08/15/2012 03:15 pm ET Updated Oct 15, 2012

It's Time for Customer-Centered Reform of Education: Part 1

In our August 7 post, we called upon the national Commission on Educational Attainment to bring forward new "business models" and actionable approaches to enable higher education to do a much better job in creating value for its customers -- i.e., students. In this post, we provide our analysis and thoughts on why it's time -- past time, indeed -- for customer-centered reform of higher education by examining the following areas that impact the value equation for students: college costs; graduation and placement rates; return on investment; and career education and skill development.

Costs: Colleges Gone Wild. The Federal Student Aid division of the U.S Department of Education in its Strategic Plan FY 2012-2106 states:

"The cost of attending public four-year institutions has grown at a rate of 6.5 percent per year from 2001 through 2010. The trend is similar in all sectors of post-secondary institutions. If this trend continues, the cost of a public education in 2016 will be well over twice the 2001 cost."

College costs have sky-rocketed over the past half-century. In an October 23, 2009, Inside Higher Ed interview with Scott Jaschick, James Garland, former president of Miami University of Ohio and author of Saving Alma Mater: A Rescue Plan for America's Public Universities, observes: "Back in 1961... [University of Minnesota undergrads paid]... $213 yearly tuition. Last year [2008] Minnesota students paid $9,621 for the same experience, an increase of 4,400 percent."

Graduation and Placement: Less Than Full Achievement and Disclosure. For students, it's not only getting into the higher education race, it's making it across the finish line and being rewarded appropriately for it. As various studies have shown, the results of higher educational institutions of all type are highly variable at best and awful at worst. Moreover, it's frequently hard to get sound data to judge those results -- especially in terms of job placement.

In an April 9 article for Businessweek, Richard Vedder notes that "a goodly proportion (more than 40 percent) of those attending four-year colleges full time fail to graduate, even within six years." The Harkin Report on For-Profit Higher Education released on July 30 states that "more than half of the students who enrolled in those colleges left without a degree or diploma within a median of 4 months."

In an attempt to provide better consumer information to prospective students, the Higher Education Act of 2008 included a number of new information requirements including one to disclose "information regarding the placement in employment, obtained by graduates of the institution's degree or certificate programs." The American Enterprise Institute examined compliance with the employment placement requirement in its November 2011 report, The Truth Behind Higher Education Laws, authored by Kevin Carey and Andrew Kelly. The authors indicated that "About two-thirds of the eligible colleges (101 out of 151) provided information about the employment of recent graduates." Carey and Kelly stated that 30 of those colleges "did not respond to the survey and did not have accessible employment information on their websites."

Return on Investment: Fewer Dollars, Less Sense. One of the strongest arguments for getting a college degree is that the college graduate earns more than the high school graduate over a work life. As Mary Pilon notes in her Feb. 2, 2010, article for the Wall Street Journal, the differences in projected earnings at that time ranged from a high of $1 million-plus to a low of $279,893. The Pew Research Center recently pegged that figure at $650,000 in a press release of May 17, 2012. That was based primarily on analysis of data in a report that Pew released in May of 2011.

Regardless of the exact size of the earnings difference, Richard Vedder in his Businessweek article asserts that "...for many, attending college is unequivocally not the right decision on purely economic grounds." Vedder's arguments include: "Earnings vary considerably between majors."

The Pew research supports this, commenting:

"The average figure masks wide variations in the financial returns to a college education, such as field of study. ... The number of college graduates far exceeds the growth in the number of technical, managerial and professional jobs... We have for example, more than 100,000 janitors with college degrees, and 16,000 degree holding parking lot attendants."

That may explain why, as Vedder notes in a July 20 posting for the Center for College Affordability, "Compare 2008 and 2010, looking at the average earnings of those working full time year round. For males with a high school education, earnings rose 1.87 percent, while for those with bachelor's degrees, they fell 4.17 percent..." At least those people are employed. In his July 29 New York Times article, "Is Algebra Necessary," Andrew Hacker points out that "a January 2012 analysis from the Georgetown center found 7.5 percent unemployment for engineering graduates and 8.2 percent among computer scientists."

Career Education and Skill Development: Buyer Beware. Much emphasis has been placed by the Obama administration and its predecessor on use of the community college system as an alternative for those students who are vocationally oriented or need remediation or additional preparation before pursuing a four year degree. Community and career colleges are viable higher education options but not unqualified ones. Many students who start programs do not complete them. The costs can be high. And, the students may be educated for jobs that don't exist.

The Federal Student Aid Strategic Plan points out,

"The growth in enrollments at proprietary and two-year institutions has soared in recent years (total growth of 31.6% between 2001 and 2009). This dramatic increase has produced its own unique set of challenges including higher student default rates."

The Harkin Report highlights that at for-profit colleges, "Among 2-year Associate degree seekers, 63 percent of students departed without a degree."

In a working paper issued in February 2012, The Center for Analysis of Post Secondary Education and Employment (CAPSEE) commends the for profits on the one hand, stating, "Short run retention is high and the for-profits do an admirable job of graduating students from shorter certificate programs." CAPSEE then condemns them on the other stating, "But the for-profits also charge higher tuition and fees than public sector alternatives, and their students are more likely to end up unemployed and with substantial debts."

The grades on the report card for higher education in these four "value" areas are not good ones. In our next posting, we will look at three more areas: teacher preparation; technology and education; and primary and seconday education to see how they impact the value equation.