March 31, 2026 · Episode 305
Inside Neg Reg and the 2026 Higher Ed Changes
37 Min · By Dr. Drumm McNaughton
Neg Reg signals major higher education changes before July 2026. Learn what presidents and boards should do now on Title IV, accreditation, and cost.
Title IV loan limits change July 1, 2026. The accreditation Neg Reg begins this May. Both trace back to the One Big Beautiful Bill, (OBBB) an act of Congress that cannot be reversed by a change in administration. Institutions that have not started preparing are already behind.
Andy Vaughn, President and CEO of Alliant University and one of three higher education representatives on the 2025 Negotiated Rulemaking RISE Committee, joins Dr. Drumm McNaughton on the Changing Higher Ed podcast to examine what the latest Neg Reg signals about Title IV changes, accreditation reform, delivery costs, and the decisions institutions need to make before July 2026.
Higher education has spent years hearing that affordability, student debt, and public skepticism are becoming existential pressures. What is different now is that those pressures have moved from the background into federal action. The issue is no longer whether institutions agree that cost and value matter. The issue is whether they are willing to redesign programs, pricing assumptions, financing models, and delivery structures before the external pressure becomes financial damage.
This is why Neg Reg matters so much right now. It is not simply a federal process story. It is one of the clearest signals higher education leaders are going to get about where Washington is heading, what assumptions are under attack, and how much of the old operating model is now exposed.
Why This Neg Reg Was Unlike Prior Ones
Most negotiated rulemaking processes begin with more room to shape the result. This one did not. The One Big Beautiful Bill set the terms before the rulemaking process even began. In practice, Congress used a reconciliation vehicle to push through structural changes to Title IV funding and institutional accountability that a full Higher Education Act reauthorization would ordinarily have handled. That left negotiators with a narrower field than prior committees typically have.
That distinction matters more than many institutions may realize. When federal policy is driven mainly by the executive branch, colleges and universities often assume they can wait, absorb, or outlast the shift. A new administration may reverse it. A future regulatory change may soften it. A legal challenge may delay it. This is different. Institutions are dealing with a framework rooted in statute, not just administrative interpretation.
That changes the planning posture. Leaders should not be asking whether they can preserve the existing model until the politics settle down. They should be asking which parts of the existing model are no longer defensible under the conditions now being imposed.
Student Debt Is the Political Driver. Delivery Cost Is the Structural Problem.
At the center of the bill is public anger over student loan debt and a broader frustration with the value proposition of American higher education. That is the political engine behind the changes.
But debt is the visible symptom, not the structural cause. The underlying problem is the cost of delivering higher education programs. Institutions have spent years trying to manage pressure through enrollment growth, tuition resets, discounting, and better messaging. None of those solves the underlying issue if programs remain expensive to deliver and students have fewer viable ways to finance them.
That point matters because many leadership teams still treat these pressures as if they are mostly perception problems. They are not. If a university is still carrying rigid, high-cost structures inside programs that the market is beginning to question, then no amount of branding or value language will protect it for long.
This is also why simply growing enrollment is not a real answer. More students can temporarily cover a weak cost structure, but they do not fix it. They put a Band-Aid over the revenue problem while the delivery problem remains intact. Once financing changes, demand softens, or public scrutiny intensifies, the same weakness surfaces again.
These Regulations Are Unlikely to Be Reversed
Higher education leaders are used to working through policy swings across administrations. Many have learned, rationally, to assume that executive branch priorities can change fast and can be changed back just as fast. That assumption is less useful here.
These changes come out of an act of Congress. Reversing them would require new legislation, not just a new secretary, a new interpretation, or a different White House. That means institutions building strategy around the hope of near-term reversal are relying on a weak premise.
Boards need to understand what follows from that. This is not a moment for temporary compliance maneuvers or wait-and-see management. It is a moment for structural planning. The institutions that accept that early will have more room to redesign. The ones that do not will be forced into late-stage reactions with fewer good choices available.
The Accreditation Neg Reg Beginning This May Is Primarily About Cost, Not DEI
A lot of higher education coverage has framed the Department’s scrutiny of accreditors mainly through the DEI lens. That is part of the environment, but it is not the whole story and may not even be the main story.
The more consequential issue is whether the accreditation system, especially at the specialty and programmatic level, is blocking the kinds of changes institutions would need to make in order to lower the cost of delivery while maintaining quality.
That is the real pressure point. Many colleges cannot simply lower tuition on command because the programs in question are expensive by design. Student-to-faculty ratios, supervision requirements, in-person expectations, facilities assumptions, program length, and other accreditor-driven structures lock in cost. Some of those standards protect quality. Some may preserve legacy structures that no longer deserve automatic protection.
This is where institutions need to stop speaking in abstractions. In many high-cost programs, especially licensure-oriented graduate programs, there may be room to shorten program length, reduce repetition of prior learning, expand competency-based pathways, or use technology-mediated supervision where it still protects quality. There may also be room for more hybrid or synchronous online delivery in places where facilities costs have become a disproportionate burden.
Those are not marginal changes. In some cases, they could materially reduce the cost of delivery. But none of that happens if accreditors are treated as an external compliance checkpoint rather than as a central party in the redesign conversation.
That is why the accreditation Neg Reg matters so much. If Washington is serious about pushing institutions to lower cost and strengthen value, then specialty accreditors are now part of the core operating discussion whether they want to be or not.
How to Read the Kent Remarks
A lot of higher education leaders heard recent remarks from Under Secretary Nicholas Kent as an attack on the sector. The more useful interpretation is that they were a signal of impatience with a system still tethered to outdated delivery assumptions, outdated protections, and outdated definitions of quality.
