Though the authors state in the Introduction that, “We believe such [online] systems have the potential to improve faculty productivity and lower instructional costs without sacrificing educational quality,” online education continues to face staunch critics.  Fundamentally, the report notes that the onslaught of online education in the higher education landscape has the potential to completely transform our concept of and basic approach to educating the nation’s college students.  The concept of online education is so foreign to many that there is some resistance based solely on it being “different.”  The authors conducted interviews with a variety of institutions utilizing online education in a variety of ways.  Not surprisingly, considering the relatively recent arrival of online education on the higher educational scene, institutions are still working to figure out how best to utilize new technologies to reduce instructional costs, improve student learning outcomes, and maximize faculty effectiveness.

Online education is becoming such a disruptive force (to use Clayton Christensen’s terminology) in education that the authors state, “Online learning is taking place at just about every college and university in the nation.”  In their interviews with administrators and faculty at institutions implementing online education in some way, there were some common themes uncovered discussing the rationale for the introduction of online education.  Many institutions, for example, see online offerings as a revenue generator.  Online education has the ability to reach non-traditional students (adult learners who are not able to attend class in a physical, more traditional setting) as well as students who would otherwise not enroll with the university due to geographic location.  While there are significant startup costs associated with implementing an online environment, many schools anticipate eventually recouping that initial investment through decreased use of facility space, increased enrollments thanks to the online offerings, and more effective use of faculty time.  Interestingly, some universities have seen cost savings as well as increased revenue yet the authors point out, “Very few institutions are using either the savings from online education or the net incremental revenue to reduce the price of education to students.”

Schools are also beginning to utilize online education as a means of improving student retention and persistence.  Practically speaking, the current economic crisis that has led to reductions in faculty size and reduction in course offerings, has effectively barred many students from getting into the classes they want and need to graduate.  By moving courses to an online environment, more can be offered overall and fewer students will be blocked from registering for core courses.  In this way, students will be more likely to continue their educations unabated.  In addition, some schools believe that online education has the potential to dramatically improve our understanding and execution of practices to improve student learning outcomes.  Some institutions have implemented online education as a means of testing this theory.  The authors acknowledge that “the belief that students in online courses may learn the material better than their traditional-format counterparts did not appear to be widely held.  This may be partly due to the scarcity of convincing evidence, produced by rigorous evaluations, about the effectiveness of hybrid or online learning compared with that of traditional modes of teaching.”  (The Department of Education released a meta-analysis in 2009 that found that “on average, students in online learning conditions performed better than those receiving face-to-face instruction.”)  

While there are many reasons stated by university administrators for implementing online platforms, there are many perceived barriers, some of which have been stated in the discussion above regarding the rationales for implementation.  As is the case with all disruptive technologies, a small group of early adopters carries the burden of proving the value to others.  For many faculty members interviewed for the report, online education is seen as the end of their value as instructors.  The authors note that fears over diminished faculty ranks in the face of online education was a common theme in their conversations.  While online learning does lend itself to a certain level of “automation,” the faculty must still remain engaged in order to make the course as effective as possible.  Additionally, for those faculty who are willing to venture into the world of online teaching and learning, the authors recommend that institutions create some type of incentive or compensation program.  The initial work required on the part of the faculty member teaching in an online environment is substantial enough that universities should consider breaking down this particular barrier by offering some type of incentive or additional compensation structure for innovative faculty members willing to pursue the online platform. 

For many faculty members, control or ownership over the course is paramount to all other concerns.  The report notes that some faculty members have questions about the implications for intellectual property standards in the online environment.  Others note that they take great pride and care in crafting their courses and many are unfamiliar with the concepts associated with instructional design – they teach the way they were taught and are comfortable in that setting.  In response to these stated challenges and perceived obstacles, the authors have provided a series of remedies including to “make faculty pioneers heroes” by embracing those willing to venture into the online environment and pave the way for others to follow.  Other strategies include establishing centers within the institution separate from the traditional to experiment with online learning and continuously developing a mechanism for mining data that will assist in providing answers to the questions of student learning outcomes, persistence, and retention in the online setting. 

Though there are some perceived barriers to the adoption of online learning systems in American higher education, there is significant evidence that students are migrating toward the online environment.  Babson Survey Research Group, in conjunction with The Sloan Consortium, Inside Higher Ed, and Pearson, noted in its recent report titled, “Going the Distance: Online Education in the United States, 2011” that in the Fall of 2010, more than 6.1 million students took at least one online class.  That represents a 10.1 percent increase over online enrollments in Fall 2009.  In his book The Innovative University: Changing the DNA of Higher Education from the Inside Out, Clayton Christensen notes that the cost of operating an online university is half that of operating a traditional one, largely because of a lack of facilities needed for students.  (To see more about Christensen’s theories in The Innovative University, see my blog article posted last August.)  This translates into an opportunity for students to receive an education for significantly less cost than they could at an average traditional university.  Considering the ambitious goals of the Obama Administration to bring America back to its preeminent position in terms of college graduates, an alternative to traditional higher education is necessary.  At this point online education seems to be a viable alternative and the number of students registering for online courses at traditional universities and the number enrolling at fully online institutions like APUS is a testament to this – despite any perceived barriers.

