Making College Textbooks More Affordable

The price of college is on nearly everyone’s mind these days. Until now, the share of family income required to pay for a four-year public college has risen significantly only for low- and moderate-income families, but there is a growing sense across the nation that a college education may be moving beyond the financial reach of many middle-income families as well. Governors, state legislatures, and college presidents feel relentless pressure to restrain increases in the price of college, especially for those students who can least afford it.

Rising prices of textbooks and other learning materials – and steady increases in the total amount that students must pay for them each year – comprise just one component of the price of college, and a secondary expense for many students. But these outlays are very visible and especially frustrating to millions of students and parents. While the share of family income required to meet yearly textbook expenses has not risen much, prices are already too high for low- and moderate-income families and are pressing middle-income families as well.

The resulting groundswell of criticism against colleges, bookstores, and publishers has translated into action across the nation to do something about it. The political imperative to turn the page and restrain increases in the price of textbooks – indeed, to lower them if possible – cannot be overstated. A Search for Solutions. From a policy perspective, rapid price increases and lack of affordability are best understood as symptoms of a structural imperfection in the market for textbooks and learning materials – a market driven by supply rather than demand.

Faculty select textbooks from publishers, bookstores order them, and students must pay. The end consumer has no direct influence over the price, format, or quality of the product. Treating both the symptoms and the underlying cause of the problem thus requires a dual and simultaneous approach: • In the short term, steps must be taken to increase affordability for all students, but especially for those from low- and moderate-income families. • In the long term, a supply-driven, producer-centric market must be transformed into a demand-driven, college- and student-centric market.

Pursuing short-term improvements in affordability without addressing the problem of market failure is likely to undermine the quality and accessibility of learning resources in the future. Today’s Solutions. The good news is that states and colleges are already taking steps to increase affordability. A variety of actions is under way across the country to lower the burden on students and parents of yearly outlays for textbooks and learning materials (Exhibit 1).

These initiatives range from textbook rental programs, to the use of no-cost content whenever possible, to ensuring sufficient financial aid to cover textbook expenses for students who cannot afford them. While these short-term efforts have some disadvantages – limited application across institutional sectors, program costs indexed to the rising price of textbooks, and over-reliance on textbook resale that could exacerbate price increases – stakeholders who have undertaken them are to be highly commended.

Certain efforts in particular, such as collaboration among faculty and institutions, innovations in alternative textbook formats among traditional and nontraditional publishers, and the increasing use of digital technology to meet student and faculty demands for appropriate learning materials, will benefit students and families greatly. iii EXHIBIT 1: TODAY’S SOLUTIONS 1. Strengthen the Market for Used Textbooks • Used Textbook Initiatives • Guaranteed Buy-back Program • Book Swaps 2.

Utilize Faculty Textbook Guidelines • Submit Textbook Orders on Time • Retain Textbooks for a Longer Period • Know the Price of Textbooks • Consider Less Expensive Alternatives • Use the Same Textbook for Multiple Courses • Retain Older Editions 3. Provide Key Information to Students and Parents • Send Information before Term Starts • Post Textbook Lists and ISBNs Online 4. Increase Library Resources • Textbook Reserve Programs • Faculty Use of E-reserves • Donations of Textbooks to Libraries • Textbook Lending Libraries 5.

Adopt Alternatives that Lower Price • No-frills Textbooks (Format Alternatives) • Custom Textbooks (Content Alternatives) • Buying Consortiums • Profit Margin Reduction 6. Implement a Textbook Rental Program • Full Rental Programs • Partial Rental Programs • Hybrid Rental Programs 7. Improve Related Financial Aid Policies • Provide Emergency Vouchers, Credits, or Loans • Create Need-based Grants for Textbooks • Increase Financial Aid to Cover Textbook Expenses 8.

Utilize 21st Century Technology • Electronic Textbooks • No-cost Online Textbooks • Open Educational Resources (OER) • Print on Demand • Electronic Readers • Online Collections of Educational Content iv Tomorrow’s Challenge. The bad news, however, is that most of the short-term solutions now underway – while well-intentioned and sorely needed – are not aimed at, and will not eliminate, the underlying structural imperfection in the market for textbooks and learning materials. All stakeholders – students, faculty, colleges, bookstores, and publishers as well – are victims of the failure of this market.

