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.

The authors point out that according to the U.S. Department of Education, only 20 percent of community college students graduate within three years and only 40 percent of four year college students graduate within six years.  In fact, only 27 percent of college students attend the traditional residential college that most people envision as the idyllic college environment.  Even more telling of the changes in college student profiles, 45 percent of students attending four year colleges reported working more than 20 hours per week and 60 percent of students attending two year colleges reported working more than 20 hours per week.

Data from the survey indicates that the number one reason students cite for dropping out of college is that they had to work and attend school at the same time and the stress of doing both caused them to leave school eventually.  Balancing work and school was a bigger barrier for them than financing the cost of an education (54 percent versus 31 percent).  Only 10 percent of students who left college cited boredom as the reason.  Over 55 percent of students surveyed stated that they had to work full-time and that they did not see how they could work full-time and go to school at the same time.

Nearly six out of 10 people in the study who left college stated that they had to pay for college themselves without parental support.  In addition, their process for selecting the college of their choice was much less rigorous than most people imagine.   Nearly two-thirds of those students who did not complete college stated that they selected a college because of its convenient location to them while 60 percent chose their college because its schedule worked with theirs and 57 percent selected a college because its tuition and fees were affordable.

Affordability and access have an ongoing theme with some of the survey responses, similar to the two key themes from the final report of the Spellings Commission.  Approximately 80 percent of students who dropped out indicated that more financial aid should be available for part-time students and that more college classes should be offered at nights and on weekends.  Nearly the same percentage stated that the cost of attending college should be cut by 25 percent.  Approximately 57 percent indicated that it would be helpful if there were more classes offered online.  Over 60 percent of all students surveyed (graduates and dropouts) stated that most people do not have the opportunity to go to college.

While the survey results were interesting, there were not many findings that surprised me.  The data from the Measuring Up annual reports indicate that many Americans cannot afford college.  The growth of online programs at both for-profit and non-profit institution demonstrate the need for adult students to attend an institution whose courses are available on their time schedule.  The request for federal student aid for part-time students is long overdue, and if there were one item from this study that I would recommend policy makers to consider, it would be that recommendation.  Data from the U.S. Department of Education confirms that 73 percent of today’s college students do not meet the traditional profile of full-time, residential students.  The financial aid system rewards full-time students and penalizes part-time students, particularly those who work full time.  With our president’s goal of having more Americans attain college degrees, finding ways to make a college education more affordable should be a national imperative.

According to the policy brief, of the students who earned a degree or certificate program during the 2007-2008 academic year, some 41 percent graduated with no debt whatsoever.  Those students borrowing more than $40,000 to pay for their educations represented only six percent of total student borrowing.  Students borrowing money to pay for a certificate program carried substantially less debt overall than those borrowing money to pay for an associate or bachelors degree.  A meager one percent of those borrowing money for a certificate program found themselves $40,000 or more in debt upon graduation while ten percent of those borrowing to complete a bachelors degree carried that level of debt or more upon graduation.  The above statistics found in the College Board’s policy brief are logical when one considers the number of credits required to complete each of the three degree types compared above.  What’s not logical is the $40,000 threshold selected to evaluate reasonable debt loads.  Obtaining a $40,000 loan for a certificate program is almost certain to lead to a negative ROI unless the certificate is related to technical training in an extremely high paying profession.  Even then, it is a risky venture.  While borrowing $40,000 for a four year degree sounds better, it may not be relative to the average loan balance of graduating students.  The College Board briefing does not take into account the students who borrow money to attend college who don’t graduate at all, or the students who attend college until their money runs out.  Using limited outcomes with a broad brush to stimulate policy discussions can be misleading.  With approximately half of college freshmen graduating in six years, we shouldn’t ignore the half that don’t finish.

Lewin points out in her article that “over all, for all kinds of degrees and settings, the median student loan debt of borrowers in 2007-08 was $15,123, up 11 percent from…2003-04.”  There are many who argue that even this amount of student debt is too much.  It seems ironic that today’s students seem to realize the importance of a college education as evidenced by increasing enrollments nationwide yet are often hindered in their efforts by the daunting costs.  A later article in the September 4th issue of The Wall Street Journal cites evidence of the government’s National Postsecondary Student Aid Study (NPSAS) that two-thirds of college students borrow money for college while only 12 years ago, just over half of all college students borrowed money to fund their educations with the average amount borrowed significantly less ($13,172) than it is today ($23,186 according to the article).

