Changing Higher Education

Free college tuition is a lovely, but dangerous idea

"Free college tuition" is rapidly becoming a rallying cry in the permanent presidential campaign which now drives all policy discussions. It is easy to understand why. Tuition and fees in both the public and private sectors of higher education have been climbing much more rapidly than inflation and family income for over four decades. Even families well up in the middle class are finding the cost of higher education increasingly prohibitive, greatly limiting educational choice and opportunity. Higher education debt has become one of the largest debt categories for individuals and families, and is negatively impacting career choices, initial home ownership, automobile purchases, etc. The heart of the American Dream- educational and economic mobility-is threatened. 

This issue of educational and economic mobility is indeed critical,and deserves to be at the center of  serious policy discussions. The problem is that free college tuition,as catchy and simple and attractive as the idea is, is not a viable solution to that problem in any proposal that I have seen.

The high cost of funded research in colleges and universities

A college or university that does research ends up spending considerable resources of its own even when most of its research is “funded”. How and why is this the case, and where does the institution look to find the resources needed to cover this unfunded research cost? Undergraduate tuition seems like one likely source.

 

These internal research expenditures fall into two categories, which I will call “open” and “hidden”. As these terms may suggest, the first is a set of costs that are reported nationally by the NSF and consequently appear in numerous reports put out by the institutions themselves. On the other hand, hidden costs are well known, but seldom openly discussed even thought they contribute very significantly to the institutional cost of research .

"Baumol's cost disease" is the answer to a different question

In 1966, William Baumol and William Bowen looked at the origins of rising salaries for live performances (music, theater, dance), and noted that an underlying issue was that such performances could not easily be made more efficient - productivity could not be increased (Baumol and Bowen, Wikopedia). The oft-quoted ( and quite convincing) formulation of this concept is that a Beethoven quartet must be performed by exactly the same number of musicians today as was required in the 19th century, and that the quartet requires roughly the same amount of time to perform. No increase in productivity over two centuries! This inability to increase productivity should, according to simple economic arguments, lead to flat incomes - rising income usually is a result of increased productivity. However, despite this, salaries in the performing arts had risen over time. Baumol and Bowen concluded that this occurred because it was necessary to keep salaries on a par with those in industries that were seeing productivity increases in order to keep workers in the performing arts. This "push" of salaries in industries without productivity increases is called Baumol's cost disease.

Very often, when someone poses the troubling question, " why is college so expensive?", the response is simply "Baumol's cost disease", said with an authority that suggests that should settle the discussion. In fact, used in this way, Baumol's cost disease is like the magician's gesture that is designed to get the audience's attention away from place where something important is happening. In reality, customer's don't care about the cost of making a product, they are concerned about the price they must pay, and that difference leads one down a potentially fruitful path of reflection about both Baumol's formulation, and critical issues in higher education.

Cost allocation in the research university and what it tells us

Universities often report a number that appears to indicate how much the university spends on instruction. We might believe that this number accurately represents teaching expenses and even do some analysis based on that belief. We would be wrong to do so. 

John V. Lombardi, in How Universities Work

This somewhat cynical observation by Lombardi was informed by his broad and sometimes painful experiences as Provost at Johns Hopkins University, President of the University of Florida, Chancellor of the University of Massachusetts at Amherst, and President of the Louisiana State University System. However, in these times of heated discussions over who should pay for higher education and a background of rapidly increasing student debt,  it is important to have some idea of what the actual costs of producing that education are. In this post, I review some of the reasons why it is difficult to define the instructional costs at a research university, and why various constituencies might not want that information to be generally available. After discussing how a business model view simplifies some of the issues around calculating instructional costs, I describe a recent analysis of such costs in the University of California system, which reaches some surprising conclusions. These conclusions lead to a consideration of why cost -shifting between missions is so important in the current approach of the research university. Taken together, these results suggest that one of the key issues that should be focused on in order to control higher education prices are the synergies between the different functions of the research university and the actual "added value" to the customer of those synergies. In particular, the analysis suggests that rising prices in undergraduate education are not likely be controlled unless society finds alternative ways to fund a significant component of the cost of university research. 