Blaming or punishing any stakeholder for market failure is not the answer. What is needed is a collaborative effort to build a true 21st century solution – a national digital marketplace – that can meet the needs of all stakeholders, particularly students and families. The centerpiece of such a marketplace (Exhibit 2) must be an enabling infrastructure of technology and support services with which institutions, students, faculty, bookstores, publishers, and other content providers can interact efficiently.

This infrastructure would consist of a transaction and rights clearinghouse, numerous marketplace Web applications, and hosted infrastructure resources. The transaction and rights clearinghouse would process each multi-part transaction; collect funds from the purchaser; distribute royalties, fees for resources, and/or commissions; secure rights through a digital rights management capability; and track content. Marketplace Web applications would enable transactions with content providers and institutional portals.

The hosted infrastructure would ensure that all systems interface, support a registry of millions of learning items, provide marketplace services to thousands of campuses and millions of users, and process hundreds of millions of transactions for both fee-based and no-cost content. While potential obstacles to development exist in the areas of agreement on a single system, technological standards, copyright policy to address digital content, and start-up resources, they are clearly surmountable. Furthermore, groundbreaking work has been done by California State University (CSU).

When fully developed, CSU’s statewide solution can be the first step toward a national digital marketplace for voluntary use by other states, colleges, faculty, and students. Next Steps. Short- and long-term efforts to improve textbook affordability must be led by the higher education community with the close involvement and cooperation of the publishing and technology industries. However, the federal government can foster the most effective and promising efforts by states, colleges, and other stakeholders in several ways: • Encourage states and colleges to adopt those short-term solutions already identified that best suit their needs. Partner with states, colleges, and the private sector to ensure grant aid is sufficient to cover textbook expenses for needy students. • Support experiments to assess the costs and benefits of alternative approaches under consideration by states and colleges. • Provide for the timely prototyping of the market enabling infrastructure needed for implementation of a national digital marketplace. • Promote creation of a voluntary national textbook information clearinghouse as an early product of the prototyping and testing effort, to build support and momentum. Provide incentives to states and institutions to use the national digital marketplace once designed and implemented. A federal strategy designed to advance, complement, and integrate the best state and college initiatives could improve the affordability and quality of learning resources for all stakeholders. v EXHIBIT 2: TOMORROW’S CHALLENGE: CREATING A NATIONAL DIGITAL MARKETPLACE National Digital Marketplace Institutional Requirements, Representation & Services CSU Digital Marketplace Model Marketplace Technology & Services Infrastructure -Year Colleges Textbook Publishers 2-Year Colleges Industry Requirements, Representation & Services Content Developers Proprietary Colleges Book Stores Transaction & Rights Clearinghouse Marketplace Web Applications Hosted Infrastructure Resources Textbook Publishers Content Developers Book Stores • • • Marketplace Enabling Infrastructure Transaction & Rights Clearinghouse Marketplace Web Applications Hosted Infrastructure Resources Students Institutions Instructors vi FOREWORD In a bipartisan letter from Congressmen Howard P. Buck” McKeon and David Wu in May 2006, the Advisory Committee was asked to conduct a one-year study of the cost of college textbooks and to make recommendations on increasing the affordability of textbooks. A primary objective of this study was to “continue to shed light on this issue so that consumers are aware” of the rising costs of textbooks. In addition, the letter specifically requested that the Advisory Committee fulfill the following objectives in conducting the study (Appendix A): • Investigate further the problem of rising textbook prices. Determine the impact of rising textbook prices on students’ ability to afford a postsecondary education. • Make recommendations to Congress, the Secretary, and other stakeholders on what can be done to make textbooks more affordable. As a first step in conducting the study, the Advisory Committee asked Dr. James Koch, an economics professor and former college president, to provide an economic analysis of the textbook market and factors pertaining to textbook pricing, and to suggest an initial design for the study. In September 2006, the Committee held a public hearing to officially launch the study.

A distinguished panel of representatives from the policy, higher education, publishing, and research communities commented on the proposed study design and offered further suggestions on the study. Over the next eight months, three field hearings were held across the country to hear from all stakeholder groups who were engaged in efforts to make textbooks more affordable. These hearings were held in Chicago, Illinois in December 2006; Santa Clarita, California in March 2007; and Portland, Oregon in April 2007. Information from the hearings was used to inform the findings and recommendations in this report.

