Is the business model of higher education broken?
Yes, according to University of Maryland Chancellor William Kirwan and Gail Mellow, president of LaGuardia Community College in New York. "With the economy as it is, the public sector will not be able to make the investment to hold down tuition," Kirwan said. The two spoke as panelists Tuesday evening in a debate about the cost of higher education hosted by the Miller Center of Public Affairs.
The epic price tag of a college education has helped bring the business structure of higher education to the forefront of policy discussions. From 1982 to 2007, college tuition and fees soared by 439 percent, while median family income only rose by 147 percent, according to a report by the National Center on Public Policy and Higher Education. At this rate, "college costs are outstripping the ability to pay," wrote David Breneman, a professor at the University of Virginia, in a recent white paper.
Despite the astronomic rise in cost, not everyone agrees that higher education needs a financial overhaul.
"If the model was truly broken, enrollment would be declining.... That's not happening," said Yale University President Richard Levin, who also spoke as part of the Miller Center panel. China and India, he added, are changing their post-secondary institutions to be more like the U.S.
Daniel Hamburger, president of DeVry Inc., one of the leading for-profit companies in higher education, agreed with Levin. "We don't have one model, we have three," Hamburger said, referring to public, not-for-profit private and for-profit institutions. "It makes [higher education] accessible to everyone."
"As government support for higher education goes down," Mellow said, "the broken business model is shifting that debt burden to students and their families, often loading them with punishing levels of debt." In fiscal year 2009, 31 states cut mid-year appropriations for higher education.
Mellow accused the for-profit sector of destabilizing federal funding of higher education by taking a disproportionate amount of Pell grant money, federal scholarships for low-income students. "We need to make a business model that does not let colleges make profits for shareholders while taking needed tax dollars away from public higher education," she said.
Hamburger defended the proprietary school role by pointing out that students, not schools, choose where to spend Pell grant money. What's more, the private sector can build capacity that the public sector won't be able to afford in the foreseeable future, he added.
The debate took a turn when Kirwan pointed out that the vast majority of American college students are educated by public institutions. Ray Suarez, a senior PBS correspondent and moderator of the debate, called private institutions "niche players." In 2007, 76 percent of undergraduates were enrolled at public institutions, according to data from the Education Department.
"Our nation's ability to provide the size of educated workforce we need, and to provide the opportunities for moving up the economic ladder, rise and fall on the public sector," Kirwan said.
Whether the financial model for higher education needs serious reform, both sides are working to control the cost of tuition.
Leveraging technology, cutting "back office" costs, consolidating business services, shortening the length of programs and being "transfer-credit-friendly" were some of the strategies the education leaders identified for holding down costs.