Posts

Grade Inflation Eats Away at the Meaning of College by George C. Leef

The Year Was 2081 and Everyone Was Finally Above Average.

Every so often, the issue of grade inflation makes the headlines, and we are reminded that grades are being debased continuously.

That happened in late March when the two academics who have most assiduously studied grade inflation — Stuart Rojstaczer and Christopher Healy — provided fresh evidence on their site GradeInflation.com that grade inflation continues.

The authors state, “After 30 years of making incremental changes (in grading), the amount of rise has become so large that what’s happening becomes clear: mediocre students are getting higher and higher grades.”

In their database of over 400 colleges and universities covering the whole range of our higher education system, from large and prestigious universities to small, non-selective colleges, the researchers found not one where grades had remained level over the last 50 years. The overall rise in grades nationally has brought about a tripling of the percentage of A grades, although some schools have been much more “generous” than others.

Or, to look at it the other way, some schools have been much better than others in maintaining academic standards. For instance, Miami of Ohio, the University of Missouri, and Brigham Young have had low grade inflation. Why that has been the case would be worth investigating.

In North Carolina, Duke leads in grade inflation, followed closely by UNC. Wake Forest is in the middle of the pack, while UNC-Asheville has had comparatively little.

But why have American colleges and universities allowed, or perhaps even encouraged grade inflation? Why, as professor Clarence Deitsch and Norman Van Cott put it in this Pope Center piece five years ago, do we have “too many rhinestones masquerading as diamonds?”

Part of the answer, wrote Deitsch and Van Cott, is the fact that money is at stake.  “Professors don’t have to be rocket scientists to figure out that low grades can delay student graduation, thereby undermining state funding and faculty salaries,” they observed.

It might surprise Americans who believe that non-profit entities like colleges are not motivated by money and would allow honest academic assessment to be affected by concerns over revenue maximization, but they do.

But it is not just money that explains grade inflation. At least as important and probably more so is the pressure on faculty members to keep students happy.

History professor Chuck Chalberg put his finger on the problem in this article in the Minneapolis Star-Tribune.

Chalberg writes about a friend of his who had completed her Ph.D. in psychology and was working as a teaching assistant to a professor and graded the papers submitted by the undergraduates “with what she thought was an appropriate level of rigor.” But it was not appropriate, she soon learned. The professor “revised nearly all of the grades upward so that were left no failures, few C’s, and mostly A’s and B’s.”

Had she underappreciated the real quality of the work of the students? No, but, Chalberg continues, “the students thought that they were really, really, smart, and would have been quite angry and thrown some major tantrums if they got what they actually deserved.”

Thus, giving out high but undeserved grades is a way of avoiding trouble. That trouble could come from students who have an elevated and unrealistic view of their abilities and will complain about any low grade to school officials.

It could also come from their parents, who have been known to helicopter in and gripe to the administrators that young Emma or Zachary just can’t have a C and if it isn’t changed immediately, there will be serious repercussions.

Another possibility is that faculty will give out inflated grades to avoid conflict with those school administrators.

Low grades affect student retention and at many colleges the most important thing is to keep students enrolled. Back in 2008, Norfolk State University biology professor Stephen Aird lost his job because the administration was upset with him for having the nerve to grade students according to their actual learning rather than giving out undeserved grades just to keep them content. (I wrote about that pathetic case here.)

Could it be that students are getting better and deserve the higher grades they’re receiving?

You’d get an argument if you ran that explanation by Professor Ron Srigley, who teaches at the University of Prince Edward Island. In this thoroughly iconoclastic essay published in March, he stated, “Over the past fourteen years of teaching, my students’ grade-point averages have steadily gone up while real student achievement has dropped. Papers I would have failed ten years ago on the grounds that they were unintelligible … I now routinely assign grades of C or higher.”

Professor Srigley points to one factor that many other professors have observed — students simply won’t read. They aren’t in the habit of reading (due to falling K-12 standards) and rarely do assigned readings in college. “They will tell you that they don’t read because they don’t have to. They can get an A without ever opening a book,” he writes.

