Anonymous Donor Pays for College of Every Student in Kalamazoo
nytimes.com
nytimes.com
"To receive a full scholarship, students must have attended Kalamazoo public schools since kindergarten. The program, unveiled at a November 10, 2005, Kalamazoo Board of Education meeting, is also viewed as an economic development tool for Kalamazoo. Since the Kalamazoo Promise was announced, enrollment in the school district has grown by 16%, test scores have improved, and a greater proportion of high-school graduates are attending college. In 2010 alone, the Kalamazoo Public School district saw enrollment rise 3% to 12,409."
Have to be there K-12 to get full tuition. There's a chart that shows the sliding scale based on your length of attendance. Most interesting part is that if you move in for the tail end of high school you get 0% covered to prevent people from temporarily joining the community just for the tuition.
Attendance -> Proportion of full tuition
K–12 100%
1–12 95%
2–12 95%
3–12 95%
4–12 90%
5–12 85%
6–12 80%
7–12 75%
8–12 70%
9–12 65%
10–12 None
11–12 None
12 None
EDIT: Added table.
I once had a conversation with a state legislator where he argued it wasn't the responsibility of government to provide grant and loan opportunities for higher education, and that by doing so, the federal government was disincentivizing saving and investing. Instead, he argued universities should be more market driven (which I will concede might introduce more price competition in the face of rapidly rising tuition rates). He was a firm believer that a university education should be something one works and sacrifices for.
In my elected position with public education at the time, I disagreed (and still disagree) with some of his claims, believing a subsidized higher education experience for a expanded pool of people is a long-term net gain compared to crime/prison costs and the cost of government-funded social safety net programs. (Although, again, college-student families admittedly qualify for most government assistance programs already, but this is hopefully a short-term rather than lifetime dependence.)
I'd love to see the long-term effects on the quality of life, debt, and employment prospects of these students.
But I am bothered by the vast amounts of grant and loan money that get absorbed directly by colleges, raising the cost for everyone and creating a positive feedback loop that requires endlessly more taxes and debt to sustain.
I feel we've been sold a bill of goods ("opportunity through higher ed -- don't let your kids fall behind in the new global economy, etc etc") that is way past the point of rationality.
Granting "free" money will indeed cause problems, but a loan that is required to be repaid seems like the right way to go in the long term, provided that after the higher education is completed the individual in question is able to actually provide value.
The NPV of college is $100k. The marginal student can scrape together $10k to go to college. The marginal cost of a student is less than $10k for the college. How much will the college charge? $10k. What's the benefit to the student? $90k.
What if an $89.9k subsidized grant is available? Now the college can charge $99.9k. What's the benefit to the student? Still $90k.
Now lets say an $89.9k loan is made available. The college can still charge $99.9k. What's the benefit to the student? $.1k. This is actually happening (though it isn't quite so extreme). The existence of loans is allowing colleges to capture more of the value of college from student.
The real world is actually worse than this simplified example in a lot of ways. Many degrees aren't worth it (from a purely monetary perspective), and the result is probabilistic, but student loans can't be discharged in bankruptcy, and payment is up front (w.r.t. a person's career), so the student takes on the risk, but the college gets the reward regardless.
Every college and university presents itself as altruistic and socially motivated in its publicity material - but if you judge colleges and universities by their actions instead of their words, which is to say in terms of inflation-adjusted tuition costs, they seem pretty mercenary/market oriented to me. According to [1] the same public college 4 year education rose in cost by more than 300% between 1988 and 2008, while median family income rose by only 90%, and the cost of a new car by just 20%.
I don't blame them for this in a market-driven system - a free market actor maximizing its share of the economic surplus is like a dog humping your leg, it's just being a dog. But I don't think it's wise to deny that it's happening.
[1] http://www.deltacostproject.org/resources/pdf/Trends-in-Coll...
Now, the question is, what party _should_ be covering for the cost X? In the grant scenario, it is society/tax payers who cover the cost of education. In the load scenario, it is the individual being educated that is covering the cost, deferred to the future.
Either way, it is not the case that the college recieves less profit for the service of educating. To me, incentive alignment is critical to the success of a policy, and i feel that a loan tends to incentivize those who works ultra hard to make it, whilst a grant will not. Now, i m not saying all grants are bad, but grants should be based on academic results, as a reward incentive, where as loans should be made available to all who wants an education.
