In each issue, we identify and briefly describe a small number of books that are insightful about consequential matters and offer new ways of thinking strategically about the nonprofit world.

Andrew Hacker, professor emeritus of political science at Queens College, City University of New York, and Claudia Dreifus, an adjunct professor at the School of International and Public Affairs of Columbia University, provide an interesting overview of the dismal and frightening cost structure of higher education in the United States today.

They lay out in compelling detail a range of analytic data widely familiar to campus leaders, faculty and administrators, college parents and the general public: average costs rising at rates that far exceed the rate of general inflation; increasing average debt loads for undergraduates and graduate students; and attenuated average college completion time for undergraduates. They suggest that declining full-time faculty teaching loads, ever more elaborate campus sports programs and an institutional “arms race” to enhance student amenities are among the causes of ever increasing tuition levels. Their jeremiad fundamentally questions the value of undergraduate education at most institutions today because of what they consider to be low value in relation to high price.

The authors make prescriptive suggestions for correction, such as abolishing tenure, capping executive compensation, and limiting college athletics, most of which are politically untenable and institutionally unrealistic. The real value of their work lies in graphically depicting a failed financial architecture in what has been one of the U.S.’s truly world-ranked industries (to be crass about the economic power of U.S. higher education in the world market). This comes at a time when U.S. universities and colleges play an ever more important role in economic development and manpower training and provide leadership of the knowledge economy that no other sector can hope to provide.

The Conflux of Three Significant Factors

What the book unfortunately does not do is to think through the likely collision course of three factors: an increasingly problematic financial architecture of higher education (both public and private); the inevitably disruptive impact of technology on higher education pedagogy, positioning and outreach; and the adversely changing U.S. higher education “balance of trade” with other countries that threatens to reduce higher education’s historically effective contribution to society in advancing research.

There is coming a likely collision in U.S. higher education of a problematic balance of trade.

College Pricing
Tuition rates can surely not continue to increase so rapidly during an era of fragile overall economic conditions—even with the growing role of third-party payers, primarily the Federal and state governments through guaranteed loans, direct financial aid and research funding with related overhead. (See William Bowen‘s seminal work regarding the systemic inability of universities and colleges and other nonprofit institutions to increase productivity at the same rate as inflationary expense growth.)

Much of the reason that tuition levels have inexorably increased is that higher education is inherently expensive and increasingly costly to provide. Interestingly enough, the book implicitly suggests that the higher education terrain may mimic the consumer sector, with segmentation into strata of low-cost providers versus high-priced elite institutions that will continue to appeal to individuals with sufficient disposable resources and/or tolerance for indebtedness. Hacker and Dreifus name a group of ten institutions that they maintain provide high-quality education at low cost, and thus offer a new definition of a “good college”—while acknowledging that many colleges and universities fall in the middle, between the “value” and the “luxury” market for educational institutions.

Technology
Most institutions of higher education—and many commentators on the sector—have not yet realized that technology will substantially alter the current business model, though in ways that are not yet evident. The current messy complications of health care offer a parallel: positioned at the intersection of increasingly dominant third-party payers; absorbing technologically-driven advances in understanding and treating human disease; and reacting to the growing impact of science and delivery on improving the overall quality of health care— all at a time when a large sector of the population lacks affordable access to such care. Technology’s impact on newspapers and magazines is another sobering example of its ability to wreck havoc on a long-standing, successful business model.

On the other hand, technology will undoubtedly provide significant opportunities to increase flexibility of instruction (including, but surely not limited to distance learning), reframe in-class pedagogy (no longer a need to provide basic or advanced information) and, possibly, lower costs of educational delivery. It will surely also enhance institutional affiliations and partnerships, continue to foster multi-site research and instruction and improve the quality while lowering the costs of administrative and support services.

The disruptive impact of technology is likely to advance rapidly, as an increasing number of young students who have grown up with the Internet (and now social media) contemplate college and enroll in classes taught by a generation of faculty that is generally unfamiliar with the newer learning modes, and are more motivated by research. Stay tuned.

Balance of Trade
U.S. institutions have enjoyed a positive balance of trade with international students for the past several decades. Foreign students have provided healthy margins to many universities and colleges because they have typically not required institution-funded financial aid and their number has been robust and growing. But strong institutions of higher education are emerging in Asia, India and the Near East. Foreign students are encountering increasing difficulties in obtaining visas and U.S. higher education costs are continuing their inexorable rise. The problem is compounded by the many foreign students who are electing to return to their home countries upon graduation to build strong institutions of higher education that can emerge as competition to their U.S.counterparts.

Research
While undergraduate teaching has surely suffered at some institutions because of emphasis on research (and not all research can be called path-breaking), the overall volume, quality and impact of research results flowing from America’s universities is unparalleled. Sixty years ago there was an inspired decision to nestle government-funded basic and applied research within universities rather than independent research centers, and to insist on peer review to depoliticize the process. While research costs have exploded over the past several decades, they have not substantially contributed to growing tuition costs. And an increasing number of institutions are providing meaningful opportunities for undergraduates to participate actively in serious research projects.

Advancing Public Scrutiny of the Nonprofit Sector
The real issue that Higher Education? inadvertently makes evident is that a whole swath of the nonprofit sector in this country is increasingly under siege. The book is symptomatic of growing public concern about the value, purpose and costs of higher education—and by extension, much of the whole nonprofit sector—at the very moment that higher education holds the greatest promise for unleashing the vast potential for innovation, entrepreneurship and economic revitalization that the country needs to counter severe economic challenges.

Thus, Hacker’s and Dreifus’ work is important for the nonprofit sector—rather than just higher education— because it so nicely manifests early symptoms of the current disturbance, with a tone bordering on frustration, distress and regret. Their suggested remedies are not likely to be practical or relevant; they miss some important larger issues; and the book does not take imaginative advantage of its rich analytic base. But raising the flag about the conjunction of troubling trends plays the helpful role of a “canary in the coal mine.”

There will surely be many more articles and volumes about the problems of higher education and conceivably the whole nonprofit sector. These should be taken as warning signs that major change is coming. It will be prompted by evolving public perceptions of the value, integrity and impact of nonprofits—at the very moment when nonprofit missions have never been more relevant, important and critical to meeting an unparalleled set of societal needs and demands. Therein lies a critical strategic challenge for the whole nonprofit sector.