An article published in The Chronicle of Higher Education on the same day the New York Times article appeared takes a different view on the data presented in the report.  The author, Beckie Supiano, writes of the increasing level of student debt over the last five years rather than focusing on the 41 percent who manage to graduate with no student debt.  Supiano also points out in her article that the data does not account for PLUS parent loans, loans to students from family members or friends, or credit card debt accumulated from paying college tuition.  College students and recent graduates are carrying more credit card debt than their counterparts who graduated only four years ago.  According to a recent study conducted by Sallie Mae, today’s graduates leave college with 41 percent more credit card debt than those who graduated only four years ago with one in five owing at least $7,000 in credit card debt upon graduation.  Only 20 percent of students with credit card debt reported paying off their balances every month.  Considering the increasing levels of credit card debt among today’s college students and recent graduates, taking such debt into consideration may dramatically change the report’s conclusions. 

While the College Board appears to find these results reassuring, there are several elements of the big picture that should be given consideration.  First, “manageable” is a relative term.  What may be “manageable” for one individual may not be for another.  While there is obvious value in identifying trends in the higher education industry, we must be careful to realize that individual cases matter.  As the report states, there are still at least ten percent of the 2008 graduating class who are carrying $40,000 or more in student debt.  When the National Center for Public Policy in Higher Education issues its annual Measuring Up report, it reports college affordability data by income quintile since earnings above or below these thresholds can be quite influential over the ability of a student to attend college.  Given the fact that students from the higher income quintile groups have a higher college completion rate, the College Board’s usage of data from graduates only doesn’t reflect the overall picture.

Additionally, in today’s turbulent economic conditions, job prospects for recent college graduates are limited.  Factor in jobs that pay a “good” salary and the options shrink that much more.  As I discussed in an article earlier this summer, recent college graduates are struggling to find relevant jobs, much less one that pays them a salary high enough to live and pay off their student loans in a timely manner.  A May 9 article in The Wall Street Journal predicted that “even those who land jobs will likely suffer lower wages for a decade or more compared to those lucky enough to graduate in better times.”  As The Wall Street Journal article of September 4th points out, many recent college graduates are so economically strapped by student debt upon graduation that they are beginning to delay significant milestones in their lives including getting married, buying houses, and having children.  The article notes that a 2006 survey conducted by Mathew Greenwald & Associates, Inc. found that of 1,508 college graduates under the age of 35, 39 percent believe that it will take them more than ten years to pay off their household’s education-related debt. 

Lastly, the College Board  analysis  does not differentiate between full-time students and part-time students.  Attending part-time not only allows a student to maintain some form of employment while in school, it also may be a method used to avoid incurring significant student debt.  The Associated Press (AP) published an article on August 28th that outlines President Obama’s plan to boost Pell Grants in an attempt to not only increase access to college opportunities but to provide greater affordability for low-income students.  The plan would “ensure lower interest rates for need-based college loans” and “provide more college aid to veterans.”  Pell Grants are funds that a recipient is not required to pay back.  Even with President Obama’s stated goals for the Pell Grant system, however, many question whether the initiative goes far enough in addressing the economic burdens of attending college.  For example, as the AP article describes, “the maximum Pell Grant last year was $4,731” while “public college tuition and fees were $6,585.”  It is important to note that not every Pell Grant recipient receives the maximum amount and even if he or she is so lucky, there remains a shortfall of nearly $2,000 still needed to attend even a public college.  Additionally, there are no caps on tuition increases in the Federal Financial Aid system similar to the Medicare and Medicaid systems in healthcare.  Increasing Pell Grants may not make any headway if colleges continue to increase tuitions at rates higher than the earnings of the average family.

 The College Board data does not reassure me that today’s students are not carrying as much debt as many previously thought. There are conflicting sources of data that make it appear that the College Board’s policy piece is not representative of the entire college continuum.  I think the nation’s policymakers would be better off commissioning a consumer survey to see what the debt expectations are of our graduating high school seniors and their families and then comparing that data to the various sectors (fulltime, part-time, etc.).  The enrollment shift that appears to be occurring this fall and may well continue into the spring semester and next year may prove that the student consumers have become more educated than the organizations who study them.