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Better-Than-Ivy Education: $7,376 a Year

With titles such as Our Underachieving Colleges, Going Broke by Degree, Excellence Without a Soul, and Remaking the American University, several excellent books have argued in recent years that there is significant room for improvement in American undergraduate education. As a former student, parent of students, college faculty member, and taxpayer, I share this view.

As a researcher who studies entrepreneurship, I have observed entrepreneurs successfully develop the non-traditional student market. I have wondered if the traditional student market could be revitalized by a major wave of entrepreneurially driven innovation. So, in “The $7,376 ‘Ivies,’ ” a study soon to be published by the Center for College Affordability and Productivity, I looked at undergraduate education for traditional students as if I were exploring a new venture opportunity.

I started by creating a value-designed model for a hypothetical college, and then determined its cost by developing a detailed pro forma income statement. By value-designed model, I mean a model designed for value “customers”. These are the students (or perhaps more often their parents) who are looking for “value” — a high quality product at a relatively low price. When buying a car, they’ll take a $22,000 Toyota Camry over a $105,000 Mercedes S or a $10,000 Chevy Aveo 5. To get to a low enough price point for the value customer, a college must either have a large subsidy from public or private sources, or have lower costs. I looked at the cost side. As the title of my study suggests, I found that value-designed models of undergraduate education can radically reduce costs AND increase quality.

The hypothetical school I designed is called the College of Entrepreneurial Leadership & Society (CELS). CELS is designed for traditional, undergraduate college students of moderately selective to highly selective academic standing who want to be actively involved in the “college experience.” CELS is not for students interested in a pure vocational school or an ivory tower. Rather, CELS targets students who want to exit college a better, more mature person with a solid foundation for life and a successful career.

CELS will offer a broad curriculum that provides students with a strong liberal education, appropriate technical skill for entry level+1 jobs, potential to be general manager of an organization in their chosen profession early in their career, plus foundational skills and knowledge for life outside of work. Majors will be offered in Behavioral Science, Business, Communication Arts, Education, Engineering Science, Information Technology, Letters & Civilization (interdisciplinary humanities), Public Affairs and Science & Technology.

As a former student and parent, I think CELS would provide an extremely high quality education. You may not share this view. That is fine. The market for higher education is large with multiple segments. Several value designed models are viable, and can produce significant cost savings.

For example, a CELS with 3200 students would have a total operating cost (without room and board) of under $8,000 per student. This is the cost to the school, not the cost to the student. Price (i.e. tuition) is the cost to the student. Because most colleges are heavily subsidized by a state and or/private philanthropy, they are able to charge tuition well below their actual cost. CELS’s cost of under $8,000 is drastically below the cost of “top” liberal arts schools ($25,000 to $62,000) that cater to prestige-oriented customers. But it is also well below the $12,000 cost of public regional colleges who have many price driven customers and a less academically selective student body. So, if a CELS received the same level of subsidy as a public regional college, it could charge students about $4,000 less than the regional, even though the product was competitive with the “top” liberal arts schools.

To arrive at this low cost position, I didn’t cut corners on anything that was important to the CELS value proposition. CELS doesn’t use many adjuncts, faculty salaries are competitive with those at research universities’, a laptop is included in tuition, the Division III football stadium has a Jumbotron, etc. As the CELS example illustrates, a college using a value designed model could deliver a prestige quality product to its target market and yet have vastly lower costs.

The key to getting higher quality and lower cost is to constantly use a value mentality when designing the model. All decisions need to be made so as to maximize value to the target market. Who are your potential students and what package of benefits (primarily learning) and price is attractive to them? It is crucial to realize that different target markets may be looking for different benefits. Students at a No Frills University may not be interested in a “college experience”, but CELS students think it extremely important. Ivory Tower College students may see the study of “Knot Theory“ or “Divas, Death, and Dementia on the Operatic Stage“ as vital to their education, while CELS students will find these topics an academic curiosity at best. So how to maximize value varies from college to college.

However, there are some major techniques that simultaneously add value and decrease costs, no matter what the target market.

