Soft Skills Dictate the Capabilities of Professional Development Services – Part 2

As a continuum to our last blog, we will discuss how corporations can effectively acquire, retain, and refurbish talent in order to remain competitive and meet increasing technological consumer demands. The good news is that solutions are in plain sight. In fact, Infosys, a global leader in next-generation digital services and consulting, has delineated strategy to help corporations address the talent needs of today and prepare for those of the future.  Now how to best implement and execute these strategies?

Cast a Wider Net for New Hires. The battle for new hires continues. It is well known and undeniable that Ivy League and other elite campuses are important targets for recruiters. Harvard University, Caltech and Stanford University produce the most employable graduates, according to the 2018 Global University Employability Ranking.[1] However, the demand for these graduates is highly competitive, so expanding the net for potential recruits is a must. This strategy has proven to yield excellent employee bases for some of the top companies. For example, Unilever, a transnational consumer goods company used machine learning algorithms to select its target number of 800 graduates from a wide net of over two million applicants. As a result, they were able to uncover an immense amount of data on the types of employees ultimately hired, which was then analyzed over time to reveal the most important attributes of a successful new hire. Those characteristics included learning agility, resilience and personal mastery. That is not to say that graduates from these top institutions are not equally qualified. Instead, the data points to the fact that companies who pigeonhole themselves to a narrow pipeline of graduates may miss out on a slew of capable and eager talent who will diversify capabilities, support digital initiatives and allow companies to “create the graduates they need.”[2]

Reskill and Redeploy In-House Talent. The idea that corporations can create the graduates they need is no myth. However, this requires continuous efforts from corporations to reskill and redevelop their existing talent. Nearly every company depends on traditional approaches such as instructor-led classroom training, onboarding programs and coaching. This requires corporations to actively transition away from the traditional route of hiring and firing and instead, train acquired talent as often as possible in unconventional ways. The most competitive companies are now adding digital campuses, boot camps and hackathons (a design, sprint-like event in which computer programmers collaborate).2 Most importantly, they are investing in soft skills that complement technical skills and help create a lifelong learning culture that fuels success. Below is a depiction of the variety of skill development techniques leading organizations are utilizing:

Engage Temporary Workers and Gig Economy Strategically. In addition to casting a wider net and reskilling, leading companies are leveraging temporary workers to fill the talent gaps. Although it requires strong internal processes to contract, integrate, manage and release these workers, they are proven to be highly useful and provide a different set of skills depending on the industry. For example, according to Infosys, technology companies use temporary staff for technical skills in 95% of digital initiatives. Manufacturers utilize temporary employees for design capabilities on 70% of their projects. Life sciences companies contract externally for business and industry expertise for 48% of their digital transformations.2 In all, these employees can be a great value add, allowing companies to expedite initiatives while catering to the changing needs of the consumer.

Align Organizational Structure to Evolving Business Needs.  Organizations must move away from hierarchal and matrixed organizational structures to team-based, self-managing ones for agile project needs.2 This allows for soft skills to be at the forefront of digital transformation, as the ability to collaborate and adapt are of upmost importance in advancing technical prowess and meeting the continuously evolving consumer demand.

Corporate strategy needs to be in perfect alignment with digital initiatives. This includes the development of a lifelong learning culture, the installation of an organizational structure that promotes cooperation, and, most importantly, the casting of a hiring net that captures talent with the soft skills that will ultimately drive initiatives. When corporations embrace this fact, they will realize movement. But, when they execute, they will realize growth

To learn more about MHT Partners, a leading education investment bank, please contact Alex Hicks (ahicks@mhtpartners.com) or Rebecca Bell (rbell@mhtpartners.com).

