The moral case for doing a better job of giving Americans the opportunity to succeed is very compelling. The economic case is just as strong. If more Americans are educated, more will be employed, their collective earnings will be greater, and the overall productivity of the American workforce will be higher. –Treasury Secretary Timothy Geithner, March 15, 2012.
It is generally agreed that a college degree is a good investment because it raises lifetime earnings and makes employment more likely. But it may be necessary to borrow money to pay for time in the classroom (especially in the US — the focus of this article). After graduation many students are saddled with a backpack full of debt, including debt that comes through federal student loans. These outstanding loans recently passed the $1.2 trillion mark.
Tardiness in payments can damage the credit scores of young adults. But despite the terrifying plight of entering the poorhouse, most graduates anticipate that their loans will be repaid out of future earnings.1
Fifty-nine percent of students in public institutions graduate after six years and 65% from private nonprofit institutions. By comparison, Adventist graduation rates average 46%.2
So what do we know about the costs of a college education in both public and private nonprofit four-year institutions and how students fund their education? And how do these costs differ for students attending a faith-based Adventist institution of higher learning?
Adventist Economic Platforms
From the Adventist leadership’s point of view, graduates from the church’s colleges are likely to return more in tithes and offerings than the amount the church contributes through subsidies to support these institutions (about a third of the subsidies go to Loma Linda University). Producing workers in God’s vineyard is also an important outcome. Many graduates will become employed as accountants, pastors, teachers, physicians, nurses, dentists, hospital workers and so forth in denominational employment.
Educational costs continue to soar. Since 1978, college tuition has increased by more than 1,120% while the average family’s wages have barely budged.3 Adventist institutions depend on tuition to survive. As former president of Pacific Union College Richard Osborn stated, “Taking into consideration the low income level of many members, family income levels may represent the greatest threat to the future of Adventist higher education. . . Adventist colleges are under-endowed and overly dependent on tuition for operations.”4 It costs much less to enroll in a state-supported institution, so students in Adventist colleges pay a premium for their education.5
Reviewing financial data from the National Center for Education Statistics (NCES) for all North American Adventist postsecondary institutions yields some surprising results. This data is created by each institution and submitted annually to NCES. Consequently it is possible to produce a custom data set representing only Adventist institutions.6 Using this information we can study how Adventist students typically pay for their college education through a combination of grants, loans and scholarships.
Laying out a financial map for an incoming freshman begins with a one-time event before the student enrolls in college. The need-based financial information filled out by a student and his or her parents is called the Free Application for Federal Student Aid (FAFSA). Information from the FAFSA is used to distribute a variety of government grants and loans and institutional scholarships. Students whose family incomes are too low to generate expected family contributions qualify for the maximum Pell Grant (not a loan). Other funds, such as state grants, are distributed by the institutions based on aid to the students with greatest financial needs, and other factors.
The Sticker Price
Tuition discounting began in the late 1970s. It has become standard practice for most four-year colleges and universities, including Adventist institutions. Administrators use tuition discounts to attract “buyers” (similar to a car dealer), by “giving away” the institution’s money where it can attract the most qualified students and fill the most seats in the classrooms.
The sticker price posted by an Adventist college or university in its prospectus does not represent the actual fees that a student is likely to pay entering college (see table 2). For example, the average sticker price across all Adventist institutions is $32,491 (the least expensive is Kettering at $21,762 and highest is La Sierra University at $41,490). After “gifting” institutional merits and scholarships the average net cost to enter college for all Adventist institutions is reduced to $20,539 (Kettering is again the lowest at $16,954 and the highest is Oakwood University at $25,949).
La Sierra University and Pacific Union College publish the two highest sticker prices. California has a higher cost of living but also a generous state grant program (Cal Grant) that may pay as much as $9,500 per year to qualified students (the grant does not have to be paid back). Aware of the availability of Cal Grants to California students, these two schools capture some of this state money by setting higher sticker prices.
Now we can consider the dynamics of average net pricing in more detail. From Table 2 you can see that the least expensive campuses are the health science professional schools and Washington Adventist University.
The sticker price is reduced by institutional grants, awards, tuition waivers and scholarships. Table 3 shows the amount of Adventist scholarship aid applied to 80% of the attending students with a total of over $142 million (basically in the form of uncollected tuition). Essentially the schools are “giving away” 37% potential tuition to attract the students. Parents are likely to brag about their children receiving a scholarship on entering college. This is good marketing. Parents and students then augment this discounted tuition by taking out federal student loans and/or by qualifying for Pell Grants and seeking other sources of grants and loans.
The cost to students who finance a portion of their education using loans (such as federal student loans) is an increasing burden. The student must repay not only the principle balance but also any accrued interest. In a few cases poorer families receive tax credits (tax expenditures) to reduce the cost of attending college. The economic impact of tax credits on the federal budget is the same as direct expenditures.
