Fixing the College Business Model

Read the financial news and you get two very different portraits of the automobile industry. On the one hand, a shortage of microchips, foam and plastics has crippled production and devastated sales. On the other hand, manufacturers’ profits are at a record high as sales shifted toward larger, more expensive models.

I’m originally from Detroit and, prompted by my colleague Michael Rutter, I’ve spent some time recently pondering an analogy between the auto industry and higher education.

Superficially, the two industries—one profit-driven, the other proud of its nonprofit status—could scarcely be more different. In fact, however, news articles about these economic sectors are eerily similar.

“The pandemic will permanently change the auto industry,” we are told. Or “Reimagining the auto industry’s future: It’s now or never.” Or “Five Trends Transforming the Automotive Industry.” Just substitute “higher education” for autos and the articles would read much the same.

Just as higher ed is undergoing seismic shifts, so, too, is the automotive sector, what with the turn toward electric vehicles, online sales, semi-autonomous driving and ride-sharing services.

There’s another parallel: both sectors depend heavily on public subsidies, direct and indirect.

Even though I spent a summer on the evening shift in a metal-working shop, I don’t romanticize my hometown industry. It’s not a particularly efficient or well-managed business, its quality and environmental impact are questionable, and it’s only sustainable thanks to repeated bailouts, union concessions and government interventions—and all the infrastructure government has enabled: cheap gas, roads and highways, and, of course, an intentionally inadequate system of mass transit.

And now the federal government is poised to offer even more incentives to promote the transition to electric cars.

Our system of higher education, too, is heavily subsidized. Without a vast array of public subsidies and tax breaks, our system of higher education would be utterly unaffordable. Even the most richly endowed colleges and universities rely heavily on federal financial aid, their tax-free status and tax-deductible donations.

We heavily subsidize higher education for many good reasons. It not only benefits individual graduates, but society as a whole. It builds social capital; promotes local and regional economic development; enriches and entertains society culturally, athletically and intellectually; and advances innovation.

But like the auto industry, it’s not especially efficient, its quality is uncertain, its outcomes highly variable and it’s only sustainable because of various subsidies. Like the auto industry, which is buttressed by a rich mythology (of cruising down Main Street and, like Jack Kerouac, getting our kicks on Route 66), colleges and universities benefit from a romantic mythology of their own—of dorm life, nightlong heavy raps, boisterous football weekends and leafy quads. College, we tell our children, will be the best years of your life.

A key question is whether our current model for financing higher education is sustainable, especially given far-reaching changes in the student body, as fewer and fewer fit the stereotype of the traditional-aged college student, 18 to 21.

More are older, more are parents and more attend part-time. More balance their studies with substantial amounts of work. More are first-generation college students, who aren’t able to draw upon the advice of parents who attended college. More have family responsibilities. More received an uneven preparation in high school. Most important of all, more come from lower-income backgrounds, with the share receiving Pell Grants rising sharply.

The institutions that serve the bulk of undergraduates must do much more to help nontraditional students succeed. We know what to do: increase financial aid. Offer more proactive advising. Expand supplemental instruction and other forms of academic, social and psychological support. Provide an education that is learning, learner and outcomes focused, featuring lots of active and experiential learning, more substantive feedback, and a greater emphasis on career preparation.

But support services cost money, and it’s unclear who will pay. If anything like our current approach to higher education is to thrive, the answer is “society,” via an expanded state and federal role in higher education finance.

It’s not unlikely that any forthcoming resources will target students (in the form of increased financial aid) rather than institutions per se—placing individual colleges and universities in a zero-sum competition.

If public financing expands—for example, through increases in Pell Grants, expanded loan forgiveness programs or direct aid to institutions—we should expect such expenditures to come with strings attached.

As taxpayers, we want government and accrediting agencies to ensure that public funds are well spent and result in substantial increases in college completion, especially for students from low-income backgrounds, and not simply contribute to administrative growth or “mission creep”—an increasing emphasis on research at the expense of teaching.

There are, of course, alternatives to expanded public financing. All you need to do is ask some members of the Texas state Legislature, who tout the advantages of industry apprenticeships, lower-cost nondegree certificates and industry-recognized credentials, expanded corporate training, greater reliance on lower-cost fully online (and not state-supported) providers like Western Governors University, and increased institutional entrepreneurship (including more professional master’s programs).

