INTRODUCTION

Bernardsville is an affluent village of nineteenth-century colonial homes, a small town center, and modern strip malls located in northern New Jersey, just thirty-five miles from midtown Manhattan. It’s the type of American bedroom community where the college-educated settle, start families, watch their children grow up on the town ball fields, and then send them off to college after graduation from Bernards High School.
   With a rich selection of Advanced Placement courses and the exclusive two-year International Baccalaureate curriculum, the 750-student high school is often ranked among the best public schools in the state. In the fall of 2005, Samantha Dietz entered her senior year at Bernards. She was a member of the debate club, Harvard Model Congress, and worked for the student newspaper. She took Advanced Placement psychology, as well as several International Baccalaureate courses, including English, French, and environmental science. She maintained a 3.9 grade-point average. And like almost all of her senior class, she was bound for college the following fall.
   Dietz would be the first in her family to go to college. Her parents had solid jobs in technology, despite having only high-school diplomas. They didn’t push her to go to college, but Dietz’s teachers and guidance counselors did, especially to four-year colleges. She applied to more than a half a dozen schools: Rutgers University, Drew University, Fairleigh Dickinson University in New Jersey; Hofstra University in New York; and Allegheny College and Bucknell University in Pennsylvania. She was accepted to all but Bucknell, where she was put on the wait list.
   When decision time came in the spring, Dietz closely examined the financial-aid offers from each of the colleges. For her, the choice would be strictly about the bottom line. Fairleigh Dickinson offered her the most financial aid, nearly all of it in grants that wouldn’t have to be paid back. Its campus was about twenty minutes away, so she could live at home and save on room and board. With Fairleigh Dickinson’s financial package, Dietz’s tuition bill would be about half of the university’s $25,000 list price at the time. Her decision was easy.
   What Dietz failed to examine was Fairleigh Dickinson’s graduation rate. In 2006, only 38 percent of its students graduated within six years, a rate well below all of the other schools she had considered. The two other local schools on her list, Rutgers and Drew, graduated more than 70 percent of their students within six years. Though Fairleigh Dickinson was giving Dietz a boatload of money, her chances of emerging at the other end with a degree were pretty dismal.
   Dietz took a full slate of classes her first semester. To pay tuition, she waitressed and helped manage a restaurant near her house. She worked twenty-five hours a week, mostly on nights and weekends. “By Thanksgiving, I was exhausted. I had no down time,” she recalls. She was doing well in school, with mostly Bs in her classes. “I felt like I was killing myself for nothing,” Dietz says. “This was money I could be saving and starting my life. I was managing a restaurant, handling finances and employees. I was learning a lot less about the real world in school and paying so much for it.”
   Toward the end of the semester, she received a letter from the university announcing that state funds to private colleges in New Jersey were at risk of being cut. It was a warning: she would likely need to pay even more the following fall.
   So she dropped out of college.

The Dropout Crisis

The story of Samantha Dietz is not unique. It reflects a broad, national trend in American higher education, where some 400,000 students drop out every year.1
   For most of the twentieth century, the United States bragged that it had the best colleges and universities in the world — and rightfully so. Since the end of World War II, when colleges and universities threw open their doors to returning GIs, helping to create a vast middle class that defined a generation, these institutions have been the envy of the world and a symbol of American greatness. They attracted the most talented students from other countries, and graduated young Americans who were the best educated in the world.
   Not anymore. Over the last thirty years — and particularly in the first decade of the new millennium — American higher education has lost its way. At the very top, the most elite and prestigious institutions remain the best — the world still clamors to get into Harvard, Princeton, Yale, Berkeley, Stanford, Amherst, Williams, and a few dozen other household brands.
   But at the colleges and universities attended by most American students, costs are spiraling out of control and quality is declining just as increasing international competition demands that higher education be more productive and less expensive. Only slightly more than 50 percent of American students who enter college leave with a bachelor’s degree. Among wealthy countries, only Italy ranks lower. As a result, the United States is now ranked number twelve among developed nations in higher-education attainment by its young people.2 As the baby boomer generation leaves the work force, the country risks having successive generations less educated than the ones that preceded them for the first time.
   Such trends carry significant economic risks for the United States. For every dollar earned by college graduates, those who drop out without a degree earn sixty-seven cents. Since the turn of the century, average wages for high-school graduates — who today make up about half of the adult population — have fallen considerably to just over $19,000, below the federal poverty level for a family of four. Nothing short of winning the lottery helps ensure a young person will achieve the American dream quite like a college degree. A four-year college credential is the best ticket — and perhaps the only ticket — for kids from the poorest families to get ahead. For children from families at higher income levels (defined as $61,000 and above), a degree helps them make it to the top themselves.