I believe that spending on education is positive sum. That surely isn't always and everywhere true, but I believe that it's true at the margin, considering the conditions in the U.S. The book that originally convinced me of this was _Children as Pawns: The Politics of Educational Reform_, by Hacsi. It details, along with a lot of other evidence, a longitudinal randomized controlled trial (which is very rare in educational policy) which shows a positive benefit from additional education spending (admittedly, of a very specific type, and in one particular context). There's no way to provide a good summary of the evidence in the book, so let me just say that my opinion is that while the evidence is tenuous, the overall weight of the evidence indicates that the gains from education in tax revenue are greater than the costs. If you like, you can check out the book and decide for yourself. If you agree, then government funding of education seems like an obvious solution. And, of course, the overall gains to society are much greater than the increased tax revenue.
I don't mean to say that our educational system is particularly good. In fact, I think it's very inefficient in many ways. That doesn't preclude the previous conclusion, though.
The second reason is that, in the model above, college administrators capture much of the value added by subsidies. Some gain goes to "good" students, and "bad" students are severely penalized. I believe that's apparent from looking at the practical results, and you can see that in the model by adding student ability and graduation rate to the simple model above. You get an even more extreme result if you add types of degrees (hard vs. easy, with hard degrees resulting in more compensation. Typing out the entire "proof" would be tedious, but I can do it, if you disagree with the result of the model, given the premises. But, in the end, this is a philosophical difference. I don't think that we should be subsidizing college administrators (who are already much better off than average) and really good students (who, on average, will do fine in life anyway) at the expense of bad students (who, IMO, could use some help). I understand that a lot of folks would prefer that people are rewarded purely on talent. Having subsidized loans with a random probabilistic outcome magnifies that, so perhaps you think that solution is fair and just. If that's the case, and you're not convinced that spending on education is a net positive, then there's no hope my line of reasoning will convince you, and we'll have to agree to disagree.
I agree that incentive compatible solutions are important, but I don't think that creating a system that's efficient (in the sense that an econ 101 student would use the word) is the only thing we should consider.
P.S. Your original comment has been downvoted, but it wasn't by me. I disagree with your position, but I don't think you're arguing in bad faith or presenting even presenting a fallacious argument, which are the things I would downvote someone for.
The question isn't _whether_ students have any skin in the game, it's _why_ does an education cost X in the first place.
Perhaps some of the local colleges can provide at that price, but we've created a system that values name-brand education, and the artificial scarcity at the top (partly, to protect brand identity) mitigates some of the downward price pressure.
Even still, if marginal costs are a fraction of tuition (and I believe they are, often) why are tuition rates increasing so rapidly?
Its a shame that an entire generation of educated Americans are being enslaved by an unparallelled level of debt so early in their lives. The NYTimes has had many articles that give a good idea of how deep the problem is: http://www.nytimes.com/2012/09/01/business/shedding-student-... http://www.nytimes.com/2012/09/09/business/once-a-student-no...
I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap.
There will be some ugly financial realities along the way. Private, public, not for profit, and for profit schools will go belly up along the way. Educators who teach things that can be taught online better will find themselves with no job market. Students whose defaulted $70k loan balloons to $200k because of non-payment will be at a tremendous financial disadvantage over the next generation of students with no debt.
Kalamazoo makes for a warm feeling story. Reality is a lot more sinister. It is giving free weapons to one small group in an arms race. In this case, everyone else is getting killed with debt.
You're presupposing that tuition has anything to do with the cost of providing education, and that tuition will go down if the costs go down. It doesn't. Skyrocketing tuition is the product of schools being non-fungible prestige goods. It's how the price of Prada handbags doesn't have anything to do with their manufacturing cost.
College in the US isn't about education. It's about signaling. And the price of desirable signals, like Stanford or U Michigan, isn't going to go down based on competition from cheaper online educational institutions.
As long as 99% of employers depend on the traditional signaling methods, very few capable people will eschew a traditional college education. Only in certain segments of software engineering does the idea even have any traction.
> For instance, Y Combinator is a more powerful signal than Stanford is. (Stanford graduates don't automatically receive $150k in convertible debt for their endeavors once they graduate.)