We also have good evidence that on average, today’s college students spend much less time in studying in homework than students used to. In this 2010 study, Professor Philip Babcock and Mindy Marks found that college students today spend only about two thirds as much time as they did some fifty years ago. That’s hardly consistent with the notion that students today are really earning all those A grades.

On the whole, today’s students are receiving substantially higher grades for substantially lower academic gains than in the past.

Grade inflation is consistent with the customer friendly, “college experience” model that has mushroomed alongside the old, “you’ve come here to learn” college model. For students who merely want the degree to which many believe themselves entitled, rigorous grading is as unwelcome as cold showers and spartan meals would be at a luxury resort. Leaders at most colleges know that if they don’t satisfy their student-customers, they will find another school that will.

Exactly what is the problem, though?

Grade inflation could be seen as harmful to the downstream parties, the future employers of students who coast through college with high grades but little intellectual benefit. Doesn’t grade inflation trick them into over-estimating the capabilities of students?

That is a very minor concern. For one thing, it seems to be the case that employers don’t really pay much attention to college transcripts. In this NAS piece, Academically Adrift author Richard Arum writes, “Examining post-college transitions of recent graduates, Josipa Roksa and I have found that course transcripts are seldom considered by employers in the hiring process.”

That’s predictable. People in business have come to expect grade inflation just as they have come to expect monetary inflation. Naturally, they take measures to avoid bad hiring decisions just as they take measures to avoid bad investment decisions. They have better means of evaluating applicants than merely looking at GPAs.

Instead, the real harm of grade inflation is that it is a fraud on students who are misled into thinking that they are more competent than they really are.

It makes students believe they are good writers when in fact they are poor writers. It makes them believe they can comprehend books and documents when they can barely do so. It makes them think they can treat college as a Five Year Party or a Beer and Circus bacchanalia because they seem to be doing fine, when they’re actually wasting a lot of time and money.

Dishonest grading from professors is as bad as dishonest health reports from doctors who just want their patients to feel happy would be. The truth may be unpleasant, but it’s better to know it than to live in blissful ignorance.

This article was originally published by the Pope Center.

George C. LeefGeorge C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

Federal Student Loans Make College More Expensive and Income Inequality Worse by George C. Leef

One day, Bill Bennett may be best remembered for saying (in 1987, while he was President Reagan’s education secretary) that government student aid was largely responsible for the fact that the cost of going to college kept rising. What is called the “Bennett Hypothesis” has been heavily debated ever since.

A recent report by the Federal Reserve Bank of New York lends support to the Bennett Hypothesis.

Authors David Lucca, Taylor Nadauld, and Karen Shen employed sophisticated statistical techniques to analyze the effects of the increasing availability of federal aid to undergraduates between 2008 and 2010. They conclude the institutions that were most exposed to the increases “experienced disproportionate tuition increases.”

By the authors’ calculation, there is about a 65 percent pass-through effect on federal student loans. In other words, for every $3 increase in such loans, colleges and universities raise tuition by $2.

It is very good to have a study by so unimpeachable a source as the New York Fed supporting the conclusion that quite a few others have reached over the years: Increasing student aid to make college “more affordable” is something of an impossibility. The more “generous” the government becomes with grants and loans, the more schools raise their rates.

Other studies have reached the same conclusion.

In his 2009 paper Financial Aid in Theory and Practice, Andrew Gillen showed that the Bennett Hypothesis was true, although more so at some institutions than others. In their 2012 study, Stephanie Riegg Cellini and Claudia Goldin found that for-profit schools unquestionably raised tuitions to capture increases in federal aid.

Such analyses are amply supported by personal observations about the way college officials look at federal aid. Peter Wood, president of the National Association of Scholars writes that when he was in the administration at Boston University:

The regnant phrase was “Don’t leave money sitting on the table.” The metaphoric table in question was the one on which the government had laid out a sumptuous banquet of increases of financial aid. Our job was to figure out how to consume as much of it as possible in tuition increases.

