Even leaving aside the economic news of the last year, I’ve become convinced that all but perhaps four or five American universities with extraordinary wealth have come to the end of a long period of bountiful growth. I’ve muttered the occasional Cassandra-like warning for more than a decade now that we were collectively heading for a unseen cliff, and I think now the precipice is visible ahead.
Let me lay out the basics as I see them.
1) Tuition is a smaller part of the revenue base for many of the wealthier institutions than outsiders commonly imagine. Other income, most importantly endowment income, pays for a significant proportion of the per-student cost of selective higher education. Moreover, at many selective institutions, tuition is effectively charged on a sliding scale: basically, universities and colleges ask an entering student how big their parents’ wallet is, and set their fee from the answer.
Still, few institutions could survive if they minimalized or eliminated tuition. Steady increases in tuition above the rate of inflation in the 1970s and 1980s allowed many institutions to dramatically improve what were often shabby facilities, improve what were then poor working conditions for faculty, and to offer a much fuller range of services. Since then, those increases have underwritten further growth along the same lines, though there are also important areas where most higher education has been strongly exposed to cost increases that were also well above inflation, such as libraries and information technology.
This era is over. Tuition cannot keep rising at this rate, at least at institutions which are or attempt to have need-blind admissions. First, family incomes are not keeping pace with tuition increases. Rising income inequality means there is a steadily smaller and smaller group of families that can be expected to pay the full cost of higher education. Unless institutions were willing to slide out their fee scale even further, with a premium charge for the richest 1% of families that was double or triple the current highest charge, the base charge cannot keep going up above inflation at all. (I suppose you could argue that legacy admissions and capital campaigns and the like are a premium pricing tier of a sort, but the more overt that equivalence becomes, the more corrosive the likely consequences.)
This is leaving aside external political pressure over tuition increases, which I think is likely to increase regardless of who wins the Presidency this November.
2) Endowment income. Let’s just say I think it’s unwise to expect that anything but the unusually well-invested endowments can expect anything like the rate of return that many have seen over the last two decades. I worry that many will be hard pressed to hold on to the position they’re at right now if the overall investment environment gets any worse. This income pays for a lot of what colleges and universities have right now, but it’s not going to pay for another decade of growth comparable in scale and magnitude to the two decades previous.
3) Fund-raising. I just don’t think there’s the money out there for capital campaigns like the ones that most institutions have run in the last two decades. The people who made those campaigns work are tapped out, or they want to move on to other (arguably more deserving or needy) philanthropic targets. The current economic climate is the opposite of the irrationally exuberant eras of money accumulation that occasionally filled fund-raising targets. A lot of smaller annual donations are going to get harder for many professional families to make. Colleges and universities will still be able to make up some ground through fund-raising, but I don’t think it will compare to past efforts, let alone make up the difference in missing revenue from other sources.
4) Anything else. A fortunate few institutions may have unusual sources of revenue to tap (IPOs, intellectual property rights, etc.) but that’s not most of us.
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So, the party’s over, I think. However, I’m not hearing a lot of preparation for what higher education will look like if steady growth is over. Planning for minimal growth or even contraction in some cases might just require budgetary prudence and restraint, but I do think there’s a different mindset involved. It’s not just about questioning every area of current and future expenditure.
Here are some of the shifts in thinking needed.
1) Knowledge does not expand automatically like yeast dough. Progress is not adding disciplines, subjects, new areas of knowledge. Progress is knowing what we know better: making better use of what we know, communicating what we know more effectively, and not treating all forms and types of knowledge as if they were the same or required the same kinds of resources. Progress is discriminating between older disciplines or ways of knowing that need active stewardship and older disciplines or ways of knowing that can be replaced or transformed by new programs and projects. Progress is recognizing where some areas of the average curriculum would benefit from amalgamation and a movement towards generalism.
2) The provision of a full-service infrastructure by most residential universities and colleges needs a hard, skeptical reconsideration on an ongoing basis. Moreover, I do not think the presumption of such a reconsideration is necessarily towards the elimination of frills and creature comforts. It’s possible instead that there are some professional and administrative services that many universities carry out through their own staff that could be better and perhaps more minimally provided by external vendors, for example.
