Off and on over the last four years I’ve been speculating in this space about the future of the educational enterprise at colleges and universities like George Mason where I work. Mason is a so-called “mass market university” that has a large enrollment (over 30,000), an amazingly diverse student body, and offers most academic programs available in higher education today (with the big exception of health programs other than nursing). There are hundreds of state funded universities like ours around the U.S., and many more privately funded institutions that, while smaller, are quite similar to us.
All of the mass market institutions in the U.S. are in big trouble. The sky isn’t falling, but there are definitely cracks in the firmament.
Why are we in trouble? The answer is both simple and very complicated. The simple answer is that institutions with much better brands than ours have thrown themselves head first into the MOOC swamp and already we are seeing signs that in the coming year or two many, if not most (or even all) of these institutions will find ways to offer academic credit for what are now free courses. Once that happens, our students are going to vote with their feet (or fingers on keyboards) and will start taking increasing numbers of courses from these institutions–both because these courses are convenient, and because they are from institutions with better brands.
When that happens, we can expect that more and more of our students will be presenting us with transcripts from Stanford, Penn, Michigan, the University of Virginia, and other similarly better known competitors, and demanding that we accept these courses toward our degrees. Right now our rules make it all but impossible for our students to actually do this, but we can expect a groundswell of demands for change in our “study elsewhere” policy, the relevant passage of which reads:
Students who apply for admission to Mason usually do not seek simultaneous enrollment at another collegiate institution. In those unique situations when a student does seek concurrent enrollment, the student must obtain advance written approval from their academic dean. This process permits a student to enroll elsewhere in a suitable course unavailable at Mason. Catalog numbers and descriptions of courses to be taken elsewhere must be submitted with the request for approval. Students must submit an official transcript for all such course work to the Office of the University Registrar. Note that while credit may be approved for transfer and a minimum grade must be achieved, grades themselves do not compute into any Mason GPA. Students who enroll elsewhere without advance written permission while enrolled at Mason may not receive transfer credit for course work taken at other institutions.
Can you imagine that every time one of our students wants to take a MOOC course from a name brand competitor they have to submit a signed form to the dean’s office for review? Trust me, I was an Associate Dean, and I know that such a procedure is unsustainable.
Or, can you imagine that one of our students takes a course from, say, Stanford University, earns an “A” and presents that transcript for transfer of credit and is told, “Sorry, you can’t do that.” That too is unsustainable.
So, before long, we are going to have to accommodate ourselves to the notion that we may lose 15, 30, or more credits per student to online competitors. We already give up close to half our tuition revenue each year to the local community colleges, because half of our undergraduates transfer to us after completing their AA degree elsewhere. And our “native” students (those enrolling as freshmen) are coming in with credits in hand from AP, IB, and other college equivalent programs. If we end up giving up another 15 or 30 credits to online competitors, there will be such a large hole in our budget that we can’t continue to operate as we do.
How big would such a hole be? Around $10.5 million per year if our first time freshmen end up taking 15 credits from online competitors in their first two years.
To arrive at that figure, I consulted our official enrollment census for Fall 2012, which says that our first time freshmen took 40,087 credits, or essentially 15 credits (14.88) per student. About 20% of our total enrollment is paying out of state tuition, so if we assume that the freshmen class is also 20% out of state, then those freshmen are generating $21,775,258 in tuition this fall for their 15 credits. If those same freshmen end up taking 15 credits online elsewhere during their first two years, that’s a $21 million dollar hole blown in our budget, or $10.5 million a year. For an institution with an endowment worth less than $60 million, that’s a loss we can’t live with.
Why not dive into the MOOC swamp with our competitors you might ask? The simple answer is that we don’t have the brand to compete there and, with our tiny endowment, we can’t afford to give up all but a tiny sliver of our tuition revenue to the platform providers (as Coursera’s contract with its participating universities stipulates). That door is closed to us.
The news is no better elsewhere. A recent report by the accounting/consulting firm Ernst & Young on Australian higher education argues that not one of Australia’s universities can survive to 2025 with their current business models. The report’s authors argue that, among other things, all of Australia’s universities have to make substantial cuts in non-instructional/research staff to refocus their overall staffing on income producers (faculty). I don’t know, but suspect, that the same could be said of many American institutions of higher education. Certainly at Mason we’ve seen a substantial increase in the size of our administrative staff over the decade that I’ve been here.
The Ernst & Young report argues that there are three models that universities might follow to survive to and beyond 2025:
- Stay with the status quo, but significantly streamline their operations;
- Become a “niche dominator,” i.e., stop trying to be all things to all students and focus on one or a few niches where they have a chance of winning greater market share;
- Become “transformers” in which they redefine what it means to be who they are, create new markets for their products, and outsource much of their operations.
As much as I dislike the business-speak of these proposals, one cannot deny that we have to take seriously the fact that we can’t stand pat as disintermediation rolls over our industry.
Mason is hosting a conference called The Future of Higher Education this Friday and Saturday (largely restricted to an internal audience). I’ll be interested to see just how much time we spend on the hard realities of the situation we are facing. I’ll be live blogging the conference, so stay tuned to see what we do and don’t discuss.