There’s Talk of Sharing Financial Risk in Higher Ed. We Should Focus on...

Opinion | Coronavirus

There’s Talk of Sharing Financial Risk in Higher Ed. We Should Focus on Reducing It Instead.

By Burck Smith     Oct 9, 2020

There’s Talk of Sharing Financial Risk in Higher Ed. We Should Focus on Reducing It Instead.

COVID-19 has upended the traditional logic of recessions and higher education. Typically, when jobs evaporate, Americans turn to colleges and universities to increase their skills and marketability. With this downturn, though, the increased interest is there, but enrollments aren’t.

This fall, undergraduate enrollment decreased by 2.5 percent from 2019, and some of the steepest declines were at the two-year institutions (-7.5 percent) and for-profit universities (-1.9 percent) that typically see the greatest surges from newly-unemployed workers looking to retrain. More than 4 in 10 adults say that the pandemic has made them more likely to pursue additional education—yet they are far more skeptical about whether doing so will be worth the cost or lead to a good job. These potential students see tremendous risk, and they’re paralyzed.

The financial risk of entering higher education was already high, precisely because of the cost of failure. Degrees hold significant weight in the workforce—further evidenced by the fact that workers with college degrees are faring better in the current recession. But too few students actually earn degrees. Even in more stable times, four out of ten freshmen never get to the finish line of a BA, and many of them leave with student debt. In other words, while the return on investment of completing a degree is high, the ROI of starting a degree is much lower.

This problem has long bedeviled policymakers, accreditors and other entities charged with quality assurance in higher education. More recently, it has led to calls from both sides of the aisle for “risk-sharing.” The idea is that colleges should be at least partially on the hook financially if students aren’t successful.

We are indeed long overdue for a new approach. But what if, instead of just redistributing risk, we used the advantages of online learning and other innovations to substantially reduce that risk?

As COVID-19 reshapes higher education, we must ask, “what makes higher education such a risk in the first place?” Ultimately, it boils down to the high cost, both in the rising cost of tuition and in the opportunity cost, coupled with a substantial likelihood of failing to complete a degree.

But higher education doesn't have to be as risky as it is today.

One key to changing the equation is to reduce the cost of starting higher education—specifically, the amount students pay for courses in their first year of a degree program. The majority of students who stop out of college do so before their sophomore year. Front-loading low-priced coursework would reduce the risk of starting a degree program.

A number of institutions are showing the way. Western Governors University and Utah State University have created low-risk online pathways for students who need math, writing and pre-requisites. The Community College of Denver built an academy specifically for students with “some college and no degree.” All of these pathway programs use online coursework to lower the price and let students pay on a monthly subscription so they can easily pause and come back or stop without assuming the expense of a semester’s commitment.

And BYU-Pathway program and Education Access program within Bright Horizons’ EdAssist -- a company that manages employer sponsored tuition reimbursement programs for nearly 300 companies -- are both designed to help workers and other learners start higher education in core subjects at a low cost and complete at their own pace using the same subscription format.

The programs are working. Students who do well in the academy or pathway courses and are ultimately admitted to a full degree program outperform those who go straight into a degree program. So these students are increasing their chances of winning and reducing the cost of failure.

More broadly, online learning has tremendous potential to improve the ROI of starting a degree. For well over a decade, low-priced online courses have been available to students, though they are usually not eligible for federal financial aid. Completion of these courses is a strong indicator of future success—and failure does not dramatically limit other postsecondary options.

Another opportunity to reduce risk is to rethink what it means to leave college before completing. We need to redesign our systems to allow students to pause their education without being treated as highly stigmatized drop-outs. At StraighterLine, the online provider I founded twelve years ago, roughly one-quarter of students taking our courses are re-enrollees, for example, returning to education after focusing on other priorities. These students didn’t fail—they just didn’t succeed yet. And we can expect their numbers to swell amid the pandemic, as pressing family and health concerns pull people away from education for weeks or months.

As it stands now, students who step away from higher education receive black marks on their transcripts that make future aid eligibility more challenging which dissuades them from returning. And most traditional institutions create an all-or-nothing situation for students because they base credits on conforming to a fixed instructional schedule that many students find difficult to fit into their lives as they balance work and their studies.

Alternative providers, on the other hand, are not bound by the structural requirements of federal financial aid and can offer more flexible options. Such an approach is particularly powerful for students who require developmental or corequisite education because they can get up to speed at a significantly lower cost and without eating into their lifetime limits on federal financial aid. It can also allow adult learners to master or re-learn skills more quickly—reducing costs, and thus risk—and others to move more slowly as life requires, reducing the likelihood of failure and thus reducing risk. The latter is especially important during a health and economic crisis like the one we face today.

COVID-19, for all its destruction, has given us an opportunity to reassess. As we make our way through an uncertain fall in higher ed, there is at least one thing we can expect: prospective students will remain paralyzed if we don’t come up with new approaches to meeting their needs and reducing the risk of doing the kind of self-improvement they want and need to thrive.

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