What College Presidents Think of Future of Higher Education
Inside Higher Education just released its annual “Survey of College and University Presidents.” The results, which cover a wide variety of topics, are revealing if not surprising. There are too many individual findings to discuss in a single article; therefore, we’ll concentrate on the findings that deal most directly with the state of higher education as an industry and the health and sustainability of its institutions.
COLLEGE PRESIDENTS WORRIED ABOUT FINANCES & PUBLIC PERCEPTION
Collectively, the survey findings suggest that college presidents are worried about higher education’s fiscal health, deteriorating public perceptions of American higher education, and enrollment stabilization and growth, especially at tuition-dependent institutions.
One of the most striking aspects is that the survey did not reveal wide swings in college and university perceptions on these issues compared to previous years. The levels of concern remain high, likely indicating that these issues continue to be deeply troubling to leaders, but no single issue rose to the top. That having been said, the survey responses forecast continued uncertainty about the future of higher education.
PRESIDENTS EXPECT HIGHER EDUCATION MERGERS, CLOSINGS TO CONTINUE
Inside Higher Education (IHE) measured fiscal health in part by asking presidents about institutional mergers, closures, and acquisitions. They found, “About a third of the presidents agree that more than ten colleges or universities will close or merge in the next year, while another forty percent say at least five colleges will do so.”
A striking finding is that nearly 12 percent of college presidents “predict that their own institution could fold or combine in the next five years.”
Concern over mergers and closures relates directly to the financial health of the various sectors of higher education. On this issue, the results stabilized when compared to the wide swings of previous years. But there were differences across institutional sectors (e.g. public, private, community colleges, flagship, regional).
PRIVATE COLLEGE PRESIDENTS MORE CONFIDENT OF THEIR OWN SUSTAINABILITY
Private college presidents are the most confident in the viability of their institutions over the next decade. There was renewed hope, especially among private four-year college leaders, in the ability of their own institutions to be sufficiently nimble and adaptable to be sustainable going forward, an encouraging sign from previous pessimistic assessments.
One especially interesting finding questioned which sector was believed to have the most sustainable business model. The presidents identified wealthy elite private colleges and universities and public flagship universities as the best able to withstand uncertainty.
Interestingly, the numbers dropped off dramatically for the other sectors. As IHE noted, “Community colleges followed at 44 percent, with other public institutions (25 percent), private colleges (11 percent) and for-profit institutions (9 percent) lagging.”
Apparently, survey respondents did not share the confidence of private sector presidents, for instance, when judging the sustainability of small, private colleges as a sector.
LEADERS BELIEVE PUBLIC PERCEPTION OF HIGHER ED BASED ON MISUNDERSTANDING
In response to survey questions about the public perceptions of American higher education, “[p]residents overwhelmingly believe the public’s skepticism is based on misunderstandings about colleges’ wealth, how much they charge (and spend) and the overall purpose of higher education.”
The survey respondents believe that the public has been swayed by misperceptions about them. IHE noted: “Asked to assess which of several factors were the most responsible for declining public support, 98 percent of the presidents cited ‘concerns about college affordability and student debt’.” Other factors identified were the greater need for career preparation for students, perceptions of liberal political bias, and, to a much lesser extent, an under-representation of low-income students.
HIGHER EDUCATION HAS AN OPTICS PROBLEM BUT LEADERS HESITANT TO SPEAK OUT
These responses imply fairly strongly that American higher education has an optics problem. It continues to play defense rather than move forward on several fronts with an aggressive response to perceived misconceptions. In part, it comes down to higher education leaders’ — such as the presidents surveyed — capacity and willingness to speak out.
IHE reported: “Asked whether they had responded to the turbulent political movement in 2017 by speaking out more on political issues, 55 percent said yes and 45 percent said no.” There was also little sense of introspection on whether there was much truth to negative public perceptions.
MEETING ENROLLMENT GOALS IS CONCERN FOR COLLEGE PRESIDENTS
Finally, there continues to be a high level of concern among college and university presidents about their ability to meet enrollment projections. IHE noted: “eighty-two percent of presidents described themselves as either ‘very’ (42 percent) or ‘somewhat concerned’ (40 percent) about meeting their institution’s ‘target number of undergraduates’.” These numbers were down from previous years.
In this year’s survey, presidents worried about retaining students and finding enough full-pay students to subsidize institutional financial aid.
