The Controversy Behind Transparency

This episode of Future you is brought to you by Nelnet Campus Commerce, delivering payment technology for a smarter campus and by Entangled Solutions. This is Future youe with Jeff Salingo and Michael Horn.

Welcome to Future you. I'm Michael Horn, joined by my co host, Jeff Salingo, and delighted for our episode today as we welcome two guests in our studio here in Somerville, Mass. We don't normally do that. We normally have one, but we get two today because they are the founders of edmit. We've got Nick Dukhoff and Sabrina Manville. Welcome to the show, guys.

Thanks.

And the question we'd love to dive in is, frankly, what is edmit? We know you all started it to help students and parents make much better decisions around higher education, given that costs are escalating and so forth. But give us a little bit more depth into how you got started in this company and what problem you're solving. Great.

Yes, thanks. First, thanks for having us. Michael and Jeff are excited to be here. Nick and I started the company first. We were working in higher education. We were working in institutions of higher ed. Nick was at Northeastern and I was at Southern New Hampshire. And those are very different institutions. But we were seeing families having the same questions and problems when they were considering where to go to school. And those are really around the finances. As you mentioned, the cost of college is going up and it's very hard for students to actually understand how much it's going to cost for them when they're first applying. They also were having more and more questions about the outcomes of college and whether it's worth it and whether this more expensive school was more worth it for them. And so we started edmit to help demystify a lot of the numbers and data that have been coming out kind of on the policy side and try to bring those more into the hands of the consumer so that they could make wiser decisions at every step, whether it's starting to apply to knowing where to go to, what to major in, and all of those things that really have a long term impact on their finances as a family.

So what's the business model here? So who are the customers and what are they buying? What's the product?

Yeah, that's a great question. So our product is really divided into three parts. We have our software, and our software helps families understand all the questions that they may have about how much is going to cost them, can they afford it, what's worth stretching for, and all sorts of other tips and advice through our digital software solution. We Also offer content. So we have a learning center. We actually just published a book, Better Off After College. And we're about to release a course where students and their parents can get certified as smart borrowers. And we're currently putting together a consortium of partners that will be offering benefits to those course takers after completion. Then the third part is we have an advising network where parents and students can actually talk to one of Edmet's college financial counselors to help them make smarter college financial decisions.

So is your hope to try to bring the kind of the financial fit of college up in the process? It seems like most students are picking colleges based on academics or social reasons. And then it's kind of like at the last moment they're making the decision on finances is to try to align those two things together, which always seems to be out of alignment. Now, of course, colleges love that, the fact that it's out of alignment because it works to their advantage. You fall in love with the college emotionally, and then you have to figure out how to pay for it. So I'm assuming that parents love your product. Maybe colleges don't always.

That's exactly right. That we're trying to. We're trying to integrate the financial conversation at every step of the way. So really, you should, when you're figuring out what your list is, what your college list is, be looking at not just where can you get in and what's your kind of reach and safety schools, but also financially, are there schools that you know are definitely going to be affordable for you versus the ones that might not be? And that's definitely part of our advice.

So one other question, because I've been intrigued by this since I got familiar with what you guys were building, which is that you're not just sort of giving net tuition price calculators or something like that. You're really looking at each individual and giving information based on your profile and others like you. At this particular college, this is what you're most likely to pay. So it's not an on average figure. It's really specific. How are you getting that sort of data to be able to give that sort of recommendation?

So our data, we think about our data as a pyramid. The foundational layer is government data, and we're grateful for the great work that the government has done in collecting and making data available. Department of Education, labor, and other departments. The middle layer is licensed data. We have a number of partners, both private companies, nonprofits, and researchers. We also are constantly mining the web whenever there's publicly available Data that we think can better inform our data and our models. We're out there pulling it then the top of the pyramid. And this is in many ways the most important is first party data. So our users are contributing their own data back into the platform and we use that to validate all of our models and assumptions and improve upon them.

You recently made news because of another model that you wanted to build around institutions potentially going out of business. So this has been a lot of discussion. We're in the Boston area today, today recording the show. This has kind of been ground zero for that here in the Boston area around institutions just not being able to be financially viable. Could you talk a little bit about what the model you were trying to build here around colleges and their financial viability?

Yeah. So as a comprehensive financial tool with data, we started getting questions from our customers about the potential college closures in their area. And this was obviously not yet a widespread issue, but it's something that is hitting the news in local areas. And so we just started to hear some questions and frankly didn't have a good answer, even as experts in higher education. And so we set out to do a little research project about it and to try to see what are the kind of leading indicators that could predict kind of the financial stability stability of a college. And that was the research we did. We have not figured out how to present that to the customer. And that actually wasn't phase one. We knew that that would be a more complex thing to figure out because frankly, you need to contextualize information whenever you're putting it in front of families that might not have all of that context. But our first step was to really look at what data was out there and how we could use it to better inform the questions of financial health.

