(keynote delivered at the Distance Learning Administration Conference on June 5, 2013)
I began writing this speech nearly three months ago. A week and a half ago, I wrapped it up and thought I had better run through it one last time in case any new educational technology had been released that I needed to discuss today. While nothing notable has been released, I am sure that somewhere, someone with a background in technology is working on the next great thing to sell to students and/or institutions.
Let’s start by taking a look at the landscape today in higher education? (Slide 2)
Over the past 20 years, total enrollment in higher education increased to an all time high of approximately 21 million students in Fall 2010 and 2011. More high school graduates are attending college than ever before. The percentage of first time, full time freshmen who complete their degree in four years is 37.9%, increasing to 58.3% in six years. The percentage of all college students who conform to the traditional definition of full-time 18-22 year olds is less than 20% of all college students. Many are working adults (over 25 years old) who are earning their degree as a part time student.
In addition to higher overall enrollments, the average student taking longer to complete college, and many non-traditional students attending college; the cost of college has become a major issue. (Slide 3) The increase in the cost of attending college has outstripped the increase in annual earnings of the average family by 83% for families in the middle 20% over the past 30 years according to The College Board. See how the size of the slice of pie in the chart has increased. (Slide 4) The average student who graduated from college in 2012 accumulated approximately $23,800 in student loan balances and that number continues to increase. Even worse, from an administrator’s perspective, borrowing money to attend college is no longer ignored or as casually cast aside as it once was. How many times have you heard people say “as long as you graduate from college, you’ll be able to repay your student loans”? With student loan balances above $1 trillion and exceeding total credit card debt, the student loan issue is front and center.
Salaries for freshly minted college graduates have flattened since 2007, creating a lower return on investment for most grads, particularly those who have borrowed to pay for their education. (Slide 5) Recent statewide surveys in Texas, Virginia, Colorado and Tennessee by College Measures indicates that graduates with a two year technical degree in those states earn more than graduates from four year degree programs. Also since 2007, the percentage of recent college grads who are unemployed has increased, creating increased pressure on the sector from politicians, policy makers, parents, and graduates. (Slide 6) In fact, a 2013 Inside Higher Ed survey of parents indicated that 38% of parents responding believed that the most important reason for their children to attend college is to get a job and 34% were likely to restrict their child’s choice of college based on tuition. Showing the generational differences in thinking about higher ed, 88% of 2012’s college freshmen responding to a UCLA HERI survey believed that college attendance is mandatory for a better job. Evidently, those of us who are parents have a higher tendency to think of education and the acquisition of knowledge as a reason to attend college whereas our children are looking for employment. Finally, if there ever was a disconnect between college presidents and employers, you don’t have to look any further than the data from a Chronicle of Higher Education 2013 slide pictured here. (Slide 7) Evidence points to a huge disconnect between college presidents, 54% of whom believe that a bachelor’s degree has increased in value since 2005, and employers with only 33% of those surveyed believing that the value of a 4-year degree has increased in that time. Of course that wouldn’t be the first time that college presidents were out of touch with reality.
Over the past 20 years, the number of students taking online classes has increased exponentially moving from 11% of all college students taking at least one course in 2003 to 32.7% in 2012. (Slide 8) According to the most recent Sloan Consortium survey, nearly one third of all college students (6.7M) took at least one online course in the most recent year and it’s likely that students taking at least one online course will reach 10 million in the not too distant future. (Slide 9) Eduventures is another organization that attempts to calculate students who only attend college through online degree programs and estimates that number to be approximately 3.2 million in the most recent year with nearly 24% of all adult college students estimated to be enrolled in fully online degree programs and the percentage is increasing.
You don’t have to be a cost accountant to think that online courses should be able to lower the cost of education. Yet during this 20-year period of rapidly increasing adoption of online education, the exact opposite has occurred. Why? Because many institutions added online courses, not programs, to a fairly standard, high fixed cost traditional model of higher education. Some traditional institutions chose to create online master’s degree programs in order to stay away from the turf wars that might have been created with the undergraduate faculty and were able to keep pricing of the online and on-ground master’s programs relatively the same. Until the last seven or eight years, many of the successful 100% online undergraduate programs were established by for-profit institutions and were priced between public institutions and private colleges. Pricing decisions were made based on the perceived market positioning and not the cost of operating through technology.