Inside Higher Education’s survey remains a valuable annual “pulse check” for higher education. The results this year suggest that, while the concerns remain the same, college presidents often perceive that the clouds are more ominous over the other types of institutions and for higher education generally.
There is an open question about how contemplative and self-reflective higher education is about itself. And there is clearly concern about how politics and public perception affect higher education policy and overall sustainability. The cumulative effect of the survey results suggests that higher education is in a period of steady transition.
American colleges and universities are reaching for every means through which they might increase net tuition revenue. Net tuition revenue is the revenue that the college takes in from tuition after factoring in (i.e. deducting) all institutional financial aid.
NET TUITION REVENUE IS FLAT OR DECREASING AT MANY COLLEGES
The harsh reality is that net tuition revenue is flat or decreasing at many institutions. Since tuition is the principal source of revenue for these institutions, this is an increasing problem. Put simply, a college cannot continue to exist without sufficient revenue to meet its expenses.
In the short term, colleges may be able to rely on one-time donations, increases in the annual fund, a higher endowment spending rate, or the use of temporarily restricted funds, but in the end, the financial health of almost all is heavily dependent on how much tuition they bring in each year.
DEMOGRAPHICS WORK AGAINST INCREASED ENROLLMENT AS REVENUE SOURCE
Since national demographics work against higher enrollment levels from the traditional applicant pool of 18-22 year-old first-time students, an institution must now rely on other means to pay the bills.
Some look beyond the traditional pool of full-time, first-time students, working to build their transfer population or full-pay international students. But the transfer pipeline is hardly seamless and the optics of rising tuition sticker prices work against transfers, who often attend less expensive community colleges.
In addition, the policies of the Trump Administration cast a long shadow over the ability of colleges and universities to plan the size of their international student population with any certainty.
How best to create a robust admission pool from which to draw remains a thorny problem, but it’s important to institutional health. Colleges and universities rely on strong enrollments to right size their institutions. This means, in part, accounting for “stop outs” and “drop outs,” who diminish the size of their student body. If retention figures are not steady, or better yet improving, the impact on an institution’s bottom line can be dramatic.
NEED FOR PREDICTABLE RETENTION CREATES ALLIANCE WITHIN COLLEGE ADMINISTRATION
The need for predictable student retention creates an alliance among enrollment, academic affairs, and student life professionals. Higher education institutions — and many of their accreditors — place special emphasis on improving retention to become more sustainable.
The problem is that it sometimes becomes more of a numbers game. Student affairs staff provide a plethora of programs and opportunities for students to connect. They work individually to support students who are homesick, unengaged, or dissatisfied with the campus environment. But what they often miss is that first link that should be made between what the school offers and what prospective students want.
It is not enough — indeed, it is unsustainable — for the student affairs budget will provide support for clubs that represent the whims of students at a unique moment in a particular class. Succeeding generations may not sustain the passion of students focused on a singular interest in later years. Further, the college or university may not be able to justify a growing roster of club and related activities.
No matter how wealthy, a college cannot support everything that each student might want to do.
STUDENT LIFE PROGRAM MUST BE ALIGNED WITH ENROLLMENT STRATEGY
What will be required in the future is a more orderly, systematic, and systemic approach to student life tied directly to enrollment strategy. At the moment, most colleges enroll students because of the quality of their academic programs, if these are defined, well-respected, and differentiated from competitors.
But students live on a campus that is defined both by the classroom experience and the thousands of teachable moments that occur each day outside of classrooms and laboratories.
They may have institutional reputations as Christian colleges, outdoor environmental programs, the home of Greek life, and liberal or conservative, for example, that appeal to a certain type of student. The best example is how students attract their student athletes into well-regarded athletic programs.
ATHLETIC PROGRAMS ARE EXAMPLE OF STUDENT “FIT” AND RETENTION
For generations, colleges have attracted athletes because athletics offers a unique, idiosyncratic experience for teammates. An athletic team is a “new home,” where students associate with others with similar passion and interests. For student-athletes, the culture of an athletics program will — in many respects — determine fit, and correspondingly, improve overall retention numbers based on this fit.
Enrollment officials should see their student affairs colleagues as a kind of front line on retention. It may be that much of the retention problem could be solved if student life worked more carefully with enrollment.