In research that I conducted initially for my doctoral dissertation and then later in a paper with my colleagues Phil Ice and Angela Gibson, I identified several factors as significant variables leading to student disenrollment from an online program.  These variables include no transfer credit received, student’s last grade of F, student’s last grade of W, and low number of courses completed by the student in a 12-month period.

Over the past year and a half, my colleagues and I have continued to examine the student disenrollment patterns at the American Public University System (APUS) and have discussed those patterns with colleagues at a number of other institutions offering online programs.  More and more, I have come to believe that the persistence of students who complete three or more undergraduate courses at APUS and the tendency of students who complete fewer than three courses at APUS to eventually disenroll are much more correlated to adult student behaviors previously identified by researchers using data from traditional institutions.

During the past decade, a major increase in enrollments has occurred  with the number of adults attending online programs versus face-to-face programs.  The reasons are obvious:  working adults are able to attend online programs from any location at any time.  Those with jobs that frequently take them out of town no longer have to juggle schedules to meet the requirement of taking a face-to-face class, but can log in from another city or country; the only requirement is a computer and an internet connection.  Additionally, adult students with a family can come home from work and log in to their classroom after dinner and after the children go to bed.  Those adults whose jobs require them to work non-traditional evening or night shifts can log in during times that suit them and not worry about losing sleep to attend face-to-face courses at a local college or university.

One of the earlier studies regarding persistence rates of adult students was published by the U.S. Department of Education’s National Center for Education Statistics (NCES).  In this study, researchers Laura Horn and Mark Premo identified seven risk factors that were associated with the likelihood that a student would not graduate from college.  These risk factors were:  being independent, attending college part-time, working full-time while enrolled, having dependents, being a single parent, delaying entry to college, and not having a traditional high school diploma.  Working adults attempting to complete an associates’ or bachelor’s degree are likely to have at least three of these risk factors and those with children may have five or six.

Other studies of persistence relating to adult students provide explanations and characteristics of transfer students.  Noting that my own research indicated that students who had transferred credits were  more likely to graduate than those who did not transfer credit, I reviewed some of the literature about transfer students and student attendance patterns.  Wright and de los Santos wrote about this phenomenon in “Maricopa’s Swirling Students: Earning One-Third of Arizona State’s Bachelor’s Degrees” in 1990.  Later, director of Indiana University’s National Survey of Student Engagement, Alex McCormick, wrote a research article titled “Swirling and Double-Dipping: New Patterns of Student Attendance and Their Implications for Higher Education,” outlining the various patterns of student attendance and their implications.  In his article, McCormick attributes the likelihood of students to attend multiple institutions to the standardization of credits and the ability to transfer credits from one institution to another rather easily.  McCormick outlines eight different patterns of attendance for swirling students.  These are: 
• Trial enrollment – Students experimenting with another institution before formally transferring
• Special program enrollment – Students completing most of their coursework at their home institution but completing a special program (e.g., semester abroad) elsewhere
• Supplemental enrollment – Students enrolling at another institution for one or more terms to supplement or accelerate their program (examples include summer programs or taking a course at another institution because it’s unavailable at the home institution)
• Rebounding enrollment – Students alternating enrollment at two or more institutions
• Concurrent enrollment – Students taking courses at two institutions simultaneously
• Consolidated enrollment – Students who satisfy their home institution’s residency requirements but a substantial number of their credits come from at least two other institutions
• Serial transfer – Students who make one or more intermediate transfers sequentially in order to complete a degree
• Independent enrollment – Students pursue work unrelated to their degree program and no credits are transferred

McCormick notes that several longitudinal studies exist and while they provide descriptions of attendance patterns, they fail to provide explanations for those patterns.  He cites Clifford Adelman’s 1999 study that examined the longitudinal data of the 1982 high school graduates’ cohort and identified that students who attended multiple institutions accounted for approximately 60 percent of all students who began at four year institutions.  Approximately 37 percent of all students from the 1982 cohort attended two institutions and 22 percent attended three institutions.  Confirming some of the classifications outlined by McCormick was Adelman’s finding that three in five of the 1982 graduates who attended two institutions returned to their first college, as did half of the 1982 graduates who attended three colleges.  It’s important to note that Adelman’s longitudinal study over 16 years examined college attendance data over a much longer period than the NCES data required to be reported by institutions participating in the Federal Student Aid program.

The studies mentioned by McCormick and Adelman are excellent starting points for discussions about why more research is necessary to determine the explanations of student swirling.  Is it possible that adult students might attend even more institutions today because the availability and popularity of online courses and programs has increased substantially over the past decade?  The Sloan Consortium’s most recent publication, Going the Distance:  Online Education in the United States 2011, has identified that nearly one third of all college students completed at least one online course in 2010-2011.  At the recent Council of College and Military Educators (CCME) Conference, the Department of Defense reported that 75 percent of all military tuition assistance payments were for students attending online programs.  While the military may be more mobile than most working professionals, the data otherwise supports the increasing trend of adult students enrolled in online courses/programs.  As noted earlier, the risk factors for college completion are compounded for working adult students and may lead to explanations of some institutions’ student transfers.

