Financial Aid Freakonomics: In Search of the Tipping Point

Kevin Fudge

American Student Assistance

February 7, 2014

About ASA

• Private nonprofit • Public purpose mission = empower students

and alumni to successfully manage and repay their college loan debt

• Provides student loan education • Develops financial competencies through

innovative web-based tools and trusted, neutral advice

• All free of charge to students and alumni.

What Is Freakonomics?

• A novel way of looking, of discerning, of measuring

• Understanding how things aren’t quite what they seem

• Asking questions that lead to nothing – or something…

Something or Nothing?

• What’s in a name?

– Governor Dummer Academy

– Beaver College

– Case Western Reserve University

• Does it matter where you went to college?

YES!

Source: Brewer, Eide and Ehrenberg, 1999

NO! (if you can read hieroglyphics)

“Students who attended more selective colleges do not earn more than other students who were accepted and rejected by comparable schools but attended less selective colleges.”

Source: Dale and Kruger, 1999

About The Tipping Point

• We have trouble estimating dramatic, exponential change

• People can radically transform their behavior or beliefs in the face of the right kind of impetus

• We can shape the course of social epidemics

The Tipping Point

• Change happens not gradually but at one dramatic moment

• This will not be a gradual decline – it will not taper off or gently decelerate.

• IT WILL FALL OFF THE CLIFF.

The Answers Are In The Questions

Today’s Questions

• What is being measured?

• How is it being measured?

• What is not being measured?

• What will be the tipping point for higher education?

Trends In Student Aid

About Those PLUS Loans…

For Example, UMass-Amherst

2003

Tuition Fees Room Board Total

$1,714 $4,768 $3,080 $2,393 $11,955

2013

Tuition Fees Room Board Total

$1,714 $11,544 $5,846 $4,593 $23,697

Percent Increase in Total Cost? 98.2 Source: University of Massachusetts Amherst Office of Institutional Research

Interesting Juxtaposition

Source: The Buffalo News – August 22, 2013

What’s In A Number?

Outstanding!

• 2.13 = Award Winning!

• 330 = Award

Winning!

• 98.6 = Ideal!

Um, Not So Much

• 2.13 = Does Not Meet Criteria!

• 330 = Is Not

Included!

• 98.6 = Ideal in AZ!

How Does 98.6 Degrees Feel?

Source: National Oceanic and Atmospheric Association

Interesting Juxtaposition

Source: Chicago Sun Times – September 10, 2013

How Does $20,000 Feel?

How Does $20,000 Feel?

Source: Fry, 2012

How Does Zero Degrees Feel?

Source: National Oceanic and Atmospheric Association

What Will Be The Tipping Point?

• $75,000 private school tuition?

• $40,000 public school tuition?

• New alternatives for credentialing/signaling?

• Student revolts in the quad? (Occupy Campus)

What’s Being Done To Avoid The Tipping Point?

Actions

• Re-evaluating Financial Aid Policies

• Wellesley Quick College Cost Estimator

• Carolina Covenant

• Access UVA

Are They Working?

• 75 schools adopted no loan policies for low-income students

• 1 school adopted reduction in loans to low-income students

• 2 schools ended no-loans policies

“We shouldn’t give poorer students an advantage wealthy students don’t have. They all graduate with the same degree.” – William Goodwin, VP of Board of Visitors, UVA

Sources: http://www.finaid.org, The Washington Post – August 9, 2013

Nothing To See Here!

Tipping Point – Higher Ed Alternatives

Is Graduate Enrollment Up?

Source: USA TODAY (9/13/13)

Is Graduate Enrollment Down? • Loss of master’s

degree pay bump

• LSAT down 11%

• Law school applications off 12% - third year in a row of decline

• Open Letter to Interim Dean George D. Brown

Sources: Milwaukee Journal-Sentinel (9/1/2012) and Pittsburgh Post-Gazette (11/26/13)