That does not mean every institutional concern about tone is misplaced. It does mean leaders should focus on what the remarks reveal about direction. The Department is not signaling interest in preserving the current equilibrium. It is signaling that colleges and universities, and the accreditors around them, are expected to participate in a serious restructuring of how education is delivered, how quality is maintained, and how cost is controlled.
That is a much bigger issue than whether a speech landed well. Institutions that respond only to the rhetorical irritation may miss the actual substance of what is coming.
The Permission Problem in Institutional Change
Higher education has a deep cultural problem with change. The sector is comfortable studying it, planning it, discussing it, and forming committees around it. It is much less comfortable when change reaches the point of affecting faculty roles, long-standing program design, accreditor expectations, or the stability that boards and administrators often mistake for institutional health.
This is why the permission problem matters. Institutions do not become more adaptive because leaders announce that innovation is welcome. They become more adaptive when faculty and staff see that experimentation will not be punished, that trying something new will not automatically be treated as recklessness, and that learning through mistakes is not career damage.
That is especially important now because higher education is facing multiple overlapping pressures at once: federal financing changes, accreditation pressure, AI adoption, employer expectations, and consumer skepticism. Institutions that require certainty before experimentation are going to move too slowly for the environment they are now in.
The culture shift required here is not cosmetic. It means taking the handcuffs off carefully enough to protect quality, but decisively enough to allow meaningful redesign.
AI Has Moved from a Risk Management Question to a Program Quality Question
Higher education’s initial response to AI followed a familiar pattern. The first concern was how to control it, restrict it, and keep it from destabilizing the institution. That was understandable. It is no longer sufficient.
AI is now a curriculum issue, a graduate-preparation issue, and an employer-relevance issue. Programs that are still treating it primarily as a threat are now running a different risk: sending graduates into fields that are already incorporating AI without preparing them to work competently in that environment.
That is especially important in professional and clinical pathways. If a program prepares students for settings where AI-supported tools, workflow systems, documentation support, or data-driven processes are already becoming normal, then leaving AI out of the curriculum is not caution. It is a preparation failure.
This does not require blind adoption. Ethical use still matters. Guardrails still matter. Academic integrity still matters. But institutions that spend 80 or 90 percent of their time on containment while neglecting practical integration are putting themselves behind both students and employers.
There is also a broader signal here. AI is one of the clearest tests of whether an institution can do more than talk about innovation. It reveals whether the institution can create a sandbox for faculty and staff to learn, fail, refine, and improve before the market moves on without them.
Graduate Programs Face Real Exposure Starting July 1, 2026
The Title IV loan limit changes will likely hit graduate programs hardest. That matters because many graduate and professional institutions depend on funding patterns that assume students can borrow beyond the federal caps.
That assumption is now exposed. Some students will not qualify for private loans. Some will not be able to secure a co-signer. Some will not want to accept the rates or repayment structures they are offered. That means institutions with graduate-heavy portfolios may see a meaningful share of prospective or current students face financing gaps with no reliable historical baseline to use for planning.
This is where leadership teams need to be much more specific than they usually are. Aggregate institution-wide discussions are not enough. Exposure has to be modeled program by program. Which programs rely most heavily on borrowing above the new caps? Which student populations are most vulnerable to private lending barriers? Which offerings are priced in a way that leaves too little margin for disruption? Which programs are worth redesigning now before the market forces harder choices later?
Some institutions may find that the answer is not simply better financing support. It may be a sharper value proposition, stronger differentiation, shorter pathways, or lower-cost delivery structures that reduce dependency on borrowing in the first place.
Faculty Need to Help Design the Solutions
Too many institutions wait until financial pressure is fully visible before they involve faculty in difficult program decisions. That almost always makes the process worse.
Faculty and program directors need to be brought in early if institutions are going to redesign programs without breaking what makes them valuable. They know where genuine learning needs sit. They know where redundancy has accumulated over time. They know which requirements protect quality and which ones may simply reflect convention.
That matters because the next phase of institutional change cannot be done effectively through administrative decree alone. A president, provost, or CFO can identify the pressure. They cannot, by themselves, design the smartest academic response to it.
The strongest institutions in this cycle will be the ones that bring faculty into the redesign conversation before the decisions become defensive and reactive.
What Institutions Need to Do Before July 2026
The work now is not theoretical. It is operational.
Institutions should already be stress-testing graduate and licensure-heavy programs against the July 2026 Title IV changes. They should know which programs depend on borrowing above the new federal caps and how many students may struggle to close the gap through private lending.
They should also be reviewing or building private lender relationships now. For graduate-heavy institutions, that is not a secondary issue. It may become a much larger part of the student financing landscape.
At the same time, leadership teams should be pulling faculty and program directors into redesign discussions early. If lower tuition or lower borrowing capacity is going to force cost changes, then those changes should be shaped by the people who understand how learning outcomes, program structures, and student realities actually work.
This is also the moment to scrutinize cost-of-delivery assumptions that institutions have tolerated for too long. Program length. Repeated coursework. Observation requirements. In-person rules. Facilities burdens. Technology integration. Specialty accreditation constraints. Some of these will remain necessary. Some will not survive honest review.
Institutions should also be clear-eyed about timing. Waiting until July 2026 to act is not planning. It is reaction.
Three Takeaways for University Presidents and Boards
- Embrace change rather than manage around it
Institutions that try to protect current structures through this cycle will find those structures changing anyway, just under worse conditions and with less room to shape the outcome.
- Plan for permanence
These changes are rooted in an act of Congress, not a routine executive-branch rule swing. Strategic planning that treats them as temporary will likely be wrong.
