07/07/2014 08:51 am ET Updated Sep 06, 2014

The Future of Higher Education: Is There a Middle Ground?


The National Association of College and University Business Officers (NACUBO) issued its survey of private, non-profit four-year colleges last week. The results -- a snapshot of the health of the higher education community -- speak to the condition of the patient.

It's clear that the patient is suffering. The problem is that the origins, symptoms, and likely outcome differ by diagnosis. The very complexity of a complex, decentralized higher education system makes the treatment difficult, with the prognosis varying by specific institutional circumstance.

Still, there are some common themes that are troubling.

To begin, discount rates last school year reached a new high estimated at almost 47 percent for first-time, full-time freshmen. Even more telling net-tuition revenue remained stagnant, with growth estimated at slightly more than one percent. Adjusted for inflation, colleges have seen no growth on average for well over a decade. Further, enrollment has dropped at half of the more than 400 institutions surveyed with respondents arguing that sensitivity to high sticker prices, a smaller pool of traditional applicants, and increasing competition contributed most directly to enrollment pressure.

Reaction is as expected. Many point to the impossibility of achieving new revenue growth by building revenue streams from graduate, continuing education and professional programs. Others blame the spotty success of recruiting efforts, the failure to deal with cost drivers, including compensation, consumer revolt against high sticker prices, and internecine warfare across departments over reductions in faculty and staff.

Where can colleges and universities turn for relief? The most recent edition of The Economist offers one potential glimpse in an article on "creative destruction." Their theme is that "higher education suffers from Baumol's disease -- the tendency of costs to soar in labor-intensive sectors with stagnant productivity." To support this argument, The Economist notes that college costs have risen by an average of 1.6 percent above inflation for two decades. Further, they contend that job shifts will force continuous, lifelong education as some jobs become obsolete and others emerge that will be driven by technology solutions.

Their concluding argument is perhaps the most compelling. The Economist argues that government should put money and regulatory authority behind philosophical and structural changes to higher education. They suggest: "Reinventing an ancient institution will not be easy. But it does promise a better education for many more people. Rarely have need and opportunity so neatly come together."

So, is the ball game over for traditional providers of higher education retired from the team to be replaced by online strategies and government backed competency exams?

The fact is that the decentralized and chaotic groupings of higher education institutions -- public, private, lower division, upper division, graduate, professional, online -- and its younger cousin the MOOC -- will survive because Americans value choice and access and financially support the current structure. There will continue to be a pressing need for inner city youth to find a first higher educational opportunity somewhere. Adult learners will need to retrain for jobs that don't exist. And wealthy parents will still seek a residential liberal arts experience for their children and pay for the privilege of doing so.

The present mix of educational offerings won't change. The difference will be that there will be more obvious winners and losers. No college or university can offer enough complexity to fully insulate the institution from outside forces. Traditional methods of financing the educational enterprise -- the comprehensive fee, availability of debt, endowment growth, fundraising, and auxiliary revenues -- are stressed. As a community, higher education is reacting defensively rather than hitting the "refresh" button to restate the crisis as an opportunity. One danger in the clash between tradition and technology will be that Luddites never win in the long-term but they can weaken what they seek to protect.

The prescription for danger will vary by institution and type. Strong institutions that might seem robust are often in significant trouble because of poor management, structural problems like discount rates, institutional arrogance, or a defensive "duck and cover" mindset. Weaker institutions can fail because of a pullback by traditional funders, including the state and federal governments, limited institutional resources, and ineffective enrollment and financial aid strategies. And finally, archaic, incremental governance that most values process over action typically controlled by uninformed, volunteer boards of trustees exacerbates this growing problem.

The sustainability strategy for each institution will be different. For the core group of institutions that have historically defined the foundation upon which American higher education is built, the tools exist. These include deeper strategic thinking, better assessment, sustainable partnerships, and shifting enrollment approaches. The question is not so much how to solve the problem but whether to admit that the problem exists.

There are two lessons from the intersection of the NACUBO study and The Economist article. The first is that the problems described are longitudinal and systemic. They won't go away with an improving economy or a better admission class. The second is that one size does not fit all and that government-backed seed capital and discretionary action can weaken the complexity and vitality of American higher education even while trying to strengthen it. Nuance has meaning when charting new directions.

This leaves us with a perplexing but critical question. If leadership ultimately must come from within higher education, will the disruptive innovators who understand the history and traditions step forward to make change happen?

Our current broad, diversified system of higher education is still the envy of the world. Let's be sure that the fix doesn't make parts of it irrelevant.