The modern university is a conglomerate. It performs a huge variety of duties and functions, serving a wide range of constituencies. Because most universities are nonprofit, they tend not to account for money in a way that ties revenues to expenditures within each function. Rather, they raise money from a variety of sources — tuition, the government, donations, fees for service, investment earnings, etc. — and spend money on a variety of things — education, research, scholarship, musuems, hospitals, sports, administration, and so on and so forth.
Revenues and expenditures are often only loosely connected, and there’s a great deal of internal cross-subsidization between things that make money and things that don’t. How much is unclear — most university budgeting and accounting systems aren’t even designed to answer that question. But on some basic level, cross-subsidization is absolutely vital to the logic and financial vitality of large higher-education institutions. It’s an inefficient, madcap system, but on some level it works, in that it’s been sustaining a large number of very successful colleges and universities for a long time.
But conglomerates that operate in this way are also vulnerable to external competition. Cross-subsidization, by definition, means that some people are paying more than what they’re buying costs to provide. What happens if someone comes into the market and competes on just that one service, the profitable part that is keeping the money-losing activities afloat?
Traditionally, universities haven’t had to worry about this, because they only competed against other conglomerates. Then the Internet came along and started breaking established markets into smaller pieces. It allowed new organizations to provide information-based services at radically lower costs. Higher education is, unavoidably, information-based. But it’s been shielded from this kind of competition because the accreditation process is hostile to new organizational models and essentially requires competitors to adopt many of the conventions and costs of the conglomerate model.
What if that weren’t the case? How cheap could, say, a standard introductory course in College Algebra be? How about $99 a month, by subscription–not for one class, but as many introductory classes as a student is able to complete? It’s not a theoretical number–it’s actually happening, right now, as I explain in this new article in the Washington Monthly magazine. If universities are no longer able to charge more than an individual course costs to offer — if the positive side of the cross-subsidization scheme disappears as prices fall to the marginal cost of production — what’s going to happen to the conglomerate as a whole?
The Monthly also has a whole new Web site complete with other interesting articles, new college rankings, a blog (of course), etc. Take a look!
8 Responses to College for $99 a Month?
costdean - September 3, 2009 at 8:38 am
Huh?
dank48 - September 3, 2009 at 8:40 am
A college education is available to any literate person who has the time for it, for a lot less than $99.00 a month, at virtually any public library. Of course, you don’t get the sheepskin, and a considerable amount of discipline would be required, but the books are there, and unless you want to major in some cutting-edge, fast-changing field, you can have it for the taking.The education part of college no more requires brick walls covered with ivy than it requires caps and gowns. We mistake the surface for the substance, the shadow for the reality.
tgroleau - September 3, 2009 at 10:34 am
I’ve discussed this issue with many of my colleagues at the small, private college where I teach.In the age of accessible learning outcomes, it will be increasingly difficult to justify multi-million dollar classroom buildings when on-line programs can show through nationally-normed assessments that their outcomes are equal to brick & mortar schools. In order to maintain premium pricing and traditional formats, we need to sell students (and parents) on a complete 4-year residential experience that includes much more than classroom education. In our case, music ensembles and athletic teams are a significant draw for students. In that environment, who is more expendable a good statistics teacher or a winning basketball coach?
erindaly - September 3, 2009 at 10:53 am
dank48: Hear, hear! A voice of reason in the wilderness.
_perplexed_ - September 3, 2009 at 12:47 pm
Mr. Carey writes: “Higher education is, unavoidably, information-based.” True, but it is not solely, or even mainly about “information”, else the library would be, as dank48 points out, entirely sufficient. And appropriate guidance about what to read can be found in the dozens of course outlines available on the internet. $99 is a ripoff if all you want is information…
nmsgg3 - September 3, 2009 at 1:32 pm
Education does not merely equate to acquiring new information. Education involves growth, critical thinking, values definition, and applying what you learn, among other things. By saying that what we provide in higher education is equal to reading a stack of books is insulting. Higher education is just as much about the experience, as it is about earning a degree.
