Higher Ed’s Biggest Pressure Cookers in 2019

column | Market Trends

Higher Ed’s Biggest Pressure Cookers in 2019

By Michael B. Horn (Columnist)     Jan 25, 2019

Higher Ed’s Biggest Pressure Cookers in 2019

Last year my colleagues at Entangled Solutions offered their predictions for what would unfold in higher education in 2018. We talked about financial challenges facing schools, mergers and closures, cutting-edge technology, personalization and more.

So how did their predictions fare? And what do they foresee for 2019? Here’s what Paul Freedman, Terah Crews, Jeff Selingo and Mike Berlin had to say.

What are the three topics or trends that will dominate higher education in 2019?

Terah Crews: 1) Mega-philanthropy. Michael Bloomberg’s $1.8 billion gift to Johns Hopkins was only the beginning. We will continue to see game-changing mega-gifts, assuming we don’t go into full recession, that could change institutions for generations to come. The question is will we see the establishment of another elite university—or an elite for the 21st century. Stanford, Vanderbilt and Duke, while fixtures of higher education today, trace their roots to mega-donors in the late 19th and early 20th centuries. Will we get another in the early years of the 21st century?

2) Bricks and clicks. With over 30 percent of students taking at least one course online, look to colleges and universities creating a more seamless experience between online and in-person. Traditional universities with limited facilities for growth will look to make it easy for students to take at least one class online to free up space for enrollment growth. The question is when, not whether, we will see online colleges follow suit and establish small in-person footprints to attract students in regions they consider strategic for growth—think Amazon 4-Star stores.

3) Consolidation and radical collaboration among small colleges, particularly those in the Midwest and Northeast. The demographic destiny here looks foreboding. With a disappearing middle class and high school enrollment declines, small colleges will increasingly seek to survive and reduce costs through radical collaboration or consolidation. The question is when we will see large universities become active buyers in states like Texas and California to gain better access to growing markets.

Jeff Selingo: 1) Finances are going to be big, both at big public universities continuing to face headwinds in states given where public funding is going, but also not well-endowed tuition dependent colleges and universities.

2) Student learning and outcomes. Obviously there’s been a big focus on student success, meaning retention and graduation. But now there will be a focus on what do students actually know and how are they applying that after college.

3) Equity and inclusion. Specifically, how do we deal with new demographics coming into higher education who not only look different from who higher education has traditionally served in the past—and different from the faculty teaching them—but also in terms of socioeconomic status?

Mike Berlin: 1) The year ended with two big deals in the OPM space: Wiley’s acquisition of Learning House and Grand Canyon’s acquisition of Orbis. The OPM market will continue to see this type of activity with consolidation and new entrants changing the dynamics of the market.

2) The educational philanthropy space is beginning to have more conversations about learn-work interoperability and opportunity pathways. In 2019 we will see significant investment and hopefully innovation in this sector.

3) California Community College’s new online community college will successfully launch and serve as a model for system-level innovation in other states.

Revisiting your predictions about the most strategic consideration for colleges in 2018, each of you said some variation of financial sustainability would be critical. How did that play out and what should we expect for 2019?

Paul Freedman: As predicted, we saw a number of closures and further downgrading of the debt of universities and larger indications that financial pressures are real and, if anything, growing. That will trend will continue to be exacerbated by the Trump effect on international applications, which was a source of sustainability for some institutions. It’s only going to be made worse in coming years because of student demographics, which are not favorable for traditional-aged college students.

Berlin: Although college M&A [merger and acquisition] activity did not reach a tipping point, the underlying conditions that will lead to consolidation and other forms of radical consolidation have continued. This is just a question of when, and not if.

Crews: Most struggling institutions are still limping along rather than closing doors and merging. We did hear that there was an uptick in expressed interest in mergers last year.

Selingo: It hasn’t changed. No one has figured out what is the new model for higher education. We continue to discount tuition at unsustainable levels, we continue to look for revenue that doesn’t really exist at the levels we need it to, and we refuse to cut costs. Until a university or college is willing to do something that is bold and different, financial sustainability is going to continue to be an issue.