However, if you operate online only, there are some rather obvious traditional college operating expenses that can be eliminated. After all, if a student can live at home and a faculty member can teach from home, the physical plant costs are substantially lowered. No classroom buildings, no laboratories, no cafeterias, no student centers, no dormitories, fewer parking lots, less security, no athletic teams, no athletic facilities, no coaches, no athletics compliance staff, etc. Students don’t have the benefit of these facilities or services, but they shouldn’t have to pay for them either. Pricing has been one of the differentiators that we have used at APUS, choosing not to take higher undergraduate tuition for the past 12 years but to let our students receive the financial benefit from lower costs. Our thinking has been that students who have a positive and affordable online experience will share that story with others. As a result, over 40% of our students indicate that they heard about our school from another student or a faculty member. That in turn reduces our marketing costs.
Additionally, most of the purely online institutions have been able to find efficiencies in administrative expenses by increasing enrollments, automating many back office processes, and effectively taking advantage of scale.
Because of the market demand for an online degree that was convenient for primarily adults who couldn’t or didn’t want to travel to a physical campus, billions of dollars have been invested in technology to enable the successful scaling of higher education. Some of the technology developed is proprietary but most of it is available to all institutions.
Institutions and companies serving the online sector have invested in (Slides 10, 11):
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Because all of our courses are online at APUS, we have implemented all of these systems and more. If we had not implemented them, we would not have been able to have scaled our enrollment to its current levels while holding tuition flat AND we would not have been able to have served our students as effectively and efficiently as we have. As you can see, the bulk of investment and development in these systems and automation at APUS and the majority of the institutions offering online programs have occurred with the non-learning processes. Much of the reason for this was related to a lack of traditional systems designed to accommodate online students. Another reason was that politically, at most institutions, it was easier to justify and implement automated systems for the non-teaching functions. Cutting staff positions that had been automated was easier to do than adjusting teaching assignments, particularly when there wasn’t enough data available to determine most effective teaching styles, ratios, etc.
With all of the systems implementation to allow online programs to scale, you would think that prices would have flattened out. That hasn’t happened. Why? At institutions that offer online classes along with residential classes, the tuition is usually the same because the business models are not designed to work together very well. While many traditionalists disagreed with some of the writings of Clayton Christensen and Henry Eyring in their book, The Innovative University I thought the authors’ most understated piece of advice to traditional colleges was: build and maintain your residential model at an optimal cost level in order to break even and build an online model that is priced incrementally instead of fully-loaded. (Slide 12) Christiansen and Eyring also point out that the costs of running an online university are approximately half of that of running a traditional university. I wonder if that’s why the American Bar Association doesn’t accredit online law degrees? More students at a lower price equal more attorneys earning less. Oh, well, I guess that’s why accredited law schools have seen enrollment declines the past three years with an estimated application decline of approximately 13.4% for enrollments this fall
At the end of the day, the survivors of this technology disruption in higher education will be those who figure out a working economic model. Designing a working model won’t be easy primarily for some of the following reasons.
Buying online classes is becoming cheaper and cheaper. So is building them as long as you’ve invested in technology and people infrastructure. Burck Smith, founder of Straighterline, has evangelized for years that the cost of teaching an online course was much cheaper than what colleges were charging for on ground courses. His particular model ignored faculty initially, providing tutor assistance for self-motivated learners. More recently, Straighterline has offered an option to have an instructor-led course for an incremental cost of $100/course.
There are certain courses that set themselves up well for massification, in my opinion. Primarily, these are general education courses like English composition, College Algebra, Beginning Calculus, Introduction to Psychology, etc. Ignoring the need for remedial education, why shouldn’t the general content for these courses be the same? If you operate a large state system like California, Texas, North Carolina, and Florida, why shouldn’t you lower your cost of education by building standardized online courses for half a dozen or so general education courses. What would the cost reduction be related to physical facilities alone? According to Christensen, the cost of operating online is half of face-to-face.