Not really, outside a very specific niche of people doing a very specific type of startup work. If you want to build a web app, yeah, Y Combinator is a valuable signal. If you want to work for Lockheed-Martin or Goldman Sachs, not so much. As for $150k in convertible debt... you can earn that much in bonuses working on Wall Street for a couple of years, with far less risk and far more predictability.
Regarding my comment on bad parenting, before people crucify me for blaming the victim, I assure you that a lot of poor, uneducated parents actively interfere (knowingly or not) with their children's educational chances. They do this mainly through ignorance (leaving TV on at night in child's room, never reading to them when they are young, not helping with homework, putting children to bed too late, etc.) I've watched this happen with most of my friend's growing up.
Yes. College tuition costs have been rising way faster than the rate of inflation.
Only one source, a search engine will find you many more. http://inflationdata.com/Inflation/Inflation_Articles/Educat...
I'm sure there are edge cases where it really is impossible to get funding, but I know several people who went to very expensive schools and got it nearly all paid through various scholarships. NB: most of these scholarships were not granted by the college itself, but by an outside agency, whereas most people I know seem to only apply for scholarships through the college.
1: http://www.iwillteachyoutoberich.com/blog/college-at-stanfor... 2: http://www.iwillteachyoutoberich.com/blog/some-people-think-...
I think a huge part of the problem is not so much the resources, but the mentality that surrounds the poor. Having grown up poor, I was focused on being cheap, not on value. Of course, no one every said, "Hey, with your 3.3 GPA maybe you should apply somewhere else".
I also only took the ACT once after having been away at summer camp and only getting 3-4 hours of sleep each night for the past week, and no idea until later that people retook it.
The other aspect, is that in small rural towns it has been my experience, that the guidance counselors who do the college admissions have no idea what to do with a student who doesn't want to go to the traditional schools, which in my case were the 3 nearest community colleges, the University of Nebraska, University of Iowa, or Iowa State.
Ramit, would tell you that just because the information is out there, that isn't enough. In regard to this, it is absolutely true.
http://www.thedailybeast.com/articles/2012/09/10/the-cost-of...
I agree with this. Some of the benefits of an individual's education accrue to society at large. However, the vast majority of the benefits of an individual's education accrue to the individual. Why not split the funding in a similar way? If the benefits aren't worth the cost to the individual, that's a good signal that the benefits may not be worth the cost for society to subsidize.
There are things that shouldn't be market-driven. Look at Germany for an example - no vouchers needed to go to college there because the government simply pays for everybody (even foreigners). And the economy is doing fine.
http://www.time.com/time/world/article/0,8599,1976724,00.htm...
I would love to see higher education made accessible to everyone with the ability to do so, and would love to see college cost a lot less, even if it is too late for me (6 figures of student loan debt). But just saying 'the government should pay for it look at Germany' is a far too simplistic outlook, especially in the face of crippling yearly deficits that aren't showing any signs of going away under either party's 'leadership'.
Apparently, since there is only one dimension in this particular argument, cobrausn believes there is only one factor in economic results. Today, anyway.
That's the kind of thinking that turned east Asia from a place of wretched poverty to a place of wealth in my lifetime.
I mean, some clue that education has been the driving force in the growth of east asian countries, rather than internal/external factors of other kinds.
I was more looking to something like books, articles, researches that would explain how _investments in education_ in eastern countries have been the most effective on growth, rather than everything else.
Or the opposite, say, the last 20 years of low growth in japan are due to disinvestments in education.
[0] http://www.wolframalpha.com/input/?i=singapore+gdp+growth+ra...
I'll quote a few relevant snippets from the article, for anyone who doesn't want to read the whole thing.
Challenging the conventional view, there is actually a striking global correspondence between the world economic slowdown since 1973 and ever-increasing levels of educational spending. Comparisons between countries also confound the idea that more education translates into more growth. For example, South Korea is often given as an example of a country that made education a priority since the 1960s and saw significant economic growth. But as Professor Alison Wolf from King's College London points out, Egypt has also prioritised investing in education, but its growth record has been poor (4). Between 1970 and 1998 Egypt's primary enrolment rates grew to more than 90 per cent, secondary schooling levels went from 32 per cent to 75 per cent, and university education doubled - yet over the same period Egypt moved from being the world's forty-seventh poorest country to being the forty-eighth.
