The Higher Education Business Model: Innovation and Financial Sustainability

November 2013
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Colleges and universities face daunting challenges to long-established business models. The cost of providing higher education continues to rise but sources of funding have eroded. Endowments suffered major losses during the financial crisis and many haven’t recovered, government aid is down (only two states increased their support of higher education between 2008 and 2013), and students, as well as their parents, are stretched thin financially and can’t absorb the above-inflation tuition hikes to which the industry has grown accustomed. Further worsening this challenging climate, the public is beginning to question the value of higher education given the large debt incurred by students and their often poor prospects for employment. To ensure financial sustainability, many colleges and universities are responding by experimenting with changes to their business models.