The leaders of many of the nation's colleges and universities aren't sleeping well these days. Mounting cost pressures, a moribund economy, and changing demographics are making life difficult for top college administrators and raising questions about whether major changes may be needed in the business model that has long sustained American higher education.
"Bubble" is the word that keeps cropping up among observers of the education sector. The concern is that even with government subsidies, college has become too expensive for many Americans, particularly when paired against an uncertain job market. If the steady stream of applicants to traditional four-year colleges were to drop, would the bubble burst?
[Read one expert's take on the higher education bubble.]
A slow leak seems to be more in line with the sentiments of college administrators. They clearly see the landscape changing, but aren't yet in panic mode. That's one conclusion that can be drawn from recent inquiries and conversations with top college officials, including a poll by U.S. News and Fidelity Investments that drew more than 1,500 responses. The unease the colleges have felt in recent years has been amplified by the decline in the national and state economies. Money pressure is the No. 1 issue, even as administrators must be mindful of the changing workforce, international competition, and the creative destruction that Internet technology is imposing on many industries.
Yet there was also some evidence of contradictions, if not delusion. Radical change is not afoot. This was most notable in the budget area where, despite all the pressures, virtually no one saw their budgets shrinking. And tuition, it seems, will continue to rise.
Among the key pressures concerning schools:
• Increasing student cost: For more than 20 years, college tuition has far outstripped the rate of inflation. Yet consumers keep paying for what has long been seen as an essential good. With the annual cost of private school often topping $50,000—and public school costs, while lower, rising at an even faster rate—everyone wonders when we will hit the breaking point.
Not yet, according to college administrators. The poll finds little expectation of tuition declining. This comes even though there is general acknowledgement that the pricing model is a mess. The sticker price is often not what students end up paying, as schools make individual deals to attract talented students. Those who pay full price are effectively subsidizing those who get a break.
Particularly for smaller schools, this is creating big problems. At the U.S. News/Fidelity Investments forum, Lewis Duncan, president of Rollins College, described it as, "if not a failing, at least an unsustainable business model." Said Duncan: "Our costs are rising faster than the consumer can pay. There are a number of small, private liberal arts colleges that are in very deep financial trouble."
One necessity, Duncan said: "The value statement of a liberal education needs to be better made. Why small classes, why the Socratic dialogue method of teaching has value for many students."
[See the rankings of the Best Liberal Arts Colleges.]
• Wary consumers: Value is increasingly on the minds of consumers. While academics talk about "outcomes measures," consumers are increasingly asking, "What do I get for my money?" A liberal education may be an amorphous if wonderful thing, but in the minds of consumers, a job is the tangible outcome they're looking for. Schools have a hard time answering that question, contending that it is too difficult to create any simple measures of student outcomes.
"The higher ed industry is not a homogeneous university," said Philip Hanlon, provost of the University of Michigan. "It's many, many different kinds of institutions. One single test does not work well."
Reflecting consumer sentiment, state legislatures and even the federal government have begun to apply pressure. Some states are demanding higher accountability standards and the Department of Education has begun to impose so-called "gainful employment" rules on the for-profit schools such as University of Phoenix and Kaplan Education.
The principle is that in return for federal loan money—many for-profits get 90 percent of their funds from federal loans and grants—the schools must show that their graduates are getting jobs commensurate with the cost of the education. It's a concept some think might spread to traditional schools as well, which also get significant federal dollars. The law school sector, where there have long been complaints about shoddy post-graduate employment data, was stunned when a graduate of a California law school filed a fraud claim because he couldn't get a job.
Interestingly, the most significant outcomes problem that the U.S. News/Fidelity survey found was about the quality of incoming high school graduates. College administrators felt overwhelmingly that high schools had to improve their product.
[Catch up on the latest developments via the High School Notes blog.]
• Tight budgets: It's hard to generalize on school budgets because their fortunes vary widely. But one generalization may be in order: The rich schools are getting richer (Yale University just completed a $3.8 billion campaign to lift its endowment closer to Harvard University's) and the poor schools are in trouble.
State schools have been particularly hard hit, although in many cases they seem to be turning to private funding sources to keep growing. Schools like the University of Michigan and University of Virginia used to get 80 percent of their funds from the state; now it's often less than 20 percent.
As Eduardo Ochoa, the Department of Education's assistant secretary for post-secondary education, observed: "So many governors and state legislatures are cutting back dramatically the support for higher education to the point where I think that the traditional compact that we've had in our society for public higher education, which was perceiving of it as a public good and deserving of state subsidy, is being eroded."
But for all the cost pressures, there was little sense that schools were cutting actual expenses. The vast majority of administrators responding to the U.S. News/Fidelity poll expected to be increasing their budgets in the coming years. There was no expectation of any change in the system of lifetime tenure, which has been criticized as adding significant cost to faculties to promote research at the expense of teaching. And no expectation of much change in the faculty workforce.
• Changing academics: The poll found a marked emphasis on science and math—where the jobs are—as the key growth disciplines of the future, somewhat at the expense of the humanities. Officials are aware of the business community clamor for graduates with the skills to fill available jobs.
Renu Khator, president of the University of Houston, described partnering with the energy industry: "We said, okay, what is it that you need to meet your workforce need and what is it that we need to do in order to meet our collective needs in workforce and research."
Yet for all the emphasis on measurable outcomes in math and science, there is a concern that the demands of the future workforce will be even more complex. "We need to layer on a set of skills that will allow students to deal with the new work environment," said Michigan's Hanlon, "which is things like the confidence and experience to innovate, to create, the ability to reinvent themselves, the ability to work in teams, particularly with diverse sets of people and increasingly in an international situation." You can't measure that.
[Learn about programs that are combatting students' disinterest in the sciences.]
• Needed innovations: Looking ahead, there seems to be a slow but insistent move toward rearranging the structure of the university. "There has to be a real transformation in our system where we introduce a new dynamic of continuous productivity improvement in higher education, something that hasn't occurred before," said the Education Department's Ochoa. There are various avenues favored by administrators, including alliances with two-year colleges, joint ventures with other schools, and building out often lucrative adult and continuing education programs.
Not an issue is the online for-profit model, which officials don't consider a threat, nor online education in general: few expect to be granting online bachelor's degrees. Technology and its ability to make teachers and students more productive is another matter, though more in terms of talk than action.
"We haven't really had a great discussion in the academy yet about how it's changing what we teach," said Rollins College's Duncan. "And because the academy changes at glacial speeds it will take a little while for us to catch up."
A large area of interest is redefining schools as a community resource and the partnerships that emerge from that, whether related to workforce, K-12 education, adult education, community college feeder programs, or industry research.
As Houston's Khator put it, "Trying to run on your own does not work and it will not work. So we've created many partnerships. That is the future for us." One size will not fit all, but the principle of refining a school's mission looks to be crucial. "Schools are having to find their centers of excellence," said Duncan. "What they're known for."
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