It’s almost impossible to find a day when there’s not an article about the latest rage, MOOCs. My favorite reaction to MOOCs was former University of Massachusetts Chancellor Dr. Jack Wilson’s at last year’s Sloan Consortium kickoff keynote when he stated, “you would think we haven’t been doing anything in online learning for the last 20 years based on the publicity the MOOCs are generating.” The popular form of MOOCs bears little resemblance to the original version created by the Canadian academics. They’re massive in terms of enrollment but most of them are lectures by rockstar professors sliced into 4-6 minute segments in order to keep the attention of the students who take them. There’s little to no interaction between the professor and the students. MOOCs are currently being offered for free. The institutions that have built the courses aren’t being altruistic. They haven’t figured out the business model yet. However, ACE has reviewed five of the Coursera MOOCs and has recommended college credit for those who complete the courses with a passing grade. Some colleges including mine have agreed to accept the ACE recommendations for students who complete the course and take a proctored final exam. Ultimately, it is up to each degree-granting institution whether to accept credit for these courses and Sloan’s “Changing Course” report indicates that Chief Academic Officers are not entirely sold on the legitimacy of MOOCs with only 28% indicating that MOOCs are a sustainable method for offering courses. Regardless of Chief Academic Officer and faculty expectations, Coursera recently announced a deal with 8 or 9 state systems to either offer their courses to students at those institutions or offer their platform for institutionally designed MOOCs. The details are a little fuzzy, but my guess is that the larger state institutions will lease the platform and develop their own MOOCs assuming that they’re committed to the idea of offering lower cost, online classes.
What hinders the adoption of MOOCs for general education courses at many institutions? One reason is that general education courses are already a significant contributor to margins through the usage of large lecture classes and graduate assistants as teaching assistants. Another reason may be arrogance – why should my institution use the same Calculus textbook as your institution? The biggest reason why MOOCs are NOT the panacea for general education courses is that they’re not designed to maximize effective learning outcomes. In December, my colleague Dr. Jennifer Stephens Helm and I co-authored a piece for the monthly viewpoints of the National Institute for Learning Outcomes Assessment entitled “Why Learning Outcomes Assessment is Key to the Future of MOOCs.” (Slide 13) Essentially, we argued that until data is available about how much a student learns from the course, the value of that course is unknown.
Most online classes have been taught like a traditional class, including MOOCs. Technology has only recently been used to assist learning but holds the potential to improve learning. Using a digital classroom, every interaction can be recorded and measured. My colleague, Dr. Phil Ice, and I participated on a panel at the Sloan Emerging Technologies Conference in San Jose a couple of years ago and in response to a question from a Chronicle of Higher Education reporter, Phil noted that “in its basic form, the data from an online classroom is similar to the data from a retail transaction on Amazon.com.” If Amazon (and others) are able to mine that data to determine the buyer’s preferences, why can’t educators mine the data from a classroom in a similar manner to determine a student’s learning style and adjust the teaching in a way to best enable that individual to complete the course and the program. The ability to shift the directional focus of the instruction based on the student’s action(s) is increasing rapidly through innovations like the Open Learning Initiative (OLI) classrooms developed at Carnegie Mellon.
OLI courses utilize Artificial Intelligence to focus on the area where the student needs guidance and reinforcement in assignments until the material is mastered. It’s one of the first examples of personalized or adaptive learning, one of the latest buzzwords for a theoretical course objective enabled by technology but implemented in very few online courses today. It definitely won’t be the last example. A year ago last month, the Gates Foundation convened a group of technology leaders from a dozen or so institutions to discuss the future of personalized or adaptive learning. From that meeting and others, a report was ultimately produced by Education Growth Advisors that looked at 70 companies offering adaptive learning products. As noted in an April 4, 2013 Inside Higher Ed article by Paul Fain, the group attempted to define adaptive learning as “adaptive learning takes a sophisticated, data-driven and in some cases, non-linear approach to instruction and remediation, adjusting to a learner’s interactions and demonstrated performance level and subsequently anticipating what types of content and resources learners’ need at a specific point in time to make progress.” The next slide (Slide 14) shows an example of a taxonomy overview constructed by the group. I highly recommend reading this report for a thorough overview of adaptive learning and ways in which institutions and vendors are thinking about technology enhanced learning beyond today’s versions of online courses. The next slide (slide 15) shows how the report has grouped 8 of the 70 vendors identified and the segment of education that their product is designed for.
One of the vendors identified in Slide 15 is the Carnegie Mellon OLI. The researchers developing those courses believe that one instructor for 200 students is a reasonable ratio for leading the online courses that they’ve developed. At the same time, many institutions have capped their online enrollments at 20 or 30 per class, citing best practices in engagement between faculty and students. Whether it’s 20 or 200, that’s a long way away from 100,000 students as are currently enrolled in some of the largest MOOCs.
