Transformation of Higher Ed: Four Futures for Online Scale

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The (Continual) Transformation of Higher Ed
Transformation of Higher Ed: Four Futures for Online Scale
By Clay Shirky • Issue #7 • View online

Will online education force dozens or even hundreds of in-person colleges to close in the next decade? Having studied the matter for the last several years, I can confidently answer: That’s the wrong question. 
Whether more colleges close than open or vice-versa is a side-effect of two other forces – the number of students who want to attend, and the ability of existing colleges to accommodate them. And once you see that questions of closures are really questions of supply and demand, it is easy to see why all or nothing pronouncements about online schools replacing in-person ones are so dumb.
Assertions that online instruction has put higher education “just on the edge of the crevasse” make good headlines, but don’t account for the fact that new types of education are never perfect substitutes for older ones, and never wholly replace them. Public colleges did not replace private ones, land grant colleges did not replace liberal arts colleges, and online universities are not going to replace in-person ones. 
What online schools are going to do – are doing already, in fact – is competing with some in-person schools, for some students. Online schools are not the wave of the future, they are a wave of the future. They create a new competitive stress in an existing ecosystem, rather than being some sort of disruptive alternative. This competition may lead to more closures or fewer, but it will not lead to wholesale collapse.
Questions of supply and demand have always shaped higher education. For most of the 20th century, demand outstripped supply; more students led to more colleges because the largest US universities couldn’t enroll more than 65,000 students or so on a single campus. There was no regulation enforcing this limit, and larger in-person enrollments are not theoretically impossible – Ramkhamhaeng University in Bangkok enrolls nearly 500,000. (Bangkok has the population of Pennsylvania, and Thailand’s higher ed is nationally directed.) Despite there being no overt restriction on campus size in the U.S., some combination of inter-state competition and managerial overhead kept the largest campuses at around this level. Past that limit, students had to go elsewhere, providing an impetus to found new colleges. 
The 65,000 limit lasted til the end of the century. Since then, however, three very different institutions have grown to over 100,000 students. Each is majority or wholly online: University of Phoenix, Western Governors University, and Southern New Hampshire University. Though the country’s largest universities used to be public, all three are private – Phoenix is for-profit; WGU and SNHU non-profit.
Phoenix was the first to scale up, crossing 100,000 at the turn of the century and eventually reaching half a million in 2011 before beginning its dramatic collapse. Phoenix’s growth was almost entirely reliant on a loosened regulatory environment, allowing them to asset-strip Pell grants from students while providing a terrible education. When Obama-era investigations began to bite, Phoenix lost 40,000 students a year for the next several years, recently crossing 100,000 again going the other way. Phoenix seems unlikely to rise from these ashes, but it was the first school to demonstrate the possibility of six-figure enrollments at an accredited institution.
Western Governors was next, crossing 100,000 in 2017. Unlike Phoenix, Western Governor’s grew steadily between 1995 and now. Of course, merely offering online courses is not enough for a school to grow large; the whole institution had to be designed around large scale and low cost. WGU was created to provide competency-based education – credit for demonstrated mastery of a subject, rather than time in a classroom. Competency-based education follows the student’s schedule, and advisors provide learning support rather than scheduled instruction, which allows WGU to employ banks of advisors to help students, but no traditional faculty. 
SNHU was the third school to cross 100,000, later than WGU but growing faster. SNHU offers ordinary online courses, staffed almost entirely by adjunct faculty, and designed its entire operation to grow rapidly. It enrolled 11,000 online students in 2012, and 128,000 last year. At 1000% growth in less than a decade, it is on track to become, improbably, the largest university in the United States. WGU and SNHU have blown past the old upper limits.
Both schools are ordinarily accredited U.S. universities. Both are now operating at double the size of the largest in-person campuses of the 20th century. (While many observers were waiting for outsiders to remake higher education, insiders were already doing it.) Even more remarkably, they expanded during a prolonged decline in the number of undergraduates overall, which fell by a million and a half over the last decade
It’s also worth noting that WGU and SNHU don’t have a lot of competition. Arizona State only just crossed 100,000 last year, the first public university to do so, while Grand Canyon, a for-profit attempting to convert to non-profit status, and Liberty, the country’s largest Evangelical university, saw significant COVID bumps in online enrollment, and may cross 100,000 soon. The remaining schools with large online populations are growing far more slowly.
However, even a few institutions at that scale can affect the overall ecosystem. WGU and SNHU each enroll more students than the country’s 700 smallest schools combined, so in a zero sum competition for students, growth at the top means pressure everywhere else. And in the U.S., zero-sum ended a decade ago; with undergraduate enrollment falling, there are hundreds of small, poorly funded schools already struggling with decline; the emergence of even a few schools with six-figure enrollment is a new source of stress. (Remember, the schools you’ve heard of won’t be the ones that close, and the schools that close won’t be the ones you’ve heard of.)