In addition to the hearings, the Committee conducted an extensive review of the literature – including state legislative initiatives – and reached out to all stakeholders. As the study progressed, it became apparent that most of the solutions currently being implemented by states and colleges did not and could not address the underlying structural imperfections identified in Dr. Koch’s initial paper and study design. Indeed, some of the shortterm solutions could very well exacerbate the failings of the existing market for college textbooks and learning resources.

Accordingly, the Advisory Committee made a special effort to identify long-term approaches, such as that of California State University, aimed at designing and implementing a 21st century digital marketplace. To guide our efforts, we commissioned a paper from Mr. Patrick McElroy, CEO and founder of Learning Content Exchange, who has nearly 30 years of experience in education, technology, and publishing, to assess the need for such a marketplace, delineate its basic features, outline the nature of the effort that implementing such a system would require, and identify the associated challenges.

The Koch and McElroy papers are available on our website at www. ed. gov/acsfa. vii ACKNOWLEDGEMENTS The Advisory Committee is indebted to many individuals for their important contributions to the completion of this study and report. Dozens of experts across the country provided us with extensive guidance and support. Many served as panelists during our hearings in Washington DC; Chicago, Illinois; Santa Clarita, California; and Portland, Oregon. Included in Appendix B is a complete list of these individuals.

For graciously hosting the three regional hearings, we are indebted to: • The University of Illinois, Chicago • College of the Canyons, Santa Clarita, California • Portland State University, Portland, Oregon. In addition, for their invaluable technical advice, we give special thanks to: • Dr. James Koch, President Emeritus and Professor of Economics Old Dominion University, Norfolk, Virginia • Mr. Patrick McElroy, CEO and founder of Learning Content Exchange. ix TABLE OF CONTENTS Executive Summary ……………………………………………………………………………………………………… ii Foreword…………………………………………………………………………………………………………………….. vii Acknowledgements ………………………………………………………………………………………………………. ix A Search for Solutions Focus of the Study ……………………………………………………………………………………………………… 1 Stakeholder Perspectives …………………………………………………………………………………………….. Affordability: What Do the Data Show? ……………………………………………………………………….. 5 Improving Affordability for All……………………………………………………………………………………. 9 Today’s Solutions Strengthen the Market for Used Textbooks ………………………………………………………………….. 11 Utilize Faculty Textbook Guidelines …………………………………………………………………………… 3 Provide Key Information to Students and Parents…………………………………………………………. 14 Increase Library Resources………………………………………………………………………………………… 15 Adopt Alternatives that Lower Price …………………………………………………………………………… 16 Implement a Textbook Rental Program……………………………………………………………………….. 18 Improve Related Financial Aid Policies ………………………………………………………………………. 0 Utilize 21st Century Technology…………………………………………………………………………………. 21 Benefits of Short-term Solutions ………………………………………………………………………………… 23 Tomorrow’s Challenge The Textbook Marketplace in Transition …………………………………………………………………….. 27 The Future System: A National Digital Marketplace …………………………………………………….. 1 How a National Digital Marketplace Would Work ……………………………………………………….. 35 Building a National Digital Marketplace: A Collaborative Effort……………………………………. 38 Potential Obstacles……………………………………………………………………………………………………. 43 Next Steps The Federal Role………………………………………………………………………………………………………. 47 What Congress and the Secretary Can Do………………………………………………………………… … 48 Endnotes………………………………………………………………………………………………………………………. 51 References……………………………………………………………………………………………………………………. 59 Appendices………………………………………………………………………………………. 71 A SEARCH FOR SOLUTIONS The outcry over rising prices of college textbooks and instructional materials is a manifestation of the growing frustration with the escalating price of college.

There is a very strong feeling across the nation that this basic student expense – like most other college expenses – has become unaffordable for millions of students and families. This, in turn, has triggered a flurry of activity and potential remedies in state legislatures and on college campuses aimed at lowering these outlays by students and parents. Unfortunately, these well-intentioned initiatives have been punctuated far too often by an unproductive debate among stakeholders, dominated by claims and counterclaims as to who is most responsible for rapidly rising prices of textbooks:

Publishers have been the target of charges that they take excessive profits, set wholesale prices too high, spawn new editions far too often, bundle textbooks with expensive supplements that add little value, and seek to ban re-importation of textbooks they sell for less abroad. Bookstores have been accused of exacerbating the problem by not selling components of bundles separately; stocking too few used textbooks, previous editions, and lower-cost options; not paying students enough for used textbooks; and setting profit margins too high.

