Biden’s $10K, Higher Ed’s Business Model & The Future Of Knowledge Sharing.

Tech Industry

Higher Education is once again under fire. President Biden’s decision to forgive $10,000 of some student loans has again raised issues of access, affordability and value – which gives us a chance to explore one of biggest and most controversial business models in the US. (Note that it’s much less an issue in other industrialized – and even not so industrialized – countries that have long since addressed access and affordability issues.)

This is a tough one for a professional educator who values the “degree” far more than just a credential. To be clear, I believe the value of higher education is wrapped in knowledge – AKA passports to careers. These careers are increasingly technological or technologically-influenced. So education that includes some aspect of technology – regardless of the field – will serve students well as the world inevitably moves to digital. A bias? Not at all. Find a field or business where technology is a minor player.

I also believe that the higher education business model itself must change. Not just regarding access and affordability, but in terms of content, delivery and partnerships. Will “sages on the stage” persist? Unlikely. Will 4-year degrees dominate outcomes ten years from now? No. There will be alternative forms and content sooner than we think. Ideally, the 4-year universities will evolve aggressively to own these alternatives. They have the infrastructure, the processes and the faculty. They also have the knowledge: American universities are still the envy of the research world. But like most successful business models, there’s a resistance to change described all too well by countless business strategists and historians. I hope that higher education remains on top of its current game while strategizing about the next one, and that it never becomes the Yahoo, Nokia, Blockbuster, Blackberry, JC Penny or Sears of the 21st century.

But let’s talk about today.

Tickets & Passports

As a credential – where students get their resume tickets punched – degrees have value simply because there are still individuals, organizations and industries that expect certain tickets to get punched. Do ticket punchers get what they pay for? Sure, they pay for a credential and they get one. One can argue the ROI on this transaction all day long. They enter these programs to get credentialed and they leave credentialed. Do they learn as much as they should or could? No. Professors in the ticket trenches, sadly, know this is true.

Transaction closed.

Then there are students who want to learn something new, something interesting and, yes, something monetizable – purposes that can co-exist. These students are often undergraduates who know – or have been told – that a degree is the passport to professions in which they might have an interest – and can monetize. The smart ones buy a passport that lets them into multiple professions. We know all about attrition rates and career pivots which represent a journey made possible by knowledge. Career flexibility is a huge part of the transaction, which separates education from training.

Most colleges and universities offer tickets and passports, as they should: business is business.

Dollars & Debts

But tickets and passports are expensive. It’s no secret that tuition has increased much faster than inflation. Student loan debt in the US is an unfathomable, astronomical $1.75 trillion (as of August 2022).

Here’s the breakdown (the bold is mine):

“Average debt

Bachelor’s degree debt

$28,950

Graduate school loan debt

$71,000

Parent PLUS loan debt

$28,778

Law school debt

$145,500

MBA student debt

$66,300

Medical school debt

$201,490

Dental school debt

$292,169

Pharmacy school loan debt

$179,514

Nursing school student debt

$19,928: Associate Degree Nursing (ADN)

$23,711: Bachelor of Science in Nursing (BSN)

$47,321: Master of Science in Nursing (MSN)

Veterinary school debt

$183,302”

Ever wonder why it costs so much to see a dentist – and why dental procedures are barely covered by insurance? Is there a correlation between high medical costs and the average student debt of healthcare professionals (including veterinarians)? Maybe so. Maybe not. But access, affordability and debt sure yield some interesting correlations.

Access & Affordability

Access is a near-perfect function of cost. The wealthier the student, the greater the access. Yes, there have been measurable attempts to improve access with scholarships and Pell grants, but access by poorer students is still largely enabled by debt.

Listen to this:

“Never has a college degree been more necessary to make it in this country. Nearly two-thirds of jobs require some form of postsecondary education, and yet our higher education system is not equipped to do its job. Consider these four troubling facts:

“First, the Pell Grant is not what it used to be. Pell is the cornerstone federal aid program for students from low-income backgrounds to help them pay for college. At its peak, close to 50 years ago, Pell once covered nearly 80 percent of the cost of attendance at public four-year institutions. Today, the maximum Pell award covers less than one-third of the average cost of tuition, fees, and room and board.

“Second, if you think students today can work their way through college, think again. In 47 states, on top of any and all financial aid they receive, low-income students need to work more than 15 hours per week to pay for a public four-year education. This is an issue because studies suggest that working over that threshold can slow students’ progress toward a degree or force them to leave college altogether.

“Third, community colleges operate on only half the revenue that public four-year institutions receive. This means that community colleges don’t have the resources they need to adequately serve low-income students as well as Black and Latinx students who are more likely to attend community colleges.