Then there’s the advice that consultants typically offer:

• Cut administrative and operational costs.
• Outsource wherever possible.
• Replace full-time tenured faculty with less expensive, more flexible adjuncts, and trim benefits.
• Alter your curriculum to offer more popular majors while downsizing or eliminating those that are less popular.
• Become more entrepreneurial and market-oriented and increase expenditures on fundraising and pursue grants, institute summer programs, rent out campus facilities, offer dual-degree/early-college courses, and partner with businesses.
• Differentiate your campus—or, conversely, expand and diversify your program offerings and the markets you serve.

Given likely shifts in control of Congress, massive federal support for higher education looks increasingly unlikely.

How can institutions that are not especially agile, flexible or adaptable keep tuition affordable while meeting their budgetary challenges?

Here are some suggestions.

1. Serve a broader range of students.

There are three significant growth sectors: first-generation students from economically disadvantaged backgrounds, many of whom received an uneven education in high school; community college transfer students; and adult learners who need to reskill or upskill.

• To successfully serve enrollees from low-income backgrounds will require institutions to prioritize proactive advising, mentoring, learning support services and financial support. Bridge programs and enhanced orientations can also help ensure that these students can hit the ground running.
• To meet the needs of transfer students, it’s essential to streamline and expedite the transfer credit process, make sure that credits apply not only to gen ed but major requirements, provide equal access to financial aid and ensure the availability of essential courses.
• Working adults, in turn, need shorter, more convenient programs that offer job-related skills and industry-recognized credentials.

2. Double down on student success.

The most effective and efficient way to improve institutional finances is to increase retention and graduation rates. To that end:

• Deploy technology to identify curricular bottlenecks—courses with high DFW rates and large equity gaps—signal when students are off track, and prompt timely interventions.
• Optimize course offerings and institute block scheduling that will make it easier for working students to concentrate their courses in the morning, afternoon or evening. Redesign gateway courses to improve learning outcomes.
• Alter policies and practices that impede student success. Simplify and streamline degree pathways. Discourage double and triple majors.

3. Demonstrate value.

The best way to recruit, retrain and graduate students is to cite the return on investment that your education offers.

• Be able to explain your “value add”: the specific programs your institution offers to build marketable skills and prepare students for a career.
• Point to the strengths of the education your institution offers, for example, access to more active, project-based and experiential opportunities involving supervised research, mentored internships, field experiences and study abroad.

4. Coordinate closely with partner institutions.

For four-year institutions, obvious partners are feeder high schools and community colleges. But businesses, hospitals, museums, nonprofit and social service organizations, and government agencies also provide opportunities for collaboration.

5. Rethink incentives.

Incentives matter, and most institutional incentives favor growth, status and prestige, while most professional incentives encourage scholarship above teaching, mentoring or campus service. If your institution’s priority is to increase student success, timely completion and postgraduation success, your incentive structure and resource allocations need to reflect those considerations.

• Allocate resources to reflect your institution’s priorities. Make learning communities, cohort programs, teaching innovation and instructional and learning support services central to your academic objectives.
• Reward faculty who dedicate themselves to student success and equitable outcomes.

Our sector’s future will depend on ever-increasing public subsidies. Unlike the subsidies that the auto industry receives, ours are incontrovertibly worthwhile. Be even if higher education’s societal contributions should be self-evident, not everyone is convinced.

We need to do a better job of demonstrating our worth, and the best way to do that, I am convinced, is not merely to quantify the value we add to local economies as employers, investors, incubators and industry partners or to explain how we create more knowledgeable and active citizens, teach workforce skills, and generate research that fuels economic growth. Those claims are too abstract to be convincing.

Instead, we need to showcase our students’ postgraduation outcomes. But we can only capitalize on their success if we truly bring the overwhelming majority of our students to a bright future.

I used to teach at an institution where two-thirds of the students exited with nothing but debts and bitterness. Since then, that campus has done a lot to raise graduation rates. Still, however, nearly 40 percent of first-time, full-time students and over 55 percent of part-time students fail to graduate in six years.

Those outcomes shouldn’t be acceptable, especially given the entering students’ high school GPAs and board scores, and they threaten the level of public support that higher education requires. We simply must do better if we are to get the financial support we need.

Steven Mintz is professor of history at the University of Texas at Austin.