February 22, 2016
Operational Models and Educational Debt in ATS Seminaries
Why do we care? What do we know? What can we do?
Part Two: What Do We Know?
Today, we are going to look at some inferences that we might be able to make as a result of our research into operational models and student educational debt at seminaries within the Association of Theological Schools (ATS). Sioux Falls Seminary, Northern Seminary, and Indiana Wesleyan University worked together on a project with the goal of seeing how we might affirm or challenge the funding and operational assumptions that undergird theological education.
At the end of our post from last week, we noted the following: 1) Educational debt is not correlated to the price of tuition; 2) We have created a system wherein students can borrow significant levels of funds each year regardless of how much they are actually paying in tuition; 3) The increased levels of credit made available to students through changes in the federal loan program resulted in money passing from the government, through students in the form of debt, and to seminaries; and 4) Education on personal finance can positively influence decisions regarding debt.
When combined with this graph from our post on January 25, the first three items in the list above (tuition prices, the pass-through effect, and student borrowing) led us to think about the connection between institutional budgets, operational models, and the cost to deliver theological education. To look closely at these topics, we used data from ATS that focused on institutional budgets and their relative makeup. We used a subset of schools that remained constant, meaning they were all associated with ATS for a given period of time. In this case, it was 135 schools for which we could find data from 1996 to 2014.
From 1996 to 2014, the budgets at these seminaries rose pretty much every year (except for 2008). At the same time, their relative makeup, or the composition of their budgets, remained remarkably stable. Let’s connect that with the stats from January 25. Between 1996 and 2014, ATS seminaries saw an 11% decrease in FTE while experiencing a 78% rise in net tuition! So, let’s recap. Budgets were increasing, enrollment was dropping, and students were paying more money in tuition. At the same time, the composition of budgets remained stable. Let me provide a few thoughts on why that is interesting.
The Law of Inefficiency
Together, these realities led us to create a theory we call the Law of Inefficiency. The graph below is a depiction of how we believe the Law of Inefficiency works. As schools receive more money, they tend to increase their budgets. As budgets increase, schools tend to hire more staff at a rate almost equal to that of the rising budgets. As staff size increases, schools tend to implement even more complex processes, which are only workable because of the increased number of staff.
Please note that this “law” is simply a theory of what we believe may have happened over the past two decades. It seems to be supported by the data, but without actual staffing numbers it is impossible to validate. I am well aware of the fact that the faculty and staff at all seminaries are asked to do more than is reasonable. I am not writing this to say that we have too many staff or faculty. Rather, I am saying that if budgets rose and the composition of those budgets stayed the same then one of at least three things happened (or all of them happened): 1) every seminary gave equal pays raises to every employee every year, 2) healthcare costs rose at the same pace, or 3) more people were hired.
We are working to gather data that supports this theory, but our circumstantial findings seem to point to a reality where schools may not have responded well to the increased credit supply offered to students. Over the past two decades, seminaries have received ever-increasing levels of net tuition, seen students increase their levels of borrowing, and watched enrollment peak and then drop. The bottom line is that, as an industry, we are spending larger amounts of resources to serve a smaller number of students. That seems to point toward inefficient operational and educational models.
But We Have Changed!
It is right to note, however, that many schools are attempting to address the inefficiencies that live within theological education. Some very good work has been done in this area. Our findings reveal that more may need to be done. One school in our study went about the task of seeing how its change efforts had impacted the financial composition of the school. It found that despite all of its efforts at “change,” there was no demonstrable shift in the composition of its budget over the course of an entire decade. Nothing changed by more than 2%. If tuition comprised 60% of the budget 10 years ago, it still comprises 60% of the budget today. The data for the same set of 135 ATS schools confirms this school is not alone. The 2% Rule seemed to be a reality for several schools in our study. When a portion of the budget did shift by more than 2%, the move was still relatively small.
It seems therefore that the “change” we are enacting may not actually be resulting in change. Could it be that we need to stop thinking about incremental adjustments in our operational and educational models and begin to think about disruptive adjustments that require integrated innovation and result in enterprise models that produce effective systems of theological education?
In summary, what we know is that the issue of student educational debt within ATS schools is multifaceted. Higher tuition prices, Cost of Attendance calculations, and the inefficient models we often use do not alone result in larger levels of debt, though they are important factors. At the same time, rising levels of debt are not solely the result of a lack of curriculum on the topic of personal finance. We believe our research confirms what many people may have already thought to be true. Educational debt is related to all of the above. Rising tuition, inefficient operational and educational models, Cost of Attendance calculations, rising institutional costs, and the lack of curriculum on the topic of personal and institutional stewardship are all contributing to the issue of student debt.