College costs/prices

Arizona universities turn to cities in lieu of state support

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As states pull support for higher education construction, cities offer incentives to develop new campuses.

Occupy protests focusing increasingly on student debt

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Student debt has emerged as a major focus of the protests. Some worry that prospective students are hearing the wrong message -- while others see important shifts in the political debate about borrowing.

Private Colleges Embrace Student Loan Reimbursement Program

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A few small private colleges are following the lead of law schools, using a loan repayment program to help students perform service work immediately after graduation.

Cooper Union weighs charging tuition, raising questions about viability of tuition-free model

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Cooper Union debate about charging tuition points to the challenges of maintaining tuition-free higher education.

Reports find student aid shift from states to federal government

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With tuition continuing to rise, College Board reports find the burden of paying for college shifting from states to the federal government.

The Disruption Is Here

A recent essay here by Robert Archibald and David Feldman challenged the idea of a "higher education bubble." They argued that a degree, even an expensive degree, is still worth it. They correctly pointed out that a degree is not an asset that responds to supply and demand like other markets. Their point that "on average most of us are average, and the data show that college is a very good investment for the average person," is true enough. But their real message was: there’s no need to panic, the status quo is still working. I disagree.

Said essay is part of a broader continuing discussion, this round set off by Peter Thiel's statements surrounding his 20 Under 20 Program encouraging students to "stop out" of college – with the idea that they are more likely to achieve entrepreneurial breakthroughs on their own than with more formal education.

Thiel is a managing partner at one of the venture investors, Founders Fund, in my company, Inigral. Ironically, Inigral serves educational institutions with our Schools App, and most of our clients are traditional colleges and universities. (Schools App is a community platform inside Facebook and on mobile devices that helps to welcome the incoming class during the admissions, orientation, and first-year experience, making sure students find their “fit” and get off on the right foot.) So my company helps keep students in college while Thiel is going around talking about the potential value of "stopping out."

Given this irony, people often ask me what I think about Thiel’s comments suggesting that higher education is in a bubble. Here's what I think: He is mostly right, but the future prospects for education are more optimistic than Thiel suggests for two primary reasons: 1) Though it looks like an economic bubble, it's unlikely that there will be a precise moment in which the market crashes. Instead, there will be a slow market shift towards amorphous market entrants that can deliver relevant, quality education conveniently and affordably. 2) There's a path forward if folks in higher education understand the processes of both disruption and change management.

Thiel's critique of higher education isn’t that degrees have no value. It’s about whether the industry is ripe for disruption, which I have defined in the context of education here. Thiel correctly observes that higher education is a market with unsustainable price increases based on irrational confidence. It’s true. Tuition has grown at rates that astound and outrage since the early '90s, and these prices seem unable to turn course. Our system incentivizes institutions to pursue selectivity, gargantuan research, and increased spending per student (small class sizes, student services, physical plant).

As of yet, there's no market mechanism to reward high levels of student success for the least possible cost. This is irrational. Thiel’s critique is based on an unstated assumption: market forces are starting to unleash on institutions that have not had to learn to thrive in a post-Internet, mobile device-oriented, and competitive marketplace. Indeed, few are currently asking themselves the important questions and embarking upon the dramatic transformations that will allow them to thrive.

This bubble is not going to suddenly crash; degrees are not normal assets that can be bought and sold on the open market. Even more importantly, the irrational confidence in education is founded on some fundamental truths: education produces opportunities for individuals, an educated population can both compete globally and provide a great foundation for democracy, and I would add that an education is an end in itself -- a transformative process that provides a near-priceless value. To boot, almost all of our nation's postsecondary institutions are filled with smart people who can not only survive, but also thrive if given the right road map, tools and opportunity.

Higher education should be transforming as quickly as it can. Whether or not there's a "bubble" that will be dramatically "popped" does not change the bold reality of an oncoming future, what I propose to call the Great Disruption.

