Finishing in Four: Texas Higher Ed Reform

In the upcoming session of the Texas legislature, there will be a big push to alter the formula for computing public support for state universities. Currently, public support is based on enrollment. There are various proposals floating around for an alternative, but almost all of the suggest pegging at least part of university's funding to its four-year graduate rate. The logic is that the current system creates incentives for institutions to delay students' progress toward their degree in order for colleges and universities to continue to extract tuition and fees from students, contributing to problems like excessive student loan debt.

Despite concerns that an altered funding formula emphasizing completing will create incentives to turn colleges and universities into diploma mills, it is clear that some kind of outcome-based formula adjustment is going to happen. For public colleges and universities, the challenge will be to respond to the new funding environment and the evolving economic realities of higher education in effective and constructive ways

The University of Texas has presponded to the finish in four push by setting up a pilot program to forgive a small amount of a student's loan debt should they make timely progress in their academic program. As I have explained here before, I am skeptical the UT plan will do much. The size of the incentives is too small to matter except at the thinnest margin.

Here at Texas's other flagship research university, the administration seems to be focusing its preliminary efforts on increasing the level of hand-holding thrust onto students. I hear that there will be a new computer interface that will allow students to map out a four year degree plan as incoming freshmen and cross-reference their original plans with their ongoing progress as well as maybe adding new advising staff in academic departments (and some other sneaky business like pushing students to declare majors earlier and making it harder to change majors later on).

I think both UT's and TAMU's approaches are flawed. There is no obvious way to offer financial incentives for timely completion of a degrees that are big enough to matter to students, small enough not to hurt the university's bottom line and be politically palatable, and not be counterproductive (insofar as they discourage students who get off track from completing a degree at all). I also think increased hand-holding won't do much but create more bureaucratic nonsense, overburden the university's generally excellent advising staff, and inadvisedly shift responsibility for students' progress from the student to the institution.

What to do, then?

There is no single magic bullet. Yet, colleges and universities can go a long way by helping to ensure that entering students have the skills they need to excel in college and offering help to students who are not prepared for college-level work. Likewise, colleges can eliminate policies that actually facilitate students getting off track on their degree plans and provide some modest, social incentives for students to keep moving toward their degrees. Along these lines, I have a handful of modest proposals for improving four year graduation rates at Texas A&M. Some of these will readily translate to other public college and universities in Texas (and elsewhere), but, others are idiosyncratic Aggie business.

1. The Structured Pass/Fail First Semester

I have adapted this idea from Dartmouth Political Scientist Brendan Nyhan. I completely agree with him that unprepared students are a huge problem for colleges and universities in general, and doubly so for Texas's public universities with mandates to automatically admit students based on their relative performance in high school regardless of the quality of their high school. Brendan advocates allowing students to take their first semester of classes pass/fail to let the acclimate to college while relieving some of the pressure that can come from that first semester of college.

I'll take this idea a step further and advocate that students entering college take a structured schedule made up of courses from the university core curriculum. Everyone would take composition, math, literature, a natural science, and either American government or American history, for example. The first semester course offerings would emphasize basic skills like writing, logical reasoning, and reading comprehension that would pay dividends throughout students' later coursework. Forcing students to take these up-front would avoid the problem of students getting in over their heads because they lack the basic academic skills they should have mastered in high school. Similarly, the freshman curriculum would provide the institution with a way to identify students who need remedial assistance in these areas to prepare for advanced work later on.

The first semester curriculum courses would be offered on a pass/fail basis to allow students to acclimate to college in a less stressful environment and to keep the emphasis on learning rather than performance. I know it sounds touchy-feely, and I was very skeptical of the idea when I first read it. As I have revisited Nyhan's post, though, and read other accounts of pass/fail first semesters, I have become convinced that the system provides a way to short-circuit many of the problems that lead to students getting off track in their degree programs in the first place: failing to effectively adjust to college, falling behind due to poor preparation in high school, and suffering from a lack of basic skills. The pass/fail system gives students incentives to admit academic weaknesses and seek help rather than incentives to cover-up their academic shortcomings and avoiding them. In other words, students could focus on improving their skills rather than gaming their courses.

