The downturn was certainly not kind to NYU. As we speak, the reengineering efforts are trimming budgets and staff across the University in order to offset some of the damage to the university’s finances.

Bloomberg reported earlier this month that in the Fiscal Year 2009 (ending June 30th) the NYU endowment shrank by 12% to $2.2 billion, down from $2.49 billion. You might be surprised to know that this is very encouraging news.

Ken Redd, director of research and policy analysis at the National Association of College and University Business Officers, told me that college endowment losses are expected to fall between 15 and 25 percent in FY 2009. NYU fell well short of that range.

And a comparison with other leading universities tells an even bigger story. Columbia’s endowment dropped 21%. MIT also saw a 21% fall. Penn’s lost 15.7%. And Harvard and Yale each saw a massive 30% drop.

Here’s something rich: Yale’s chief investment officer, David Swensen, bashed on NYU’s 1970’s, 80’s, and 90’s conservative investment strategies in his book, “Pioneering Portfolio Management.” He wrote (my emphasis), “By failing to understand the relationship between the permanent nature of endowment funds and equity investments, NYU’s endowment sustained long-lasting, if not permanent damage.”

Someone should probably read him his own words, as he just stewarded the Yale endowment through brutal 25% losses by investing heavily in hedge funds and private equity. He plans on, according to the Wall Street Journal, keeping the strategy. Hmm. Maybe you wanna try that whole conservative thing. Kinda worked for us.

Although its past performance left a lot to be desired, NYU has had superlative investment success in recent years. From FY 2007 to FY 2008, NYU saw (pdf) the greatest endowment growth (14.5%) among all universities with a >$1 billion endowment. Coming in a distant second was Northwestern at 11.4%.

In a statement to Bloomberg, Michael Alfano, NYU executive vice president, said, “Much of NYU’s success — though we are unaccustomed to call a negative a ‘success’ — can be attributed to the foresight of the investment committee of the board of trustees, which recognized early on the contours of what was happening nationally and directed the university’s assets to be reallocated to reduce risk.”

One major player in the handling of the NYU endowment is the chairman of the finance committee. His name is Laurence Fink. He sits on the board of trustees and is also the Chairman and CEO of BlackRock, a company that, according to the NYT, “has won contracts to run major government rescue efforts involving Bear Stearns, the American International Group and Citigroup. It also won a bid to carry out a Federal Reserve program to stimulate the housing market and it has been hired to help evaluate Fannie Mae and Freddie Mac.”

This guy is big time. He has had extensive contact with Treasury Secretary Timothy Geithner. He has had a strong hand in shaping federal policy. He was even one of the pioneers of mortgage-backed securities, precisely the financial tools that brought down the financial system when the housing bubble burst.

And he seems to know how to handle the stock market. BlackRock posted a $786 million profit in 2008 as other financial companies crumbled around it.

You have to wonder how much he had to do with keeping NYU’s losses so modest.

Photo courtesy of Flickr user -nathan (CC).

Ah, good times.

Anyway, I got to feeling curious about which of our fine professors and administrators decided to put their money where their mouth was and donated money to the Presidential candidates in the 2008 cycle. The results are pretty epic.

Using the Huffington Post’s FundRace tool, which aggregates the Federal Election Committee’s list of $200+ donations to single Presidential candidates, I searched for those people listing either “New York University” or “NYU” as their employer.

Of 312 donors (giving at least $200), 306 of them gave to Democratic candidates. That means that only 1.9% of the donors gave to Republicans. Donor list after the jump.

In monetary terms, NYU employees gave $266,710 to Democrats and $5,052 to Republicans. John McCain received only 4 donations totaling $1,830. Rudy Giuliani received 1 for $2,300. The last $922 went to Ron Paul. Talk about an enthusiasm gap.

Here are some notable donors:

Top Donor – Susan Anderson, Professor of Psychology – $5,600 to Hillary Clinton

Peter Unger, Professor of Philosophy – $4,600 to Barack Obama

Cheryl Mills, Senior VP and Secretary – $2,300 to Hillary Clinton (she served as Deputy Counsel to President Bill Clinton)

Mark Gertler, Professor of Economics – $520 to Barack Obama (previously interviewed on NYU Local)

Alicia Hurley, Vice President for Government and Community Engagement – $2,050 to Hillary Clinton, $350 to John Edwards

Paule Marshall, Professor of English and Author – $4,500 to Barack Obama

Thomas Cooley, Dean of Stern – $250 to Barack Obama

Lynne Brown, Senior Vice President for University Relations and Public Affairs – $500 to John Edwards and $500 to Hillary Clinton

Diane Ravitch, Research Professor of Education & Former US Assistant Secretary of Education – $500 to Hillary Clinton

Keep in mind that this is a loose analysis. Some of those listed were students. Nobody who donated under $200 is listed. But you get the idea.

Photo from Folioart: Jonathan Milne.

I appreciate that Charlie wanted to open a conversation on this topic; however, there are a number of factual errors – some serious, some disappointing — that really need to be corrected.

