College Education for Free? Eat Your Heart Out, Bernie Sanders

Illustration credit: Wall Street Journal

by James A. Bacon

Progressive icon Bernie Sanders famously called for “free” higher education. Not free for taxpayers, of course, but free for students. Daniel Pianko, co-founder of the University Ventures fund, thinks that nearly free tuition may be coming — thanks to market-driven innovation.

COVID-19 is accelerating trends that were underway before the epidemic saddled traditional higher-ed institutions with the task of reopening campuses and keeping students, faculty and staff safe. Many classes are being taught online, and many colleges and universities are offering a 10% tuition discount as compensation.

“Such discounts imply that students are still getting 90% of the value of higher education (about $45,000 worth, on average) from their Zoom lectures, but much of the educational content has become widely available for free. Students and parents can’t be faulted for suspecting that an online education should cost next to nothing,” writes Pianko in the Wall Street Journal.

Pianko expects that one day online educational institutions will be able to provide college degrees almost for free.

While Virginia institutions try to make college “affordable” by raising tuition for the wealthy and subsidizing the poor — leaving their bloated cost structures intact — companies in the University Ventures portfolio are devising radical new business models with the goals of “making higher education more affordable, pioneering entirely new approaches to learning, and helping employers think differently about how and where they discover talent.”

Writes Pianko:

Higher ed is … poised for transformation. Even before the pandemic, momentum was building in the education market away from high-cost operators and toward low-cost ones. Southern New Hampshire University and Western Governors University, nonprofits that charge less than $10,000 a year in tuition, have already become some of the largest and fastest-grown institutions in the country. They each serve more than 100,000 students by using online delivery and competency-based instruction to drive down costs dramatically without sacrificing quality.

These mega-universities will leverage technology to drive tuition revenue to zero over time. Some are already on the way, and the pandemic may accelerate the shift for many others. Rather than collecting tens of thousands of dollars from students up front, colleges might make money by forming partnership with employers, by charging students a percentage of their post-graduate income, or via government-issued social-impact bonds tied to successful outcomes like graduation rates. …

Technological change affects industries in deep, novel ways that established players ignore at their own peril. New education models are already driving tuition down, but there’s still room for more massive, structural price-driven disruption in this industry. In the wake of the pandemic, the winner will be the institution that takes the cost of online learning down to free. …

Few can imagine what will befall colleges in a world without tuition revenue. But that world may be coming.

Helen Dragas, former rector of the University of Virginia, famously fought the battle of online education a decade ago during the controversy over the firing and rehiring of President Teresa Sullivan. Dragas lost that fight, but the underlying issues haven’t gone away. The University of Virginia has doubled down on its high-touch, high-cost business model with a social-justice overlay. If Pianko is right, UVa and the rest of Virginia’s higher-ed system is cruising for a major bruising.