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 September 1962 Rachel Carson published her groundbreaking work, Silent Spring, documenting the negative impact of pesticides on the environment, specifically on birds.  The book received nationwide acclaim and landed on the New York Times best-seller list where it stayed for 31 weeks.  In 1962, the New York Times wrote of Carson and Silent Spring, “’She tries to scare the living daylights out of us and, in large measure, succeeds.’” The editors of Discover Magazine recently included Silent Spring among its list of the 25 greatest science books of all time.  Prior to Carson’s book, environmentalism and sustainability were lofty ideals that had very little concrete application and brought even less sense of collective urgency.  As a result of Carson’s book, however, tangible actions were taken (the banning of the harmful pesticide DDT).  Carson proved to us all that even the voice of one individual can make a difference and with her voice, given to us through her work, Silent Spring, the modern environmental movement was born. 

Through various fits and starts, the American environmental movement has continued to gain momentum.  The passage of the National Environmental Policy Act (NEPA) in 1970 was a promising step in the right direction and represented the world’s first national policy on the environment.  The NEPA met with resistance in the United States, however, but sparked a larger movement and environmentalism as a discipline and practice began to spread across the globe.  National efforts to address environmental problems including climate change became more commonplace and the United Nations established its Environment Programme in 1972 as a result of the UN Conference on the Human Environment.  In recent years, despite international criticism regarding the United States’ stance on several international environmental treaties (most notably the Kyoto Protocol) Americans are beginning to see sustainability featured more prominently in their daily lives.  Addressing what is arguably the world’s most pressing collective issue will take more than a conscious recycling effort.  We must realize that negative changes to the environment impact every aspect of our lives and must be addressed in a holistic and comprehensive fashion.  One sector of American life is taking sustainability very seriously – American higher education is leading the march toward promoting sustainability. 

As colleges and universities began to consider the impact of their own operations on the environment, they also began to disseminate information about sustainability to their students, either formally or informally.  In 2006, as a result of planning sessions among a group of college and university presidents and a representatives from a variety of environmental organizations (including Second Nature and ecoAmerica) held at the Association for the Advancement of Sustainability in Higher Education (AASHE) conference at Arizona State University, 12 devoted college and university presidents outlined what would later become known as the American College and University Presidents’ Climate Commitment (ACUPCC).  By March 2007, 152 college and university presidents (I was one of them) signed the precedent-setting commitment aimed at providing a framework for addressing sustainability in higher education.  Today, nearly 700 institutions of higher education have signed the commitment.  Each of them has committed to reducing their environmental impact and working toward eventually achieving complete carbon neutrality by a date of their individual choosing based on their specific circumstances (based on our location in West Virginia and the limited fuel mix available to us at this point, APUS has chosen 2050).  While the goal is ambitious, I am convinced that if there is any collective group capable of addressing such a pressing issue, it is higher education. 

Colleges and universities have served as the nursery for nurturing social movements in America for decades.  As with the civil rights movement and the women’s rights movement, the growing movement to address our collective issue of global environmental change is being fostered on college and university campuses across the country.  It makes sense that these settings would nurture such movements – college campuses are packed with great minds eager to learn and understand, eager to make a difference in the world.  Though the ACUPCC provides a logical and effective framework for implementing sustainability into operations and curricula, many schools who have not signed that specific commitment are taking the issue of environmental change very seriously, as well. 

As students graduate from colleges and universities that recognize the critical nature of and are working to address the issues of global changes in the environment, they will enter the workplace more prepared than any previous generation to tackle these issues on an even grander scale.  As with other social movements whose sparks were ignited on college campuses and eventually spilled into our larger society, so too will be the path of the sustainability movement.  Colleges and universities are realizing that it is no longer enough to discuss lofty ideals in a theoretical setting.  We all must take collective action to address the world’s most pressing problems.  I applaud those schools that are working to address the issues related to environmental change and feel confident that this is just the first wave of a movement that will continue to grow.

In 2004, the American Public University System (APUS) Board of Trustees elected Dr. Kate Zatz as a new board member.  As APUS’s newly appointed president, I visited Dr. Zatz who worked at Hudson County Community College in Newark, New Jersey.  We talked about a number of things during my visit and I asked her if she could recommend any publications about student retention.  She handed me a copy of Leaving College and told me that it was an excellent resource for reading about student attrition research.  I read it and distributed copies to others at APUS.  Later on, Leaving College and my interest in student retention would inspire my doctoral dissertation and subsequent research related to online student retention.  When I received a pre-publication notice for Completing College: Rethinking Institutional Action a few months ago, I ordered a copy.

In the preface to Completing College, Vincent Tinto states that the goal of his book is not to develop a new theory of retention but to suggest a framework that institutions can utilize in applying policies and actions to improve retention and college completion.  Based on the quantity of dog-eared pages and highlighted paragraphs in my copy, I would say that he has accomplished his goal.

Tinto cites four conditions that must be present at colleges and universities in order to enhance retention and completion.  These four are expectations, support, assessment and feedback, and involvement.  Conveniently, he has organized a chapter of the book to discuss each of these conditions and provides case studies as well as references to research that support the effectiveness of actions in the areas that improve retention and completion.  Another chapter entitled “Administrative Action” provides policies and practices including investments, organizing for a focus on retention, and the timing of actions.  While he notes that some retention practices are effective throughout college, Tinto strongly advocates an institutional focus on the first year student for the most effective return on time and expenses invested.  A three step action plan for institutions is recommended.  The first step is for an institution to align and sequence courses and support courses so that success in one leads to success in the following course(s).  Next, faculty actions and interactions in the classroom are critical to student success.  Lastly, faculty development is critical to the institution’s retention efforts and must be included in a plan.