Will the largest schools grow or shrink? Will total headcount shrink or grow?
Seen in this light, the question “Will online education force dozens or even hundreds of in-person colleges to close?” is really the concatenation of two others: “Will the largest institutions continue to grow, or will they start to shrink?” and “Will total undergraduate enrollment continue to shrink, or will it start to grow?”
Consider institutional scale first. The best reason to bet on future growth is past growth. The schools that have enrolled over 100,000 have figured out how to increase instructional and advisory staff quickly and cost-effectively, removing one of the old limits to size. 
The argument that the largest schools will start to shrink is more speculative. Competition could trim their sails. One key to their growth is simply spending millions on TV advertising; other schools could in theory copy that. And regulatory limits, which brought down the for-profits, could come to non-profits. WGU was sued by the Federal Government because their advisors did not look enough like standard faculty; although the suit was later dropped, its an example of the potentially showstopping effects of Federal action.
It’s also not clear how much of the growth of SNHU and WGU has been new demand. Since 2010, the two of them together have added fewer students than Phoenix lost. Their growth could just represent a transfer of students from for-profits to non-profits, and peter out once the shrinking of the for-profits is complete.
Next consider the other question, about the total size of the undergraduate population. The best reason to bet on future contraction is past contraction. The size of the undergraduate cohort has been declining for ten years, and the fall in birth rates since the 2008 crisis will start to bite in the middle of the decade, as the first of the post-crash generation turns 18.
However, Nathan Grawe, who provides the clearest coverage of the ‘birth dearth’, often notes that demographics are only destiny if the current trends in attendance continue. There are possible counter-efforts, including making community college free nationwide or nearly so, or clearing large amounts of debt among the ‘some college/no degree’ population, or further expansion of the company-wide tuition remission at enormous firms like Starbucks, FedEx and Disney, could lead to a reversal, where the number of students grows again, after a decade of shrinking. 
Four Futures
The size of the largest online institutions could continue to grow, or it could reverse and shrink. The number of students could continue to shrink, or it could reverse and grow. These are simple questions, with either/or answers. For each question, both answers are plausible and consequential. 
The laziest thing you can do with questions like that is make a two-axis chart, so let’s get started.
Two Questions, Four Futures
Two Questions, Four Futures
Consider the future represented in the upper-right quadrant, Something for (Almost) Everyone, where the largest online schools continue growing, and the undergraduate population reverses course and starts growing as well.
In this future, the largest online schools become even larger, but the prevalence of cheap or free higher education, cleared debt loads, and corporate subsidies draws more students in to higher education overall. Competition between schools continues, somewhat eased by rising headcount; colleges fight for a piece of a growing pie. Online schools will still create new competitive pressures, and there will still be closures every year. (Hence the ‘almost’). These will happen a little more frequently if large schools grow faster than total student population does, a little slower if not, but given that there are thousands of colleges, even a dozen closures a year will feel gradual in the larger scheme. (Each closure will still be experienced as a local crisis, of course.) 
Cross down to the lower-left quadrant, Distributed Pain, where the largest online schools reverse course and start shrinking, and the student population continues its current trend, shrinking as well.
In this future, SNHU and WGU have their sails trimmed as Phoenix did before them, and no other schools take their place. Instead, some new upper limit on individual school size appears, preventing the arrival of one or more WalMarts of higher ed. In this future, competition between schools is made more acute by falling headcount; colleges fight for a piece of a shrinking pie. These closures will happen a little more frequently if the undergraduate population shrinks faster than the largest online institutions do, a little slower if not, but in this future as well, the decline of institutions will be relatively gradual. 
From the perspective of individual schools, “Something for (Almost) Everyone” and “Distributed Pain” would feel very different – a college that grows 2% a year is a very different (and happier) place than one that shrinks 2% a year. However, both possible futures assume the size of the largest online schools moves in tandem with the overall undergraduate population. And in both “Something for (Almost) Everyone” and “Distributed Pain”, there would be no takeover of higher education by a few online schools, and no collapse of smaller ones, just continued, grinding competition and a small but steady annual toll of failed schools. 
Now consider instead the upper left corner, The Official Future, where both current trends reverse; the largest online schools shrink, but overall undergraduate enrollment grows.
This is the best world most existing schools can hope for – competition from large schools weakens, while the recruiting outlook strengthens. (Scenarios like this are often called The Official Future, because institutions typically imagine futures where everything works out well for them.) The Official Future would not be utopia, but it would be a respite from the current decline. 