  • Having a coherent curriculum. A well-designed curriculum is key to both improving student learning and lowering costs. Providing a personalized education through mass customization is possible if you build upon a well-designed platform of courses for both general education and the major. While done to insure quality of learning, significant cost savings also ensue because you are reducing the number of class sections you offer. At CELS almost 50 percent of a student’s course work is a set of general education courses that are required for everybody. CELS faculty will spend a great deal of time designing these courses to insure that they provide a consistent learning experience so that every CELS student will graduate with the core general knowledge and skills for their future. The same approach will be taken in the design of required courses for the major. Given a strong platform in both general education and their major, students can use the remaining 20 percent to customize their education. They can pick specialized courses in their major, courses from other majors and off-campus learning experiences to match their individual career goals and personal interests.
  • Using appropriate teaching technique and technology. What is appropriate varies by course; but generally active learning works better than passive, and active learning can generally be done as well in a class of 100 as a class of 5. (The exception is when the students’ work product needs to be highly customized). A lecture format class of 25 students is much less effective than a class of 100 using an active learning format, but costs four times more per student to deliver. For example, Socratic case method classes of 100 have long been used successfully in major law schools and graduate business schools.
  • Consolidating majors. Intellectually fragmented arts and science majors and highly specialized professional majors are not appropriate for an undergraduate education. They also significantly increase the number of undersubscribed classes that have to be offered. In other words, rather than Accounting, Finance, Management, and Marketing majors, CELS has a Business major. Similarly, CELS has Letters and Civilization rather than English, History, Philosophy and Religion.
  • Keeping the undergraduate education mission primary. Other missions like graduate education and research can add significant costs. While good missions in their own right, they provide little if any direct benefit to undergraduate students. In addition, they have a tendency to distract attention from undergraduate education. Performing them may actually reduce benefits to undergraduate students. So, at CELS expectations for faculty research range from modest to non-existent. From CELS’s perspective, faculty can do research as a job perk, not because it is a vital part of our mission.
  • Reducing organizational silos. Disciplinary and functional silos are a barrier to providing a coordinated education that meets students’ needs. In addition, reducing silos lowers cost by reducing the number of faculty and administrators needed. For example, at CELS, faculty are in multi-disciplinary units along the lines of the majors. Individually, most faculty have some multi-disciplinary skills so it is much easy to coordinate interdisciplinary education, and you need fewer faculty. Because there are fewer faculty and CELS is not a research school, there is no need for an extra level of management (deans’ offices) between the front line supervisors (department chairs) and provost.

With a value-designed model, a college can deliver a prestige quality product to its target market at a fraction of current cost. Value designed models could radically remake higher education, however this cannot be done overnight. Most existing schools should not immediately convert to a value-designed model. New models need to be tested and refined on a small scale before wholesale adoption. Beyond that, the barriers to innovation at most colleges are probably far too high to make wholesale adoption feasible at this time.

Today CELS and other value-designed models should be pioneered by: 1) the social or for-profit entrepreneur interested in starting up a new independent college, 2) the successful multi-college university that wants to pursue radical innovation through a new college without disrupting their existing colleges, and 3) the existing small college that is willing to make major disruptive changes internally in order to drastically improve its value externally.

At this time, public policy makers, concerned citizens, and educators should actively encourage pioneer innovators. Then over time, many existing colleges will imitate the successful pioneers, both because the pioneer has developed the innovation and demonstrated its usefulness, and because the pioneer’s success puts pressure on under-performers to increase productivity. Thus higher education industry performance could improve dramatically overtime. However, in order to reap widespread benefits from innovation in the future, there must be pioneer innovators today.

Vance H. Fried is a professor of management at Oklahoma State University.

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Comments

Fried’s Fantasy

While I concur fully with much of Professor Fried’s value-based model of undergraduate education, I am sadly skeptical that it will get the attention and acceptance it deserves from the higher education community, for the following reasons:

1. The professoriate is historically the greatest impediment to change.

2. The model would lead to consolidation of departments and loss of power and status, which would be resisted.

3. The initial cost of phasing out large numbers of faculty to make this work precisely at a time of declining enrollments would require a truly visionary cost-benefit analysis.

4. The “risk” attendant to convincing the body politic as well as the customers that quality education can come in the form of lectures of 100 versus seminars of 25 requires world class leadership, salesmanship, marketing and public relations. These skills are rare in the domain of higher education.

5. The AAUP.

Otherwise, I applaud this proactive model but I can only fantasize that bold, entrepreneurial leadership would arise and show us the way rather than have the painful consolidations soon to be forced upon us by the coming decline in numbers become the driving factor. Now, that will take real vision.

Alan Haas, President at Educational Futures, at 8:00 am EDT on July 8, 2008

Reality bites

Something effective, challenging, and not money-wasteful in academia?

Ah, c’mon. Mr. Obama was just kidding about change. Reality bites — remember?

Bart, at 8:45 am EDT on July 8, 2008

Almost there

Professor Fried needs to speak further with the legal community about the real utility of 100 person Socratic method case law classes for training would-be lawyers. Anecdotal evidence from a large number of lawyers indicates that the utility is nil—it prepares you for graduating law school, but not for passing the bar exam or being an attorney. If the idea here is to evaluate value for money, we cannot compare professional school courses (especially ones of dubious value) against undergraduate liberal arts courses.