[1] https://www.timeshighereducation.com/student/best-universities/best-universities-graduate-jobs-global-university-employability-ranking
[2] Infosys Talent Radar 2019 Report

Soft Skills Dictate the Capabilities of Professional Development Services – Part 1

In a world where digitalization has become the standard, there is an unwavering consumer demand for new, innovative, personalized content. Since change in consumer demand is the only constant, digital transformation has become imperative for all businesses in order to remain competitive. Digital transformation means more than delivering and embracing new technology; it encompasses change in thought and organizational culture. It often requires restructuring of business models in a way that proactively seeks to understand customers while innovating ways to captivate changing needs. Today, it is apparent that the most effective way to meet the digital demand is through digital talent. However, instead of creating new job titles, most companies prefer to retain quality, tenured employees while modifying the required skills of their current job positions. In order to do so, companies must continue to nurture the skill sets of both existing and newly acquired talent through professional development services, creating a culture of lifelong learning.

As digitalization evolves and corporations become more data driven, one would think technical skills surpass soft skills, but this is not the case. A research report conducted by Infosys, a global leader in next-generation digital services and consulting, suggests that the soft skills emphasizing collaboration rank higher than individual skills and are just as important as technical prowess. In addition, the study concludes that undervaluing learnability is the “biggest tangible barrier to reskilling the workforce.” [1] This underestimation impedes the activation of a lifelong learning culture, which is required to captivate the rapidly progressing consumer demand. It also decelerates the digital transformation process – a key to profitability and competitive advantage today.

Corporations across various industries are demanding skillsets that complement their digital initiatives and projects. Infosys’s research [1] reveals that:

 

Going forward, it will be critical not to overlook how essential these innate skills are for both design thinking and continuous personal and technical development.  Both traits are required for today’s talent to understand and keep pace with new technologies and consumer demands.

It is safe to say that the skills companies need most vary by industry and the types of digital initiatives they pursue. However, learnability is one that is needed across all industries, especially ones that require a profound understanding of the consumer in order to offer new, personalized digital experiences. For instance, the education sector must cater to the needs of its consumers, the students, whose abilities to learn in the traditional way has changed with increasing technology. In response, this industry has become increasingly more tech-enabled to tailor the learning experience for each individual. The education technology space has seen  $962 million raised over 65 deals in the first half of 2019 compared to $750 million across 62 deals in the first six months of 2018. [2] In the K-12 Professional Development market alone, there is a predicted $3.2 billion to be generated in net sales by 2021 [3] and this figure continues to grow as investors recognize the necessity of this market with such advancing technology and consumer demand. This goes to show how crucial learnability is. If educators and teachers are still seeking new ways to positively impact their students, then all professionals and corporations should feel the same way toward their respective end markets and customers. More importantly, it should be reflected in their office cultures and their hiring strategies.

In a society where consumer demands are growing with new technological advances, corporations must continue to educate and revitalize the skills of their professionals. However, the biggest intangible barrier that limits the tremendous potential of reskilling as a competitive advantage, is undervaluing learnability. Technical prowess is stagnant without indulging them with soft skills. And – it is up to corporations to seek employees with this skill set while cultivating culture of lifelong learning. This is the only way to reap full benefits of the booming professional development market and captivate the continuously changing consumer demand. The next question is… What necessary steps need to be taken to effectively do this?  Stay tuned for MHT Partners, a leading education investment bank, next “Learning Curves” blog for part 2.

[1] https://www.prnewswire.com/news-releases/need-reskilling-and-non-traditional-talent-nurturing-in-a-culture-of-lifelong-learning–finds-new-global-research-from-infosys-300916708.html
[2] https://www.edsurge.com/news/2019-08-07-us-edtech-funding-already-nears-1-billion-in-first-half-of-2019
[3] https://marketbrief.edweek.org/marketplace-k-12/investment-opportunity-strong-bit-risky-k-12-education-report-says/

 

Coming up the Learning Curve: The State of Adult Learning

The importance of adult and continuing education has become increasingly clear in recent years. Rapidly changing technology and a growing population of low-skilled adults means there is substantive demand for better workforce development systems equipped to meet 21st century needs. While low government funding and high cost continue to act as a barrier for continued expansion, there are several other compelling factors that are paving the way for innovation in the alternative education space.

