The Post-Pandemic University
Covid-19 will reshape how we think about higher education and online learning.
Tuition and fees for a private-college education more than doubled over the last 30 years. At public universities, costs increased tenfold. Meantime, the expected return on investment for a four-year degree, while still positive, is not as strong as it was. Rising costs and uncertain returns make many ask if higher education is a bubble—an over-priced asset due for a correction.
Though most graduates still see their investment pay off with better lifetime earnings and shorter, less-frequent spells of unemployment, higher education has become bloated and overpriced. The current system is unsustainable and will face inevitable change. Universities and colleges face leaner times and must adapt, making better use of technology, streamlining top-heavy administration, and offering more value for the cost. The coronavirus pandemic could accelerate the transition.
Even before Covid-19, colleges and universities faced declining enrollments, and some smaller schools had closed. Now, all schools are taking a hit. Even if they retained tuition for the spring semester, colleges and universities have had to make pro-rata refunds on room, board, and fees. A fall opening remains uncertain, and many administrators worry that keeping campuses closed would be catastrophic to their bottom lines. Universities rely on tuition and fees, but few parents will be willing to pay $30,000—and up—for online classes.
Even if universities do resume classes in September, they will likely see fewer international students, especially students from China, who pay full tuition and have become a significant part of the student body at many schools. This will mean less revenue, and consequently less financial aid for domestic students. Higher prices, a leaner economy, and a risk of regular shutdowns with reversions to online classes could mean a final reckoning for many schools, particularly small private colleges. Top-tier elite schools will retain appeal for children of the wealthy, but regional institutions will find it harder to operate as they have in the past.
Many factors have contributed to inflated education costs, including administrative bloat, fancy amenities, greater demand, government subsidies that reduce price awareness, and “cost disease”—the term, attributed to economist William Baumol, connoting how certain industries become more expensive because they can’t readily become more productive by reducing labor costs. In growing economies, most industries use technology to make more with less. Industries like education and health care, however, typically require lots of specialized labor. As the economy grows and labor becomes more expensive, the cost of services from labor-intensive industries rises more than that of other goods.
With the advent of online learning and telemedicine, technology exists to make education and health care more efficient. Neither tool caught on enough to disrupt these industries until the pandemic. All students are doing distance learning now; by most accounts, remote schooling has not been an unmitigated success, at least so far. But certain aspects of higher education are better suited to online treatment than others.
In 2017, for example, Jonathan Meer and Steve Wiggans, economics professors at Texas A&M, concluded that large lectures made it impossible to engage with students, many of whom didn’t bother to show up, let alone pay attention. They moved their Introduction to Economics class, normally delivered as a lecture to 300 students, online. The idea was not only to develop a better, more tailored learning experience but also to free up teaching resources for smaller elective classes that should be taught in person. Moving big lectures online potentially lets large public schools like A&M offer the same high-quality learning experience that smaller, private colleges offer. Technology unbundles the college experience: teaching, interaction with professors, and socializing need not take place together. This more flexible arrangement could pose a threat to many universities’ business model, but education consumers might benefit from it.
Up to now, many universities have offered some online classes, but they’ve rarely been regarded as serious alternatives to in-person learning. Assuming universities resume instruction in the fall, that could change. Large, crowded lecture halls may be considered high-risk, and some students, especially international students who may face travel restrictions and those with compromised immune systems, may be offered full-time remote learning. Universities will likely explore hybrid models that leverage technology with some in-person teaching. Large lectures may remain online, while smaller seminars get taught in person. This new model could represent a better way for universities to function, even absent a pandemic—and if students demand it, universities will have to find a way to make it work financially.
We often assume that disruptive technology threatens human agency, but that’s a misconception. The first Industrial Revolution made goods such as mass-produced cloth cheaper and more accessible, but high-quality, handmade garments still had a place in the luxury market. Technology today is doing something similar for services, including education—asking students to pay a premium for high-touch, in-person teaching, while offering them a discount for remote classes. This was already the trend, even if universities resisted it. The pandemic will accelerate progress toward a more customizable and affordable system of higher education.
The future is uncertain, of course. If a recession is prolonged, demand for education will increase because that’s how young people normally ride out bad labor markets. But students will be more price-sensitive, especially if online learning has less stigma and can be combined with in-person instruction. Universities will need to be more competitive, demonstrate the value of in-person learning, and offer flexible alternatives.
None of this means that higher education is coming to an end. But the current product no longer functions well for students and families. Universities must shift to a leaner, more productive business model. In the end, a hybrid system of online and in-person instruction will expand consumer choice and preserve the core functions of the university, while streamlining those features that have outlived their purpose.
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