A retort might be that education isn't the sole determinant of growth - other factors may offset its positive economic role - but it remains a necessary one. But this argument doesn't stand up either. The rapid growth of Hong Kong, another of the East Asian tigers, wasn't accompanied by substantial investment in education. Its expansion of secondary and university education came later, as more prosperous Hong Kong parents used some of their newfound wealth to give their children a better education than they had had.
A study for the World Bank came to similar conclusions. In a paper called 'Where has all the education gone?', public policy academic Lant Pritchett couldn't find the positive correlation between education and productivity that underpins so much current international development thinking (5). Economist William Easterly summarised the study:
'African countries with rapid growth in human capital [the fashionable term for people's work abilities, especially levels of education] over the 1960 to 1987 period - countries like Angola, Mozambique, Ghana, Zambia, Madagascar, Sudan, and Senegal - were nevertheless growth disasters. Countries like Japan, with modest growth in human capital, were growth miracles. Other East Asian miracles like Singapore, Korea, China, and Indonesia did have rapid growth in human capital, but equal to or less than that of the African growth disasters. To take one comparison, Zambia had slightly faster expansion in human capital than Korea, but Zambia's growth rate was seven percentage points lower.
PS: There is plenty of talk about the value of rich people investing in the next waves of technology. However, Moving into the realm of 8+ figure incomes only a tiny fraction of that spending ends up on the type of mass producible goods that lead to economic growth, instead buying things like gardens or Yachts that quickly lose value.
China's slow rise to power from 1949 to 1979 wasn't because of corruption, but incompetence and policies, practices & ideology that was incompatible with economic growth, positive reform & capitalism. The anti-capitalist purges in the early 1950s lead to a wave of Shanghaiese & others moving to Hong Kong, to help boost its economy. There were some positive reforms in China to help boost economic growth and living standards, but those are overshadowed by the massively incompetent programs that destroyed the economy and country for thirty years, this after decades of war and civil war.
If anything, the level of corruption has massive increased since the reform period began in 1979. Though that may be the type of corruption has changed, from food, job, marriage, life, location & housing to money as the prime difference in the types of corruption being most prevalent.
A negative, compared to government funding, is that the economy has lost mobility of labour. Getting a full scholarship requires the child to be enrolled from K-12. Loss of mobility might be a good thing, in that it prompts people to improve their local economy, rather than run away. Alternatively, it could lock people into a form of serfdom, unable to move to better their situation.
I'd advocate that a voucher system, whereby the government gives each student a voucher for the degree of their choice, would be preferable to the widespread adoption of "the promise".
If this were to roll out on a national level then it would be much similar to public school, but rather than K-12, it'd be K-BA. Maybe there'd be vouchers, maybe not.
The point is that this is an experimental model for economic growth and social benefit for the town, not the model for the entire nation.
Call me cynical, but if this had been my idea - I would have taken it to potential local wealthy benefactors, and probably would not have bothered pitching it to "the government"…
The interesting bit comes when you're thinking about investing, say to build a gas station or a wallmart, knowing that the population will be relatively stable is an incentive.
They don't constrain where the kids go, they can go to any school that they are accepted to AFAICT from the article. So some schools might recruit them knowing they won't need financial aid.
It is a fascinating experiment in so many ways.
So no free rides to Harvard... or Ohio State.
Edit: I didn't mean to imply that Michigan has bad schools. Simply noting that this offer requires families to set up roots in the town and it also requires that the students go to college in state. Not saying it's a positive or negative, just a two-fold geographic limitation designed to stimulate the local and state economies.
I never felt needy for options while looking at universities in the state of Michigan.
More seriously though, since daughter #3 is college shopping, we've been talking about various colleges. Michigan has a lot of great schools, for a variety of students and for a variety of majors. So it's not a 'limit' in any sense of the word.
The amount of culture and philanthropy in area is very high considering the population. In Kalamazoo there's the Kalamazoo Area Math and Science Center (thank you Upjohn family), the Gilmore Keyboard Festival (thank you Gilmore family), the philanthropic work of the Stryker family, ... the list goes on and on.