Midwestern U. Prof, Professor at Midwestern U., at 9:40 am EDT on July 8, 2008

As a once-and-future entrepreneur, I say: you’ve got the business plan; why not actually put this idea into action?

Andrew, at 9:45 am EDT on July 8, 2008

Easier with vouches?

For programs like CELS to work, it would be very helpful if we had a rational system of public financing for higher education. This would facilitate overcoming the current massive market distortions caused by our arcane and opaque system of public funding for higher education.

Huge administrative bureaucracies at are public universities are now free to soak up billions of dollars in wasteful spending. The public has scant idea where their tax dollars for higher education are going, even as each year taxpayers are asked to pay more and more directly to these same schools in the form of tuition and fees.

If States made this funding available directly to students in the form of vouchers instead of funneling it through wasteful administrative bureaucracies, programs like Professor Fried’s CELS model could flourish.

Ken D., at 11:25 am EDT on July 8, 2008

Socratic Method

“Professor Fried needs to speak further with the legal community about the real utility of 100 person Socratic method case law classes for training would-be lawyers. Anecdotal evidence from a large number of lawyers indicates that the utility is nil”

I agree that socratic method does not prepare one to be a lawyer. As the law is so diverse a field, no school could possibly hope to prepare you for practice in a specific type of law and nothing short of actually practicing law could.

Socratic method, however does teach you how to reason and think extremely well, which is an invaluable skill and something the memorization and regurgitation of most undergraduate classes does not do at all.

Dave, Attorney, at 12:25 pm EDT on July 8, 2008

Disagree with two assumptions

Sir,

I am afraid there are two tennets of your model that severly hinder it from providing the “better-than-Ivy” education it wishes to provide. First, I am aware of no English department who shares a significant number of professors with a department of Religion. Also, few English majors need to take a great number of history courses, and vice versa. I think opportunities for consolidation among the liberal arts, sciences, and religion departments are few. Secondly, research is what draws the best professors into the field, especially in sciences and engineering. Most science undergraduates take advantage of research opportunities, working with great professors in the field. Most students entering into pure sciences have aims to be a professional researcher, and working in research as an undergrad is more and more a necessary condition to getting entry into the best graudate schools. Consider also that research programs bring a vast amount of money to colleges, so much so that universities focus obsessively on these departments to help bring offet costs in other departments.

Of course, one might say, “Does the CELS really need the _best_ professors to achieve its goals?” It might not. However, the best students will go to the schools with the best professors, as these students tend to be the ones with ambitions to eventually enter academia themselves. And if those are the students this school plans to attract, I don’t think your model, as presented, will be able to pull them in ahead of the Ivies.

JSH, at 12:25 pm EDT on July 8, 2008

Fried’s Got it!

Two notable facts leap out of Vance Fried’s contribution: First, this is one of several “value” models. Thus, the real contribution is to foster/encourage value thinking about college design. Second, eliminating the undergraduate subsidy for research/graduate study can dramatically decrease the delivery cost of undergraduate education.

Of course, it is another story, just what the “value” model for graduate/research study will be! My “Habits of Mind” (with Carol Allen) works on similar inspiration.

W. B. Allen, Dr. at Michigan State University, at 12:25 pm EDT on July 8, 2008

Why not $0 a Year?

Professor Fried has proposed a wonderfully fresh, timely, stimulating experiment. Yes, it seems utopian, but it at least tries to address real and urgent problems that critics have raised, analyzed, and expounded repeatedly. Some version of this vision is probably feasible. You might need the right amount of collective will and some of the essential conditions for an academic version of a perfect “anti-storm.” In fact, why not up the utopian ante: how about aiming for a $0.00 education? Complete financial aid for every student. Such a thing might be done with a large endowment that pays above all for the faculty, the core administrative units, and the classroom- and study-facilities. There would be no investment in dorms, dining halls, parking garages, sports facilities or teams, career counseling and medical units, bookstores, extensive research libraries, museums, etc. These would not necessarily be altogether absent, but they would largely be the provinces of other entrepreneurial agencies. The “college experience” would be centered on the classroom and the curriculum and depth and breadth of learning. The proof would be in the pudding. We need creative thinking and actual experimentation to resolve our current dependence on oil; why not a parallel effort in the domain of higher education?

Peregrinus Utopianus, Associate Professor, Modern and Classical Languages at Saint Louis University, at 12:25 pm EDT on July 8, 2008

Where do I sign up for a school like this? I previously worked at a private university that costs over $40,000 yearly yet gives out merit scholarships to students whose parents could afford to send 10 kids, all in the effort to buy a better student population while taking away needed funds for lower-income students of all races. And with state university being twice the cost of your fictional (yet hopefully soon-to-be-created) school, getting the most bang for the buck is crucial.Great idea.