kathden - September 8, 2009 at 12:51 pm
Here’s the problem about education reform: a holistic phenomenon, the education and maturation of human beings into responsible adults, is viewed under some narrow perspective which allows one to exercize leverage. But you don’t worry about the systemic effects, you just claim that you have the key to the future and talk policy-makers and legislators into funding the changes. If one is lucky one gets marginal improvements from the narrow perspective, but other pathologies are induced. Five to ten years later someone else comes along with another narrow perspective and starts the cycle again.The U.S. is trying to do to higher education what it did to elementary and secondary eduation over the last forty years. Obviously lots of people want to jump on the bandwagon.
brianhanley - September 8, 2009 at 1:18 pm
How do you deliver quality education for less than it costs at most subsidized institutions? This is a reality for state universities – they are subsidized. And every research university is subsidized by NIH and NSF because of the high overhead charges. Similarly, how do you deliver quality education at a distance? There is actually a long and respectable history, with the University of South Africa one of the leading pioneers because of necessity in a country composed of large numbers of farming families unable to send their sons and daughters away. I was involved as a student for part of my undergraduate education in that experiment in the USA before the internet, and online education has the same weaknesses and strengths. The primary weakness is determining that the student actually did the work for which they are awarded credit. For distance learning institutions this was solved by proctored examinations and stronger relationships with professors. Distance learning institutions mostly had a higher faculty to student ratio, although some made it work very cheaply by signing on working people who were not academic faculty, but otherwise qualified to care for one or two students. The internet has not changed this problem from what I see, it has largely swept it under the rug, hoping it will not be a scandal someday. The second major weakness is that such schools do not have much “atmosphere” they don’t enculturate students. As nmsgg3 says, a university is supposed to bring young and old together to inculcate values as well as knowledge. The third major weakness of distance learning (i.e. online) is that it is hard to tell if a student has learned to think or not. Labs are hard to conduct. My school tried to solve this by having report papers that would be read by faculty. Each student was different, which made the job very labor intensive. We all know how much work it is to grade things, and that essays are the hardest to grade – they require thought from us who grade. But essays do work, and this did serve my education well. However, from what I have seen of online education, the essay method is not used much. Labs are a perennial problem as well. I also don’t see that online education is making use of proctored exams even though it is possible to do so. Proctored exams are how SATs, GREs etcetera are done, and it works. In South Africa, a student could go to a court, the principal of a lower education school, etcetera, to find a suitable exam proctor. Conversely the great strength of distance learning is that it is delivered with little or no “personality”. We like to think of professors as “great motivators” and essays of application to graduate school, etcetera sometimes explicitly suggest such be discussed. Unfortunately, the reality in academia is quite different. Professors who unmotivate students are not so rare. So distance learning, like internet learning, allows students to interact with the knowledge directly, and at least they won’t have distaste for a professor to turn them off. For good students interested in the material, this is very helpful. I think the bottom line with online schooling is that when universities get to the point that the culture educates students in a life of academic crime and unethical scheming, the lack of transmission of culture is an asset. We are kidding ourselves if we think that there are not serious problems with academic crime in todays big universities. Students do hear about Professor L who stole the grant from Professor Y, and got himself a corner office. They hear how the administration did nothing because it was afraid it might lose its million dollar plus cut of the grant. Students hear about Dr. M who falsified his data and got a plum professorship because it helped professor S get a big grant and become a powerful chair. They hear that Professor H slept with his favorite student who got through a doctorate despite deficiencies, while student K was denied it despite running the lab. They hear that administrations cover it all up as a matter of course, or else are supine. Most of us know that this stuff is rampant today at most big universities if we are honest. The message to students? Cheating pays. If students are too disconnected to know about such stuff, they are better off. However, based on my examination and personal experience, I think that quality education can be delivered online for less than at traditional schools for motivated students. But I do not believe it can be done by for-profit companies for less than 1/4 traditional cost. I think it is a serious challenge to do it for 1/2 the cost at a non-profit. As long as major universities are honest enough that their cultural experience is positive; as long as traditional universities are teaching adequately for the majority of students who don’t care about the subject and aren’t motivated; for as long as bricks and mortar schooling is subsidized; online education will not take over higher education. Online education will be an adjunct, and a useful one for many subjects. Online education can allow many students that need it to break out of the ironclad course schedule that forces them to understand less of what they learn to regurgitate because of volume. But will it replace standard universities? No.