About an hour north of Kalamazoo is Grand Rapids, another major Michigan metro area, which is also defined by philanthropy: Art Prize (thank you DeVos family) and the Fredrick Meijer sculpture park (thank you Meijer family), just to name a few.
Are all towns in the United States like this?
It reminds me of the story of a West African king who went on a pilgrimage to Mecca. On his way to Arabia, the king gifted so much gold to all intervening communities that the price of gold crashed, taking with it the economies of North Africa and Arabia.
By removing the exclusion mechanism for these students, it in effect turns college education into a public good.
As a country, we've deemed that this is so vastly in the public interest that we provide free K-12 education to all students regardless of how much (income/property tax) their family pays.
I'm not very familiar with studies of free college-level educations, but based on the thousands of studies that shows the incredible economic and social benefits to obtaining higher levels of education, I'd wager that any negative consequences will be vastly out weighed by the positive impacts.
I'm just using this an example of unintended consequences in this type of stuff. I'm well aware this handful of kids aren't enough to skew tuition prices, that most public institutions (which this program seems to target) have caps on tuition increases, etc... Regardless, disconnecting the consumer from the price of the product have caused tuition prices to rise artificially fast.
As the article notes, most of the recipients use the grant at the community college, which is the least expensive possibility involving an accredited college and real degree.
Not always. Cost of education in the UK has skyrocketed more since the scrapping of grants in favour of a loans+tuition fees model. Part of this is that when there is a marketplace based on prestige, nobody wants to appear cheap, so price becomes based on the highest price that the market will bear.
If there is a limited supply of a good that is highly desired by the richest in society, and if price is used as an indicator of quality for that good, then it is the connection between the cost and the consumer that drives prices upwards.
For things like speedboats and handcrafted watches and personal spaceships, this is all cool, and I don't think that randomly insanely rich people buying toys like this does much harm really on the scale of things and probably does a lot of good if anything. Power tends to follow a power law, no matter what kind of politics you try and squidge in the middle.
However, if it is then thought to cause injury to the society in general for certain goods (such as education and health services, for example) to be priced above people's general means, then the state can lower the cost of that good by regulation or by direct competition by the state. The purchasing power and drug research of the UK's NHS being a good example.
And I don't think there is any massive contradiction in being lassie-faire capitalist with most stuff and socialist with specific areas. It seems to be how places like Finland get along mostly, and they seem to be doing ok.
[edit] Just thought, private spaceships shouldn't be on that list as they follow a different set of economics, as the rich people who want them are directly funding their construction rather than purchasing a consumer good. Posh watches and big speedboats follow this rule though.
[edited]
1) There's certain stigma attached to blue-collar jobs now that everyone and their pet hamster are proud bearers of a college diploma. Finding a good plumber is next to impossible.
2) There's a subset of people thrown into permanent unemployment. Might be a cultural thing, but second education is a rare beast (as you hang out with students of the same level pretty much throughout the degree, so there's social pressure to be in the same age group as other classmates), and if your first and only degree is not very employable (hi, History majors), it becomes a constant conversation point of how screwed up the society is when a college graduate cannot find a job.
Given that we have 20 year olds taking on tens of thousands of dollars in debt, when I don't really think most of them have any perspective at all to judge the seriousness of that, I'm not sure we can say that everyone going to college today is 'paying for it'. We might say that many of them are paying for it (in many senses of the phrase) for years/decades to come.
What would free education do to the labormarket if students no longer had to work part time to make ends meet? What would happen to housing market when students have disposable income not going to tuition?
"No man is an island" is not just a trite old adage, but a very real economic principle.
I suspect that if free education plus a free living allowance were paid for by the state to impoverished students, then you would have the UK until the mid '90s.
And given the levels of unemployment in the US at the moment, it could do a lot worse than paying those who are going to be out of work anyway, to go to school instead of sitting idle.
Also, as the housing market crash was partly triggered by toxic credit, people having more actual money as opposed to relying on debt would have probably reduced this slightly.
[edit] Also, I think it is fair to say that John probably wasn't thinking about keeping people poor to satisfy the demand for cheap labour in an oligarchic plutonomy when he penned those words.
For I am involved in mankind. Therefore, send not to know for whom the bell tolls, it tolls for thee.