John, at 1:10 pm EDT on July 8, 2008

Reduced versatility

As Dr. Fried acknowledges in his proposal, such a “value” school would produce liberal arts generalists. The major disadvantage of this is that such a school would be unable to offer adequate preparation to a student who wished to pursue graduate education in the sciences or other technical subjects.

For example, an undergraduate wishing to pursue graduate education in physics would need to take about twelve math courses and fourteen physics courses. That would occupy about two thirds of the typical forty or so one-semester courses that comprise a standard undergraduate degree. A “value” school couldn’t simultaneously achieve the savings that come from a standardized, common curriculum and still offer so many specialized courses.

This isn’t a problem for a student who, upon choosing a college, is sure that he does not want to pursue graduate school. In reality, many students don’t know what they want, or change their minds upon entering college. This is particularly true of students who apply for “generic” liberal arts degree programs.

The truth is that, even at inefficient large universities, a basic liberal arts education is not that expensive to provide. Much of the price of such an education is used to subsidize specialized education in engineering and science, and also (as noted by Dr. Fried) faculty research. Science and engineering education is expensive for several reasons: cost of equipment for lab-based courses, cost of running small, specialized courses (e.g., statistical mechanics), and finally, higher faculty salaries (as opposed to e.g., English professors).

If Dr. Fried’s CELS-type schools were to achieve substantial market share, competition and the resulting loss of cross-subsidy would drive up the price of science and engineering education at schools that still offered such things.

If no other changes were made, this would likely result in decreased production of scientists and engineers, and increased production of liberal arts majors. Would this be a bad thing? I constantly hear about the need for more scientists and engineers, but I don’t know that I’ve ever heard anyone say we need more liberal arts majors (although perhaps that would change if more liberal arts majors received the kind of high-quality education Dr. Fried hopes to provide).

A big problem is that we, as a society, have not had a national discussion as to the role of universities. Major research universities think their primary role is to do research, with teaching a very distant second (trust me—I’ve sat on a faculty hiring committee, and this is the reality, despite anything such schools might say about their commitment to teaching). Much of the public thinks the primary role of such schools is undergraduate education, hence the intense competition to get in to “top” schools.

Dr. Fried’s CELS seems like an interesting proposal, and I hope it becomes a reality. If it does, it will force a much-needed public discussion on the role of the academy in society.

Travis, at 1:55 pm EDT on July 8, 2008

Re: Better-Than-Ivy Education

Vance Fried provides a welcome addition to discussions about changes needed in higher education. The specifics are not so important as the mere fact that an entrepreneurial effort was made to imagine a different future for undergraduate education.

Like several of the people making comments, I disagree with the details. But I think it’s a wonderfully refreshing approach. There should be more efforts like this and some kind of opportunity (a wiki maybe?) for people to comment, build on the ideas of each other, and try to carve out a future for higher education that is better than what we have presently.

The technology exists to create colleges and universities unlike any we’ve ever seen. What’s missing are the social innovations needed to tie the possibilities together. One very large innovation concerns the price and cost issue that Vance Fried addresses.

I applaud Vance Fried for creating a new business model and making it public for discussion.

Gary Lewis, at 2:25 pm EDT on July 8, 2008

Consumers?

While I think that it will be difficult to transform an existing institution into a CELS, I think a CELS could certainly be built from scratch. I believe there are enough faculty on the market who could and would join such an enterprise.

The real question is whether students would attend. Will they believe that a new institution is worthy of a value price, instead of a bargain price? The most successful startup in recent years, of course, is Phoenix, which reached a largely untapped market by combining convenience with a bargain price. How hard is it to introduce a new “mid-grade” product in any market without an existing mid-grade tier?

Moreover, will students be willing to buy the Camry at sticker price when they are conditioned to look for Mercedes with deep discounts that sometimes get even lower than $7,376? Many institutions appear to experience a “Wal-Mart effect,” in which their lower pricetag seems to convey to students that their product is inferior, and so the institutions raise tuitions to send signals about value, and shift those tuition dollars into financial aid in a high-tuition-high-aid model.

But I appreciate the model and the effort to find a solution. It’s worth trying, if you can find funding.

sibyl, at 2:25 pm EDT on July 8, 2008

John asks, “Where do I sign up for a school like this?”

