The Rise of the Informed Consumer

The Rise of the Informed Consumer and Student Return on Investment

June 3, 2014

Ryan N. Carroll, MBA Director Hobsons

Welcome & Overview !  The Higher Education Marketplace

!  Overview of Students’ College Attendance Decisions

!  A Closer Look at Choices and Choice Process

!  A Closer Look at Information

!  Student Return on Investment Framework

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!  The Higher Education Marketplace

Macro Factors

Demography Fewer high school graduates nationally

Demographic shifts having different impacts in different parts of the country

Greater racial and ethnic diversity

4 McGee, Jon, (2012). Disruptive Adaptation: The New Market for Higher Education. Eden Prairie, MN: Lawlor Perspective.

Unemployment Affected all types of families during recession

Continues to influence economic behavior and choices

Family Income Median income now similar to 1996

Real income declined for all family types

Home Values Source of financial risk for many families

An anchor to mobility

Family Debt & Savings Families change in habits during recession (saved more)

Behaviors are changing, however

Student Demographics

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National Center for Education Statistics. (2013). Projections of Education Statistics to 2021. Washington DC: National Center for Education Statistics.

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21.6 million undergrads in U.S. higher ed today.

38% enroll part-time 20% work full-time 38% graduate from 4 year institutions in 4 years

Who are your students?


U.S. Census Bureau. (2012). School Enrollment and Work Status: 2011. Washington, DC: Census Bureau. National Center for Education Statistics. (2012). Digest of Education Statistics

2011. Washington, DC: National Center for Education Statistics.


Factors that Impact the Higher Education Marketplace

What other macro factors do you believe are shaping the conversation around the value of college? How? Partner, Discuss, Share

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! Overview of Students’ College Attendance Decisions

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“A consumer is making a choice to maximize expected utility or minimize expected cost.”

Hal R. Varian, UC Berkeley Economist

people.ischool.berkeley.edu/~hal/Papers/sigir/sigir.html

When making economic decisions…

College Attendance Decisions

Other important factors in a student’s decision to enroll, such as:

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The decisions of peers Family expectations

theop.princeton.edu/reports/wp/Fletcher%20THEOP.pdf


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http://www.gallup.com/poll/163268/americans-say-graduates-jobs-status-key-college-choice.aspx

41%

16%

37%

32%

22%

40% 43%

14%

40%

51%

13%

33%

0%

10%

20%

30%

40%

50%

60%

% grads able to get a good job

% students who graduate Price of college/university

All respondents <$3,000/mo. $3,000-$7,499/mo. >$7,500/mo.

In your opinion, which of the following is the MOST important factor in choosing which college or university to attend? (general population response)

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Generally speaking, the higher the tuition at a college or university, the better the quality of the education.

5 4 3 2 1 Strongly agree Strongly disagree

10% 13% 29% 20% 25%

http://www.gallup.com/poll/163268/americans-say-graduates-jobs-status-key-college-choice.aspx

Fed’s College Ratings System

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“We have not even begun to develop the college ratings system yet, and we are only in the beginning stages of soliciting input from a wide range of stakeholders about the metrics that should or should not be used in the ratings system… No later than December of 2014, we’ll use the feedback we receive to finalize the college ratings system.” September 20, 2013, Secretary of Education, Arnie Duncan


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Timeline:

!  November 2013: 4 OPEN FORUMS

!  December 2014: Final version

!  2015: Implementation

!  2018: Results tied to federal aid (about $150B)

Hobsons analysis and sharing opportunity

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What have we learned from forums?

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“We're talking about policy decisions that can really shape higher education

for years, if not decades, to come.” —Angel Cabrera, George Mason University

“It's not fair or reasonable really to rate institutions on their performance without

consideration of the nature of their student body.” —Peter McPherson, APLGU

“Unless students are given the counseling . . . to use this data in

a way that best meets their needs, their abilities, their

orientations, the best data in the world is going to be of little to no

use.” —David Baime, AACC

“”The most critical information for students or prospective students and for policy makers is simple: how likely it is that the student will succeed and how

much will it cost?” —David Longanecker, WICHE

http://www2.ed.gov/documents/college-completion/11-13-13-gmu-forum.pdf and http://www.insidehighered.com/news/2014/02/07/colleges-and-analysts-respond-obama-ratings-proposal


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Big Issues:

!  Purpose – Accountability? Consumer information?