Student affairs must define not what current students want so much as how enrollment can attract students on the basis of what enrollment determines will be most attractive to prospectiveapplicants.
Is it more useful for a college to have an equestrian team in an urban setting or a gospel choir that reflects the college’s efforts to recruit in urban areas? Should a college invest in a marching band if research demonstrates a demand for this kind of activity among prospective applicants?
These efforts to link enrollment strategy to shape student life to recruitment can have innumerable benefits. Like athletics, co-curricular student life offerings provide students a home-away-from-home and outside of their classroom experiences. It makes the fit possible.
Students experiencing a good “fit” are more likely to stay enrolled, boosting retention. And retention is perhaps the best predictor of how to increase the bottom line by growing net tuition revenue that every college desperately needs.
American higher education is a complex, decentralized, and interlocking network of institutions that provide education to a disparate group of learners. Historically, many of the fundamentals build around an applicant cohort of 18- to 22-year olds. The demographics of the 21st century predict that this group will not be able to support a robust pool of potential students into the future.
For many colleges, the choice is to expand the pool, both geographically and to better reflect shifting demographics. College administrators, seeking an admitted student population that mirrors the ethnic, gender, race, and religious characteristics of the country, generally work to open fresh applicant streams from among historically disenfranchised groups.
It is new territory for many schools in which campus culture supports these efforts intellectually but wrestles with the cost, preparedness, and internal dynamics of the cultural change required to maintain recruitment standards and retention and graduation rates.
STUDENT RECRUITMENT, RETENTION COSTS GROWING
Those colleges relying upon the 18-22 year old pool of applicants have little choice. From a financial perspective, these institutions have always relied upon wealthy, full-pay families to provide much of the revenue to support financial aid for needy and deserving students.
The problem, now growing into a crisis over the past twenty years, has been that the recruitment and retention costs for each class now exceed the capacity of the institution to balance full-pay revenue with the needs of less fortunate students.
COLLEGE DISCOUNT RATES SAP SCHOOLS’ FINANCIAL STRENGTH
A dramatic rise in unfunded aid – translated into the college’s discount rate – has sapped the financial strength of many institutions. The hard truth is that a college operates with fixed costs – heavily tied to labor, land, debt, and financial aid – that permits little left in an annual budget for discretionary moves that might offset these alarming trends. At a growing number of institutions the discount rate is now over 70 percent.
What industry – or any financial enterprise – can operate on 30 percent or less of the revenue that it advertises as its sticker price for the product that it delivers?
COLLEGES’ HIGH STICKER PRICE MAKE AFFORDABILITY ARGUMENTS NEARLY IMPOSSIBLE
Another problem vexing colleges is the sticker price. Trinity College (CT) just announced a comprehensive fee (tuition, fees, room and board) of $71,660 for next year. Trinity is an outstanding college where students receive an exceptional education. But the optics look terrible for those colleges and universities that cross the Maginot Line of $70,000 per annum.
It is difficult and sometimes impossible to argue affordability when the sticker price is confused or equated with with the bill that students and their families actually pay. Does a high sticker price limit the size of a potential pool regardless of a college’s policy on generous financial aid?
There are at least three approaches to combat this trend:
The first is to increase the financial aid budget to offset increases in a college’s sticker price. This seldom works, especially over the long term. It is difficult to be less generous to successive classes without an enrollment strategy that matches financial aid to changes in enrollment practice. The most nimble colleges have a well-delineated financial aid model that links their enrollment practices to where they want to be in out years. But most institutions seldom follow through, effectively decreasing net tuition revenue over the long term and raising the discount rate higher.
A second option is to shift the financial burden to students, generally in the form of increased loans. The problem is that many students see debt as a responsible way to pay for an education, whatever the level of debt incurred. The result is that many students unskilled in handling debt become subject to it. The result is disastrous and often leads to higher default rates among students, many of whom fail to graduate, who work at jobs that do not permit them to repay debt that they did not understand when they agreed to its terms.
A third option is to rely on support from states and the federal government. The trends work against students here. Government support for student aid and debt relief has been – put kindly – spotty at best. Further, governments at all levels are losing their discretionary ability as pressing fiscal and political priorities affect their discretion. There may be a point at which discretion and government regulations intersect with hard choices ahead for those who seek state and federal aid.
What’s the alternative?