- Bring faculty and staff into the solution early
Program redesign and cost restructuring cannot be done well in isolation. Faculty and program leaders need real authority to help shape what comes next.
Dr. McNaughton’s Bonus Takeaway
Recognize that this process was different in kind, not just degree. Higher education typically has a voice in shaping federal policy. That was not the dynamic here. Engaging with these changes as given, rather than as open questions, is where productive institutional work begins.
Quick Overview
- OBBB functions as a de facto HEA reauthorization and cannot be reversed by a change in administration
- The policy driver is student loan debt; the structural problem is the cost of program delivery
- Enrollment growth does not address delivery cost
- The accreditation Neg Reg beginning May to June 2026 is focused on value proposition and cost of delivery, not primarily DEI
- Specialty accreditors are the missing party in the cost-reduction conversation
- Under Secretary Kent’s ACE remarks were an invitation to collaborate, not a challenge to institutions
- Title IV loan limit changes take effect July 1, 2026, with the greatest exposure for graduate programs
- Based on Alliant’s internal modeling, 10 to 20 percent of graduate students in affected programs may face a private lending gap with no historical precedent
- AI adoption is now a program quality and workforce preparation issue, not a risk management one
- Lumina/Gallup and AAC&U research puts employer satisfaction with graduate preparation at 70 to 80 percent
- Faculty must be partners in redesigning programs, not recipients of decisions made above them
About Our Podcast Guest
Andy Vaughn serves as President and CEO of Alliant University. He began his career in higher education at National University in San Diego and has since served in various leadership roles at institutions nationwide, including Regional Dean, President and CEO, Chief Operating Officer, Vice President of Marketing and Admissions, and Associate Director of Student Services. Prior to joining Alliant in 2015, Vaughn served as President and CEO of Trident University, California, where he also held the role of Chief Operating Officer. He currently serves on two boards, including the Board of Directors for St. Luke and the Central Valley Education Consortium. Vaughn earned his undergraduate degree from the University of Nebraska–Lincoln, his graduate degree from National University in San Diego, and his doctoral degree from the University of Southern California.
Connect with Andy Vaughn on LinkedIn →
About the Host
Dr. Drumm McNaughton is the founder, CEO, and Principal Consultant at The Change Leader, Inc. A highly sought-after higher education consultant with 20+ years of experience, Dr. McNaughton works with leadership, management, and boards of U.S. and international institutions. His expertise spans key areas, including accreditation, governance, strategic planning, presidential onboarding, mergers, acquisitions, and strategic alliances. Dr. McNaughton’s approach combines a holistic methodology with a deep understanding of the contemporary and evolving challenges facing higher education institutions worldwide to ensure his clients succeed in their mission.
Read the Podcast Transcript →
Transcript 305: Changing Higher Ed podcast – with host Dr. Drumm McNaughton and guest Dr. Andy Vaughn – Part 1
Introduction to Changing Higher Ed®
Welcome to Changing Higher Ed®, a podcast dedicated to helping higher education leaders improve their institutions. With your host, Dr. Drumm McNaughton, CEO of The Change Leader, a consultancy that helps higher ed leaders holistically transform their institutions. Learn more at changinghighered.com. And now, here’s your host, Drumm McNaughton.
[00:00:31] Welcome and Guest Intro
Drumm McNaughton: Thank you, David.
My guest today is Andy Vaughn, President and CEO of Alliant University. Andy’s a repeat guest of this program, he’s been with me multiple times. We started knowing each other back at Trident University when I was a department chair and faculty member there, and he was the COO and later became its President. Andy’s had a long and distinguished career in higher education starting at National University in San Diego, and has served as regional dean, President, CEO, COO, Vice President of Marketing, et cetera.
Andy recently served on the Negotiating Rulemaking panel for student loans, and he joins me for part one of a two-part series on the Neg Reg process. What’s going on at the Department of Education, the upcoming Neg Reg on accreditation, and the resulting changes that higher ed institutions must make because of the OB3 bill.
Andy, welcome back to the program.
Andy Vaughn: Drumm, thanks for having me back again. Appreciate it.
Drumm McNaughton: My pleasure. I am looking forward to our conversation. You’ve been doing some amazing stuff over the last few months with Neg Reg and OB Cubed (One Big Beautiful Bill Act), all of those things. We’re going to get into that in just a minute.
[00:01:48] Andy’s Career Snapshot
Drumm McNaughton: But for those listeners who haven’t tuned in to hear you before, give us a little background, please.
Andy Vaughn: Sure, so I serve as President and CEO of Alliant University. We’re a seven campus system and an online school focusing primarily on graduate level programs that lead licensure and mental health, K 12 certification, and health sciences, including nursing. I’ve been in this role for about 11 years, served as CEO and President of Trident University where you and I met, probably 15 years ago already. Can you believe that?
Drumm McNaughton: That was a while.
Andy Vaughn: It was a while. That was back in Orange County in California. I’ve been in higher ed a little over 30 years. Started on the front line in operations and fell in love with higher ed, I never intended to be in higher ed my entire career, just fell in love with it in my first six months, and that was 30 years ago.
Drumm McNaughton: Yes.
[00:02:36] Trident Memories and Execution
Drumm McNaughton: Well, you’ve done some amazing things. I remember from Trident, working on the business side of the house. You, I believe you came in as the COO. Redid their marketing, their operations, stepped into the CEO role, worked through a number of the issues that were going on. I just remember nothing but you doing great things at Trident.