  • Highly Fragmented Industry. Perhaps one of the more attractive features of the adult education market is the lack of a clear leader. Few companies have managed to champion meaningful market share in the continuing education arena, and even fewer still address the overt need for adult remedial and developmental education solutions. Unlike its K-12 counterpart – where massive education technology companies like Pearson, K12, and Cengage reign unopposed – a fragmented market offers plenty of opportunity for smaller companies to innovate, compete and succeed.
  • Large Target Market. According to 2017 census data, approximately 27% of U.S. adults aged 25 and over hold only a high school diploma. Over 12% of those 26.5 million adults lack a high school degree(1). An even smaller fraction of the total pool of low-skilled American adults are currently enrolled or participating in a continuing education program, community college, or workforce development program (including adult basic education, ESL, HISAT, computer and financial literacy, and other job-based skills programs). Leveraging technology is a big opportunity to affordably scale these programs to reach the millions of adults in need of the basic education and skills critical to boosting employability.
  • Less Legislation. The U.S. currently spends approximately $10 billion per year on adult education (only $200 million of which is spent on digital materials) (2), compared to an annual spend of over $650 billion on K-12 education services. While only a small piece of the overall education expenditure pie, lower vested interest in the space means that there is little regulation required to adopt new policies and practices, and more room for disruptive innovation. An example is mobile learning: whereas use of smartphones is still gaining adoption in the K-12 classroom setting, mobile learning among adults can serve as a convenient, affordable, and simple learning solution. One favorable piece of legislation affecting this industry is the Workforce Innovation and Opportunity Act (WIOA). Administered by the Education Department, Title II of the WIOA – the Adult Education and Family Literacy Act – federally mandates a focus on integrating technology into adult basic education and career pathways programs in a manner sufficient to help adult learners improve basic skills and gain college credits. Alternative education providers can use these publicly available plans to create or adopt new content and delivery models that support the WIOA’s core purpose.
  • Demand for Upskilling. Continuing education is also more flexible to adapt to employers’ projected needs. Rapid developments in technology and innovation continue to alter the knowledge and skills necessary to enter the workforce, with a focus on digital and financial literacy. Companies operating on an international scale may also benefit from career development programs tailored to foreign language, communication, and cultural sensitivity training. That said, there is significant opportunity for education providers to partner with employers to create customized career pathways programs that satisfy demand for industry-specific talent.
  • Flexibility of Coursework. Adult learners are likewise able to tailor their own personal education experiences such that they gain the skills and knowledge relevant to their personal goals. Online education also presents a flexible alternative to the traditional, face-to-face method of learning; adult education providers can offer a variety of learning options (self-paced, blended, and online learning) during nontraditional hours of operation to serve adult students otherwise busy with work and family obligations.

If you would like to learn more about MHT Partners, a leading education investment bank, please e-mail Shawn D. Terry (sterry@mhtpartners.com), Alex Hicks (ahicks@mhtpartners.com) or Rebecca Bell (rbell@mhtpartners.com).

(1). Adult Education Comes of Age (EducationNext)
(2) Accelerating Change: A Guide to the Adult Learning Ed-Tech Market

Education Technology – A Component Not a Cure All – Part 2

As a continuum to our last blog, we will discuss how to effectively implement education technology to spark growth in academic achievement, close the digital learning gap and talk about possible improvements that can ignite future leaders. The good news is that solutions aren’t far reaching. In fact, many have already been identified but simply need to be solidified.