Faculty have been faulted for largely ignoring price, routinely assigning textbooks only partially relevant to the course, switching from textbook to textbook on a whim, selecting lower-priced alternatives very rarely, and failing to use all the material in the bundles students are required to buy. Colleges have been taken to task for failing to guide faculty in textbook selection, not providing students and parents with guidance on planning for textbook expenses or venues for textbook purchase other than the college bookstore, failing to eep enough reserve copies at the library, providing insufficient financial aid to cover textbook costs, and not disbursing financial aid before students need to purchase textbooks. Students have even been held partially responsible for placing more importance on the price of a textbook than on how it improves the learning experience, not acknowledging that the price of a textbook is actually the purchase price minus the amount for which they sell it, and not being smart shoppers by taking advantage of options readily available to them. Focus of the Study.

To improve the tenor and quality of the debate, our one-year study took a different tack: a focus not on who is responsible for rising prices, but rather on a search for solutions. In this vein, the report first examines the problem from the viewpoint of each major stakeholder. It then analyzes whether textbooks in fact have become unaffordable over time and, if so, for whom and what might be done about it. Most important, it shows how higher education can lead an effort to make textbooks more affordable for all students in both the short term and the long term, and how Congress and the Secretary of Education might help to achieve that end. Claims and Counterclaims about Who Is Responsible Stakeholder Perspectives Three regional hearings and an extensive review of the literature have revealed that rapidly rising prices of college textbooks are a symptom of a complex underlying problem in the market for textbooks and learning materials. To accurately define the full dimensions of this problem, it is essential to start with an examination of the perspectives of the individual stakeholders. While often in conflict, these points of view include valid concerns and legitimate interests that must be addressed if comprehensive solutions are to be found.

It is especially important to include in this assessment of the problem any actions that are already underway to solve it – efforts that can become models for other stakeholders to emulate. Students and parents are experiencing sticker shock when it comes to college textbooks. After assessing family resources, applying for financial aid, and often taking out additional public and private loans, students enroll in college, select courses, and go about the process of purchasing required textbooks and other course materials.

Students and parents often pay the textbook bill out of pocket. What they see is often out of line with the price of books in other venues. Since the textbook bill comes last, it can strain or exceed remaining financial resources. In such cases, textbook expenses can become the final barrier to college. Some students are much more affected by price than others. For students enrolled at community colleges, where annual textbook expenses are often nearly equivalent to the price of tuition, the low-cost option of community college is effectively doubled in price. For other students, the timing of financial aid disbursement can result in gaps between the start of classes and the ability to purchase textbooks and course materials. These students especially would benefit from lower price options. Many students are more focused on their inability to purchase materials that meet their individual learning needs. Publishers’ bundling practices in which textbooks, CDs, and other supplemental materials are offered for a single non-negotiable price, are irritating to those who prefer to purchase only the components relevant to their needs.

Similarly, many students prefer to purchase used books because they do not plan to keep them, yet used book supplies are often inadequate in part due to frequent edition changes by publishers. 2 Students are interested in the appropriate application of digital technology to instructional materials. For some, portability is a benefit, and for most, schooled in computer technology and Internet use, the Web beckons as a source of research and easily accessible no-cost materials. Across the board, students are frustrated by the seemingly rapid depreciation of textbooks when they attempt to sell them to the college bookstore during end-of-term buy-back. Student and Parent Concerns The cost of textbooks is often the final barrier to college Students are interested in the application of digital technology to instructional materials 2 The primary interest of faculty members has been choosing textbooks and course materials that provide the best available learning tools for their students.

Over time, many faculty have come to understand that the educational value of particular texts must be balanced with their prices. 4 But when selecting textbooks for course adoption, faculty can be frustrated by the perceived difficulty of acquiring pricing information. In addition, some instructors have become increasingly disenchanted with the choice of a single textbook for a particular course, and have expressed a desire to assemble modular materials from multiple sources, thus allowing them to pick the best of available resources for each topic a course will cover.

