As Republican governor of Indiana, Mitch Daniels has been an efficiency maven, and his scalpel has gone after higher education along with everything else. He has also introduced price competition by welcoming Western Governors University Indiana, a low-cost online college that, among other heresies, gives credit for experience.

The announcement that Daniels will become president of Purdue University, leaving one political battlefield for another, led to speculation that he is eager to make a mark in the roiling universe of higher education.

Certainly, the nation’s colleges require much greater fiscal discipline, and Daniels, a former executive at Eli Lilly & Co. and former director of the White House Office of Management and Budget, will provide some of that.

But he wouldn’t have taken the job if it was just about cost-cutting. The recent tumult at the University of Virginia, where the president was pushed out, then reinstated two weeks later, is a microcosm of a broader conflict: the staid, slow-moving university pitted against the business exigencies of a competitive future. The Virginia faculty rallied to the defense of Teresa Sullivan, the president, spurring a protest of 2,000 people on campus and condemnation of the board of trustees for its secretive tactics. The professors won this round. But the debate in Virginia was not over whether the university has to change, but how fast. Such conflicts are likely to proliferate.

Tuition Bubble

Public universities nationwide are under the gun, as they keep raising tuition to make up for falling state subsidies. They are competing both with private colleges with much bigger endowments, and with low-cost alternatives to the traditional college experience.

All of U.S. higher education is facing fundamental change. A little like the Catholic Church before the Reformation, it is experiencing heresies and pockets of resistance to its reigning idea: that young people should march in lockstep through four years of college, and pay plenty for the privilege.

If more students decide not to buy into this model, and balk at paying bloated costs, how do public universities, even presumably well-run ones such as Purdue, adapt?

Consider the rising competition:

-- Anyone can take online courses from the Massachusetts Institute of Technology and Stanford University free of charge. Thousands have done so. And at MIT you can even get a credential for successful course completion. While these and other efforts to offer top-quality free or low-cost classes are widely talked about, the fallout has not been fully fathomed.

-- Cheaper courses abound. The average degree at Western Governors University costs about $15,000 total. StraighterLine offers courses approved by the venerable American Council on Education for $99 a month plus $39 for each course taken.

-- Short-term certificates, awarded by for-profit and community colleges, are a growing option. According to the Georgetown Center for Education and the Workforce, 1 million certificates were awarded in 2010, a year when 1.6 million bachelor’s degrees were given.

-- For-profit colleges already enroll more than 10 percent of all students. While these schools are expensive and suffer from a bad reputation, only partly deserved, for recruiting too many students and relying almost entirely on federal student aid, some are flexible enough to cut costs if the market demands it. That is not true of traditional schools, where tuition in real dollars has tripled over the past 20 years.

-- Even high-income parents are increasingly sending their children to lower-cost community colleges -- 22 percent of those families did so in 2010, according to a survey by Sallie Mae.

Devalued Diplomas

These alternatives will only become more popular as doubts grow about the value of a diploma. While the recession may explain why almost half the class of 2012 was unemployed or “underemployed” after graduation, a new report from the U.S. Chamber of Commerce cites “growing skepticism about whether those lucky enough to graduate have acquired the skills and knowledge necessary for success in the 21st century economy.”

Colleges are responding not by controlling costs but with faculty intransigence and with grandiose plans to make online education a source of revenue that can subsidize on-campus operations. This revenue is likely to be elusive, especially if reformers succeed in breaking up the cartel that controls the granting of college credits.

Public universities have been too comfortable for decades. As academic quality began to slip, the costs kept going up --- faster than for health care. Yes, there were recessions, and the states cut appropriations. But the universities responded by raising tuition, and when the states prospered again, the tuition never went down.

Rising tuition has meant increasing debt. More than two-thirds of all students borrow money to go to college -- 42 percent of the students at Purdue, for example, which is charging more than $20,000 a year even for in-state students for tuition as well as room and board.

The only way a college president can control costs is to make changes that the faculty -- the most powerful group in almost every university -- is likely to oppose. Presidents who try to do such things, such as Lawrence Summers at Harvard, don’t necessarily succeed. And because Daniels is a politician and businessman rather than an academic, the faculty will cut him no slack.

You can expect to hear charges of “corporatization” when he steps forward with proposals to consolidate departments or increase teaching loads. Daniels has no doubt watched the experience of his Republican neighbor in Ohio, Governor John Kasich. Even though Kasich maintained funding for the state universities (they loved that), he ran into opposition when he tried to increase faculty workloads and institute a three-year degree.

Research Costs

Purdue, with almost 40,000 students and more than 15,000 faculty and staff members, may be a good place to test changes in higher education. The school has a plan to “take its place among the premier research universities of the 21st century,” says a university report. But building the research side -- something that Sullivan has been hoping to do at Virginia as well -- is going to take a toll on undergraduate education, and that’s where a collision is coming. Why continue to tolerate giant lecture classes, courses taught by graduate students, and a growing number of nomadic adjuncts -- all so a top-flight faculty can write papers that build their reputations among their peers?

When his Purdue appointment was announced, Daniels said he would no longer take part in “partisan political activities or commentary” as he finished his term as governor. His challenge is to show that higher education can withstand the tsunami that is coming. He will find that his career in a different political arena has just begun.

(Jane S. Shaw is the president of the John W. Pope Center for Higher Education Policy in Raleigh, North Carolina. The opinions expressed are her own.)

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To contact the writer of this article: Jane S. Shaw at shaw@popecenter.org

To contact the editor responsible for this article: Katy Roberts at kroberts29@bloomberg.net