$10k Higher Ed: Part II

What’s a “diploma?” Background While something called a “diploma” was handed to Roman soldiers upon discharge (an image of that document is what appears at the top of last Monday’s piece on this subject, BTW), the notion of a credential for completing a course of education can be traced to Medieval times when the earliest universities would provide those who finished their studies (usually in classical languages and religious texts) with a “sheepskin” literally made from the skin of a sheep (quelle coincidence!) Since I tend to lose people when the conversation turns to history even faster than they flee when it turns to philosophy, let’s fast forward to the 20th century when the modernization of every aspect of society (from agriculture to industry to transportation and business) required more and more experts trained to work in professions that never before existed. In the US (which led the world in both agricultural and industrial production as the 19th century turned into the 20th) the need for “skilled labor” within newly emerging management and engineering classes led to the rapid expansion of college and university systems churning out ever-increasing numbers of college-educated specialists. And with this dynamic, a tug of war intensified between the self-perception of colleges and universities (which saw themselves as the embodiment of a tradition that could be traced back to Galileo and Socrates) and the reality of higher education as the means to ready people for the workforce. All of the trends I discussed in the last newsletter (including the massive growth of education measured in number institutions built, students enrolled or dollars spent) can be traced back to an assumption which developed during the tumultuous 19th and 20th centuries that said education was the solution to any stated societal challenge or ill. And many (if not most) of the controversies surrounding higher education up to the present day derive from how this assumption plays out in a marketplace defined by vocationalism, entrepreneurship and snobbery. For-Profit Colleges That Chronicle piece begins by talking about the fraught relationship between the academy and the labor market. And the for-profit college system was created – and rapidly expanded – to fill a need for specific work-related educational programs that elite colleges were not providing. For-profits tend to play the role of villains in any debate over the economy of education. But if you talk to people involved with this industry, they point out (correctly) that they are taking on students that fancy-pants colleges have chosen to exclude through the highly-selective admissions process they boast about, and educating those students in subjects professors at elite colleges don’t care to teach. Now they are educating these students within the context of for-profit operations that involve charging what the market will bear and trimming costs in order to reach desired margins of profitability, a spreadsheet-based approach to schooling that strikes a discordant note with most people involved with the supposedly altruistic mission of educating the young. But just as for-profit publishers have served as convenient punching bags when the skyrocketing cost of education comes under political scrutiny, so too for-profit schools tend to get dinged for raising prices as fast as their non-profit counterparts. You’ve seen this same for- vs. non-profit dynamic play out in the world of MOOCs where privately held startups like Coursera and Udacity are looked at with suspicion while non-profits like edX are given a pass (or use their non-profit status to contrast themselves with competitors). But just as Harvard became a multi-billion dollar organization by doing many of the things multi-billion dollar private companies do (such as raise prices while cutting costs), any MOOC provider – like any college or university – needs lots and lots of money to stay afloat. And the price of running a major university today includes cutting paychecks to professors and administrators who expect to be paid like corporate executives, building stylish buildings named after rich people, keeping lawns manicured and students (who today expect comfortable dorm rooms, fancy facilities, and tasty, healthy meals) happy. Again turning to that Chronicle piece, one of the ways “non-profit” schools have pulled in the revenue needed to pay for everything administrators, professors and students on campus want is to create new “products” – like freshly minted Master’s Degree programs – that come with high price tags (funded, like everything else we’ve been talking about, with a combination of parental savings, government dollars and public and private loans). While I’ve avoided entering debates over public funding of education, it needs to be noted that the massive expansion of higher education could not have taken place without substantial investment of resources at both the state and federal level by leaders of all political stripes ready to demonstrate their commitment to education by keeping the money spigot open year after year after year. And while different members of the educational class like to point at the other guy for wasting the taxpayer dollar (by expanding the number of debt-laden students they accept into their programs or raising prices at twice the rate of inflation), the fact remains that the entire inflationary spiral in higher education could not have taken place without billions in government spending underwriting more billions (if not trillions) in educational loans. The $10,000 Degree The debate over MOOCs as a substitute for expensive residential college that turned white hot last year needs to be seen in the context of “fixes” (quick or otherwise) proposed over the years to solve the problem of the skyrocketing cost of higher education. And while my Degree of Freedom experience demonstrated that a purely MOOC-based alternative to residential college is not for everyone (indicating that MOOCs alone are unlikely to serve as a substitute for traditional degree programs), there is no denying that any trillion-dollar business enterprise (which is what education has become) is going to resist any alternative that might disrupt lucrative (if ultimately fragile) business models. Other proposed alternatives that turned out to be intriguing sideshows include things like the Thiel Fellowship or Uncollege – programs designed specifically for students looking to skip college entirely in order to pursue education through entrepreneurship and life experience. Not that these programs are unrewarding to those involved with them. But like the Silicon Valley culture from which such radical experiments emerged, programs like Uncollege derive from (and are underwritten by) a high-tech-startup-fueled optimism and are not likely to scale beyond a fortunate but atypical few. One of the more interesting broad-based proposals I heard about while attending a recent conference at Tufts University was the $10,000 degree introduced by Texas Governor Rick Perry in 2011. Unlike Thiel or Uncollege (or even MOOCs), the $10,000 degree was a challenge thrown down by the political leader of a state (i.e., one of the guys responsible for writing the checks supporting a billion dollar state education system). And while many laughed off the concept (especially when Perry became a candidate for President), some schools decided to take him up on his challenge to see if a college degree worth of schooling could still be delivered for the highly affordable sum of just $2500 per year. Now keep in mind that we are not talking about an education that costs $100,000 to deliver subsidized down to $10K (something certain lucky scholarship-underwritten kids enjoy today), but rather something that can reasonably be called a college education delivered for a total of ten grand. And if you look at some of the experiments various state and community colleges tried that would lower costs to that level, it’s clear that mixing the creative awarding of credit, leveraging unused capacity and online learning tools can drive down the cost of a degree substantially. But looking through these options from a non-accounting perspective (especially programs in which students are completing their high school and college degrees in parallel), it’s not entirely clear that such experiments can scale to meet the needs of more than a small number of industrious students eager to pay less to possess a sheepskin. And while it’s worthwhile expanding the number of ways such enterprising students can achieve their goals, some of the schemes being tried in Texas remind me of that contortionist I used to watch on TV who was forever squeezing himself into impossibly small boxes. These $10,000 degree experiments remain interesting, however, because they demonstrate that a college degree does not have to cost $75,000 or $150,000 or $250,000+ just because that is what people continue to pay to obtain one. And while I’m pretty sure that $10,000 will never cut it as the “real” price/cost for a higher ed program that would be acceptable to broad numbers of student and parents, some of the long-overdue cost and pricing experimentation going on at the edges of the academy might finally shake loose an alternative or two that eager political leaders and/or educational entrepreneurs can help bring to the mainstream. But if such alternatives come into being, what might their price tag ultimately be? (Or, putting it in another way, what is the “true cost” of a college education?). Well if you look at this analysis of the cost of a home vs. a car vs. college as a percent of family income, if college costs had risen at the same rate as housing, a degree (at least one from U Penn) would cost around $15,500 per year, or roughly $60 grand in total (write me if you want to know how I performed that calculation). And this number, while not as appealing as the $10K BA, strikes me as a reasonable target worth considering. Stay tuned to Monday editions of the Degree of Freedom blog and this newsletter for further thoughts on how we might get there.