The Tarnishing of The Great American Dream and How Best to Fix It – Part 1 of 2
By: Dr. Mary Campbell, Dr. Ravi Kumar & Dr. Nick Vyas
“ Last week, the student loan forgiveness bill was vetoed and subsequently unable to override in the house as it missed the needed two-thirds majority by two votes.” So what’s next? This two-part article will focus on this critical issue with in-depth analysis and outlook.
Jean Paul Getty, ranked the most luxurious living American in 1957 Fortune magazine, had this to say about his formula for success: “Rise early, work hard, strike oil.” As ironical as his statement was, Mr. Getty, a petro-industrialist, also famously known to negotiate with the kidnappers of his grandson to bring down the ransom to a tax-deductible sum, was right on the money, literally. For a good part of history, affluence was a privilege exclusive to the manor born – unless one struck gold, or during the early-modern industrial age, struck oil, like Mr. Getty.
Such odds, however, changed with time. The NY City elite-led progressive reforms of the early-20th century dramatically improved the accessibility to higher education for the masses, making it possibly the modern-day equivalent of marrying into aristocracy. Today a graduate of a high-ranking American University stands a good chance of breaking into the top 20 percent of the income distribution, regardless of family background (Chetty et al., 2017). In the postwar era, an American HEI (Higher Education Institute) degree has played as significant a role as entrepreneurship in making upward social mobility a reality for many.Every success story has a seamy side, however, and this one has cast a dark shadow over the dreams and life-aspirations of countless Americans.
It is now commonplace to read troubling stories of young and middle-aged Americans whose lives are being overcome and dictated by student debt. The current trend presents a likelihood that this year seven out of ten college graduates will start their work-life weighted underneath an average student debt of $30,000, a number that has doubled in the last ten years. Today, student loan borrowers are more likely to put off plans to start a family, own a home, or save money. By 2019, total student debt reached a record high of $1.5 trillion and increasing still, making it the second-highest consumer debt in America, second only mortgage debt. At a more significant level, the ongoing crises of our times threaten to disrupt the dream of reformers to provide more comprehensive and equitable access to higher education to all Americans.
Cushioning the blow
Not that there is any dearth of resources available to help students manage, reduce, and, in extreme cases, erase the debt. Based on need and eligibility, supporting resources include grant aid, debt relief programs, market-based approaches such as debt refinancing plans, and, a surprisingly helpful last resort, bankruptcy, under a student-petitioner who fulfills an “undue hardship” standard.
On their part, analysts, administrators, and educators have been making earnest attempts to find a solution to address this growing crisis. It has become a “hot-button” political issue in the current presidential campaign, with most candidates having thrown their respective hats into the ring, promising panaceas around plans to either forgive or cap student loan debt.
Notably, however, there is no concrete action plan, nor even a serious debate to be seen at the policy or administration level on the leading cause of the crisis – the soaring cost of study at an American Higher Education Institution (HEI). This is certainly not for the media’s lack of attention, which has been quite vocal about it for several years at this point.
Arguably, there are two main reasons why all the public debate about the rising cost has not translated into any actionable agenda:
1) it is a hard problem to solve; and
2) it is an issue unique to America’s higher education sector. Let’s call it “The Educator’s Dilemma.”
Let us explain.
The HEI cost escalation problem
The cost of education at an American HEI has increased sharply at both public and private universities over the past three decades. According to The College Board’s Trends in College Pricing 2019 report, average tuition and fees have tripled at public 4-year and more than doubled at public 2-year and private nonprofit 4-year institutions – after adjusting for inflation – between 1990 and 2020. From a global perspective, America’s college-education cost is currently higher than that of any other developed country, barring one, Luxembourg, as per the latest statistics released by the Organization for Economic Cooperation and Development (OECD).
How did America’s HEI education get so expensive?
The data and the available literature points to the following domino effect that panned out over the last three decades: deep state budget cutbacks, particularly those brought about after the 2008 recession. This led to an increased competition among colleges to garner more revenue and attract more full-tuition paying students, most of whom turned out to be out-of-state and international students (Field, E. 2006). In turn, college spending began to focus more on improving metrics, favored in international and national college rankings such as learning outcomes, student-faculty ratio, faculty quality, and the amount of research published by the faculty, among others. Better rankings created a more significant global demand for a U.S. education, which encouraged American HEIs to spend more to fulfill the demand. This cycle continues today with further state budget cutbacks!.[DKRK1].