In 2010, four years after Dietz quit Fairleigh Dickinson, she signed up for a class at nearby Raritan Valley Community College. Since then, she has taken one class a semester, paying about $500 a course. She wishes her counselors in high school had encouraged her to consider community college, instead of mocking two-year institutions as places for students who couldn’t hack it on a four-year campus.
Now, Dietz is twenty-four years old and working for a real estate company. Her job doesn’t require a degree, but she thinks she’ll eventually get one. She has heard the statistics on the long-term payoff of a degree, but for the moment Dietz feels she is better off than many of her high-school friends who went to college. “They graduated and are in worse situations,” she says. “They are back to waitressing or nannying, not doing anything with their degree. They are living at home and in tons of debt. I’m in a much better situation.”

A Risk-Averse, Self-Satisfied Industry

American higher education is broken.
   Like another American icon — the auto industry in Detroit — the higher-education industry is beset by hubris, opposition to change, and resistance to accountability. Even the leaders of colleges and universities think we’re in trouble. More than one-third of them say American higher education is headed in the wrong direction.3
   In 2006, in its final report from a year-long study, a federal commission studying the future of higher education warned of the dangers of complacency. “What we have learned over the last year makes clear that American higher education has become what, in the business world, would be called a mature enterprise: increasingly risk-averse, at times self-satisfied, and unduly expensive,” it said. “History is littered with examples of industries that, at their peril, failed to respond to — or even to notice — changes in the world around them, from railroads to steel manufacturers.”4
   Change comes very slowly to higher education. Many institutions in the United States were established over two centuries ago, with a handful dating back to the days before the American Revolution. Tradition is important at these colleges. A confluence of events — flagging state support for public colleges, huge federal budget deficits, and falling household income — now makes it necessary to consider new approaches.
   Ideas for change are everywhere. Almost every day a report about innovation in higher education or an invitation to a meeting about its future lands on my desk. In April 2012, I made my way to one of the largest of those gatherings, the Education Innovation Summit at Arizona State University.
   The summit was notable for who wasn’t there. As I scanned the name tags of the 800 or so attendees, I found very few were actual educators — the college presidents, professors, or others who spend their days on campuses immersed in the business of higher education.
   This gathering at an office park for start-ups run by Arizona State had attracted educational entrepreneurs, CEOs, and investors to hear talks about the future of education and see demonstrations from more than a hundred companies promising to bring massive change to the tradition-bound industry.
   Kicking off the meeting with a call to arms was Michael Crow, the hard-charging leader who, in his ten years as president, had transformed Arizona State from a sleepy public university to a test bed for new ideas. Lecturing the group on what ails higher education, he summed up its problems in a word most of us had never heard — filiopietism. Translation: higher education is clinging to tradition. Too few students are going to college, not enough are graduating, and the whole thing costs too much. Quoting his father, a US Navy sailor, Crow called this a “piss-poor performance.”
   Although Crow is derided in some academic circles for his business-like approach to higher education, he found a sympathetic audience in this gathering. For this crowd, lacking an academic pedigree is exactly what’s needed to reform the outdated methods of traditional colleges, and of course, profit at the same time. Investors are lining up to cash in on the college of tomorrow. Venture capitalists poured some $429 million into education companies in 2011. That same year, in the midst of a worldwide economic slump, 124 education start-ups received financial backing, the most since 1999 during the height of the dot-com boom.
   The new business ideas that are changing higher education range from rethinking how high-school students apply to college (think Facebook, with colleges making friend requests to prospective applicants), to how courses are delivered (150,000 students in an online class), to how learners are certified (think of a badge like those given in the Boy Scouts, instead of a diploma). Each new idea raises the anxiety level of administrators on traditional college campuses that have had a monopoly on the credential market and want to maintain it.
   In other industries, “those who don’t innovate go out of business,” Jennifer Fremont-Smith tells me under the ninety-degree Scottsdale sun during a break in the program. She is cofounder of Smarterer, a Boston-based start-up that offers technology for validating technical skills on everything from social media to Microsoft Office programs. “Higher ed,” she adds, “shouldn’t be different.”
   Despite the technological advances of the past two decades, the revolution in the way college education is delivered is just beginning. For the most part, the residential college experience of today is much like it was ten or twenty years ago — the classrooms, dorms, dining halls, and quad. Though laptops and iPads are ubiquitous in lecture halls, students can take classes online, the dining halls have sushi, and nearly everyone has a smartphone, the basics of going to college and getting a broad education or training in a profession remain largely unchanged.
   At least for now.
   A college has many purposes, from research and discovery to maturing students. At its core, one of the purposes is information delivery, and in recent years other long-established content providers from music to journalism to books have been transformed by technology, resulting in the decline of the middleman — record stores, newspapers, bookstores, and publishers. Are colleges next? Talk of a coming disruption to the traditional college model has reached a fever pitch in some corners of higher education — each day seems to bring news of innovations with the potential to transform how we get a college degree, just as iTunes forever changed how we buy music.