Faculty find that each publisher’s natural desire to protect its own proprietary materials has made combining material from two or more publishers nearly impossible. Increasingly, faculty are turning to Internet resources, no-cost materials, used books, and no-frills textbooks in order to satisfy student demand for low-price materials. 5 Faculty Priorities Many instructors are disenchanted with use of a single textbook Publishers are aware of the growing affordability problem and are taking important steps to make textbooks more affordable by producing electronic textbooks, as well as multiple types of no-frills and custom texts.

Individual publishers are moving into the digital and multimedia markets, but investments in technology infrastructure and research remain high as competition among publishers depresses collaborative effort. The significant investments in proprietary materials and the integrity of their peer-reviewed textbook development processes can inhibit publisher flexibility to student demand. 6 Publishers stress that they are dedicated to producing and bundling supplemental materials as learning enhancements, which clearly add value to instruction.

They argue that frequent edition changes in many subjects are necessary to keep up with the pace of research and knowledge acquisition. Finally, publishers maintain that the unbundling of textbook packages does not necessarily reduce price because development costs are attached to each piece, and they are able to offer a discount only when a student purchases the materials as a group. 7 Publisher Interests Publishers argue that supplemental materials add value to instruction

Public two- and four-year college systems have become particularly sensitive to the rising price of textbooks and the increasingly vocal reaction of students and parents. In several states, such as Connecticut, Virginia, Illinois, and Minnesota, studies have been conducted to determine what can be done to make textbooks more affordable. Many institutions across all sectors have created taskforces to evaluate the situation as it pertains to their individual campuses and to develop recommendations to reduce textbook prices. 8 Some have already implemented major changes to improve textbook affordability.

Solutions College and Bookstore Views 3 Many college bookstores are trying to make college textbooks more affordable involve recommendations to faculty and students on book selection and purchase, rental programs, used book initiatives, and other efforts. Many college bookstores are participating in efforts to make college textbooks more affordable. Bookstore managers report initiatives to increase the stock of used books, compare prices across used and retail book distributors and wholesalers, offer textbook scholarships, as well as share tips on book shopping with their customers. Some bookstores have reduced profit margins on textbooks. Policymaker Imperatives State lawmakers have identified textbook prices as a significant concern for students and have initiated legislative efforts to address the problem. Although only a minority of the proposed bills have passed, the effort is a clear indication that reducing textbook expense is a high priority for policymakers. Over the last three years, 34 states have proposed a total of more than 100 bills related to textbook expenses. 0 Proposed bills have included eliminating state sales tax on textbooks, providing guidelines for stakeholders, recommending rental programs, and improving the process of financial aid distribution as it affects textbook purchase, among other initiatives. A widely referenced statute is Connecticut’s, which requires that textbook publishers reveal to faculty information on pricing and the length of time a new edition will be viable. 11 Federal lawmakers have also been hearing complaints about this issue from their constituents.

Congressman David Wu responded by asking the Government Accountability Office (GAO) to investigate the causes of rising textbook prices. In 2005, the GAO released College Textbooks: Enhanced Offerings Appear to Drive Recent Price Increases. The GAO report provided a comprehensive overview of the textbook industry in an attempt to explain the many factors contributing to the rise of college textbook prices. As federal lawmakers absorbed the report’s implications and listened to constituent pleas, both Congressman Wu and Congressman Howard P. Buck” McKeon requested that the Advisory Committee study the issue in-depth for one year and provide recommendations on making textbooks more affordable. 12 Over the last three years, 34 states have proposed over 100 bills related to textbook costs An assessment of concerns, interests, and actions already underway is an essential first step in defining the problem and searching for solutions. The problem involves much more than textbook prices and their rate of increase over time. It involves the valid concerns and legitimate interests of all stakeholders.

The underlying issues are complex and include not only the finances of students and parents, but also the faculty’s understandable interest in the highest quality, up-to-date textbooks and instructional materials to drive learning. They include not only the advance of technology and its application to college instruction, but also the need to maintain a robust private publishing industry to meet the future needs of higher education. To be effective and comprehensive, solutions must match the full dimensions of the problem. 4

Affordability: What Do the Data Show? A major objective identified by Congress in the letter requesting this study (see Appendix A) was to determine the impact of rising textbook prices on students’ ability to afford a postsecondary education – a primary concern of their constituents. Assessing affordability depends on how the term is defined. Consider the following policy questions, each of which is related to a particular aspect of affordability: • How much do students spend annually on textbooks and learning materials? Has the total amount students pay each year risen faster than the prices of other commodities? • Has the total amount students pay each year risen as a percentage of family income over time? • Does total grant aid from all sources, on average, cover the amount that low- and moderate-income students pay annually? Taken together, the answers to these questions help to define affordability. Annual Textbook Expenses. Estimates of total annual expenditures per student vary by source.