An update on StraighterLine - a "disruptor in the making"?

A few years ago, I identified a few organizations that I thought were doing things in higher education that were examples of approaches that potentially could be disruptive to the field (Potential disruptions in the higher education space). Among these is StraighterLine, which offers primarily introductory level college courses much more inexpensively and flexibly than traditional colleges and universities.  Entry level courses are relatively similar in many if not most colleges, and at the same time are the most profitable for the colleges because they are most often taught in large classes. If students in large numbers were to opt for the StraighterLIne combination of online convenience and low cost, it would prove quite disruptive to the budgets of many traditional institutions. 

A business model view of changing times in higher education

 

As my regular readers know, I have written several posts that utilize a business model approach to look at one aspect or another of higher education. Last year, readers suggested that I combine several of these posts in an article that would combine multiple threads - ideally in a coherent fashion! The resulting article has found a good response among policy and institutional leaders, and so I thought that some of my other readers might also find it interesting. I have pasted it in below. For those who would prefer it in PDF, they can Download Business model view of change. Curiously, the original document contains Endnotes that were stripped out by Typepad, but they are not crucial to the arguments. 

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Changing times in higher education viewed through the prism of the business model

Lloyd Armstrong

Summary: The environment for higher education in the United States is changing rapidly. The effects of this changing environment will not be the same at all institutions, however. This article uses a business model approach to look at some of these environmental changes from a perspective that gives leaders tools to better understand how various changes might impact their own institutions, and how they might best respond.

 

The UC system moves off in a dangerous direction

When Janet Napolitano was appointed president of the University of California System, I was disappointed. Just when the UC System really needed a visionary educational leader who could inspire faculty and administrators to make the significant changes needed for the university to thrive in a significantly new environment, a career big government bureaucrat was put at the helm. 

Unfortunately, President Napolitano's new budget proposal reflects her background- it is pure big government response to a problem. The UC must have a 5%/year increase in funding from the State, or the students must pay it via big tuition increases. All problems will be solved with more funding, not better management, not getting rid of waste, not creativity, not new approaches, just more money. Sic transit California as a center of can-do creativity - just turn on the money tap.

A return to the elephant of college pricing

Every few years, I return to a consideration of ever-increasing college prices (2009, 2011). In these reports, I describe college pricing as an elephant because the issues around it are large, and depending on one's perspective, one can come to quite different conclusions as to what the beast looks like.  In particular, I have looked at undergraduate prices (tuition, fees, etc) at private, non-profit four year institutions from three different perspectives: the public at large, students and parents, and the institutions themselves. I was stimulated to return to this issue by the recent release by the National Association of College and University Business Officers (NACUBO) of their 2013 Tuition Discounting Study, which provided me with some new thoughts about the institutional view of the beast.  This year, I am adding a fourth perspective, that of government, since some interesting issues have arisen there recently. 

Accreditation: ally or obstacle as higher education wrestles with change?

Goldie Blumenstyk recently published a very nice description of the accreditation issues that led to the shut down of the  generally acclaimed for-profit/nonprofit partnership of Altius Education and Tiffin College.  As Blumenstyk points out, there are critics who feel that this demonstrates that the accreditation system is broken, and others who say that it has done what it was designed to do. It may be that both positions are correct, as I shall discuss in this post.

In the spirit of full disclosure, I have connections to both parties. I was on the advisory board of Altius until it closed down recently, and Sylvia Manning, President of the HLC (which challenged the partnership), was my Executive Vice Provost at USC for several years and remains a good friend. I have no interest in getting into a discussion of the merits of the decision of HLC, but rather would like to put it into a larger context of the strengths and limitations of the accreditation system. 

Are tenure track professors better teachers?

Higher education is faced with many challenges at this time. Two, however, stand out as providing critical tests for the future viability of many institutions. The first is the growing set of constraints on revenues, and the second is the increasing necessity to improve student learning significantly (How can we think about the wave of new innovations in higher education?). Figlio, Schapiro, and Soter (FSS) recently published an important National Bureau of Economic Research working paper whose provocative title I have borrowed for the title of this post. That paper has important implications for responding to both of these challenges.

