Case Studies in the Price/Value Proposition of Post-Secondary Education

The promise of “free” yields no sustainable boost in demand.

The high-profile element of the cost/value ratio of higher education is the numerator, described in consumer terms as “the price of tuition.” While the value (denominator) of post-secondary matriculation can only be expressed through abstractions like “lifetime earnings compared to non-attenders,” or “upward mobility, better citizenship and healthier, happier lives,” the cost is manifest in dollars and cents: cash outlay per semester, per student, based on program. The key variable in the numerator therefore becomes the institution of enrollment: same program at community college may cost virtually nothing, while at a private institution the cost will be tens of thousands of dollars a year.

As is the case for most products or services that become commodities, entities unable to deliver new, value-added experiences must compete for market (enrollment) based on price; as more competitors enter the market, the margin between cost of providing instruction and the revenue derived becomes razor-thin unless operational costs are controlled mercilessly.

In the public sector, strong access to tax revenue can lead to price competition that is even more ruthless: community college districts and state general fund resources backfill operating costs even when enrollment revenue lags. Price of tuition suppressing enrollment demand? Cut tuition prices even more. Or better yet, make community college tuition “no cost” for qualified in-state students.

At the behest of former U.S. Senator Lamar Alexander and the support of former Governor Bill Haslam, Tennessee implemented “free community college” under the Tennessee Promise Program in 2015. In its first six years, the program supported nearly 12,000 students across 84 counties. One eastern Tennessee region reported a 90 percent gain in enrollment in 2016 compared to 2008. Other states and localities have mimicked the policy and now at least 24 “Tennessee Promise” clones operate across the U.S.

Sounds ideal. Until it isn’t. At the beginning of April, the Tennessee community college system announced lay-offs and reductions in force to deal with falling student participation levels. Open positions in many colleges will be eliminated, not filled.

“Student headcount at the state's 13 community colleges hasn't been this low since 2001,” an official with the system told Axios Nashville. Indeed, enrollment across the state is down more than 14,000 students since 2019, more than wiping out the initial bump in enrollment demand derived from the “free tuition” program introduced six years prior.

In recent years and well before the pandemic, Tennessee like several other states in the southeast suffered with some of the lowest college attendance rates in the nation. Likewise, labor force participation has lagged in the same locales, creating stress on the workforce demands of employers, businesses and entrepreneurs. Community colleges in those locales offer an important gateway to job training and economic opportunity.

Direct stakeholders in figuring out the cost/value proposition of post-secondary education include more than individual students and the institutions aspiring to enroll them. Economies at the local and state level have a lot at risk as well, and that footprint is as large as the community.

While some are tempted to offer “free college tuition” as a silver bullet remedy for declining college enrollment rates, workforce development deficiencies and other social maladies, the complexity of the cost/value proposition for post-secondary education is apparently defies conventional wisdom. Investment of time, intellect, spirit and emotional energy are required for students to derive good benefit from enrollment. Even if the monetary investment is minimal, many other components of the value proposition must be “right” to attract and sustain participation. Figuring out how to optimize those value-added factors are foundational to institutional transformation. Competing on the basis of price alone leads to a circumstance where, to be kind, the service cannot be given away.