The following estimates have figured prominently in the recent debate about affordability: • According to GAO, first-time, full-time students spent a total of $898 at four-year public colleges and $886 at two-year public colleges on books and supplies in 2003-04. 13 • According to the College Board, sample average undergraduate budgets for 2003-04 put annual expenditures on books and supplies at $817 at four-year public colleges and $745 at two-year public colleges. 4 While other estimates of annual expenses on textbooks vary depending on the year, type and control of institution, and subset of students sampled, it seems reasonable to conclude that these expenditures can easily approach $700 to $1,000 today even after supplies are subtracted. 15 However, whether the estimate is $700 or $1,000, affordability cannot be assessed by examining the absolute level of total expenses alone. It depends on how much expenses have risen over time, what share of family income they represent, and whether they are typically covered by grant aid for students from low- and moderate-income families.

Annual per student expenditures on textbooks can easily approach $700 to $1,000 today Four Policy Questions 5 200 180 160 140 Percentage 120 100 80 60 40 20 0 1987 1988 1989 1990 FIGURE 1: INCREASE IN COLLEGE EXPENSES AT TWO-YEAR PUBLIC COLLEGES 1987 TO 2004 Tuition & Fees Textbooks Room & Board Other Costs CPI Transportation 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Analysis of data from the College Board Annual Survey of Colleges and Bureau of Labor Statistics 250 FIGURE 2: INCREASE IN COLLEGE EXPENSES AT FOUR-YEAR PUBLIC COLLEGES 1987 TO 2004 004 Tuition & Fees 200 Percentage 150 Room & Board 100 Textbooks Transportation Other Costs CPI 50 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Analysis of data from the College Board Annual Survey of Colleges and Bureau of Labor Statistics 6 Annual Textbook Expenses Over Time. The cumulative percentage increase of tuition and fees, room and board, transportation, other expenses, and books and supplies for two-year and four-year colleges are displayed in Figures 1 and 2. 6 These increases are compared to the Consumer Price Index (CPI) over the same period. Nearly all the Textbook components of college expenses outpaced the CPI from 1987 to 2004 for expenses have both two-year and four-year public colleges. Although tuition and fees risen more rapidly dominated the growth in expenses, textbook expenses rose more quickly than prices of than every other component at two-year public colleges, and every commodities component but room and board at four-year public colleges.

Textbook nationwide expenses rose far more rapidly than the prices of other commodities nationwide: 107% at two-year public colleges and 109% at four-year public colleges, compared to 65% for the CPI. According to this measure alone – annual expenses per student over time – policymakers might conclude that textbooks have become increasingly unaffordable. Annual Textbook Expenses and Family Income. Although total annual expenditures per student for textbooks increased significantly over the period, they changed very little as a percentage of family income.

