Rebooting for the New Talent Economy

April 1, 2012

Anyone who follows the news will recognize the schizophrenic character of public discussion of American higher education. On one hand, its research universities are “the envy of the world.” As James Fallows of The Atlantic and David Brooks of The New York Times, among others, have noted, they are one of the few strategic advantages the nation has in a global economy driven by creativity and technological innovation. A not inconsequential set of observers from afar, China’s leaders, and increasingly its students, have identified the mode of intellectual inquiry associated with liberal-arts education as a high priority for advancing university-level education in that emerging Leviathan.

On the other hand, the significant drop in indicators of educational quality and achievement that characterize both the nation’s K-12 and college-level systems has higher-education critics decrying its failure to educate or train our citizens for the jobs of the future. And as the economy has tanked, college graduates are struggling to find jobs after accumulating unprecedented levels of debt. Indeed, for the first time, student debt nationally exceeded credit-card debt this past year, a fact given considerable visibility in the Occupy movements across the country.

President Obama has used his bully pulpit to insist that colleges and universities do a better job of graduating their students while curbing the seemingly insatiable demand for increased tuition dollars. In his recently announced budget, Obama called for a new $8 billion program to support community colleges to help improve access to college-level training and education for all qualified Americans.

He sees the emerging private, for-profit higher educational institutions, of which his company is a part, as best positioned to provide the needed educational changes.

Into this milieu enters Andrew Rosen, the CEO of Kaplan Inc., one of the largest and most profitable private, for-profit providers of higher education. Rebooting for the New Talent Economy is well documented, illuminating, frequently amusing, and often thought provoking. Rosen acknowledges that different sectors of higher education generally serve their students well. But in the aggregate, he suggests, higher education has failed the na-tion: It relies on traditional models of college and consumes too many financial resources, while not providing opportunity for large numbers of Americans to access the skills and training they need to perform the new economy’s jobs.

As the book’s title suggests, Rosen sees efficiencies and opportunities in new technologies for educational delivery and data-driven assessment. These technologies, he argues, are optimally suited to expand educational access and address the nation’s most fundamental educational and social challenges. He believes the changing global economy calls for a remodeling of higher education’s incentive systems, funding structures, and quality assessments. He sees the emerging private, for-profit higher educational institutions, of which his company is a part, as best positioned to provide the needed educational changes. is not intended to be a critique of research universities: “To be clear, this book is not about the research role of American universities, which has brought unimaginable innovation to fields such as medicine, technology, food and agriculture, materials, policy—indeed virtually every part of our economy and society,” he writes. “Rather it addresses whether institutions of higher education are incentivized to deliver excellent learning outcomes for a broad range of students; whether America is getting its money’s worth for its investment; and most important, whether we are getting what we need from our higher education system in an era of increasingly intense global economic competition.” And Rosen, who earned his law degree from Yale, appreciates the value of meandering through a curriculum we tend to associate with liberal education.

Rosen begins his analysis with public (and the news media’s) overemphasis on the traditional college-age population and a truly small segment of highly visible institutions in American higher education. He notes that the generally recognized top twenty institutions in the country enroll about 1 percent of all students in American higher education, and these established traditional and prestigious universities and colleges “have dominated for many decades, even centuries.” Citing The Winner-Take-All Society, a book by one of his Duke professors, ITT/Terry Sanford Professor of public policy Phil Cook, and Cornell’s Robert H. Frank, Rosen notes the power of sustained institutional prestige means there has been very little change in the institutions recognized as being among the very best in the nation over the past sixty years. (Duke would be one of the rare exceptions.)

In 2008-09, Rosen writes, only a little more than a third of all students enrolled in degree-granting programs were eighteen to twenty-four-year old, full-time students at four-year schools. Roughly two-thirds were older than twenty-five, frequently part time, and enrolled at two-year schools.

Rosen cites former Duke parent and Harvard Business School professor Clayton Christensen’s theory of “disruptive innovation.” New market segments ignored by traditional institutions create opportunities in which new entrants change the market, often with fierce opposition from the more established institutions. “Higher education in America has experienced three major waves of disruptive innovation: the establishment of land-grant colleges in the second half of the 1800s, the dramatic expansion of community colleges in the post-World War II era, and the re-cent wave of for-profit, or ‘private-sector’ universities. The colleges that resulted from these bursts of innovation were each greeted with condescension, criticism, and charges of illegitimacy,” he writes. But over the years, they have emerged as major players in American higher education. In time, he argues, “the newer private-sector universities will achieve the same level of acceptance.”