If you agree with me that the contents of many general education courses are generic, then why should the price of access be high? Why not use OLI courses? Why not have a state or a private foundation pay CMU, Stanford, or others to develop an OLI to personalize the learning and help the students maximize their learning? If we can do this, we can lower the cost of the first two years of college. Granted, it isn’t the same experience idyllically described by many, but that experience is getting more expensive and out of reach for many. It will be interesting to see how the San Jose State University project with Udacity offering three introductory math MOOCs for approximately $150 per class works out from a learning outcomes perspective. The cost is approximately one fifth of the normal cost per class for a student. It will also be interesting to see if faculty override the Coursera deal with 8 or 9 state systems or if the project will be successful in lowering the cost of courses at those institutions.
Another topic that appears to be getting more and more play in the higher education press is competency-based learning. While it’s arguably been around for 50 years or so, it’s being discussed more and more for several reasons. The first reason is that the changing demographic of the college student is moving from the 18-22 age range to adults over 25 years old. Most adults are unable to attend college full-time and life gets in the way of many successfully completing college. Current estimates are that 42 million Americans have completed some college and have dropped out. Providing recognition and college credit for college level learning on the job or through other experiences shortens the time for degree completion for our adult learners and allows some to earn credit for their years away from college while working. Allowing online competency-based courses also eliminates the clock hour requirement currently required by the Department of Education and also allows students with exceptional academic skills to complete courses as fast as their abilities and time allow. Lastly, partnerships between universities and corporations where on the job training and learning are evaluated for academic credit enable the corporation’s employees to complete their degrees quicker and at a lower cost as well as recognize them dually for workplace and college level accomplishments. One example of a partnership like this is APUS’s partnership with Walmart, where approximately 180 different job positions were evaluated for learning through a thorough review by faculty teams examining the corporate training and on the job experiences of retail employees and managers as well as transportation and logistics managers. Implementing programs like this is a lot of work and careful planning needs to be done to document application of credit to learning. I am sure that there are more of these in process at multiple institutions and many more to come.
If the cost of the first two years of college decreases for many students and successful colleges partner with corporations to leverage on the job learning with academic learning, what will or should differentiate colleges and universities in the remaining two years of four-year baccalaureate programs? What happens to a non-elite, small, residential four-year college that is unable to adjust its fixed cost structure? In my opinion, this is what will determine the winners from the losers. Institutions that focus on the relevance of the curriculum/degree programs offered, the quality of their teaching, the relationship with employers and placement for jobs, and the ability of graduates to attend quality graduate schools will win out. However, the ability to increase tuitions annually with little consideration to the consumer is gone for many colleges and universities. And that leads me to the economic disruption that is about to occur. If technology enables lower costs for the first two years of college for many students, value is created for the student, but not for the institution.
Remember the two basic principles of economics: supply and demand? If every institution begins to offer online courses and programs as part of their strategic plan to bring in additional tuition revenue, excess capacity will be created. I suggest that it already exists. I believe that any of the four institutions with over 80,000 online students could double its enrollments with little difficulty and little need to build additional buildings like traditional institutions need to expand. At the same time, none of the top four institutions in terms of online enrollment has a brand and reputation as strong as any of the elite institutions participating in Coursera and EdX. What if one of them breaks from the pack and begins to offer accredited degrees at low cost? Georgia Tech just announced a $7,000 degree, a Master of Science in Computer Science. Their intention is to attract 10,000 students which is five times more than they’ve graduated from their residential program over the past two decades. Will all of those graduates be hired? Who knows?
If there’s excess capacity, prices are likely to fall. Falling prices should benefit those who cannot afford higher education. However, for some individuals, attending college creates an opportunity cost to their families, depriving them of another wage earner. Others may not have had adequate academic preparation for college; due to substandard school systems, lack of mentors, or both. There may not be enough qualified demand to meet the excess capacity generated by technology. At the same time, institutions offering technology assisted personalized learning courses for educational remediation and college preparation may be able to create a niche market, if offered at the right price point.
If colleges think that moving up the ladder to offer graduate degrees is a panacea for the shrinking tuition dollars, they should apply the same market analysis that they would employ for expanding their undergraduate programs. I agree that more and more, a graduate degree is becoming the differentiator with employers who are looking for a college-educated employee. A recent article (May 25) published in The Washington Post written by Nick Anderson points out the rapid increase in the number of master’s degrees granted by American colleges and universities with a 63% increase from 2000 to 2012, more than 18% higher than the increase in bachelor’s degrees. Perhaps more significant was the statistic that Georgetown University, George Washington University, and Johns Hopkins University now graduate more master’s students each year than undergraduates. Were any of you aware of this? Is this part of a broader trend with elite colleges, not just those in the Washington/Baltimore area? While expanding undergraduate enrollments may not maintain the exclusive image that elite universities desire, it appears from this small sample that elites may be expanding graduate enrollments and in the case of Georgia Tech, are willing to consider big increases in graduate enrollments if admissions standards and academic quality standards can be maintained.