One reason why the cost escalation problem is such a dicey one is that any proper solution should leave the virtuous part of the demand-supply cycle undisturbed. State cutbacks may make fiscal sense, and the growing competition among colleges for better rankings and the resultant endless supply of privately funded international students have yielded rich dividends, for the U.S. higher education sector and the economy at large.
According to the 2019 Open Doors report on International Educational Exchange, released last year by the Institute of International Education (IIE) and the U.S. Department of State’s ECA Bureau, the number of international students in the U.S. hit a record high in 2019 at 1,095,299, a 63 [DKRK1] percent increase over the last decade. In terms of the economic benefit, international students contributed $44.7 billion to the U.S. economy during the year (a year-over-year increase of 5.5 percent). Their participation also created or supported 458,290 direct and indirect jobs during 2018-19.
The other reason this such a complex problem is that higher education is a service industry; even more, it is a personal service industry and deemed a public good. That introduces two variables often overlooked by the popular accounts of the high-tuition problem. First, higher education, considered a fundamental infrastructure for a thriving economy, has historically been supported by government subsidy and private philanthropy. The degree differs for public and private colleges. Therefore, any analysis of the rising cost is not complete without considering the historical trajectories of state versus private funding. Second, because it is a personal service industry, its cost drivers differ from other sectors such as the manufacturing sector, financial services, and others.
Archibald and Feldman, in their 2011 book Why Does College Cost So Much? Identified three principal drivers of HEI education cost: 1,) Cost Disease, a feature peculiar to personal service industries and explaining why service prices rise faster than goods prices; 2) Highly Educated Employees, or the cost of hiring highly educated workers such as those in research support roles have risen sharply over the last several decades; and 3) Standard of Care, denoting the objective that HEIs must provide the best-available educational experience to meet the expectations of students and families who are picking up the tab.
Much has also been written in recent years about what has commonly been termed “administrative bloat,” or how administrative and research support spending has outpaced instructional expenditure in the last thirty years. There needs to be a much more comprehensive and nuanced discussion around this subject. They are merely pointing out the improved amenities and the growing numbers of professional staff unless one shows that they are not contributing to improving the learning outcomes and overall value. In essence, any approach addressing the rising college cost and debt issue must take a refined and distinctive view. The problems outlined above are multilayered, interlinked, and therefore intrinsically complex. And then there is the Educator’s Dilemma.
The Educator’s Dilemma
Higher education’s significance has grown sharply over the last fifty years, more so since the 2007 Great Recession. Recent statistics show rising employment opportunities for those with at least a bachelor’s degree, modest gains for those with a college education, and a declining preference for those with a high school degree or less. The significant earnings gap between the HEI-educated workers and the rest has widened at an even higher rate since the recession. In short, there remains a staggeringly high premium placed on an American HEI education today. This is both a blessing and a curse.
Booming demand has driven the HEI system into a state of complacency. It is valid for both public and private HEIs. Student enrollments are guaranteed, whether financed by the state, philanthropists, or private lenders. Immune to the market forces that would keep any private enterprise “on its toes,” the HEIs have little motivation to drive cost-reducing or productivity-increasing innovation across all operations.
Unaffected by the enormous technological advancements in delivery deployed by other similar service industries like healthcare, the HEI sector clings to legacy thinking and a mindless affinity for the status quo. Let us simply say, it shows. Although they may feel they have been responsive to the realities of escalating tuition and other fees, the curricula too often remain antiquated in a world that is transforming at a blistering pace. Too many educators remain distanced from the real world, and departments work in silos in an age when integration and interconnectivity is the norm. It is not even a new norm. This has become an increasing embarrassment[EM2] .
The apparent lack of appetite for change on the part of many educators to be responsive the changing dynamics stems, sadly, from an insular vantage point that is arrogant in its infinite wisdom and classist origins. It is also often blind to the fact that bold innovation and creativity can improve learning outcomes and preserve quality while also reducing the cost of a lauded education. It, quite simply, upsets the proverbial apple cart.
