Affordable Higher Education Is on the Horizon
February 6, 2013
Conversations on how to make college affordable are endless. Technically, we know how to significantly lower costs and improve quality, but little appears to be happening. Existing institutions are intransigent, and tuition keeps going up. Providing affordable education is simply not a goal of today’s leading colleges and universities. Most could cut tuition in half by simply returning to their business models of 25 years ago, but they have no incentive to do so.
However, the future for affordable education is actually very bright. This is because new ventures, not established institutions, are the source of disruptive educational innovation. Rather than worry about how to make the establishment more affordable, we should leave the establishment alone and take a venturing approach to affordability. We should promote new ventures to lead the way with disruptive innovation. As they become successful, the establishment can either follow along or perish.
In a recent paper (“Venturing to Affordability”) published by the American Enterprise Institute, I looked at venturing in higher education. Venturing is the use of new ventures to drive innovation through a whole industry. Venturing has been the cornerstone of economic progress in the United States over the last 40 years. Venturing brought higher education to non-traditional students.
Venturing brought online education. Venturing is the route to affordability.
The current environment for new, affordability-oriented ventures is excellent. Higher education is a huge market. Established colleges are often ineffective and always inefficient. They have high costs and charge high prices. New ventures with innovative models can improve quality and drastically reduce costs. They can offer a substantially better value to students than the established non-profits, yet still be profitable.
Venturing isn’t limited to for-profits. Western Governors University is experiencing explosive enrollment growth by providing college at a tuition below that of public colleges and universities, even though it does not receive any state subsidy.
The horses are already out of the barn. Education ventures stressing affordability are already gaining market acceptance. New ventures are popping up. “Smart money” is flowing to these ventures. Industry incumbents must switch or face extinction—some in the very near future. Tuition will come down substantially. Affordable higher education is on the horizon.
OCPA research fellow Vance H. Fried is a Riata Professor of Entrepreneurship at Oklahoma State University. This article is excerpted from a larger paper published as part of the American Enterprise Institute’s series on “Stretching the Higher Education Dollar.”