Colleges Can Still Save Themselves. Here's How.

Michael Morgenstern for The Chronicle

December 02, 2013

In 2004, at the height of its success, Blockbuster had more than 9,000 video-rental stores around the world. A few weeks ago, when the chain finally surrendered to the plethora of video-on-demand services delivered directly to viewers via broadband Internet connections, it had just 300 stores left.

Blockbuster is another in a long line of retail giants—Borders, Circuit City, Tower Records—that were forced to shutter their bricks-and-mortar operations by upstart competitors, which seized on customer preferences for the ease, convenience, and low cost of shopping online.

The disruption that technology has inflicted on the retail sector over the past decade is often used to illustrate what is about to happen in higher education. The narrative goes something like this: Traditional colleges, particularly the many that are in the middle of the pack but charge high prices, will lose out to nimbler, cheaper competitors offering degrees on flexible timelines, either in hybrid format (in-person and online) or fully online.

This forecast comes with its own set of headline-grabbing predictions about the number of institutions that will go out of business as a result. Last month Clayton M. Christensen, a Harvard Business School professor and champion of disruptive innovation, suggested in a New York Times essay he wrote with Michael B. Horn that the "bottom 25 percent of every tier" of colleges will disappear or merge in the next 10 to 15 years.

A few weeks earlier, speaking at a conference in Washington, Andrew S. Rosen, chairman and chief executive of Kaplan Inc., predicted that only 600 traditional colleges would survive the next few decades. Rosen told me afterward that in the future, students won't need "a physical presence for four years" in order to acquire a college degree. "Over time," he said, "the market has to realign itself to what's needed, and presence is not the essential piece."

The coming demise of the residential campus is a popular refrain for good reason among those who study the worrisome financial picture facing many institutions. Moody's Investors Service reports that net-tuition revenue—that's the cash colleges have left after giving out financial aid to students—is essentially flat or declining at three-fourths of public colleges and three-fifths of private colleges. What's more, a survey of more than 400 small private and regional public universities by The Chronicle this fall found that nearly half had missed their goals for either enrollment or net-tuition revenue.

Such depressing statistics often result in far different reactions on campuses: either a malaise that the end is near or overconfidence that the good days will return, just as they always have. As a result, institutions rarely introduce the sometimes radical changes they need to make, because one group of constituents believes the sky will fall tomorrow anyway, while others refuse to acknowledge that this time is different.

Predictions that hundreds of colleges will close should not be seen as a death sentence for higher education, at least not yet. Even soothsayers like Christensen, Horn, and Rosen give many colleges years, if not decades, to figure out a path to survival. The question is whether institutions will quicken their pace of change to lower their costs and better serve the changing educational needs of students and the global economy.

The only way some colleges will survive is to form deeper academic alliances with other institutions, across town or across the country. By closely aligning with other institutions, colleges can share courses, either physically or virtually. They can also pare back entire academic departments, putting most of their resources toward making a few degree programs distinctive while leaving the rest to their partners. In some cases, the combined brand might be stronger than any of its individual institutions.

Of course, such sharing requires colleges to have much more flexible work forces, not one that's largely immovable because of tenure. An idea that higher education needs to adopt is one floated by, among others, Lawrence S. Bacow, a former president of Tufts University, that would put a clock on tenure. Instead of a lifetime guarantee, tenure would be for a specific time commitment—perhaps 20, 25, or 30 years—followed by one-year contracts.

Other key reforms to ensure the survival of hundreds of colleges must come on the student side of the ledger. The race to capture revenue from affluent students by offering them more and more financial aid under the guise of merit aid must stop. Not only does such a strategy force many colleges to increase their sticker price year after year in order to afford bigger financial-aid packages, but it also often comes at the expense of low-income students. Nearly two-thirds of private institutions charge their poorest students (those whose families make $30,000 or less) a net price of more than $15,000 a year, according to the New America Foundation.

Another competition among colleges, to provide the fanciest student amenities, is showing signs of slowing as colleges find themselves tapped out when it comes to taking on more debt. If the past decade was about building climbing walls and palatial dormitories to attract students, the decade ahead for colleges will be about proving their value to prospective students and families increasingly unwilling to pay higher tuition prices.

That means moving away from a one-size-fits-all system, in which students largely follow the same calendar and curriculum on their way to collecting 120 credits for a bachelor's degree. The colleges that succeed in proving their value will be those that understand the diversity of their students' needs, just like most companies segment their customer base, and offer a variety of paths to a degree, whether it's a three-year plan, a low-residency option, a combination of hybrid and online courses, or more co-operative education programs, in which students are placed temporarily with companies in their fields.

More of the decisions colleges make about their direction must be rooted in data. For too long, colleges have developed their strategies based on intuition and on the desires and interests of faculty members. Adding academic programs, for instance, rarely came at the expense of cutting departments or changing requirements. Now the data exist to track students, the classes they took, how they performed, and their outcomes after graduation—all of which can inform decisions.

The collapse of higher education's business model has been predicted many times before now. Yet more colleges have opened in the past 50 years than have closed. That record provides a false sense of security for academics and contributes to the hubris of American higher education. But failure is not unprecedented. In the years before the Civil War, more than 700 colleges closed for economic reasons or because of competitors entering the scene. Just because academics today think that colleges shouldn't fail doesn't mean they won't.

Jeffrey Selingo is a contributing editor at The Chronicle and a professor of practice at Arizona State University.