I’d like to start with the big picture, if I may. Between 2002-03 and 2009-10, cost of attendance rose 40.0%; institutional aid (gift, scholarship, and grant aid provided by NYU) increased by 94.8%. We gave Charlie information for two five-year periods – the one he was using (2002-03 to 2006-07) and the most recent (2005-06 to 2009-10) – and, in each, it showed that the percentage increase in institutional aid exceeded the percentage increase in tuition.

I would have thought this might have been highlighted as the key issue. Or the fact that NYU is providing some $160 million in institutional aid – far more than most other universities.

I did, in fact, include the data Beckman supplied that showed need-based aid has increased substantially over the last five years. But my major points were: 1) that a larger share of the money is being directed to the neediest and 2) that NYU still hasn’t proven that they are trying to make the school more affordable for everyone. I did not mention NYU’s large amount of aggregate aid because I think per capita numbers are the only ones that really matter (as Beckman also points out when people note NYU’s large endowment).

As I mentioned, there were some important errors in Charlie’s post that need to be addressed. Let me outline them.

With regard to paragraph four – on a per student basis, NYU’s endowment is not 148th out of the 522 private universities with the largest endowments, we are 184th. Let me illustrate the importance of being that far down the list: the total cost of attendance at Princeton is about $50,000; the total cost of attendance at NYU is about $54,000. According to the 2008 NACUBO endowment student, NYU’s endowment per student was about $70,398; Princeton’s was approximately $2.26 million per student. The rule of thumb is that – on average – endowments will yield about five percent per year. In Princeton’s case, that’s about $113,000/year; in NYU’s case, that’s about $3,500/year. Although we don’t know exactly how much of the Princeton endowment supports financial aid, this conveys a fairly clear sense that they – and similarly situated schools – have substantially more resources in hand for that purpose.

I fully acknowledge that NYU has a difficult time meeting full need. I explicitly stated that the administration has good arguments on their side and then, in the very next sentence, wrote, “NYU has a huge student population and therefore a small endowment per capita, which makes meeting full financial need impossible.”

In regards to NYU being 184th, not 148th, that was a transcription error. Sorry, it’s fixed.

With regard to the two charts – there is a fundamental flaw and a labeling error. The fundamental flaw with the two charts (which Charlie notes): they use only data for full-time, first-time degree/certificate-seeking freshmen. Our financial aid program serves ALL undergraduates, not just freshmen, so looking at the charts does not really tell the whole story. And there’s another important error: the chart titles do not match up to the data Charlie describes — these charts incorrectly claim to represent aid to “4-year undergraduates.”

There are number of reasons I used the data I did. The first is that they are the publicly available data from the Department of Education. (That is also the reason the charts only go up until 2006-2007. The latest data are not available.) This was the only way I could include Columbia as a comparison. When Beckman told me that the numbers only included first-time, four-year freshman, I considered scrapping the charts. But the numbers still describe the general experience of most students coming from high school and allow for a comparison.

If I had full access to all financial aid data, I would love to create similar charts using the full undergraduate picture. As it is now, it’s comparing apples to oranges. I think there is value both in what I presented and Beckman’s numbers, which I also presented.

The labeling error was caused by my creating the charts before realizing the IPEDS data did not apply to all undergrads. I didn’t catch the mistake on my rewrite. I did, however, specify what the charts represented in the text of the article. The chart titles are fixed.

With regard to paragraph 13 – Charlie is wrong in stating that the increase in institutional aid to those with need began in 2005; I wish he had thought to ask us. During the years on which he is focused – 2002-03 to 2006-07 – the percentage of total institutional aid that went to students with need increased from 84.1% to 87.7%

This is becoming somewhat of an overly technical argument, I think. It is possible that there was a 15% drop in the number of students receiving aid (from 2002-2006) due solely to some students no longer receiving merit aid (though there’s no way to know), but it doesn’t really change my main arguments. I do think it is good (as I wrote yesterday) that NYU is giving more need-based aid in lieu of merit-based aid.

I still think the fact that first-time, four-year undergraduates saw costs significantly outpace aid during the five years I pointed out is concerning. Why are other undergraduates seeing more of the financial aid money?

With regard to paragraph 17 – two errors in this one. 1) Adjusting for inflation would change the percentage figures, but it wouldn’t change the fact that institutional financial aid increased at a faster rate than cost of attendance. However, in response, here are inflation adjusted figures: between 2002-03 and 2006-07: the total cost of attendance increased by 12.6%; total institutional aid increased by 19.0%; institutional aid to students with need increased by 24.1%. 2) Charlie didn’t ask us for the “average institutional aid increase” (by which I assume he means the average institutional aid grant). Had he asked, I would have told him that average institutional aid grant increased from $7,780 in 2002-03 to $9,811 in 2006-07 (for students with need, it increased from $8,338 to $10,416 over that period) (NB: the figures in part 2 are not inflation adjusted)

1) This is good news. Now we have apples to apples. Again I wonder, why are rising high school seniors seeing less so much less of an increase in aid when compared to the full pool of undergrads?

