Higher Ed in Vermont and the Nation

In his “State of the State” message Governor Scott said his “biggest concern” was Vermont’s aging demographic and shrinking population.

“If we don’t break this cycle, our institutions, including state and local government, won’t be able to afford what they currently do, or what they would like to do in the future, because costs will continue to rise much faster than our tax base can contain,” he warned.

Population decline has become a focus for many struggling institutions, including the higher ed community. Vermont saw three private colleges close last year , and another is essentially shuttering in June. The well-being of Vermont’s 17 remaining colleges is vital to the state’s economy and life-sustaining to the towns they reside in.

Colleges under stress usually cite demographic change as the challenge. But it only camouflages deeper problems, which, if addressed, might secure a market-appropriate number of colleges for Vermont’s future.

The New England Commission of Higher Education (NECHE) has posited the possible loss of as many as 60 colleges in the Northeast in the next decade. The Chronicle of Higher Ed decided at the last minute not to publish an analysis of the financial runway for 946 private colleges in the country when they were threatened with lawsuits.

Many of Vermont’s recent college failures seem to have caught their boards off guard. Reviewing the same information the board should be seeing, NECHE predicts and warns a college that they’re in trouble long before it fails. Given the responsibility trustees bear for the cost of “teaching out” all students with government loans, one would assume that they were watching finances carefully in their own self-interest.

While the stresses affecting private colleges differ somewhat from those felt by community or public colleges, where relentless declines in state and federal funding have distanced them from their goal of offering affordable college to all. That said, there are common factors affecting both public and private colleges that go beyond either demographics or funding.

The public’s misperception about college finances further masks higher ed’s problems. It’s widely assumed that colleges with massive endowments will always be secure, even though they may be hemorrhaging money annually. But positive annual fund balances are critical to a college’s survival, otherwise the financial runway ends when the endowment is spent. Controlling operating costs is as vital to a college’s survival as is growing endowment returns to cover them.

Two variables where colleges have some control are tenure and infrastructure costs.

Tenure, originally deployed to protect teaching faculty from removal by donors, religions, or powers inimical to their curriculum has survived its original intent. The First Amendment and civil statutes largely protect employees from “wrongful discharge,” as does the robust tradition of academic freedom in all but the most ideologically-driven institutions. The downside of tenure is the guarantee of employment regardless of academic performance and the fixed cost it imposes on an institution that must downsize to survive. With considerable controversy, Vermont Law School recently revoked tenure for 75% of its faculty, a move that further secured its future.

Infrastructure is another burdensome variable. For years, U.S. News Best Colleges ranking gave inordinate weight to student amenities rather than academic excellence, which is more difficult to analyze and rank objectively. In the second half of the last century this set off a race to add such things as pools, climbing walls, spas, and enhanced living quarters to attract students, pushing tuitions to today’s levels which average $45,000 for a private college.

Although many of the more elite Ivies and privates have nominal tuitions in the $60 – 80,000 a year range – the full cost to attend Middlebury is $71,830, Bennington – $72,650, Champlain – $59,698, St Mikes – $59,765 – the actual average price paid for attending is much less when discounts for merit and need are factored in. The average discount rate in the U.S. is now about 50% and students have become adept at getting colleges to bid against one another for their applications. Discounting constitutes an operating loss to colleges that must then be filled from other sources such as philanthropy.

On average, students entering the workforce will do so with $28,500 and a debt-to-income ration of 20%.

And today’s student may be of any age, family or employment status. Dorms and rigid educational residency both impose significant costs in both money and time. Many young people no longer have either as they enter a world increasingly hostile to starting a family, finding employment, and affording housing and healthcare, making low or no-residency models increasingly attractive.

At 23, I was married with two children, attending UVM full-time, and working the nightshift at IBM, and had to focus on making a living from my education.

Furthermore, students themselves have changed, turning away from the traditional lecture / note-taking / exam pedagogy and seeking more active engagement. They want to interact with teacher/practitioners: engineers, artists, social, environmental, educational, healthcare providers. They want to learn by doing. So, business is reaching across the education boundary – no longer requiring a college degree, inviting eager applicants onto their payrolls, promising to help them get a college degree, and to pay for it while they’re employed.

The real driver behind the need to dramatically reinvent higher ed is the collapse of its traditional value equation. A recent article in the Washington Post asks “Is college still worth it?”

To survive, leadership must have the courage and power to experiment and reinvent for the future. If colleges are to survive they need to redefine their relevance to a broader range of potential students. The number of “tuition-is-no-object” students that fund an escalating discount rate, here, in the Middle East, and in Southeast Asia is dwindling, and federal anti-immigration efforts are rapidly tarnishing America’s reputation as a learning destination.

If Vermont is to have a vibrant higher ed community, we must stop dithering and be realistic about the financial pressures on both institutions and their students. We must respond creatively to the new forces shaping higher ed, looking to new student markets, new curriculum and engagement options, and new learning technologies.

The time is now. Let’s get on with it.