America’s colleges and universities should assume that any solution must be organic and come from within the higher education community. The discount rate at many colleges is now approaching a tipping point.
It’s not that colleges and universities face massive, wholesale closures. It’s more like death by a thousand cuts in which closures increase steadily but without a classic catastrophic event that shakes the college and university community to produce the next generation of operating changes necessary to survive.
It feels a little like being the lobster in the pot brought to a boil. When you fully recognize the danger, it’s already too late. The task ahead is to plan for an orderly review of how to prepare for an uncertain future and how best to pay for it.
Despite the resourcefulness and creativity that characterizes American higher education, the failure of many colleges to rethink how they will continue to support the educational enterprise over the long-term keeps most administrators awake at night.
But there is some good news out there. Surprisingly, much of it centers on the careers of arts and humanities graduates.
Mainstream and social media tend to portray arts and humanities graduates as underemployed and overeducated, flipping burgers or making cappuccino, a stereotype that is refuted by a recent study.
The American Academy of Arts & Sciences found that arts and humanities graduates like what they do after graduation, feel fulfilled by it, and advance steadily in their careers.
The study surveyed humanities graduates about salary, status at work, and level of job satisfaction. In a recent interview, Robert Townsend, the academy’s director for the Washington office, expressed hope that the findings might change the conversation: “I think the top-line numbers about earnings still tend to drive much of the conversation, while the counterexamples are too often anecdata. Hopefully, these numbers will provide for a better-grounded discussion.”
LIBERAL ARTS GRADS START WITH LOWER SALARIES BUT CATCH UP WITH STEM, BIZ GRADS
Using government data and Gallup polling of workers nationwide, the academy found that arts and humanities graduates begin their careers with lower average starting salaries. The average annual salary for those holding a bachelor’s degree in the humanities was $52,000, 15 percent less than the average of $60,000 for all majors was $60,000 and significantly behind the $82,000 average earned by those with undergraduate engineering degrees.
But here’s the surprise: Arts and humanities graduates report a high level of job satisfaction; indeed, nearly 87% of these workers were satisfied with their job in 2015.
Matthew Hora, a University of Wisconsin professor in the liberal arts and applied studies, noted in the Chronicle of Higher Education that the AASS study should “contradict the popular narrative about under-employed baristas and the need to redirect students away from these disciplines.”
In addition, the AAA&S study found that over time the wages of arts and humanities graduates catch up to workers with STEM and business degrees.
The report also finds that humanities majors are flexible, not bound to a specific career, and employable in a wide range of fields. One telling note, however, is that many arts and humanities majors do not see an explicit link between their undergraduate training and the job that they hold.
OUTCOMES ARE WONDERFUL DEFENSE OF THE LIBERAL ARTS
These outcomes and findings represent a wonderful defense of the liberal arts. Neither liberal in a political sense nor narrowly about art, the liberal arts train American undergraduates to think. Students learn to speak, write, apply quantitative methods, use technology, and work in collaborative settings. These are the skills that employers seek in recent graduates.
And by and large – often depending upon how carefully the college integrates the liberal arts into the curriculum – it explains why humanities majors are desirable employees. Look at it this way:
Would you rather have as a new employee an engineer trained narrowly as an engineer or an engineer more broadly trained as an engineer in the liberal arts?
On a macro level, the viability of American higher education rests on a curriculum that trains the next creative generation of graduates upon which American society will depend.
POLICY MAKERS AND LEGISLATORS SHOULD HEED STUDY RESULTS
The study’s findings shine a light on the need for that fresh thinking. First, lawmakers, especially at the state level, must understand that a flexible, nimble, and broadly educated workforce is better than a narrowly trained one.
The quality and versatility of the American workforce will be diminished by efforts to redirect money only to the graduates in technical fields.
COLLEGE & UNIVERSITY LEADERS SHOULD REINFORCE VALUE OF LIBERAL ARTS EDUCATION
It would also be wise for colleges and universities to reinforce the value of a liberal arts education to arts and humanities majors who, as the study suggests, use what they learned in the workforce without recognizing how their training made them among the most employable across it.
An English major who can write or speak compellingly is just as valuable as a history major who can interpret data. Look at the global corporate, political, educational and social leadership to illustrate this point.
And finally, there is a pay gap between arts and humanities majors and their counterparts in the first years after graduation. Loan repayment programs should be graded for repayment in some part by the starting salaries of recent graduates.