2) I went ahead and adjusted the numbers for inflation. The average institutional aid grant increased 11.2 12.6% from 02-03 to 06-07. The cost of tuition increased 12.8%. This basically confirms my tuition vs. financial aid analysis. The cost of attendance (which includes room and board, books, etc.), however, only increased 8.6%.

With regard to paragraph 23 – Charlie says “average aid packages increased this year by almost $1500. (That is not institutional aid, that is overall aid, which includes student loans. I imagine the large bulk of that increase is in loans, particularly considering this year’s recession.)” That’s incorrect — that increase was in institutional aid. I pointed this out to Charlie already, and he indicated he would be correcting that, but I wanted to make sure that this was clear.

Indeed, I corrected this yesterday. I got this wrong because the WSN article called them “aid packages,” which refers to grants, work study, suggested student loans, etc., and not “institutional grants.”

Having highlighted Charlie’s key specific errors (some of which he will probably correct, but it is important to get them on the record), I’d like to speak generally again for a moment.

NYU is not among the relatively small set of institutions that “meet full need” – meaning that our financial aid resources are not sufficient to fill the gap between the expected family contribution (as determined by FAFSA) and the cost of tuition for all our students. We know that because of this, many students take on debt to attend NYU because they really want to be here. That places a real responsibility on NYU — one we feel keenly and constantly strive to meet – to strike a balance within the resources we have: to make NYU as affordable as possible to as many as possible and at the same time to give our students an education that is manifestly and recognizably excellent, to give them a chance to learn from faculty who are at the forefront of adding knowledge to their disciplines, to create supports that help them succeed academically, to provide them with opportunities that are truly distinctive (such as through our connections to NYC and our extensive international network), and to prepare them well for their lives after they receive an NYU degree, whether that be grad school, professional school, or the workforce.

That’s what we work at every day. That’s why we added extra funds to financial aid this year, that’s why we slowed the rate of increase in cost of attendance to its lowest level in 20 years this year, that’s why non-union employees received no salary increase this year (saving $23 million), that’s why we have been cutting administrative costs (a savings of $53 million annually by the end of this year), that’s why we didn’t look to cuts in academics (even when other major universities did), and that’s why we do fundraising.

– John Beckman, NYU Public Affairs

Certainly I give credit (and I did yesterday) to the things NYU does well. I’m very encouraged by their recent financial aid increases that far outpace tuition increases. I write about this because I think we should all be thinking critically about what exactly NYU is doing to make school “as affordable as possible” and to give us the excellent education we come here to receive. I do think NYU has their intentions in the right place, but there are still big questions about affordability that haven’t yet been resolved.

When you dig down into statistics like John and I have been the last couple of weeks, it is easy to see the same numbers and draw different conclusions. We can both slice and dice numbers to fit our positions. It is important that we don’t get caught up arguing about the numbers when the big picture is far more important.

If NYU feels comfortable with students going into deep debt in order to attend, then so be it. It seems to me that the University would be wiser (and better) if they eased up on the breakneck pace of enrollment and expansion, taking care to lower costs. No doubt, the University has made great strides over the past decade, but this is a better time than ever to slow down, think about the economic fundamentals, and plan accordingly.

2:19  - Corrected inflation calculation discrepancies.

6:45 – Corrected percentage change math error and edited for clarity.

It is easy to bash on NYU for its stingy financial aid department. Everyone has heard about the University topping the list of schools with “Students Dissatisfied with Financial Aid.” You may also recall that, last semester, the school began calling students with a large gap between their need and their financial aid award to make sure they really, truly could afford to come to NYU.

But something has been missing in all the yelling about how expensive it is: actual evidence (particularly since administrators have some good arguments on their side).

NYU has a huge student population and therefore a small endowment per capita, which makes meeting full financial need impossible. University Spokesman John Beckman writes me, “NYU is not among the relatively small set of institutions that ‘meet full need’ – meaning that our financial aid resources are not sufficient to fill the ‘gap’ between the expected family contribution (as determined by FAFSA) and the cost of tuition. That’s largely a reflection of our per student endowment,” which was 148th 184th in the country in 2008.

Beckman also frequently points out that we have one of the highest percentages of Pell Grant-eligible students among major research universities. (Since Pell Grants are generally awarded to low-income, very needy families, the previous statistic is often used as a proxy for economic diversity on campus).

But that last point raises a big question: why does NYU attract so many needy, low-income students if its financial aid is so bad?

It is useful to compare NYU to another school for this analysis. I chose Columbia because it has a nearly identical percentage of students receiving federal grant money (mostly Pell Grants). Take a look at these charts of the most recent and available public data:

The first shows the percentage of first-time, four-year freshman receiving either federal, state, or “institutional” (college) grant money. The second shows what percentage of those students is receiving money from the school.

Pretty striking trends, no? A smaller percentage of NYU students are receiving financial aid and a lot fewer are getting any help from the school itself (compared to NYU in the past). Columbia’s trends are both upwards.

So what can we infer from this? It’s hard to say, really, without knowing a lot more about the internals of the financial aid department. At first glance, it would be easy to conclude that the student body is getting richer, since fewer students receive aid.

