Adapting to Pressure

Although higher education's doubters are skilled at making bold proclamations about coming apocalypses, a considerable number of scholars and commentators have developed middle-of-the-road analyses that acknowledge challenges but remain more optimistic about colleges' and universities' future prospects.

A notable recent example comes from two economics professors at the College of William & Mary, Robert B. Archibald and David H. Feldman. They published a book last year, The Road Ahead for America's Colleges & Universities (Oxford University Press), that simultaneously raised worries about mounting pressures on colleges and universities and predicted many four-year institutions can adapt and appeal to college students long into the future. Their latest work follows their 2011 book, Why Does College Cost So Much? and they have long argued that broad economic forces, not inefficiency, have driven up college costs.

Archibald and Feldman's predictions aren't as sweeping or attention grabbing as Harvard professor Clayton Christensen’s theory of disruptive innovation. In fact, they're happy to distance themselves from the world's most aggressive prognosticators, arguing futurists are people who are happy if you don't read their books in 20 years. They point out that the future is not preordained and can instead be changed by policy choices, economic decisions and other unforeseen events.

Nonetheless, they acknowledge that forces -- notably income inequality -- are making it increasingly hard for many students to pay for college. Institutions serving underprivileged students are facing some of the greatest threats, they argue. As such, the higher education system's ability to drive economic opportunity is uncertain going forward.

Archibald and Feldman answered questions about their book and their thoughts on higher education's future via email. The following exchange has been edited for length and clarity.

Q: You think the bundle of services colleges and universities provide will continue to be valuable to enough students to endure. But you suggest that it's most likely to fray or unravel for the best-off and lowest-tier students. Does this unraveling have to be a net negative?

Feldman: “Have to be” is too strong a term. Most students benefit from a high-touch environment rich in counseling, mentorship, advice, example and peer interactions. This is especially true for low-income and first-generation students. These attributes of the traditional face-to-face instructional model are expensive.

Yet most low-income students attend non- or minimally selective schools that are increasingly resource starved. Of necessity, many of these colleges and universities are slicing away or diluting parts of the bundle of services the traditional model offers. For most 18-year-olds, however, the current online world is a poor substitute. We can imagine a wonderful world of low-cost web-based education targeting the precise job skills each student supposedly wants and needs. But the current online options do not live up to the hype.

Lastly, we don’t argue that the traditional model will fray for the best-off students. We can imagine a small minority of very motivated, very mature and very well-prepared students moving into nontraditional programs like the Minerva Project or other online alternatives. But the bulk of the nation’s high-income families will, for the foreseeable future, continue to send their children to elite public and private colleges and universities that offer a richly resourced environment for academic learning and personal growth.

Archibald: Not every service offered in the bundle is needed, but a complete unraveling as suggested by some would be a big mistake. It is easy to find examples of excesses at some institutions, for example, lazy rivers in the recreational center, posh dining halls and too much money in the athletic departments. Colleges and universities could do some cutting, but the basic bundle of services needed to provide a supportive education to the traditional-age student should not be cut too much. The idea that students could get services of equal value on the open market seems to us to be unrealistic.

Q: You name some other industries that have followed the same pattern of cost increases as higher education: dental care, medicine, legal services, life insurance. What do they all have in common?

Feldman: All of them are personal services whose main providers are highly educated. Service prices over all have risen much faster than the prices for manufactured goods over the last 100 years. As a result, we spend a greater fraction of our income on services. The primary driver of this phenomenon is “cost disease.” Technological change has reduced the amount of labor needed to produce most goods coming from factories, farms and mines. To get a feel for this, just watch a video of a Ford Model-T assembly line and compare it to how a modern plant operates. Count the number of people you see doing repetitive tasks. Most services are immune to this because the service is the time of the provider.

For services that employ a lot of highly educated labor, the cost pressure is even more acute because the wage premium on highly educated labor has risen over the past 40 years. Lastly, new technologies tend to ratchet up the quality of services like higher education and medical care rather than push down the price. Using the medical analogy, the “standard of care” rises over time, and the standard is set in the market.

Q: You note that across the country, there are going to be enough students to support the current level of colleges and universities. But those students look different than those who have traditionally attended college, either because they are older, more ethnically diverse, poorer or located in different regions. Is there reason to hope that many institutions can actually adapt to serve a different type of student?