Educators and administrators agree that education technology should enhance, but not dominate, the classroom. Students should not feel overwhelmed or deterred by the challenges of technology, but rather empowered due to unlimited access to personalized, digital content. Nevertheless, the potential misuse of technology can lead to a wide discrepancy between potential and actual effectiveness. More than 90% of teachers report they rely on their own experience and instinct to guide the way they utilize and teach technology in their classrooms(1). While experience is usually the ultimate advantage, in a world that is becoming more technological, experience only goes so far. That said, educators must actively seek to effectively implement education technology into their classrooms and utilize academic research to best cater to the needs of all students. School district focus should be to allocate adequate time and money towards professional development programs that help teachers evolve and improve their teaching techniques in harmony with advancing education technology. Once educators learn how to use technology to successfully tailor learning, we expect to see optimism meet opportunity.

The digital learning gap is another underlying problem that has been identified but has yet to be solved. This gap is caused by differences in how children access and use technology in and out of school to improve their learning opportunity and outcomes(2). While some students have grown up in technology-enabled schools and households that support this system, others have not. This makes adapting to new technology in classrooms less favorable for certain students, widening the digital learning gap. There are two things, in addition to professional development programs, that must be done to shrink this gap and increase academic achievement:

  1. Increase access, both at school and at home. Even with 45 million students having access to high-speed internet at school, there are still 2.3 million students who do not. In addition, 15% of U.S. households with school-aged children do not have a high-speed internet connection at home(2).
  2. Increase participation2. Educators and schools must constantly teach and instill the importance of education technology participation. Approximately 11% of households do not use internet, with the majority of these making below $30,000 a year or living in rural areas(2). Our schools must acknowledge this reality and help students and their families realize the importance of technology and internet access to their futures.

Nevertheless, the potential of the digital classroom is near break through. More than 75% of teachers, students, and parents believe tailored learning utilizing technology is a better way of learning than the traditional, whole group, lecture-style classroom(1). This coupled with the incessant development/creation of digital content and devices, equates to a wide window of opportunity. MHT Partners, a leading education investment bank, knows that both financial sponsors and strategic buyers are making it a priority to invest in education technology companies, with $962 million raised over 65 deals in the first half of 2019 compared to $750 million across 62 deals in the first six months of 2018(3). The industry is booming, and there’s no indication of it slowing down.

[1] https://www.edsurge.com/news/2019-08-06-hype-hope-and-humblepie-for-predictions-about-digital-learning
[2] https://digitalpromise.org/2019/01/09/closing-the-digital-learning-gap/
[3] https://www.edsurge.com/news/2019-08-07-us-edtech-funding-already-nears-1-billion-in-first-half-of-2019

Education Technology: A Component, Not a Cure All – Part 1

Schools have increasingly migrated away from traditional classrooms in favor of digital classrooms, given the fact that technology has inserted itself into nearly all aspects of human life. Educators view classroom technology to creatively engage students in course content, as it offers personalized learning opportunities rather than a “one-size-fits-all” solution. The combination of flipped classrooms, access to online content, and data that allows teachers to access student performance in real time creates an ideal, tailored learning environment. The implementation of tailored learning supports the idea of “learner variability,” a concept defined by Digital Promise, a top tier education non-profit that works at the intersection of education leaders, researchers, and technology developers to improve learning opportunities for all through the operative use of education technology. The science behind learner variability studies the range of cognitive, social, emotional, and psychological skills that each individual student brings into the classroom. Some students breeze through traditional curriculum, have prospering social skills, and benefit from a stable support system and home life. Other students may require more guidance in order to retain and regurgitate educational content, lack natural social skills, and have a chaotic home life . Digital Promise concludes that each of these intrinsic aspects must be considered to effectively customize learning and to build effective learning solutions and curriculums for students.

The 2008 published book, “Disrupting Class,” optimistically predicted that 50% of all high school courses in 2019 would be digital. While the numbers aren’t quite there, they are certainly moving in that direction. Nearly 35% of teachers say they utilize technology in education daily, and another 23% say they use it most days1. Technology implementation is moving in the right direction; however, the most important question to consider is whether students are reaping the benefits classroom technology is intended to provide. Research conducted by Digital Promise suggests an unfortunate answer: NO. Nearly 65% of the public believes that students are not reaching high levels of educational achievement, while only 35% think schools are adequately addressing the underlying issues that would spark growth in educational achievement. In addition, only 20% of the general public, 31% of parents, and 39% of the teachers believe schools “regularly and effectively tailor instruction to meet the needs of individual students” despite the advancement and availability of education technology(1). These statistics suggest that the application of technology in education has been ineffective.