Pell Grants from Federal Government
Pell Grants are the most frequently cited source of support to low-income families. Table 4 shows the financial distribution to Adventist higher education through the federal Pell Grant program. This money goes directly for tuition and other costs to attend. The Pell revenues are significantly higher than subsidies given by the Adventist church to higher education ($22 million after excluding $10 million to Loma Linda University). Adventist students average slightly higher Pell Grants ($3,978) compared to the national average ($3,650). More than 40% of Adventist students qualify for Pell Grants. This implies that almost half of the Adventist students come from families below the poverty level (the definition is a family with an income of around $30,000).7
Federal Student Loans
In addition, undergraduate students may also take out federal student loans each year to pay for their education.8 On average, over the next four years, college students who graduate from private nonprofit colleges will borrow $28,100. Together with state and federal money from Pell Grants, and augmentation from other sources (possibly including paying jobs and family support), undergraduates are able to attend Adventist institutions.
Facing rising tuition costs and increasing debt exposure, educators, parents and students are asking the question: Is Adventist education pricing itself out of the marketplace?9 A staggering 69% of Adventist students take out federal loans in the course of their education. To balance this the institutions give out scholarships in the form of tuition discounts, while the students make binding agreements with the government to repay loans after leaving school.
The out-of-pocket net price is what families and students pay as the direct cost of education. Unfortunately, many students will not complete their college education after six years of enrollment (perhaps less than half).10 Also as a consequence, according to the U.S. Department of Education (USDoE), students in private nonprofit four-year colleges pay the highest out-of-pocket net price and are therefore more likely to acquire more debt.11 This may explain why only about 25% of eligible Adventist high school students attend an Adventist tertiary institution.
Becoming part of the costly and time-consuming federally granted accreditation process allows faith-based Adventist schools to participate in state and federal grants and loan programs. Accreditation confers legitimacy on colleges and their programs. A few conservatives in the church believe that government largesse is the mortal enemy of religious liberty or that there is a conspiracy to secularize Adventist higher education through regional accreditation. But it is clear from a financial point of view that accreditation has taken on a far more consequential role. Students attending an Adventist college are eligible to receive millions through federal and state financial aid.
The Dynamics of Financing a College Education
During the 2012-2013 school year undergraduate students received an average of $13,370 in aid, including $7,190 in grants from all institutional sources and Pell grants, another $4,900 in federal loans, and $1,280 in a combination of tax credits and deductions and Federal Work.12
To compare how Adventist students fund their education we can use the financial data from NCES to create a pie graph showing these different components. Students are faced with tuition costs, books, living and other expenses. As we saw, on average the sticker price for Adventist education is $32,491 (vs other private nonprofit four-year institutions of $43,500 or $23,200 for four-year public including housing). Using the College Navigator found in the NCES statistical database it is possible to estimate how Adventist education is typically funded.
Charting this cost is quite subjective since every student entering college arrives with different financial resources and housing needs. But based on the financial data the average total net cost for all of the Adventist colleges is somewhere around $20,539. (For comparison other private nonprofit four-year institutions is slightly less at $18,100).13 In this example, we include all of the possible financial components an entering student might be qualified to receive including work study, loans and grants. This pie chart assumes a student with a good grade point average, a poverty threshold that triggers a Pell grant (42 % of Adventist applicants) and Cal Grant from the State of California. The reduction of the sticker price is the result of applying these financial structures to lower the average net price. Out-of-pocket expense in this example is $3,208. Remove any component and the out-of-pocket expense increases.
Generally, tuition has gone up each year followed by increasing government grants and loans. (Adventist colleges averaged 2.2% to 4.5% increase in tuition from 2012 to 2013). Some educators claim that the availability of federal student loans, particularly subsidized loans, provides cover for institutions to raise their tuition. Analysts are calling for reinvention of education.14
After attending college, some students find themselves with student loans they are unable to repay because they do not complete their degree and are unable to gain employment (during the fourth quarter of 2013, 11.5% of such loans were at 90 days behind in payments). One solution discussed by the USDoE is to improve graduation rates using higher selectivity strategies by the schools.
Another important issue emerges from this report regarding government financial aid for students attending Adventist higher education. What would happen if an Adventist school lost its accreditation and access to federal student loans and grants was denied to the students? The financial stakes in accreditation are high. Additionally, students could not transfer credits to other colleges or universities or expect to have a competitive education.15 It would force the school to close. This has already happened with one Adventist institution. The 129-year old campus of Atlantic Union College (AUC) was on probation with its accrediting body for nearly ten years. Finally accreditation was withheld and AUC collapsed.