So I'm, I guess I'm guilty as a bit of a co conspirator with you on this in the sense that I helped pitch it to Paul Fannin Inside Higher Ed when he wrote the story. But it got a lot of backlash from colleges that he then reached out to. From the list that said, hey, you look like you're sort of under the 10 years of viability left. Can you just talk about sort of what that incident was like from your perspective in a startup trying to give students and families better information and how that sort of went down from your mission perspective?

That's a great question. We knew that this was a sensitive project and we took great pains to really deliberate and be thoughtful about how we plan to release that information. And thank You, Michael, for connecting us with Paul and Inside Higher Ed. I think they treated it with care. And it was our intent to really start the conversation by making this data our model and the methodology available on GitHub, an open source community that would have enabled us to welcome comments from anybody to make that research better. Unfortunately, a college and a association kind of flexed their muscles a little bit and made us take a step back and think, think a bit more about whether that was the right time and place for us to make that research public.

And so where do you stand now? Because you've done a lot of research, you have this model. I've looked at it. Frankly, I think it's conservative of anything that there's going to be more schools closing. You've taken great pains at this point to really look at the actual finances and not layer in all the things we know coming like demographics and competition from faster, cheaper alternatives and all the things that might be out there that people like me like to write about. So where does this go from here? Because this is still pretty valuable information that having the context around would be useful.

Yeah, absolutely. So we've been having a lot of conversations. We've actually already shared kind of the data one on one with people that request it who are interested in doing research of their own or using it in some way. We are considering some kind of convening in the winter spring with researchers where we could get more feedback on the model and kind of ways to improve it. So really our next step is to continue the work in some way, hopefully with a wide set of partners that bring expertise to this. This isn't our core business as a company and so we do want to make it available, but we're likely to do it with others.

Right? It's not your core business, but this is consumer. I mean, what frustrates me is the blowback, right? Because this is consumer information that people should have, right? It's, you know, students and parents should have it. And it frustrates me because, you know, Michael and I just spent the last couple of years working on books about admission and the whole process is so on the side of colleges and universities, right? They hold all the cards in admissions and in many ways they hold all the cards in financial aid and almost everything about the college experience. I mean, no model is going to be perfect. So no matter how many researchers you bring together, you're going to create some model someone's not going to like. So even though it's not part of your core business, it is part of the consumer information that people should have. Right. So at some point, do you just say this is the best we can do and people should have this information?

Yeah. So we've had very encouraging conversations with folks in the Department of Education, funders and others who want this information to be made available to consumers and taxpayers. We're all taxpayers. We all have, I think, a right to know more about how those taxpayer dollars are being spent and also about what commitment these colleges have to their students. We're talking about real potential consequen here. I think this has continued to go overlooked, which is perplexing to me that we're talking about real people who are being marketed to, are enrolling at and then matriculating to institutions that may very possibly close while they are enrolled, with no protections whatsoever to the student making what is already hard. I mean, we have a college persistence and attainment problem in this country, and the students oftentimes finding themselves having difficulty to complete are likely to be the same students that may find themselves literally out of a college, not of their own fault.

Yeah, yeah. And you've made the blockbuster analogy, obviously, in some of your writing around this about you were, I guess, the gift cards or something like that that you hung on to for Blockbuster Video only to find them out of business at some point. But analysts were writing about that in that were predicting that. So I guess to you all, now's your chance on the show to break some news. Any institutions in the New England area you want to sort of spotlight or tease out or if you don't want to go that far, we'd love it if you did. But if you don't want to go that far, how should we think about this question? What are the big variables that you all are looking at in your model itself?

Yeah, I think the data is publicly available. You know. Yes, we're competent researchers and data modelers. It isn't rocket science. Forbes recently put out a rating of their own that ended up being somewhat consistent their scores with the colleges.

I saw your tweet say it was over 90%.

There was a high correlation, especially among the colleges that we had as likely to fail within the next five or so years. So others can certainly reproduce this, and I'm sure they will. I know there's a book coming out, Johns Hopkins Press, I believe soon. I'm excited to read that. But this data will be made available in some form or fashion, whether it be by us or someone else. And I think colleges should really be thoughtful about how they're communicating their financial health, both to their students, their communities, and frankly, the broader public that has a right to know.

So, Nick, both Michael and I have small kids. Mine are 10 and 8. My wife and I were just talking this morning about what we want to do about their 529s this year as we end the end of the, we're recording this in December, nearing the end of the tax year. And so you've predicted, though, because I'm everybody's always trying to figure out, you know, my kids will go to college in 2028 and 2030. And everyone's trying to figure out what college will actually cost by then. And you predicted recently that, you know, college tuition won't be rising as fast as it has been. You predicted, you know, 145,000 in 2036. Can you talk a little bit about how you arrived at that number and why isn't going. Is it, it's not going to rise at the level it has been in your opinion?