Rosen, who writes with a lively and occasionally tongue-in-cheek style (one chapter is “Club College: Why So Many Universities Look Like Resorts”), describes what he calls “Harvard envy,” a seemingly never-ending cycle of vast amounts of money spent, often on non-educational offerings—four–star, hotel-like housing and recreational facilities (his section on climbing walls is particularly instructive and amusing), exotic dining opportunities— with little or no improvement or expansion of student enrollments.

From his perspective, the land-grant and public universities, created to serve a different population from the elite private colleges and universities, now measure themselves by prestige and a set of incentives associated with well-endowed private colleges—what he calls the “Ivory Tower Playbook”—rather than on a variety of “more appropriate measures,” such as student learning outcomes and responsiveness to student and economic needs. At the same time, he says these subsidized institutions are placing increasing financial strains on taxpayers and students and their families.

Rosen describes the strengths and weaknesses of the various sectors of higher education in historical context. His discussion of the emergence of the public universities is quite good. The land-grant institutions focused initially on strengthening agriculture, especially in areas other than the Northeast, where private colleges were well established, and have been the catalysts for great social and economic progress. Rosen undervalues to some degree the central role of national defense and the need for a trained and well-equipped military in his discussion of growth of the public institutions. The greatest federal investments in higher education were all militarily related—the first Morrill Act, which created the land-grant system, came shortly after the Civil War, the G.I. Bill followed World War II, and the great expansion of student aid through the National Defense Student Loan Program in 1957 followed the launch of Sputnik.

Rosen is spot-on in describing the important and often contradictory missions of the community-college sector and the abysmal failure of these institutions to access their fair share of state dollars in competition with the more politically powerful K-12 and public university sectors. (Full disclosure: I am a trustee of Durham Technical Community College.) He writes persuasively about the increasing reluctance of states to fund their public-education systems at all levels, which leads to increased tuitions at the public campuses, limits access to the institutions and the classes needed to graduate, and increases student debt.

That’s where the private, for-profit sector comes in. Rosen believes the “pedagogy used by the new generation of private-sector colleges is sound and proven—and in some cases they may do a better job of educating students than traditional institutions.” He is critical of more traditional institutions for tending to measure inputs instead of outputs—focusing on the credentials coming in rather than the learning that actually takes place. And while he discusses at some length the criticisms of the sector in which Kaplan is a leader, he spends a good deal of the final section of defending the private, for-profit sector from its critics.

To Rosen’s credit, he acknowledges the congressional investigations and charges of misconduct against a number of high profile, private, for-profit institutions in recent years and concedes that these charges in some cases are valid—low completion rates, pushing unaffordable federal loans on students, marketing to and recruiting students who cannot do college-level work, and inaccurate reporting of the job placement of students. But he argues that these are outliers and that the private, for-profit model can work since schools or companies that cheat on their customers will lose those customers. Further, since this sector is not subsidized, as are public college and universities, the cost to taxpayers is relatively small.

He is speaking in relative terms, of course, since the federal government is on the hook for the billions of taxpayer dollars in Pell grants and loans it provided to these institutions. Somewhat surprisingly, Rosen does not devote a great deal of time arguing for online learning per se, but essentially says it is the future. Not surprisingly, he doesn’t mention that the private, not-for-profit schools, according to a New York Times report in December 2011, are among the leaders in lobbying expenditures in Washington, with some $16 million spent on fighting new U.S. Department of Education regulations.

There is much to like in this book. Rosen is right that there is something troubling about the disparity between wealthier students who can attend private colleges with large endowments, or state schools with taxpayer subsidies, while students with fewer advantages attend private, for-profit schools with less of a subsidy and a greater proportional need for larger loans (which leads to greater student debt).

In my Duke seminar on higher education and the news media, we discuss many of these issues. I plan to add to the syllabus. —John Burness

Burness retired in 2008 as senior vice president for public affairs and government relations at Duke and served during 2010-11 as interim president of his alma mater, Franklin & Marshall College. He is a visiting professor of the practice at the Sanford School of Public Policy.