With health care restraining costs, can higher education be far behind?

Health care cost containment is no longer a fantasy. While health expenditures have increased much faster than GDP for many years a combination of factors is likely to bring that trend to an end: hard economic times, cost shifting to patients, and increased consumer understanding that more care isn’t always better.

The one major sector of the economy that’s as dysfunctional as health care is higher education, where costs have also ballooned. Now that student debt is getting the attention it deserves and politicians are beginning to turn their focus to college costs, there will be pressure for creative solutions. I’m encouraged that leading universities like Harvard and MIT are starting to put classes online.

It will be a long, long time before this movement disrupts the business model of Harvard and MIT themselves. That’s because there’s a large and –thanks to the emergence of China– growing surplus of people willing to pay full freight for theĀ privilegeĀ of a Harvard or MIT education. It can also be worthwhile to go to such schools to make connections and to have a rich cultural and social life. But schools of much more middling quality charge nearly the same tuition as the choicest universities, and they should be very worried indeed. Would you pay $200,000 for four years at Generic College when you could take online classes at Harvard and MIT and pay a few thousand dollars for a certificate indicating your completion of the classes?

I hope the Harvard/MIT experiment progresses rapidly and that lesser schools find creative ways to respond that increase the value that students receive.

May 16, 2012

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