   If every revolution has a turning point, perhaps that defining moment came for higher education in the fall of 2011. A Stanford professor, Sebastian Thrun, and Google’s Director of Research, Peter Norvig, offered their graduate-level artificial intelligence course online for free. They thought the class might appeal to 500 students, perhaps a thousand. It ended up attracting 160,000 students from 190 countries, prompting the label “Massive Online Open Course,” or MOOC. The 22,000 students who finished received an official “Statement of Accomplishment.” Thrun then asked the top thousand students who had perfect or near-perfect scores on their assignments to send him their résumés. He promised to pass the best ones on to tech companies throughout Silicon Valley. After the course ended, Thrun turned his focus to a company he started, Udacity, which offers low-cost, online classes.
   The success of the Stanford class touched off a string of announcements in the following months by MIT, the University of California at Berkeley, the University of Pennsylvania, the University of Michigan, Princeton University, and dozens of others that they would attempt to deliver a piece of their brand-name education to the masses online. At the same time, new ideas to substantially lower the cost of a traditional college degree were emerging. The most notable effort was at the University of North Texas. There leaders called in the management consulting firm, Bain & Company, famous for helping corporate America restructure its operations, to assist the university in designing the college of the future for its branch campus in Dallas. The model shaped by Bain called for a limited number of majors tied to the needs of the local economy (such as business and information technology), classes offered year-round, and hybrid courses (a combination of online and face-to-face classes). For students who graduate on time, a bachelor’s degree would cost about $18,000.
   The new University of North Texas campus and massive online courses like Thrun’s are precisely the type of disruptive forces that Clay Christensen envisions displacing traditional players in higher education. Christensen, a Harvard Business School professor, is the father of the disruptive innovation theory that argues that the most original new products take root at the bottom of the market and eventually move up market, displacing established competitors. Think of cell phones replacing landlines and digital cameras replacing film. Christensen has written several best-selling books on the theory. He believes higher education is the next industry ripe for this kind of change, and in 2011 he laid out his arguments in the bookThe Innovative University. I met him that summer at a day-long seminar he held for those leading change in higher education. “We need new models because the cost of higher ed is becoming prohibitive,” he told me. “The history of innovation tells us those new models are not going to come from within higher ed. They will come from new entrants.”
   As a reporter, I’ve heard plenty of people over the years make similar sweeping statements about coming change, only to see nothing happen. In each decade since the 1970s, the end of higher education as we know it has been predicted, usually during a deep recession that made people question the need for college. In 1976,Newsweekmagazine ran a famous cover of two college graduates donning their cap and gown while holding a shovel and jackhammer. The headline: “Who Needs College?”
   Of course, those predictions now seem greatly exaggerated, furnishing current college leaders with an abundance of overconfidence. The truth about change is that we tend to overestimate its speed while underestimating its reach.
   This moment in higher education is ripe for change. States have increasingly rolled back their financial support for higher education, leaving their public universities, which already educate eight in ten Americans, scrambling for cash at a time when more students are trying to get in. By some measures, state taxpayer support for higher education hasn’t been this low since 1965, when there were fourteen million fewer students in the system.5 Over all, student debt has surpassed trillion dollars while, since the late 1970s, the annual costs at four-year colleges have risen three times faster than the rate of inflation. Some $110 billion in student loans was borrowed in 2011 alone. Some 50 million Americans now hold some kind of student loan, slightly more than the number of people on Medicare and almost as many as receive Social Security benefits.
   The massive run-up in student-loan debt has raised plenty of comparisons to the bubbles of the last fifteen years in tech stocks and housing prices. Could higher education be the next bubble to burst? Some economists dismiss this idea, pointing out that a college degree is not an asset like a house or a stock, which can be flipped and will lose value if people can’t or don’t want to buy it on resale. Still, a kind of bubble could exist if students overvalue degrees from some colleges — and I believe this is already happening. The worth of a degree is often measured by the salary a graduate receives, especially when they come from elite colleges and go on to lucrative employment at Wall Street banks and consulting firms. But these kinds of employers recruit only at top colleges. The question remains: is a degree from Podunk U worth $50,000 a year? Even if you go $30,000 or $40,000 into debt to get a diploma and then have trouble getting a good job?
   Heavy debt burdens for recent college graduates might make good news stories, but they rarely generate more than a collective sigh from the public and politicians who largely see a college education as a private good paid for by the person who benefits from it most, the graduate. As one state lawmaker told me when I asked him if he worried that the average debt of graduates in his state had hit the $25,000 mark, “So what? That’s the price of a new car.” Under the hood of that new shiny car are societal shifts causing a growing divide between the haves and have-nots in higher education. The wealthiest colleges are spending ten thousand dollars more per student on instruction than less affluent schools that dedicate about as much money to their students as high schools do. Even as more of our citizens need an education past high school, elite colleges are making themselves even more exclusive, proudly boasting each spring about the smaller and smaller percentage of applicants they have accepted (in 2012, Harvard rejected nine in ten applicants, including at least 1,800 high-school valedictorians).6 At the 200 colleges that are most difficult to get into, only 15 percent of entering students in 2010 came from families in the bottom half of incomes in the US (under $65,000). Nearly seven in ten students on those campuses come from the top income group (above $108,000).7
   The result is that the US higher-education system is becoming less of a meritocracy. In the last decade, the percentage of students from families at the highest income levels who got a bachelor’s degree has grown to 82 percent, while for those at the bottom it has fallen to just 8 percent.