Sure. I recently had the opportunity to write for Barron's an opinion that was an expected value calculation for what college would cost for my daughter when she matriculates in 2036, in 17 years. There's a lot of downward pressure on college pricing. There's demographic headwinds, there's online and other competition coming out of Silicon Valley and innovation broadly. Colleges are oftentimes finding themselves having to compete more for the same students where they may have had kind of more territory in the past. International student interest seems to potentially be waning, at least in the short term. TBD on if that's a long term consequence, there are politicians running for president who are talking about meaningful changes to the higher education landscape, including free college. I think when you add kind of all of those up, you get enough pressure that makes the likely expected cost of college lower than it is today. In my model, it's virtually flat and that's net adjusted for inflation. When you take into account all of those factors, I think that college will cost virtually the same as it does today in 2036, even though real wages should be much higher in 2036. So college, in fact may cost less in the future than it does today.

Well, I think Jeff and I will hope for that for our kids. But in the meantime, super appreciative of you both dropping by the studio to talk to us on Future youe. And we'll be right back.

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Learn more at Entangled Solutions welcome back off a great conversation with Nick and Sabrina and Jeff. It caught my interest that they were talking that you asked them about how to help students and parents much earlier in the college admissions process. Start to think, think through the financial question, not just sort of what college do I like based on social ideas or based on academics, things like that, but actually bring in dollars into the picture. I'm curious, you've spent a lot of time with families, you spent a lot of time with admissions offices on these sorts of questions. What's your take on the feasibility of people bringing that in and what's needed to help them bring that information much earlier?

So we've tried this so many times. The net price calculator which was put into the Higher Education act years ago was supposed to try to bring up the cost of college, but obviously it doesn't quite work the way it's supposed to all the time. Most students and parents don't even know it exists. You can't quite find it on some college websites and most students fill it out not really knowing much about their parents finances. Then we had a change in federal law so that students and parents can use prior, what was called prior prior year. They could use basically old tax returns. The FAFSA deadline was moved up by a couple months. Again, the hope was you would know earlier on what your expected family income was. Colleges could package financial aid packages earlier, but none of this really changed the basic assumption that I think when you start the college search is people start I want to go to these five colleges or I want to go to this state or something like that. And you don't really think about price. And it still amazes me in this day and age that almost everything else we buy, we buy especially big ticket items. We don't search for a house without really having a price range. We don't search for a car without having a price range. But yet we search for colleges with not really having a price Range. And so what ends up happening then is I think students get emotionally attached to some colleges and people stretch. And this is why people end up stretching. And again, that's all, as I kind of joke to them, it's in interest of the colleges to have people.

Yeah, I mean, I've joked a few times now because for my book, I think a big takeaway is that a lot of people aren't viewing college as an investment still, they're viewing it as a benefit that they're almost entitled to. And so they don't ask these questions. I think people have missed misinterpreted some of our advice in the book about pushing off the price question a little bit to later because we more want to see like what are you interested in? And broaden options and then you should bring in prices as you're actually applying. We don't mean to say anchor on something, but I think this also gets into some of the gapping phenomenon that you've started to write about and become concerned about. That's not actually just or at all in some cases impacting low income students, but actually middle income students.

Yeah, I mean, and so this is what happens when, you know, the expected family contribution is X and colleges and universities package have a financial aid, a number that's lower than that that they're providing. And so students and parents have to look elsewhere for that money. And the average gap now at a public university is about $12,000. At a private university it's about $14,000. And that's gone up a lot in the last 10 years. And why is that? Because college costs continue to rise, prices continue to rise, but yet family incomes are stagnating. And what ends up happening, I think is that many students stretch because again, they're making these choices kind of under the gun at the last minute in the spring. And then they show up on campus and they realize they're paying all this extra money that they didn't expect to pay and they're kind of annoyed by it. So student engagement by them is not very good. And those are the students I think for most colleges where they end up dropping out or transferring.

So I'm curious actually, how does this play into early admissions? Because we're about a month out when this episode airs, from everyone getting their early admissions decisions, some colleges filling half their class, maybe even a little bit more in some cases through that pool. How does this play in with that?

So I think some of it is that some of the big early decision schools that take in so Much of their class are not gapping as much because most of them will meet full need. And I think that parents and students who are savvy enough about early decision because it's such a small number in the grand scheme of things, I don't think they're as concerned about that. But I think that we really need, I mean the thing that as we were talking with Sabrina and Nick about, we need to bring more transparency to pricing. Again, that's all in the benefit of the consumer and not in the benefit of the college. And what's happening now, I think in higher education, given the contraction in the market, given the fear about financial sustainability, is that colleges are trying to husband as many resources as they can and they're trying to control the process even more so than ever before. So there's nothing in, in their view that they want to do this right, because again, it's not to their view.