Beckman disputes that idea. He writes, “…we have been reducing the percentage of aid that is ‘merit’ – or non-need – based; we reduced it by 26% between 2005-06 and 2009-10. This was entirely intentional: given that students’ need is greater than our resources, we concluded this is the right thing to do.”

He concludes that the decline in students receiving aid is due to fewer students receiving merit aid.

However, if you look back at the charts, you’ll see significant percentage drops well before 2005, when Beckman cites the beginning of the reduction in merit aid. (Don’t get me wrong: it’s a good idea to move more money into need-based aid and I applaud NYU for its decision). (Ed. note: See Beckman’s response for an update on this point).

Here’s the rub: the percentage of students receiving federal aid hardly budged during the same time frame displayed on the charts. It dropped only 2 percent from 2001 to 2006, from 17 to 15 percent. This suggests NYU’s “economic diversity” is staying relatively constant.

Now look at this:

You can see how much less money we receive in comparison to Columbia, but that can be chalked up to small endowment per capita. However, this cannot: from 2002-2006 (adjusted for inflation), NYU tuition rose 12.7%. Yet, across the same time period, average institutional aid for first-time, four-year freshmen only increased 7.0%. At Columbia, tuition went up 10.5% and average institutional aid went up 15.3%.*

Beckman again takes issue. He notes that the Department of Education data I used for these charts does not include all undergraduates, only first-time, four-year freshman (the typical out of high school student joining NYU). He writes (emphasis added), “Indeed, when we look at financial aid spending and cost of attendance for all undergrads over the period you examined – 2002-03 to 2006-07 – we find that cost of attendance increased by 21.7% and institutional aid increased by 28.6%.”

Unfortunately, Beckman doesn’t provide the average institutional aid increase, which I used. Nor are the numbers adjusted for inflation, rendering them meaningless. Indeed, if you don’t account for inflation, it appears as if average institutional aid increased nearly 19.9% while tuition increased 26.4%. Still not a good story for NYU, but not nearly as telling as the inflation-adjusted numbers above.

So, where are we? We can see that NYU has become quantifiably more unaffordable and yet it still attracts the same percentage of highly needy students. I think Occam’s Razor suggests that a higher percentage of financial aid dollars are flowing to the school’s neediest students, making it harder for “middle-class,” but needy students to attend and driving down the number of students receiving aid.

If indeed this is the case, it could be because NYU knows that highly qualified but highly needy students will be offered great financial aid from other top universities, so they seek to match their offers. It could be because they have found they can maximize enrollment by asking less needy students to take on more debt than the neediest. It may just be that they think it’s the fairest allocation of the funds available.

What makes this more interesting is parsing John Sexton’s emails. He wrote back in May that one of the University’s major goals is to:

Enhance financial aid for our neediest undergraduate students and improve the quality of student life and wellness.

Not all of our students, just our neediest.

Now I should give credit where it’s due: NYU increased financial aid 7.8% this year – twice the tuition increase. And Beckman notes, “Using FAFSA’s criteria,…need-based aid at NYU has increased 64 percent over the last five years (2005-06 through 2009-10), while (as noted above) undergraduate tuition and fees increased by 22.3%.” This is encouraging (though I would like to see these numbers adjusted for inflation).

But then we read that this is NYU’s biggest enrollment ever – how can they expect to offer decent financial aid if they keep increasing the pool of students who need money?

John Beckman is quoted heavily in a piece in WSN that was published today that attempts to rebut this question (see correction) that addresses this question. There are some good defenses, read the piece, but think critically about Beckman’s arguments there, particularly that average aid packages increased this year by almost $1500. (That is not institutional aid, that is overall aid, which includes student loans. I imagine the large bulk of that increase is in loans, particularly considering this year’s recession). Beckman writes that this is wrong – the average grant increased $1500 this year. The WSN article says “financial aid package,” which refers to grants, work study, recommended student loans, etc. I should have fact-checked this myself – sorry for the confusion.

He wrote to me on the topic as well, saying, “Additional [enrolled] students do mean additional students who need aid; however, it also means additional tuition from those who do not require aid, some of which is used for financial aid for needier students.” Good point, but Beckman is missing the big picture.

If we continue to expand the student body, NYU will never significantly grow its per capita endowment, which is what really makes meeting need possible, according to Beckman himself.

The real issue is that financial aid is a zero-sum game. If you give more money to the neediest students, it comes directly out of the awards to needy students who still have to take out loans. So if NYU is serious about affordability for all of its students, they will limit enrollment and continue to increase financial aid more than tuition.

Beckman writes that the University wants “to make NYU as affordable as possible to as many as possible, and to make the education as excellent as possible.” Yet the average indebtedness of an NYU student at graduation is $34,850, over 33% higher than the national average. Does that statistic reflect NYU making NYU as “affordable as possible to as many as possible?”

New research found that it doesn’t matter where you go to college – you make the same amount of money regardless. That knowledge is bound to hurt good universities like NYU that just aren’t offering good value.

