Relating the housing and education markets

In a wonderful and expansive blog post, Mark Cuban — businessman, billionaire, and owner of the NBA’s Dallas Mavericks — draws a clear and detailed analogy between the housing market bubble bursting and the current state of the higher education industry. Yes, I had heard this before but he paints a wonderfully vivid (though, of course, disturbing) picture of the economics of the situation.

His general points are as follows:

• Too many students have loans that are too big to be easily paid back.
• Student loans are too easy to get.
• The end recipients of the loan money (colleges and universities) are motivated to continue raising their tuition rates because they don’t have to worry about either paying the money back or whether or not they will receive it — it’s guaranteed!
• Borrowing money to pay for college and then hoping to earn it back in lifetime earnings is just like home buyers hoping to buy an over-priced house and then flip it in a couple of years for many thousands of dollars more. And it worked for many years…until it didn’t any more. And the effects of this bubble bursting are likely to be no less horrific than those for the housing bubble.
• Since student debt is so high upon graduation, students are essentially forced to move back home and put almost all their money to their loan payments. Not saving for a car. Not buying a nice wardrobe for work. Not stimulating the economy and creating jobs! Making the loan payment…for years and years. Unless they can’t, and have to go into bankruptcy.

Here are words (those of Mark Cuban) that should send shivers down the spine of every business professor in a top-ranked (or even medium-ranked) school:

As an employer I want the best prepared and qualified employees. I could care less if the source of their education was accredited by a bunch of old men and women who think they know what is best for the world. I want people who can do the job. I want the best and brightest. Not a piece of paper.

If this sentiment were to spread, then the game would change over night. What if potential employers defined “best prepared and qualified” in a way that wasn’t necessarily equivalent to “degree from a highly ranked and accredited university”? It’t not like there aren’t alternatives out there waiting.

Let’s consider these three:

DIY U

DIY U: Edupunks, Edupreneurs and the Coming Transformation of Higher Education is a book by Anya Kamenetz “about the future of higher education. It’s a story about the communities of visionaries who are tackling the enormous challenges of cost, access, and quality in higher ed, using new technologies to bring us a revolution in higher learning that is affordable, accessible, and learner-centered” (from this page).

P2P University

From their home page, “IT’S ONLINE AND TOTALLY FREE. At P2PU, people work together to learn a particular topic by completing tasks, assessing individual and group work, and providing constructive feedback.”

UnCollege

Their mission is “To change the notion that university is the only path to success and to help people to thrive in an ever changing world in which it is virtually impossible for educational institutions to adapt.”

With the efforts by MIT, Harvard, Stanford, and others, professional schools (such as Michigan Ross) need to be leading the charge towards digital education. Why? Because they have the most to lose. When students routinely are asked to pay $50,000 per year while simultaneously giving up their position in the work force, the professional school better have a really good defense against any questions about their value proposition. Lots of questions need answers, or at least the possibilities need to be explored:

• What will digital education look like?
• How is digital education best accomplished?
• What are the different pricing levels and education delivery models?
• How does the blended learning model fit in all of this?
• How can the threat of “free” (or, at least, extremely low cost) models of education be met?

In any case, standing on the sideline shouldn’t be an option. And, to be sure, the burden of worrying about this should not fall on the head of only the administrative team. Faculty, staff, and administration need to feel the urgency of this threat — the sense that something needs to be done, the feeling that the organization’s existence is being questioned, and that everyone is pulling in the same direction and working towards the same goal. Not all compensation questions and long term organizational issues can be answered before schools need to begin taking action. Faculty need to begin trying out educational delivery models with support from the school. The administration needs to come up with strategic plans for positioning themselves in the marketplace, while the faculty needs to have a sense of that direction and trust that the administration will be looking out for their best interests. If action isn’t taken soon, the range of possible actions available to schools and faculty is going to be severely limited. Act now, and figure out answers later. Everything can’t be known because the world is changing too fast. Some best guesses and assumptions have to be made.

This can only work if faculty and the administration have the sense that they are sitting on the same side of the table. What do you feel at your school? Are these two groups ready to work together?