Recent trends and global-shifting events indicate that the HEI’s long run of good fortune may be seeing the end of the status quo road. The value of college education, particularly that of the four-year college diplomas, is not growing as fast as before. Various factors, including a ballooning HEI education cost, a federal government debt crisis spiraling out of control, and a slowing down of the labor market’s demand for white-collar workers, do not portend well for the HEI sector. This is why it has become an absolute imperative, more than ever, for the HEI stakeholders to unearth, challenge and change the status quo.
Higher education institutions have been doing what they can to ease the burden on low-income students. Top-tier institutions like Harvard, Stanford, NYU, and Columbia University have introduced programs that make tuition-free or reduced for students from low to middle-income backgrounds. The University of Southern California recently joined its peers with the critical initiative of waiving tuition entirely for students from families with an annual income of $80,000 or less.
As noble and salutary as these initiatives are, quite frankly, it is like putting a Band-Aid on a bullet wound, considering the enormity of the crisis. Right now, a greater need is to address the systemic issue of cost inflation in higher education and to do so swiftly and decisively.
We see this issue from the perspective of driving operational excellence, using technological innovation with blended quality management principles, across the higher education enterprise. This tsunami-sized need has been tapping louder and louder on the windows of traditional models for a while now, with some worthy efforts observed at some institutions, but it is likely not fast enough to meet this significant moment of need and opportunity.
Part two of the blog will explore how lessons learned in supply chain and enterprise excellence can be applied to address the stated issues afflicting the higher education system.
*** End of Part I ***
Mary Campbell, PhD
BA, University of California Irvine
MA, California State University, Fresno
PhD California School of Professional Psychology – Alliant International University
Mary Campbell is the President and Founder of the Penelope Group and the mayor for the City of Hermosa Beach. She held various positions at University of Southern California; Assistant Vice President, Talent & Organizational Effectiveness, Assistant Vice President, Career Services and Executive Director.
Dr. K. Ravi Kumar
PhD Industrial Engineering & Management Sciences, Northwestern University
M.S. Industrial Engineering, University of Texas at Arlington
From 1987 to 2013, he was Professor of Operations Management in Department of Information and Operations Management and served as Department Chairman, Vice Dean for International and Graduate Programs. From 2009-2011, he served as Distinguished Professor and Dean of College of Business at Korea Advanced Institute of Science and Technology (KAIST). From 2013-2018, he was Shaw Chair Professor at Nanyang Business School (NBS) in NTU, Singapore, where he served as Dean and Associate Provost. During his tenure, NBS was globally ranked by the Financial Times as # 10 for its EMBA and # 22 for its MBA and he helped raise over SG$35 million. Professor Kumar has received awards for teaching excellence at both University of Illinois and USC. Professor Kumar is author or co-author of more than 70 articles in international peer-reviewed academic journals. Global companies have funded his research as well as the National Science Foundation.
Nick Vyas, Ed.D.
BS, MBA California Polytechnic University, Pomona
Ed.D. University of Southern California
EDUCATOR. KEYNOTE SPEAKER. AUTHOR. GSCM SPECIALIST. INDUSTRY ADVISOR. THOUGHT LEADER
Dr. Nick Vyas, is a known practitioner in operations management and organizational excellence through the application of Blended Quality Management, AI, ML, RPA, Blockchain, and Data Analytics. Vyas received his Doctor of Education from the University of Southern California, with his published dissertation on Conceptualization of Higher Education Excellence System (HEES): Use of Advance Data Analytics and Blended Quality Management. A Subject Matter Expert (SME) in End-to-End Global Supply Chain Management, Dr. Vyas has led cultural and business transformation for fortune 100 companies. He implemented breakthrough process improvements for over 500 projects that have transformed businesses for clients in the field of health care, service, government, retail, and end-to-end supply chain focusing on procurement, sourcing, IT, distribution, logistics, and transportation.
As the Executive Director and Co-founder of USC Marshall’s Center for Global Supply Chain Management (GSCM), MS in GSCM and as an Assistant Professor, Vyas is educating the next generation of business leaders. As a thought leader, he speaks at conferences sharing his views on global trade, disruptive technology and its impact on global supply chain management.
Currently, Dr. Vyas is working on a supply chain consortium to help hospitals get their needed medical equipment during this COVID-19 crisis.