More and more, I am convinced that the United States needs a national database that tracks the progress of college students as they attend multiple institutions.  The Predictive Analytics Reporting (PAR) Framework funded by the Bill and Melinda Gates Foundation and managed by the Western Interstate Commission for Higher Education (WICHE) Cooperative for Education Technologies has a database with 640,000 student records from students attending online programs at six different institutions.  That’s approximately 10 percent of the students who took online courses last year according to the Sloan survey mentioned earlier.  The National Student Clearinghouse provides data as it is contributed by participating institutions, but institutions are not required to belong to the consortium and only recently has the Clearinghouse been able to accept student data from institutions with non-traditional financial aid enrollment periods.  In addition, that data does not aggregate by institutional profile in a more granular format (adult serving, commuter college, online, etc.). 

During the last reauthorization of the Higher Education Opportunity Act in 2008, Congress inserted a provision prohibiting the Department of Education from creating such a database.  To quote McCormick, “if educators, policymakers, and researchers are to assess institutional impact, they will need better information about [an] institution’s attendance profile, if not detailed information about the source of credits at the student level.”  As Adelman and others have identified, there are multiple types of institutional profiles as well as profiles of students who attend those institutions.  Before a policymaker or pundit makes a disparaging remark about student persistence rates at a particular institution or group of institutions, they need to have data far beyond that related to first-time, full-time students that has been the baseline for institutional reporting to the Integrated Post-secondary Education Data System (IPEDS).  Institutions and researchers should collaborate to provide more insights to explanations for adult student drop out beyond “life happens.”  More research on adult student swirling needs to be conducted, particularly for those students attending online programs or institutions.

The first article, from The Chronicle of Higher Education, discusses the concept of “badges” that are awarded by various websites, training companies, individuals, etc. The concept is that the badge is relatively easy to earn (to keep the learner motivated and engaged) and indicates that they have achieved a certain skill level or learning competency.  At the Khan Academy, students receive a “Great Listener” badge for sitting through 30 minutes of video lectures and can earn an “Awesome Listener” badge after completing a full hour of video lectures.  In addition, visitors and users of that site can earn badges indicating “Master of Algebra” or “Challenge Patches.”  Similarly, MITx is a newly announced venture by Massachusetts Institute of Technology (MIT), slotted to be released in an experimental prototype version in the spring of 2012 and designed to recognize people who complete MIT’s online courses and successfully pass the tests and quizzes.  MIT has an arrangement with OpenStudy to offer badges to students who are helpful in course discussions.  The John D. and Catherine T. MacArthur Foundation has a $2 million grant to test the badge platform in education.  With the Foundation’s support, The Mozilla Foundation (best known for the Firefox browser) is “building an Open Badge Infrastructure to enable the interoperability and collection of badges” which will “support badges from any issuer across the Internet.” 

Both The Chronicle of Higher Education and Inside Higher Education wrote about the tenured Stanford professor who has left to form a startup, Know Labs.  Sebastian Thrun and a colleague taught an artificial intelligence MOOC (Massively Open Online Course) this summer to more than 160,000 students and he plans to commercialize that type of course through the Udacity portal owned by his startup, Know Labs. Thrun’s venture will not only offer courses developed and taught by him but also by others.  One of the first courses that Udacity will offer is “Building a Search Engine” which will be seven weeks in length and which will be taught by David Evans, Associate Professor of Computer Science at the University of Virginia.  Thrun is betting that the word (grades/recommendation) of a highly regarded professor will win over prospective employers or current employers of students taking courses.

Richard Vedder, an economist at Ohio University, wrote an article for the Chronicle’s Innovations blog entitled “Beware: Alternative Certification is Coming.”  Most of the article talks about Straighterline’s lower priced college course offerings and the announcement last week that Straighterline is offering students the opportunity to take the Educational Testing Service (ETS) iSkills test and the Council on Aid to Education’s (CAE) Collegiate Learning Assessment (CLA) test (the one made famous by New York University Professor of Sociology and Education, Richard Arum and University of Virginia Assistant Professor of Sociology, Josipa Roksa in their book, Academically Adrift: Limited Learning on College Campuses).  Vedder also discusses the Khan Academy and MIT certification offerings.  My favorite paragraph from his article relates to his discussion of the first week of beginning economics courses when professors explain the point that:  “If the price of something rises a lot, people look for substitutes.  Resources are scarce and they [people] maximize their utility by shifting away from high priced goods or services to the lower priced good or service.”

The comments sections in the online postings of these articles range the gamut from commending the idea to ridiculing it.  I happen to think that these alternatives to traditional higher education are to be expected as part of the continuing onslaught of alternatives for a service that many can either not afford or believe is overpriced.  As Christensen states in his books about innovation (specifically Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns and The Innovative University: Changing the DNA of Higher Education from the Inside Out), it’s not always the disrupter that succeeds, but sometimes the incumbent who adopts the disruptive technology and deploys it successfully.

One of the issues that I see with badges is the issue of identity verification and assuring that the person who earned the badge is actually the person who did the work.  Just like the recent SAT test taking scandal on Long Island, if I have a talent at taking a certification course and there are no checks and balances in the system, I may be able to take the course/test for others using their identity.  That problem can be solved, but some solutions are more expensive than others and the expensive solutions may overweigh the cost of the badge or the alternative certification. 

