Reauthorization of Higher Education Act

With the government shutdown that just concluded, there had been a respite in discussion regarding Congress’ impending reauthorization of the Higher Education Act (HEA). Reauthorization, however, has the potential to further the monumental change we are just beginning to see in higher education. Policymakers on both sides of the political spectrum are demanding big changes. The appetite for substantial reform could very well unify Congress in ways that keeping the government functioning and raising the debt ceiling could not.

There is little question that federal regulation of higher education will continue to expand – continuing a long-term trend of the federal government usurping certain powers that in the American system have typically been considered to be part of a university’s institutional autonomy and/or left to the century old practice of self-regulation (accreditation). This is occurring as Europe and most of the world that had strong central government control of higher education via education ministries have moved towards more autonomy and the principles of accreditation/self-regulation.

A perfect storm of circumstances exists that almost ensure expanded federal regulatory intervention in higher education via the HEA. First, during 2013-14, the federal government doled out nearly $ 180 billion in funding tuition via student loan disbursements, grants, and tax benefits. Next, our system of accreditation is still paying for past and perceived “sins” as brought to light in the 2006 Spellings’ Commission report. Further, we are reminded almost daily of the relatively poor (overall system) outcomes of higher education. Last but not least, pricing continues to outpace a consumer’s (students, families, and government) propensity to pay.

What does expanded regulatory intervention look like?

  • Linking funding or components of it to outcomes.
  • Quasi price controls. While the federal government cannot institute direct price controls theoretically, it can establish de facto pricing controls via setting new eligibility criteria for federal funds (Title IV student aid programs). The federal government has employed this practice quite successfully as it related to compelling states to raise their drinking ages in the 1980s or risk losing highway funds or requiring hospital emergency rooms to treat and stabilize indigent patients or lose Medicare funds.
  • More federal “direction” on programs that schools “should” offer, percentage of a school’s expenditures that MUST be allocated to educational delivery, length of programs, and possibly curriculum influence. This essentially gives the federal government significant power on issues that are currently at the discretion of the institution. An excellent example of this type of policymaking is found in the Affordable Care Act, which requires insurers to spend high percentages on patient care versus administrative overhead, tells insurers what benefits they must offer at a minimum, etc. Again, all this is achieved by tying compliance with eligibility to receive federal grants and student aid funds.
  • In line with more federal “direction” on higher education, it is not too difficult to foresee uniform academic and curriculum standards for higher education similar to the Common Core standards that have been adopted and implemented by the vast majority of states for K-12 education. While there is no technical federal mandate for Common Core and participation is voluntary, the financial incentives for states to participate in Common Core were so strong that not participating made little political or practical sense for most states. National curriculum standards were almost unthinkable until recently. Governmental involvement in core academic issues, which many would argue are at the heart of institutional autonomy, may seem far-fetched now but are arguably much closer to reality than many may realize.
  • Allowance for other actors (think Apple, Amazon, Rosetta Stone, National Geographic, Google) to enter the education market either as a full alternative to accredited colleges or to offer competency-based courses that colleges receiving federal funds must accept. This essentially causes the so-called “monopoly” of post secondary education to be thrown open to viable and market-based competition – competitors that can and will offer products that will be of minimal cost or no cost to consumers. These competitors will NOT need federal support and therefore will not be part of the federal regulatory structure. This also essentially eliminates the need or at least influence of accreditation bodies.
  • Full embracement of a more refined MOOC model. Education, content, and instruction are well on their ways to becoming “open-source” commodities. This is already happening. Federal policy could encourage this trend. Coupled with even slight policymaking inducement, emerging content practices and artificial intelligence based instructional technologies that will “teach” courses and provide instruction in a consistent way customized for each student’s learning needs – could be emboldened. In such a scenario, facilitation becomes the need, not professorship. The value will become the certification of competency and degree conferment versus what schools do now.

As we know from history whether it be with the deregulation of the airlines or telecommunications as well as the increased regulation of banking most recently; federal policymaking typically has goals. In this case, I believe the goals are significantly reducing cost of higher education, improvements of outcomes, and innovation. The deregulation of telecommunications is what eventually brought us the smartphones that I write this on as well as the Internet that is how I can freely distribute on. Imagine what innovations can be brought to the space with these types of actions detailed above. Essentially, it forces colleges to act fast, fully embrace technology, reinvent themselves, gut their overhead, and compete for their lives – change or die a quick and painful death.