Analyzing data for eight cohorts of first year students at Northwestern University, FSS conclude:

We find consistent evidence that students learn relatively more from non-tenure line professors in their introductory courses. These differences are present across a wide variety of subject areas, and are particularly pronounced for Northwestern’s average students and less-qualified students.

How a course-rich world might impact higher education: III. existing traditional institutions

In the first post in this series, How a course-rich world might impact higher education: I. Technology vs pedagogy, I looked at some of the characteristics of the readily-available, "off the shelf" new college level courses (NCLCs) that have created a course-rich world. In particular, I examined the potential of the NCLCs to produce disruptive innovation in higher education.  In the second, How a course-rich world might impact higher education: II. Creating new institutions, I discussed using this new course-rich resource to create new institutions using higher education business models that are radically different from the faculty-centric model that is traditional in higher education. Because these institutions are creating business models that are optimized around the NCLCs and other similar online offerings, they are using the NCLCs in a potentially disruptive fashion.

In this post, I turn attention to some potential uses of these NCLCs in existing traditional non-profit institutions of higher education.  As is well known, such innovations are often used to produce both sustaining innovation when utilized within the context of the traditional business model, and disruptive innovation when used within the context of a new business model optimized around the new innovation. Because of the wide variety of traditional institutions of higher education and of the challenges they face, we can anticipate that NCLCs will be used in both sustaining and disruptive modes in this sector.

How a course-rich world might impact higher education: I. Technology vs pedagogy

This is the first of three posts in which I look at some of the ways in which the new, "off the shelf" course-rich world created by the Open Courseware Consortium, MOOCs, commercial publishers such as Pearson, etc.( all of which I called the new college level courses, or NCLCs) might impact the business model of higher education.  

In an earlier related post, How can we think about the wave of new innovations in higher education?, I suggested that the course-rich world would greatly change the Resources box of the higher eduction business model. In a subsequent post, Michael Raynor's analysis of disruption - and higher education, I reviewed Michael Raynor's extension of Clayton Christensen's theory of disruptive innovation, and promised to apply his results to a study of the NCLCs.  This is that promised post, in which I look at some of the characteristics of the NCLCs that may determine whether they have the potential to drive a disruptive innovation.

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Raynor's work indicates that the speed with which the NCLCs can improve in value will tell us something about the ways in which their use may impact higher education. Thus, we should first focus on the characteristics of the NCLCs and not on specifics of how they might be used. To think about that, we need to attempt a definiton of "value" for the NCLCs.

"Value" in education is a mixture of attributes that students may desire. Since we are talking about NCLCs, we are really concerned only with those attributes most connected to education itself, and not to related areas such as social growth or research. The value of education itself is certainly composed of several components, among which are: the effectiveness and depth of the learning that can be achieved; the ease and convenience of access; the academic brand of the provider; and recognizable certification. However, issues of such as specifics of how the NCLCs are used and whether certification follows are really part of the Procedures box in the higher education business model, and will be discussed in subsequent posts of this series. In this post, I will look at questions of the academic brand of the NCLCs and the effectiveness and depth of learning that can be achieved - and how fast they might be improved. 

Michael Raynor's analysis of disruption - and higher education

In a recent post that focused on the business model for higher education, I discussed how I believe that the greatest pressure on the "Resources" component of that model comes from the new "off the shelf" course-rich world in which we live. College-level courses, which formerly had to be created in-house by faculty, are suddenly to be found everywhere. MOOCs are, of course, a very visible and discussed new component of this course-rich world, but not the only component. Other sources of the course-rich world are textbook companies such as Pearson and McGraw-Hill and open source materials such as can be found at the OpenSourceWare Consortium.   I will be looking at some of these new sources of college-level courses (NCLCs) and considering how they might impact the higher education business model in a series of upcoming posts. First, however, I want to introduce another approach that I have found useful in these reflections.

 Michael E Raynor's The Innovator's Manifesto: Deliberate Disruption for Transformational Growth extends Christensen's theory of disruptive innovation in interesting directions. His goal is to make disruption a predictive theory, so he focuses on identifying the characteristics of an innovation that increase the likelihood that it will eventually be disruptive. He also considers the relationships of some of the characteristics of the innovation to the speed with which it can grow into disruption. This post will focus on explaining his approach and some of his results that are most pertinent to higher education.