Yeah, this is where the Paul Tuff book, I think, and the excerpt that came out in the New York Times Magazine from it is sort of telling in terms of how colleges are trying to piece together their class to optimize both the right quote unquote mix of students, but also the right revenue mix to be able to support the program.

And so, Michael, I was interested, since you had a role in this brouhaha, a little bit that they talked about. What, were you surprised that there was that much pushback? Were you surprised that there was even threats of lawsuits? And do you think one day these numbers will see the light of day?

Yeah. So when Nick texted me and told me what was going on, I was shocked, to be totally honest. By the same token, there was some reason I was wary about naming names. I mean, Nick and I have co bylined a piece together about using this data where we didn't name names of schools. And I think we both had a reticence of it. And when it came out, I actually immediately got in touch with some friends at the Wall Street Journal and other places and said sort of, what's your take on this? Are we crazy? Because when you step back from it, on the one hand you say, well, be careful because the moment you put out financial information, it's maybe a self fulfilling prophecy fewer students will go there. And does that cause a college to go into decline? Although that hasn't yet happened at Sweet Briar or even Hampshire, although I guess it's 18 students or something like that enrolled there at the moment, but in its new class, I should say.

But.

But there's some fears about that. I get those fears. Right. And no one's trying to accelerate the closure of a college. By the same token, in any other industry, we have analysts doing all sorts of analysis and reports to bring to light concerns they have about the financial viability and ongoing sustainability of an enterprise. It's very common. And for such a high commitment decision as college is, for students having some basic transparency, knowing that, yes, like the future could change. Right. That college could innovate the way Southern New Hampshire did, the way Simmons College did and change things around is absolutely true. And it's not a bad thing to have that information out there. I think it's an academic freedom issue almost. I mean, what was your take? As you know, you used to be the editor of the Chronicle.

Yeah, I mean, I was really frustrated by it. I understand Nick and Sabrina, as a startup, they didn't want to take the chance. I'm hopeful that some other publication will just take this on and just do it because as we talked about in the interview with them, every piece of analysis on this data, as they said, is public data. Everyone's going to have a problem with it at some point. And so at some point you just have to put it out there and have this discussion.

And I will say the model was conservative in the sense of it was looking at financial inflows and outflows essentially and solvency based on cash reserves. It did not factor in all the other issues that are out there in terms of demographics and so forth that we know is coming out. And if you were to layer on some of those models, I think it would look worse than theirs, say, suggests that it is for certain colleges.

So one of the things we're going to be doing this year, in 2020, on future years, taking audience questions. So bring them on, send them in. You know, we're going to be asking for them on, on social media. And so we have a few that we got for the beginning of 2020. And the first one comes from Robert Gibson. Michael, and I'm going to ask you this. The question is, do you attribute the spate of college closings to the disruption theory or more so to the result of changes in demographics and the looming dearth of college age students?

So I'd actually say none of the above. I would start with the business model of colleges, just the inability to continue to bring in the revenue necessary to keep up with the cost increases that we've. Yes. You know, net tuition hasn't risen as fast, but it's still rising because the college cost pressures are there, administrative overhead has gone up significantly and it's just hard to keep it. I would say factor number two in the college closings will be demographics, though still not disruption theory. Disruption theory might be a distant third. I just, I personally think disruption is hit in the master's degree programs. I don't think it's really hit the undergraduate experiences yet. And so to the extent that those cash cow master's programs are holding up a college or university, sure, disruption's part of the story, but I don't think it's the main player yet.

And I think part of the issue here too is we're not going to see this across. We tend to talk about higher education as an industry or a sector and there's obviously different pieces of it, different silos of it. So we're not going to see this among certain types of institutions in certain places in the country either.

That's absolutely right. And I think, you know, where disruption theory could play a role later is in these faster, cheaper college alternatives like the Kenzie Academies in the Midwest. Right. That are offering a year program as a opposed to say a two year program or a four year program from a non brand name school that maybe it starts to hollow out. That and that coupled with the demographic trends I think could play a role in some colleges collapsing. I just don't think it's a significant player yet.

Well, it was great to have Nick and Sabrina on the show today and to talk a lot about probably something we're going to be talking frequently on Future youe this year around around kind of the financial sustainability of colleges and universities. So thanks for joining us on Future youe. And join us for our next episode. Hey folks, Michael Horn here.

Hope you enjoyed the latest episode of Future youe. And just a reminder to please subscribe to us on your favorite podcast platform and if you like the podcast, rate us so that others can find us and find out about the good conversations that we're having here. As always, thanks so much for listening.