The science program at La Sierra University (LSU) has also come under sharp criticism by some segments of the church. The specific religious encroachment centered on the Genesis account of biotic origins and the biblical flood ― topics of a religious faith rather than scientific.16 Church leaders took umbrage and withheld religious accreditation through the Adventist Accrediting Association, insisting that LSU biologists teach the basic worldview and framework of a six-day literal creation. This presents a teaching dilemma because students also need to be exposed to evolutionary principles. The incongruity brought to the forefront concerns about academic freedom, institutional autonomy and organizational structures.17
These important academic issues caught the attention of LSU’s regional accrediting agency, which formally expressed concern about the situation. Resolving the issue took several months, as well as changes to the bylaws. In order to keep its accreditation, the university took steps to ensure its autonomy as an educational institution separate from the church.18
But at the very same time, attorneys representing the North American Division, Pacific Union Conference and LSU were in the Riverside Supreme Court only a few miles away defending church leaders against an independent governing structure for LSU. The sworn testimony of church leaders of the NAD and PUC asserted that although the church has many schools and constituencies, and several levels of organization, the SDA Church is all one indivisible, hierarchical united church.19
Obviously, this position creates a practical problem because educational accrediting agencies do not accredit churches. Taxpayers do not expect to be paying for religious indoctrination. This is a touchy issue. The Chronicle of Higher Education has pointed out that “Skeptical and unfettered inquiry is the hallmark of American teaching and research.” The contradiction is obvious.20
The dynamics of funding an Adventist education through a combination of student tuition government loans and grants gives a new appreciation for the interplay between accreditation and the money contributed by the government. It is also apparent that the church’s higher education institutions must not lose accreditation, or they will also lose their students. The government invests in the future of its citizens, and in return expects them to receive an education that promotes professionalism and employment.
The refrains of “quality education” reverberate around Adventist higher education. We know that is imperative. But are parents and church members willing to pay for it? Are they willing to pay a higher premium in tuition so that young people can keep going to Adventist institutions?
T. Joe Willey, received his Ph.D. in neuroscience from the University of California, Berkeley and taught at Loma Linda Medical School, Walla Walla University and La Sierra University. He was a fellow with Nobel Laureate Sir John Eccles at the University of New York, Buffalo, and research fellow at the Brain Research Institute at UCLA, Los Angeles.
1 Rana Foroohar. The School That Will Get You a Job. Time Magazine. February 24, 2014. Pp.24.
2 Publishing these rates is required by the 1990 Student Right to Know Act. The rates vary by the institution’s level of selectivity of applicants. For example, the University of California Berkeley with high selectivity has 88% graduation rates.
3 Jason Ritchie. Student Debt: Paying Back the American Dream. Huffington Post. August 4, 2014. To put this in perspective, this is more than four times as much as the consumer price index.
4 Richard Osborn. Facing Our Challenges. Higher Education Conference on Mission. Florida Hospital College of Health Sciences. February 11, 2007. p. 8 and p. 20.
5 Trends in Student Aid. College Board.
6 My thanks to former President Dean L. Hubbard of Northwest University of Missouri for guiding me to the right person in NCES to obtain this data.
8 Does not include loans by parents through the Federal Parent Plus Loans.
9 Henry E. Felder. Are Adventist Colleges and Universities Worth it? Spectrum Magazine. Fall, 2012. p. 67.
10 Ibid. p. 71.
11 Trends in Student Aid. College Board. 2013. Data Point. U. S. Department of Education April 2014. Out-of-Pocket Net Price for College.
12 Data from NCES for 2012. (Not all of this data is shown in this article but was evaluated in costs determined for undergraduate students in the dorms).
13 Out-of-Pocket Net Price for College. U. S. Department of Education. April 2014.
14 There is considerable disagreement that student aid allegedly gives colleges and universities “license” to increase tuition. See Why Student Aid is not Driving up College Costs. Washington Post June 1, 2012.
15 Briefing the Future of Universities. The Economist. June 28th-July 4, 2014. p. 20.
16 Larry Becker. Why Accreditation is Necessary. La Sierra Public Release. April 12, 2013.
17 T Joe Willey. Continued Analysis of La Sierra University Student Survey Reveals Faulty Allegations. Spectrum. May 20, 2011. “A Wall Unto Them on Their Right Hand and on Their Left.” Adventist Education the Midst of a Sea of Science. Reports of the National Center for Science Education. January-February 2012.
18 WASC Letter addressed to LSU President Randal Wisbey by Harold Hewitt, WSCUC Chairman. March 7, 2014.
19 David Olson. LA Sierra University: Employees’ Case Dismissed. The Riverside Free Enterprise Press. March 21, 2014.
20 Peter Conn. The Great Accreditation Farce. Chronicle of Higher Education. June 30, 2014. S. Alan Ray. Equal Rights vs. Religious Principles. Chronicle of Higher Education. July 2, 2014.