Similarly, Robert Iosue, former president of York College, writes in his book College Tuition: Four Decades of Financial Deception (co-authored with Frank Mussano), “Common sense dictates a connection between government largess to the buyer and higher prices from the seller. For me it began in 1974 when grants and loans were given to students based on the cost of college. Higher cost: more aid from our government.”

It has always been difficult to defend the position that federal student aid has nothing to do with the steady increase in the cost of attending college; the publication of this study makes it much more so.

Despite their conclusion that financial aid increases costs, the authors of the New York Fed report suggest that aid is beneficial on the whole. They wrote, “[T]o the extent that greater access to credit increases access to postsecondary education, student aid programs may help to lower wage inequality by boosting the supply of skilled workers.” Now, while that is not a finding of the paper, it aligns with one of the justifications commonly given for policies meant to “expand access” to college — that it ameliorates the presumed problem of growing income inequality.

In this speech in 2008, for example, former Federal Reserve chairman Ben Bernanke said, “the best way to improve economic opportunity and reduce inequality is to increase the educational attainment and skills of American workers.”

That argument is grounded in basic economics: if college-educated workers are paid a lot and workers without college education are paid much less, then by increasing the supply of the former, we will lower their “price” and thereby reduce the earnings differential between the two groups.

That sounds plausible and egalitarians embrace the idea. In a recent paper published in the Cambridge journal Social Philosophy and Policy, however, Daniel Bennett and Richard Vedder argue that, after decades of government policy to “expand access,” we have reached the point where doing so now exacerbates income inequality.

“It has become an article of faith that higher education is a major vehicle for promoting a path to the middle class and income equality in America,” the authors write. The trouble, they argue, is that while policies to promote college enrollment had a tendency to do that in the past, we passed the point of diminishing returns.

Key to the Bennett/Vedder analysis is that fundamental economic concept — diminishing returns. As someone buys or enjoys more and more of something, the benefit from each marginal unit eventually starts to fall. That applies to education as well as other goods and services. It applies to individuals, since there is some point beyond which the benefit from additional time spent on education isn’t worth what it costs.

It also applies at the societal level. At first, Bennett and Vedder observe, the students drawn into college by government aid were overwhelmingly very able and ambitious. They benefited greatly from their postsecondary education. Society not only became more prosperous due to the heightened productivity of those individuals, but, the authors show, more equal. Measured by Gini coefficients, income became less dispersed in the early decades of federal policies to promote higher education.

But what was apparently a beneficial policy at first is producing increasingly bad results today. Not only is federal student aid making college more costly, it now leads to a growing income gap. “Additional increases in [college] attainment,” Bennett and Vedder write, “are associated with more income inequality.”

Why?

The reason is that subsidizing college has led to a glut of people holding college credentials. As a result, we have seen a huge displacement in the labor market — college-educated workers displacing those without degrees. I have often called that the “credentialitis”problem; workers who have the ability to do a job can’t get past the screening by educational credentials that is now widespread.

Consequently, the latter group — the working poor — now faces increasing difficulty finding jobs in fields that used to be open to them.

Federal student aid programs were expected to have nothing but good economic and social consequences for America. Instead, however, they are simultaneously making higher education more costly (that is, soaking up more of our limited resources) and, owing to credentialitis, making the distribution of income more unequal.

Of course, the politicians who started us on this path meant well. Most of those who keep pushing us further down the college for everyone path probably believe that they’re pursuing greater equality and productivity. The truth of the matter, as studies like the two I have discussed here show, is that continuing to push the “college access” agenda is making America worse off.

This post first appeared at the Pope Center.

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

The Best Debt in the World by Emma Elliot Freire

Hard to believe, but Britain’s student loan problem is worse than the Yanks’.

In late 2010, tens of thousands of British students took to the streets of London. They protested government plans to cut direct funding of higher education and raise the cap on tuition from £3,290 ($5,500) to £9,000 ($15,000). Some of them occupied government buildings and clashed violently with police. Hundreds were arrested.

