The Cost of Failing Programs in Higher Education

Every new program launched by a college or other institution in higher education is a bet that the idea will resonate with students and grow enrollments, and too many of these bets don’t pay off. Then, what factors must be taken into consideration while developing new academic programs? The stakes are high for US higher education, which is in an unprecedented financial crisis brewing even before COVID-19 hit.

  • The nonpartisan Hechinger Report estimates that more than 500 institutions show two or more signs of financial strain. 
  • Undergraduate enrollments have fallen 4% since last year.

Many colleges and universities are developing new academic programs into place, hoping to draw in new students and the revenue they bring. But developing new academic programs will only work if those new programs cover their costs. A program that grants no conferrals cannot be paying for itself, and in fact, maybe dragging an institution closer to the brink. Even a bachelor’s program that grants ten conferrals per year is far from thriving. A program with enrollment at this level could be covering a good portion of its costs. But unless such a program brings prestige or other intangible benefits, it is far from achieving its financial objectives. In this environment, higher education has to be innovative. Yet, for the same reasons, the margin of error is smaller. 

Developing New Academic Programs with No ROI = Lost Opportunity

Colleges close to the financial edge can afford fewer mistakes. Not only does developing new academic programs fail to recoup its investment for the institution, but it also represents a lost opportunity. The money spent on one of these programs could have been spent on developing new academic programs that would produce a return on investment for both students and the institution. 

Expanding the market for higher education is likely the key to survival for many institutions. Yet, there seems to be no consensus on how much it costs to start up a new program, what the return on investment is expected to be, or the number of enrollees and conferrals required to succeed. Institutions may set metrics for success, such as numbers of students enrolled or degrees conferred, but there is little evidence of a rigorous return-on-investment standard. 

Institutions rarely calculate a new program’s costs in terms of overhead. The more these are factored in, the higher the estimated cost. Nor is there an accepted standard for how many conferrals a new program should create to be viable. Of course, it is important to note that, for many programs, the number of conferrals produced may not be the primary goal. Courses are offered because they serve other parts of the institutional mission. Engineering schools like MIT offer literature programs not because they expect to turn out a lot of graduates in those fields but because they want to produce well-rounded scientists and engineers. Religiously affiliated colleges will offer philosophy and theology as part of their founding mission, even if few graduates join the clergy. Area and gender studies programs provide diverse perspectives and speak to broader concerns in society. In these situations, the fact that many students pass through these programs as part of their general education requirement is justification enough. In today’s fiscal climate, however, the greatest cost is in lost opportunities. The college could have spent the same amount of money on a different program that might have brought in paying students. 

Higher education or EdTech platforms, on the whole, doesn’t view itself as a business concerned with making a profit. Institutions rightly view other missions, such as turning out well-rounded, thoughtful citizens or driving cutting-edge research, as of primary importance. And these objectives are increasingly critical to student success well beyond the university. But while a college may not be a business, it still has a business model: a strategy for generating revenue to sustain its impact. 

If institutions want to launch new programs to gain more tuition-paying students, it is essential to have a rigorous process to ensure that new programs accomplish that. Some elements of that process that institutions may want to consider include:

1. Understanding What Employers Need 

Getting a good job is the primary reason students give for going to college. For the nontraditional students who make up a greater proportion of enrollees in most new programs, the connection to work is even stronger. Not all courses need to be vocational, but career-oriented courses must hit the mark in terms of providing valuable, up-to-date job skills. 

2. Understanding the Students you Want to Attract 

What are their expectations? What does success mean to them? Are you offering them a good return on their tuition? This is particularly critical because there are dramatic differences in underemployment, the percentage of students who land in a job that doesn’t require their degree for different majors. Developing academic programs that attracts students but doesn’t connect them with viable careers won’t be sustainable for long.

3. Set Specific Metrics to Show Return on Investment 

Institutions need to enter into developing new academic programs with precise, measurable goals for revenue and conferrals. Will a new program development actually expand an institution’s base of potential students? Or just move existing students from one program to another? 

Developing New Academic Programs Based on Job Data

JobsPikr delivers job market data that empower employers, workers, and educators to make data-driven decisions. With our intelligent technology, we analyze hundreds of millions of job postings and real-life career transitions to provide data into labor market patterns. This real-time strategic data offers crucial insights, such as which jobs are most in-demand, the specific skills employers need, and the career directions that offer the highest potential for workers. 

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