Here's a suggested survival guide:

First, regard any continuing education programs, night school, certifications, or alternative models of education as start-ups within your organization. If you don't have one already, start a fully online program. Allow these groups to act as independent entities that can explore different models of how to educate and serve students. Hire the best, smartest, and most courageous people to run them. Allow them to innovate, and have your main operation learn from their innovation actively. Do not assume that their models cannot inform your traditions, because the speed at which traditional institutions learn to adopt these new models will determine how healthy they can stay when the full market forces of disruption start to occur.

Second, embrace "blended learning" and competency-based assessment. Move away from seat-time-based models in an attempt to bring rapid cost efficiency, especially to our more generic courses. We're already trying to teach our "Econ 101" courses to 500 students at a time. Why not go at them with even more scalable models to the point where one course can serve nearly unlimited numbers of students? It’s already possible through lecture capture, video content, blended learning, different technology supported models of coursework, participation, grading, and assessment. What needs to exist but doesn’t yet will come rapidly once the market starts to demand it.

Third, actively seek vendors as partners that can provide technology to "scale" any of your existing processes out of the classroom -- marketing and communication, financial aid, student services, community building, and student success. Over the past 30 years or so, technology has been used within the existing educational model and within the operating framework of our institutions. Institutions need to look at technology differently -- they need to see it as an opportunity to transform what they do and help them adapt.

The reality is that in higher education, there is a lot of spending focused on improving student success, but not all the efforts scale and their outcomes are often difficult to measure. Too often, success is measured anecdotally because there's no scalable way to gather real-time information, but this changes with schoolwide software. A small handful of schools, in particular Purdue University, seem capable of building this technology internally, with projects such as Mixable and Hotseat. But most colleges and universities will find that they are not very good software developers. Even if they can build something they will have trouble building upon it and maintaining it. So colleges should seek this kind of software from others.

Fourth, actively seek to take advantage of the Internet as services arise that are of interest to your students, your faculty and staff, and more importantly -- your market. Put lectures on iTunes U and Youtube, get your professors on Academia.edu and Notehall. Send your students to StudentMentor and StudentAdvisor. See what happens. Something will pop up that will remarkably improve or change what you do. One thing is for sure: we're quickly going to move to a model where "all-star" faculty members who have amazing reputations as both thinkers and teachers will probably be your best foot forward on the Internet.

Fifth, just adopt good management practices from business. Decide who you are and what you are good at, and start cutting the rest. Hold people accountable. Who is responsible for persistence and completion? Give people incentives. Who gets a bonus if the persistence and completion rates go up? Constantly improve institutional efficiency and effectiveness: who’s responsible for identifying opportunities to improve and taking the necessary steps?

On a personal note, my biggest fear is that our institutions in higher education are not structurally capable of making efficient and courageous decisions that will allow them to innovate and thrive through the coming Great Disruption. As a result, probably the biggest element of focus needs to be on change management and reorganization that will provide true accountability for student success, as well as create incentive systems that reward risk taking in pursuit of excellence and efficiency. Having said that, the worst thing to do would be to spend all your focus as an administrator going through a painful and time-consuming reorganization that delays pursuing the five tips listed above.

The cost-cutting race is on. And the Great Disruption is just beginning.

Author/s: 
Michael Staton
Author's email: 
info@insidehighered.com

Michael Staton is CEO of Inigral.

Dealing With Fine Print

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Auxiliary service agreements tying vendor spending on facilities to contract renewals raise conflict-of-interest questions -- and may be quite common.

The Real Rising Cost of English Universities

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Tuition will exceed government's estimates, leading to more questions about direction of higher education.

Luxury, Subsidy and Opportunity: Purchasing a Quality Education

Many parents ask about the differential benefit their children might get by attending an expensive private college or university. Prestigious private institutions have elaborate facilities, luxurious appointments, constant attention to student needs and desires, and small classes. They also carry high sticker prices.

