McKinsey's education practice manager reveals the 4 biggest changes you can expect to see from US colleges in 2021 and beyond
- The coronavirus pandemic and America's $1.5 trillion student debt crisis will permanently change the future of college.
- About 10 million student loan borrowers could be out of work because of the recession caused by COVID-19, and this will impact their ability to make debt repayments on time.
- Business Insider spoke with Emma Dorn, global education practice manager at McKinsey & Company, who co-wrote the firm's recent report on the rising toll of America's student debt crisis during the pandemic.
- Dorn said institutions should focus more on student needs, work to increase more diversity, and partner with each other to stay afloat.
- Visit Business Insider's homepage for more stories.
The $1.5 trillion student debt crisis exploded over the last decade, and the coronavirus pandemic has made it even worse.
About 10 million borrowers could be out of work because of the recession caused by COVID-19, and this will impact their ability to make student loan debt payments on time, CNBC reported.
This, coupled with the impacts of the coronavirus pandemic, has put colleges in a difficult position. Campuses have been forced to make cuts and layoffs because so much of their budgets are dependent on on-campus attendance.
In December, President-elect Joe Biden proposed a higher education plan of $10,000 of loan forgiveness per borrower. But it's unclear whether his plan would become a reality.
Higher education is bound for more major changes than any other industry and McKinsey & Company, a leading consulting firm, is analyzing the impact. With over 40 active partners and 500 colleagues carrying out 100 education-related projects each year, the firm has spent more than 10 years studying outcomes for students from pre-kindergarten years to early career.
Business Insider recently spoke with Emma Dorn, global education practice manager at McKinsey & Company, who cowrote the firm's recent report on rising toll of America's student debt crisis. Dorn assisted in developing analytical tools and training programs for consultants who work in the education sector. She also helped McKinsey define its global strategy across higher education.
Here are the four biggest trends that will shift how colleges operate over the next five years because of COVID-19, according to Dorn.
Students who can't afford to pay for school will be deterred from attending
According to McKinsey's analysis of publicly available data from the Integrated Postsecondary Education Data System (IPEDS) and the US Department of Education, the total student debt in the US is now higher than the country's credit card debt. Students are graduating with more debt and it's impacting everyone, Dorn added.
College does still hold value, but the rising costs are deterring students from getting degrees.
"Our analysis suggests that there's still promising value in a college education," Dorn said. "But there's also a growing perception that higher education is no longer affordable, and that could put off many students from even trying to get degrees. This ultimately prevents minorities and kids from low-income families from enrolling in institutions."
Debt has increased by 45% over the last decade once you adjust for inflation. Repayment rates have gone down from 75% to 57% in just eight years, Dorn said. The student-loan borrower system is becoming unsustainable, and young professionals are not purchasing houses or starting families because they're being crushed by student debt.
A shift toward flexible college
In 2018, 35% of students in the US incorporated online courses to their curriculum, Dorn said. But now, e-learning rates are at 100%. A hybrid model in education will emerge as a result of the coronavirus pandemic. To stay afloat, institutions need to provide the best quality education at the lowest costs for students.
"We're going to see more differentiated models going forward, where universities will be thinking more about what is needed for students to succeed," Dorn said. While some students might want to be on campus all the time, others might want to be fully virtual, or a mix.
There's also a growing interest in gap years. Harvard University, for example, saw a 33% increase in deferring students in 2016. MIT also reported a doubled number of deferrals between 2009 and 2010.
Scott Galloway, a bestselling author and top-ranked professor at NYU's Stern School of Business, recommended that students defer college enrollment and take a gap year for their best interest. Schools will need some time to adapt to the pandemic, and some time off might even help students prepare for the intensity and competitiveness that comes with higher education, Galloway previously said.
"There's a lot of evidence showing that if your kid takes a gap year, he or she is more likely to graduate when they come back with better grades," Galloway said previously. "They need a little bit more seasoning, a little bit more maturity."
Black Lives Matter protests and students using social media to call out schools for racism is forcing colleges to take a more serious look at diversity on campus, both in their student and faculty populations.
Though institutions have become more intentional with addressing systemic racism on campus, doing more of the same is not enough, McKinsey researchers said. Between the 2012 and 2032 academic years, the proportion of Asian and Hispanic high school graduates will grow from 24% to 31%. Universities need a more inclusive plan for building a diverse student body.
"Students of color are struggling more," Dorn said. "I think there's a real imperative for universities to move fast to get both their student body and faculty more diverse."
Some schools are taking steps to address this. For example, Harvard Business School is hiring a chief diversity officer, revamping their curriculum on race and diversity issues, and recruiting more Black students and staff, Business Insider previously reported.
McKinsey recommended that higher-education leaders redesign student recruitment and update faculty-performance measurements to make sure that mentorship for diverse students don't just fall on the shoulders of under-represented faculty members. More opportunities for intergroup dialogue and conversations about race through programs and clubs can also create a more inclusive environment.
A focus on M&A and partnerships
Dorn said she expects to see mergers, acquisitions, and partnerships among institutions as schools try to stay afloat.
Some of this consolidation is already happening. Pine Manor College, a small liberal arts college in Massachusetts, for example, announced a merger with Boston College citing financial struggles during the pandemic.
"Just weeks before I arrived, the college had been put under probation for its financial status," Tim O'Reilly, the president of Pine Manor, told Insider Higher Ed. "We always shared out loudly, clearly, with donors, alums and the public media that we were a financially fragile institution."
Dorn said we're likely to see more consolidation down the line, as universities struggle to make up for lost revenue during the pandemic.
"Given all the pressures right now on higher education, it's just not sustainable," she said.
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