When Price Eclipses Value

After a Wall Street Journal report that the average net cost of colleges and universities increased about 1.9 percent over the past year—roughly in line with inflation, as opposed to the 6 percent annual growth it’s been averaging—NPR’s Anya Kamenetz rounded up “signs that the decades-long rise in college costs is nearing a peak.”

Also this month, the annual Gallup/Inside Higher Ed survey of business officers at colleges and universities found them more pessimistic about their institutions’ finances. Overall, 71 percent of chief business officers (74 percent of those serving at private non-profit institutions) agreed that media reports saying higher education is in the midst of a financial crisis are accurate, up from 63 percent in 2016. More of them now believe any new spending will have to come from reallocation, versus from increasing net revenue via higher enrollment or a lower discount rate—which possibly represents their recognition of a price ceiling.

Meanwhile in the marketplace, public opinion is veering away from regard for the value of higher education. Pew, a political action committee poll, and Gallup all have recently found that Republican-leaning citizens, in particular, lack confidence in colleges and universities and question the worth of attending college (believing a college degree “would result in more debt and little likelihood of landing a good-paying job”). The top reason among Democrat-leaning citizens who lack confidence in colleges and universities is because they are “too expensive.”

Growing speculation that college prices may have hit a ceiling was on display at this month’s NACUBO meeting during a session about the tuition reset strategy to move away from the high-price, high-discount model. With greater acknowledgement that many students and their families are eliminating colleges based on published tuition prices, there is also renewed (albeit quiet) talk of relaxing anti-trust restrictions on colleges to allow collaboration to drive down price, as well as a call on elite institutions to provide leadership to halt price increases despite their own ability to sustain them.

 

Tuition Reset Session

Carole Arwidson, our vice president and director of market research, presented alongside our clients Concordia University, St. Paul and Utica College. (Inside Higher Ed)

Anti-Trust Exemption Proposal 

As Jon Marcus reports, “Colleges say they could lower tuition—if only they could talk to each other about it.” (The Washington Post)

Brandon Busteed to Elites

Although wealthy and elite universities can afford to keep spending big on financial aid, Busteed argues they should instead lead in reducing the cost of delivery. (Gallup)

 

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Even as the higher education industry becomes more acutely aware of an alignment shift in marketplace perceptions of college value, clinging to the old ways of doing things causes unwillingness among many colleges and universities to take proactive, “edupreneurial” action. As a result, some will close in the near future—and many others will be put to the test.

The widespread decline in primary sources of revenue is a catalyst for higher education to focus on #MarketSmart opportunities that maximize strengths, create synergistic advantages, and eliminate shortcomings. A value eclipse could be occurring this recruitment season, but customized market research that assesses the situation, provides informed solutions, and motivates relevant implementation can help bring a college out of its shadow.