3) Where higher education is exposed to cost increases which are potentially within its control, universities and colleges need to band together comprehensively as buyers and dictate terms to their own advantage. There’s not much that can be done about energy costs or insurance: any big employer is exposed to those at an equal base, and then to whatever extent they consume those above and beyond that base. On the other hand, libraries and information services are areas of unique exposure. I’ve written a lot about these issues: there are reasons for academia to completely rethink its production and consumption of publication and knowledge that have nothing to do with cost. But it’s also insane to be exposed to escalating costs when we potentially have such massive collective leverage over the sellers.
4) All colleges and universities need to look hard at different areas of their curriculum in terms of the expenses involved, and ask whether some kinds of pedagogy or some subjects are worth the resources that they seemingly demand. At a lot of selective institutions, there is a political covenant that instructs both administration and faculty to act as if all areas of the curriculum are notionally equivalent in their right to resources, and that the actuality of resource distribution can be safely ignored. (When you add professional schools at large research universities into the mix, this picture gets more complicated. Nobody acts as if the Wharton School at the University of Pennsylvania is either notionally equivalent in its right to resources, or forgets that Wharton has a very large resource pool of its very own. ‘Every tub on its own bottom’, as the saying goes.) In this resource-usage sense, the hostility that sometimes gets directed at the humanities is a bit crazy: most (though not all) of the humanities are a very cheap date. About the only time they get disproportionately costly is when the faculty-to-student ratio in any given humanistic discipline is markedly lower than the average at a given institution. In an environment where growth is not happening, no institution can afford to say that the relative cost-to-benefit of any given curricular enterprise is off the table.
5) My impression is that many colleges and universities have put some of the bounty of the past two decades into the maintenance of political amity within their own faculty and administration through paying for duplicate or multiple approaches to curricular and institutional decisions. Meaning, rather than choose to commit to one philosophy or approach, we often choose instead to fund competing or contradictory approaches in order to avoid the political turmoil involved in telling one faction or group, “No”. Maybe some of that is still worth doing, but in some cases, it simply may not be a sustainable approach.
6) Colleges and universities that have chosen to underwrite growth in some areas by steadily degrading the working conditions of adjunct and non-tenured instructional staff and simultaneously relying on that staff to generate more and more of the teaching are going to have to flatly stop doing things that way. One reason: in a far more difficult economic climate, I really think that prospective students will be far less indulgent of degredation of educational quality that follows on that approach.
Another reason: some institutions have already gone as far as they possibly can go along this track, short of converting their entire faculty to short-term, badly-paid, chronically abused adjuncts. (That’s not far off from the picture at a few large universities.) Instructional staff are going to need far better working conditions, and that is going to have to come out of some other area of expenditure, whether it’s the salary budget for tenure-track faculty and administration, or from some other institutional budget.
7) I think the most important but subtle thing that has to happen is just that every stakeholder in academia is going to have to develop new mental habits, to stop assuming or believing that growth is the default. At least at selective institutions, I find that in everyday conversation about curricular questions, administrative choices, and so on, the assumption of growth or plenitude is deeply ingrained.
The funding situation for public institutions is very different: though the state contribution to funding has been shrinking over time, the state still claims a great deal of control over tuition, admissons and expenditures. These decisions, then, are not just market-and-pedagogy-driven, but very political. I recently got polled — lucky me! — about what educational priorities for state institutions of higher learning should be, and what would be the best arguments for maintaining and expanding funding (and quality) in what is certain to be a climate of retrenchment (Kansas public institutions were told to prepare a budget planning for 5% cuts over the next two years). Though the “boom times” weren’t terrible for state institutions, they weren’t anywhere near as good in terms of fundraising — very few state institutions get the kind of philanthopic attention that private school do (outside of athletics, and professional schools which get corporate donations), so the contraction of disposable income isn’t going to be as directly noticeable. Declines in spending (sales taxes) and pressure to provide cheap professional training (community colleges) are going to be major factors, though.
