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I have an idea that I want you to pick apart. I’m not sure this is an original idea. (Few are.) But here is what I’m thinking.
The idea is that tuition shifts to a subscription model. Enrollment as a first-year student comes with a commitment to pay X dollars for Y years. In exchange, all credits, certificates, degrees, programs and other educational offerings are included in the tuition. If a learner decides to opt out at any point, then she pays the balance of the education consumed so far.
What might a lifetime educational subscription look like? Let’s say that students would have the option of paying the traditional tuition costs or going with the subscription model. To make this easy, assume that the expected discounted tuition is $25,000 per year. (Leaving aside room and board for now.) The total tuition will be $100,000, assuming no hikes over four years.
A student could either pay the $25,000 per year -- through loans or savings -- or agree to pay an annual subscription for 50 years. Let’s set that subscription cost at $4,000 per year, so the total cost over a lifetime will be $200,000. (Maybe that subscription fee is indexed to inflation, so it rises automatically.)
Again, keeping things simple -- a school trades the up-front higher payment for a guaranteed longer-term annuity. (With allowances made for students who opt out and pay off their costs.)
At first, the dollars coming in are not enough for the institution to cover its costs. This shortfall is made up by borrowing against the asset of expected subscription revenue.
Why move to a lifetime subscription model? Making this shift would solve (or at least address) three problems.
The first problem is that education, and credentialing, are now lifelong. We all need to be continually updating our skills and demonstrated competencies. The model of “finishing” our education no longer aligns with the reality of the labor market. And yet, our education and credentialing system is set up for discrete rather than continuous learning. Shifting to a model where admissions means lifetime access to courses, credits, credentials and degrees only recognizes the needs of 21st-century learners.
The second problem a subscription model would address is student costs. We have this crazy system now where the bulk of educational costs accrue when an individual cannot pay them. Earnings grow through a lifetime, but tuition is due at the beginning of adulthood. This system of financing higher education, made worse by public disinvestment, assures that most people will have high levels of educational debt. If we could spread costs over a lifetime, then the financial burden of postsecondary education would lessen.
The third challenge that a 50-year college subscription plan might address is institutional finances. Most schools struggle to manage yield through discounting. Revenue volatility drives up the costs of capital. Student debt grows while colleges operate under permanent fiscal crisis and scarcity. There has to be a better way. Waiting for states to suddenly realize the irrationality of postsecondary disinvestment is analogous to building a retirement portfolio on lottery tickets. We need some innovation in financing.
Why might a 50-year college subscription model not work? About a million reasons.
There is no indication that anyone would ever agree to commit to paying a few thousand bucks for lifetime access to higher education. The high-tuition/high-debt model is so ingrained in our thinking and culture that it will be hard to move to something different. We might not blink at paying $144 a year for Netflix or $600 a year for cellular data and a smartphone, but we have no history of paying $4,000 per year for courses, credit, credentials and degrees.
Even if there might be demand for a higher education subscription model, it may not be realistic for tuition-dependent institutions (say residential privates) to make this transition. They would lose too much money up front and have too big a liability down the road. (With the commitment to keep offering and even grow alternative credential and master’s programs.) Wealthier schools don’t need to innovate on the financing side, and less well-resourced schools might not be able to.
A higher education subscription model may theoretically work in some institutional edge cases (private residential colleges) but is likely a poor match for public institutions -- and is probably irrelevant for community colleges. As the majority of all first-year students, and the plurality of all students, are at community colleges, this subscription idea is immediately a nonstarter for most of the college-going population.
The point here is not to put forth a magic idea that solves the postsecondary financing crisis. Instead, we need to be thinking as creatively on the business model side as we have been experimenting on the delivery (and learning) side of higher education.
Can we identify circumstances why this model might work, rather than all the reasons that it would not?
Can we think of one college where this experiment could play out?
Can we get foundations and wealthy benefactors behind the idea of underwriting innovation in higher education financing?