To add to the discussion of inefficiency, it is apparent that ineffectiveness touches students in unequal ways. According to a survey conducted by Digital Promise, the general population not only believes education technology has been inefficient in yielding higher achievement but also believes it has mainly been ineffective for students who struggle in the classroom. In retrospect, this means that gifted students are receiving the most benefit from the technology solutions – ironic given one would think students who struggle the most would see the most academic improvement from the implementation of education technology. Academic achievement results disprove this common perception. Struggling students see education technology as an added layer of complexity to the classroom which compel them rather than propel them.

Could too much optimism create unrealistic expectations for education technology? It is safe to say that educators and schools have enthusiastically advocated for the digital classroom as a “fix all,” however, it must not be overlooked that efficacy is limited to the way technology is utilized. 80% of the general public confidently says that, if used appropriately to address the underlying issue of learner variability, these solutions will result in an upsurge in academic achievement1. But, implementing the optimal balance between traditional and digital classroom teaching is impending. The variance in academic achievement can and must be reversed. The burning question is… How?

In the next “Learning Curves” blog, we’ll discuss potential answers to this question of “how” to effectively implement education technology to both spark growth in academic achievement and close the Digital Learning Gap. Stay tuned!

[1] https://www.edsurge.com/news/2019-08-06-hype-hope-and-humblepie-for-predictions-about-digital-learning

 

Careers in Trade

Most families aspire for their children to earn a college degree. Yet higher education affordability remains a top concern, and the associated level of student debt can create years, even decades, worth of financial challenges for young adults. So, what about students who lack the time or finances to commit to a four-year degree program? Does an alternative scenario exist that yields the same results?

What is a Trade School?
A trade or technical school focuses on teaching marketable skills for particular careers. Vocational schools offer streamlined training opportunities in comparison to a bachelor’s degree. For this reason, trade programs tend to involve shorter time between enrollment and graduation. Furthermore, the learning schedule is often part-time in nature, providing greater flexibility with evening and weekend classes. Class sizes tend to be smaller than four-year college programs and the learning content typically includes hands-on practice, whether in school or via an externship.

Lower Cost Options Can Yield Quality Results
For those who lack the finances or time to invest four years in college, pursuing a trade diploma or certificate is not necessarily a “step down.” In fact, these programs provide the necessary skills that lead to very stable incomes and long-term careers. For example, the average annual wage for an air traffic controller is $125,000. Construction managers, computer network architects and elevator mechanics can also work their way to salaries of $100,000 or more . Trade programs typically require two years to complete and though they are not equivalent to a bachelor’s degree, tuition is significantly less. At the same time, while some trade programs are very specific in nature, for example, a commercial pilot’s license, others, like welding, do not necessarily restrict the student to a specific industry upon completion.

Trade Programs Can Lead to Meaningful Careers
Four-year degrees are meant to provide a holistic learning experience via core curriculum in addition to a concentrated study in one or more fields. That said, liberal arts’ programs face challenges in demonstrating the perceived value of their degrees as they can make it more difficult to connect coursework to careers. No doubt the application of such degrees is useful beyond the subject knowledge; however, there is not always a clear path to employment, and the demand for liberal arts degrees is currently declining. In contrast, trade programs offer hands-on learning as part of coursework, and in many cases, require externships in order to complete the program. These opportunities build real-world experiences that reinforce the content learned as well as boost the student’s marketable credentials upon graduation. Many trade schools maintain close connections with local employers that seek to hire these students with job-ready skills. Like traditional universities, nearly all trade schools offer career services to streamline the transition from school to career more easily for graduates. One added benefit of trade careers is that many cannot be easily replaced by a computer or outsourced to other countries. For this reason, there is actually a shortage of trade employees in the U.S., and the hands-on, in-person job offers very stable employment.

