Last month, Moody’s Investors Services issued a negative outlook for the entire U.S. higher education sector. The main reason cited for the outlook was increased fiscal pressure on key university revenue sources. A major contributor to that pressure is increased tuition price sensitivity among potential students. High tuition and the prospect of crushing debt levels after graduation have caused an increasing number of young people and their families to question the value proposition of a college degree. That, along with a prolonged dip in the traditional college age population and the weak state of the economy in general have created an immensely challenging present and uncertain future for America’s colleges and universities.

Moody’s is just one of many voices that call into question the viability of higher education’s current business model. Mark Cuban, the high-profile chairman of HDNet and owner of the NBA’s Dallas Mavericks recently opined in a Huffington Post piece with the ominous title “Will Your College Go Out of Business Before You Graduate?” that U.S. colleges are spending too much money on new buildings and setting themselves up for a major collapse comparable to that experienced by the newspaper industry in the past decade. Ultimately, Cuban believes college is still worthwhile, but advises young people to prepare a “college value plan” that involves getting as many low-cost credits as possible at local schools and via online classes and generally avoiding debt as much as possible. He states, “It just doesn’t make sense to pay top dollar for Introduction to Accounting, Psychology 101, etc.”

This increased public pessimism about higher education and its financial situation from outside critics has caused some in academia to weigh in on the issue. R. Barbara Gitenstein, President of The College of New Jersey, recently authored a response to the Moody’s outlook in the Huffington Post, which essentially agreed with Moody’s assessment of the financial challenges faced by Higher Ed, but took issue with their recommendations for reform. Gitenstein’s piece was largely a defense of the public value of what colleges and universities provide and stating her belief that the frequently criticized major “cost drivers” in the system such as tenure, classroom instruction and student life services are fundamental to their ability to provide that value.

The extent to which Gitenstein is correct in her assessment will largely determine what course higher education will have to take to adapt to increased price sensitivity for their services and weather the current financial storm. The process of adaptation is likely to be challenging. One glimmer of good news for higher education among all this pessimism is that the 21st Century economy continues to demand a college educated workforce, as this piece in The Atlantic argues, rather persuasively. So, the question isn’t whether higher education still has a demonstrable value to individuals and to society – even vocal critics like Mark Cuban concede that it does – but the extent that it can be delivered in a manner that is affordable without sacrificing quality. That is likely to be the most pressing issue in higher education for the foreseeable future.

If you currently work in the higher education industry and you would like to know more about how RMS can provide solutions to help your institution navigate through a challenging environment, please contact our Business Development Director Sandy Baker, at SandyB@RMSresults.com or by calling (315) 635-9802.