overhead excessively, were audited, and eventually fined (Federation of American Scientists Report #91095). The system was revised. Administrative cost was capped at 11 percent.

Overhead recovery rates that are representative for the country at present are hard to find. The University of Michigan currently recovers 54.5 percent. At a presumed rate of 60 percent, a medical school that attracts about 200 million dollars in direct cost for specific research from federal agencies annually (not an unheard-of amount), will receive another 120 million unspecified dollars for indirect cost recovery. This sum would approximately cover the investment for a new five-story research building. The more square feet of laboratory space a university adds, the more investigators can pursue federally funded research, the greater the returns for the institution, inviting yet another clone of a research building. I believe that this chain reaction fueled the current construction boom, boding ill for the future. The cranes may disappear soon.

First, federal funding for biomedical research has been eroding over the past 10 years in the face of a steadily rising number of applications. According to the National Institutes of Health Office of Extramural Research, the grand total average success rate of grant applications fell from 34.2 percent in 1997 to 24.4 percent in 2007 (see success rate table at NIH funding).

In addition, the investment portfolios of endowed research institutions shrank catastrophically in recent weeks and credit has all but dried up. American private universities are commercial enterprises. In his congressional hearing, the former CEO of Lehman Brothers, Richard Fuld, named the exposure to commercial mortgages as the prime cause of his bank's downfall. National Public Radio's All Things Considered broadcast this snippet of his testimony entitled "Lehman CEO Testies On Capitol Hill" on Oct. 6.

On top, private universities are linked into astronomical increases in college tuition and fees. According to Tamar Lewin's in The New York Times on Oct. 29 with the title "Downturn Expected to Drive Tuition up", tuition and fees are about to exceed $50,000.- per academic year for some institutions, forcing them to offer substantial financial aid to attract academically qualified students. If the portfolios of these universities do not recover soon, some may find themselves unable to service their debt.

When you are looking for a college these days, you may wish to read my post dated Jan. 24, 2008, and re-assure yourself that there are not too many cranes on campus.

Addenda

• Tamar Lewin filed a second report report on this issue with the title "Tough Times Strain Colleges Rich and Poor" in The New York Times today. It is quite consistent with the observations above (11/08/08).
• Charles Bagli aptly describes in his report with the title " As Vacant Office Space Grows, So Does Lenders' Crisis" in The New York Times today, the problems afflicting commercial mortgages that Mr. Fuld regretfully recognized in retrospect as lethal to his bank (01/04/09).
• Reuters Health and Science Editor Maggie Fox reported in her post with the title "U.S. hospital profits fall to zero: Thompson Reuters" today that, according to a recent Thomson Reuters Healthcare survey of more than 400 profit and non-profit U.S. hospitals, the examined institutions were not able to generate surplus revenue for new infrastructure expenditures already in the third quarter of 2008. Because of losses in investment portfolio and slowed medical insurance reimbursements, half of the hospitals were operating at loss. The study was discussed in Janet Babin's segment on National Public Radio's Marketplace with the title "Hospitals ailing with financial stress" on the same day (03/02/09).
• I just finished my walk around the campus of Vanderbilt University and counted among the university-owned real estate projects completed since my arrival in 1994: four complexes housing offices, hotels and/or retail, four apartment complexes, eight large multi-storied parking garages,  four large dormitories on a commons, three student centers, a baseball stadium, a totally refurbished football stadium, six large and three small research buildings, a new wing for the School of Engineering, a new School of Music, a new School of Law, a new School of Business, a new School of Nursing, two large and one small hospital buildings, plus one large outpatient clinic just completed. I neither counted major renovation projects, nor may my list be complete. The total of the investment may roughly amount to as much as 2.4 billion dollars. That is, the university spent the equivalent of its entire current endowment on the expansion of infrastructure (03/29/2009).
• National Public Radio's Market Place broadcast an interview of Kai Ryssdal with Chronicle of Higher Education reporter Paul Basken entitled "Stimulus creates application avalanche" today on the implications of this year's 10.4 billion dollar stimulus for the National Institutes of Health (NIH) to fund scientific research at academic institutions. About 115,000 grant applications were filed with the NIH so far this year, constituting a 1.5-fold increase over last year's 77,000. About 21,000 grant applications directly targeted the stimulus funds (06/09/09).
• Today Gina Kolata reports in her article for The New York Times entitled "Playing it Safe in Cancer Research" that the NIH may be able to fund roughly one percent of the applications for economic stimulus-financed grants known as challenge grants (06/27/09).
• As an example in support of my own impressions, Richmond Times Dispatch writer Karin Kapsidelis reports in her article with the title "Rising cost at Virginia’s universities mostly unrelated to instruction, study says" published online Jun 10, 2013, by the Daily Progress that Virginia public research universities have increased infrastructure spending over the past two decade, while investment in instruction declined (06/15/2013).