A Meaningful Path to Consider
Trade schools are a great option for working adults, people with family commitments or those needing greater flexibility in their education. It is an alternative that provides the chance to learn in-demand skills for a specific career and enter, or re-enter, the workforce more quickly than would otherwise be possible. The lower cost and greater convenience can be a valuable tradeoff for students as they think about their path to employment and a long-term career.

MHT Partners, a leading education investment bank, will keep their finger on the pulse of this emerging education alternative and welcome the opportunity to learn more about your experience in the education industry.

Alex Hicks (ahicks@mhtpartners.com)
Rebecca Bell (rbell@mhtpartners.com)

Are College Loans Worth It?

Headlines about the growing cost of education and the massive amount of debt burdening students after graduating college are prevalent. Student debt levels have grown to astronomical levels since the early 2000s, with total student debt in the U.S. approaching $1.5 trillion at the end of the first quarter of 2019.[1]

Not all of the factors behind the increase in student debt are bad.  For instance, more people are going to college now than ever before, largely due to the fact that approximately 65% of job openings in the U.S. require some level of education beyond high school, such as an associate’s or bachelor’s degree.[2]  On the other side of the equation, the increase in debt is also attributable to the cost of education which has grown at an annualized rate of 5.5% over the last 30 years.[3]  As the cost of education surges, more people are focusing on the tradeoff and asking themselves, is the cost of college really worth it?

 

 

Survey Says

The pursuit of higher education is ingrained in our culture and college is viewed as a crucial step in advancing your professional career.  If the perceived importance of college wasn’t already obvious, the recent “Varsity Blues” college bribery scandal, which involved some of the most rich and famous people in the country, serves as a stark reminder of the extremes some people will take to get into a good school.

Interestingly, while an advanced degree may seem like a necessity, a recent survey indicates nearly two thirds of U.S. college graduates have regrets about their education because of student loans.[4]  Surveys also show soon-to-be college graduates lack the preparedness needed to feel financially secure when leaving college.  Experian recently conducted a survey of near-term graduates which indicated:

  • 40% rate their financial security as poor or fair;
  • Only 16% have a job lined up after graduation;
  • 57% wish they had taken on less student loan debt; and
  • Only 53% feel that being debt free is an attainable goal.

While the debate about the cost of education and the mounting student debt continues to attract headlines, most people will agree higher education is one of the most reliable paths to ensure future success.  Nevertheless, alternatives such as trade schools or apprenticeship/vocational programs are expected to garner more support and enrollment as students seek to avoid the financial burden associated with four-year, higher education degrees.

To learn more about MHT Partners, a leading education investment bank, please contact Alex Hicks (ahicks@mhtpartners.com).

[1] US Federal Reserve Bank of New York
[2] Georgetown University, Recovery: Job Growth and Education Requirements Through 2020
[3] National Center for Education Statistics
[4] PayScale, Inc. Online Salary Survey

The Future of Higher Education

The ongoing increase in tuition prices compared to stagnating wages for college graduates poses challenges for the prospective collegiate, particularly one requiring student loans. The added cost of room and board, transportation and other incidentals are an added burden to the gross price of higher education. For students and families on a budget, finding ways to cut costs is an important consideration. The obvious alternative to a four-year degree without paying a premium is online higher education. But is online education really the same?

Fully online institutions spend approximately $5,000 per student, approximately one-sixth the amount spent by private, non-profit schools with fewer than 5% online enrollment.  Traditional schools tend to spend more on instruction and faculty, which are expensive resources. Fully online schools devote proportionally more resources to academic support and student services, most likely due to the self-paced nature of these programs. One of the obvious benefits to online education beyond the reduced cost is student accessibility regardless of geography or proximity to the school. Students have greater flexibility when it comes to attendance and completing course work.  This model is especially useful for students who live at home and need to balance work or family obligations with their academic requirements.