As soon as employers start accepting the badges, the value equation for higher education will lower, putting additional stress on a system that is already stressed by its high prices.  If employers value the training of a superstar professor over a university, that will be another disruptive force to the sector.  The situation reminds me of the scenarios described by Nicholas Carr in his book, The Big Switch (which I wrote about in my blog in July 2008).  Carr’s premise is that the lower cost of technology switches the power from institutions with lots of capital to the individual entrepreneur who is able to “rent” powerful servers and technology from vast farms owned by Google, Microsoft, etc.  Having accreditation and a fancy campus with many faculty and staff may not overwhelm a solo professor/instructor able to convey valuable knowledge to students and to “certify” them by awarding a badge.

The fact that “badges” and other forms of alternative certifications are surfacing daily is another example of the evidence that traditional higher education is overpriced and under siege.  According to a recent Pew Research Center survey, the primary reason that students don’t attend or complete college is financial.  In fact, 57% of adults responding in the survey said that the higher education system does not provide good value for the investment and 75% said that it is not affordable.  The trend is for U.S. employers to seek workers with at least some post-secondary education.  If our colleges and universities are unable to provide employers with graduates with these credentials, it opens opportunities to corporations, organizations, or even individuals offering the alternative credentialing.  Colleges and universities should look to some of these alternatives as viable means to providing a lower cost education as well as a way to preserve or grow their existing enrollments.

Unlike Clayton Christensen who writes about innovative companies as a Professor of Business Administration at Harvard Business School (thus making his transition to writing about innovative universities less surprising), DeMillo’s background is in engineering and computer science.  His observations, however, stem from his background as a professor at a traditional “brick and mortar” school.  From his position inside the hallowed halls of academia, he notes that the institutions in the middle, those between the elite institutions (top 75) and institutions that admit everyone, are the ones that are in trouble with a value proposition squeeze coming from above (elite) as well as below (business model to serve anyone or everyone at a lower price point).  DeMillo stresses that modern universities are businesses (contrary to some of the myopic ideologues who insist that non-profit institutions don’t have a business model) and are competitive organizations run by smart people.  Similar to Christensen, DeMillo argues that the class-oriented society and culture of higher education creates a faculty-centered model that is difficult to break out of for institutions undergoing competition for enrolled students.  (For a review of Christensen’s book, Disrupting Class: How Disruptive Innovation Will Change the Way to World Learns, see my August 2008 blog article.  To see my review of Christensen’s book, The Innovative University: Changing the DNA of Higher Education from the Inside Out, see my August 2011 blog article.)

DeMillo states that in any market, the winners are those with competitive brands, price, or value.  Brand is difficult to build for all but the elite colleges and universities, price continues to increase for almost all institutions and in most cases is becoming uncompetitive, and value is a concept seldom understood by the faculty at most institutions.  Because most college presidents are promoted from the ranks of academics, they are ill-equipped to understand the importance of strategic planning and understanding competitive threats from business disruptors like creative proprietary institutions.

DeMillo states that his book is “ultimately an essay about value.”  Most of the world does not understand the traditional American business model for higher education that is faculty-centered and resource inefficient, not to mention costly.  If American universities want to “survive” (DeMillo’s choice of words) over the next generation, they must apply the following three lessons of our global economy to their operations:

1. Focus on value and deliver a degree that is priced reasonably and that is of reasonable quality.
2. Focus on costs by controlling them in ways that are unthinkable by faculty-centric institutions to include:
a. Deskilling (greater use of adjuncts)
b. Better use of physical plants
c. Better use of materials
3. Establish an individual institutional reputation versus continuing to chase the elite institutions at the top.

DeMillo takes the time to review and report on activities of proprietary or for-profit institutions that he credits for being student-centered because students provide their main source of income.  DeMillo states that enrollment growth is a good thing at a for-profit in that it increases revenues and profits and allows the institution to reinvest those profits in additional services and programs.  Traditional institutions determine their charges from a fixed cost model designed to measure the cost of hours of instruction in the classroom with little consideration for the appropriateness of the charge or the specific relevance of matching labor delivered to competitive market costs.  Online programs run by proprietary institutions price based on services consumed or delivered and unencumbered by a high fixed cost structure; because of this, they are able to provide a competitively priced product with a value recognized by the students they serve.

Institutions in the middle are subsidized by public funds, sponsored research, endowments, or church support.  Tuition fluctuations at these institutions create revenue gaps that have to be covered by increases in one or more of the relevant subsidies.  Those subsidies are shrinking.  DeMillo states that it is not clear how much disruption institutions in the middle can tolerate, but for many, resources are stretched and stressed beyond the breaking point.  DeMillo argues that all institutions in the middle have to pay attention to price sensitive customers.

DeMillo spends some time talking about non-profit and proprietary institutions that are process centered and provides examples about efficiencies that lower the production cost for those institutions.  Another topic that he spends a little time discussing is “hacking degrees.”  Hacking is a topic that continues to be discussed by many writers including Anya Kamenentz, author of DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education.  It is a controversial topic for those focused on traditional education but more strategic for those focused on the capabilities of technology and the learning that the internet and employers provide many adults.  In my opinion, it is a topic that is not covered enough in this book given its potential for impact on the higher education sector.