“And fourth, even before the pandemic, public higher education was already in deep trouble. When the pandemic began, only 18 states had fully recovered from cuts made in the wake of the Great Recession.

“These are just a few of the reasons why so many students leave college with no degree and debt they cannot repay. Black borrowers – who are hard hit by employment discrimination and have nearly 10 times less wealth than white families – are most likely to suffer.”

There’s nothing more tragic than brilliant students who cannot enter higher education simply because they don’t have the money. Sure, they can borrow it, but we all know how that often turns out.

Biden’s $10K

President Biden’s recent decision to forgive $10K of some student debt, while a gift to many students in debt, barely scratches the surface of the debt problem and does nothing to address access and affordability. There are also legitimate questions about the students who worked hard to pay their full debts to society. Very legitimate questions. In fact, the forgiveness did more to remind us about affordability and access than anything else. Maybe that was the intention all along. Or just a partial fulfillment of a campaign promise. (It’s always hard to tell what motivates politicians in an impossibly divided country. Nonetheless, gifts should be accepted with a smile and in this case a skeptical nod to the persistent business model defined by costs that remain too high for far too many Americans.)

Knowledge Competitors

Business strategists should always look over their shoulders. Who’s taking market share? Who’s about to overtake them? The higher education business model in the US has proven intractable. Other industrialized countries have business models very different from the US. Here are a few:

“French students enjoy the luxury of state-funded college, but they still must pay the tuition of between $220 and $2200 US dollars. Compare the costs of University education in the United States and lack of debt load upon graduation, and there is motivation to study. In France, the majority of students do not have to take out loans for their college education. The result is a large population carrying degrees from world-class colleges.

“The university system in Germany is entirely government-funded, meaning the students pay no tuition fees whatsoever. However, like Sweden, France, and the rest – living expenses are not included, so many Germans work to support themselves while in college. Still, the net result is little to no student debt among German college graduates.

“Tuition for college in Scotland was eliminated by the Scottish Parliament in 2008.

“These are but just a few countries who offer free tuition for their college-bound populace. Other countries around the world provide a free college education, among them Greece, Scotland, Denmark, and Argentina.”

China and Russia, arguably our major global economic and military competitors, also offer free or near-free tuition. In China, the highest-ranked schools are public not private; in the US, it’s just the opposite.

Student debt in China and Russia is tiny or non-existent.

So why does the US deny tuition to its citizens? The arguments flow fast and furiously from those who benefit from the current business model. But if we truly value knowledge creation and dissemination above all else, wouldn’t we want to create and share as much knowledge as possible? Wouldn’t we want to compete with knowledge?

In addition to the countries that provide tuition for their students are the (relatively) “new entrants” that have entered the educational space. Many of these players address the access issue, but not the affordability one – yet. Traditional 4-year colleges and universities usually ignore or disparage these players. But is that the smartest competitive position they should take?

Examples of some of these players include Udemy whose revenue has sky rocked over the past few years (with annual growth rates of up to 90% and revenues north of $500M). 2U is over $1B. Others? Take a look:

  • Coursera
  • Zovio (which owned Ashford University which was acquired by the University of Arizona)
  • Full Sail University
  • 2U
  • Grand Canyon Education (which owns the Colangelo College of Business, GCU Honors College & GCU College of Science, Engineering, and Technology
  • Udemy
  • Adtalem Global Education (which owns the American University of the Caribbean School of Medicine, Ross University School of Medicine, EduPristine & Chamberlain University)
  • Strategic Education (which owns Capella University & Strayer University
  • Perdoceo Education (which owns the American InterContinental University, Colorado Technical University & Trident University International)
  • The University of Phoenix (which was acquired by Apollo Global Management)

The for-profit educational market is as volatile as it gets. Lots of mergers and acquisitions. Is this relevant to traditional colleges and universities? You’d be blind if you didn’t see the end game here: improve standards, get accredited and provide a comparable product for less money (eventually) — in addition to their current education and training offerings. When the gap between for-profit and not-for-profit credentials fades, the business models will change. When course transferability happens – built on accreditation – the playing field levels. Online education – which was accelerated and accepted throughout and beyond the pandemic – breathed new life into the for-profit delivery model.

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Some colleges and universities are already partnering with for-profit providers. 2U, for example, provides instructional design and teaching to universities. This is where not-for-profit meets for-profit business models.

For-profit providers are easily the Trojan Horses of the traditional educational market. Business strategists should always look over their shoulders to see who wants their customers.

Now What?