Obama's higher education views

As a back-up to President Obama's State of the Union speech, the White House has released The President's Plan for a Strong Middle Class and a Strong America. A much commented-on sentence in a section with the challenging title Holding colleges accountable for cost, value and quality reads:

The President will call on Congress to consider value, affordability, and student outcomes in making determinations about which colleges and universities receive access to federal student aid,either by incorporating measures of value and affordability into the existing accreditation system; or by establishing a new, alternative system of accreditation that would provide pathways for higher education models and colleges to receive federal student aid based on performance and results. 

The mention of "alternative system of accreditation" has understandably caused considerable discussion, and I would be remiss if I did not join that discussion. Before that, however, there is a very important point contained in the President's message that I think has not gotten appropriate attention. 

Should professors be replaced by a computer screen?

Cathy Davidson,  the John Hope Franklin Humanities Institute Professor of Interdisciplinary Studies and Ruth F. Devarney Professor of English at Duke University, has just published a post on the HASTAC site that I recommend to all. Its conclusion is clearly conveyed in its attention-grabbing title: If We Profs Don't Reform Higher Ed, We'll Be Re-Formed (and we won't like it). Her message is further underlined by inclusion of the slide (above) which closes many of her presentations.

Davidson discusses four reasons why there is currently a great deal of discussion about replacing professors with computer screens:

(1) Too many students worldwide want to go to college to be able to accommodate them all.

(2)  College in the U.S. costs too much

(3) Online education promises to be lucrative to for-profits

(4)  Our current educational system (kindergarten through professional school) is outmoded. 

 Davidson makes excellent cases for each of these points in her post. She closes by briefly describing some of the efforts she has encountered in her travels that are beginning to address some of these issues. Rather than weakening her excellent arguments by attempting to summarize them, I will simply recommend that you read the original.

I would add another reason to this excellent list that is a slight modification of the 3rd point above:

(5) Online education promises to be lucrative to nonprofits

Just as Davidson says that (3) really bothers her, I will say that (5) really bothers me. Many of the traditional nonprofit universities and colleges are jumping into the online business because they see it as a new source of much needed revenue. As a former administrator, I understand the need for new revenues as much as anyone, so I am a fan of increasing revenues. My concern is that in most cases the online initiatives are not being done in a way that incorporates the online education into the educational mission of the institution - it is a financial, not educational advance. As a result, little emphasis is being placed on educational effectiveness in many of the new online programs. I have great fear that when the educational outcomes of many of these new programs are evaluated, they will be shown to be relatively ineffective. This result will lead many to conclude that online education is intrinsically inferior, when all it will really show is that inferior pedagogy leads to inferior learning. Nonetheless, such a negative, albeit flawed, analysis could be a big setback in the much needed expansion of effective online learning in higher education.   

 

How can we think about the wave of new innovations in higher education?

Much has been happening recently in higher education - MOOCs, competency based degrees, alternative credentialing, Presidential (of the US, that is) statements that real increases in tuition must stop, etc. This has led various observers to predict tsunamis, tipping points, crises, and/or disruptions for higher education.

How should one begin to analyze the possible impacts of this seemingly endless set of new "environmental conditions"? I find that a useful starting point is the business model of higher education.  The following picture describing the elements of a business model is taken from a recent publication, Disrupting College,  by Clayton Christensen, Michael Horn, Louis Caldera and Louis Soares (CHCS).   

 

This picture emphasizes that there are four key components of a business model, and that all of these components must fit together in an interdependent way in order for the model to be viable. The lock on the picture emphasizes that no one component can be changed without causing significant changes in the other components once the model has reached a viable equilibrium. 

Economic mobility and family income in the US

Economic mobility - children being able to rise to a higher economic position than their parents - is a central part of the American dream. Unfortunately, the reality is that there is less economic mobility in the US than our national narrative supposes. Recently released data on multi year trends in family income suggest that this situation is is not likely to improve in the near future.

