Access, Affordability & Survival in American Higher Education

The National Association of College and University Business Officers (NACUBO) published its report on tuition and revenue trends last month. NACUBO surveyed 401 colleges and universities, including 305 smaller colleges, 57 comprehensive and doctoral universities, and 39 research institutions. It also compared this year’s results with previous data collection.

The data show that American higher education is moving into dangerous and uncharted waters that demand different decisions based on new ways of thinking.

For so many reasons, it would be better if America were a place where family income grew rapidly and income inequality diminished, particularly for jittery consumers now recast as angry, disaffected voters in the general election. But unfortunately, this optimism seems misplaced. It’s unreasonable to assume that waiting for the Great Recession to sputter to a close will allow American higher education to return to time-tested financial models now openly fraying at the edges.

The problem is that America changed fairly dramatically in the early years of the 21st century, evolving into a weary and less optimistic society tested by incessant war, manufacturing decline, new technology, and global competition, among numerous other factors. Colleges and universities largely looked inward, relying on older assumptions that tuition fees, government loans, student debt, institutional retrenchment – and for the lucky few – endowments draw downs made possible.

College governance – trustees, administration, and staff – saw only some of it coming. Financial forecasts failed to include a social forecast of what might happen if existing operating models failed to produce enough revenue. The inherent weakness of the shared governance model that encourages cultural inertia on campuses and within the sector further exacerbated this problem. Colleges budgeted to survive, rather than invested to thrive, as the 21st century marched on.

Somewhere along the way, American higher education lost its “sacred cow” status. Changing demographics, shifting consumer practices, and relentless social media re-characterized the value of a college degree, often negatively. Where the middle class once saw a college education as a fundamental pillar supporting the American dream, many now treated it as a negotiable commodity rather than a shared sacrifice.

It would be less bleak if the financial and operating models supported the kind of change within American higher education, matching its evolution to the speed of change in the post industrial economy. It’s on this issue perhaps that the NACUBO findings tell their most dramatic story.

NACUBO found that tuition discount rates – what colleges offer to students in the form of institutional scholarships – reached 49 percent for full-time freshman, up from 47 percent a year earlier. For undergraduates across the campus, the rate was roughly 43 percent. Writing in the Washington Post, Danielle Douglas-Gabriel translated the impact: “Private colleges put nearly 43 cents of every tuition dollar toward scholarships and grants.” This number is staggering because it excludes the state and federal grants and loans and any other support that the student might bring into the mix.

The news is particularly troubling because it suggests that American colleges and universities – overwhelmingly tuition driven – do not have the capacity to step forward with greater discounting. A deeper dive into the impact of college finances shows why.

It comes down ultimately to revenue growth. Rick Seltzer noted in Inside Higher Education in May that “small institutions – those with total enrollment below 4,000 – estimated net tuition revenue per freshman increased by just 0.6 percent in 2015-16 after no growth the year before.” Research universities gained 3.2 percent while comprehensive universities gained 1.8 percent last year.

The picture darkens when looking at enrollment trends. The NACUBO report shows that 37.5 percent of institutions reported enrollments declined in both their freshman classes and across their entire undergraduate bodies from 2014 to 2015. Among undergraduates, 77.6 percent received institutional grants in 2015-16, up from 77.2 percent and 76.4 percent in the previous two years.

It comes down to access, affordability, and survival. How long can American higher education maintain a commitment to access, especially if the critical access portals are in serious financial disarray, often for diverse reasons with different funding sources? How much longer can the “big ticket” structural costs in a college’s budget – labor, physical plant, financial aid, and technology – be met through current funding mechanisms? What happens when a college must decide between access and institutional survival because it kicked the can down the road for too many years?

These are serious, disruptive issues. That having been said, however, most of us are still rooting for American higher education. There is an effort to seek new models at almost every level and adjust strategies to see what might work in a redesigned operating model. Higher education is a strange, undefined mix of cultural inertia and creativity. It may be that the crisis needed to hit first before structural changes can occur. If so, it’s time to change.

Mr. Selzer of Inside Higher Education turned to Rick Beyer, a former private college president and the managing principal of AGB Institutional Strategies to summarize: “We’re in a deflationary market for tuition pricing, and we’ve hit a time in the marketplace where the consumers are now in charge of what they’re going to accept. As a result, colleges are going to have to completely redesign their business model to be prosperous in the future.”

This article was originally posted on the Huffington Post College blog.

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