An elementary school teacher and an engineer have different initial resources and skill sets, yet both contribute to their fields of employment. Further, there should be a cut-off below which college graduates should not be expected to repay their loans until their salary level improves.
The theory is simple. America needs a fully functioning, comprehensive workforce. It should not pick winners and losers. However, it can support an informed, educated, and creative citizenry that provides the range and balance to weather unimagined changes in the global workforce.
Moody’s and Standard & Poor’s recently released their updated outlooks for American higher education. The news is not good.
Moody’s revised its 2018 outlook for higher education from stable to negative “as aggregate operating revenue moderates while expense growth increases.” Moody’s vice president, Susan E. Shaffer, elaborated: “the annual change in aggregate operating revenue for four-year colleges and universities will soften to about 3.5% and not keep pace with expense growth, which we expect to be almost 4%.”
PRIVATE COLLEGES MAY OUTPERFORM PUBLICS, BUT COST-CUTTING IS NEEDED
Moody’s expects private institutions to outperform their public sector counterparts. But about 15% of universities will be forced to cut costs in response to stagnant or weak revenue growth next year. The ratings agency believes that support from tuition and related fees, research funding, and state appropriations will remain weak. Further, net tuition will be depressed over affordability concerns and slow enrollment growth.
While private universities will have revenue growth of about 3% – 3.5%, these numbers will be considerably less robust in small- and mid-sized colleges and universities. This is especially dangerous since so many of them serve low- and moderate-income students. They draw from the same regions in which the students and their families live.
Moody’s notes that the recruitment demographics are horrible and that higher education is subject additionally to changes in its relationship with the federal government.
Moody’s speculates that federal tax reforms, the levels of research support, and changes to the Pell Grant and subsidized federal loans in the future could profoundly impact affordability and access.
HIGHER EDUCATION FLEXIBILITY IS LIMITED IN FACE OF FISCAL CHALLENGES
Standard & Poor’s makes a similar finding. Presented as grim, the S&P outlook finds that higher education’s flexibility “in programming, financial operations, enrollment, resources or student draw” is limited. Like Moody’s, S&P cited the recent federal tax on colleges with large endowments, together with growing consumer skepticism and demands for lower sticker prices and more effective services.
Significantly, Standard and Poor’s also warned of lasting damage to college and university reputations in the current political climate.
S&P offered some encouragement, however, finding that higher education institutions could improve their standing if they established new partnerships, peeled back their reputation for cultural inertia, and increased their efforts to recruit non-traditional students.
Writing on these subjects for EducationDive, Jeremy House summarized that “all parties seem to agree that a myriad of issues haunt higher education.” He noted that the American Association of State Colleges and Universities (AASCU) “called 2018 one of the most uncertain years for higher education.”
FUTURE OF US HIGHER EDUCATION DEPENDS ON ABILITY TO INNOVATE
Mr. House reported that the common agenda driving the future of higher education in the S&P and AASCU positions is a call for innovation. He further suggested that colleges could grow their student body by serving more post-traditional students, enhancing strengths and partnerships, embracing data analytics, technology, and online learning.
For those of us who work at imagining ways to strengthen American higher education, these are good and necessary tactics. But by themselves they are insufficient, roughly equivalent to the proverbial Dutch boy plugging the holes in the dike. Further, it’s not so much that the dam threatens to break but more that consumers will find new, alternative ways to find and use the water effectively.
The success of American higher education will depend heavily on innovation. That’s why the warnings from Moody’s and Standard & Poor have special urgency.
Those institutions that are the most adept and nimble will likely craft the best path to sustainability. It starts with these colleges and universities developing a clear value proposition and sense of self. That’s quite different from remembering their history, although working their history and traditions into their value proposition is unmistakably necessary.
FUTURE STRATEGY MUST COMBINE PRINCIPLE AND PRACTICALITY
What’s most needed is a sharper strategy that combines principle and practicality. American higher education must anchor a seamless pathway to a lifelong education that prepares Americans for rapid change in a global economy. It must bridge the chasm between formal education and employment by preparing its graduates with a worldview that is able to imagine their contributions to society.
But strategy alone is insufficient.
