An increasing number of higher education institutions in the United States are now financially unsustainable and debt-ridden according to a new report that surveyed almost 2,000 private and public schools from consulting company Bain & Co. and Sterling Partners, a US-based private-equity firm.

University debt in the US is increasing annually at 12 per cent per year with the report attributing gross financial mismanagement and a lack of sustainable business models as two damaging factors.

The report also warns that fallout won’t be confined to just college campuses as the effects ripple through university towns and cities.

In the past four years, the decrease in public funding has forced the university to eliminate more than a tenth of its workforce. This has lead to a 20-year low drop in house prices in part because laid-off workers moved away. Students are also spending less and the city’s sales-tax revenue fell by 15%. In response, the city this year slashed its budget by 6%.

It seems that universities in the US, as well as other countries, have never faced more challenging conditions. Doing nothing to change these dated models is simply not an option for universities or for society.

So what are the solutions?

New models in action: Beyond public or private

The world of higher education is transforming and demand for quality education has soared. However, many institutions do not know what to do now that their existing models have become out-dated, public funding continues to evaporate and the 21^st century student has more choice at home and aboard, including numerous, emerging online options.

Private sector investment is growing rapidly, but often without the underlying foundation of academic standing and public universities do not have the governance, financial and management structures in place to meet the challenges of an ever-changing education environment. Therefore, new strategies and operating models are required with private-public partnerships set to play an important part.

The INTO partnership model provides the opportunity for the public and private sector to work together to address the global demand for and expand the global supply of quality higher education, allowing our partner universities to improve student access and promote student mobility, without relinquishing control of their academic standards.

Financial remodelling: A revolution in demand for higher education calls for urgent action

Higher education institutions need sound, profitable business structures that help secure their financial future. This is accomplished through investment in operations and management, capital projects, shared infrastructure and capacity growth.   Public-private partnerships, such as those INTO has established with Oregon State University, University of South Florida, and Colorado State University, can be part of this solution.

INTO has proven it can sustain our business by reinvesting profits to build a strong network of university partners who serve a growing student market and attract investors. A strong track record and transparent governance has enabled us to secure external investment even in the most challenging financial conditions.

We’ve invested £316 million in capital projects and infrastructure on the campuses and in many cases, our university partners have benefited from our financial strength in the creation of living and learning centres, rather than diverting their own resources or calling on diminished public funds.

An International Solution: Creating access and opportunity through innovative academic Pathway programmes

The demand for international higher education is growing exponentially and those institutions – of which there are many – who do not evolve to meet demand will suffer as a consequence. In 2009, approximately 3.7 million students were studying outside their home country and UNESCO estimates this will grow to 7.0 million by 2020 (UNESCO, 2009).

The global shift towards improved access to higher education presents ambitious leaders in the university sector with a remarkable opportunity. However, emerging global competition and the rising expectations of students leave no room for complacency.

INTO has worked closely with our North American partners to develop an academic Pathway model that fully integrates international students into the university community.  These students receive specialised academic and student services to ensure their success while they acclimatise to life on an American university campus.  The model is proving successful in preparing students for further studies in the US and through increased campus internationalisation, benefiting the university communities in immeasurable ways that extend far beyond generating additional tuition revenue.

Pathway programmes at our US partner universities have also allowed our partners to harness global demand and attract substantially increased numbers of international students to their campuses. Both institutions have enjoyed enhanced exposure in international markets, resulting in a stronger flow of student talent.

A record 912 students from 32 countries enrolled in the Fall 2011 intake at INTO Oregon State University, exceeding targets by 46 per cent. At INTO University of South Florida, international student enrolments totalled 590 students from 33 countries, a 27 per cent increase over 2010 figures. INTO’s US partners have experienced faster growth of international student admissions than the state and national averages, and the programs are predicted to continue to experience dramatic growth in the coming years.

For more information, visit www.into-corporate.com