Maybe they shouldn’t have gotten so worked up. It’s now becoming clear that most of them won’t repay their loans in full. Some of them will even be getting their education for free.

The UK government’s student loan scheme is more generous than its American counterpart. Any British student who is accepted to a university is automatically entitled to a government loan for the entirety of their tuition. Most universities are charging £9,000 per year. British students can also get loans for their living costs, which range from £4,418 to £7,751 per year. The average student will graduate £44,000 ($74,000) in debt.

The core difference between the British and American systems lies in the terms of repayment. American students typically have to start repaying 6 months after they graduate. Opportunities for loan forgiveness are extremely limited, and loans cannot be discharged via bankruptcy. By contrast, British students don’t have to start repaying until they are earning £21,000 ($36,000) per year. They must then pay 9 percent of their gross income as long as they stay above the threshold. Their outstanding balance is automatically forgiven 30 years after it became eligible for repayment. Also, the loans do not appear on their credit report. 

“The thing people worry about with debt is that they won’t be able to pay it back. The way this is structured means that is not a worry ever, and it doesn’t follow you around until your old age,” says Sam Bowman, Research Director at the Adam Smith Institute, a free-market think tank. 

Bowman finds it helpful to understand loan repayment as a tax. “You can either think of it as a graduate tax or it’s the best debt in the world,” he says. “It makes sense to think of it as a graduate tax, a specific kind of tax on a specific action that is designed to offset the cost of that action.”

Uncharted waters for repayment

The first students to take on the new, larger type of loans have yet to graduate, so it is hard to estimate what repayment rates are likely to be. However, the Institute for Fiscal Studies (IFS), an independent research center, is already projecting that 73 percent of students will not repay their loans in full. They believe the average amount written off will be around £30,000 ($50,500).

report released in July by a committee of the British parliament reached similar conclusions. “By providing favourable terms and conditions on student loans, the Government loses around 45p [cents] on every £1 it loans out.” When the new policies were first announced in 2010, the government projected it would only lose 28p per £1 loaned out. The report notes that government loans to students are expected to total £330 billion by 2044. “We are concerned that Government is rapidly approaching a tipping point for the financial viability of the student loans system,” says the report.

By and large, students still think of themselves as having “real debt” for their education. “One valid criticism of the loan system is that students don’t realize how generous it is,” says Nick Hillman, director of the Higher Education Policy Institute. “Students think they’re paying for the entirety of their education when actually they’re not. Taxpayers are covering quite a lot of the cost.”

The IFS report notes that the lowest-earning 10 percent of graduates will only repay £3,879 (in 2014 prices). A survey earlier this year showed that 40 percent of graduates are still looking for a job 6 months after leaving university. If this trend continues, some graduates may never start earning £21,000.

A few savvy individuals are learning to work the system. British financial advisors encourage parents who could contribute to their child’s education to have their kid take out government loans instead. Martin Lewis, who runs the popular website moneysavingexpert.comwrites, “If a parent pays the £27,000 tuition fees upfront, and their child becomes a poet and never earns above £21,000, the whole £27,000 would have been wasted.”

The only people who can expect to repay their loans plus interest in full are the small group who take high-paying jobs soon after graduating and get regular pay increases for the next 30 years. These individuals are thinking hard about whether they need a degree. “The only income group that has gone to university less are the richest. That might be surprising, but what the debt does is it imposes some cost on people for going to university,” says Bowman. “So if they have other options, they take them. Maybe they could skip college and join their parent’s business or their parents can find them jobs.”

This is one immediate impact of the new loan scheme. There will undoubtedly be unintended consequences that may only become evident years or decades from now. For example, Britain may see an increase in the number of stay-at-home parents. Loan repayment is tied to an individual’s income. Spouse’s earnings are irrelevant. Child care is already very expensive. For some families, the extra 9 percent they would lose in loan repayments will be enough to push one parent out of paid employment.

Loans without borders

Loan repayments are collected by Her Majesty’s Revenue and Customs, the British equivalent of the IRS, via withholding from a person’s paycheck. This makes it fairly simple to collect money from anyone working for a British employer. Things become harder when a graduate leaves the country. 

