Higher Education: Lower Costs

To: University Administrators

Re: The Answer To Out-Of-Control Costs

With just a month until the Presidential Election there is robust debate on the scope of the government budget and the size of the deficit. Parents and students are facing a more immediate and personal budget crisis: the one caused by the cost of education. Almost everyone agrees the cost of higher education is at crisis levels – and the pain hits home regardless of political party.

The cost facts and trends are alarming. Tuition for universities and colleges is up six-fold in the past three decades, and at the current rate will double again in 15 years. Payments are current on just 38 percent of student loans, and student debt now stands at more than $1 trillion dollars, which exceeds the entire consumer credit card debt.

Can colleges and universities be more efficient? Sure. Many are already working on sharpening their budget pencils. But can they stop the runaway cost increases by just doing the same old thing more efficiently? No. To get the cost of education back to an affordable level, universities and colleges must approach things very differently. Needed is a new approach that moves the average cost of higher-education move from average annual increases of 5 percent to annual reductions of 5 percent.

What can be done to materially and systemically reduce costs – while maintaining the high quality of the education and experience? Harness technology. It has worked in every other industry.

Technology can reduce the number of expensive new buildings.

Fewer new buildings equal less cost: less cost to build, less cost to operate. Today’s students do not utilize physical space in the same way as previous generations. I went to the reading room to study, now students study in the coffee shop. Today’s students research from their laptop, whereas I went nightly to the library. The more a university enables the digital revolution, the more connected students and teachers will be. This connection is both powerful in its own right as well as it reduces the need for investing in buildings that historically were necessary to connect through place.

Technology can leverage the expertise and time of faculty.

The ability to record, host, and stream lectures exists – it is easy to use and it is inexpensive. This one technology allows faculty to re-imagine the best way to teach and to reorganize the best use of their time. There is no reason to give the same lecture over and over again – perfect it, record it, and stream it. Why have mega 500 person introductory lecture classes – record the lecture and make it available anytime, anywhere. The faculty that has the most expertise can now reach more students. The faculty that has the best approach for communicating the materials can now reach more students.

Technology can expand the reach and brand of the institution.

In the past, if an institution wanted to expand, it did so through building and operating adjunct campuses. These were expensive (many invested hundreds of millions of capital plus incurred additional operating costs of tens of millions each year) and also inflexible (What if opportunities changed? What is student demand shifted?). Today, a college or university can expand using technology far more inexpensively and with far more impact. Now the institution can expand leveraging its software – its brand, its intellectual property, and its people. When an institution is able to leverage the assets it already has over more students, the cost per student declines.

These are just a few ideas. Technology has driven down the cost – and increased the quality – in almost every other segment of our economy. It can do the same for higher education.


Donn Davis

Donn Davis is Managing Partner of Revolution Growth and he co-founded Revolution LLC with Steve Case in 2005. Revolution Growth is a venture capital firm that invests in and helps build innovative, consumer-facing companies that aim to disrupt large, existing industries.

Read More