Let’s stipulate that the US – at the federal level – will never change the current higher education funding model, that the US will never follow in the footsteps of its partners or rivals. I wish there was evidence to the contrary, but’s there’s not, and there’s unlikely to be any in the immediate or even longer-term futures. Successful business models are really hard to change, no matter how compelling the moral-ethical, competitive or practical arguments to the contrary might be.

Let’s also stipulate that any reduction of, or restriction to, the creation and sharing of knowledge undermines a country’s ability to compete. We’re told that college enrollments are falling and cost is the reason why fewer Americans are going to college – obviously not good. But this wouldn’t be the first time Americans fumbled the ball on the one-yard line. Just look at the number of mass shootings in the US every year. In 2021, “692 (were) recorded … which was the highest figure since the Gun Violence Archive started tracking shootings in 2014.” So in light of fumbles in crime, healthcare, poverty, homelessness, the environment and medical bankruptcy, we have to find other solutions to our access and affordability educational problems.

First, we must look beyond the federal government to change the business model. If the objective is to increase the creation and sharing of knowledge, we must end run federal policymakers. States have the power to increase access and reduce costs. This represents a ground-up strategy (with little or no hope of a trickle-up effect). Some states have already begun. There are at least 19 states with free community college tuition, and New York, Indiana and Washington state have free tuition programs for 4-year colleges. There are also local and city-specific free tuition programs. These programs change state-by-state and city-by-city competitiveness. Are they a large enough incentive to actually attract some of the best, brightest and motivated students most in need? Would you move to a state that would educate your kids for free? Perhaps. After all, many Americans move to states because of tax rates, weather and — shall we say — “values.” Lots of families move to counties that have highly-rated K-12 school districts. Might higher education be valuable enough for families to relocate? If more states, regions and cities expanded their tuition-free and tuition-assistance programs, cost could be reduced or eliminated for those who need the most help. (Are there Americans leaving the US for greener educational pastures? Yes.)

Next, technology can help bring college to students. The pandemic taught us that we don’t need to live in traffic (and pollute the world) to “work” – or learn. When the pandemic “ended,” everyone returned to campuses around the country. While there are huge social benefits to campus life, not all students need to be on campus to learn. There are millions of students who might learn remotely. There’s no reason to shut down the learning infrastructure that got us through the pandemic. Instead, it should be expanded to widen access to students who don’t have the wherewithal (or money) to commute to, or live on, campus. This infrastructure could be subsidized by states, regions, cities and companies who want to recruit the most qualified students into their workforces.

Traditional colleges and universities should begin to aggressively experiment with alternative styles, substance and delivery models, as well as “transferable content,” that is, content that’s additive to multiple outcomes including degrees, certificates, and expertise-based courses that enable mix-and-matches in processes, industries and transactions. State government and industry subsidies should accelerate this process. The possibilities here are endless.

Case- and project-based learning is effective. We need more of it, especially for graduate students. Storytelling should be a pedagogical requirement.

Ben Sasse, among others, challenges the whole degree business model:

“Programs offering bachelor’s degrees are stuck in a predictable mold: Most classes are between three and four credit hours; each semester’s load is between 12 and 18 credit hours; each semester’s length is 15 weeks; each year is two semesters; four years makes a degree. In an economy and culture as dynamic as ours, this much standardization makes little sense. Not every 18-year-old is going to college full-time for four years (actually 5.5 years at many ‘four-year schools,’ but we’ll set that ugly fact aside for now). Few students are taking classes at 8 a.m. on Monday – and fewer still are taking Friday classes. Not everyone is going to do eight semesters in a row. Our ossified, one-size-fits-all approach isn’t working for the majority of current students – let alone for the potential students sitting on the sidelines.”

Colleges and universities should also become “knowledge homes” to their students through lifelong learning opportunities designed to connect knowledge and practice across industries and key processes.

Student advising should morph to career counseling and placement – all from the same place.

Incentives are important to every business model on the planet. Are faculty properly incentivized? Most colleges and universities have some sort of scoring system where faculty are evaluated every year for their performance. But as Wallace S. Sayre reminds us, the stakes are small. There are few bonus programs out there, and high performers are usually stuck in narrow % ranges of annual raises. What if faculty were incentivized to be creative? Perhaps tenure should be traded for meaningful bonuses for outstanding performance. How many professors would “sell” their tenure to earn significantly more money based on how well they performed against the same metrics used to provide meager annual raises?

Universities might also become direct lenders. There are some loans-to-donation conversion models that should be explored.