Other private colleges struggle to stay afloat financially, unable to charge enough in tuition and fees and too poor in endowment to subsidize the kind of elite-style education often associated with the words "private college." Public universities also vary dramatically in what they charge, what students actually pay, and what amenities and services they provide. 

Consumers, the parents and students, struggle with the data, which are never clear, and seek to find the best possible match between a student’s abilities, temperament and style and an institution's capabilities and charges. Any reasonable judgment becomes difficult because we have no reliable method for determining the value of the educational product generated by either public or private, large or small, rich or poor institutions. 

Parents and students in the marketplace for higher education seek a prestige, luxury education for a bargain price, and work to identify subsidies that will offset the real cost of a luxury education. These subsidies come in many different forms, and while much attention focuses on merit scholarships and need-based financial aid, institutions manipulate their prices and costs in other ways that disguise the full subsidy involved.  

Private institutions, whose discount rates among the most prestigious institutions reach an average of perhaps 40 percent, but fall to much lower rates among less wealthy colleges, subsidize educational costs through payments from the earnings on their endowments.  As a result, the price a student pays at a wealthy private institution, even at the sticker price, is less to much less than the actual cost of instruction.  

Public universities also subsidize the cost of higher education. Their legislatures will subsidize tuition, providing a low rate for in-state and a high rate for out-of-state students, clearly reflecting the subsidy.
Big public universities have other subsidies as well, some of which they share with their private elite counterparts. Their research enterprise supports faculty, graduate programs and facilities available to undergraduates who choose to take advantage of them. Their endowments bring better faculty and better facilities than the revenue generated from students and state could afford, and the size of the big publics and the larger private institutions allows them to cross-subsidize a wide range of niche academic specialties that smaller institutions cannot support.

Prestige public and private institutions also subsidize non-academic enterprises such as major sports programs and a wide range of cultural enterprises from theaters to rock concerts to art galleries.

What about quality? Quality in higher education at the undergraduate level is an elusive measurement.  Some measure undergraduate quality by focusing on variables that measure how much is spent per student, how many students are in a class room, how high the quality of the participating student are, or similar items that speak to the nature of the process that moves the student through the system rather than to a direct measure of the value of the education delivered. The evidence to support this relies more on faith than any science.

What we do know is that like all luxury goods, small classes in elegant surroundings are surely more comfortable, more graceful, more convenient and more personalized. Like a luxury Mercedes, the expensive education, whether purchased from an elite private or out-of-state at elite public institution, may be more costly, more comfortable, more elegant, and more prestigious than an educational Chevrolet, but the luxury features contribute little to the effectiveness of moving passengers to the supermarket. 

Many studies have attempted to identify a major difference in the outcomes from attending expensive private institutions or attending high quality public universities in-state at half the price. Few of these find any significant difference in the outcomes, and in most cases the differences that do exist usually appear to reflect the differences in the wealth and opportunity provided by the students’ family circumstances before they enter college rather than any particular enhancement that comes from the luxury process of education.

Universities and colleges have no magical power. The value of the education acquired at most middle to upper ranked schools (by any criteria) is mostly dependent on the commitment and focus of the student rather than on the miraculous power or luxury characteristics of the institutional process. Moreover, most colleges and universities sell a commodity product, an education that at its core is fundamentally similar between institutions. The amenities may differ -- luxury dorms, elaborate student centers, complex and fully equipped recreational facilities -- but the chemistry and English classes are pretty much the same.

Luxury is a good thing if you want it and can afford it. If someone will deliver a Mercedes for the price of a Geo, why not ride for the four years in style? Nonetheless, if you find yourself in a Geo, you will get to the supermarket at almost exactly the same time as your friends in the Mercedes. What you do when you get out of the car, however, depends almost entirely on you, not on the luxury of your ride.

Author/s: 
John V. Lombardi
Author's email: 
lombardi@umass.edu

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