And now we’re back to what I wrote about last month: NYU’s exploding tuition costs and rising student debt levels. It just can’t last. If you continue to leave students with insufficient financial aid, they’re going to stop enrolling. And it will be ugly when that happens.

John Beckman responds, and I respond to him, here.

*

Data from the Department of Education, Columbia’s Institutional Research website, NYU’s Institutional Research website, and the NYU Archive. Photo courtesy of Flickr user AMagill (CC).

4:15 – Updated for clarity.

4:25 – Updated to reflect that the WSN article wasn’t written to “rebut” the question I raised. The article does, however, contain arguments that address that question, as I note above. The two articles are not related, other than that they cover similar material.

4:50 – Facts corrected regarding grant money increase from last year to this year.

10:50 – Chart titles corrected. Minor edits for clarity.

* 10/22 6:45 – Basic math error fixed. To calculate percentage, I was dividing (b-a)/b when I should have done (b-a)/a. The mistake does not change the point, only the numbers. The original sentence sentence read: “from 2002-2006 (adjusted for inflation), NYU tuition rose 12.3%. Yet, across the same time period, average institutional aid for first-time, four-year freshmen only increased 6.6%. At Columbia, tuition went up 9.5% and average institutional aid went up 13.3%.”

Despite the general lack of community-building college activities at NYU like big sports, being in everyone’s business, and going to the same frat house to party every weekend, we do have some things in common. We all love the Hayden lady. We all love cheap food ($1 slices, falafel, chicken over rice). And we all hate NYUHome.

Earlier this week, I got particularly fed up when Albert told me for the third time that my elapsed login time (11 minutes) exceeded the maximum allowed (10 minutes). So I sent a laundry list of complaints to ITS, filled with snark about how NYUHome mirrors NYU’s bureaucracy in a digital format.

To my surprise, I got a professional, useful response two days later. Here are some of the insights.

I really only use two things on NYUHome: Blackboard and Albert. Having to click through the Academics tab to get to them is a source of great irritation. (Small things on the Web make a huge difference in ease of use).

But check this out: You can put Blackboard and Albert on the front page. From ITS’ Priya Ollapally (give her a raise!):

The Home tab is customizable… If you click “Channels” on the upper-right hand corner of the screen, you can choose what channels should appear in your Home tab. Some can’t be removed, but any can be added.

You can also rearrange channels tabs so that the channels you want to access most are at the top. By clicking the [+] in the upper-right corner of each channel [on the front page], you’ll expand a menu of icons; to move a channel up, click the up arrow. It’s a little tedious, and we’ve been hoping to make channels click-and-draggable, but enhancements like those often get put on the back burner when more urgent issues arise.

I was embarrassed that I hadn’t figured this out before (I never tried channels, only preferences), especially since the fix is so simple.

You should also know by now that NYU’s email system is horrible. Here’s more advice:

Regarding email: we’re exploring ways to make it better, but services that affect our community of thousands can take some time to improve. In the mean time, I’d suggest using Apple Mail or Thunderbird, since the web interface is understandably clunky. Instructions are here.

Not bad options, but I would recommend forwarding to your Gmail account (you have one, right?). NYU Local already covered exactly how to do that here.

Finally, it turns out that Albert isn’t managed by ITS. (This is certainly part of the problem, NYU. Consolidate, please.) I will list them here in the hopes that someone who manages Albert will see them. 

• Make a login available on the “exceeded 10 minutes” screen so that we don’t have to log out and back in. So annoying.
• Eliminate extraneous pages. There are way too many times when we have to go through a preliminary page with a “submit” button before we get where we want to be.
• As a corollary to the previous point, allow us to set our preferences. I am always looking for “all undergraduate courses,” not law courses. Don’t make us select that every time.

Please, leave your grievances in the comments. But remember that Priya feels our pain:

I totally understand that there are a lot of systems in place at ITS that can be greatly improved — it’s a frustration for us employees as well, but we are definitely working on it all the time with the limited staff we’ve got.

NYU’s Bruce Bueno de Mesquita, one of the country’s most prominent political scientists, pimped his latest book, The Predictioneer’s Game, on the Daily Show Monday night. Bueno de Mesquita is known for his predictive models based on rational choice theory. He quantifies the influence and desires of every actor involved in making a decision or causing an outcome, plugs the numbers into his models, and predicts, usually quite precisely, what will happen in the future. He says that a CIA study affirmed that his model is correct over 90% of the time.

Bueno de Mesquita is a fascinating guy – if you ever have the chance to see him speak at NYU, jump on it. Last semester, the Sharp Lectures club hosted him. I imagine he’ll speak again.

There are serious critiques of the theory he bases his work on (see NYU Local’s Luke Pattan’s here), but he stands by his predictive success.

Recently, Bueno de Mesquita ran his model to determine whether or not Iran will obtain a nuclear bomb. He claims that Iran won’t make the bomb – they will be just about to build one, but will suddenly stop by early 2010.

Read this excellent profile in the New York Times for more.

The University of California – Santa Cruz student occupation has been another addition to the chaos of California’s budget crisis.