2. A First Year Campus Residency Requirement

Most college students are legally adults. They are eligible to buy and smoke cigarettes, read dirty magazines, vote, serve in the military, etc. Generally, colleges and universities should treat students like adults. And, universities should definitely not simply replace helicopter parents with helicopter advisors, counselors, and staff. Having said all of that, colleges should be aware of the problems and challenges facing their students, and, in light of their educational mission, structure themselves in ways that help students learn and achieve their various academic, professional, and personal goals.

Many students who get off the track of a timely degree program do so because of problems that develop during their first year of college. Some of these are strictly academic, i.e. they are not prepared for college-level work. Others are "extracurricular." Removed from home for the first time, students get distracted from their academic endeavors and begin to fall behind in their courses. Obviously their grades suffer, but, more importantly, they are not learning material in introductory courses which will be necessary in later courses and in professional tasks related to their field of study. Early success, therefore, pays substantial dividends down the line.

Requiring first year students to live in on-campus dorms helps facilitate that early success. Trivial logistical obstacles to students getting to class or to the library, like parking, are minimized by living on campus. Access to a university's services and facilities are maximized. Some of the classic distractions of college life can be minimized or managed by dormitory rules. Likewise, students living on campus can be more easily organized into learning communities that can facilitate things like study groups, collaborative assignments, and student clubs and associations. Given these various benefits and with the possible exceptions of married students, students with children, or older students (say, those 21 or older), freshmen should be required to live in on-campus.

3. Eliminate "Q Drops"

At Texas A&M and other public colleges and universities, students are allotted a number of "Q drops," or opportunities to end their enrollment in a class without cause (e.g. a medical excuse, military deployment, etc.) after the normal drop/add period ends. Students receive no credit for Q dropped courses. Q dropped courses are reported on transcripts, but they do not factor into students' grade point averages. If a student Q drops a course after the twelfth class day, their tuition is not refunded. The state limits students to six Q drops; Texas A&M currently allows three, though that will increase to four next year.

Q drops are a drag on both academics and student finances. Academically, they provide students with an escape hatch from difficult coursework. Students who are not performing well in a course should be encouraged to redouble efforts to improve their performance for the rest of the term.

Q drops do the opposite. They allow students to avoid their academic problems and perhaps "shop" for easier alternatives to the Q dropped course, choosing a less demanding instructor or taking the dropped course elsewhere (perhaps online or at a community college).

Q drops obviously slow progress toward a degree, since Q dropped courses do not yield academic credit and cannot be replaced with another course once the normal enrollment period has ended. Students taking their state maximum allotment of six Q drops would be missing more than a full semester's worth of course credit. That means longer times to graduation and, of course, greater expenses for college, greater financial burdens on students and their families, and higher student loan debt.

Q drops should be eliminated. Texas A&M has very sympathetic policies for students to withdraw from courses for cause. I would be surprised if other state colleges and universities were not similarly responsive to students with medical problems, family emergencies, and other circumstances which may legitimately interfere with students' normal academic process. Allowing students to deal with difficult exigent  is perfectly reasonable. Allowing student to drop courses without cause, though, serves neither the student's interests nor the institutions'.

4. Aggie Ring and Sports Pass Reforms

With the possible exceptions of the various U.S.military academies and their cousins like the Citadel, college rings are a bigger deal at Texas A&M than anywhere else I have encountered. Students crave their Aggie Ring. I have heard students in official university videos say that their ring is more important to them than their diploma. They are a big deal.

Likewise, A&M has a big time athletic program. Of course, football is king, but the University is a perennial contender for the Directors' Cup, a national award for the best all around collegiate sports programs. Student attendance at many sporting events, even those that draw spares crowds elsewhere, are very popular at A&M.

Students' eligibility for Aggie Rings and sports passes should be tied to timely progress toward a degree.

Currently, students become eligible to purchase their rings once they have completed at least 90 credit hours with at least an 2.0 GPR, which is what Texas A&M calls a GPA. That requirement should be updated. The university should authorize rings only for students who complete at least 90 hours in three years or less, i.e. students who are on track to complete degrees in four years. Students who are not on track for timely degree completion would become ring-eligible only upon completion of their degree. Likewise, the university should limit access to student tickets for sporting events to those who are making timely progress toward their degree and those students who are off-track who have also returned to a record of satisfactory progress toward their degrees for some period of time.