!  What should be measured?

!  What should be considered successful outcomes?

!  How can the system drive change and innovation?

!  A Closer Look at Choices and the Choice Process

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Students have more choices than ever…

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TRADE SCHOOL? FOR-PROFIT? LIBERAL ARTS?

ONLINE? BLENDED LEARNING?

MOOC? IN-STATE?

OUT-OF-STATE?

FOUR-YEAR? TWO-YEAR?

PUBLIC? PRIVATE?

Can people have too much choice?

Study #1: Jam Study !  Researchers set up two tasting booths for jam –

one with 24 different flavors and one with 6

!  60% of customers went to the booth with 24 choices, and 40% went to the booth with 6 choices

!  30% of the customers with 6 options bought jam, while only 3% of the customers with 24 options made a purchase

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Iyengar, Sheena S., & Lepper, Mark R. (2000). When Choice Is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 79(6), 995-1006.


Study #2: Essay Study !  Students in an introductory college-level

course were given the option of writing an extra credit essay.

!  Half the students were given a list of 30 possible topics, the other half a list of 6.

!  Students with the list of 6 topics were more likely to write the essay than the group given the list of 30.

!  Students given fewer choices for topics wrote higher quality essays.

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Study #3: Chocolate Study !  Customers chose chocolates either from a

display of 30 or 6.

!  Customers reported greater enjoyment selecting from the display of 30 chocolates.

!  Later, however, customers who selected from the display of 30 chocolates were more dissatisfied and regretful of their choices than the customers who chose from the display of 6 chocolates.

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Conclusions: !  Having extensive choices in a trivial context can

be de-motivating (perhaps even more so in the context of significant decisions).

!  The only context in which people are more comfortable with extensive choice is when they have previous experience with some of the options.

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Information can add to the problems of choice overload:

!  Too much !  Varying quality !  Too little !  Trustworthiness

But high quality information can overcome the negatives of choice overload.

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www.nytimes.com/2010/02/27/your-money/27shortcuts.html?_r=0

!  A Closer Look at Information

Where do students turn for information about college? People

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Peers: One study showed that conversations with friends increase the probability of college enrollment. But if a student’s preferred college isn’t popular with peers, the student is less likely to enroll in that particular college.

theop.princeton.edu/reports/wp/Fletcher%20THEOP.pdf

School Counselors & Admission Officers: College choice can be shaped by data. In one study, providing graduation data increased enrollment by 15% in the college with the higher graduation rate.

www.aei.org/papers/education/k-12/filling-in-the-blanks/

Where do students turn for information about college? Tools

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Online tools: !  Financial Aid Shopping Sheet: helps students and families understand

college costs

!  Net Price Calculator: helps students and families estimate their out-of-pocket cost to attend college

!  College Confidential: helps students and families navigate the admissions process

! Payscale: helps students and families investigate the ROI of colleges, degree programs, and professions

!  Naviance: complete ILP functionality for middle and HS with college and career research, includes transcript sender

!  The College Board: MyBigFuture

Default Rate – Not Grad Rate?

27 http://www.educationsector.org/sites/default/files/publications/Defaults_CYCT-F_JULY.pdf

!  Student Return on Investment Framework

Assessing Return on Investment

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What information should students know when making decisions about college?


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What do you think?

Please brainstorm in small groups: •  What are good measures of student return

on investment? Consider… - Student Body Profile - Finances & Financial Aid - Learning Environment - Non-cognitive Benefits - Alumni Profile


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What factors are most important to the student?

Please discuss in small groups: •  Prioritize the measures •  Share Top 3

Report back to whole group

Priority Measures

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Discuss the following:

•  The “Top 3” measures

•  Feasibility of reporting the “Top 3” measures

•  Cautions and concerns associated with the “Top 3” and reporting these measures to prospective students

Share 1 key point with the whole group

Next Steps

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How will we continue this discussion? How will we move from discussion to action? How can Hobsons help?

SROI

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Are you interested in continuing this conversation?

Hobsons is interested… Assembling group of interested institutions in developing an SROI index. Contact me for more information.

Thank You!

Ryan N. Carroll Director Hobsons [email protected] 513) 985-6003