The plain hard fact is that higher education operates on a mid-20th century business model that is unable to anticipate 21st century changes. Many colleges and universities run like the “Mom and Pop” corner variety stores that ultimately failed because they could not compete and adapt as the world changed. For them, it was more about a failure in process and delivery than in the quality of the product.
Indeed, the biggest obstacle facing American higher education is the cultural inertia that permeates many campuses to reinforce an antiquated, incremental business model.
Can the business side of higher education keep up with the educational innovation that now energizes its research and teaching?
I’ve been thinking a great deal lately about how disruption will play out in American higher education. My hopes – and concerns – reflect a bedrock belief that America’s colleges and universities operate on an unsustainable finance model that must adapt to new realities. It is impossible to predict how many colleges and universities have the capacity or willingness to make the kinds of structural changes that reach beyond where most have charted their courses.
That having been said, it seems likely that we will see an uptick in mergers, closures, and acquisitions, particularly for poorly endowed and under-resourced institutions that cannot control their financial aid discounts and spending rates.
While almost all institutions feel some level of pain, those with weak governance, internal fiefdoms that fail to communicate across the campus, uninformed faculty, and poorly articulated value propositions will be the first to fall.
EXTERNAL FORCES COMPOUND HIGHER ED’S INTERNAL PROBLEMS
External forces compound the growing problems faced by higher education, where the annual outlook by the ratings agencies has now eroded once again to “negative.” There are a number of quality institutions with financial aid discount rates over 70 percent. A number of these institutions are unable to stop the rise in these rates.
Basic math suggests that as the effects compound, these institutions will so severely limit their options that the impending question on the horizon is how and when they will lose their independence.
IT’S NOT TOO LATE TO AVOID THE DEBACLE AHEAD
In the once robust world of decentralized American higher education, the tragedy is that so much of what will play out could be stopped. There are a number of players who can step in to avoid the debacle ahead.
The first is, obviously, the higher education community itself.
Each and every college or university must determine its value to its community and to American society as a whole. Once defined, its leadership must be courageous in articulating its own value proposition.
Stakeholders – led by trustees and faculty – must accept this value proposition and must adjust their roles accordingly, clearly differentiating what is truly distinctive about their institution – what it does differently than its peers.
The campus community must live within its footprint. And it must adapt to the new realities that fund what it can do best within its means to serve the common good.
STATE AND FEDERAL GOVERNMENTS HAVE STAKE IN HIGHER EDUCATION
The second stakeholder group is government, both at the state and federal level. There has never been an effort to have the state and federal governments coordinate their support, especially their financial support, of America’s colleges and universities. The impact varies widely across states.
- Is it the responsibility of state governments, for instance, to bolster student aid and infrastructure needs rather than simply provide direct public subsidies?
- Should the federal government effectively designate America’s research universities as the lead participant in many strategic national research and development efforts?
- Can the federal and state governments lighten regulatory restrictions in an overregulated higher education industry?
MEDIA PLAYS POWERFUL ROLE IN SHAPING PUBLIC PERCEPTION OF HIGHER ED
The third stakeholder group is the media through which the message about higher education is delivered. Much of the negative perception of education shared by American consumers comes from the sensationalism of anecdote, political posturing, and polling. It festers in an unregulated, hyperactive, and reactionary social media environment. Good stories seldom draw ratings and sell print media. This combination of ratings-driven establishment and out-of-control social media has encouraged new – generally negative — perceptions not driven by data.
The cumulative effect is to throw higher education under the bus, often through some combination of bad data and self-inflicted wounds.
The positive message of higher education’s contributions to the common good in American society is often drowned out by sensational, if often accurate, stories of colleges in crisis. The weakness of its parts effectively drowns out the good of the whole.
CAN DISRUPTION RESTORE PUBLIC FAITH IN AMERICAN HIGHER EDUCATION?
This is the point at which disruption can play a critical role in restoring the faith of the American consumer in the value proposition of American colleges and universities. As disruption sweeps across colleges and universities, higher education is facing the same kinds of pressures as the health care industry.
If higher education, government, and the media that together shape the parameters of higher education continue with their current level of disconnected incoherence, the results may work against a robust college community.
America loses in the end. However, there is an alternative view.
Led by America’s colleges and universities, disruption within higher education can be good for American society – especially if it is intentional and self-directed.
Higher education must break out of the “we’ve never done it this way before” mindset that governs broad national policy despite solid evidence of remarkable innovation in isolated sectors of the academy.