On Friday, my colleague Ned wrote a post about the UCSC occupation with the title, “UCSC Students Go All TBNYU On the Administration.” Yesterday, the Washington Square News ran a piece titled, “Occupation at UCSC similar to TBNYU’s,” along with a staff editorial agreeing with the UCSC students’ reasoning while condemning their methods.

Set aside the fact that WSN (as usual) failed to attribute credit to NYU Local for breaking the story while adding almost no value to it. The news piece isn’t the issue in today’s paper. The editorial, however, is a factually inaccurate, poorly thought-out mess that needs to be addressed.

Here’s the first substantive bit from the WSN editorial (emphasis added):

While the WSN editorial board doesn’t necessarily condone [the UCSC] students’ actions, we recognize that they are fighting for a worthy cause. In a previous editorial, we cautioned NYU not to allow budget constrictions to affect the quality of education. But we think UCSC has sacrificed academics to cut costs, and by raising tuition by 30 percent — mid-semester, no less — the school has burdened students at a time when students cannot handle the burden.

First of all, the University of California has not raised tuition yet. They are considering a phased-in hike of undergraduate tuition fees in two installments: a 15% bump in the spring semester and a 15% bump in fall 2010. That means that this year, if the plan is approved, students will pay 7.5% more than they expected to pay.

Of course, any increase in tuition can be a burden to students, but you have to keep the proper perspective (which requires the facts). Almost one-third of the increased fees are set aside for financial aid.

The editorial continues:

Compared to TBNYU’s occupation, we are more sympathetic to the UCSC students than our own. At UCSC, it appears there is more of a focus on realistic, legitimate goals, rather than extraneous and self-serving promotional goals listed by TBNYU.

They need to read UCSC’s statement again. There are no goals. Yes, they note a lot of the pain the UC schools, faculty, administration, and students are feeling. But they only call for everyone to “occupy and escalate.” Regardless of whether or not you agreed with them, TBNYU did, in fact, have goals.

WSN continues (emphasis added):

UCSC’s students have a clear focus in mind: budget. Their administration has drastically increased tuition, forced faculty furloughs and cut courses, all in the name of budget. We are used to increased tuition, but NYU is a private school. We knowingly chose to attend here, despite the price tag. But UCSC is a public, state school, and students depend on consistency in price. And forcing furloughs on faculty and cutting courses directly and negatively impact educational quality [sic]. The students are right to protest, and we believe they truly have all students in mind rather than themselves.

I find it interesting that this editorial never mentions the reason for the rising tuition, furloughs, and budget cuts: the massive fiscal crisis in California. The state faces a projected budget shortfall of over $40 billion. The reduced funding from the state (as it tries to balance its own budget) and increasing costs have left the UC system with a projected $753 million budget shortfall.

What that kind of financial trouble leads to is hard decisions. They must find a way to balance the budget. Unlike the Federal Government, they cannot continue to carry a huge debt. So workers have to take days off. Students have to pay more. These kind of cutbacks are happening all around the state of California. Of course it has a “negative impact” on the education system, but would it be fair to keep tuition low while many more staff saw reduced wages or layoffs?

So what is it the students are protesting? If it’s a failed system of government and referendums, I totally agree. But anger at the UC system itself seems displaced – some of the finest schools in the country are part of it and, indeed, a high-quality education there comes at a much lower price than NYU or the Ivy Leagues.

For the WSN editorial board, it must seem a lot easier just to read the UCSC occupiers’ press release, gratuitously bash on TBNYU, and avoid any sort of serious thought about a tricky subject.

According to a statistical analysis of thousands of economics papers, Gertler is the 14th most cited author in the world (a sign of his influence on the field), coming in just behind National Economic Council Director Larry Summers (#13) and Nobel Prize winner Paul Krugman (#12).

Gertler is a long-time publishing partner with now-Federal Reserve Chairman Ben Bernanke. According to Gertler’s CV, the two were co-authors on 9 papers. Much of their work focused on monetary policy – precisely what Bernanke is now determining.

Get Gertler’s take on the recession, his work with Bernanke, and whether or not any of us will be able to get a job after the jump.

It looks like we may be climbing out of the recession this quarter (at least technically – employment is still looking bleak) . Do you think we’re out of the woods?

We’re still in the woods but at least now we can see the light coming in from the edge.

What do you think of the Fed’s monetary policy response to the financial crisis?

Many observers agree that the Fed’s aggressive and creative interventions kept the financial markets and the economy from falling off a cliff. So I would say that’s pretty good.

You worked together with Fed Chairman Ben Bernanke for many years. You must see the imprint of your work together in his decisions. Where has that been most noticeable?

There was no way he was going to let the financial markets melt down on his watch. This was the mistake that central bankers made in the Depression and he was not going to repeat this mistake. He realized immediately that the Fed needed to act quickly and needed to not be afraid to experiment with new policies. That’s exactly what he did.

Do you and Bernanke ever discuss policy decisions?

We’ve had some brief big picture discussions but he can’t discuss anything confidential.