You each said that partnerships would be the most important innovative practice in higher education in 2018. How did that evolve and what do you foresee for partnerships in 2019?

Crews: Corporate partnerships did see an uptick last year as more and more of the education ecosystem explores career and technical education. Look to more Facebook/Pathstream-like partnerships in 2019. Mega-universities will look to corporate partnerships and skill-based unaccredited programs to future-proof against projected flattened enrollment growth. States, as in California’s new online community college, will place increased focus on underserved markets by developing corporate partnership backed skill-based education programs.

Selingo: I think we’re seeing that. In 2018, Make School and Dominican University partnered to create new computer science programs. Hampshire College is now asking for a strategic partner. We see a number of other partnerships happening in the arena, and so I still think that partnerships are the precursors to mergers and acquisitions or simply going out of business in higher education.

Freedman: That prediction was pretty solid. You see the prominence of collaborations like the University Innovation Alliance to spread innovations across institutions. APLU [Association of Public and Land-grant Universities] created a similar structure to do the same. You also see partnerships between institutions and companies. A number of companies, including, Walmart, Lowes and Disney, have announced partnerships with universities..

What do you see as the most important technological development in higher education in 2019, and how do you rate your 2018 prediction?

Freedman (2018 prediction: augmented and virtual reality): I’m not perfect. Not all my predictions came true. VR and AR didn’t make the gains that I expected. The actual killer app in that space is haptic gloves. This space really depends on muscle memory in the learning equation. It’s easy to produce high quality content for VR or AR, but you have to create the tools to replicate the haptic experience. The revolution in higher ed will wait for that device set.

In 2019, interoperability for open education resources (OER) is going to be the big technological opportunity. Given the continued momentum with general-ed courses using OER, the question will be what that allows. What technology can you plug into OER, and what does that mean for investments in upper-division and specialty courses where there is no OER ecosystem? OER is here to stay, and 2019 will be around what its presence enables.

Selingo (2018 prediction: personalization in courses and curriculum that starts to bend the cost curve): I don’t think personalization, at least in courseware, really resulted in much in 2018. Probably where personalization is helping already is around student success and advising. We see it with chatbots, for example at Georgia State. Because professors control so much of classroom, it’s hard to personalize that experience as of yet. Perhaps if we see movement on the student success side of things—so personalizing course catalog in some ways—it could perhaps lead to personalization in the classroom. I think 2019 will be around personalization on the student success side.

Crews (2018 prediction: active learning technologies): After 2018, I’ve grown bearish on new technology driving change. It is not that great new technology isn’t being developed, it is that our dated operating and business processes are throttling most of the benefit we might gain from these technologies. It is like being a Porsche and then putting a speed limiter on it that prevents you from driving faster than 35 mph.

It is time to take a hard look at our institutional systems and processes. We have been too scared for too long that any changes would undermine the core principles that make American academia great. That doesn’t have to be the case. We can improve how we operate while protecting the best of us. One way to start? Reimagine the decision-making process at institutions to reduce risk, contain costs, and increase experimentation while remaining democratic.

Berlin (2018 prediction: OER): I think OER-based content solutions have reached critical mass, especially in introductory disciplines. This, coupled with new economic models and inclusive access, have created the conditions for significant change in the publishing market.

Last question: How much consolidation—closures as well as mergers and acquisitions—do you foresee in 2019?

Berlin: I think this year we will see a moderate number of mergers. 12, or one a month.

Crews: We are still in the early years of consolidation. I predict we will see a minor uptick, but by and large buy-side schools and sell-side schools are going to only dip their toes in the water until there is more urgency or until they see more examples of successful mergers that provide a roadmap for success. Look to schools acquiring nonprofits, like the SNHU and LRNG merger, as a lower-risk, less regulation way to grow.

Freedman: I think double what we saw in 2018.

Selingo: We will probably see a lot more than I would have expected even a couple months ago. I’m really starting to worry about the broader economy. We’re starting to see a broader slowdown in the economy, a downtown in the stock market. These larger economic measures, which have been positive for so many years since the Great Recession, are moving in the wrong direction at the same time that colleges have still not found that sustainable model. Those two things combined will lead to more closures.

