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May 28th, 2017

Insight

Why this professor is certain 'free' community college will be an expensive mistake

Laura Hollis

By Laura Hollis

Published Jan. 23, 2015

When Professor Clayton Christensen of Harvard Business School published his bestselling book, "The Innovators Dilemma," in 1997, he added the term "disruptive innovation" to the popular lexicon. Using case studies from multiple and diverse industries, Christensen showed with astonishing consistency what happens when disruptive innovations occur at the confluence of other societal or cultural trends and how these can push existing business models off a precipice.

We saw this 15 years ago with the advent of the mp3 and the ability to share digital music files. These were cool and accessible technologies, true. But what made them game-changers was the public's unhappiness with the music industry's business model. Consumers longed for a different way to buy and enjoy music. Musicians loathed the morass of manipulative contracts and impenetrable royalty accounting that made a misery out of their careers.

This was an opportunity waiting to be seized. Shawn Fanning, John Fanning and Sean Parker seized it with the creation of Napster, which gave music producers and consumers the power to bypass all of that with peer-to-peer file sharing. Notwithstanding the initial legal battles won by the recording industry, the old business model was defunct. (iTunes, anyone?)

Higher education stands today in much the same position as the recording industry did 20 years ago.

College tuition increases have been outpacing inflation now for almost four decades. Readily available student loans began in the late 1970s. Coincidence? No. Student loans were supposed to make college more affordable. (Sound familiar?) Instead, this "third-party payer" system gave colleges and universities carte blanche to start jacking up tuition, as students began borrowing rather than paying up front. Students, in turn, demanded more services, nicer dorms and better facilities. Departments insisted upon creating new programs and more faculty lines. And so the upward spiral began; once those costs are in place, they don't go away.

But skyrocketing tuition is just one strike against the traditional college education model; other trends are eroding public confidence in the system: the proliferation of meaningless degrees that hold little promise of gainful employment; the protracted adolescence that college has become, with endless partying and substance abuse; and the sexually irresponsible "hook-up" culture, just to name a few. Americans in ever-larger numbers have begun asking why this is worth saddling themselves with a five- or six-figure debt.

Many of those Americans have been actively seeking other options — and finding them. According to ccweek.com, enrollment at community colleges rose from 6.39M to 7.33M between 2003 and 2013 (down a bit from a 2010 high of 7.89M). Even online programs have begun to eat into traditional college enrollment — not at the high end of the market, certainly. But as Professor Christensen explained, disruptive innovations are often ignored precisely because they never start at the high end of the market. Twenty years ago, people scoffed at the idea of getting a college degree online. Now even schools such as Stanford and MIT offer Massively Open Online Courses, and some writers envision a future where students will choose from courses offered by multiple institutions to create their own custom degree program.

At the critical intersection of new technology and consumer frustration, old ways of doing business collapse. Those who cannot adapt go the way of buggy whip makers.

Higher education is no different.

But if President Obama succeeds in putting community colleges on the federal gravy train, he will eliminate the very incentives that community colleges have to offer a meaningful alternative to expensive four-year programs. Instead of competing for consumers who have limited dollars but very specific needs, community colleges (like their four-year counterparts before them) will be incentivized to increase tuition, offer meaningless frills and pander to the federal and state governments for what will inevitably be unaccountable expenditures.

Ironically, the groups that have the most to gain from this misguided idea are the four-year colleges and universities, who have good reason to fear the rise in popularity of community colleges, technical schools and online education programs that threaten to disrupt the way they've done business for — literally - centuries.

But it is the American students who will lose.

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Laura Hirschfeld Hollis is on the faculty at the University of Notre Dame, where she teaches courses in business law and entrepreneurship. She has received numerous awards for her teaching, research, community service and contributions to entrepreneurship education.

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