Related Posts

• Academic Debt: A Mind-Numbing High-Wire Act
• No Country for Shrinking Violets
• Academic Institutions & Profitability
• The Financial Crisis & Higher Education
• On the Value of Education

-->

-->

On the Value of Education

My son attends Meigs Magnet Middle School since last fall. The school is part of Metropolitan Nashville Public Schools. Acceptance is based on grades and a lottery. The other day, I had the chance to visit during class. I received my primary and secondary school education in Germany. The visit was my first at a US magnet school. Learning is project-oriented. The teachers were competent and involved. I saw children of a great variety of ethnic and racial backgrounds. Their diverse faces shared one striking feature: big, bright, and curious eyes. I was deeply impressed by their ubiquitous thirst for knowledge and cannot imagine a more profound demonstration of the essence of education. Its success cannot be bought. Rather, a successful education depends upon opportunities given and opportunities taken.

This principle also applies to higher education. Currently, graduating high school students and their parents are preparing college applications in this country. The New York Times ran an instructive article about the work of guidance councilors on January 4, 2008, accompanied by an illuminating Q&A section. Obviously the parties involved are deeply concerned with the wisdom of their decisions. Often, the equivalent value of a home may be spent.

I have studied and worked at four academic institutions, that is the Johann Wolfgang Goethe University Frankfurt a.M., Germany, the University of Tennessee, Knoxville, TN, USA, the University of Lausanne, Lausanne, Switzerland, and Vanderbilt University, Nashville, TN. The most demanding undergraduate class I took was a three-quarter course in Biochemistry for premedical students at UT. Regardless of private or public institution, only a select few students I met were eventually accepted by medical schools affiliated with the Ivy League. Besides impeccable grades, the most influential factor seemed the MCAT score. Everybody felt the need to take the Princeton Review.

Although higher education costs a lot in the US, it is a commodity without warranty. Education is not like a garment made to measure. Keeping with this analogy, the garment's fit depends on the ingenuity of the tailor and the wearer alike. The prospective student must decide in which environment her/his development may benefit the most. This may not necessarily be at the most expensive and prestigious school. A superb teaching environment does not depend on prime recreational facilities and posh accommodations. There may be value in simplicity. One of the most brilliant teacherswhose thoughts are still remembered after more than 2,400 years worked with very little overhead.

Addenda

• Unigo is the most informative college survey site, if you do not know which direction to turn (added 09/21/08).
• You may wish to read on the unfolding financial crunch gripping U.S. colleges and universities in my posts dated Oct. 30 and Dec. 9, 2008.
• The other day, I paid my first visit to an American mega-university. More than 63,000 students toil at Ohio State University (OSU) in Columbus, Ohio. Total cost in this academic year for in-state students may come to a third of private college cost. Its a huge campus. The shear size may be startling. But I was deeply impressed with the faculty. All professors I met had attended highly reputed universities and spent their earlier careers at top-ten research universities. I took my visit to show that many institutions of higher learning in this country may offer an excellent education at affordable cost. If we are willing to take the front seat, crowds pose no obstacle. We were a thousand students in my Introduction to Biology lectures. Yet, even an auditorium for a thousand students offers seats up front. You could easily read the slides and enjoy the action still from the tenth row. The lectures were highly instructive. The demonstrations were fascinating. These crowded lectures sowed the seeds for many posts on this blog (10/31/09).
• Last weekend, Nashville made the national headlines with the news of a catastrophic historical flood. According to NashvilleWX Channel2, some areas received more than 18 inches of rain. Last Monday evening, the Cumberland River crested just under 52 feet, 4 feet below the highest level recorded in history. Mayor Karl Dean estimates that the damage may exceed $1.5 billion. The Tennessean covers the events extensively. The impact of the horrific deluge depends on location. We live on a hill. Though our basement is unfinished, it only turned damp. No tornado struck our home. We were spared one more time. By contrast, homes and businesses near the Cumberland River and its tributaries were totally flooded. To date, we know that ten people lost their lives in Metropolitan Davidson County. About 2,000 residences took water. Countless families lost their homes. Public schools have been closed all week. My son's school, Meigs Magnet Middle School, provided outstanding leadership in these extraordinary times. On the day of the worst flooding, May 2, the school's principal inquired in phone and e-mail messages about the status of the students and their families. Based on the school's initiative, we know now that flooding severely affected at least 20 Meigs families, and the PTO is organizing help and relief. My son could not attend a better school (05/06/10).
• People begin to listen (05/24/10)!

• Based on a student survey conducted by ratemyprofessors.com, Robert Franek, Laura Braswell and the staff of The Princeton Review compiled a list of the 300 best professors at US institutions of higher learning along with professor and school profiles. The list was published in softcover by Random House this year and is quite informative. For example, Harvard University (private; annual tuition: $34,976.-) contributes two professors to the list. By contrast, The College of William and Mary (public; in-state tuition: $13,132.-; out-of-state tuition: $35,409.-) is home to ten such professors. According to William and Mary's Faculty Compensation Board Report 2009-10, full professors at the college earned on average roughly $112,000.- in that academic year (most recent data available), whereas at Harvard University they earned $198,400.- in the academic year 2011-12 (AAUP's Annual Report on The Economic Status of The Profession 2011-2012 with the title "A Very Slow Recovery"). Passion for teaching need not necessarily correlate with pay (05/23/12)!

Related Posts

• Smoke Stacks, Colleges & the Sensitized Mind
• The Value of Education, Economically