The fact is that the financial model of American higher education is broken. The revenue generated no longer supports the people, programs, and facilities that form the decentralized higher education community that is still admired globally.
Something must be done soon. The answer will likely come from within higher education. My strong hope is that positive disruption arrives before consumer perception and the fiscal crisis intersect to do irretrievable damage.
Last month, Rick Seltzer reported in Inside Higher Education about a brewing controversy at Oberlin College, which is facing a significant budget shortfall. The College, including its prestigious Conservatory, faces a multi-million dollar deficit caused largely by lower-than-expected enrollment.
Trustees charged with looking into Oberlin’s shortfall found that the College relies too heavily on cash from gifts. In a letter to the student newspaper, The Oberlin Review, two faculty members argued that it is “inadequate and depressing that neither the board nor the administration has the leadership or imagination to address the crisis in any other way than by eliminating raises for faculty and staff.”
OPTIONS FOR CLOSING BUDGET GAP WITHOUT CUTTING COMPENSATION
In response, Oberlin’s administration pledged to look for new revenue to reduce spending in the short term. This will encourage and permit development of long-term strategies to broaden its appeal to college-bound students, raise money through a new comprehensive campaign, offer early retirement plans, and place stricter conditions on funding for large capital projects.
IS OBERLIN’S CAMPUS CULTURE HURTING ENROLLMENT?
There are two ways to look at Oberlin’s situation. The first is to criticize the school for getting itself into this mess, failing to educate its stakeholders about the crisis and not including them more directly in seeking a solution.
Critics might argue that any financial changes must be more fundamental because Oberlin has a shaky financial model that will be subject to unanticipated cyclic downturns when some combination of enrollment softness, brand weakness, and fundraising failures and endowment shortfalls hit the College in the future.
It is unlikely that Oberlin suffers from an enrollment shortfall, as some contend, because its faculty and students lean toward one end of the political spectrum, even if, in fact, they do. Oberlin appeals to students who are comfortable with the campus culture; indeed, it one reason that 27 % of those who are accepted in the college of arts and science actually enroll there.
An alternative to criticizing campus culture for the current budget woes is to commend Oberlin for facing the tough questions that beset its peers and aspirants across the country. Most college leaders envy Oberlin, with its sterling reputation and a $770 million endowment upon which to base its decisions.
What Oberlin should demonstrate to the rest of American higher education is that serious, purposeful, and inclusive conversations must occur if an institution is to avoid what many less endowed and recognized colleges already face – open concerns about whether they are sustainable.
For most of higher education – public and private – the facts are clear. The operating model doesn’t work, especially if the college relies overwhelmingly on a tuition-grounded comprehensive fee.
At all but a handful of colleges and universities, fundraising cannot keep up with growing demands on the budget. Fundraising is, at best, a long-term solution. Even with the run-up in the stock market, most institutions do not have endowments that are meaningful supplements to tuition revenue.
Auxiliary revenues are flat and typically diverted to pay for academic programs that student tuition cannot finance. At the Division 1 level, for example, only one in eight athletic programs pay for themselves. And most colleges have already made tough decisions on creating basic efficiencies — either through short-term actions like salary freezes or on a more permanent basis, like modifying health and retirement plans.
There is little wiggle room left in budgets that are largely fixed by labor and capital costs including debt repayment, facilities upkeep, and technology. There is almost no discretion left in many college operating budgets.
Some colleges panic, surmising that a shift to new programs at the undergraduate, professional, or continuing education levels will keep the wolf from the door.
Others are thinking more about online programming opportunities. It may be that a solution based on shifts, modifications, and new programming ventures will offset growing financial aid discounts and annual operating increases. It is more likely that such actions will delay the reckoning that will come when discounts make long-term survival an open question.
In the end, what we need to hope for most is that colleges are nimble and creative institutions with long histories that survive the upheavals that they face as these venerable institutions have in the past.
What’s so encouraging about Oberlin is that they are asking the right questions.
The road may be a little bumpy until transparency improves, but Oberlin put its future on display to address systemic issues. And it did so before it had no choice.
Change is coming to higher education. Each institution will find a different solution on a path to sustainability. But the solution will be about strategy, not tactics.