Like any good researcher, DeMillo provides recommendations for institutions in the middle to “survive” and thrive in the 21st century.  Broadly speaking, institutions should define their value and become “architects” for new business models.  As it applies to the definition of value, institutions should forget about who is above them, focus on what differentiates them, establish their own brand, not romanticize their weaknesses, and be open.  From an architecture perspective, institutions should balance faculty-centrism and student-centrism, use technology, cut costs in half, focus on their own measures of success, and adopt the New Wisconsin idea which is to be truthful to the community that you serve.  His recommendations are sound and grounded.  Because of the entrenched culture at many of the institutions in the middle, I doubt that few will be able to follow DeMillo’s recommended path to improving their performance and financial stability.  Those that are able to follow the path, should see improvements in reputation, enrollments, and be able to distinguish themselves from their competition.

Bailey points out that the public sector has frequently employed the expertise of private industry in various attempts to solve the nation’s problems.  For example, in March 2010, President Obama reached out to private-sector businesses, agreeing to provide some $150 billion in support of those businesses developing an alternative to foreign oil.  He said to the CEOs in attendance, “’Your country needs you to mount a historic effort to end, once and for all, our dependence on foreign oil…And in this difficult endeavor, in this pursuit on which I believe our future depends, our country will support you.’” 

In another example, Bailey points out that the Review of US Human Spaceflight Plans Committee established by the White House Office of Space and Technology Policy recommended that NASA seek private sector assistance in developing commercial spacecraft.  “The review argued that this would free NASA to focus its attention and investment on developing more advanced capabilities, particularly in deep-space exploration.”  In each of these examples, a significant problem or dilemma has been acknowledged and government has rightly recognized that private sector innovation has the business agility and market understanding to propose and execute a meaningful solution.

In the realm of education, however, the pattern of public-private cooperation has not held true.  Bailey states that “Instead of involving the private sector, education policymakers have actually created policy and funding barriers that skew support to non-profits and prevent for-profits from participating in programs aimed at improving teaching or learning.”  He uses the American Recovery and Reinvestment Act’s Investing in Innovation competition as an example of education policymakers “shutting out” private sector for-profit institutions.  He explains that Congress wrote that legislation in a way that effectively excludes the for-profit education sector. 

In explaining why government is hesitant to engage the private sector in the higher education debate, Bailey recounts some of the most pronounced criticisms of online education.  He explains that many fear that government support for for-profit universities could lead to “market distortion.”  On the other hand, systematically excluding the private sector can lead to its own variety of market distortions and fundamentally, “these concerns do not outweigh the benefits of having a thriving marketplace of private-sector entrepreneurs tackling social problems, particularly in education.”  Interestingly, there also seems to be resistance to government engagement of private sector education institutions because of a belief by some that one should not make a profit on education.  It is difficult, in my opinion, to justify this notion – especially in light of the fact that government engagement of private industry in the areas of clean energy, healthcare, and space exploration has set the precedent that it is okay to turn a profit while addressing some of the nation’s greatest challenges.  Additionally, no president of a non-profit college or university operates continuously on negative margins.  Prudent managers of non-profits are obligated to cover operating costs or explain why not.  The non-profit system actually encourages continued increases of expenditures during good economic times since the tax code questions a non-profit that continually generates a substantial surplus.  In order to reduce surpluses, additional projects are funded.  In addition, the taxpayer subsidies of non-profit entities are already very large.  In addition to allowing families of students to receive education tax credits, alumni and parents are allowed to deduct charitable gifts, and the institution does not pay income taxes on its endowment earnings, the receipt of charitable gifts, and generally, little to minimal property taxes and no income taxes are paid. 

Private enterprise plays an integral part in the fulfillment of national policy initiatives.  As Bailey points out, “Private industry routinely takes technologies pioneered by the government and turns them into cheap, reliable and robust industries.”  Why should online higher education be any different?  The federal government developed the initial product – education (via compulsory, free public K-12 education, and eventually the establishment of government subsidized institutions of higher education) – and placed significant value in obtaining that product.  In an era of considerable funding cuts and a bleak financial outlook for most institutions, it seems that now is the optimal time to engage the private sector for its opinion and ideas in order to reach President Obama’s stated education goals. 

Schneider and de Alva note that consumers are largely oblivious to the cost of an item, focusing almost solely on the price instead.  As long as the price seems reasonable (or, at least comparable to other similar products), the consumer is not likely to consider what the actual cost of the product is.  As the authors point out, nowhere can this be seen more clearly than in higher education.  Since the downturn of the economy in 2008, a deluge of articles have been published exploring the price of a college education (see the “Impact of the Economy on Higher Education” section of this blog) but little has been written for the American public about the true cost of a degree (that data is typically buried in academic policy and research reports that typically do not receive broad media coverage).  Schneider and de Alva have undertaken the daunting task of publishing the total cost of a bachelor’s degree for the American taxpayer.  Their findings are notable, assuming that those in a position to influence public policy and a broader national discussion read their paper.

