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In today's issue: A big haircut for universities; where are the boys in higher ed; the online opportunities for regional colleges; and the latest on direct admissions.

⚡️ Breaking News: The newest update on applications to college is out this morning from the Common App. Three numbers that caught my attention:

1️⃣ How Optional Is Optional? Applicants reporting test scores grew for the first time since 2021–22, and are up 11% over last year, outpacing non-reporters.

2️⃣ Publics are Hot, but not the Ivies? Applications to public college members grew at a faster rate (10%) than those to private members since 2023–24 (2%). Growth in applications was slowest for the most selective institutions.

3️⃣ Border Closing. The rate of domestic applicant growth exceeds growth in international applicants for the first time since 2019.

🦾 Attention higher ed leaders: Are you trying to figure out your AI strategy? 

Join me in New York City on February 27 at Google’s Pier 57 office where we’ll be discussing how AI will impact higher ed. 

• Your counterparts from government will also be there to share their lessons and there will be hands-on demonstrations of AI tools that you can put into use now on your campuses. 
• Michael Horn and I will also be recording the Future U. podcast with CUNY’s Ann Kirschner, Pace University’s Marvin Krislov, and Google’s Chris Hein. 

Space is limited but I have some invites to the recording and the free event to give out. To request one, complete this form.

📚 Quick Book Update: My next book is in copy-editing, so I’ll be giving you a sneak peek soon. But in the meantime, plans are gearing up for the launch September 9, when Dream School: Finding The College That’s Right For You hits bookshelves. 

• We’re already scheduling book events in various cities at schools and with parent communities. If you’re interested in bringing the message of how to widen the lens on the college search to your school or community, hit reply. 
• We’re also planning a launch party at the NACAC annual conference in Columbus. If you’re planning on attending, let us know by completing this one-question poll if you want to be on the invite list for the party.

THE LEAD

Like most universities, Rutgers is constructing buildings on its campus and in New Brunswick, NJ  using bond debt.

Two of the buildings have research labs, where the cost to pay back the bonds was expected to be covered by reimbursements from the federal government for grants the university is getting from the National Institutes of Health (NIH).

Not anymore.  

Last Friday, the National Institutes of Health, which is the biggest funder of university research, announced a new reimbursement rate that drastically cuts what universities get for so-called indirect costs of grants (things like buildings, utilities, building maintenance, and some administrative costs).

Michael Gower, executive vice president and chief financial officer at Rutgers, told me that the university has a structural deficit that they were trying to reduce even before this news hit on Friday.

“These are real costs,” said Gower, who has been calculating indirect costs since the 1990s at five different universities. “This is not like overhead in the contracting world where there is a profit built in.”

Indeed, colleges and universities already aren’t getting fully reimbursed for their costs. University budgets have a ton of cross-subsidies, and a lot of different revenue streams also support indirect costs on research: student tuition, clinical activities at university hospitals, state appropriations (for public universities), and unrestricted dollars from the endowment.

The question now is will anyone pay the research costs the government won’t anymore? And if so, who will bear the brunt of it? Or will universities simply get out of the business of federal research?

In making the cuts to indirect costs at the NIH, the White House has claimed that it's "slashing the cottage industry built off of the waste, fraud, and abuse within our mammoth government"

But in reality, there hasn't been any evidence from the government of that in university research since 1990, when federal auditors uncovered nearly $200 million in questionable bills from Stanford University. The university which had accounted for the expenses as “administrative overhead” on government grants during the 1980s.

The details that emerged in congressional hearings had the makings of a Hollywood script:

🚽 A $1,200 antique commode

🛥️ Depreciation on a 72-foot yacht

🎹 A grand piano at a university-owned house

Stanford eventually settled with the feds and paid $3.4 million back to Uncle Sam.

In the process, Stanford's billing rate on federal grants was cut from 70% to 54%.

That means for every research dollar that Stanford received for direct costs on a grant (think: salaries, travel, equipment), it could charge the government as much as 54 cents for overhead costs associated with that research. (It does not mean that more than half of federal grants that go to Stanford are applied to overhead costs).

Indirect costs are an arcane area of university budgets that only accountants really get excited about. Yet they have attracted the attention of congressional appropriators ever since the Stanford scandal as a tool to rein in federal spending.

The issue resurfaces every few years, and at times, budget hawks on Capitol Hill have found unlikely allies in researchers who see indirect costs as a black box of expenses. 

The issue of indirect costs has come up again—and this time quite dramatically.

The new reimbursement rate of 15% accounced last week by the NIH is “in lieu of a separately negotiated rate for indirect costs in every grant.” 

Yes, there isn’t one rate but multiple ones that are negotiated with the universities. Universities sometimes accept less than the negotiated rate for overhead costs, just to get the grants.

That means universities end up covering research costs out of their own pocket.

That’s often been the case for colleges looking to make a name for themselves by trying to rise in the rankings of research universities. Now, everyone will need to pay more—a lot more—if this policy remains in place. (On Monday, 22 states sued the NIH over the cap and got a temporary injunction). 

Exactly how much more they'll pay is unclear because the rates are negotiated and are considered confidential information. But an analysis by James Murphy, director of postsecondary policy for Education Reform Now, shows that for just the five largest research universities we might be talking about a haircut of more than $630 million. 

It’s not just institutions, but entire states that stand to lose (see map below), which is one reason why the junior GOP U.S. Senator from Alabama raised concerns in recent days: the University of Alabama at Birmingham alone receives more than a billion dollars in NIH funds.

Given the money at stake in blue and red states, the politics of this seem to indicate it won’t stay in place. Even so, the GOP is looking for money everywhere in its latest bid to cut taxes and its lawmakers like to particularly take aim at higher ed.  

That giant sucking sound you hear is an estimated $4 billion dollars suddenly disappearing from the coffers of colleges.