What do you think of Washington’s fiscal policy response? Was the stimulus the right idea? Too big? Too small?

I don’t think we know the full outcome yet. I think it was right to experiment.

What do you think of Obama’s proposed financial regulations? What’s missing?

I think it is absolutely critical to pass financial reform. Otherwise we will head down the same path. Though it was completely distasteful, it was in the best interests of the economy to assist large financial institutions to prevent a market meltdown. But we need to adjust the regulatory framework to prevent these institutions from taking the kinds of risks that put us in the mess we are in today.

Macroeconomics, as a field, is having somewhat of an identity crisis right now. Paul Krugman fired up the debate once again this month with his long piece for the New York Times magazine describing how “economists got it so wrong.” As ‘freshwater‘ and ‘saltwater‘ economists snipe at each other on the Internet, this is your chance to weigh in. Where did economists go wrong and who’s to blame?

I think Paul has point that there was a general sense of complacency in the profession and of overconfidence in our ability to manage the economy. Twenty-five years of mostly strong economic growth with price stability can have that effect.

But I don’t think a failure to predict the crisis means a failure of the profession. Anticipating the crisis required an appreciation of the risks posed by the shadow banking system, which just about everyone on the planet missed (including the rating agencies.)

Once the crisis hit, however, policy-makers like Bernanke made extensive use of research (including much of his own) to diagnose the situation and the design the response.

Let me add that while some of the saltwater/freshwater debate [ed. note: basically, the rift between coastal schools (hence, saltwater) that generally believe that fiscal stimulus is effective during a recession and inland schools (freshwater) that don't] remains, the best work today combines elements of both. One reason Bernanke did so well was that he ignored the fringe elements on both sides.

Which economist’s work had the most influence on the response to the financial crisis and why?

Have to say Bernanke relied pretty heavily on his own work. One of those weird co-incidences of history – a scholar of financial crises put in charge of the Fed right before one hits.

What research are you working on right now?

I’m trying to model how the Fed’s unconventional approach to policy in the current crisis affected the outcome.

Will the class of 2010 be able to get jobs? How about 2011?

Things look better for the class of 2011 but those in 2010 should not lose hope. That’s right about the time the job market should pick up.

UPDATE: Welcome MR and Brad DeLong readers! There is more econ stuff around the site: most recently, see our posts on health care and college tuition bubbles.

But it has to stop at some point, right? Is the value of a college education really so great that students and families are willing to pay an increasingly larger fraction of their income for it?

I don’t think we are. And I think NYU will face some very difficult financial decisions in the near future if they don’t start working to adjust tuition prices to match the fundamentals.

In 1950, NYU charged $496 for a year of education ($4,442 in 2009 dollars). This year, tuition is $36,586.

Last week, innovation and marketing blogger John Caddell made a chart just like mine (h/t Felix Salmon – thanks for the idea!) and simply noted, “This is what happens when prices increase above the rate of inflation for decades.”

Every year, NYU raises its tuition, usually far more than the inflation rate. Even though this year’s increase, 3.85% (2008’s inflation rate), was the lowest in almost a decade, it is likely to be well over this year’s average inflation rate (since March, there has been deflation, a negative inflation rate).

So, once again, even during a recession, the real cost of attending NYU has grown.

According to the College Board, the average indebtedness of NYU students at graduation is $34,850 (compared to a national average of $23,186). Ouch. As costs grow, so will the amount of debt we take on. In fact, the WSJ just reported that the amount of federal student loans disbursed this academic year was $75 billion, 25% higher than last year – the largest jump ever recorded.

At what point will prospective students decide that the costs don’t justify the benefits?

Reuters economics blogger Rolfe Winkler thinks the economics of higher education are already wildly distorted. He writes:

The market for college education looks a lot like the market for houses circa 2006 –  very bubbly. And the reason is similar: There is too much credit.

Colleges can keep raising prices, despite the recession, because the government keeps lending students more money to pay them.

…

But the extra credit isn’t benefiting students. It’s just inflating the price of their education, burying them under a bigger pile of debt despite stagnant wage growth and poorer employment prospects.

This is eerily reminiscent of the housing bubble, when too easy credit inflated the price of houses well beyond their fundamental value.

He continues by arguing that the federal government is making too much money available through Stafford loans (citing the WSJ piece) and artificially pushing the price of college up.

Why do we go to college? Aside from intangibles like social training and new experiences, we go because a degree offers us the opportunity to make more money during our lifetime. Does the current price (~$200,000 when you include housing) reflect that we will make $200,000 more than if we didn’t go to college?

Perhaps, but a recent study (pdf) puts the value at $121,539.

And so there may well be a bubble. If there is, the top NYU administrators should start thinking now about what they’re going to do about it. Because NYU is a tuition-driven school, if the bottom drops out of the college market and tuition prices fall 30%, it would devastate the 2031 plans, force job cuts, and leave academic departments reeling. Does NYU have the chance of a major realignment in the perception of the school’s value built into their statistical admissions models?