Economic mobility in many developed countries was described in a recent OECD report. This report demonstrated that the United States has lower economic mobility than most other members of the OECD:

edX: a step forward- or backward?

edX, the new distance learning collaboration recently announced by MIT and Harvard, has gotten a lot of attention, and rightly so:

Harvard University and the Massachusetts Institute of Technology (MIT) today announced edX, a transformational new partnership in online education. Through edX, the two institutions will collaborate to enhance campus-based teaching and learning and build a global community of online learners.

Coming on the heals of the appearance of Coursera, Udacity, and the edX precursor, MITx, this has led numerous commentators to suggest that we have entered a veritable age of aquarius for massively open online courses (MOOCs). All of these efforts involve, to one degree or another, universities of the very top rank and each will offer online versions of university level courses using the most advanced technologies. Further, all will be open to anyone who wants to sign up, and the courses will either be free or involve a very nominal cost for e.g. testing. Importantly, however, none of these efforts will lead to course credit, degree or certificate from the universities involved. Instead, successful students can hope for a signed letter of completion from their well-known instructor or a certificate from the organization

Preliminary results are very exciting, indeed. Sebastian Thrun, founder of Udacity, did an online course at Stanford that drew over 160,000 student, and Udacity has over 200,000 students signed up for its first six courses. MITx's first course enrolled about 120,000 students.

Market-leaders can adapt to disruptive innovation!

One of the more striking - and disturbing - findings of Clayton Christensen's original work on disruptive innovation was that market-leaders were almost never able to cope with the attack of a disruptive innovator (see my earlier post). Even in cases in which leadership understood the danger posed by the disruptor, inertia and short-term economic constraints and incentives almost always led the market leaders to maintain their original trajectories. Over time, the disruptors produced better and cheaper products than the market leaders, and correspondingly the customers switched allegiances. The disruptors became the new market leaders, and the former market leaders often simply disappeared.

Since many have suggested that higher education shows all the characteristics of an industry that is ripe for disruptive innovation, this inability of market leaders to adapt in the face of disruption is rather disturbing.  However, there is good news from more recent research by Christensen and his group.

Totally unrelated new data on household income and student loans

Sentier Research recently published a report on Household Income Trends: January 2012. This is regular series that looks at trends in real (inflation corrected) median annual household income in the US. I had discussed an earlier report in my post A bad 4 years for family income, a good 4 years for college prices.

There is a lot of interesting data in this recent report, but one paragraph jumped out at me:

The median annual household income in January 2012 can be  put into broader perspective by a comparison with previous levels of household income dating back to the start of the last decade. The January 2012 median annual household income of $50,020 was 5.4 percent lower than the median of $52,852 in June 2009, the end of the recent recession and beginning of the “economic recovery.” The January 2012 median was 7.8 percent lower than the median of $54,242 in December 2007, the beginning month of the recession that occurred just over four years ago.  And the January 2012 median was 8.7 percent lower than the median of $54,790 in January 2000, the beginning of this statistical series. These comparisons demonstrate how significantly real median annual household income has fallen over the past decade, and how much ground needs to be recovered to return to income levels that existed in earlier years. 

An 8.7 % drop in median family income since 2000 is huge and suggests a pretty significant change in life-style.

Harvard inaugurates its Initiative for Learning and Teaching

ON ONE HAND:

The good news is that Harvard is beginning to play a public leadership role in increasing student learning! The Harvard Initiative for Learning and Teaching (HILT) had its inaugural event, a symposium, on February 3. HILT was founded as the result of a generous $40M gift from Harvard alumni Gustave and Rita Hauser. The invitation only event brought in several outside luminaries with considerable expertise in learning, such as Physics Nobel Laureate Carl Weiman, and around 300 people from the Harvard community including Harvard's own luminary in the field, Eric Mazur.

The poor state of undergraduate student learning over all has been chronicled in many books and studies (see an earlier discussion here).  One of the most readable of these books was written by Harvard's own Derek Bok - Our Underachieving Colleges, so the issues are not unfamiliar at Harvard itself. As Bok (and many others) pointed out, the problem is not that there aren't many well documented ways to greatly increase student learning, it is that these methods have not been adopted widely by colleges. The powerful forces of the status quo have dominated teaching and learning.  

