Which MBA?

Daniel C Smith, dean of Indiana University’s Kelley School of Business, says that universities need to find new ways to combat rising tuition costs

THE current economics of higher education, at least in America, are not sustainable. As high-paying manufacturing jobs disappear, college education becomes a necessity. Yet, for more than a decade, tuition fees have risen at many times the rate of inflation. What’s more, the forces driving these increases will not abate. America’s public universities face steep cuts in state support, rising healthcare and energy costs. And when cash is tight, the philanthropists who are so important to universities disappear. This means that not only will the price of tuition continue to increase, but universities’ ability to offer financial aid to students is also hit. 

If the cost of attending an American university becomes prohibitive it will threaten the country’s long-term global competitiveness. It is, therefore, not only a problem for students but also for businesses and society. To remain competitive, America needs a new model of student financial support; higher education and the private sector have a joint responsibility to innovate in creating such models. 

Enter the business school. Business schools are perfectly positioned to develop new ways of paying for higher education. At the Kelley School, we are exploring an “education circle of life” model of financial support for students.

It begins with the immediate needs of businesses—particularly small- to mid-size companies that are the growth engines of the economy. In order to grow and hire more talent, these companies must explore opportunities beyond US borders. But many lack the skills or global contacts to do so. Most top business schools, on the other hand, have a global network of alumni, corporate friends and government contacts. They also have superb students and faculty. Our idea is to create a consulting consortium in which teams of students help client companies identify, assess and capitalise on global growth opportunities. Using distance-learning technologies, student teams collaborate with international alumni, students at partner universities and global corporate partners to pair mid-size American firms with global opportunities.

So where does tuition support come in? The firms pay a fee for the student consulting services. A portion of the fee goes towards the students’ tuition costs; the remainder is paid into an endowment account that provides financial aid for deserving students. Contracts are also structured so that a portion of new revenue generated from the global ventures will, for a set period of time, add to the scholarship endowment account.

The education circle of life creates growth for mid-size firms, which can in turn spur employment. The initiative provides students with hands-on experience and in the process creates a sustainable revenue stream for the school to offset rising tuition costs.