The authors divided their sample into the following categories: public, private not-for-profit, and private for-profit institutions.  Beyond that,  they used a variation of the well-known rankings reported in Barron’s Profiles in American Colleges which provides six categories for schools ranging from “noncompetitive” (open admissions schools) to “most competitive” (highly selective, elite institutions).  Interestingly, American taxpayers subsidize the least competitive schools far less than they do the most competitive.  The irony is that the largest and fastest growing sector of the college population includes low-income and non-traditional students who are attending the lesser competitive schools.  These schools tend to offer greater flexibility for part-time students, working adults, and other “nontraditional” student populations.  To provide perspective on the dramatic differences in taxpayer subsidies, consider that “among not-for-profit institutions, the amount of taxpayer subsidies hovers between $1,000 and $2,000 per student per year…”  Among the most selective institutions in the nation, “the taxpayer subsidy jumps substantially to more than $13,000 per student per year.”

The amount of return (ROI) is important when considering any investment and can mean the difference between whether one makes an investment or not.  In the case of higher education and the taxpayers’ “investment,” the return is far lower than necessary to justify the current subsidy trends of the more highly subsidized institutions.  “For public institutions, taxpayers are investing more than $60,000 for each bachelor’s degree granted in the three less competitive categories, close to $75,000 in the highly competitive institutions, and more than $100,000 for each bachelor’s degree granted in the most competitive flagship institutions.”  In the less competitive schools, high dropout rates and longer time taken for completion of the degree decrease the taxpayers’ total ROI.  The highest dropout rates, however, tend to be found in the lesser competitive institutions – the same institutions receiving the least taxpayer subsidies (or none at all in the case of private for-profit institutions). 

According to their research, bachelor’s degrees earned from the private for-profit institutions offer the highest ROI for taxpayers since so little taxpayer money is invested into those schools.  The authors also consider the income taxes paid by those without and those with bachelor’s degrees.  Data shows that individuals holding a bachelor’s degree have lifetime earnings substantially higher than individuals without a college degree and therefore pay more in taxes, providing a benefit to the taxpayer. 

For example, because for-profit institutions receive no state appropriations but pay income taxes, there is a “net ‘profit’ to the taxpayer” for bachelor’s degrees earned at schools within this category.  Table 2 in the report shows that there is a benefit of approximately $6,100 to the taxpayer and over the degree holder’s lifetime, taxpayers will realize a net benefit of approximately $60,900 thanks to higher taxes paid by the graduate holding a bachelor’s degree from a for-profit institution.  By contrast, at a public school (non-/less competitive category), the taxpayer will subsidize approximately $6,000 per bachelor’s degree per year and ultimately see a total cost of $67,600 per bachelor’s degree.  Over the lifetime of the graduate’s career, the taxpayer will not see a positive ROI for subsidies provided for the benefit of the degree-holder.  The ultimate net cost to the taxpayer for a bachelor’s degree earned from a public school in the “non-/less competitive” category is $7,500.

In concluding, the authors make several recommendations that are worth re-iterating here.  First, they encourage stakeholders to focus efforts on addressing issues of college completion and retention.  This makes sense considering that the bulk of taxpayer costs associated with degrees earned at the lesser competitive schools (where the majority of students are earning degrees) is a result of high dropout and slow completion rates.  Additionally, the authors recommend that policymakers reverse “the current policies that result in providing the lowest levels of taxpayer support to the institutions that enroll the highest percentage of low-income, nontraditional, and minority students…”  Providing additional monetary incentives to these students can help boost the college completion and retention rates, ultimately benefiting the taxpayer as degree holders earn more and pay more in income taxes over the course of a lifetime.  The authors point out that if the Obama Administration’s “completion agenda” is met, taxpayer ROI at the lesser competitive schools where dropout rates are highest will increase.  The authors also recommend that policymakers take notice of the Lumina Foundation for Education’s Guide for State Policymakers which calls for  states to make strides in expanding and strengthening “’lower-cost, non-traditional education options,’” including online education.  Finally, the authors note that little data has been collected regarding the true and complete cost of a bachelor’s degree.  By understanding the real and total cost of the educational product as well as the price, policymakers can gain a better understanding of the true financial picture of higher education. 

The Economist presents data that may back the case that it’s not just the economy.  In examining data accumulated in their annual ranking of the top 100 MBA programs, they note that in 2010, the average cost of an MBA for the 85 schools outside of the top 15 was $81,911 while the average starting salary for the graduates of those schools was $81,178.  Five years earlier, the two year cost for the same 85 schools was $60,247 while the starting salary average was $78,442.  The attached graph shows that the disparity was greater ten years ago when the average starting salary was over $80,000 and the average cost was slightly less than $50,000.  The comparison could hardly be more dramatic; increasing costs of tuition have cut the noticeable advantage of attending a residential MBA program outside of the top 15. 

Elite schools like Harvard still have an advantage according to The Economist’s survey data.  Additionally, the article mentions a recent event at Harvard hosted by a large consulting firm where a member of that firm’s senior management noted while speaking to the faculty that the most valuable player on the Harvard Business School team was the Director of Admissions, a not so subtle reference to the elite students recruited to the school and subsequently recruited by that consulting firm.