Figure 3 shows textbook expenses over time as a percentage of family income at two-year and four-year public colleges. 17 Overall, expenses for textbooks stated as a percent of family income have been trending upward, but only very slightly: • For low-income students (at the 25th percentile of family income) at four-year public colleges, textbook expenses as a percentage of family income grew slightly from 2. 0 percent of family income in 1987 to 2. 2 percent in 2004. • For high-income students (at the 75th percentile of family income), textbook expenses as a percentage of family income also increased slightly from 0. percent in 1987 to 0. 8 percent in 2004. Policymakers might thus conclude that, as a percentage of family income, annual expenses per year for textbooks today appear to be only marginally less affordable than nearly twenty years ago. Annual Textbook Expenses and Grant Aid. Shown in Figure 4 is the total amount of grant aid per student from all sources by family income at two-year and four-year public colleges. This amount is compared to total tuition and fees, transportation, and other expenses in their institution’s cost of attendance, excluding room and board and books and supplies. 8 • Even for the lowest income students at four-year public colleges, total expenses minus room, board, books, and supplies exceeded total grant aid in 2004 by $1,513 ($7,479 – $5,966). But textbook expenses have not risen much as a percentage of family income Grant aid is not sufficient to cover textbook expenses for low- and moderate- income students 7 FIGURE 3: TEXTBOOK EXPENSES AS A PERCENT OF FAMILY INCOME 1987 TO 2004 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 1987 1988 1989 1990 1991 1992 4-Year Public College Low Income 2-Year Public College Percent -Year Public College Middle Income High Income 2-Year Public College 4-Year Public College 2-Year Public College 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Analysis of data from the College Board Annual Survey of Colleges and Postsecondary Education Opportunity, Bachelor’s Degree Attainment by Age 24 by Family Income Quartiles, 1970 – 2004. FIGURE 4: TOTAL GRANT AID AND COLLEGE EXPENSES 2004 Total Grants at Two-Year Public Colleges Total Grants at Four-Year Public Colleges Average Four-Year Public Tuition & Fees, Transportation, Other Expenses No Room & Board No Books & Supplies 7,479 $5,966 $5,841 $5,300 $3,046 $3,100 $2,897 Average Two-Year Public Tuition & Fees, Transportation, Other Expenses $3,697 No Room & Board No Books & Supplies $2,531 $1,932 $1,808 $1,666 $1,580 $1,227 $798 $698 $527 $4,739 $0 – 9,999 $10,000 19,999 $20,000 29,999 $30,000 39,999 $40,000 49,999 $50,000 59,999 $60,000 69,999 $70,000 ­ 79,999 Low Family Income Moderate Family Income Source: Analysis of data from the College Board Annual Survey of Colleges and Postsecondary Education Opportunity, Financial Aid Packaging for Full-Time,

Full-Year, One Institution, Dependent Undergraduate Students. • 8 2004 • Likewise, even for the lowest income students at two-year public colleges, total expenses minus room, board, books, and supplies exceeded total grant aid by $1,693 ($4,739 – $3,046); Textbook The bottom line is that for students from low- and moderate-income expenses are not families, total grant aid from all sources does not typically cover textbook affordable for expenses, much less room and board, at either two- or four-year public students from lowcolleges.

Even for students who live at home with parents, these and moderateexpenditures must be financed through earnings from work and/or income families borrowing. Thus, while textbook expenses over time have not increased much for these students as a percentage of family income, they can represent a significant barrier to access and persistence. Improving Affordability for All Even after accounting for total grant aid, textbooks and other learning materials appear to be unaffordable for students from low- and moderate-income families at both two- and four-year public colleges.

Whether they are affordable or not for middle-income students depends on the definition of affordability used. However, perhaps the most important policy question remains: can annual expenditures on textbooks and learning materials be reduced for all students without diminishing the quality and diversity of those resources in the process? The answer is yes, both in the short term and in the long term as well. Short-term solutions are those that can and should be implemented today. These solutions will make textbooks more affordable by reducing annual per student expenditures on textbooks – a major symptom of the problem.

While effective and laudable, the vast majority of these initiatives do not address the underlying imperfection in the market for textbooks – a market driven by supply rather than demand. Indeed, pursuing short-term improvements in affordability alone, without simultaneously addressing the problem of market failure, is likely to undermine the quality and accessibility of learning resources in the future. The market for textbooks and learning resources is broken. Faculty select textbooks from publishers, bookstores order them, and students must pay.

The end consumer has no direct influence over the price, format, or quality of the product. In the long term, the supply-driven, producer-centric market of today must be transformed into the demand-driven, college- and student-centric market of tomorrow. Doing so will require the development and implementation of a national digital marketplace serving all stakeholders and all sectors of higher education. Fortunately, the necessary technology is available today and a robust institutional model for such a marketplace is being developed by California State University. Today’s Solutions

Tomorrow’s Challenge 9 TODAY’S SOLUTIONS The study hearings and literature review revealed a long list of actions currently underway in states and on college campuses across the nation aimed at lowering the annual outlays on textbooks by students and parents. That such a wide variety of initiatives exists is testament to both the perceived immediacy of the problem and the ingenuity of the stakeholders. While these short-term efforts do have some disadvantages, and may not in each case be suitable for all stakeholders, those who have undertaken them are to be highly commended.

Stakeholders who have yet to act are best advised to review the efforts of their peers and implement those most suited to their particular needs. The initiatives have been organized into eight categories that represent the entire range of emerging short-term solutions. Used textbooks offer perhaps the most direct way for students to save on textbook expenses. Used books are typically 25 percent less expensive than new ones and many students prefer to purchase textbooks used. 19 But the demand for used books often exceeds the supply.