In the book’s final chapter, Tinto calls for institutions to keep a focus on their retention initiatives and not to let them fade away over time as leaders and participants move on to other responsibilities.  He writes that many institutions have retention projects but that few take them seriously (most include retention projects as just one more item on a long list of projects).  Tinto notes that for adult students in particular, success is measured one class at a time and that dropouts are not always dropouts until a number of years have elapsed (he recommends keeping a dropout in the system for nine years).

Similar to Leaving College, Completing College has two relevant appendixes at the back of the book.  Entitled “Retention and Persistence” and “Retention and Accountability,” these appendixes discuss the difficulty of measuring and defining persistence.  Tinto urges that no one rush to judgment without examining the attributes of students, the nature of their intent, as well as the types of institutions that they attend.  Disappointingly, but understandably, data is not presented related to persistence and completion rates for online institutions or programs nor for for-profit institutions.  While Tinto mentions that these results should be studied, he states that there are not enough reliable studies to make a meaningful comparison.  After discussing various initiatives related to accountability, Tinto states that none of them take into account student swirling (which I have written about before), double dipping, and transfer.  In the case of students enrolling at multiple institutions, Tinto states that this situation raises the issue of which institutions should be accountable and for what.

All in all, Completing College exceeds my expectations as a college administrator.  Vincent Tinto’s research subsequent to Leaving College provided him with the idea of constructing a framework that colleges and universities can use as a basis for action related to improving retention and completion.  The case studies and research cited are excellent examples of projects that worked in certain institutions and with certain students.  The appendixes are helpful for distribution to those on the outside who may still think that all college students are first-time, full-time freshmen who live on campus and who graduate in four years.  Improving retention and completion is a must if our nation is to return to its globally competitive position.  Vincent Tinto has capped his years of research with an excellent book for institutions to utilize if they are serious about improving retention.  I intend to order a few extra copies.

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.

In general, the report finds that revenues are down and spending (overall and per student) reflects that decline.  Recession-related state budget cuts meant deep cuts to educational appropriations.  As a result, schools in every sector of the industry raised tuitions (in some cases significantly) in an attempt to make up that difference.  American Recovery and Reinvestment Act (ARRA) funds may alleviate some pressure in the future but because most institutions did not begin receiving those funds until the last part of 2009, the impact of that funding source is not fully captured in the report. 

Some of the most striking statistics are related to community colleges.  In 2009 alone, community colleges were educating more than 6.5 million students, accounting for approximately one-third of all the nation’s college students.  Though shouldering a large portion of the burden of educating the nation’s college students, community colleges also saw the largest funding declines during the decade.   

The authors point out that “nationwide public appropriations for higher education never completely rebounded from the 2001 recession, and the 2008 recession is proving to be more serious and longer lasting.”  This decline in appropriations has trickled down to have a direct impact on the student.  In an attempt to make up the lost appropriations, most colleges and universities increased tuition consistently over the decade.  Unfortunately for the student, however, most such increases failed to make up the entire difference in lost appropriations and did not equate to an increase in spending per student.  On average, increases in tuition revenues made up for only about half of lost appropriations except for at public community colleges where tuition increases accounted for less than half of the difference. 

The findings outlined in Trends in College Spending are particularly salient in the current economic environment.  As the report’s authors note, when compared to the 2001 recession, “…the 2008 recession is proving to be more serious and longer lasting.”  Even though the recession was identified as “over” in mid-2009, the economy has clearly not rebounded and unemployment remains significant (9.1% as of last month).  According to Mark Kantrowitz, publisher of FinAid.org, “the average increase in annual college enrollment during a recession is 567,400 (4.5% of total college enrollment), compared with 150,800 (1.2% of total college enrollment) between recessions.”  Between 2008 and 2009, as reported in the Trends in College Spending report, enrollments in US colleges and universities increased by more than 860,000 students, “nearly a 5 percent increase since 2008 and the single largest one-year increase since the mid-1970s.” 

One of the only positive trends found in the data is related to educational productivity.  In 2002, colleges and universities began providing data on undergraduate credit hours per degree.  The analysis done for the Delta Cost Project report show that colleges and universities are using credits earned more effectively, reducing total credits to be taken to earn a degree.  The authors note that more effective use of credit hours earned has “translat[ed] into a ‘savings’ of nearly a half a semester’s worth of credits.”  This is a very positive finding especially when one considers the increase in tuition rates across the board and decrease in spending per student. 

As the authors point out, the ramifications of the “Great Recession” of 2008 are still being felt and will continue to reverberate through the industry for at least the next several years.  President Obama, however, has stated that it is his hope and intention that America regains its standing as number one in the world for number of college graduates.  In considering the policy implications of the study’s findings, the authors note that even with the improvements in instructional efficiency, much more needs to be done if the nation is to achieve the President’s goals.  The report notes that reaching such an ambitious goal (the United States currently ranks 12th in the world), “will require improvements in educational performance at every level of the educational pipeline, from high school graduation to college completion, averaging 4 percent per year.  The gains in degree/certificate completion reported here are close to 1 percent per year, and by themselves are not enough to meet the attainment goals…”