In the past several years, online higher education has come under increased scrutiny by the federal government and policymakers.  As a relatively new trend, online education has been closely examined by some, not so closely examined by others, and has a number of critics.  In a recent report called “Odd Man Out: How Government Supports Private-Sector Innovation, Except in Education,” published by the American Enterprise Institute, author John Bailey notes that an acute lack of support and engagement from government agencies to the private sector in education is not only out of sync with other public-private enterprises, it is counterproductive in attempting to reform higher education. 

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.

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The October 2011 issue of American Enterprise Institute for Public Policy Research’s (AEI) Education Outlook included an interesting analysis of the total cost of a bachelor’s degree titled, “Cheap for Whom?:   How Much Higher Education Costs Taxpayers.”  The authors, Mark Schneider and Jorge Klor de Alva, go beyond a surface analysis of tuition rates, student fees, and books.  Their analysis delves deeper into the overall financial cost model to consider and analyze taxpayer subsidies as part of the cost of a bachelor’s degree. 

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.”

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I read an article in the October 15, 2011 issue of The Economist entitled “Trouble in the Middle.”  The article begins by stating that interest in MBA programs at American business schools peaked in 2009 and applications have fallen since then.  The author states that some business schools are worried that the trend is related to more than just a slow recovering economy, but in fact a greater change.

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.

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Last month the Delta Cost Project released its annual report on college spending, Trends in College Spending 1999-2009: Where Does the Money Come From?  Where Does It Go?  What Does It Buy?  Examining the decade between 1999 and 2009 the report paints a bleak picture of the current state of higher education spending with very small but notable improvements in specific areas. 

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.   

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In March 2000, the heads of state of the European Union (EU) nations set an ambitious goal for themselves: to make the EU “’the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion’” by 2010.  Known as the Lisbon Agenda, this program aimed to revitalize the nations of the EU that had collectively experienced economic stagnation in the years preceding the agreement.  Just as President Obama has identified education in general and college graduation rates in particular (stating that “by 2020, America will once again have the highest proportion of college graduates in the world”) as a vehicle for driving economic growth, the Lisbon Agenda put emphasis on the same.

A 2006 report from the Commission of the European Communities titled “Delivering on the Modernisation Agenda for Universities: Education, Research, and Innovation,” noted that the “modernization of Europe’s universities, involving their interlinked roles of education, research and innovation” is a “core condition” for the success of the Lisbon Agenda.  In that same year, the Spring European Council agreed upon the establishment of the European Institute of Innovation & Technology (EIT) which would “contribute to improving Europe’s capacity for scientific education, research and innovation, while providing an innovative model to inspire and drive change in existing universities, in particular by encouraging multi-disciplinarity and developing the strong partnerships with business that will ensure its relevance.”  Additionally, the Commission called on member nations to create national systems that allowed for geographic mobility of degrees between various EU member states, greater autonomy with strengthened accountability for universities, incentives for partnerships between universities and the business community, and an increased “employability” of graduates. 

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Today’s higher education environment vis-à-vis the national economic situation has ignited a debate over whether a college degree is worth the cost.  Significant budget cuts in many states have meant that colleges are raising tuitions, increasing fees, and offering less in scholarship money to students.  Few students had enough money saved to pay for college prior to the economic downturn which has had a catastrophic impact on many schools (see my daily headline postings and links in the “Impact of the Economy on Higher Education” section of my blog for some examples).  With less money allotted for scholarships, work study programs, and higher tuitions and fees, more students than ever before are incurring large debts to pay for their college educations.  The current unemployment rate stands at 9.1 percent and recent college graduates are reporting extreme difficulties in finding a job.  All of these factors have combined to fuel the debate over whether college is as invaluable as once believed or not valuable at all given recent economic realities.

Within only a couple months of taking office, President Obama announced his goal to increase the national college graduation rate which is woefully low (40.4 percent, according to statistics from the College Board) compared to those of other nations including Japan (53.7 percent), Russia (55.5 percent), and Canada (55.8 percent).  One of the main initiatives associated with President Obama’s plan to boost college graduation rates included a proposal to provide $12 billion in funding to US community colleges over a ten year period.  Per the President’s plan, however, these funds would be for use in improving programs, courses, and facilities; not, in other words, to assist students in paying for their degrees at these schools.  Obama also told community colleges that he would like to see them play a more active role in creating jobs while simultaneously graduating five million more students than current rates by the year 2020. 

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