Students invest in universities, so pay them a dividend

The university model has been stuck in limbo for centuries. Little has changed in terms of the university framework since the first university in the Western world, the University of Bologna, opened its doors in 1088, let alone the first continuously-operating degree-granting universities of Al-Karaouine in Morocco (859 AD), Al-Azhar in Egypt (970-972 AD) and Nizamiyya in Iraq (1065).

Granted, technological advances have enabled classes and courses to be offered online, records to be stored electronically, and more recently, ‘smart’ universities to be an extension of the ‘smart’ ecosystems dominating our daily lives. But as the cost of acquiring a university degree has sky-rocketed – emptying the pockets of students and their families – and as the pockets of vice-chancellors are being filled ever so generously, it is time to disrupt the university business model.

Such a disruption can be achieved by providing the conditions so that all stakeholders involved in the university system – from faculty and staff to community members as well as students – have a vested interest in the university ecosystem.

This vested interest must go beyond the personal and emotional or the psychosocial connections that universities have traditionally relied on. This vested interest must be financial, especially where university income is dependent upon the income it receives from its ecosystem.

Partnership model

What I am proposing is that the university model must be built on a co-operative or partnership model where all stakeholders – and not just the vice-chancellors and a select few who receive fat pay cheques – benefit financially from the university ecosystem.

Although co-operative models in higher education have been discussed in the past in terms of governance structures, no one, to my knowledge, has gone a step further to extend partnership models to financial modelling of universities that extends to faculty, staff, and students.

Probably the most successful and biggest partnership model in an organisational ecosystem is the John Lewis model. This model could serve as a starting point and could be adapted to fit the university ecosystem.

But imagine, if students, faculty and staff could all share in the profits of their university.

According to official figures published by the Higher Education Statistics Agency (HESA), universities in England recorded a £1.8 billion (US$2.5 billion) surplus in 2014-15. Although Universities UK does not like the term ‘profit’ (since universities are not-for-profit organisations) and prefers the term ‘surplus’, the end result is the same. This ‘surplus’ is lining the pockets of vice-chancellors and the select few at the top of the university pyramid.

Sharing the surplus with students

What if this ‘surplus’ could be shared among faculty, staff – and yes, students as well? What if faculty and staff shared in this ‘surplus’ as long as they were employed at the university? But what if students shared in this ‘surplus’ for life? After all, alumni play a major role in the university ecosystem and are ‘used’ by universities for the benefit of universities long after the student graduates.

This ‘surplus’ could not only go towards paying off students’ loans from their first year while still at university, but it could also continue to give them an income – albeit perhaps a small income – each year, for life, as and when the university has a ‘surplus’ to share.

And what if students’ loan repayments were tied to this surplus rather than to their earnings? After all, the loans students get are in order to invest in the chosen university.

In all situations – other than university loans – the lender agrees to lend because the investment is deemed to be able to produce a viable return in order to pay back the loan. This viable return – which must be tangible for the lender to be able to lend – must come from the university since that is where the investment is made and not in some prospective intangible future.

However, students are told to invest in their chosen university and get or find their own return themselves from their possible future! In short, universities have found a ‘clever’ way around students not sharing in the returns of their investment, by saying that students are investing in their own future and not in the university itself.

No. Students invest in the university they choose to go to so that they can have a better future. The having of that better future is simply the perk of the investment and not the investment itself.

Students are not investing in a possible future. They are investing in the university they attend. They are investing time, effort and money in the university they attend.

After all, the university they choose to go to and the status of that university, the course they take and how well that course is put together by that university, and the faculty that teach them and how well they teach them, is what students are investing in.

If all of these factors are operating efficiently and effectively, students’ investment in that university will have been sound and should produce a return on the investment. The return on the investment is a share in the ‘surplus’ that universities make because many students (the community and other stakeholders) are investing in that university. The return on the investment is not a possible future: it is the ‘surplus’ that universities make.

Students who pay tuition to a university are investing in that particular university and are entitled to a return on that investment. Since they pay in money, then the payout (or ‘return’) must be in money also. And this return is a share in the ‘surplus’ universities make. It is a tangible financial return that students have a right to share in.

Currently, the only ones from the university ecosystem that are enjoying this ‘surplus’ are the vice-chancellors and a select few at the top of the university pyramid who are lining their pockets with fat pay cheques.

It is high time students and their parents realised this and stopped falling in the deceptive university trap telling them that they are investing in their future. They are investing in the university they attend and the return on that investment must come from that university. This is a basic principle of investment economics. There is no situation that I know of where one invests in X but waits or expects to get the return from Y.

A disruptive university model? It can certainly shake the foundations of the higher echelons of the university pyramid who are enjoying fat pay cheques at the expense of students.

Dr Frances Tsakonas is an ‘edupreneur’. She has worked for governments, institutions and international organisations around the world. She holds a PhD in higher education internationalisation from the Institute of Education, University of London, a post-masters specialist degree in education from Harvard University, a master of education in multicultural education from Lesley University, a post-graduate diploma in institutional management and change in higher education from the Center for Higher Education Policy Studies in the Netherlands, a specialist masters in consulting and coaching for change from HEC Paris, and is currently completing a masters level diploma in strategy and innovation at the University of Oxford’s Saïd Business School where she has also been accepted to the EMBA programme. She will be exploring the model discussed above during her time at the University of Oxford on the EMBA programme.