Finally, consider the lower right corner, “Returns to Scale,” named for the economic description of organizations that can operate more cheaply as they grow. Here, both current trends continue; the biggest schools get bigger, while the student population contracts further.
In this future, there is no upper limit to enrollment, which is to say that Silicon Valley intuitions about growth come to higher education. Western Governors and Southern New Hampshire could grow to Phoenix’s old size, half a million students each, equivalent to the cumulative enrollment of every one of the thousand colleges with fewer than a thousand students. This is a world where the threat to all but the richest, cheapest, or niche-iest schools would be brutal competition for a declining population, and where school closures accelerate to several dozen a year, from the half dozen or so a year we’ve seen for the last decade.
The Futures of College
There is a natural tendency, when thinking about the future, to believe you can intuit how it will turn out, and to imagine it will turn out well. Both impulses are unhelpful.
The advantage in thinking about futures, plural, is that doing so dismantles predictions like “Either online education will have a massive effect or a minimal one,” and helps avoid concentrating only on rosy scenarios. There is also value in understanding the things that are not varying from one imagined future to the next.
Some of the things that are true in all four of these imagined futures are:
Our largest universities will always be online: Large online schools are part of the ecosystem today, and already creating some pressure on other schools, including on smaller online schools. Even if growth shrinks, in all of these futures the largest universities will be majority or solely online, because only online instruction allows institutions to get past the old limits on in-person enrollment. (Going online does not automatically create large scale, but the lack of online limits it.)
No more hyper-growth: There are no futures where the Golden Age (1945-1975, RIP) returns. The hyper-growth of that period, which let nearly anyone getting a Ph.D. find a job at some recently founded school, can never happen again. It is possible to have 500% enrollment growth over a generation if you start with only 5% of the population attending college, as happened in the US after 1945. It is not possible to have 500% growth if you start with 25%, as happened after 1975. Even in the most favorable possible future for most schools, slow growth is the best we’ll get.
Competition as the new norm: As recently as the 1970s, higher education was regional and uncompetitive. People went to a college near home; even Ivy League schools were regarded as institutions that served New England families, not the whole country (much less the world.) Rising benefits to college and falling costs of transportation helped selective schools recruit nationally. Then public universities began actively recruiting out-of-state students to make up for reduced state funding. Now WGU and SNHU are beginning to compete with state schools. And the final frontier is the possibility of a national market for the millions of students who currently attend one of thousands of community colleges, the last institutional type shielded from geographically broad competition. (As with the digitization of newspapers, being able to reach everyone else’s local audience means everyone else can reach your local audience as well.) 
The Future Has a Location: Different locales have different futures. Something for (Almost) Everyone could unfold in states with one or more large online schools and a growing student population. This roughly describes Arizona or Florida. There could be Distributed Pain in states with no big online schools and a shrinking population, like Minnesota, or Maine. The Official Future, with many medium-sized online schools and a growing student population, is Texas, or Georgia. And Returns to Scale, in states with a big provider and a shrinking population, describes New Hampshire, or Maryland. 
Many of the biggest changes to higher education come from outside our institutions, sometimes as opportunity, sometimes as threat, often as both. The Morrill Act subsidized higher education in every state, and made “the Mechanic arts” a suitable subject for college study. (The critics who complain that college has latterly become too career-focused are 159 years too late.) The replacement of most Great Books curricula with electives was driven by student preferences. The GI Bill made higher ed a mass phenomenon, a pattern unique in the world, and still rare outside the U.S. today. Over and over, colleges and universities have remade themselves in response to opportunities and pressures from outside their walls.
Today, the biggest opportunities and pressures are related to competition. In the 20th century, rising demand was modulated by the size of the biggest campuses, which led to the founding of new colleges by the hundreds. Half of that equation ended in the mid-1970s, as growth in the student population first slowed, then reversed after the financial crisis of 2008. This was enough to tip U.S. higher education into a full decade of institutional contraction in the 2010s, the first in modern history. 
The other half of that equation, the old limit on the number of students any one institution could enroll, has also been dismantled, as first Phoenix, then WGU and SNHU grew past 100,000 students, a pattern that may now be picked up by ASU, Grand Canyon, and Liberty. 
Predictions are hard, especially about the future; maybe everything will work out fine in the Official Future. But it is also notable that if we simply assume continuation of the two current trends – the increasing size of the largest schools, coupled with declining student numbers – the Returns to Scale future is the one we get. The point of imagining multiple futures is not to guess which one is right, but to be ready for whichever one comes.
The (Continual) Transformation of Higher Education is a newsletter by Clay Shirky. Publishes weekly, more or less.
I’d like to thank the Today In Tabs community for illuminating feedback on an earlier draft of this essay.
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