Cost and Change in Higher Education: The rise of alternative providers

Devon Cancilla, Vice Provost for Online Learning

Depending on income level, the average family will spend between 16 and 40-plus percent of its annual income on college related costs. Think about this for a minute! The median US household income in 2014 was $51,939. That represents between $7,272 and $20,776 of a family’s income going to pay for college expenses. At the same time, the average US undergraduate loan debt for a student graduating in 2014 was $28,950. In 2014, UMKC’s average undergraduate debt load was reported to be $29,464 (Institute for College Access and Success). Depending on your circumstances, such as the number of kids you have going to college, this represents a significant investment and this just for an undergraduate degree!  Having just had my second child graduate from college, believe me I have felt the pain. But finances aside, the question I have found myself asking is, how does the rising cost of education drive innovative change in higher education?

First, let me say that I am a very strong believer in education. I believe that education is a fundamental human right and that there is absolutely no question that a vibrant society needs an educated population. That said, the real question for me has become whether the traditional four-year institution represents or even should be, the only acknowledged source of that education. Coming to grips with this question is at the heart of the very real changes we are witnessing in higher education. I think we are rapidly approaching the time where a college degree is not the only type of credential that identifies educational obtainment. We are already starting to see this occur through alternative forms of credentialing such as certificates or nanodegrees. Often, the pathways to these credentials are not through institutions of higher education but through alternative providers such as companies or publishers. Sometimes these arise through partnerships between companies and universities. The recent announcement between Cengage, a publisher, and Excelsior College provides a clear example of these changes. These types of alternative pathways to credentials will continue to increase and I believe that there are at least four things driving this: technology, open educational standards, assessment, and cost.

In this issue, I will focus on cost in the broadest sense and this is in reference to the information presented in the first paragraph. The fact is, cost has become one of the significant drivers to change, such as the emergence of alternative providers, in higher education. This is where it is important to understand that students, or more usually, their families, are consumers. Although my colleagues in the business school may disagree, to me a consumer is a person that has a choice in how and where to spend their money. To me, this is different than being a customer.

Although all consumers are customers, not all customers are consumers in the sense of having choice. You may be a customer of a power company, that is, there is only one provider of power to your home. You have little choice. This is, more or less, how higher education evolved. For example, when I was an undergraduate (oh so very long ago), I had little real choice but to go to the university in my state. Although I’d been accepted to any number of other schools around the country, there was no way I could afford to really go to any of them. I was a customer of the university because I had little choice as a consumer.

But things have changed and they have changed dramatically. With the advent of online programs and the development of alternative credentialing, students now have greater choice in whether to attend a particular institution or to go to an alternative provider, and cost has become an important factor in this choice. Students have shifted from simply being customers to now being consumers with real choices. Although I have never liked thinking or talking about students as customers, I do think it is important to think about students and their families as consumers. Alternative credentialing makes understanding this distinction even more important.

Historically, the only way to obtain a degree was to attend a college or university. These institutions, although competing with each other, were the only game in town if you wanted a degree, and degrees have been society’s standard of demonstrating a level of educational achievement. With the increasing recognition of alternative providers and credentials as alternatives to degrees, there are now legitimate options to obtain an education. Students can behave more as consumers rather than as customers. They have more choice in how, when, and where to spend their educational money. As stackable credentialing gains favor, students will select options that better fit into their lifestyles and allow them to build an educational portfolio that includes work experience and a greater mix of credentials. Rather than march through a 120-credit degree program in four or five years, they may mix and match micro-credentials over many years.

So what does all this mean? It means that universities have to be increasingly agile in not only the types of programs they offer but in how those programs are offered. Can they be offered as a series of micro-credentials? Can they be offered online? Can educational partnerships be formed with companies? How can we better compete with other universities as well as alternative providers? The real question then becomes, how do we offer the knowledgeable consumer who has choice as to where they spend their educational dollars, the best education in a flexible format and at a reasonable cost?  This is why it is so important to understand what cost has to do with higher education. Whether we, as educators, like it or not, we are faced with an increasingly competitive educational market.