While the purpose of the article is to compare costs of high end MBA programs, the comparison can easily be made across the entire continuum of accredited business programs.  The Association of Advance Collegiate Schools of Business (AACSB), one of the accrediting bodies for U.S. business schools, estimates that there are 13,670 institutions world wide that offer a business degree.  Being able to distinguish your program and your graduates from the masses is more than likely the only way that you can command a premier price going forward.  In more recent commentaries on the general state of global higher education, books like The Global Auction: The Broken Promises of Education, Jobs, and Incomes and The Innovative University: Changing the DNA of Higher Education from the Inside Out also stress the need for differentiation, tuition reductions, or both in order for institutions to maintain their competitive edge.  My theory is that regardless of your business program’s relative ranking, competing on price and product differentiation is the only safe way to ensure long term success.

Since APUS courses are offered wholly online with no time for face-to-face instruction, we developed a number of math instructional videos using Camtasia tablet software and embedded them in our classrooms to supplement the instructional materials.  Later, we decided to make our math videos available to everyone on our American Public University iTunesU site  and our APUS Youtube channel.  Comments to the individual videos, primarily in the form of thank you’s, demonstrate the usefulness and the need for technology like this.  More recently, we partnered with McDonogh School to establish a website, www.campusmath.com, to offer primarily math videos to the public for an elementary school through high school curriculum.  While I can’t speak on behalf of McDonogh School, I think that both of our institutions are aligned with the belief that math skills need to be improved and providing access to these videos to teachers, students, and parents may contribute to improved skills without providing the teachers and professors inside of a physical or electronic classroom.

The article about the Khan Academy in Wired mentions a teacher at Santa Rita Elementary in California who uses the videos from the Khan Academy to replace some of her lectures and then spends more time in class working on problem sets.  Teachers using the Khan Academy videos and problem sets have access to a dashboard that lets them see exactly where the student is stuck on a particular concept or problem.  Increasing the amount of time spent in class solving problem sets provides the teacher with more one-on-one time with the students who need assistance.  Contributing Editor Clive Thompson mentions the 1984 Benjamin Bloom metastudy that measured the effectiveness of one-on-one tutoring versus general classroom instruction (two standard deviations more effective for one-on-one instruction).  Obviously, schools cannot afford to teach everyone one-on-one but technology is capable of assisting teachers and students to improve learning outcomes.  What prompted Khan to record his videos was the discovery that viewing videos over and over again in private is less embarrassing for the student than admitting in a one-on-one session that they still don’t understand the material.  Judging from the comments posted by students on our Youtube videos, Khan’s discovery is on track.

Based on the increasing frequency of its use in the classroom, technology continues to advance at a pace faster than the implementation capabilities of many of America’s K-12 schools, colleges, and universities.  At the same time, there are a number of educational innovators who are willing to experiment.  As Clayton Christensen points out in Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns, technology will ultimately provide educators with the ability to teach students with multiple learning modalities the intended lessons without impeding the highly talented individuals from learning more.  It is my hope that few institutions and regulators impede the innovation process.  (To read my review of Christensen’s Disrupting Class, see my August 2008 blog article.)

In this report, Christensen and his co-authors (hereafter abbreviated as Christensen) discuss the potential for online education to be a disruptive influence on higher education with a total cost of education per student 40 percent less than the traditional universities (when you combine the state and federal subsidies with the cost of tuition). 

Probably the most relevant parts of Christensen’s paper are the recommendations at the back for policymakers and traditional universities.   Christensen says that state and federal officials must “honestly ask and answer” two questions.  The first question is “is the traditional universities’ business model sustainable?”  Christensen believes that there are few traditional universities that can answer yes to this question, particularly given the evidence that online education represents a scalable disruptive technology.  The second question is “is the primary stewardship to facilitate the best possible postsecondary education and training for the people in their state or whether they are appointed to be caretakers of the specific institutions that have historically provided higher education.”  If the answer is the former, then officials must include the disrupters in their partnership to ensure that as many as possible receive higher education.  If the answer is the latter, then low cost universities must be framed as “competitors and enemies.”

Christensen recommends that policymakers must remove the barriers to allowing low cost disruptors to gain share and cites Indiana’s partnership with Western Governors University that comes at no cost to the state because Western Governors is self-funded on tuition alone.  He and his co-authors also recommend that policymakers should encourage the move toward competency-based and next-generation learning models and not focus on traditional inputs such as seat time that lock in the traditional measure of a credit hour.  Christensen also states that we need to move beyond measuring degree attainment as a standard of achievement.  He states that focusing policy on degree attainment versus learning will have the impact of deflating the value of a degree and force people to focus more time and money on achieving advanced degrees which is not necessarily in the country’s best interest.

Christensen states that accreditation is a barrier but also states that it is not productive to fight accrediting bodies.  Instead, he recommends finding pathways around accreditation barriers.  As president of an institution that has worked hard to earn our accreditation, I am not sure that I agree with all of his recommendations with regards to accreditation but also understand why disrupters who have not achieved accreditation view it as a barrier.  I believe that accrediting bodies are an easy target when policymakers and disrupters choose not to understand the bigger picture, particularly when the accrediting bodies are not always transparent about their processes and policies.

