Risk Insider: Jack Hampton

Disruption Awaits Higher Education

By: | May 25, 2017 • 3 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

It’s 11 p.m. in Manhattan and the theaters near Times Square are letting out. Many residents of the city don’t own cars or at least won’t pay $30 a day to park them nearby.

Thank goodness taxis are available to transport everyone. Or are they?

Not a problem. Click on your smart phone to request a convenient, inexpensive and safe service to take you home. Immediately coming to mind is the ubiquitous Uber, but it’s not your only choice. Lyft gives it a run for its money. Even taxicab companies finally adopted the model.

Higher education may be the taxicab companies of 10 years ago. The business of college and universities is being disrupted, but the threat has been masked by all the attention given to abuses by for-profit colleges. Their misbehavior is widely known, and it has poisoned the well.

We were slow to respond when Joshua Woods, a doctoral student at Michigan State University, dramatically exposed it in 2006. He fictitiously applied to six MBA programs as part of a research project. He used bad grammar and spelling while explaining he was a 31-year-old high school graduate with a grade-point average of 2.0.

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Michigan State promptly answered. “An applicant must have a bachelor’s degree to apply for an MBA program. More information is available on our website.” Not the answer from for-profits.

Within 30 days, he was being recruited by ITT Technical Institute, the University of Phoenix, Davenport University, the American Graduate School of Management, and Corinthian College. Thirty separate emails containing four sales themes:

  • Opportunity. “The starting salary for individuals holding the MBA degree is $55,000.”
  • Ease. “We give you all the help you need to get an MBA, including federal loan financing.”
  • Encouragement. “You can do it. You can improve your life.”
  • Shame. “Are you happy with your life? Embarrassed to tell others where you work?”

In recent years, many students responded to such admonishments. To pay tuition, they were often loaded up with government and other loans. The financial ramifications of more than one trillion dollars of student debt casts a shadow over higher education today.

Higher education may be the taxicab companies of 10 years ago. The business of college and universities is being disrupted, but the threat has been masked by all the attention given to abuses by for-profit colleges. Their misbehavior is widely known and it poisoned the well.

The government is now dealing with the recruiting and financial abuses. At least we hope this is true. Are colleges doing the same?

Thus, we get to Purdue University. Is it about to engage in disruptive innovation?

In April 2017, the school acquired the for-profit Kaplan University with its 32,000 online and campus-based students on 14 campuses in seven states. The Washington Post reported the purchase was an effort to “extend Purdue’s reach into online and adult education.”

The effort by Purdue raises an interesting possibility. Colleges that disrupt the traditional model – use technology, create attractive new programs, respond to economic and other forces – may be the survivors in a world where higher education must overcome financial and other difficulties attacking the traditional education model.

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