May 16 2017 0Comment

Costs of higher education – Solutions Blog

As we discussed in the previous two blogs, higher education leaders currently are dealing with issues related to tuition and enrollment decline as well as challenges to their budgets.

While challenging, this time also has a silver lining. Proactive higher education leaders can use this time to develop breakthrough strategies to position their institutions to succeed in the future. We offer some thoughts on what’s happening across the nation in these areas.

Revisiting Leader Qualifications

In a recent Change Leader blog, we asked the critical question – is it imperative for a leader of a higher education institution to have a terminal degree? In these turbulent times, many could argue that the answer is, “It depends.”

While an impressive achievement, earning an esoteric degree may not prepare a university leader to manage complex organization.  Leaders who do not have management experience may not have a full understanding of the ramifications of a budgetary decision and they may make decisions in areas that they’re not familiar with. Therefore, these decisions may inadvertently drive up the cost of education.

Tuition is only one piece of the cost equation. Getting an education today also includes the cost of housing, books, supplies and food. Therefore, the old model of the student working their way through college is not feasible for many. “Working 10 hours a week for minimum wage during the school year and 35 hours a week over summer break was enough to pay tuition, room and board at the average public college in the 1960s and 1970s,” Washington Post reporter Danielle Douglas-Gabriel wrote. “Today, the same amount of work covers only one-third of the cost of the average public four-year university because of the increase in prices and decrease in the minimum wage in real terms.” These increases in cost can be directly related to the decrease in higher education funding by states.

A higher education leader who is not well versed in management and budgeting may make a decision that tips the scales in unexpected ways. Raising tuition may seem like a good idea, but what if the university doesn’t hit enrollment numbers? Cutting an academic department could be feasible, but what are the ramifications for research money or opportunities for collaboration with industry? Privatizing non-academic departments may be tempting, but what happens to employee morale and quality of service? These scenarios don’t have easy answers; instead, today’s higher education leaders need to understand the complexity inherent in leading and managing the institution and the budgeting process.

Developing New Operation Models

More than ever, university leaders need to closely analyze what is happening on their campus. Developing new models can create the opportunity for entrepreneurship to emerge in surprising ways.  

One example is the University of Maryland University College. As described in Inside Higher Ed, the university is paring the institution down to its academic core in order to monetize its own services and grow its endowment while keeping tuition rates low.  UMUC President Javier Miyareas describes the core as the essential part of the university, adding, “Everything else are business processes that do not have to be run in the traditional way within the university.” For example, the university’s Office of Analytics became the data analytics company HelioCampus in 2015. The university’s IT department will form a company called AccelerEd. These companies are controlled by a nonprofit, UMUC Ventures, which functions like a holding company that benefits the university.

Different ways to access a degree also may be on the horizon. In a Denver Post op-ed, columnist Megan Schrader points to the unsustainable increases in college tuition and notes that the cost of four years at University of Colorado would be almost $85,000 in 10 years if the trend toward an average five-percent-per-year increase in tuition costs continues. She remarked, “…when graduating seniors vote with their dollars on wise investments, the system will begin to correct itself. Think students opting to spend their first two years at community colleges or attending universities with a lower tuition, lower fees and lower cost of living.

Pros and Cons of Mergers

Mergers also are being considered in some cases. According to a recent report by Moody’s Investors Service, many smaller, less recognizable schools see mergers as the way to create efficiencies in the wake of stagnant or declining revenue levels.

However, mergers can be fraught with challenges because of branding and culture. For example, Rider University officially merged with Westminster Choir College in 1992, although Westminster continued to operate its own college. Recently, a proposal was made to move Westminster to the Rider campus because Rider was facing its own financial struggles. After a revolt by Westminster’s faculty members, students and alumni to the proposed move, Rider’s administration is now planning to sell the nonprofit college and its land.

A New View of Marketing

Marketing increasingly is coming under the gun as a way to build revenue streams. However, university marketing and communications staff must take into account some prevalent attitudes when planning their marketing campaigns so as not to waste precious resources.

First, it’s important to look at when a college education is worth the investment. Douglas-Gabriel’s Washington Post article on the subject points to the Urban Institute’s online project that looks at the intersection of the cost of getting a college degree and the value of college. The think tank’s researchers suggest several factors that students are now considering, including the degree being pursued, the initial investment, the odds of completing the program and the long-term value that indicate that the degree program is economically.

Furthermore, higher education needs to start widening its net as it seeks new students. A story in The Atlantic points to the changing demographics of the student body, which increasingly are of color, come from low-income backgrounds and are the first in their generation to attend college; this represents a major sea change in the student body which was made up of predominantly white students earlier this century. Therefore, colleges and universities have to think more creatively about seeking out meaningful contacts with these students. Furthermore many of these students – who would be accepted by selective colleges – don’t apply for enrollment, or turn down colleges which aren’t their first choice. In these cases, institutions have expended a significant outlay of cash and resources for a failed enrollment.

The Education Dive notes that outreach strategies and services provided on many campuses are often stagnant because these new groups of students are more difficult to educate, which makes their education more costly in a time of federal and state budget cuts. However, part of this difficult transition is due to the fact that many campuses have not thought about how to serve these students. Therefore, a variety of services and programs – such as financial aid packages, assessment of candidates’ academic qualifications, faculty hours, online courses – need to reviewed in light of these changing student demographics.

Strategically Identifying Core Competencies

All of the components described in this blog series suggest that the time is ripe for higher education institutions to deeply consider what their place will be in the changing marketplace. Honest conversations based scenario planning and analysis of key data can help leaders and their institution’s stakeholders identify a path forward in this turbulent time.

In their book Competing for the Future, Gary Hamel and C.K. Prahalad suggest four initiatives that can help institutions position themselves:

  • Identify and understand how competition will differ in the future.
  • Identify and refine insights into future opportunities that are emerging.
  • Energize and united the institution’s administrators, faculty and staff.
  • Get to the future before other institutions.

The authors suggest a three-stage approach to successfully position the institution. These phases include:

  • Competing for intellectual leadership through imagining what future customers will demand and value and then determining how to deliver those services in innovative and original ways.
  • Competing to manage the migration path through looking at the core competencies and strategic partnerships that are needed to succeed in an emerging market.
  • Competing for market share and leadership through developing a position and institutional focus based on value, cost, price and service

One example of this approach is Cal State-San Marcos. The university’s core competency is serving first-generation students. In fact, 53 percent of the school’s graduates are the first in their families to earn a BA degree.  The university has developed programs tailored to assist these students; these programs have been so successful that the university is ranked 13th nationally for preparing students for career success relative to costs. Unsurprisingly, eighty-five percent of the university’s alumni remain in the local community after graduation. Therefore, the university also serves as an economic driver for the community and boasts that 78 percent of its graduates are placed in a job six months after graduating.

Final Thoughts

University leaders increasingly are facing significant challenges in leading their institutions. However, these turbulent times can also offer a proverbial silver lining by helping leaders find new ways to enhance their institutional mission and outreach by identifying key core competencies. It’s important during these times not to get stuck in what worked in the past and instead, to heed the word of Socrates – “The secret of change is to focus all of your energy, not on fighting the old, but on building the new.”


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