BOTH sides of the political aisle are behind these types of changes and I believe will act and do so soon. Both sides gain from acting. These changes ultimately enhance our economy and our global competitiveness. The political right wants to control the growth of federal spending and stewardship of that funding. They also want more competition and realize that the “for-profit” education industry” alone with notable exemptions is largely not able to do that. They want competition. And they are not fans of the majority of universities that they view as bastions of liberal thought. On the other hand, the left wants to make schooling a lot more affordable, thereby, increasing access to individuals with lower socioeconomic status. They embrace technology and social media. They are concerned about poor outcomes that disproportionally impact lower income students as well as students of color. Large donors to liberal causes are behind a lot of the reform efforts. All this is winning the battle over traditional Democratic constituencies that might have had a reason to fight for the status quo- teacher unions, faculty associations, etc.

I believe that over 50% of our post-secondary schools will not exist by 2020 for a number of reasons. Besides the elites or so-called top 200, the only schools that will survive are those that radically change and become early adopters of what I a few years ago coined as “Education 2.0.” This “radical change” and a school’s ability to sustain will be based on the following:

1) Significant and “real” differentiators – not the fairly common ones that most schools use now.

2) Traditional Online and I am calling online “traditional” is dead. How much do you frequent a post office these days or send a telegragh? That is the future of today’s online. It does not matter if a school was an early adopter or not. Online is old news and just as saddling as the classroom was 15 years ago. True mobile learning (“mLearning”) is what successful universities of the future will early adopt now. The goals are engagement, social learning, interaction, “addictive,” anytime/anywhere, and blended learning experiences (goes way beyond the hybrid online/classroom model. This is also a lot more than an LMS mobile application, which is just putting the same bland online stuff on a smaller mobile device. It accomplishes nothing.

3) Truly immersive “Nordstrom” student lifecycle management. This means using tools, technologies and tactics that we used to build our initial contact center management business – a business that has generated over $ 1.6 billion in revenue, tuition, and donations for our customers over the past 15 years.  It is about new powerful inquiry generation efforts, 24/7 availability data analytics, and proactive student support. Finally, it is about converging student life cycle management with the students academic experience day-to-day.

4) A student experience in the “classroom” that is next to amazing – one that achieves mastery, is practical, and keeps a student coming back all the time (engagement) like Words With Friends does for many of us.

5) Next generation programming and instructional practices as well as content.

6) Recognition that the student life cycle does NOT end at graduation. It begins, evolves, and should be enduring. By providing real and actual career paths, placement (not services), and lifelong learning enhancements/opportunities, schools can create a captive customer relationship for development and to serve further. With our society innovating in months at levels that took a decade just years ago, students need primers to maintain relevancy. They need a lifelong learning partner and support organization that keeps them engaged and giving – not getting an annual fund letter or a fundraising call from a student call center. Schools can benefit from the data after graduation, as they will need to continue to substantiate their value and ROI as it relates to their competition and less expensive non-school actors.

So, what does all this mean? It means that we have amazing opportunities in higher education – available for the taking. There is an opportunity to innovate like never before, address the challenges of higher education, and double down on the leadership our nation has offered the world as it relates to higher education. Institutions must act and they need to act at the speeds of the market, policymakers, and technology – not themselves. The market is about to be thrown wide open. This is the time to act!

Washington’s Assault on Students and Non-Proft Education

The news for higher education seems to get worse by the day. More and more schools lack sustainable financial models, public institutions are losing billions of dollars in funding due to financial challenges at the state level, and financing for the Pell Grant program that is a key resource for lower income students is at risk.  These challenges are amplified by changing demographics that do not support the traditional student model that most schools continue to exclusively rely upon, increased competition, and a heavy resistance to change on many campuses.

The aforementioned issues are even more pronounced for past, present, and prospective consumers of post-secondary education. Student loan debt now exceeds credit card obligations, our institutions are failing to graduate millions of students after saddling them with substantial student loan debt, and many students who are fortunate enough to graduate lack the skills needed by many of our employers. If all this is not enough, our education system continues to enable a pervasive college attainment gap based on socio-economic status. If you are an adult without a college education, poor, a Latino, or African-American, you are significantly less likely to gain access to a quality college education – even if you are college ready!

