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Design or Disruption: Change in the Higher Education Business Model

The EvoLLLution | Design or Disruption: Change in the Higher Education Business Model
With the future of higher education too murky to predict, the traditional model became considered unaffordable, unnecessary and often too conventional for modern times.

Here they go again–“they” being the pundits and politicians repeating superficial assertions posing as serious arguments. Assertions include those regarding student debt; the rise in tuition charges; institutions being slow to change; and a digital future that seems foreign to contemporary institutional leaders.

When it comes to student loans, I have no idea why anyone would voluntarily incur over $100,000 in debt for an undergraduate degree, yet this is the example used by mass media regarding student and parent borrowing. But students and families who assume this debt are obviously willing to “buy” a brand. The average student debt is about $30,000, a sizable sum, yes, to be paid from the average graduate’s first-year salary of about $50,000. But this is a quarter or less of what the media promote as the norm because of those willing to borrow for more prestige than they can afford.

As to the $1.7 trillion in debt trumpeted in the news, let us remember that the government’s low interest rates and generous limits on borrowing make student loans a wise alternative to credit cards.

Tuition increases are often blamed on the amount of federal aid available, yet numerous authoritative studies have concluded that this is not the case. It is true that public college tuition has risen in relation to reductions in state support for higher education, and it is also true that some public and private institutions have pursued a high tuition-high aid strategy for enrollment through the use of discounts designed to recruit talented students or to maintain their enrollments. Nevertheless, the increase in tuition of about 25% over the past ten years is not so far off from the Higher Education Price Index (HEPI) estimated increase of about 2.6% per year. HEPI is the specialized unit of measure of inflation in higher education expenses designed to take into account the cost of goods, materials and personnel at colleges and universities.

A third assertion is that institutions are slow to change. The indicator for this lag is the tenure system, the time it takes for institutions to adopt new policies and programs, and the expressed desire to respect heritage and fundamental principles of liberal education before making changes.

However, institutions of higher education are creators of the new as well as curators of the past and critics of the status quo by asking “why?” and “why not?”. Look at how state officials and corporations look to universities for assistance in economic development.

Higher education has changed dramatically in the last 100+ years. Just think, about 4% of high school graduates went to college in 1900, compared to 70% now. Consider the Land Grant Act, the new academic programs it fostered in agriculture, mechanic arts and technology, and the effects of the Industrial Revolution on experimental science.

Consider how the 20th Century established community colleges; the introduction of mass higher education with the Serviceman’s Readjustment Act; and the V-12 Programs, which accelerated baccalaureate completion for officer candidates in World War II. Consider also the blossoming of schools of business and education following that war. Not to mention the National Defense Education Act, area studies, as well as the growth of the National Science Foundation and support for science following Sputnik, among other signs of change and progress.

Yes, university governance can seem slow, but perhaps corporate governance should take more time to make decisions about expanding or acquiring another company. Perhaps, then, we would have fewer failed acquisitions.

While university origins can be traced to Bologna in the year 1088, this institution is as contemporary as today’s society, with a built-in resistance to fads masquerading as progress and a resilience that leads to new relevance. The diversity among institutions is a strong indication of higher education’s ability to change.

The promotion of distance learning and free massive open online courses (MOOCs) is sometimes presented as a necessary disruption to these so-called somnolent institutions of education. But one must ask, disruption for whom?  It rarely seems that proponents of disruption want their own children to attend college online. Such new models are for the poor and ill-prepared, for whom postsecondary schooling is necessary but for whom society is unwilling to support viacommunity colleges and other forms of higher education.

There is a digital future, and it’s here now. Large numbers of institutions are responding to the coronavirus by turning to online instruction. The central questions to ask about the purpose of online learning are: “For whom? and “Why?”. We also need to understand that technology is a tool–a means and not an end unto itself. And we must ask: who will pay? The most recent innovations occurred at universities, where the institutions bear the cost of development and faculty act as entrepreneurs to develop new approaches. How long can this model last?

