Home Current Events Why Higher Ed Is Reopening: “It’s the Business Model, Stupid!”
Why Higher Ed Is Reopening: “It’s the Business Model, Stupid!”

Why Higher Ed Is Reopening: “It’s the Business Model, Stupid!”


Paraphrasing from political strategist James Carville’s famous line, “It’s the economy, stupid!”, I thought it would be appropriate to explain the reason why a significant number of traditional colleges and universities announced plans to return to campus this fall, instead of continuing with online courses for at least another semester or two.

As of Friday, August 21, Davidson College’s College Crisis Initiative Dashboard reported that for the Fall 2020 semester, 177 institutions will be fully online, 793 will be primarily online, 457 will be hybrid, 578 will be primarily in person, 73 will be fully in-person, 714 are to be determined (TBD), and 166 are classified as other out of 2,958 listed. On July 24, 121 institutions were fully online, 694 were primarily online, 480 were hybrid, 631 were primarily in person, 74 fully in person, 807 were TBD, and 156 were other.

In less than a month, the fully online and primarily online institutions grew by 155 or 19%. These online totals do not include the notable conversions of UNC-Chapel Hill, Michigan State, NC State, Drexel, and LaSalle that occurred this past week due to drastically increased cases of COVID-19 among students and staff.

Included in the 578 institutions that are primarily in-person are likely universities with football teams that play in the Power Five athletic conferences: the SEC, Big 12, ACC, Big 10, and PAC 12. Two of those conferences, the PAC 12 and Big 10, announced that they would not play football this fall, but the other three continue to maintain that there will be a fall football schedule.

Why? Because football covers most of the costs of major college athletic departments. Last April, USA Today writer Steve Berkowitz reported that the Power Five teams would lose $4.1 billion in revenues if this fall’s football season was cancelled. While two of the five conferences have postponed the fall football season, the other three continue to state publicly that the fall football season will happen.

Last spring, after closing their campuses and moving classes online, most colleges provided a prorated refund of room and board fees for the rest of the semester. At many campuses, room and board fees are needed to balance the budget.

According to the American Council on Education, last spring’s campus closures and the move to online education cost colleges and universities $46.6 billion. Room and board refunds were included in those totals. In a recent article in USA Today, writer Chris Quintana reported that money is a huge factor weighing in on the decision of many colleges to reopen.

It’s not just the losses of revenues from campus housing, dining, and bookstores. It’s also the risk of students choosing to defer attending a semester or two with hopes that next year will see a semi-normal return to what they thought their college experience should be.

With all the evidence pointing to the fact that the current higher education business model is broken, one of the best summaries of the situation that I read came from an outside observer. A recent post from Gapingvoid, a Culture Design Group, is worth quoting:

“The problem is that university business models are not anti-fragile, they aren’t even smart. They are based upon the way the world used to be, not the way it is, and definitely not the way it is going to be. There is a case that the current higher ed model no longer serves the interests of society, and COVID is shining a light on the hypocrisy.

One does not need a PhD to know that socialization is one of the main drivers for students to attend universities. The universities capitalize on this by creating lucrative franchises that provide unity, community, and connection for their students.

Greek life, classes, study groups, student activities are all about socialization and connecting with contemporaries. For the Ivys, proximity is arguably the greatest value of the education. By removing the ability to socialize, a large part of the value proposition is removed.

This is an inconvenient fact now for the higher education machine. Leadership proceeds pretending that the reality of school is simply about classes and they are applying dictatorial, draconian tools to keep students from assembling, despite having called them back to school.

Kids will be kids and calling thousands of them back to a far-away city to do what they could have done from home, e.g. watch classes via Zoom – is just a bad idea. We all know it is about business models. It is about money, and the point of this is that the culture of higher education, the archaic premise of faculty for life, all of it, needs to be reexamined, possibly burnt down, and started over.

The point is that ‘study from home’ at a reduced cost could’ve been a temporary solution for a semester. Instead, they put students and society at risk, principally because of outdated business models, and we all suffer as a result. And, even worse, kids are being penalized for being kids – having been lured back to a place where they are not safe.

Is this really the best that the brightest minds in our country can come up with?”

Last week, I provided examples for each of EDUCAUSE’s Grand Challenges to higher education based on the utilization of technology at my institution, American Public University System. Operating online-only has enabled us to provide an undergraduate education at a fraction of what most colleges charge.

For sure, the socialization that a traditional college provides its campus-based students is not available online, but very few of our working adult students have the time for those types of traditional activities. Whether you don’t have the time for it or the local health department has banned it, why pay for it?

There are politicians at the federal and state level who critique higher education, based on their personal experiences several decades ago when online education did not exist. When the cost of higher education is deconstructed to its various components, it’s logical that online classes should cost less than a campus-based experience.

The experience shouldn’t and doesn’t have to be inferior because it costs less. Appropriately designed online courses provide the same learning outcomes as face-to-face courses.

The ultimate question is how much longer will students want to pay for the socialization experience cited by the Gapingvoid Culture Design Group, particularly when it is more than half of the cost of a college education? Will the market be shaped by its customers or its regulators? One way or the other, the COVID-19 pandemic is likely to accelerate a market shift that has been in the making for years.



Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.


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