The State of the Union on college costs

So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury. It is an economic imperative that every family in America should be able to afford.

Barak Obama, State of Union 2012

Does this speech signal that the time has finally arrived when the government - which pays a good part of the bill - will step in to limit the rapid and seemingly never ending growth of tuition? In normal times, the answer would likely be "yes" given that politicians from both sides of the aisle have been introducing bills that would cap tuition in one way or another for almost a decade.  Thus, we might expect to see a quick moving bipartisan effort.

Potential disruptors in the higher education space. II

In an earlier post, I described some potential disruptors in the higher education space. In this post I would like to add another set - several non-profits that are trying to provide essentially free education : the Khan Academy, the University of the People, and the Saylor Foundation  .

Cost and price in higher education, again

These administrators are like cookie monsters… They seek out all the resources that they can get their hands on and then devour them

Ronald Ehrenberg in Tuition Rising

As economic conditions around the country (and world) impose increasing limitations on funding for higher education, it is worthwhile to review some of the major reasons that higher education costs are so high and rise so rapidly. An understanding of these reasons is critical to making rational responses that preserve (and perhaps even strengthen) important components of institutional mission. This is, of course, a subject that has been extensively written about over the past several decades by many authors, but since responses to the current economic situation seem to generally ignore what is known about the problem, perhaps another brief review is justified. Interested readers will find my many earlier takes on this issue collected here. 

The quote above is basically a brief restatement of what is known as Bowen's Rule, which appeared in one of the earlier (1980) extended studies of cost in higher education. Bowen pointed out that budgeting in higher education is basically the inverse of that which occurs in most industries: first you see how much income you can raise, then you spend it all in pursuit of an elusive goal of "excellence" and brand. I put excellence in quotes because it is a concept that primarily is internally defined by academe itself rather than by its customers.

Interestingly, however, a recent work by Christensen, Horn, Caldera and Soares (CHCS) called Disrupting College showed that many of the cost issues in higher education actually correspond extremely closely to well - studied cost issues in other industries. Turns out there are cookie monsters everywhere!

What will The College of 2020 look like?

Prediction is very difficult, especially about the future

Niels Bohr

(Note: the following was first published as an invited contribution on The College of 2020 in parts 1 and 2. I reproduce it here for the benefit of my readers by permission of the editors of the College of 2020)

What will the College of 2020 look like? It probably will be similar in at least one way to the College of 2011 -there isn't any one archetypical College of 2011 and there won't be any one archetypical College of 2020 either. US higher education consists of about 4,500 accredited colleges of 2011 with an incredible diversity of sizes, approaches, missions, and resources. I would expect the same to be generally true in 2020, with some important caveats: I think there will be significantly fewer accredited colleges in 2020, and the mix of sizes, approaches, missions, and resources will be quite different from today.

These changes will be driven by two forces that push from different directions, but each leading to increasing fiscal constraints on higher education. On the one side, local and national governments are finding it increasingly difficult to support higher education at traditional levels. There a world-wide movement towards decreasing the role of government in providing social goods, and the US reflects that movement. In addition, other governmental costs such as health care, prisons, and retirements are growing rapidly and squeezing out areas such as education. On the other side, all of higher education utilizes a model whose costs over the last 30 years have steadily grown about 3% a year above CPI increase. In the tuition-dependent private sector, tuition has grown apace, i.e. roughly CPI plus 3% every year for the past three decades. The costs of higher education are reaching a point where government, parents, and students are beginning to question if the product is worth the price. The answer is increasingly "no" for private institutions that have lower brand value, but the "no" likely will move upstream in the value ladder over time as costs increase until only a relatively small number of high brand value private institutions are immune. On the public side, the answer is increasingly, "no, not given our fiscal constraints" no matter what the brand value of the institution.