Sure, many of these institutions have billions in the bank in their endowments, but much of that is either restricted or already spoken for.

I asked a senior vice president from a research university that is relatively new to this game but still stands to lose millions what they might do. He said they likely will stay the course with current research since they already have the buildings and the faculty. But the question the board will eventually ask is whether research is worth underwriting for prestige—or maybe they’ll abandon certain kinds of research requiring sophisticated equipment or heavily regulated biosafety labs.

Academic research is one of America's crown jewels. At some point in our lives, we've all been impacted by discoveries made in university labs. It may take time to understand the downstream effects of this policy. Will universities abandon research? Perhaps, starting with smaller institutions that lack infrastructure and can't afford to do much independently. But many colleges have invested heavily in becoming “research universities” to burnish their brands. Walking away from that investment won't be easy.

Then there’s the cost to the university. Some 20 years ago, researchers found that unreimbursed costs from research weren’t to blame increases in college tuition.

Today’s financial landscape in higher education bears little resemblance to that era. 

University budgets are a complex cocktail of cross subsidies. And colleges were already facing much higher costs for their athletic ambitions, global footprint, and graduate education.

A cut to a flat 15% cost recovery is "beyond the tipping point" Gower said for universities to continue to subsidize research to the extent that they are now. "We can't raise tuition to support this because that would only rachet up our financial aid costs," he added.

So what might happen next? 

We're likely to see a growing divide between who does research and who doesn't. Maybe some big privates with lots of money in the bank (i.e. Harvard) will decide it's still worth it. Some states with huge budgets and big industry (i.e. New York, Caifornia, and Texas) might be willing to take on their federal subsidy themselves. And other universities will lean into what makes sense for them. 

But in the end, as Gower told me, universities subsidizing federal research has always been a choice. "It’s never been a financial winner," he said. "If you blow up that careful balance, then what?"

Bottom line: We may soon discover whether universities will ask donors, students, or states to subsidize their labs or decide the decades-old partnership of being the research arm of the federal government is over. 

The Lost Boys of Higher Ed

I have two teenage girls at home, but even if you don’t have boys in the house, the latest episode of Future U. will make you think about why men make up 40% of college enrollment these days–a gap with women that has been steadily growing since the late 1970s.

I remember when I was at The Chronicle and we once ran a story with the headline: Do We Need Affirmative Action for Men? Suffice to say, we got lots of letters. 

Setting the scene: As Richard Reeves, our guest on this episode, told an audience I was part of recently, no one wanted to publish his book, Of Boys and Men: Why the Modern Male Is Struggling, Why It Matters, and What to Do About. It was considered too controversial because to talk about the problems of boys was to take away from the gains of women.

• But as Reeves told us on Future U., this is about growing the pie; it’s not a zero-sum game. 

By the numbers: Women have outnumbered men on college campuses for decades—but the gap has been accelerating in recent years. 

• 58% of BA's went to women in 2020. Some fields have become dominated by women, reaching a tipping point. Take vet school where the enrollment of women now is 6 times that of men.
• Education is a big one, too, which has downstream effects because boys might go years without having a male teacher. Male teachers account for just 23% of teachers today. For every 17 white male students there is 1 white male teacher. For Black students, that ratio is 35:1. For Hispanic students, it's 57:1.

Yes, but: Highly selective colleges maintain gender balance due to larger, managed applicant pools.

• The real gap widens in community colleges and less-selective institutions.

Background: Boys coming out of K-12 are in a “very different place on average to girls,” Reeves told us.

• By 8th grade, boys are nearly a grade level behind in reading.
• When it comes to GPA, two-thirds of the top 10% of high schoolers are girls. “Now that's obviously just one bit of the distribution,” Reeves said, “but it's a linear relationship all the way through. And so 2/3 of the bottom decile of high schoolers are boys.”
• Men not only enroll less in college but drop out more. Half of the gender gap in degree completion is due to men not finishing once they start.

What to do: Listen to the episode to hear Reeves lay out the consequences of what’s happening to men in college, as well as his suggested solutions, among them:

🚌 K-12 Fixes: Start boys in school later (redshirting), recruit more male teachers, especially in middle/high school, and personalize learning pathways.

🎓 Higher Ed Actions: Create male-focused outreach and support (think men’s centers), design more hands-on, career-connected programs, and market colleges as places for men, too.

🎧 Listen to the full episode and subscribe to Future U.

📺 Watch highlights on our YouTube channel.

A MESSAGE FROM GROWN & FLOWN

SUPPLEMENTS

🖥️ Regional Colleges Go Online. Regional universities are finding new opportunities in online education despite the dominance of national institutions. Drawing from institutional data and case studies, this new white paper I authored (Part 1 in a 3-part series) shows how these place-based schools can leverage their local strengths and grow enrollment in the digital space. (jeffselingo.com)

📫 Getting Accepted Without Applying. This year, thousands of students will be accepted to colleges without ever submitting a formal application. That’s because more and more schools are automatically accepting students who meet pre-set performance thresholds through direct admissions programs. To learn more about the opportunities and the risks in this growing trend, Michael Horn and I asked Luke Skurman to join us on Future U. Skurman is CEO of Niche.com, one of the nation’s largest direct admissions platforms. (Future U.)

🔬The New R1s. The Carnegie classifications form the basis of so much–from the U.S. News rankings to a college’s strategic plan. Today, the first wave in a revamp of the classifications was released by the American Council on Education. As Rick Seltzer wrote in The Briefing “gone is the complex system…which evaluated 10 different variables. The new system has clear cutoffs.” The changes, he wrote, also mean more institutions get recognized for their research. There are now 187 R1 institutions–the top category–compared to 146 under the 2021 classifications. (The Chronicle of Higher Education)