To reach the goal of producing one million more college graduates a year without increasing public funding, U.S. higher education institutions would need to improve their degree completion productivity by an average of 23 percent according to a new report from McKinsey & Company. The report, Winning by Degrees: The Strategies of Highly Productive Higher-Education Institutions, provides an in-depth look at eight two- and four-year colleges and universities that have successfully raised the rate at which students complete their degrees and improved cost efficiencies.
“College attainment rates are rising in almost every industrialized country,” the report reads. “In the United States, however, they have remained relatively flat for the past ten years, even though completing a college degree has become increasingly critical to a person’s life chances. Producing more college-educated workers is similarly critical to the nation’s overall economic growth and prosperity.”
The study builds on research from the Georgetown University Center on Education and the Workforce that the United States needs to produce roughly one million more college graduates a year by 2020 to ensure that the country has the necessary number of skilled workers. To reach the 2020 goal at today’s level of higher education degree production, McKinsey & Company estimates that the United States would have to increase postsecondary educational funding by $52 billion a year from its 2008 level of $301 billion.
However, due to budget shortfalls at state, federal, and school levels, this type of funding increase is highly unlikely, the report notes. It finds that in Fiscal Years (FY) 2009 and 2010, forty-two states had to cut higher education budgets and thirty-one states are planning to make further cuts in FY 2011. To make up for these budget cuts, many states increased student tuition fees. According to the report, tuition fees rose by 439 percent between 1985 and 2005 compared to a 108 percent rise in the Consumer Price Index during the same time period.
As an alternative to increasing educational funding or raising tuition costs, the report recommends that U.S. colleges and universities lower the cost per degree. It highlights five winning strategies taken from these eight U.S. institutions that appear to raise the degree of productivity by as much as 17–38 percent without reducing quality or restricting access. The schools involved in the study all offer two-year associate degrees or four-year bachelor degrees and have open-access or less competitive admissions policies.
The report authors explain that schools fitting this profile are primary educators of low-income students and account for 51 percent of enrolled students nationwide. The schools profiled in the study are Brigham Young University–Idaho, DeVry University, Indiana Wesleyan University–CAPS, Rio Salado College, Southern New Hampshire University (SNHU), Tennessee Technology Centers, Valencia Community College, and Western Governors University. Winning by Degrees acknowledges that this group of eight schools does not represent the full variety of higher education options available to students, but focuses on successful practices that these schools employ and their positive impacts on degree production.
The first two practices that the report identifies—systematically enabling students to reach graduation and reducing nonproductive credits—contribute to raising the rate at which students complete their degrees. According to the report, graduation rates typically range from 19 percent to 45 percent at community colleges and from 37 percent to 62 percent among four-year institutions. However, successful institutions have introduced reforms that have boosted graduation rates by up to 27 percent. These reforms fall into four categories: (1) structured pathways to graduation; (2) effective student supports and services; (3) effective developmental education; and (4) effective student acceptance, placement, and preparation programs.
For example, Valencia Community College, which has a graduation rate 15 percentage points higher than that of its peer institutions, tailors support to its different student segments and has redesigned student support services to improve their quality. It has redesigned critical student support processes, such as financial aid and registration, to ensure streamlined processes, high quality of service, and high customer satisfaction. By driving down costs in these areas, Valencia has been able to invest more in counseling and career services.
The report also recommends reducing nonproductive credits because “excess crediting may give students extra educational benefit, it adds to the cost of a degree and so diminishes degree productivity.” To prevent excess crediting, the report suggests better developmental education and tutoring, policies for tracking and intervening to support student progress and completion, transfer policies that conserve credits, and innovative delivery methods. SNHU has policies in place to prevent students from being overcredited. Consequently, none of its bachelor’s degree-earning students complete more than 150 credits to graduate, compared to similar institutions where 20 percent of students complete more than 150 credits.1
The next three practices the report identifies—redesigning the delivery of instruction, redesigning core support services, and optimizing non-core services and other operations—contribute to reducing costs per student. On average, institutions spend $7,000 per full-time student on instructional costs, but some institutions, such as Rio Salado College and Western Governors University, are leveraging technology to redesign instruction and become more cost effective. These strategies include substituting full-time faculty with part-time faculty or providing course mentors to enhance online teaching materials. To become more efficient at core supports and services such as human resources, information technology, and finance departments, the report suggests converting from paper-based to electronic systems or using self-service online portals for administering financial aid.
To optimize noncore services and other operations, such as research or public services operations, the report recommends carefully assessing these noncore services and making sure they are critical to the school’s mission. According to the report, 49 percent of all institutions report that revenue from auxiliary services is insufficient to cover the expenses that these auxiliary services incur. “Often these losses are significant—19 percent of institutions report losses greater than $500 per student, and 10 percent of institutions report losses greater than $1,000 per student,” the report notes. “By maintaining only mission-critical noncore services, institutions in our sample save up to 17 percent of their peer group average cost per degree.”
In addition to the five practices the report identifies, the eight institutions profiled also benefit from four other essential elements: (1) efficient and effective operational processes supported by appropriate technology and tools; (2) effective management systems to ensure progress, build capabilities, and manage implementation; (3) leaders and staff who are committed to achieving degree productivity gains alongside high-quality educational outcomes; and (4) support from state and institutional policies that allow the institutions to choose how to achieve their quality and efficiency goals.
Download the complete report at http://bit.ly/bM5yBp.
1 The report notes that bachelor’s degrees typically require 120–135 semester credit hours to complete, while associate degrees typically require about sixty semester credit hours.