University Ventures Letter
Volume IV, #3
“Don’t put metal in the science oven.”
One of the best scenes in recent movie history occurs midway through American Hustle
, the acclaimed David O. Russell film. Jennifer Lawrence is the scene-stealing, fire-setting wife of the con-man protagonist who is given a revolutionary new product: a microwave, or as she calls it, a “science oven.” She knows not to put metal in the science oven, but in the “do whatever I want” spirit of 1979, she does it anyway. The result can be seen here
is a riotous pastiche of 70’s clothing and hairstyles showcasing the talents of four actors at the top of their games (and all nominated for Academy Awards). But the real numbskull of the story is not Jennifer Lawrence, who winds up with a mustachioed mobster, days of flames apparently behind her, but rather Bradley Cooper who plays overzealous but well-permed FBI agent Richie DiMaso.
DiMaso is the only character who ends up alone and betrayed because American Hustle
is ultimately a story of government overreach undermining government policy. In this case, the policy – the good result everyone wants to achieve – is to rebuild Atlantic City and restore economic prosperity. And the overreach is the sting operation led by the ambitious and unstable DiMaso that ends up sidelining the most vibrant, passionate and effective force for achieving that goal and the only good guy in the movie: Camden Mayor Carmine Polito.
It’s a story we’re familiar with in higher education. Not the leisure suits, elaborate comb-overs, the Mexican sheik or the Cold Cut King of Long Island. But rather the part about the government tripping over itself.
The season between the State of the Union and the Oscars is a good time to look back at the Obama Administration’s record in the reflected light of American Hustle’s
Disco ball. Because unlike the characters in American Hustle
who prepared “from the feet up,” the Obama Administration directly undermined its two top higher education policy priorities in its first term.
“All the razzle-dazzle that he does? It’s not good, it’s not real. It’s fake…
Am I crazy? I don’t think so.”
- Richie DiMaso
Despite strong support from college age students and recent graduates, President Obama entered office without much focus on higher education. The education focus was understandably K-12, but his team soon came up with a policy priority for higher education. At his first State of the Union, the President committed that “by 2020, America will once again have the highest proportion of college graduates in the world.” This goal would have required graduating an additional 10 million students by 2020 and effectively increasing the percentage of the adult population with degrees from 40% to around 55%.
From the outset, as the President did not propose tens of billions in federal funds to build new campuses, it was clear to college cognoscenti that the only way to come close to this laudable goal would be leverage online delivery. So what happened? Thanks to the hustle of the Department of Education (ED) in the 2009-10 NPRM process, we got state authorization. Specifically, 34 C.F.R. § 600.9(c) (2011) set forth that in addition to meeting the requirements of their own state, online providers would have to meet the requirements of all states where students reside.
The officials at ED responsible for this new rule must have been in a Richie DiMaso-esque haze of regulatory ambition in order to miss the impact state authorization would have on the Administration’s top higher education priority. Since then we’ve had a blizzard of state regulatory activity that has resulted in significantly more work, expense and uncertainty for traditional colleges and universities to deliver online programs. Consequently it’s now almost prohibitive for small colleges and universities to operate online programs that enroll students from outside their state – meaning online programs of any scale – and there’s less innovation and enrollment growth as a result.
“Everybody thought ‘aww, Richie DiMaso's gonna stay in the office.’ I'm outside on the field. I got people working for me, my ideas. I'm running the show. I'm the quarterback and I'm not going to settle. Those people, those corrupt people, I'm going after them.”
- Richie DiMaso
In the fall of 2011 as the Occupy Wall Street movement spilled onto college campuses and became Occupy Colleges, the Administration changed its higher education priority quicker than metal ignites in a science oven. Suddenly, affordability replaced completion as the Administration’s policy goal. A myriad of initiatives ensued, including scorecards and proposed ratings.
But when it comes to making higher education more affordable, it makes little sense to focus only on 2- and 4-year degrees. Much better to look at the full constellation of higher education options, especially the most affordable: certificate programs. Certificates are the fastest growing higher education credential. 1M certificates were awarded last year – more than triple the number of 20 years ago. A report earlier this month from the U.S. Census Bureau showed that 19M U.S. adults have earned a certificate, including 5M who have no other education beyond high school. The wage premium for certificates is 10% overall and 17% for those with nothing else beyond high school. With the expected unbundling of degrees into stackable credentials
, one would reasonably assume that shorter, less-expensive certificate programs will play a huge role in achieving affordability in higher education.
But reason is not in Richie DiMaso’s vocabulary, nor apparently in the vocabulary of the officials at ED who engineered the Gainful Employment regulation. Because they ensured it covered not only private sector institutions – where tuition is higher than at the state-supported institutions that enroll 70% of students and therefore worthy of additional scrutiny – but every institution offering certificate programs. And since 2/3 of certificate programs are delivered at community colleges and traditional universities, these institutions now find themselves in ED’s crosshairs and subject to a bevy of new reporting requirements and risk of ED sanction. Thanks to ED’s hustle, colleges and universities have been discouraged from offering shorter and lower cost certificate programs, effectively increasing the average cost of higher education.
“It’s just hard for me to control my passion. I’m a very passionate person.”
- Richie DiMaso
At the end of American Hustle
, Richie DiMaso is let go by the FBI and receives no credit for the sting operation. Reason prevails. Meanwhile back at ED, the newest higher education priority (#3 in five years) is increasing enrollment of low-income students at top colleges. This was the subject of a day-long meeting at the White House two weeks ago involving over 100 college and university presidents. ED is absolutely right to focus the power of the bully pulpit on this issue. Because it’s a direct result of financial aid policy that preceded the Obama Administration: families that earn $100k+ receive an average of $10,200 in federal financial aid while families that earn less than $20k receive an average of $8,000. “Undermatching” – where students from lower income families only apply to lower-tier, less expensive institutions – is one reason for this distortion.
So give the Administration some credit for recognizing this issue and shining a spotlight on it. It demonstrates a level of reason that throws into stark relief the higher education policy hustle of the President’s first term and gives us hope that the Administration will, in its second term, figure out a way to rein in the Richie DiMasos who hustled state authorization and gainful employment into law. To rebuild Atlantic City (or in this case, move the needle on college completion, affordability and undermatching), Richie DiMaso must be kept at bay. Because repeating the mistakes of the first term would be tantamount to putting metal in the science oven.
University Ventures (UV) is the premier investment firm focused exclusively on the global higher education sector. UV pursues a differentiated strategy of ‘innovation from within’. By partnering with top-tier universities and colleges, and then strategically directing private capital to develop programs of exceptional quality that address major economic and social needs, UV expects to set new standards for student outcomes and advance the development of the next generation of colleges and universities on a global scale.
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