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Four Strategies for Controlling Cost in Higher Education

It’s no secret that costs in higher education are spiraling. These costs, and the associated rise in student loan debt, have been a topic of conversation at almost every convention I’ve attended for the past five years or so. It’s not just talk, either – according to the National Center for Education Statistics prices for undergraduate tuition, room, and board at public institutions rose 39 percent, and prices at private nonprofit institutions rose 27 percent, after adjustment for inflation. Student loan debt is now more than $1.3 trillion.

The Causes

Inflation means costs are going to rise – it used to cost $5 to go to the movies, and now it costs more than that just to buy popcorn. But the costs of higher education have far outpaced inflation. I think there are a few reasons for that.

First, funding for higher education has dropped. In 2012, for example, state funding fell by 7.6 percent, and a report by public think tank Demos estimates that between 78 and 79 percent of tuition increases at public universities were due to cuts in funding. Funding is stabilizing as the economy grows stronger, but the ripple effect will be felt for a long time.

At the same time as funding has decreased, administrative costs have increased. According to a report from the New England Center for Investigative Reporting, the number of non-academic administrative and professional employees at U.S. colleges and universities has more than doubled in the last 25 years. This growth has far outpaced the growth of students and faculty; in fact, the number of full-time faculty has decreased as more colleges rely on adjunct professors. In 1975, 30 percent of college faculty were part time; by 2011, 51 percent of faculty were part time.

For-profit institutions also have a lot to answer for here; they spent much of their prime charging high prices for their online programs. Other tuitions rose to match this, and student loan debt also increased. It is my belief that with the for-profit footprint shrinking, costs will begin to stabilize.

Discounted pricing also is an issue. While tuitions are rising, the discount rate is rising accordingly as well, so that the actual tuition institutions are collecting has remained relatively flat. According to a report from the National Association of College and University Business Officers, the tuition discount rate is almost 50 percent, a number that is unsustainable. Such steep tuition discounting both perpetuates the notion of out-of-control tuition increases and fails to solve the problem of generating more revenue that colleges need due to decreased funding and increased operating costs.

The Solutions

All hope is not lost, however. There are steps colleges and universities can take to mitigate cost. The good news is that taking these steps will give institutions a significant competitive advantage. At a time when more students are looking for inexpensive education, being able to point to low student debt or significant savings can help colleges stand out in a crowded market.

Those institutions that are bucking the declining enrollment trend and seeing significant growth – Southern New Hampshire University, Liberty University, and Western Governors University – all have extremely reasonable price points. These colleges have found a way to keep tuition down and are cementing their perception in the marketplace as a worthwhile investment of both time and money. These lower tuitions should help stabilize the student debt load and bring it back to a reasonable place.

Embrace Technology

I am obviously a little bit biased, but taking programs online can provide a significant cost savings to universities, one that can be passed on to students. Online courses allow institutions to serve more students, because they are not constrained by physical limitations of space. Online courses also can lower capital and infrastructure costs, because campuses are serving fewer students on ground.

Additionally, costs that are not directly affiliated with instruction can be mitigated by online learning. Academic support services, career counseling, and libraries all can be operated more inexpensively online, while still offering the student a high-quality learning experience.

Use Open Educational Resources

Open educational resources (OERs) take advantage of material that is freely available, giving students a richer experience and also breaking up the intellectual monopoly long enjoyed by textbook publishers. I remember the sticker shock of going to my college bookstore and having to pay full price for a new edition of a book, and then not being able to sell it back at the end of the semester. Now, professors can develop their own, customized courses using information they curate themselves, rather than relying on pre-printed textbooks.

One of our partner institutions has embraced open educational resources to the point that they do not charge any money for textbooks. Not only does this help them keep tuition costs down, it is a hugely powerful marketing message and fosters a community where cost consciousness reigns.

Consider Alternative Forms of Education

I’ve talked a lot about emerging degree models, and I think these will be key to keeping costs less in the new world of higher education.

Competency-based education will help contain costs by allowing students to finish faster. If students get credit for skills and knowledge they already have, they will not need to spend time retaking classes that are not useful to them.

Currently, bootcamps are primarily a for-profit endeavor, but there’s no reason they cannot be a part of a non-profit university. Because these programs are much shorter and typically are focused on a specific skill, they can be offered at a lower cost.

Stacked degrees, where universities break programs into smaller chunks, also can provide a cost savings for students and for colleges. Students can take only those classes they need for that specific portion of the degree, allowing them to develop a pay-as-you-go model of education. Colleges will be able to tailor these degrees to their student population, ensuring they are not spending resources on classes that are unpopular or unnecessary. Resources will be allocated more effectively, ultimately saving money.

Develop effective messaging

Perception isn’t everything, but it’s a lot. Colleges and universities need to think about how to market their tuition in a way that resonates with potential students. That might be by waiving all fees, so students only have to pay a flat tuition. Maybe it’s giving students the option to lock in a tuition rate, so that even if tuition goes up students only pay the tuition they have agreed to. As alluded to above, maybe it’s being transparent about ways the university is looking to save students money. And of course, being open about how much student loan debt is typically required, and how soon graduates find a job can go a long way toward making students feel like a partner with an institution, instead of like a duped consumer.

Out-of-control tuition costs have a significant impact on the economy as a whole and the future of higher education specifically. As costs increase, if graduates struggle to find a job, they begin to feel that they did not get enough value for the money spent. While cuts in funding may make it seem as if increasing tuition and fees is the only solution, there are ways to cut costs while still preserving a tradition of academic excellence. Not only do these measures benefit institutions, I believe they are critical to the future of higher education.

About Todd Zipper

Todd Zipper serves as the President and Chief Executive Officer at Learning House. He joined Learning House as Executive Vice President and Chief Marketing Officer during the Weld North Holdings LLC acquisition in 2011. In his role, Todd oversees all operations and provides strategic management. Before joining Learning House, Todd co-founded and served as Chief Operating Officer for Education Connection. Todd can be reached at: tzipper@learninghouse.com