Last year my colleagues at Entangled Solutions offered their predictions for what would unfold in higher education in 2018. We talked about financial challenges facing schools, mergers and closures, cutting-edge technology, personalization and more.

So how did their predictions fare? And what do they foresee for 2019? Here’s what Paul Freedman, Terah Crews, Jeff Selingo and Mike Berlin had to say.

What are the three topics or trends that will dominate higher education in 2019?

Terah Crews: 1) Mega-philanthropy. Michael Bloomberg’s $1.8 billion gift to Johns Hopkins was only the beginning. We will continue to see game-changing mega-gifts, assuming we don’t go into full recession, that could change institutions for generations to come. The question is will we see the establishment of another elite university—or an elite for the 21st century. Stanford, Vanderbilt and Duke, while fixtures of higher education today, trace their roots to mega-donors in the late 19th and early 20th centuries. Will we get another in the early years of the 21st century?

2) Bricks and clicks. With over 30 percent of students taking at least one course online, look to colleges and universities creating a more seamless experience between online and in-person. Traditional universities with limited facilities for growth will look to make it easy for students to take at least one class online to free up space for enrollment growth. The question is when, not whether, we will see online colleges follow suit and establish small in-person footprints to attract students in regions they consider strategic for growth—think Amazon 4-Star stores.

3) Consolidation and radical collaboration among small colleges, particularly those in the Midwest and Northeast. The demographic destiny here looks foreboding. With a disappearing middle class and high school enrollment declines, small colleges will increasingly seek to survive and reduce costs through radical collaboration or consolidation. The question is when we will see large universities become active buyers in states like Texas and California to gain better access to growing markets.

Jeff Selingo: 1) Finances are going to be big, both at big public universities continuing to face headwinds in states given where public funding is going, but also not well-endowed tuition dependent colleges and universities.

2) Student learning and outcomes. Obviously there’s been a big focus on student success, meaning retention and graduation. But now there will be a focus on what do students actually know and how are they applying that after college.

3) Equity and inclusion. Specifically, how do we deal with new demographics coming into higher education who not only look different from who higher education has traditionally served in the past—and different from the faculty teaching them—but also in terms of socioeconomic status?

Mike Berlin: 1) The year ended with two big deals in the OPM space: Wiley’s acquisition of Learning House and Grand Canyon’s acquisition of Orbis. The OPM market will continue to see this type of activity with consolidation and new entrants changing the dynamics of the market.

2) The educational philanthropy space is beginning to have more conversations about learn-work interoperability and opportunity pathways. In 2019 we will see significant investment and hopefully innovation in this sector.

3) California Community College’s new online community college will successfully launch and serve as a model for system-level innovation in other states.

Revisiting your predictions about the most strategic consideration for colleges in 2018, each of you said some variation of financial sustainability would be critical. How did that play out and what should we expect for 2019?

Paul Freedman: As predicted, we saw a number of closures and further downgrading of the debt of universities and larger indications that financial pressures are real and, if anything, growing. That will trend will continue to be exacerbated by the Trump effect on international applications, which was a source of sustainability for some institutions. It’s only going to be made worse in coming years because of student demographics, which are not favorable for traditional-aged college students.

Berlin: Although college M&A [merger and acquisition] activity did not reach a tipping point, the underlying conditions that will lead to consolidation and other forms of radical consolidation have continued. This is just a question of when, and not if.

Crews: Most struggling institutions are still limping along rather than closing doors and merging. We did hear that there was an uptick in expressed interest in mergers last year.

Selingo: It hasn’t changed. No one has figured out what is the new model for higher education. We continue to discount tuition at unsustainable levels, we continue to look for revenue that doesn’t really exist at the levels we need it to, and we refuse to cut costs. Until a university or college is willing to do something that is bold and different, financial sustainability is going to continue to be an issue.

You each said that partnerships would be the most important innovative practice in higher education in 2018. How did that evolve and what do you foresee for partnerships in 2019?