Archibald: The information on these changes [is] based on well-known demographic trends, so they will not come as news to most college leaders. Many colleges are trying to change programming to deal with ethnic diversity. Some colleges are targeting aid to help poorer students, but others are focusing more aid on merit, and that does not help. Locational liabilities are more difficult to deal with. Some institutions are trying to recruit more out-of-state students, particularly out-of-country students. This will work for some, but it won’t work for very many.

Feldman: We have repeatedly seen institutions change and adapt to new technological, political and demographic environments, so yes, I think most of the nation’s traditional colleges and universities can respond productively to the challenges they face in coming years. In 1964 only 5.28 million students were enrolled in any form of postsecondary education in the U.S. And 68 percent of those students were young men. Enrollment today is roughly 21 million, and over 57 percent of them are young women.

The ethnic and economic composition has already shifted dramatically, and that shift will continue. Read the pages of Inside Higher Ed to see the experimentation and ferment in how to deal with these social changes. And new technologies may indeed play a role in improving traditional face-to-face education. Unless you accept Clayton Christensen’s forecast of the coming technological disruption of higher education (and we spend many pages outlining why we do not see radical revolution as likely), much of this change will take place inside traditional bricks-and-mortar institutions.

The thornier problems are regional.

Q: Which types of institution are likely to fare best and worst in the coming years?

Archibald: For public institutions, the ones that will fare best are the flagship and other selective institutions. These institutions will be able to adapt to a switch away from being state supported to being tuition driven. These institutions will be able to appeal to out-of-state and out-of-country students, and they may well hang on to more state support than less prestigious state institutions. The ones that will fare worse are essentially the rest of the state institutions, particularly those in states less willing to support higher education and in states that are losing population.

For private institutions, the ones that will fare best are the highly endowed selective institutions. Most of these institutions have long histories of appealing to students and can offer attractive financial aid packages. The ones which will fare worse are the smaller, less selective institutions, again particularly those in states that are losing population.

Q: What can institutions do to try to get ahead for the future?

Feldman: All institutions outside of the most elite need to invest in something that sets them apart from hundreds of other similar institutions and which offers a real distinction among the much smaller set of schools that makes up their most important regional competitors. This could be a novel core curriculum, excellence in some specialized field (languages or health care, for instance), an interdisciplinary center or a partner relationship with a foreign institution.

Another option is program sharing. Two schools located 20 miles apart don’t need to replicate expensive STEM departments, for instance. They may be able to share equipment and borrow courses to make a stronger and leaner combined department while maintaining separate identities in other areas.

Q: Many of the trends you describe and accompanying challenges stem from widening income inequality. Can they truly be changed without a major lever to address that inequality -- something like an increase in taxation?

Archibald: Colleges are having to live in a world in which income inequality is growing, and this creates many of the problems. Policy changes aimed at colleges and universities are only going to go so far. Economywide policy changes aimed at the underlying problem would make things easier for higher education.

Still, in the long run, having an educational system that offers chances for talented students from every income bracket to get ahead is a part of the solution to the widening income gap. We need a higher education system that narrows income inequality. Our fear is that our current system, and the one we can see developing, does more to reinforce income inequality than it does to narrow it.

Feldman: Much of the decision making on campuses over the last 40 years has reflected rising income inequality. The massive increase in tuition discounting, for instance, is at least in part an institutional response to these facts on the ground. A state and federal commitment to redressing inequality would indeed go a long way toward relieving the stresses on the higher education system.

But we do not see such a national response in the offing and did not build our analysis around a presumption that inequality would go away. Reallocating how government resources are spent and changing institutional behavior can help in many ways, even in a world where state and federal tax policy is not conducive to redistribution.

Q: Should some colleges and universities close?

Feldman: This is an easy question to answer yes to and be misunderstood. There is always a certain amount of “exit” in the higher education industry. Ironically, the closures that have had the greatest impact on seats over the past five years have been in the for-profit sector.

Without pointing a finger at any specific school, it’s easy to identify the characteristics of schools at higher risk. They are small, private, tuition-dependent institutions whose enrollment base is very local and increasingly financially pressed. These problems are compounded in regions of demographic decline, especially if a number of schools are in close competition for a dwindling supply of students who can afford to pay a significant net price.

Archibald: Yes. Colleges and universities need to have sufficient resources to provide a high-quality education for their students. If the institution cannot attract these resources, it should consider closing. Budget cutting can be a short-term solution for reductions in revenue, but it shouldn’t be a long-term solution. If the reasonable projections for revenue do not suggest that the institution can support good programs, the institution should close.