Note for people from the US: College/University is harder to attend to (graduating from high school is harder) and it's also harder to stay in there (or not take long), so it's still not like everyone can attend it which sucks, because the reason may besides personal problems may be the fact that you are not good at something you won't ever need again anyway. Also on personal experience stuff like math is completely different at college anyway, if you study CS.
http://www.calgaryherald.com/opinion/letters/Nose+Hill+Park+...
Note: The above Kalamazoo sheriff is probably not quite as paranoid as the story suggests since Kalamzoo has a murder rate almost 7 times higher than Calgary despite being roughtly 1/14'th the size. If Kalamazoo is that dangerous, it's natural to assume a much bigger city would be even more dangerous. Still, that's one sheriff I wouldn't want to run into in a Kalamazoo park, let alone a dark alley!
The sheriff is apparently not very good at being off-duty, oh well.
Calgary
-------
2011 Population: 1,096,833
2011 homicides: 10
Rate: 0.91 per 100,000 people
Kalamazoo
---------
2011 Population: 74,262
2011 Homicides: 5
Rate: 6.73 per 100,000
And colleges. If somehow, something terrible happens, and the money stops coming in. Let those kids finish for free anyway. Anything less is the newest worst thing that could happen to these kids and then adults.
[edit: I am curious about the downvotes. From what I gathered, the people that these donors have chosen to help are the downtrodden of this area. Much of their life may have been spent in a world of people not fulfilling their world. Fathers leaving, etc. The last thing these kids need is for yet another promise to be left unfulfilled, be it by red-tape or just some series of unfortunate events. Despite that, these children need to have the results of the promise fulfilled.]
I happen to disagree with that sentiment. I understand that giving and then taking away can be worse than no action, but I doubt that the donors' wealth is so volatile that the funds would run out before a large cohort graduates college.
I read what you said as:
* Taking A away after giving A is worse than never giving A in the first place.
* People giving A are probably not in a position to lose A.
* Therefore, I disagree that losing A would be a bad thing.
> blind to family income levels, to pupils’ grades and even to disciplinary and criminal records...
That said, I didn't know that detail how these things usually work, though that does make sense and pleases me to hear.
"The Promise" sounds like some utopian sci-fi plot, and the childrens' thank you notes for their unseen benefactors are more than heartwarming. These kind of investments that empower and multiply their effects are the farthest reaching long-term, and just brilliant.
Now I want to be a billionaire.
That's per year, right? That's very close to the $4,200/semester number. So the college payments are almost equivalent to extending education from K12 to K16. That means that this could be done, even without donations, across the country.
I am not aware of any state that has been able to convince taxpayers to fund the additional four years[1]. The "Kalamazoo Promise" sidesteps that issue via private funding[2].
[1] States typically (heavily) subsidize college tuition for in-state students.
[2] The "Kalamazoo Promise" implicitly relies on Michigan state college tuition subsidies to achieve their tuition payment promise. https://www.kalamazoopromise.com/ParticipatingCollegesUniver...
I don't know about Lansing, but there is a ton of angel / venture activity in Grand Rapids. There is now an engineering school (http://www.gvsu.edu/engineering/), a medical school (http://news.msu.edu/story/8262/), a multi-billion dollar biotech research facility -- which grants PhDs (http://vai.org/) all in downtown GR.
VCs:
http://www.bridgestreetcapital.com | http://www.mlive.com/business/west-michigan/index.ssf/2011/0... | http://www.maf-1.com/
Angels:
Coworking Spaces:
http://workthefactory.com/ | http://www.workcottage.com/
Incubators:
http://www.wmsti.org/about.htm | http://www.accelmich.org/default.aspx | http://www.gvsu.edu/marec/
I've made the call to found my startup in Grand Rapids, the cost of everything is just so much lower than the valley that you can get a LOT more runway for funding. Plus in your seed round the state will co-invest up to $250k on a dollar for dollar basis.
That said, my common sense tends to agree with you. Is there evidence elsewhere?
"When asked how the conversations that led to the Promise unfolded, Brown demurs. “That, and the identity of the donors, are things I just will never talk about,” she says. "
Smarter money is on the Stryker family (http://www.mlive.com/business/west-michigan/index.ssf/2010/0...) and the Upjohn family. The combined wealth of the two families is ~$10B and they have pretty strong Kalamazoo ties.