The federal financial aid system is complex and many researchers avoid writing about it in great detail, choosing to focus on the macro issues instead.  Christensen and his co-authors not only state that the “all-or-nothing access to federal funds for institutions does not compel students to make rational quality-cost trade-offs” but they recommend an alternative system that would provide access to funding based on quality and student satisfaction measures relative to cost.  They call their new system the Quality-Value (QV) Index and propose measuring four items:  job placement, increase in graduates’ earnings relative to the institution’s tuition cost, whether alumni would choose to repeat the experience, and whether students are able to repay their loans.  Colleges would have access to these new funds based on a sliding scale relative to the QV Index.  A ranking in the top 25 percent would allow colleges to draw 100 percent of their revenue from Title IV programs, ranking between 50 and 75 would allow them to draw 90 percent from Title IV, a ranking between 25-50 would allow them to draw 75 percent, and a ranking between 0-25 would allow them to draw 50 percent from Title IV.  I find this proposed system much more creative than the proposed gainful employment regulations and much more appropriate to implement across the board in higher education regardless of the sector.  The only metric that I would alter would be the cohort default rate as currently measured since it measures repayment over three years versus looking at the higher percentage of loans that are eventually repaid and looks at overall defaults with no weighting on the dollars involved.

As mentioned earlier, Christensen provides recommendations for traditional university leaders as well as online university leaders.  First, Christensen recommends that the correct business model must be applied for the task.  He states that online universities are organized to optimize the flow of students rather than the faculty’s ability to do their research.  The authors also recommend that traditional universities develop a strategy of focus and to choose in what area they will be excellent, thus reducing complexity that allows a reduction in costs.

Lastly, Christensen and his co-authors recommend that administrators at traditional universities frame online learning as a long-term innovation that will allow them to use it to disrupt the traditional classroom experience.  Peer-to-peer teaching employed in many asynchronous online classes allows for students to learn more deeply because they have to adapt the material to fit their individual experiences and cognitive abilities.

The authors state that their intention was not to study higher education as a whole but to examine the industry’s challenges as “problems of managing innovation effectively.”  I think that their lens is a worthy examination that policymakers should consider when looking at the funding challenges that are occurring in many states.  Higher education is complex, but as the authors point out, complexity increases costs and a focus on teaching and outcomes can point the way to a reduction in costs allowing for a more affordable tuition for students.

All of the above performance categories are relevant to my personal area of interest for higher education research, student retention and degree completion.  Grades issued to the states on a macro basis for these categories may be relevant for evaluating performance at an institutional level, particularly for institutions whose enrollment draws heavily from a single state.

 In March of 2009, NCPPHE issued a report entitled “The Challenge to States:  Preserving College Access and Affordability in a Time of Crisis.” The report was written by the Center, but its content was guided by a group of influential thought leaders in higher education policies.  The report was issued shortly after passage of the American Recovery and Reinvestment Act of 2009 (the Stimulus Act) and the report encouraged states to set priorities and spend the one-time federal funds wisely.

There were five Principles that the report encouraged policymakers, governing boards, and leaders to honor as they adjusted their budgets for both the economic impact of the recession as well as the application of stimulus funds for higher education.  These principles were:

•  Establish undergraduate access and affordability as the highest priority for state higher education policy and support.
• Protect access.  All eligible students seeking to enroll at two-and four-year public institutions should be accommodated by institutions that can meet their needs.
• Preserve the educational safety net by prioritizing enrollment capacity and affordable tuition at broad access institutions serving students from low- and middle-income families.
• Expect measurable productivity increases in education, both immediate and long-term, at all institutions.  Do not micromanage the process, but insist on accountability for resource use and performance from governing boards and institutional leaders.
• Use one-time revenues, including federal stimulus funds, to protect access and affordability and to leverage improvements in productivity, efficiency, and quality.  Avoid using one-time revenues in ways that defer productivity improvements or create long-term dependencies that may exacerbate future financial problems.

 The report provided specific recommendations in the areas of Capacity, Finance, and Productivity.  It concluded by stating that “The issues of how America will finance higher education in the 21^st century will require a new framework and consensus among taxpayers, public officials, state and federal government, and students and families.  But in the immediate crisis, the leadership of governors, legislatures, and governing boards is critical.  They must devise and implement strategies to preserve college opportunity while stimulating innovations to prepare for a future that will require enhanced access, quality, cost-effectiveness, and productivity.”

 I decided to write about this report because of the current discussions in Congress and in the press about higher education.  The Measuring Up 2010 report will be issued this year and given California’s financial crisis, all 50 states will more than likely receive an F in affordability (California’s grade in 2008 was C-, the only state with a passing grade in affordability but one in which the trend was downward). 

The Measuring Up 2008 report provided constant dollar figures showing the increases since 1982-84 in the United States in the Consumer Price Index (106%), Median Family Income (147%), Medical Care (251%), and College Tuition and Fees (439%). 

The data in Figure 5 of the report was used to demonstrate in subsequent tables how the increases in college tuition and fees had outpaced family income and other costs to create a situation where a college education was essentially unaffordable for members of the lowest two quintiles of family income.  The Measuring Up reports provide additional data from time to time.  It will be interesting to see if this year’s report provides any commentary related to the March 2009 Challenge to States report.  Based on many of the articles that I read regarding state higher education financial challenges, I doubt that many states followed many of the principles and recommendations in the report.  Given that President Obama has recommended another stimulus act for colleges, perhaps recommendations from this report could be utilized as guidelines for dispensing further funds otherwise as a country, we will continue to expand the gap of access and affordability in higher education for many of our citizens.