Andy Vaughn: Thank you. I really appreciate that. We had a great team and hats off to them. We were able to execute, which I think is what’s lacking, many times, in higher education. Strategic plans are great, but unless you execute them, they mean nothing.
Drumm McNaughton: Really? I never
Andy Vaughn: that.
I know. I can’t tell you how many universities have these great looking plans and they’re on the website and well folks, you got to execute.
[00:03:18] Change Is the New Plan
Andy Vaughn: Let’s track to that, shall we?
Drumm McNaughton: Yes, and the plan that you made five years ago probably isn’t going to work anymore, is it?
Andy Vaughn: Probably not. You got to change. Especially today. We’re going to talk about that today too. And that is change.
Drumm McNaughton: Oh, yes. Big time change, and you’ve had a front row seat with that changes going on.
[00:03:37] Inside Negotiated Rulemaking
Drumm McNaughton: Neg Reg, everybody knows Neg Reg. Negotiated rulemaking, et cetera. You had a front row seat for the latest one. Tell us about it.
Andy Vaughn: Yes, so I served on the Rise committee of negotiated rulemaking at the US Department of Education in late 2025. It was about a three or four month process, and I just have to tell you, it was an amazing experience, probably the most amazing experience of my entire career. Learned so much, got to meet some great people at the Department on the congressional side, the US House, the Senate, their policy advisors, policy writers, you name it, just had a great time, very productive time, but also a very frustrating time at times, in the process and our task was, yes, I know it’s a, it’s hard to imagine that when navigating through the federal government. But I can’t say enough about the job that the Department and all of my fellow negotiators did, but I was honored to be nominated for the committee.
There were three of us that served to represent the 5,000 US universities and colleges, and another six negotiators serving different constituent groups. I have to say, we really all came together for what became a consensus, which is pretty rare in negotiated rulemaking, but we achieved that back in November of 25.
Drumm McNaughton: Consensus can be rare when it comes to the Neg Reg.
[00:04:58] How Neg Reg Picks Members
Drumm McNaughton: So tell us about the process of being selected to serve on Neg Reg. Because it, it’s quite, if there’s only three higher ed reps, and I would assume you came from the for-profit area, there had to be some other folks, private and publics, I would guess.
Andy Vaughn: Right. Yep. So the nomination can occur from different groups. It can occur from an individual. Obviously you want to be nominated by somebody that the Department recognizes and got nominated by a former Congressman, Jason Altmeyer, who sent my nomination in. And then the under secretary, I believe himself, actually went through the nominations and shows. Probably was an input from other Department members, but got the call from the Department back in, what was it, August of last year, and was thrilled to be selected, and just a great honor to represent all of higher education through this process.
[00:05:49] Board Buy In and Time Cost
Drumm McNaughton: And it truly is now, it took a lot of time to do this. You were very smart, I think, to speak with your board prior to. Convince them. Because at that point, when you were doing Neg Reg, for those four or five months, you were a part-time CEO in many respects.
Andy Vaughn: That’s right. I went to the board of trustees of Align University and let them know, “Hey, these are important changes. Matter of fact, what we’re about to encounter in higher ed is probably the biggest change in the 250-300 year history of higher education in the US. And I really thought it was important to be on the front row of that change to impact change and also speak on behalf of the institutions of this country. Because I don’t know that everything was right that Congress wrote and OBBB for higher ed specifically, and I wanted to make sure we got our voice through and I think we accomplished that.
But also I went to my board and said, “Hey, I know this is going to be intense. All eyes are going to be on this committee, and if I serve this, you’re right. I’m going to drop down to probably a part-time CEO”. And I’ve got a wonderful team at Alliant, they backed me up and I talked to my leadership team about it. The board approved it, our shareholder approved it, and I’m so happy they did because it was really important we had that seat.
Drumm McNaughton: It is. I’ve known other folks who have been involved with Neg Reg, not the same extent that you were, and they all say it is an incredible experience. You get to see it from the inside perspective of what’s really going on. But it is time consuming, and you have, in many respects, you’ve got the weight of the higher ed world on your shoulders, because some of the decisions that are going to come out of this are going to impact the entire four or five thousand colleges and universities here in the US and even overseas.
Andy Vaughn: That’s right, I’ve never been so emotionally exhausted than going through to the end of that process because you want to make sure you take a thoughtful amount of time to hear everybody.
[00:07:45] Early Signals of OBBB
Andy Vaughn: And some schools were on this early. We started hearing rumblings about changes in Title IV back in February ’25 when most people were paying attention to other stories in higher ed.
Alliant knew early just because of our history being involved in federal policymaking over the years that we had our antenna up and I was already making trips to DC back in February, March of ’25. When the main story was DEI changes, that’s also very important, but even more important is student loan funding. That’s a game changer for institutions. We knew that was coming, we were on this very early, and so therefore, I was already flying out to these several times in the spring and summer of 25, even before O Triple B manifested on July 4th. We knew that change was coming and try to impact change before that didn’t work so much, and so I thought, well, our next role is to try to impact change and negotiate what should be done. Both what the Department needed, what Congress wanted, what the American public has been demanding for years, and then, try to have the institutional voice in that change.
[00:08:50] Gainful Employment Backstory
Drumm McNaughton: And you’ve been involved with government before. Correct?
Andy Vaughn: That’s right. So when the gainful employment rule first came out in 2011, I was working for an organization at the time that had just acquired our, I worked for an organization called US Education Corporation, run by Bill Clellen and George Montgomery. And at that time we knew that was going to be a major change for the proprietary sector and studied that.
