A complex set of issues ranging from rising tuition fees and growing student debt to dwindling public perceptions of educational institutions and doubts about the work-readiness of graduates have left many education leaders concerned about the future. No doubt, they should be. And no doubt there will be many colleges that shutter their doors or merge into one another in the years to come. But amidst the serious threats, there are also incredible opportunities for leaders to usher in what I call a “relevance renaissance” in higher education.
What is a relevance renaissance and why do we need one? Let’s start with what has led US higher education into its current predicament. The price tag for tuition and fees is a good place to start, especially when juxtaposed against widespread perception on the return for that investment. Since 1990, higher education tuition has increased by nearly 400% in the US, which is more than double the Consumer Price Index (CPI) increase over that same period. As of second-quarter 2019, American student loan debt reached an astounding US$1.6trn and surpassed total car loan debt and credit card debt. All the while, the median earnings of bachelor’s degree holders in the US are actually below 1990 levels. And for the first time in the past 40 years, the unemployment rate of recent college graduates (aged 22-27) is higher than the overall employment rate.
When costs go up and the returns on investment appear to be diminishing, consumers increase the scrutiny of their investments. Higher education has many important customers, from students and parents to taxpayers and employers. This array of stakeholders may not always be appreciated by some in the academy. And across the board, these stakeholders doubt the work-readiness of graduates and the relevance of what is being taught in colleges and universities. This negativity should be of special concern given that the number 1 reason Americans value higher education is to “get a good job”. A mere 13% of US adults, 11% of C-suite business executives and 4% of colleges’ and universities’ trustees have strong confidence in the work-readiness of graduates. Equally worrisome, only 26% of US adults with college experience strongly agree their education is relevant to their work and day-to-day lives.
In the context of rising prices and doubts about outcomes, it should be no surprise that public perceptions of higher education have dropped in the past several years. What is surprising is how much they have dropped and how quickly. In the US, these perceptions are now deeply intertwined with political leanings. Confidence in higher education has dropped 9 percentage points since 2015—the largest drop in confidence among all institutions measured by American analytics company Gallup. Driving this drop is a 17 percentage point decline in the confidence of higher education among self-identified Republican voters. Even more notable, and less tied to political affiliation, Gallup recently reported a nearly 50% drop in the “importance of college” among young adults in just the past six years. And then there’s the view of current American high school students, among whom only 7% are confident US colleges are the best in the world.
These growing concerns about the state of higher education have already started to take their toll on student enrolments and individual state funding. US higher education enrolments have fallen for eight consecutive years, a reduction of more than 2m students in total. And state funding for higher education on a combined basis is currently US$8bn below 2008 levels. (American universities and colleges depend on both state and federal support). Some might choose to believe these are simply cyclical trends, but that would be a mistake. The US is facing a coming crash in its college-going population starting in 2025—with projected enrolments set to plummet by more than 15% in every region across the country. The financial sensitivity analysis for heavily tuition-dependent institutions (which most in the US are) is such that large percentages won’t survive a sustained multi-year drop in enrolments of 15% or more.
When consumers no longer believe that a product or service is delivering on its core value proposition while its price tag continues to rise, it reaches a relevance crisis. In higher education’s case, it has lost its relevance to the workplace and has fallen out of touch with affordability for many of its customers. And perhaps no other statistic puts a finer point on this than a recent study that showed Americans rank a Google internship over a Harvard degree (by a margin of 60% to 40% respectively) in terms of what they believe would be most helpful for a high school graduate to launch a career.
Americans are eager for alternatives as they increasingly come to believe higher education is failing them. The good news is that the alternatives they prefer still involve higher education or a university experience—just in very different forms. Seventy-four percent of parents (and 55% of current high school students) would consider a “Go Pro Early” model where their child would go to work for an employer who offers a college degree as part of employment. And, interestingly, 46% of parents would consider sending their child to get a bachelor’s degree abroad instead of in the US.
It’s time for a relevance renaissance in US higher education. It’s not just a path towards ensuring survival, but a road to sustainable future growth. Relevance in higher education is defined by what is taught, how instruction is best delivered, and its relative affordability. There are four critical mindset, strategic and tactical shifts that must occur for a “relevance renaissance” to take shape in US higher education:
- Higher education must move away from the degree-only mindset. There is incredible growth in non-degree, professionally-relevant education and training.
- Higher education has to embrace the idea that growth and scale can equal higher (not lower) quality. Inclusivity, rather than exclusivity, may well become the new by-word for many US universities in the future. Some of the most successful universities today (such as Arizona State University) are growing enrolments rapidly, enabling increased investments in learning science and the overall quality of education.
- Higher education needs to pursue cost reduction strategies as opposed to those aimed at increasing financial aid. Colleges and universities have reached the upper limits of their ability to increase financial aid for students. A concerted effort needs to focus on pulling the lever of reducing their own costs. One US institution, Purdue University, comes immediately to mind. For the ninth consecutive year, it has maintained a freeze on tuition fees at its flagship West Lafayette, Indiana campus. The number of Purdue students who graduated debt-free in 2018-2019 was 59% compared with 43% nationally.
- Ultimately, it’s imperative that higher education begins to operate as a customer-centric sector Students and alumni, in reality, are not its only clients. Taxpayers and employers are equally important stakeholders who will ultimately help define the price-value relationship.
These will not be comfortable nor easy shifts for higher education institutions in the US. But they are clear and necessary. Look for the big winners to be universities with dynamic presidents who have alignment with their boards and senior leadership teams: they will be the ones to recognise the severity of the current threats and move in bold ways to adapt and thrive.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