The underlying issue is that, last year, NYU saw a record number of applications and, according to Sexton, “enthusiastic admitted students.” The price, on its face, seems justified. Tuition hikes aren’t hurting the admissions pool, so the sensible move is to drive up prices.

Remember when everyone thought the housing market had nowhere to go but up?

To compute the percentages for the graph, I adjusted the historic tuition data to 2009 dollars using the Consumer Price Index. I used Census Bureau data for median incomes and adjusted that to 2009 dollars as well. Because the most recent median income data is from 2006, I used that number (adjusted) as the 2009 median income. To see the raw data and sources, you can download my worksheet.

Special thanks to Lindsay Dumas in the University Archives for all her help.

The fourth and final post in our week-long overview of health care reform.

Here’s a fun question: Have you read the bills? It is often asked by those who haven’t to politicians who also haven’t.

Kidding aside, the legislation winding through Congress right now is complicated and not easily boiled down into a single blog post. But it’s important to know what the general features of the bills are, which, perhaps surprisingly, vary little from one another.

Today, we will be talking about the three major proposals: the tri-committee House bill, the Senate HELP committee bill, and Max Baucus’ Finance committee outline. (Obama’s plan is close to the House bill, but also includes some tort reforms and flexibility on the public option).

Here are the things that all of the major plans offer: no discrimination based on pre-existing conditions (insurers must cover you), guaranteed renewability (no rescission), no caps on lifetime benefits, community rating (which requires insurance companies to charge the same price for a policy to everyone in a given region), an individual mandate (everyone must purchase insurance), health insurance exchanges or “gateways,” subsidies for the poor (though these range from stingy to generous), and an expansion of Medicaid.

Baucus’ Finance Committee outline, currently being discussed by the “Gang of Six,” contains no public option; the Senate HELP bill and House bill do. Baucus’ bill instead proposes “co-ops,” non-profit collectives that would offer an alternative to for-profit health insurance policies. Although they sound appealing, they are, unfortunately, not very promising.

This co-op idea is being floated because it is unlikely that a public option will pass in the Senate. However, there has been talk of a “triggered” public option that would only come into effect if private insurers weren’t able to reach certain cost benchmarks after some amount of time. Olympia Snowe, the centrist GOP senator from Maine who is one of a small handful of Republicans who has crossed party lines to vote for Democratic legislation (e.g., stimulus bill), is a strong proponent of this concept. President Obama also briefly mentioned this as a possible compromise in his primetime speech on Wednesday.

Both the Senate and House call for another promising cost-cutting policy: comparative effectiveness review. The bills would establish an independent commission to research the efficacy of different treatment options compared with their costs. It should help to identify the best ways to treat different conditions. This research could, in the future, determine government payment policy, maximizing our health per dollar.

The HELP bill and House bill also include an employer mandate – or, as its called, a “pay or play” provision. Basically, employers would have to offer insurance to their workers or face steep penalties. (Otherwise, they could just drop health care as a benefit, forcing their employees into the exchanges). The Baucus outline offers an employer mandate as well, but it is a much weaker provision that has some serious downsides for low-income workers.

*

In aggregate, this legislation leaves a lot to be desired. It mostly leaves untouched the general employer-based framework that distorts insurance markets (of course, this is because “if you like your insurance, you can keep it.” More fundamental, Wyden-Bennett style or single-payer reform would cause you to lose your employer-based insurance).

The bills also do little to deal with incentive problems (currently, our system is based on a fee-for-service framework. When a doctor orders a test, does a surgery, or has an appointment with you, he gets paid. This creates incentives for doctors to overtreate, since by doing more, they earn more. There are also perverse incentives on the insurers end, who fight for the healthiest patients and try not to cover the sick. And, on the demand side, individuals often don’t see a lot of the costs of their health-care because their employers pay for most of it. It would be beneficial if we all shared in the costs of our own coverage more. See the links at the end of the post for more on incentives.)

The bills, as they stand, also aren’t going to make a huge dent in the long-term explosion of costs, either. Even if they are budget neutral over 10 years, they don’t look as if they will reduce deficits beyond that window.

And, despite Obama’s claim that he will be the last President to try for health care reform, we will, no doubt, have to return to the table to figure out how we are going to really “bend the curve” of health care spending. (The bills do establish some very promising cost-cutting proposals that could lead to new ideas down the road).

But, ultimately, if a bill gets passed, it will be a giant step forward for health care in this country. People will no longer have to worry about losing their insurance if they get sick. Everyone will be able to purchase affordable, baseline insurance (and will probably have to under a mandate). The poor and lower-middle class will receive (generous, I hope) subsidies to help them pay for their policies. If you lose your job, you won’t lose your insurance.

It would be the biggest reform package passed in years and would finally offer financial security and health care coverage to every American.

Further policy reading:

Side-by-side comparison of different health care proposals

My favorite health care article of the year: Why we should pay attention to the Mayo Clinic – and why incentives matter

A demand side look at incentives and a radically different approach to reform

Two great bloggers: Ezra Klein and Jon Cohn

How to bend the cost curve

The architect of the public option makes the case for its inclusion in reform (pdf -highly rec’d)