I’ve been studying gainful employment since its inception in 2011. That passed and we had to change a lot of things in higher education because of G.E. And then it got held in courts. It came out again in ’15 and ’16, got held up again. When gainful employment came back under the Biden administration, we’re the only proprietary school in the country that’s a Title IV doctoral clinical psychology institution. And it was getting caught up in this language that medical doctors, dentists, and osteopathy and a few other programs were getting this extra time for income measurement because of post-degree requirements. We had the same thing and I had to work about 18 months for the Department under the Biden administration to convince them of the same.
We were ultimately successful in helping rewrite that regulation to include clinical psychology and other mental health licensure programs for extra time for income as they complete their post-degree hours. That experience actually led to this pathway. So they are very connected in statute and also experience, but more importantly in relationships at the Department, at the federal government, and more importantly, for this time around, this change is being affected by US Congress, and that’s where those relationships came into play here.
Drumm McNaughton: I am quite sure that was incredibly important because you had a good understanding of how the Department worked, you had an understanding of the legislative process, and you had a knowledge, sometimes, direct knowledge of the players involved.
Andy Vaughn: That’s right.
[00:10:45] Why This Neg Reg Was Different
Andy Vaughn: I think this time around, this is where the current negotiator rulemaking, at least from the RISE Committee for Title IV changes is different than anything in my lifetime in higher ed. Most negotiated rulemaking sessions start at the executive branch level, either from the president or the Department of Education, undersecretary or secretary, and you’re running through a blank canvas of what changes could happen. How to write these new rules or regulations.
This time around is very different, and it was very frustrating for a lot of colleges and I’m very empathetic to them. But this time around, it was an act of Congress that dictated negotiated rulemaking. We had bumpers that previous Neg Reg committees did not have to work with, even the current ones don’t have to work with.
So you can’t supersede what Congress says. Congress speaks, the president signed the law, we have to follow that, that’s just the rule. So we didn’t have a lot of blank canvas. We had a very limited amount of canvas that we could work in to make it even a better rule in the end, but we didn’t have the leeway that prior Neg Reg committees had, and that’s the main difference here.
That’s why those relationships in Congress were really important because if you really want to understand anything that Congress passes and the president signs, you have to go to the people that wrote the law and ask them, tell me more about this. What’s the reason behind this? And then once you have that helps you negotiate the final language for the regulation.
[00:12:14] What OBBB Aims to Fix
Drumm McNaughton: Which makes perfect sense “o Triple B”, as you call it, made significant changes. In essence, it was a reenactment or a reaffirmation of the Higher Education Act with a new spin. Now, when I look at it, I go, “okay, the reconciliation process is supposed to be for just about budget”, but this one went much further than that. The higher education act needed to be reauthorized. It needed significant changes, and this did a lot of that. What was the big intent from O Triple B when it comes to higher ed?
[00:12:58] Student Debt and Value Pressure
Andy Vaughn: The bottom line is the angst around student loan debt in this country. Period. End of story. If you want to really point to the seminal foundational issue that this bill to be written, it’s really, I could say anger from the American public about how much higher ed costs. What is the value proposition? Is that still valuable to the American public? And what are the outcomes of universities? And, how much does it cost? Is it worth it? What is the price of education? And my gosh, our student loan debt is out of control. Let’s do something to stop that. That is really the main reason that I learned from them, and by just asking, and it, I mean, thank you, Captain Obvious. Right? That’s probably the reply most people might say here. But it’s still important you ask these questions, even if you think you might know, you really want to still ask those questions.
Drumm McNaughton: Yes. Higher ed, the loans, the 1.8 trillion in debt at this point, is a huge number, but it’s also about the delivery and it’s the delivery, the cost of delivery of higher ed that forces those numbers up.
[00:14:00] Accreditation Reform Ahead
Andy Vaughn: That’s right, and I think that’s why you’re seeing accreditation reform being on the next negotiated rulemaking committee that starts this May and June of ’26. Is, look, accreditors have been mentioned a lot by the Department of Education in the last year, year and a half, and a lot of that attention’s been paid to the DEI aspect of some accreditors. And I think that’s part of it, but I don’t think that’s the main story. And I think that’s what gets the most attention from higher ed publications, unfortunately. and still very important. Don’t get me wrong, it’s a really important topic and we have to maneuver through that effectively.
However, where the Department, I believe is going with accreditation reform is more about that value proposition. This is my opinion, only, not that of a Alliant, but my opinion, just from sitting in DC for so many months last year and talking to a lot of people that wrote the laws, that passed the regulations, my fellow negotiators, where I see the issue is not so much with institutional accreditors. It’s more about the specialty accreditors that requires certain infrastructures in their standards, which I don’t think are bad by the way, I think they’re great for quality, but we’re going to have to come to the table with the accreditors.
[00:15:11] Specialty Accreditors and Costs
Andy Vaughn: Here’s what I said on the record during Neg Reg, because when we were talking about changes to Title IV, and new student loan limits, one of the Department officials looked at me as a CEO and said, “why don’t you just lower your prices?” I said, “you know, we’re trying to, we would love to do that. We have some really innovative ideas to do that. Unfortunately, you’re missing another party at this table that needs to be a part of this discussion. That’s the specialty program accreditors. If we’re going to lower prices, we can’t do that by snapping our fingers because there’s certain requirements for specialty accreditation that you have to have X, Y, and z. I’m not saying we take that away. All I’m saying is if we’re going to be innovative, they have to be in this conversation with us. Because if we’re going to lower tuition prices, we have to lower the cost of delivery. Some of the most expensive programs in higher ed have very low margins at universities.”