A bad 4 years for family income, a good 4 years for college prices

Gordon Green and John Coder recently published an ominous report entitled Household Income Trends During the Recession and Economic Recovery. In it, they looked at real (inflation corrected) median household income over the period beginning in December 2007 when the most recent recession began, through the recovery which began in June 2009, ending in the near-present, June 2011. Over that period December 2007 until June 2011, median real household income fell  by 9.6%.  I will talk about some of the details below, but would first like to compare what happened to price in higher education over that period.

I have written about what has happened to real average published tuition and fees in private non profit colleges and universities over an extended period ending with the academic year 2010-2011, based on College Board Data. I haven't found data for the AY 2011-2012 from College Board, but NAICU reports from their surveys that the increase for 2012 over 2011 is 4.6% in constant 2011 dollars. Putting this together with the previous College Board data and the CPI increase 2010-2012, one find that the percentage increase in real average published tuition and fees for these institutions going from 2007-2008 until 2011-2012 is 10.6%.

Combining these two data, one sees that the percentage of median real family income required to pay the average real tuition and fees increased over this four year period by 22.3%! 

Brief update on StraighterLine, one of my potential disruptors

In a recent post, I described several organizations that seemed to me to be potential disruptors on the higher education space.  StraighterLine, which focuses on offering introductory college coursework on line, is one of these.

StraighterLine has now issued its first "report card", a survey of their students. The survey looked at such things as student satisfaction, convenience, perception of course rigor, and whether the student was able to obtain credit from a college of their choice for the StraighterLine course. In brief, the students seemed highly pleased with the courses on all parameters. Importantly, over 90% of those who sought college credit for the course were able to obtain it.  

The response rate to the survey was modest, and it would have been nice to see some validity discussion in the survey. Nevertheless, the report card indicates that StraighterLine is finding strong student approval of its method of offering an inexpensive way to get college introductory courses online, and that those courses are being recognized and accepted by traditional institutions.  Sounds like a good step along the path of disruption! 

Moody's looks at student-debt problems

Moody's Analytics has published a very nice analysis of the student loan situation by Cristian Deritis :

In this study, we examine the rapid growth of the student loan industry over the past few years, the weakening performance of loan portfolios, and what these trends suggest for future performance and lending volumes.

I will not go through the interesting analysis here, but simply show two very powerful graphs from the paper, and jump to the conclusions. The first of these graphs shows the rapidly growing student loans balances, which continue to grow although total loan balances have been shrinking:

The second graph, similar to many I have shown before, demonstrates a major driver behind this growth in loans - higher education tuition increases compared to increases in other sectors:

Always impressive how increases in higher ed costs outpace the rest of the pack!

Update on Perspectives on the elephant of college pricing

A year and one half ago I wrote a post called Perspectives on the elephant of college pricing. In it, I looked at the increasing cost of higher education from three perspectives: the public's view; the student and parents view; and the college view.  In all cases, I focused on private, non-profit four year institutions. Given the changes in the economy since that post was written, it seems worthwhile to give a quick update on each of these perspectives.

What does society have to pay for a student to get a bachelor's degree?

Jorge Klor de Alva and Mark Schneider have just published a paper -Who Wins? Who Pays?: The Economic Returns and Costs of a Bachelor's Degree- that will certainly cause considerable controversy and discussion. While there are many aspects of the specifics of the study that undoubtedly will be challenged and refined in the future, in a very real sense the great significance of the paper is that it introduces a perspective to the ongoing discussions of higher education that is new and critically important. 

National and state governments obviously are struggling  to come to grips with the new era of constrained budgets.  As they have tried to simply continue the old paradigms of higher education and its support into this era of constraint, results have generally been quite negative.  Resulting higher education cuts have led to significant decreases in the numbers of students who can be accepted and educated in most state systems. Often the cuts have been deepest at institutions that serve primarily lower income students.  On the private side, the recession has pummeled many endowments, and the sector depends on annual tuition increases that average inflation + 3.5%, a model that faces increasing resistance. Federal student aid support to all sectors is facing increasing scrutiny, with some of Obama's goals for increases being scrapped before the budget wars really start.

One of the major problems that all of the individuals, agencies and legislatures face as they seek to find new and sustainable directions for higher education that serves its various constituencies is simply lack of data, which then leads to a lack of understanding of the implications of aspects of current funding paradigms.