Corporate partnerships, especially at the graduate and certificate levels, should also be expanded. Customized graduate programs — not much different from how universities offer specializations today — could reduce the gap between sellers and buyers — always a good thing. Exclusive on-premise or online delivery should always be an option.

Traditional colleges and universities need to create, publicize and monetize their differences with for-profit institutions as quickly as the for-profits are consolidating. Accreditation, cost and knowledge creation are the obvious weapons. But are “weapons” the best way to think about the creation and sharing of knowledge?

Conclusions

Problem recognition is step one. All of the players must sincerely, openly and repeatedly admit there’s a huge access and affordability problem, and that incremental changes – more scholarships, improved Pell grants, more financial aid, etc. – are obviously not solving problems: enrollments are decreasing and debt is rising which means that knowledge itself is literally autocratizing.

Lip-service and optics-management is where too many players live. They should admit that the current content, delivery and outcome business model is unsustainable in spite of short-term incentives to the contrary. If there’s any doubt about “new (and not so new) entrants,” they should track that the success of online degree and knowledge providers like Udemy, Coursera, 2U and Phoenix, among so many others, that up until now have not been taken seriously as real competitors.

There are specific steps that can be taken right now:

  • States, regions, cities and companies must increase tuition subsidies. Some state schools like New Mexico, North Carolina, Wyoming, Nevada, Montana, Idaho, Alaska, Utah, Florida and Mississippi — are cheaper than William & Mary, Temple and the University of Virginia. State legislatures should increase funding to public universities. Why is this even an issue? Here’s a headline worth studying: State Higher Education Funding Cuts Have Pushed Costs to Students, Worsened Inequality.” Some good news: state budgets actually increased funding to colleges and universities in 2021, but “many of these investments were made possible by federal stimulus funding, and while federal stimulus funds serve an important purpose in stabilizing state revenues, they should not be considered a replacement for long-term state investments.”
  • Colleges and universities must explore alternative tuition funding models beyond traditional financial aid.
  • Pell grants should be expanded. This is something that can actually be done at the federal level, especially since Congress has decreased the size of the grants for years. BTW, can anyone explain this?
  • Alternative content, delivery and outcome models should be prototyped. There are countless possibilities that should be explored. Public and private colleges and universities should embrace, not resist, change even as their business models seem bullet proof today. As Yahoo, Nokia, Blockbuster, Blackberry, JC Penny and Sears — among so many others — learned the hard way, there’s no such thing as a bullet proof business model.
  • Companies should become bona fide players in the higher education process where they have direct input in the curriculum and delivery processes.
  • The whole concept of MOOCs — massively online open courses — should be re-defined as bridges to degrees and other educational outcomes.
  • Relationships with for-profit knowledge providers should be explored before they become hostile. Mergers and acquisitions should be engineered across profit lines. The number of students in play here is enormous — and growing. Public, not-for-profit and for-profit status should be revisited:
  • “While colleges in the United States are commonly thought of as being divided into three categories – public, nonprofit, and for-profit, with each model being quite distinct in its structure, behavior, and outcomes – it is that middle category that sets the U.S. system apart. In the rest of the world, there are really just two types of colleges: those under government control, and those associated with a for-profit owner, even if labeled nonprofit. No other country has a multitude of independent, private, nonprofit colleges like those in the United States.”
  • Scholarship policies should be revisited. Are there enough, are they going to the right students, can they be reallocated?
  • Knowledge-sharing should be democratized every way possible. There’s lots at stake here. We need as many knowledgeable citizens as we can create to compete in an increasingly digital, knowledge-based (STEM) world. What is it about this requirement that the US does not understand?

There’s also a moral-ethical component here that’s not part of most business models. How should this extra responsibility be managed?

How is any of this debatable?

Once thing’s for sure. If we want more students, we have to aggressively and measurably create more opportunities. Anything less is just a nod to the status quo. The good news is that access, affordability, content, partnering and delivery problems are all solvable – if the sincere goal is the creation and sharing of knowledge as broadly and openly as possible. If we don’t solve them, the divide that’s now the very identity of the US will only widen, and the country’s ability to compete globally will fall — as it already has based on the quality of its K-12 educational system:

“Thirty countries now outperform the United States in mathematics at the high school level. Many are ahead in science, too. According to the Organization for Economic Cooperation and Development, the millennials in our workforce tied for last on tests of mathematics and problem solving among the millennials in the workforces of all the industrial countries tested. We now have the worst-educated workforce in the industrialized world. Because our workers are among the most highly paid in the world, that makes a lot of Americans uncompetitive in the global economy. And uncompetitive against increasingly smart machines. It is a formula for a grim future.”

Is all this just another fumble at the one?

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