To Save Their Fiscal Lives, Colleges Need to Embrace Online Ed

An increasing number of people are beginning to ask if the high prices charged by universities for a college degree are still justified in terms of the returns on the investment. This kind of thinking hasn’t yet had a substantial impact on college enrollment rates, but according to Roger Brinner, Partner and Chief Economist at The Parthenon Group, in as short a time as five years, this might no longer be the case. When that happens, universities who don’t take steps to address this potential problem today might be facing revenue crunches as a result of shrinking tuition payments and simultaneous cuts in state and federal funding.

To avoid this, Brinner proposes that college and university presidents and other higher education leaders work to make a college degree a better value for current and potential students. And one of the most effective ways to do that is to reap savings that will come from embracing online learning.

“The confluence of flat or declining enrollment, unsustainable tuition inflation, the government fiscal crisis, and mounting student debt has created a severe business headwind that will not be resolved through ever higher tuition,” said Dr. Brinner said. “To say that this is a difficult situation would be an understatement; it means education leaders must find new ways to operate. Simply increasing prices is not an option.”

Brinner spoke at the gathering of university presidents from 30 New England-area schools organized by the Boston Higher Education Innovation Council and The Parthenon Group. He said that those who hope that higher education will continue to be the counter-cyclical industry it has been in years past – rebounding when the economy is on the downswing, benefiting from the number of people leaving the workforce to enroll in an academic program – need to prepare themselves for the other side of the cycle. According to Brinner, the number of students enrolling in college is set to stagnate as the economy slowly rebounds from the recession caused by the 2008 financial system collapse.

However, this will not be the only downward pressure on higher education revenue. Brinner also points out that the Great Recession wiped up a substantial amount of wealth from American families and it is unlikely that the slow economic recovery will allow them to make up the losses anytime soon. This means, that all large expenses – college degrees included – will get additional scrutiny, with some opting out of a university either because they will be unable to afford it or will think it not worth the money.

“Without the expected counter-cyclical tailwind, and given demographic changes in the traditional college age bracket, enrollment trends are projected to remain flat for the next five to seven years,” Dr. Brinner said.

On the fiscal side, Dr. Brinner said expanded government support or relief are unlikely. State and federal education budgets will remain crippled. The US economic recovery will be tepid or worse: at best, a strong housing recovery will partially offset coming federal fiscal restraint; at worst, the “fiscal cliff” will create havoc.

The schools that embrace online learning as a means of bringing down the price of tuition will jump ahead of their competitors when it comes to attracting students. Although every school faces its own set of circumstances that alter the value that such changes can bring, almost every kind of an institution could benefit from at least converting large beginner-level courses – that typically draw hundreds of students per section – to an online format.

“While online learning generates excitement and controversy in equal measure, its effective use is key to the future of education because it is the factor that will reduce costs and increase access over the long term,” said Robert Lytle, Partner and Co-Head of The Parthenon Group’s Education Practice, Private, who addressed the BHEIC gathering with Dr. Brinner.