The digital future has three dimensions: the institution as “provider”, deciding whether it is offering courses and programs for its current students or for a larger market; the institution as a “partner”, seeking alliances with other institutions or with companies that have the  expertise needed to expand its reach beyond the campus; and the institution as “receiver”, deciding how it will respond to applicants from high school, transfers from other higher education institutions, or current students with credits from another institution’s MOOCs, certified by a third party as meeting academic standards.

Then, there are those in the news who argue that college is unnecessary, and examples are given of students who drop out to start companies because they don’t feel they need a university education. Particular individuals are frequently cited, including Steve Jobs and Bill Gates. In a New York Times article, students were interviewed about why they left higher education to learn and earn on their own. I thought the reasons given were telling and believe that they are easily answered by institutions focused on student success.

Frequently cited reasons that student decided not students decided not to pursue continued education at a traditional university were:

  1. They did not want to be anonymous in large lecture classes.
  2. They did not want to tolerate binge drinking.
  3. They thought degree requirements were irrational.
  4. They thought that institution-sponsored competitive athletic programs enabled athletes who performed poorly academically to graduate with complete disregard for their education.
  5. They felt that degree requirements restrained them from pursuing new fields instead of liberating them to explore new areas.
  6. They didn’t think they could find experiences on campus necessary to developing networking, salesmanship and leadership skills.

Each one of these problems can be solved by a university or college, including the last set– all of these skills are accessible through university-sponsored internships, clubs or organizations, and alumni connections as well as instructional courses.

The aforementioned points are frequently covered by the media and subsequently repeated by others. However, what I believe they should be covering with more intensity are:

  1. The overall abysmal graduation rates– at many institutions, less than one-half of students graduate.
  2. The decline in state support, to such an extent that one must question the meaning of “state institution”. Does it mean state-funded, state-supported, or state-located?
  3. The lack of affordable options available to students from low-income families who usually need extra financial and academic support and often need extra social support
  4. The federal relationship to higher education, which has changed from one of great purpose, starting with the Northwest Ordinance through the Land-Grant Act and the Veteran’s Readjustment Act, to a current focus on loans
  5. The need for more alternatives to postsecondary education and training, i.e., helping to answer; “What is college?” We now include many different forms of educational experience in the same term and should be clearer about what we mean by college.

What is the purpose of college? I believe it is, and must be, as much about character and citizenship as it is about careers and commerce. In addition to majoring in a specific subject, students should learn about and consider the air, water  and other parts of the world that greet us when we’re born; the world we make: literature, history, architecture, and manufacturing; and the means by which we mediate between the world we meet and the world we make, such as philosophy, ethics, and religion. This is advanced education, a transformational experience of questioning, not answer-focused focused training. But the popular press ignores such ideas.

Furthermore, there are other critical questions to be raised about topics including tax policy, accreditation, and personnel policies.  Consider merit aid used by many institutions to recruit students with high SAT scores in order to bolster an institution’s U.S. News and World Report ranking.  Shouldn’t such merit awards be considered part of the recipient’s or parent’s taxable income?  What about the use of tax-exempt bonds for the stadiums and arenas used for major athletic programs that generate significant revenue? Might these be reviewed for centrality to institutional purpose and financial gain?

Proposed reductions in federal student aid programs such as Pell Grants and College Work Study, two programs essential to fulfilling the “American Dream”, scarcely gain attention. Why is that?

Why not call for the public release of information regarding the fulfillment of accreditation standards. Doesn’t the public have a right to know how well an institution is doing by way of third-party assessments?

Finally, the use of adjunct and other part-time faculty is growing, with some institutions hiring such faculty for over 60% of their course sections. What about their employment status? This seems to me a fair justification for inquiry and of great importance to the integrity of higher education institutions as employers.

Ongoing change is necessary for any institution or organization to maintain its vitality.  The forces of demographics, economics, and technology are especially powerful. In a separate article (see below), I have enumerated ten ways for higher education institutions to assess the integrity and vitality of their operations and academic achievements. We can continue to make changes that are needed by design and refuse to stand by while institutional purpose and integrity are the targets of disruption by unknowing external forces.



Scott, Robert A.  “Assuring Effectiveness and Productivity in Higher Education.”  Grant Thornton, “On Course,” October 2011.

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