If colleges rethink the way they teach and do business, they can save students and taxpayers billions without compromising their educational missions.
America has a deep problem when it comes to the cost of higher education. You can measure it any number of ways - skyrocketing student debt, ever-rising tuition, strained state budgets. But the most basic and stunning fact today is that, when you factor in what governments spend on higher-ed and what individuals cover in tuition, the country pays about $110,000 for every bachelor's degree and $55,000 for every associate's degree granted, not including other costs like housing and books.
Throwing more money at the problem can't be the only answer -- not when these sums already devour an outsized share of government funding and family income, when net tuition has increased at an average rate of 1.4 percent per year beyond inflation, and when colleges and universities often turn additional support into higher spending. It certainly shouldn't be the answer when there are clear ways the system could be saving money. Our research at McKinsey shows that, when it comes to cost per degree, the top quartile of institutions is 38 percent more productive than the average of their peers. If more schools were to adopt their practices, it would translate into billions in savings for families and governments. Here are just five ideas that could help make college more affordable while maintaining or improving quality.
Make sure students graduate, and graduate faster
The surest way to boost college affordability is to make certain that students complete their degrees and do it quickly. Today, the country spends an enormous amount of money educating students who ultimately drop out before graduation. Only 60 percent of American undergraduates seeking a bachelors degree complete their studies within six years, according to the National Center for Education Statistics. Just 30 percent of students seeking an associate's degree finish within three years. But dropouts aren't the only problem. On average, students who do complete their degrees are paying for more courses and credits than required for their diploma or certificate. That's a waste of resources for both students and the governments that subsidize their tuition -- a waste that makes higher-ed more expensive for everybody.
Schools that do better on these measures, such as Southern New Hampshire University and BYU-Idaho, do several things well. They reduce the odds that students will take extra credits that don't lead to a degree, and they revamp antiquated transfer agreements that wrongly deny students credit for work done elsewhere. Other schools give students support and tools that help them plan the most efficient path to graduation.
Improving today's low completion rates will also require serious strides in K-12 schooling, because a student who isn't ready to do college work in the first place will have a harder time getting a degree. If all undergraduates were college ready when they entered school, for the same cost, the country would add 300,000 additional degrees above and beyond the roughly 2 million it graduates today.
Try new ways of teaching
A number of institutions are finding that, by rethinking their models of teaching and learning, they can substantially reduce instruction costs while improving educational outcomes. Redesign of individual course delivery championed by the National Center for Academic Transformation achieved 35 percent average savings while simultaneously improving outcomes such as attendance, grades, course completion and overall retention in the programs involved. The redesigned courses allowed faculty to incorporate good teaching practices into courses with a large number of students by deploying technology. They added online tutorials and exercise that gave students much needed practice and support, implemented automated assessments and feedback, and increased interactions among students.
More radical changes have achieved similar or better outcomes. For example, Rio Salado College and Western Governors University rely on self-paced online instruction for the introduction to basic course material, use flexible adjunct faculty and student mentors, and are able to deliver instruction at least 50 percent more efficiently than peers. Traditional brick and mortar institutions can pursue a similar process to increase quality and decrease instructional costs.
Recognize that learning happens outside the classroom
Giving adult students credit for the knowledge they've earned outside of school can also reduce the amount of time it takes to complete a degree. More than 40 percent of post-secondary students who enroll each fall are older than 25, and their work experiences often prepares them with skills that bear directly on their educations. A recent study by the Council for Adult and Experiential Learning showed that recognizing this kind of prior learning can shorten the time it takes to graduate by as much as 10 months for a bachelor's degree and 4.5 months for an associate degree. Governments can partner with higher-ed institutions and the private sector to encourage testing and credentialing centers that award college credit for college-level learning in non-classroom settings.
Veterans could be the biggest immediate beneficiaries of this common sense approach. Today there are medics and mechanics who acquired skills on the battlefield, but can't land a job back home as a paramedic or mechanic because they don't have a diploma or certificate that proves what they know. We need to develop ways for colleges to recognize the academic value of such prior work.
Slim down non-instructional costs.
A thorough scrubbing of non-instructional costs typically reveals savings opportunities of 10-to-20 percent, even in institutions that pride themselves on being thrifty. The impact can be huge: For a major public institution with $1 billion in such costs, for example, $100-to-$200 million in permanent savings is the equivalent of generating a $2-to-$4 billion increase in endowment. Introducing leaner processes and shared services is one promising way to shrink the cost of management functions, student services, academic support services, and plant operations. Organizational redesign and smarter purchasing practices along the lines of what top performing private corporations now routinely do can also help.
Use financial aid as a carrot and stick for schools
A few pioneering states, such as Tennessee, have tied funding directly to specific indicators of institutional performance (such as graduation rates and job placement) with promising effect. While the education community is understandably wary about the details, state and federal governments should continue to carefully consider and pursue incentives that reward programs or institutions that embrace the changes described above. Likewise, the federal government should consider supporting alternative funding sources that could help individuals afford their education. For example, right now, tax-exempt employer tuition assistance is capped at $5,250. That limits the incentive for employees to pursue life-long learning in an era when they need it more than ever. Adjusting it is just one avenue of many that could help bring an education within closer reach for millions of Americans.