It seems like. Oh gosh. Tuition’s, Yes. It is expensive, but it’s not like universities are in some of the, in some programs are not making a whole lot of, it’s very, very, very thin margins. Why is that? Because the cost of delivery. And we can’t make a change on that until the specialty accreditors work with the institutions to affect that change. And we are determined to do that.
Drumm McNaughton: And so this next Neg Reg that’s coming up about accreditation reform is going to be huge.
[00:16:27] Kent Speech and Real Meaning
Drumm McNaughton: Let’s double back a little bit. The public angst in higher ed is around price perceived value, and does it prepare students for the future or graduates for the future. You’ve had a number of conversations with Nicholas Kent, who is the Under Secretary for Higher Education at the Department. I think I have that title right. There’s a lot of stuff coming down the line. Now, he did not make him any friends when he spoke at the ACE conference just a little bit ago. But in conversations that I’ve had with multiple folks, those comments were perceived, taken out of context. It’s not such a bad thing.
Let’s talk about that a little bit because I think it’s important for the audience to hear what’s really being thought about at the Department and how it’s going to improve higher education going forward.
Andy Vaughn: Nicholas wants the best for student outcomes and to deliver education at a lower cost, and he’s a vision to do that. And so essentially, all Under Secretary Kent is saying is, “look, we want you all to come to be a part of this change”. And I told one of our specialty accreditors about six months ago, I said, “Hey,I know you’re under fire. If I were you, I would come to the table with the Department of Education with some innovative ideas and be proactive before they come to you. To say, ‘Hey, we’ve got some really great ideas on how we can affect change to maintain quality, but reduce the cost of delivery, and therefore ask institutions to lower their tuition prices'”.
And so what Nicholas is saying is, “Hey, we are tethered”. And I’m paraphrasing his quote. I’m probably going to destroy his quote, but you get the idea of what he said.
[00:18:12] Higher Ed Resistance to Change
Andy Vaughn: he said something to the effect of, “we are tethered to bygone legacies in higher education”. I believe he is right on that. Look, higher education is in some of the challenges we are because we don’t change as fast as private sector industries do.
Drumm McNaughton: Really? [laughter]
Andy Vaughn: Every time we try to move cheese people go, “that’s my cheese. Don’t.” And what we’re trying to say is, “Hey, don’t just read that book. Just understand not only moving the cheese, we might need different cheese.”
Look, higher ed is very resistant to change. More than any sector I’ve ever seen. Why is that? There’s a lot, we could probably do a whole podcast on that alone, so I won’t get into that. But we are still using things, as I told our team one day, I said, “folks, the Department is trying to get us into 2026 and get us out of 1926. We have to use innovative tools and technology”.
And, many institutions try to dip their toe in that pool, but it sometimes it gets resistant from accreditors, not so much institutional, more program level. Sometimes it gets resistance from faculty or staff or boards. Higher ed just has to make some effective change.
And, here’s the thing about change, you’re going to make some mistakes, not everything’s going to work, and that’s okay. We have to give permission to folks to say, “change is uncomfortable and that means we’re going to probably try some things that don’t work. And that’s all right.” You have to give people permission.
And I think what Under Secretary Kent is saying is, “Hey folks, we’re going to have some change in higher ed for the better. We want to bring cost and therefore tuition down, but we have to maintain quality. Now let’s all come together and figure that out, shall we?”
Drumm McNaughton: Which makes perfect sense. We used to have a saying in the Navy, “250 years of tradition unmarred by progress”.
Andy Vaughn: Yes, exactly. Maybe the military is right behind higher ed on change.
Drumm McNaughton: I in many respects it was, but there are many changes that have to happen in higher education. We want to increase enrollment. Of course that’s important, but that is not the end all be all to fixing the issues. That just puts a Band-Aid over the revenue issues.
[00:20:26] Levers to Lower Delivery Costs
Drumm McNaughton: A lot of institutions have done tuition resets. Some of them gone well, some haven’t, but it brings it down to a more realistic price, at least what you see on the website. How do we make those kinds of changes that are necessary to reduce cost? You mentioned one, the programmatic or specialty accreditors.
Taking some of those requirements, i.e. a 12:1 student to faculty ratio and allowing that to increase. More use of distance education. I know one of the things that we’ve talked about, and frankly I know it because I’ve got a lot of friends who are psychologists, the requirements for monitoring for, somebody prior to getting their degree. It can’t be online. It has to be in person.
Andy Vaughn: That’s right. There’s a few levers that we can pull with the help of accreditors to lower the cost of delivery but still keep quality high. One of those is a length of program. Does a doctoral program need to be 120 credits? Maybe not. Could that be 90? That lowers the cost significantly. So there are some doctoral programs that lead to licensure and mental health that are a repeat of undergraduate degrees in that discipline. Could that be done in a different way through continuing education?
Or if they already have knowledge, could that be more competency based to not have to retake those courses? There’s a lot of different ways to do that. That would lower the cost by maybe 20 or 30% in some cases of these degrees, and that’s significant.
You talk about technology. That’s another place. So there are certain programs that lead to licensure in different states where training observation can be done via video. Does it always have to be in person? I don’t know. Maybe, maybe not. Could that be utilized more through technology enhancements?
The use of AI, we don’t know, we don’t even know yet that changes on a daily, weekly basis at this point. Are there innovations that are right on the cusp of happening that we could embrace in the near future to lower costs? Probably are. Also you look at different aspects of hybrid and online learning that you mentioned. Facilities cost typically depends on what state you’re in, in California could run as much as 15% of your revenue. Facilities costs are huge in California and New York and other states. Could there be more hybrid learning or synchronous learning online? Because I, there are some specialty accreditors that resist online. Most of them have come around, but not all. And that is huge for savings.