Crews: Corporate partnerships did see an uptick last year as more and more of the education ecosystem explores career and technical education. Look to more Facebook/Pathstream-like partnerships in 2019. Mega-universities will look to corporate partnerships and skill-based unaccredited programs to future-proof against projected flattened enrollment growth. States, as in California’s new online community college, will place increased focus on underserved markets by developing corporate partnership backed skill-based education programs.

Selingo: I think we’re seeing that. In 2018, Make School and Dominican University partnered to create new computer science programs. Hampshire College is now asking for a strategic partner. We see a number of other partnerships happening in the arena, and so I still think that partnerships are the precursors to mergers and acquisitions or simply going out of business in higher education.

Freedman: That prediction was pretty solid. You see the prominence of collaborations like the University Innovation Alliance to spread innovations across institutions. APLU [Association of Public and Land-grant Universities] created a similar structure to do the same. You also see partnerships between institutions and companies. A number of companies, including, Walmart, Lowes and Disney, have announced partnerships with universities..

What do you see as the most important technological development in higher education in 2019, and how do you rate your 2018 prediction?

Freedman (2018 prediction: augmented and virtual reality): I’m not perfect. Not all my predictions came true. VR and AR didn’t make the gains that I expected. The actual killer app in that space is haptic gloves. This space really depends on muscle memory in the learning equation. It’s easy to produce high quality content for VR or AR, but you have to create the tools to replicate the haptic experience. The revolution in higher ed will wait for that device set.

In 2019, interoperability for open education resources (OER) is going to be the big technological opportunity. Given the continued momentum with general-ed courses using OER, the question will be what that allows. What technology can you plug into OER, and what does that mean for investments in upper-division and specialty courses where there is no OER ecosystem? OER is here to stay, and 2019 will be around what its presence enables.

Selingo (2018 prediction: personalization in courses and curriculum that starts to bend the cost curve): I don’t think personalization, at least in courseware, really resulted in much in 2018. Probably where personalization is helping already is around student success and advising. We see it with chatbots, for example at Georgia State. Because professors control so much of classroom, it’s hard to personalize that experience as of yet. Perhaps if we see movement on the student success side of things—so personalizing course catalog in some ways—it could perhaps lead to personalization in the classroom. I think 2019 will be around personalization on the student success side.

Crews (2018 prediction: active learning technologies): After 2018, I’ve grown bearish on new technology driving change. It is not that great new technology isn’t being developed, it is that our dated operating and business processes are throttling most of the benefit we might gain from these technologies. It is like being a Porsche and then putting a speed limiter on it that prevents you from driving faster than 35 mph.

It is time to take a hard look at our institutional systems and processes. We have been too scared for too long that any changes would undermine the core principles that make American academia great. That doesn’t have to be the case. We can improve how we operate while protecting the best of us. One way to start? Reimagine the decision-making process at institutions to reduce risk, contain costs, and increase experimentation while remaining democratic.

Berlin (2018 prediction: OER): I think OER-based content solutions have reached critical mass, especially in introductory disciplines. This, coupled with new economic models and inclusive access, have created the conditions for significant change in the publishing market.

Last question: How much consolidation—closures as well as mergers and acquisitions—do you foresee in 2019?

Berlin: I think this year we will see a moderate number of mergers. 12, or one a month.

Crews: We are still in the early years of consolidation. I predict we will see a minor uptick, but by and large buy-side schools and sell-side schools are going to only dip their toes in the water until there is more urgency or until they see more examples of successful mergers that provide a roadmap for success. Look to schools acquiring nonprofits, like the SNHU and LRNG merger, as a lower-risk, less regulation way to grow.

Freedman: I think double what we saw in 2018.

Selingo: We will probably see a lot more than I would have expected even a couple months ago. I’m really starting to worry about the broader economy. We’re starting to see a broader slowdown in the economy, a downtown in the stock market. These larger economic measures, which have been positive for so many years since the Great Recession, are moving in the wrong direction at the same time that colleges have still not found that sustainable model. Those two things combined will lead to more closures.

  

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