“There is no way that the government can collect money from people who go abroad,” says Bowman. “There is a big incentive for them to stay away. Say you’re an English graduate and you go to America for a couple of years to work. If you have this debt waiting for you when you get home, there’s a big reason for you to stay abroad for as long as possible.”

The number of students who would actually permanently leave is probably very small. “It would be a much bigger problem than the student loan book if we were seeing Irish levels of emigration,” says Bowman. However, a determined few will be able to dodge repayment.

And then there’s the question of students who come to Britain from other European Union countries. Since 2006, EU law has required Britain to offer these students the same loan deals for tuition, though not for living costs. It is a tradition in British politics to blame problems that are largely homegrown on the widely-hated EU. As the issues with loan repayment have come to light, stories about EU students borrowing money and then “going to ground” have also been hitting the headlines.

This problem is still fairly small, since EU students have only been receiving loans since 2006. Hillman says that about half of EU students who study in Britain choose not to borrow or repay their loan in full before they leave the country. Many EU students enroll at British universities because they want to work in Britain later. Thus, they have a strong incentive to repay. However, data is now emerging that shows unpaid loans in the low millions. “The issue is less about what has happened to date but what might happen in the future because there aren’t many people yet who are liable to repay, but it’s growing all the time,” says Hillman. 

“If a French or Dutch person studies at a British university then goes home and gets a job, we can certainly chase them through the French or Dutch courts because they’ve signed a legal contract and they should repay,” Hillman says. “But the trouble is that it’s an incredibly expensive business. The person may owe £27,000, which is a lot of money, but chasing someone through the courts can easily cost that much.”

One way to address this problem would be an EU-wide agreement. “But there’s no real incentive for other European countries to do this because other European countries don’t use loans in the same way we do,” says Hillman. 

Relative improvement

Despite the problems, both Hillman and Bowman say the new system is an improvement over the way British higher education used to be funded. Tony Blair’s government only introduced tuition in 2004. “Before loans and fees came in, British taxpayers paid 100 percent of the cost of going to university. Now they don’t. But they still fund part of the loan cost,” says Hillman.

Bowman says it is important to remember the overall British context. “The alternative is not a kind of free market where you have everybody paying their own way and banks privately making loans to people. The alternative is going back to a situation where the government pays for everything, and that’s a disaster,” he says. “The political climate in the UK is very hostile to any kind of marketization of anything. That’s not going to change for a couple of years, at least until we’re growing rapidly, and we all feel rich and safe again.” 

Potential Solution

One interesting idea put forward by David Willetts, a Member of Parliament and former Minister of State for Universities, is to sell government student loans to universities, making them responsible for collecting repayment. This approach would address a problem that afflicts both American and British higher education: Universities collect tuition upfront and then have little incentive to ensure loans are repaid. 

Bowman supports the proposal. “Making universities responsible for whether people repay might make them more willing to turn people away if they’re not a great bet in terms of their future earning, and that might counteract some of the qualification inflation. Right now, you need a university degree for any job that isn’t blue collar manual labor.”

He believes Willetts’ idea is politically viable. “Britain has lots of middle-class people who think of themselves as being working-class. They feel like they’re fighting against the man when in reality they are the man. You could say to them that we don’t want people who haven’t gone to university picking up the bill in any way for people who have gone to university.” 

The only question is whether universities would go along with it. Right now, they have a very beneficial arrangement. 

Much will depend on how loan repayment rates develop in the next few years. Graduates will probably soon grasp that they have the best debt in the world. Maybe taxpayers will start to realize this debt isn’t such a good deal for them. 

ABOUT EMMA ELLIOTT FREIRE

Emma Elliott Freire is a freelance writer living in England. She has previously worked at the Mercatus Center, a multinational bank, and the European Parliament.

RELATED ARTICLE: Can You Pay Student Loans With a Credit Card?

EDITORS NOTE: This column with images is republished with permission. The featured image is courtesy of FEE and Shutterstock.