[00:23:04] Next Gen Students Expect Tech
Andy Vaughn: But here’s the other thing. Drumm. We are about to enter a time when, gen X and millennials are not who’s going to school anymore. The next generation down is coming and they grew up with smartphones in their hands. They’re growing up in the AI age, they’re fully expecting that we’re ready to embrace technology, and quite frankly, higher ed has not done that to a hundred percent. We’ll be lucky to get to 30, 40% at this point. This next generation of students is fully expecting us to be in 2026, not 1926. And I think that’s another key here on who we attract.
So it’s not just about lowering cost, it’s also about staying relevant. And the other piece is not just the student size. It’s relevant to employers that hire these graduates that want them to come out with competent AI skills, competent innovation and technology skills as well. We’ve got to be ready for that.
Drumm McNaughton: And we’re not, you’re absolutely right. I can remember in 2007 a colleague, I was doing a consulting project for Los Angeles Unified School District, and a colleague came in who had just watched the unveiling of the iPhone, and who would’ve thought that a new phone from Apple, Steve Jobs, would’ve had the impact that it has across every sector.
You talk about the killer apps or the killer, the changes, the PC, coming on board and Lotus 1, 2, 3, allowing managers to have spreadsheets to be able to track finances, track budget, on their desktop. Huge, huge innovation. The internet, the iPhone, and now AI, it seems like these huge technology shifts are happening far more quickly and higher ed’s got to keep up with them.
[00:24:55] AI From Fear to Adoption
Andy Vaughn: Here’s what happens. Higher ed’s first reaction to most new technologies or new innovations is, “how do we protect the institution?” And that’s good. I’m not saying that’s bad. I think being compliant is absolutely required. Okay. But when you spend 80 or 90% of your time, and I think some institutions have, including ours at times, on, “hey, how do we get hands, around this? How do we make sure….” Okay, all that’s important, but equally as important as how do we use this? How do we train with this? How do we teach students about it? And finally, I think that’s happening in higher ed, but it took a couple years to get there because the initial reaction was, “oh my gosh, this is awful. We can’t, we got to keep it out of the classroom”. Well, okay, certain aspects, yes. And the ethical approach to ethical AI use is absolutely important. Absolutely it is.
However, if that’s all you pay attention to, you are forgetting about the other part of it, which is going to be huge in a matter of months or years. And that is, let’s embrace it. How do we use this to increase student learning outcomes? But more importantly, how do we train our students? Because if we’re training, let’s say a marriage family therapist we don’t include AI within that training, then they’re going to graduate and enter the field, either their own practice or work for a hospital or a clinic and go, “I don’t know what to do with this” and it’s impacting my revenue as an individual. We got to be teaching this now.
Drumm McNaughton: Yes. And there are some colleges who are teaching it. One of my guests, David Marchick. He and Angela Vertu have implemented AI in all of the undergraduate business courses that their college teaches. They’ve done away with book reading, they’re using AI prompts to develop things, having AI create programs to where there is a marketing there have to write a marketing strategy and programs to be able to track its effectiveness and make changes. I mean, some incredible, incredible things.
We’re not doing enough of that, and I think it comes back to something that you said earlier. We’ve got to be able to tell people it’s okay to fail.
Andy Vaughn: And that means failure on prompt engineering. The first time you do that, you’re not going to be successful. And it’s creating a sandbox where people feel safe to make those mistakes, learn again, even at an institutional level, you got to tell faculty and staff, “Hey, we don’t know. We don’t know yet. It’s okay. Let’s go in and try, give them the tools and have people spend some work time learning how to navigate different tools”. I finally subscribed to the pro version of, Anthropic’s product called Claude, about two weeks ago. Blown away. I was a ChatGPT guy for a long time, and now I’m pro Claude. That’ll change probably in a few months again, but it’s important, you just play with it.
I probably spend a good half hour, hour every day just trying out different prompts and looking at developing spreadsheets. And to, to your point, we have to allow this sandbox to exist at all institutions.
Drumm McNaughton: And there are some accreditors that are better at this than others. Without mentioning the names of those who aren’t that good, I want to give a shout out to Larry Shaw at New England at NECHE. They encourage their members to try new things. They work with them closely, et cetera. If you’re an innovative university, Larry, I’m going to give you a plug here, my friend, if you’re an innovative university, you want to try it, give Larry a call he would love to work, he’s not in the market of stealing other people’s accreditation. But if you’re an up and coming, he’s an incredible guy to work with.
Andy Vaughn: And I think that’s where the Department is going with part of this Neg Reg is encouraging all accreditors, not just institutional, but programmatic and specialty as well. I think that’s where some of the resistance is happening, at that level of accreditation, in my opinion. And it’s time, everyone, we need to take the handcuffs off.
Universities have to innovate, they’re going to make mistakes, support them in that, let’s move forward. Success is not linear as you’ve seen the cliche memes over the years. It’s this squiggly line that goes back two steps, forward five, back one, forward 10, back 10, forward 15. And we have to be able to have those handcuffs removed to do that.
Drumm McNaughton: Are you getting the sense from the Department with your meetings that is what they want to see as well?
Andy Vaughn: It’s a multidimensional approach. I think you’ve got this administration has their thoughts about DEI and that’s certainly going to be part of it. I still don’t believe that’s the main topic. I think it’s a big topic, but I don’t think that’s the main one. I think what they’re really diving into this summer, and I’m not on that Neg Reg, so I’m not privy to the details behind the outline of what they’re going to be doing.