Despite the benefits, online education has suffered from the image of a cheap knockoff to traditional higher education.  Many employers still prefer job candidates from traditional, physical universities, where budget dollars are dedicated to attracting the top professors and best instruction. Furthermore, students with online degrees are considered to have had fewer in-person interactions with professors and people of different backgrounds, cultures and ideas, which they will inevitably encounter in the workplace.  Online courses also may limit opportunities to develop presentation and communication skills, which are vital in the professional world.

No doubt, the cost and experiences of online and physical higher education are different, but are results the same? Naturally, quality is more challenging to measure. Fully online and traditional schools offer the same degrees and have the same accreditation. That said, graduation rates for fully online institutions tend to be one-third lower than those of traditional schools. Whether this variance stems from a less traditional student body or lower quality learning of online programs remains to be seen.

So, what does the future hold? While online higher education is likely to put stress on traditional residential colleges in terms of enrollment and tuition prices, it is unlikely to replace them altogether.  The physical location of a university campus is more likely to become a place where online and classroom learning is blended.  Examples of creative blends of in-person and online learning already exist, even among some elite private colleges in the U.S.  These schools attempt to leverage the best of faculty and technology in order to produce the optimal combination of quality and cost reduction.  That said, as pricing pressure affects all degree-granting institutions, they will likely continue to offer the best in-person experiences at their physical campuses and transition the rest to online, which may result in a consolidation of higher education institutions and an interesting dynamic for the M&A markets.

If you would like to learn more about MHT Partners, a leading education investment bank, please e-mail Shawn D. Terry (sterry@mhtpartners.com), Alex Hicks (ahicks@mhtpartners.com) or Rebecca Bell (rbell@mhtpartners.com).

Source:  Eduventures and IPEDS data

 

High-Cost Higher Ed: College in the 21st Century

Parents and students beware: tuition has increased yet again! In what has become a rather predictable pattern since the 1980s, the sticker price for average tuition in the United States has increased faster than the rate of inflation. Weighing in at an average of $19,189 for public, four-year universities and $39,529 for private universities (including fees and board) (1), the annual cost of attending a four-year university has reached new heights – and with it, student loan debt. As a result, many students and families are having to decide between getting a degree and facing decades of debt payments after they graduate.

According to the National Center for Education Statistics, average tuition across all four-year institutions totaled $26,120 per year for the 2015-2016 academic school year, bringing total costs to a whopping $104,480 over four years. The equivalent cost of a four-year degree for the academic year ending 1996 would have totaled just $41,320. This means that the cost of college attendance more than doubled after inflation. To put those numbers into perspective, the cost of attending Harvard in 1988 totaled only $17,100 per annum. Today, Harvard students pay more than two and a half times that amount, for a total of $46,340 for the cost of tuition alone – a 171% increase over 20 years (2). If that doesn’t faze you, try tacking on another $20,000 for room and board, books, and other miscellaneous fees and expenses.

As the discrepancy between rising tuition and stagnating wages continues to broaden, it is becoming increasingly difficult for graduates to make a living and/or save for retirement and virtually impossible for students to work away their debt before graduating. Currently amounting to over $1.5 trillion, student loans represent the highest non-housing consumer debt category in the U.S. – even more than auto or credit card loans. Interestingly, the availability of student loans has created somewhat of a paradox that has fueled increases in tuition: while students otherwise unable to afford the cost of college are able to take on large amounts of debt to fund their degrees, the lack of a cap on federal aid has artificially inflated demand for higher education. Additionally, demand for higher education has also continued to increase despite decreasing government funding to support college growth. Since 2008, 44 states have decreased their funding for higher education for a total of almost $9 billion, with 18 states having reduced funding by 20% or more (3).