A very interesting post. A couple quick comments:
First, I’m not completely convinced that recent years have really been “boom times” for academia in general, even if one restricts to private institutions. For one thing, a lot of endowments got hammered by the dot-com bust, and some have yet to really recover. I was on the faculty of a top 10 private research university for the middle part of the 2000s, and it certainly wasn’t boom times; there was a salary freeze one year, budgets were flat, and a few years later some support staff were laid off. Hardly disastrous, but not a period of growth.
Second, in the case of research universities, your list of funding sources is missing outside grants, which is typically at least 25% of total budget, sometimes quite a bit more. This is almost all federal money, and it is unlikely to increase much in the future, which is also consistent with your dreary forecast.
I’ve been thinking about some of the same issues, and I’d like to toss some concerns that I think are significant:
1. A weak U.S. dollar and the formation of an international elite may make U.S. education very attractive to foreigners. I recall an article in the NY Times about U.S. universities aggressively recruiting foreign students. The situation tossed out above, that elite universities doubling or tripling their tuition is a very real possibility. The universities can have it both ways: highly progressive tuition and a population willing to pay sticker price. Part of me suspects that the tuition guarantees made by Harvard et al. are insurance for this possibility in the future.
2. The credit crunch has affected the private student loan market. Is this a symptom of credit being tight or are banks making a judgment of the efficacy of college education. Are there going to be demands put on universities for accountability or will banks go by the reputation of universities in awarding loans?
3. The blogosphere’s analysis of education’s future is not going to take into account all the types of institutions where students are educated. Most blogging heads were educated at selective private universities, small liberal arts colleges, and flagship state universities. Many of them work at these types of universities. I’m not sure that the analysis will extend to mid-major state universities, less selective private universities, religiously-affiliated universities, and community colleges. The thesis of coldspringshops.blogspot.com’s Stephen Karlson is that there is an excess capacity of access-assessment-remediation-retention and a positional arms race for spots at elite universities. Perhaps universities chasing tuition money and become more efficient will lead to a race to a top. I sort of doubt it, but…
4. The geographic distribution of universities does match the shifting demographic distribution in the U.S. There could probably me more elite universities and SLACs in the Southwest. In the future, will Americans be able to afford to travel thousands of miles to college?
This is *not* the sort of post I like reading while working on my cover letter and CV. Not one bit.
Some really important additional points, for sure. Public universities are different in very significant ways, and yeah, I did leave out grants and so on–as Topometropolis says, though, the outlook there too is gloomy.
In some interesting ways, I think community colleges may have some better fundamentals in a changed economic climate than selective private institutions that don’t have an absolutely rock-solid reputation and a guaranteed stream of applicants.
I don’t quite mean to say, by the way, that the past two decades have been boom times. But in general terms, they’ve been years of institutional growth at most though not all institutions.
I was just reading an analysis – sorry, the reference has left me noodle – that showed personal investments in higher education increasing in hard financial times. The pressure to gain a competitive advantage in a tightened job market is the explanation.
There’s a general bumping in the market for distinguishing credentials, so a race to the top is plausible, as is a race by more marginal candidates to find ‘alternative’ routes – bootstrapping a ticket to the local state school through the community college system, for example.
Btw, as much as I would love the logic of the argument to improve faculty stability, pay and working conditions to be convincing, it looks like wishful thinking to me. Once you get down out of the clouds of the elite schools, students are not savvy consumers of pedagogical goods. Many are just there for the ‘piece of paper’, so although they’re marginally sensitive to generic institutional rank and reputation, their relative priority is quick, easy and cheap.
To compound Tim’s point 6, we can think of the wave of retirements that’s always just out there beyond the reef but which somehow never makes it to the beach. Inside Higher Ed did it as a rhetorical question yesterday – Will Professors Delay Retirements?
