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Riding the Fifth Wave in Higher Education

A Survival Guide for the New Normal

James Ottavio Castagnera

The Fifth Wave in higher education is breaking on American shores. Unlike the four waves that preceded it from colonial times through the post-WWII mega-versity expansion, this wave is disrupting all sectors of the higher education industry. It will sweep away those institutions—be they public, private non-profit, or for-profit—that fail to recognize and meet the threat. Harvard professor Clay Christensen, the father of "disruptive innovation," predicts that as many as half of all American universities will close or go bankrupt within the next 10 to 15 years (See Inside Higher Ed, April 28, 2017).

Riding the Fifth Wave in Higher Education: A Survival Guide for the New Normal charts the dimensions of the Fifth Wave challenge and offers numerous general and specific suggestions for surfing the wave and surviving its tsunami-like impact. Part One of this concise handbook explains why our industry is in treacherous waters and outlines the impact of the Fifth Wave to date on all three major sectors of American higher ed. Part Two offers a range of practical responses, including ways we might break out of the tuition-discount "death spiral" and the facilities "arms race," as well as identifying our prospects for removing the albatross of onerous federal regulations from around our necks before it drags us under. If you have time to read only one book about today’s crisis in American higher education, Riding the Fifth Wave in Higher Education is the right choice. If you plan to research the topic in depth, Riding the Fifth Wave in Higher Education is the perfect place to start.

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Chapter 6. Addressing the Cost of Instruction

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ADDRESSING THE COST OF INSTRUCTION

Breaking the “Death Spiral” of Tuition Discounting via the “Value Proposition”

Three key facts of life drive this discussion.

First, most colleges and universities depend primarily upon tuition, and related room, board, and fees, for most of their revenues.

Second, most colleges and universities lack “an historic, strong or differentiated brand position…” (McGee, p. 67).

Third, “many…colleges and universities turn to the most powerful and efficient market tool they have to reach their goals: price manipulation. A college can induce demand for an undifferentiated product by effectively manipulating its price” (McGee, p. 68).

As with most things in life and business, the devil hides in the details. While tuition has repeatedly outrun inflation, gross tuition increases have been offset by tuition discounts (Selingo). Thus, “a poorly employed race-to-the-bottom pricing strategy comes with its own price—limited (or sometimes nonexistent) growth in revenue from tuition and difficulty in managing retention…” (McGee, p. 69). At least 90 percent of students at 69 percent of schools responding to a recent NACUBO survey were receiving tuition ← 91 | 92 → discounts (EAB). In academic year 2015–2016, the average freshman discount rate reached 48.6 percent (Seltzer).

Tuition discounting (aka financial aid or euphemistically “scholarships”) can’t be eliminated. It is, and must remain, a major weapon in our arsenal. But, carrying through with this metaphor, the weapon must be a...

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