But just in my conversations in DC and elsewhere with institutions, it appears where they’re going with that is to really well-define the value proposition of US colleges and universities, lower the price of delivery and therefore lower the cost of tuition, keep quality high, increase access, and finally move forward to embrace innovation that could, innovation is not always about technology, and I think when we talk about innovation, people already go to AI and that certainly is a big part of it, but innovation also means “thinking differently”. We’ve not thought differently in US higher education for decades and decades and decades. I know big shock. It’s time.
So remember, I think here’s the important part about this accreditation reform that the Department wants when they talk about innovation, I think people automatically think technology, and that is a big part of it, but it’s “thinking differently”, let’s come together, be creative, and be entrepreneurial and think about things in an innovative way. How can we deliver education differently to match not only what students expect, but also what, employers that hire our graduates expect? And let’s meet that at a hundred percent.
Drumm McNaughton: Right now it’s at 70 or 80% according to surveys that have come out from Lumina/Gallup, and from AAC&U. But there’s still that area for improvement, and if we can make those improvements and lower the cost at the same time, that’s a win-win for everybody.
Andy Vaughn: That’s right. And that’s the Department’s goal right there. Let’s do it at the same time.
Drumm McNaughton: Very good.
[00:31:25] Final Takeaways and What’s Next
Drumm McNaughton: Well, my friend, this has been a wonderful conversation. I’m looking forward to part two of this where we start talking about how you have helped Alliant make the changes based on the information coming out of Washington, things that institutions are really going to need to do in these next few months. In fact, I would say if you haven’t started on it already, you’re probably getting behind.
Andy Vaughn: You’re a little late, but not too late. We had a front row seat that enabled us to really hear what’s coming over the next couple of years in DC, which impacts all institutions, and that really gave us a great head start.
[00:32:04] Three Takeaways for Higher Education Presidents and Boards
Drumm McNaughton: Well, I look forward to that next conversation. Three takeaways for Presidents and boards. What do they need to be thinking about when it comes to what’s coming out of Washington for O Triple B? I’m sorry. It’s hard for me to say that it’s OB cubed for me,
Andy Vaughn: that’s fine, however you want to term it. I know number one is change is coming. There’s no Hail Mary that’s going to save you. You’ve got to embrace this change, and I think institutions are wise to embrace it, figure it out, be creative, and dive headfirst into these changes and navigate through. If you don’t do that, you’re not going to last very long.
Number two, these changes are very permanent in nature. Remember, Neg Reg can go back and forth, if it’s an executive level only decision, whoever comes into the White House next to either party could make a change very easily. That’s not how this happened this time, it’s an act of Congress. This is written in stone, not in pencil or pen. And the soonest this could change is probably five years away, I would say, I think this is actually permanent. These changes are going to last at least for the rest of our careers, for many of us. So don’t think that you’re going to get this reprieve in the end, I don’t think that’s coming. So embrace that change on a permanent basis.
Number three, embrace your creative side. Encourage your team to be at the table to come up with these solutions. Soon we’re going to be talking to a program group of faculty at Alliant, and in a program that will not receive the professional designation where loan limits are going to come down and we’re going to have to lower the cost of tuition. But to keep that program with a surplus on the finance side, we’re going to have to make some changes in expenses. But I don’t think administrators can just do that in a vacuum, it’s going to be re requiring the faculty to come in with the program directors as well. “Hey, let’s figure this out together. How can we meet the needs of what’s coming in Title IV in July of ’26 and how can we do that together?” Those are my three takeaways.
Drumm McNaughton: Thank you. Those are really great and I’m going to add one to it is it doesn’t really matter how the changes come about, the changes are there. Higher ed is very much collaborative. We want to say in our future, et cetera. We don’t get that with this one. To some degree with the Neg Reg we do, but this has been dictated. You have a choice to embrace it or not embrace it.
Andy Vaughn: Yep. If you ignore it, you’re going to pay that price.
Drumm McNaughton: Absolutely. What’s next for you? What’s next for Alliant?
Andy Vaughn: What’s next is navigating the changes that take place July 1st. We’ve been working on this since last summer. We were working on it before O Triple B even passed. We knew it was coming. We knew it would pass. And private lending is going to be big for graduate level institutions, and that’s about 99% of what we do. That’s a big change. So talking to private lenders. And also figuring out, the biggest risk I think for this change for graduate programs, is we estimate that 30% of graduate students will not qualify for private loans and programs that are going to need help beyond the federal loan caps. We also estimate that half of that 30% will not be able to secure a co-signer or don’t want to, so let’s say that’s 15%, another 5% may not want to take out private loans because of the interest rates and amortization schedules for repayment. So pick your number. Is it 10%, 15, 20? Yes, probably somewhere in there. This is unprecedented. We have no prior knowledge of data on what this impact is going to be.
So graduate programs specifically really have to think about differentiation, and that’s what we’re working on right now. Deliver a better value proposition, figure out the private lending piece, how that might impact your institution, and those are really what’s in the short term, impacting us.
Long term we still have our vision of growth. We’re going to talk about that in the next podcast specifically. But we’ve developed what’s called Project Evolve. And Project Evolve is more about growth than it is subtraction. But you have to have your eyes wide open. It’s not just changes at the federal government. Consumer demand is also changing. We have to meet consumers where they are as perspective students. We’ll talk about that soon.
Drumm McNaughton: Sounds good. Andy, thanks for joining me today. I look forward to part two and continuing our relationship.
Andy Vaughn: You Drumm always a pleasure.
Drumm McNaughton: Thank you, sir.
Thanks for listening today and a special thank you to Andy for joining me on this first of two parts. We’ll be going into the next part next week. Hope you can join us for that one too. Thank you.
