In the September issue of Fast Company, Editor Robert Safian posed challenging questions about the state of higher education, and the best model for the future. With the average annual cost of attending a private four-year college rising nearly 4% to US$ 32,307 this school year — the biggest increase since 2001 — academia is ripe for Blue Ocean Strategy-based thinking and solutions.
Yesterday we promised our readers the eagerly-awaited solution proposed by Gabor to the challenge raised by Robert Safian in Fast Company’s “Letter from the Editor: Lessons of the Edupunks.” Below is an excerpt from the full version of Gabor’s solution, which appears in the November issue of Fast Company.
Given the astounding tuition cost of leading universities, education has to be regarded as a business proposition by both students and the schools themselves. Students make an investment to attend in the hope of qualifying for well-paying jobs after graduation, while universities count on continuous donations by alumni to keep themselves going. Embracing this simple equation is the first step in universities shedding the false sanctity of outdated traditions in favor of asking such timely questions as: How can we create a model that minimizes the costs and maximizes the return for both students and our university simultaneously? How can we best enrich the lifestyle of our students so they are not saddled with debt from the moment they graduate? And how can we become ‘market driving’ rather than simply ‘market driven’ to attract the greatest pool of talented students? Bold questions, indeed.
So here is a possible solution: Leading universities have amassed billions of dollars in endowment. Rather than trying to out-compete each other in endowment ratios and levels, let’s tap these funds as the source for the new model. Let’s use a portion of the endowment’s yearly investment income to do away with tuition fees all together, and offer free attendance. In return, once students graduate they would contribute a certain percentage of their annual earnings to the school for x number of years, or until a specified threshold is reached.
For universities with suitable resources, the cost of this program could be relatively low – just 5% of total endowment could more than cover the full tuition of all students – meaning that they would only have to invest a portion of their yearly investment income, and not principal. To illustrate, here is the rough calculation for Amherst College, with rounded figures: 5% of its $1.7 Billion endowment would yield $50,000 for each of its 1,700 students per year, more than sufficient to cover tuition). And the returns would be tantalizing: They could select students purely on future potential from a vastly expanded talent pool, and see much greater levels of alumni contributions than currently (they could even account for a portion of students not pursuing commercial careers with their degree). For students this model would eliminate the biggest burden of higher education altogether, better prepare them for the post-graduation marketplace, and allow them to take charge of their future with much greater flexibility. In short, there would be a close alignment of interests between students and universities.
[Image via Brands of the World.]