While attending a higher education institution is often considered the logical next step towards a long and successful career, the current price tag on a college degree has forced many students to consider alternative pathways. Additionally, students planning to attend graduate school will need to be even more thoughtful and definitive about their plans for undergraduate education. That said, there is still hope for the future for students and parents on a budget. Students seeking a more reasonably priced education may consider pursuing a degree at a public university, which charges over $20,000 less on average than a private university. Furthermore, the advancement of online courses has introduced a number of opportunities in what is otherwise a very expensive and relatively stagnant higher educational environment. Though brick and mortar institutions will likely never disappear completely, there is no question that current tuition trends are not sustainable; as the needs of students and the economy change, so too must the educational system.

1 National Center for Education Statistics: “Tuition costs of colleges and universities”
2 CNBC: “Here’s how much more expensive it is for you to go to college than it was for your parents”
3 Center of Budget and Policy Priorities: “A Lost Decade in Higher Education Funding”

What Could Another Recession Mean for Public Education? A Look Back at 2008

Following a three-week government shutdown, recent sluggishness in the markets and the longest economic expansion since the Great Depression, one cannot help but wonder whether an official downturn is on the horizon. Many economists are forecasting slower growth in 2019, but the question remains, will it morph into a full-blown recession? When it comes to recessions, we see business activity slow down, profits shrink and layoffs occur. What about the effects on public education, where the entire system is financed through public funds? Let’s take a look at the impact of the most recent Great Recession.

The Great Recession marked the only period in 50 years when education spending contracted nationwide. Spending went from $610 billion to $601 billion from 2010 to 2012* and did not exceed 2009 levels again for five years. However, the U.S. economy experienced other downturns since 1970, which indicates that a recession does not always affect education spending.

K-12 employment was also negatively impacted for the first time in several decades. The number of teaching positions grew initially through the recession but then declined by 3.5% on average from 2010 to 2012**. There was a clear impact to schools and districts, albeit delayed, but to a lesser degree than the broader U.S. which saw unemployment levels exceed 10%. Interestingly, K-12 employment was also unaffected in prior recessions. Despite annual enrollment increases for the past 30 years, the student-to-teacher ratio actually declined in the two prior recessions to 2018. That said, the nearly 380,000 teacher layoffs from 2010 to 2012 reversed the cumulative improvement in the student-to-teacher ratio since 1995.

When reflecting on these two notable events, it is clear that the greatest impact on schools and students occurred from 2010 to 2012, representing a noticeable delay from the effects felt by the general economy. How did that happen? It appears a couple of variables were at play. First, federal stimulus funds provided nearly $100 billion to the Department of Education with the purpose of delivering emergency funds to states. Nearly two-thirds of that money was awarded by late 2009 which then buffered education budgets through 2010. However, expiration and roll off of these funds by 2011 and 2012, respectively, were then felt throughout the education system. This delay was also influenced by tax revenues directed toward education by state and local governments. While state tax structures vary widely, they are driven primarily by sales and income, while local budgets are supported primarily by property taxes. Given the severe decline in the housing market in 2008, one might expect that property tax revenue would have suffered immediately. Quite the contrary, many school districts were able to offset declining property values by increasing property tax rates. Local governments have utilized this tactic in prior downturns, which is why property taxes serve as a remarkably stable source of revenue. Moreover, assessed property values often lag market values, which helps to support property tax revenues, at least initially. These two combined factors upheld education funding at the local level during the worst years of the Great Recession. However, the education market was impacted in an “echo fashion” and to a lesser degree than the broader market in 2010 and 2012 as school budgets tightened due to the ongoing decline of local tax receipts and without additional federal aid.

What are the lessons learned from the past? State and local governments have weathered many downturns and have some influence over the impact to budgets. At the same time, we saw the federal government step up in 2009 and earmark stimulus funds for education. That said, it would most likely take a recession as severe as 2008 in which public, corporate, housing values, and consequently, personal incomes all decline simultaneously and to such a degree that public funding for education is negatively impacted.

* NCES
** Bureau of Labor Statistics