The Boston Consulting Group (BCG) has spent a lot of time surveying the higher-education landscape. Through conversations with a variety of education leaders and experts, they have identified long-term trends that are creating the most risk, and the most opportunities, for leaders.
In BCG Perspectives, they recognize that leaders of U.S. universities and colleges are navigating a challenging economic environment. Revenues from enrollment, government funding, and other sources have fallen, leading many institutions to raise tuition to unsustainable levels. This puts the weakest schools at risk of failing. Meanwhile, the return on investment of a post-secondary degree is increasingly subject to debate.
BCG reports that by some measures, the return on investment of a post-secondary degree is high. College graduates have much higher earnings and lower unemployment rates, on average, than people with a lower-level degree or diploma. The gap is even greater between the expected earnings of graduates holding a four-year Bachelor of Arts degree and those with a master’s or professional degree. The rate at which the return on investment gap is growing suggests that many students should continue their education past college to reap the full benefits of their degree.
However, in recent years, students, families, businesses, and government officials have continued to question the value proposition of a degree from a four-year institution.
One reason for this uncertainty is because the investment required for a college education is outpacing incomes. Between the 2002–2003 school year and the 2012–2013 school year, tuition and fees increased by 5.2 percent annually for public universities and 2.4 percent annually for private non-profit universities (inflation adjusted). This rise in costs contrasts sharply with the stagnation of the median family income and the rate of inflation. The average in-state tuition at a four-year public institution was nearly $9,000 in 2013 and more than $30,000 for a private, non-profit four-year school.
Furthermore, student debt has grown 8 percent annually since the financial crisis began. The student loan default rate within two years of graduation climbed to 10 percent in 2011 (latest data available) – double the rate in 2006. The default rate within three years of graduation (a new monitoring period required by federal law) rose to nearly 15 percent.
Colleges and universities hoping to avoid increasing tuition and fees can utilize Questica Budget for higher education to establish and evaluate unlimited multi-year forecasting and hypothetical budget scenarios. This flexible software also allows for performance tracking, enabling higher education institutions to establish quantifiable success measures for budgeting scenarios and determine how changes to spending are impacting the student learning experience.
Questica Budget for higher education represents a proven COTS (commercial off-the-shelf) software solution that is available for both on premise and cloud-based implementation. It offers one point of data entry and seamless integration into an institution’s existing financial system.
Questica currently manages over $55 billion in annual public sector budgets. In preparing for the future, we encourage you to find out more about Questica’s solutions for higher education by requesting a demo.