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Parents and students reevaluate college costs amid virtual learning

For higher education, the pandemic has forced major questions about affordability and cost into the spotlight. Both students and parents are hesitant to spend tens of thousands of dollars on classes taken via video, and many feel that the loss of on-campus life upends the college value proposition entirely. Scott Galloway, a marketing professor at New York University, joins John Yang to discuss.

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  • John Yang:

    Higher education's response to the pandemic, especially the move away from in-person classes to online learning, is highlighting larger questions about the high price tag on a college degree.

    Scott Galloway is a leading voice in that debate. He's a leading critic of high tuition costs. He's a professor of marketing at New York University, and he joins us now.

    Scott, thanks so much for joining us.

    What has this pandemic, this move away — the response we have seen from colleges, some of them putting entire — all their classes online, what has that done that this debate about college tuition costs?

  • Scott Galloway:

    Well, COVID-19 isn't as much a change agent as it is an accelerator.

    And we have seen tuition up two-and-a-half fold over the last 20 years at public universities. Meanwhile, the product really hasn't changed much. So, try and name an industry that has increased its prices 150 percent with no underlying increase in output or innovation.

    What this has done is drawn back the curtain on what is become — or what has become incredibly unsustainable pricing. Spring used to be a season of nervousness and joy about where you were going to school. And now it's become one of financial despair.

    And we have priced ourselves literally out of the market. And with remote learning, a lot of parents and students are deciding, it's just not worth it.

  • John Yang:

    It's not worth it. They don't see the value of paying tuition to sit in front of a computer?

  • Scott Galloway:

    Well, primarily speaking, a university, the value is from three things, the certification, the education and the experience.

    And we have raised prices so quickly that any sort of reduction in any one of those three things has really caused people to decide or rethink their decision. And with the experience so dramatically decreased or disabled, if you will, a lot of parents are saying, do I really want to pay $58,000, $68,000 a year for a series of Zoom classes?

  • John Yang:

    My colleague producer Courtney Norris spoke with Terry Hartle, the senior vice president of the American Council on Education, which represents about 1,700 colleges and universities, and asked him about some of these issues.

    And I want you to listen to what he had to say on this question of costs, and then we will talk about it afterward.

  • Terry Hartle:

    Colleges and universities refunded about $8 billion in room and board charges alone in the spring, when they closed early.

    But, taken together, lost revenue cost, increases, enrollment declines, cuts in state support, and increases in student financial need add up to roughly $120 billion. To put that in context, total revenue of colleges and universities in 2018 was $650 billion.

    So, we're dealing with a sudden traumatic shock to the budgetary systems of every institution of higher education.

  • John Yang:

    What do you have to say to that, that this is actually increasing costs or — for colleges and universities?

  • Scott Galloway:

    There's no doubt about it.

    Mr. Hartle and his constituents find themselves in a very tough place. The question is, did we have it coming? And that is, how are they responding?

    And instead of cutting costs and doing what every other industry is doing and does on a regular basis, instead of having an open and sober conversation and cutting costs, such that we can increase the quality of remote learning, while decreasing costs, we have entered into consensual hallucination with our finance departments and parents that we can have some semblance of a normal experience, such that we can continue to charge these usurious rates.

    In what is the mother of all tone-deaf decisions, my host institution, NYU, has decided to raise their tuition 3.5 percent.

    So, what I would say to Mr. Hartle is that he has to endure the same pain as every other industry that consumes their product standing or sitting shoulder to shoulder, whether it's sports, whether it's restaurants — whether it's sports.

    And that is, get to the good work of cost-cutting and getting leaner and meaner. Instead, they have entered into this era of denial, which will only make the unwinding in the fall that we're going to — we're going to have even more painful.

  • John Yang:

    You have also said that you think this is going to make a change in the — in what higher education looks like.

    What do you think this is — higher education will look like after the pandemic?

  • Scott Galloway:

    I think it'll be a hybrid model. There will be a mix of online and offline.

    Faculty has been very resistant to embracing technology. I'm not suggesting it's an either/or, but an and.

    The reality is, many of these classes could be taught online with the same level of outcome. It's the off-campus socialization that is probably the most valuable thing in terms of in-person. So you can envision, the silver lining here is as big as the cloud.

    If we move to a scenario where, again, with innovation and the embrace of small and big tech and reduction in the costs and an increase, dramatic increase in supply of freshman seats, we might find, like every other industry, that we can increase the quality of the product and lower the price.

    And we have done neither of those in education. This isn't a debate. It's an I.Q. test. Any sober analysis of the upside vs. the downside shows that we are going to be all remote across almost every university this fall. It's just a question, a question of how many infections we endure and how much pain we levy on university communities.

    Universities, John, have been the warriors fighting viruses, not its enablers. We need to close campuses, full stop, right away.

  • John Yang:

    Scott Galloway of New York University's Stern School of Business, thank you very much.

  • Scott Galloway:

    Thanks for having me, John.

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