No Longer a One-Size-Fits-All Experience

Eighteen years ago, just as the Internet was taking off, I graduated from Ithaca College, a traditional, residential college with 6,000 students (I didn’t have an e-mail address until my sophomore year). Sixteen years from now, my youngest daughter will go to college, and I can only imagine what her experience might be like. One of the reasons I decided to write this book is to help students better understand the various pathways to a degree and also to assist parents like me sort through the hype and the reality about the future of higher education.
   Unlike the disciples of Clay Christensen — the “disrupters” as they are known — I don’t believe that scores of colleges will simply disappear in the future and be replaced by online imitations. Sure, by my estimates only 500 or so of the 4,000-plus colleges and universities in the United States are truly safe because they have stable finances or large endowments.
Unlike newspapers and bookstores, colleges are mostly protected from market forces by large government subsidies and a complex regulatory environment that does not allow your or I to simply start a new college from our bedroom like we can a Web site that puts a newspaper out of business. Although as many as a thousand colleges are at risk of closing or merging in the decade ahead because of poor finances, the vast majority of colleges will adapt. Colleges are like cities, as so many people have reminded me throughout the research for this book. They evolve as needs change, although many of them will struggle through this next evolution.
   If you’re a parent who went to college, don’t assume your children will follow the same route. Technology has given students so many more choices about how and where to get a college credential. One difficulty I’ve encountered is that we no longer have a shared vision in this country about what a college education should consist of. Even college students today can’t be described in a single way. The people we think of as traditional college students, eighteen- to twenty-four-year-olds, make up a little more than a third of enrollments at colleges across the country. These students have different interests and learning styles from each other, so for some a four-year liberal-arts college is best, while for working adults an online degree is often the better option.
   We think of American higher education as a cohesive system, but there is nothing uniform about it. Colleges and universities provide a wide variety of educational and social services and bring them together in one package, which usually is delivered at one physical location. That system is collapsing under an unsustainable financial model.
   In its place is emerging a collection of providers. In the face of these new competitors, a portion of traditional higher education is trying to remake its model. One of the most significant efforts we’ll visit is at Carnegie Mellon University, where professors in specific academic subjects and researchers versed in the science of how students learn have teamed up to build elaborate online courses that are already reshaping how content is delivered in college and university classrooms.
   The technological revolution in how information is distributed and consumed holds the promise to scale higher education to serve more students and cut costs. At the same time, the rush to embrace technology as a solution to every problem has created tension on campuses over whether the critical role higher education plays in preparing the whole person to be a productive citizen in a democratic society is at risk. Indeed, in an increasingly complex world, the foundation of learning — a liberal-arts education — is more important than ever.

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