In the end, the institutions that survive will not be protected by their money, alumni base, or reputation. They will prosper because they figured out how to remain relevant in the 21st century.
In a recent Wall Street Journal article entitled “Baby Boomers Looking for Reinvention Try College — Again,” Douglas Belkin notes that “adult students have been a growing force at universities for more than a decade – mostly blue-collar workers or those pursuing advanced degrees focused on getting new skills.”
Looking at older, retiring adults, Belkin suggests that universities could use the tuition payments and many of these older students pay full freight. In a telling statistic, the article relates that about 10,000 baby boomers are retiring every day.
TUITION FROM ADULT STUDENTS HELPS COLLEGES’ BOTTOM LINES
Colleges and universities are overwhelmingly dependent on the revenue that they receive from tuition, fees, room and board. Many are not reaching their projected enrollment numbers. Colleges face rising financial aid discount rates, now at 50 percent. The number of full-pay students has dropped precipitously in the past 20 years while the sticker price at high-priced tuition schools approaches $70,000 per annum.
In addition, the demographics for the traditional draw of students within the 18-22 year old cohort are terrible with no significant improvement over the short term. The usual building blocks of admissions – academic-oriented admits, legacies, student athletes, over-the-transom acceptances, international students, and transfers — have not produced a robust applicant pool. Indeed, the problems creating a seamless pathway for groups like transfers are now considered a national crisis, with a great deal of experimentation going on at the state level.
With the financial outlook so bleak, perhaps it’s time for many colleges and universities to re-imagine who they serve and how they contribute to workforce preparation in America.
There will always be room for the traditional, residential liberal arts college filled with 18-22 year old students. But it’s time for the broad middle market of public and private colleges and universities to think of educating late-stage adult populations beyond graduate and continuing education programs that cater more to traditional workforce development than workforce re-imagination for late-stage career and retiring employees.
It’s in this developing grey area of retiring baby boomers where Mr. Belkin’s reporting holds special merit.
Is it possible that aging and higher education can intersect in new, imaginative and extremely practical ways to serve America’s workforce and enhance its productivity?
Why should we lose the talent, entrepreneurialism, and creativity of retiring baby boomers, especially those who seek new professional horizons and carry with them a generation’s worth of valuable work experience?
It makes practical sense for American high education to develop this market for a number of reasons.
TRADITIONAL COLLEGE MODEL DOESN’T MEET NEEDS OF OLDER STUDENTS
American higher education should be a seamless, continuous pathway that takes account of the full capabilities of its citizens. The current education formula trains broadly in the liberal arts, towards an end goal of employment after graduation, and for early- and mid-stage professional advancement. It does not provide workers in the later stages of their careers with an opportunity to match their professional interests with their life expectancy.
HIGHER EDUCATION CAN BE PATH TO MEANINGFUL RETIREMENT
The media is full of images of retiring workers who have planned well to live a life of contented comfort. But what about the millions of retirees who want something different than what a fully funded 401k fund provides – a chance instead to try something new, contribute to their communities, and remain relevant in their field if not at the same job? Is there really only one path to a meaningful retirement?
This failure to account for a lifelong seamless educational pathway to address the full range of retiree interests further exacerbates the issues that arise in a post industrial economy that is moving faster than the educational system that develops its workforce.
That’s not to say that there are not already programs that serve retiring baby boomers. Mr. Belkin cites programs at Harvard and Stanford, for example, to demonstrate the innovative programming already in place. Both programs provide an opportunity for accomplished professionals to take a moment before they try something new, often with potential global implications. Other colleges and universities offer similar platforms. Many more have “learning experience” on-campus and travel options open to most groups, especially alumni.
COLLEGES NEED MORE STUDENTS & REVENUE TO SURVIVE
But higher education is in a financial crisis driven by its dependence on insufficient revenue from a tuition-driven operational model.
If tuition continues to be the foundation upon which college and most university budgets are built, doesn’t it make sense to find new segments within the enrollment market that can pay the bills and enhance workforce productivity?
There are good and bad examples of the mounting disruption in American higher education. Rethinking who attends college, when they attend, and why they came effectively re-imagines the enrollment market for most colleges and universities. It will make better use of people, programs and facilities. It’s good and necessary disruption that can make higher education more sustainable in the long-term.
Rethinking how to create a life-long seamless pathway directly addresses the core mission of American higher education – to serve the common good.