In good conscience, I cannot conclude without a couple of comments. First, I am a glass half full type of person, Myers-Briggs ENTJ classification. (Slide 16) Second, I have always been an active proponent of change whenever quality and or cost will benefit. That activism goes back to my days as a PWC consultant and during 16 years as a healthcare executive. That said, higher education is beyond the tipping point, and technology is accelerating change. While Internet usage and growth seems flat here in the United States, worldwide growth was 8% last year. (Slide 17) Much of that growth is in emerging markets and I would suggest that there are opportunities for U.S. institutions to market to those countries if they offer reasonably priced online programs. Accelerating at a faster rate is the acceptance of mobile technology, currently at a 15% annual growth rate with increasing numbers on this curve line. (Slide 18) With the increasing integration of devices aided by the Internet, the numbers of users are exponentially increasing (as much as 10X) and costs are decreasing. (Slide 19) Recently, I saw a statistic that 68% of America’s high school seniors access the Internet predominantly through their smartphones. If you want to know how the increasing numbers of users are influencing content, check out this slide. (Slide 20) Higher ed would be wise to pay attention.
On the good news side, all of the content being added to the world’s knowledge base through increasing devices and access will require people of intellect to navigate it appropriately. In the past, that role has been led by professors, and I believe the potential is there for them to lead the way in the future provided that they and their institutions understand that the expansion of knowledge access will not be at the same cost that a privileged few (worldwide) were able to pay in the past.
Similar to Jeff Selingo, author of College (Un)Bound, I believe that approximately 1,000 low enrollment, non-elite colleges will close here in the U.S. over the next 5-10 years because they can’t compete for students at today’s tuition levels. (Slide 21) I think that technology will enable improved learning outcomes for entry level, general education, and remedial courses as well as lower the cost of the first two years of college. According to the Council for Adult and Experiential Learning (CAEL) website, America needs to increase its college graduates by 50.8% in order to return to the top nation status and be more competitive globally. We won’t do it with our existing price structure and teaching everyone the same way we have for the last 800 years. There will be a few very big colleges who serve many students at low tuition rates unless regulators or accreditors place caps on institutional sizes which would likely limit college access to the nation’s wealthiest students. The number of people with graduate degrees will increase because those with means will attain additional degrees in order to be more competitive in the employer marketplace. While elite institutions may offer more graduate slots through technology, they’re unlikely to lower their admissions standards, choosing instead to locate suitable candidates globally, probably through free MOOCs used as screening tools. States will likely shrink the number of institutions that are taxpayer supported. Community colleges, medium sized universities, and for-profit universities will increase the number of partnerships with employers. Some of these partnerships will evaluate competencies either with large corporations or across a particular industry. Other partnerships will lead to referrals of working adult students as well as leads for career placements of graduates.
Market differentiation will be important; after all, there are only so many MBA’s or lawyers needed in society. The days of many colleges filling expensive college slots with a promise of a job are unlikely for all but the elite institutions or the least expensive. Meanwhile, the surviving institutions will lead through some or all of these attributes: differentiation, price/value, a blend of technology aided instruction, and corporate partnerships, blending technology with a flexible business model.
In 2005, my dissertation chair, Bob Zemsky, co-authored a book entitled Remaking the American University: Market Smart and Mission Centered. While Bob and his co-authors were somewhat skeptical of online back then, much of the advice in their book can be applied to colleges and universities today. One quote that I find particularly prescient is: “the key to making the academy more publicly relevant and mission centered lies in making it, ironically, even more market sensitive — or, to use the term that we have come to favor, more market smart.” The world is moving too fast for most of us to rest on our laurels. I suggest that every college and university needs to be market smart and to get there quickly.
I’ll leave you with one last thought. Workforce experts say that 7 out of the top 10 jobs 10 years from now have not been created yet. What if colleges were so aligned with corporations and the workforce that degree programs, concentrations, and courses could be changed on the fly so that a graduating student found themselves educated and prepared for the positions that were opening without having to add additional courses, time, and money to prepare for the job market? It’s a market smart goal to aspire to.
Thank you.