I agree that at my institution the assumption of growth Tim identifies in point 7 informs most decisions. Sometimes it turns out to be a rhetoric of growth, when administrators announce that some positions are newly tenure track, skating quickly past the fact that someone has always been teaching these courses, whether that someone was a by-the-semester adjunct or an ongoing non-tenureable appointment. Perhaps that’s ‘plenitude,’ the feeling that the institution has enough money to regularize positions.
Carl may be right that students will not become more demanding or savvy consumers of pedagogical goods if the economy tightens or worsens. It might be that the end consumers of student training (employers) will, however.
Yeah, that’s a good point TB. In fact we can see that already in the heavy push for assessments by the Republican Department of Education and its nefarious flying monkey, Margaret Spellings. Insofar as this is not just invidious conservative backlash against the ‘liberal academy’, it probably reflects an increasing interest in discrimination by the end consumers of a saturated education market, the employers. Which further makes your point that without a significant upsectoring of the U.S. economy (or influx of students from upsectoring foreign economies) we may have maxed out the demand for college-educated workers (at least on the familiar model of college education).
I would be very interested to know where the pressure really begins, but at my school we got it very directly at the last Middle States visit – assess or die! Now we’re in the midst of grant funded discussions about how to do that better.
Was it really the DofEd that got the accreditation ball rolling?
Oooh – I just visited the Middle States website. They began as a group of college presidents organizing to protest the taxation of college property! Standards came after assuring property. Interesting origin.
The genesis of the Association can be traced to a meeting of activist college presidents in Harrisburg, Pennsylvania in February 1887. The meeting was held to protest a proposed tax on college properties and concluded with the consensus that education from early age through the university was in chaos. The presidents chartered themselves as the College Association of Pennsylvania, soon thereafter renamed the Association of the Colleges and Secondary Schools of the Middle States and Maryland.
My sense is that Middle States was told, “Do accreditation right or we’re coming for you with an axe. And that’s right by our new ideological standards, get it?” So I think Middle States passed that along to its clients: do you want the Spellings Gang to come and directly paw through your business? No? So help us out and take this a bit more seriously.”
I’ve been grading all night, and am too tired to comment properly, but I think this post is more or less correct,and it would be nice to think that faculty might be engaged in planning for what is to come rather than just bewailing and bemoaning.
One thing that I think could change is the way that graduate education in the humanities and social sciences is organized. These are prestige activities that — as long as the students are being funded — are both time and expense intensive. That is, we may see more grad programs falling into heavy teaching loads, being supplemented by tuition-based programs, or just being downsized/phased out of existence.
I also think that a positive result would be more targeted institutions, that try to do fewer things well.
We are also likely to see a push-back (even more!) against research support in the humanities and social sciences, with an emphasis on higher teaching loads.
And as in other facets of American life, the gap between the haves and have-nots of higher ed will widen.
More targeted institutions is definitely something that should be on the list. I think that’s the only way for a lot of mid-tier selective institutions to come out of a period of contraction feeling like they are still offering a very strong education.
All this, together with the relationship between harder economic times and more graduate students… jeez.
I think this is way too pessimistic.
1. You suggest that tuition will stop going up so much, because otherwise people who aren’t extremely wealthy won’t be able to afford it. However, only the extremely wealthy pay full tuition now. I expect the sliding scale on which currently the most selective schools operate to spread to less selective schools, as they raise their tuition and give more financial aid.
2. I don’t think there’s any reason to think that they equity premium has gone away, nor that colleges will stop having a long time horizon in which to invest. Further, the stock market has barely out-performed inflation over the past 10 years, a period in which there has been major growth, as you say.
3. In what sense are rich people (the people who donate large sums to endowments) tapped out? There has been a massive transfer of wealth *to* rich people over the last 10 years, and there don’t seem to be signs of the stopping.
4. Finally, the US is growing significantly and is quite rich. Further, the number of people going to college keeps going up. Education is one thing that well-off people spend their money on, and I don’t see any reason for that to change. If the US averages 2.5% growth for the next 10 years, then there will be more than $4 trillion more money available to buy things with in 2018. That pays for a lot of professors.
An addendum to topometropolis, above–also the influx of DOD grants offered to researchers in the humanities. Perhaps even *the arts*.