If there is any time higher education and its most important constituents – the students – need the leadership and support of the U.S. Department of Education (DOE), it is right now.  Yet, the Department continues on what has arguably become an overzealous trek to rein in for-profit education despite the fact that almost every higher education policy expert acknowledges that these institutions play an important and necessary role in our post-secondary system that could not be replicated by non-profit institutions. With DOE’s ideas on so-called “Gainful Employment” regulations becoming more and more of a political impossibility, the Department continues to push other regulations that it feels will have a restrictive impact on for-profit schools.  The most onerous and concerning is the requirement that institutions that offer distance education and online programs to students in states where the school lacks a physical campus be licensed with appropriate state authorities in each individual state that requires (or may require) such registration.

DOE’s position on this regulation is that schools that offer online programs to out-of-state students have always been required to be licensed where required. This is a cynical and disingenuous argument based on how both schools and states have operated as it relates to this issue. What is even more concerning is, in its attempts to make life more difficult for the for-profits, DOE has engaged in a “scorched-earth policy” that in reality will have very little impact on the major for-profits but have a tremendously adverse impact on constituencies that the Department purportedly wants to support – students and non-profit institutions! Perhaps just as ironic, this requirement will be just as difficult for many model smaller, niche for-profit schools that are providing outstanding educational experiences.  For obvious reasons, these are schools that the Department should want to showcase.

The large for-profits have teams of lawyers, regulatory affairs staff, and other resources that can quickly interpret individual state mandates and meet them. In fact, of the for-profit executives I have interviewed about this issue over the past several weeks, most look at the state approval requirements as an annoyance but a cost-of-doing business. They are working as we speak to obtain their out-of-state licensing if they currently do not have the credentials. One for-profit official half jokingly told me she believes it will actually provide their school with “another competitive edge” over their non-profit counterparts.

On the other hand, I have had conversations over the past several weeks with at least 10 chancellors and presidents of private not-for-profit and public institutions – the majority of whom have no idea how they are going to comply with this requirement. These officials do not have the staff, available expertise, or the $ 100,000+ in disposable fund to license themselves in each state that requires such approval. As a result, many presidents and other school officials have alluded to me that they will simply not offer their programs in states that require registration or those states that have particularly difficult requirements.

If smaller non-profit institutions – many of which are new entrants to the online learning marketplace that offer higher quality and niche programs have to pull out of specific states, these schools will disproportionately suffer. Recruitment, revenue, and student diversity will all be impacted. This will especially be true of tuition dependent institutions that are experiencing a decline in traditional enrollment and need out-of-state enrollments to sustain their student populations.

While this is a real issue for the financial health and sustainability for some institutions, the larger travesty is if fewer online programs are offered in specific state markets, we are denying students choice and access to quality educational opportunities. In certain states that lack strong not-for-profit online offerings and have public institutions that have to cap other types of enrollment due to budgetary issues, a distance learning program offered by a for-profit may be a student’s only option (assuming one is available).

There have certainly been abuses at some for-profit schools that need to be corrected and taxpayers as well as students deserve a return on investment on our federal student aid programs. As well –intentioned as the Department might be as it relates to the state approval requirements, this policy will hurt the groups that desperately need DOE’s support right now – our non-profit institutions and most importantly our non-traditional learners as well as others that lack appropriate access to solid educational opportunities.

DOE has a statutory role in acting as a limited regulator and a responsible steward of our Title IV aid programs.  Requiring schools to participate in up to fifty regulatory schemes is an overreach of the Department’s position in our system of institutional oversight. Otherwise, where will this end? Will a school in one state that recruits traditional students from another state to attend a campus program be required to also register in each state to have the privilege of enrolling those students?

While an imperfect system, DOE should allow our system of private accreditation that is designed to ensure that post-secondary institutions across our country meet minimum uniform standards to operate as intended – negating the need for this type of regulation. All the regional and major national accrediting agencies have implemented meaningful reforms over the past year and are best up for this job.