UT's Plan to Promote On-Time College Degrees: Will Financial Incentives Help?

The good folks out at Texas's other flagship research university have concocted a plan to create incentives for undergraduate students to complete their degrees on time. The university will forgive portions of students' unsubsidized federal student loans (those are the student loans that accrue interest while the student is in school) for students who stay on schedule to complete their degrees. The press release announcing the plan says, in part:

The University of Texas at Austin is testing a program to measure whether students can be encouraged to complete their degrees quickly by offering them forgiveness of the most expensive loans they must borrow to attend the university....

For this pilot project, the university will select 200 freshmen entering in the fall of 2013 who have been awarded Federal Direct Unsubsidized Loans on the basis of financial need. Half of the students would be offered loan forgiveness in the amount of $1,000 on the principal, plus interest accrued if they successfully complete 15 hours of their degree requirements by the end of each semester. The other half would be offered $2,000 in forgiveness, plus interest accrued, if they successfully complete 30 hours of applicable degree requirements by the end of the academic year.

UT's goal to increase timely completion of students' degree programs is laudable. Yet, I doubt that this program will successfully reduce students' time to completion.

In-state tuition at UT is roughly $10,000 a year for in-state students and $25,000 annually for out-of-state students. Throwing in room, board, fees, books, transportation, and other costs, and Texas residents can can expect to spend over $24,000 a year to attend UT with nonresidents shelling out between $40,000 and $50,000 annually. An incentive of $2,000 for staying on track to complete a degree in four years is great and all, but it amounts to something like 2-4% of the average cost of attendance at UT. If a student is not dissuaded from extending their time at the University of Texas by the relatively large price-tag of staying an extra year (or two), it seems unlikely they will be convinced to do so by the pilot program's relatively modest tuition rebate.

A bigger problem is that the program seems to misconceptualize why students aren't finishing degrees on time in the first place. Students (and their families) have huge financial incentives for finishing degrees on time. By doing so, they avoid the expense of additional education and earn the ability to work full-time with the wage premium that accompanies a college degree. Many students stay in school longer than four years despite costs (and opportunity costs) for doings so that are orders of magnitude larger than the UT pilot program's rebate. The problem, therefore, is unlikely to be redressed by marginal and naive price adjustments.

In my experience, many students who extend their time in college beyond four years tend to fall into one of two categories. The first are students who were not academically or personally ready for college when they arrived as freshmen and have stayed beyond a fourth year to re-take courses they failed or did poorly in when they first arrived. The second are students who got off-schedule due to various circumstances beyond their control: illness, childbirth, financial problems that required leaving school or taking on paid work at the expense of a full course load, etc. Neither of these groups are likely to be pulled onto a four year degree program by the lure of a couple of thousand dollars of tuition remission.

Instead, universities, including UT, will have to do the harder work of making sure that incoming freshman are placed in appropriate courses given their level of preparedness (including remedial courses if need be) and providing services and support to students with common personal and economic problems to help them stay on track for timely completion of degree programs when possible or to return to a normal academic program as soon as possible. These tasks are especially daunting for public institutions like UT and Texas A&M, who have limited control over their own admissions and enrollment given various state mandates. Yet, universities that take seriously their educational missions in general, and the growing imperative to help students manage the costs of their education by completing their degree programs in a timely fashion in particular, should not be satisfied with superficial efforts. Indeed, a serious effort to investigate the problem of extended degree completion, to understand its causes, and to develop effective interventions should be a top priority for UT and higher education as a whole.

Income Taxes, Payroll Taxes, and the 47%

Yesterday, Mike Bailey from Georgetown University (h/t Brendhan Nyhan) discussed results from a YouGov survey which finds that 78% of Americans believe they pay income taxes, even after they have been primed to consider the distinction between "income taxes" and "payroll taxes."

When Mitt Romney’s 47% comments came to light, many were surprised that Romney’s claim that only 47% of households pay income taxes is, in fact, true....

What’s going on, of course, is a disjuncture in the technical and ordinary usage of the term “income tax.”  Technically, the income tax is a progressive tax on income that does not include the “payroll taxes” paid to support Social Security and Medicare.  In ordinary usage, however, these payroll taxes are often considered federal income taxes – after all, on April 15, payroll and income taxes are rolled into the bottom line owed to the federal government....