How out of touch can people be? Look around and you’ll find plenty of public, reasonable-quality, low-cost liberal-arts colleges ALREADY OUT THERE. At my own 4-year, public college, tuition and fees for in-state students total $1,720 per semester or $3,440 annually. I’m not sure right off the top of my head what the total cost is (tuition plus fees plus state subsidy), but IIRC that subsidy is well below 50 percent, which brings the total in welkl under $7,376, which is to say we are ALREADY offering the very thing that Fried presents as some radical new possibility. The only people who will see Fried’s proposal as he and the CCAP are presenting it, as a radical alternative to existing higher ed, are people for whom “higher ed” means “upper-echelon higher ed.” Fried isn’t offering anything that doesn’t already exist. Students who want what he’s offering can enroll right here at my institution or at any of the many others like it. States that want what he’s offering either already offer it (as my state does) or they can copy what my state is doing.

Of course, if students care less about cost than about the quality of the rec center, or the hipness of the city they’ll be living in, or the level of sporting events they’ll be attending, then they won’t be enrolling here regardless of how efficient we are. Nor will they be enrolling at Fried’s school.

Eveningsun, at 2:35 pm EDT on July 8, 2008

Great goal, wrong approach

I’d aim at lowering cost without reducing quality in these ways:

1. Utilize faculty and student apartments as classrooms. They lie vacant during the day.

2. Hire non-PhDs to teach most undergraduate classes. Often the disparity between the way PhDs and undergraduates is too great. Also, many PhDs’ primary interest is in research, often arcane research, that should’nt be core to undergraduate education. Excellent bachelor’s and master’s degree holders would be both less expensive and better.

3. Forgo fancy administration buildings and country-club-like amenities such as swimming pools and golf courses. Instead, make deals with nearby swimming and golf facilities that enable students to participate at reasonable cost.

For more such ideas, see my articles “Utopia College” and “America’s Most Overrated Product: the Bachelor’s Degree, which appear in the Chronicle of Higher Education.

Marty Nemko, at 5:20 am EDT on July 9, 2008

Connections

For all the good sense of this proposal, which has a lot to be said for it purely in economic terms, there is another dimension of the college experience that Dr. Fried entirely overlooks, which will ensure that his type of college will never be able to compete with the Ivies and similar top-tier universities. The simple fact is that probably the most valuable asset one gains from attending a top-tier school is not the education one gets (there are as many bad teachers in top-tier schools as lower-tier ones) but the connections one makes that result in a network of contacts that proves invaluable over time, as demonstrated, for instance, by my Princeton classmate Marc Granovetter’s pioneering work on how one finds a job and advances in a career. Paying two or three times more for such contacts is actually a wise investment, when judged from a purely rational economic perspective.

Sandy Thatcher, at 12:25 pm EDT on July 9, 2008

Good Advice

Vance Fried, who teaches at my alma mater, is entirely on point in this article that should be distributed throughout every college. I have been writing about the same thing for more than a year now. (See “How to Fight the High Cost of Curricular GLut at this URL: http://chronicle.com/free/v54/i21/21a03301.htm).

Access to education is an issue on almost every campus. The student loan scandal has funded curricular and technological proliferation, and now that money is tight, so must our budgets. If enrollment falls, as it is bound to do, especially at high-tech (high-priced) private schools, there is no remedy other than administrative cuts and reversions.

A better scenario involves the professoriate putting in place safeguards to avoid curricular expansion (transparent Web technology can ensure that, so that nothing is done in committees without minutes and agendas) as well as technological assessment, weeding out programs and platforms that pick the pockets of students and are in place because of anecdotal sales pitches by vendors.

Meanwhile, kudos to Dr. Fried who applying sound mangerial and organizational principles in this important article.

Michael Bugeja, Iowa State University, at 7:00 am EDT on July 10, 2008

The benefits of entrepreneurship to education

I am the co-founder of myUsearch, an unbiased online service that matches students to colleges, and we deal with several colleges and universities. I am often amazed at the amount of waste that is allowed to persist in our nation’s colleges and universities and I strongly agree that we could reduce the tuition significantly if entrepreneurial strategies were applied to education. If we could shift the culture of Academia, we would make great strides to make college affordable.

Elizabeth Kudner, at 2:40 pm EDT on July 14, 2008

re: The benefits of entrepreneurship to education

Unbiased online service, sounds great. Unfortunately, you are much biased towards applying the business model in education. By all means, go ahead and enfore it on the administration of universities, but it doesn’t work in academia, because it strips the culture. Many of my current problems are because of people who have no idea what a research institution is and what the history of liberal arts means. So I’ll just leave it at this: leave the business model to things that can be consumed, but do not misunderstand, education cannot be consumed.

One concerned student, at 1:45 pm EDT on July 18, 2008

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