The most recent YouGov/Economist poll asked, “Do you pay federal income taxes?”  Seventy-eight percent said they do. Given that about 54 percent of households pay federal income tax that suggests roughly 24 percent of respondents report that they pay federal income taxes, but do not.

The upshot, as the title of Bailey's post reports, is that only 22% of Americans know that they are part of the 47% that pays no income tax. The result is interesting and suggests that Mitt Romney has a bit of a rhetorical advantage on the issue of distributing the tax burden since more than half of the people indicted by Romney's 47% comment don't think he's talking about them. Bailey adds a bit of an editorial to this analysis, though, criticizing Mitt Romney for being disingenuous about the income tax/payroll tax distinction.

What this means is that there is important political slippage between the tax policy debate in Washington and the way it is heard by many Americans.  For Romney, this slippage is convenient as discussing income taxes as if they were all or even a majority of federal taxes paints the current tax system in a particularly unfavorable light.

Convenient is not correct, however.  Everyone who discusses taxes should report the full context on taxes so that Americans working with common sense views of income taxes are not misled.

I completely agree with Bailey that the American people deserve a full and fair reporting of the context of the national debate on taxes. Respectfully, though, I disagree with him about the source of the "slippage" in the way many many Americans understand their federal tax burdens.

In fact, most of the misunderstanding about "income taxes" versus "payroll taxes" arises directly from the existence of a "payroll tax" that is separate from the "income tax" in the first place. The problem is worse than that, though. The the federal government often refers to payroll taxes as "contributions" that individuals make to "earn" various "insurance" payments. Indeed, the federal that authorizes payroll taxes is called the Federal Insurance Contributions Act (FICA).

If the payroll tax is just an income tax by another name, why isn't it just called an "income tax" and included as part of the rest of workers federal income taxes?

It is no accident. The framers of the Social Security program intentionally separated the system of taxation that would support retirement insurance from the rest of the federal government's revenue collections. They didn't want workers to think of FICA payments as ordinary taxes. They wanted to create the illusion that working people were paying into a system to "earn" benefits that would be paid back to them later rather when they retired. Of course, Social Security does not work like that. It works like any other welfare program. People who are working now pay taxes to fund payments to people who are now retired. When those of us who are presently working retire in the future, our Social Security payments will be funded by taxes collected from people who are working then.

The separation of "federal insurance contributions" from income taxes was an intentional effort to obfuscate the nature of the Social Security program (and, later, Medicare) to insulate the programs fro subsequent political opposition. As President Franklin Roosevelt famously explained:

We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.

Roosevelt knew exactly what he was he was doing. By "submerging" this part of the state, Roosevelt and the other parents of Social Security (and subsequently Medicare) successfully and fundamentally shaped the way that most people think about their payroll taxes and old age entitlements. A quick conservation with nearly anyone who is retired or near retiring will almost certainly show you that she thinks---no matter how conservative she may be otherwise---that she has a "right" to the Social Security and Medicare "benefits" that she "earned" by making her "contributions" over her whole working lifetime. This sentiment is not some abstract social contract business in her mind. It is a concrete, transactional and contractual reality.

The folks who are down on Mitt Romney for blurring the distinction between payroll taxes and income taxes and who also support continuing Social Security and Medicare in their present form as near universal, publicly financed entitlements through separate payroll taxes are trying to have their cake and eat it too. Mitt Romney's rhetoric about the 47% assumes a distinction in the contributions that people make to the federal government that was created by political liberals to manipulate public perceptions of massive transfers of income in order to insulate those programs from political attacks. Romney did not create that distinction and, to the extent that Republicans' desire to debate and reform old age entitlements are frustrated by the distinction, he and his party do not benefit from it.

So, by all means, let's have an open, fully contextualized debate about federal tax policies. But, the openness should start by recognizing that "federal insurance contributions" are just ordinary income taxes and that Social Security and Medicare are just ordinary income transfers. Unless and until the official and political vocabulary used to describe the nation's old age entitlements changes, we should not be surprised that many Americans misunderstand the nature of their tax obligations. Likewise, those who support the separation of income taxes and payroll taxes to protect old age entitlements from political opposition have little room to criticize politicians who try to capitalize on that separation for other purposes.