Used textbooks comprise only 25-30 percent of all those in the market. 20 The used textbook market has become highly competitive, involving both traditional wholesalers and online retailers. College bookstores typically order as many used textbooks as they can, as early as possible, to ensure availability to meet student demand because supply is limited. Bookstores obtain their supply from two main sources: students and used book wholesale companies, with former – buy-back from students – being the most direct means of obtaining stock. Solution #1: Strengthen the Market for Used Textbooks

In addition to purchasing used textbooks at the campus or local bookstore, The used book students also have the option of purchasing them from online retailers such as Amazon. com or from online student book swap sites. The Internet market is highly accounts for a substantial and growing percent of all sales of used competitive among wholesalers and textbooks. 21 online retailers There are three major means of strengthening the market for used textbooks, described in more detail below: used textbook initiatives, guaranteed buy-back programs, and online book swaps.

A used textbook initiative is a multi-faceted approach implemented by institutions to increase used book availability. The main emphasis is on increased communication between the campus bookstore and faculty regarding text selection options and ordering procedures. Specifically, the bookstore provides faculty with information on deadlines, the effects of switching editions or using different textbooks, and the impact of ordering bundled materials. Used Textbook Initiatives 11

Faculty have a critical impact on the price and availability of used textbooks, and can save students money by submitting orders to the bookstore by the deadline. If the bookstore knows prior to buy-back which textbooks will be used in the upcoming term, the store is guaranteed buyers, and resale value for students is higher. Early notice of re-adopted textbooks allows the bookstore to determine the number of textbooks that can be purchased at buy-back, and the number that must be located through wholesale distributors.

Faculty who use the same edition for multiple terms ensure a higher resale value for their students. One example of a used textbook initiative is the San Mateo County Community College District Bookstores, which entails sending weekly emails to faculty with reminders, updates, and information about the textbook ordering process. As a result of the initiative, nearly 90 percent of faculty now turn in their orders on time, and used textbook sales increased by 27 percent between 2004 and 2006.

The bookstore works with faculty to extend text adoption timeframes and encourages faculty to use bundled materials only when absolutely necessary. To provide as many used textbooks as possible, the bookstore works with multiple wholesale companies and commercial online sites. 22 Textbook reports from several states have highlighted recommendations for enhancing used textbook markets and have described best practices, including used textbook initiatives. 23 A new advocacy group, the Used Book Association, was created in August 2006 to promote the use of used textbooks. 4 A guaranteed buy-back program identifies for students, at the time of purchase, which texts the campus bookstore will accept for buy-back and often guarantees a buy-back price if faculty book selection is known. Such a program may increase the supply of used textbooks by disseminating accurate and timely information to students. Approximately two-thirds of students sell back at least one textbook to the campus bookstore, and many students, particularly at community colleges, sell back all of their books. 25 Yet students often have no buy-back guarantee or information on buy-back prices.

Typically, if a textbook will be used again, the buy-back price is up to 50 percent of the retail price. If it will not be used again, the bookstore pays the student between 5 percent and 35 percent of the retail price, but only if the textbook can be sold to a wholesaler. 26 Some bookstores cross-reference wholesale distributors’ price lists against course textbooks in order to offer students the best price. The University Book Store at the University of Washington (UW) provides a number of services to assist students with selling back their textbooks, including guaranteed buy-back.

The flagship bookstore serving UW’s Seattle campus operates its textbook buy-back service year-round. Guaranteed Buy-back Programs 12 The bookstore has committed to paying students 50 percent of the current price of a new textbook adopted for a future UW class whether the student bought the textbook new or used. Students are able to look up buy-back prices online to determine in advance how much they will receive for their textbooks. In addition, the bookstore has an online buy-back service called “Buy-back Alerts” that notifies students via email when buy-back prices increase after a faculty textbook adoption is received. 7 Online book swaps allow students more control over used textbook resale by connecting student buyers and sellers directly, usually via the Internet, and enabling them to set their own prices. Online book swaps, which can be specific to a single school or national in scope, are operated by institutions, students, or outside organizations. The majority serve just one school or school system. ExchangeHut. com is an example of a student-run, national online book swap. The site allows students to compare posted textbook prices with online retail sites that also offer used textbooks, such as Amazon. om and Half. com. ExchangeHut. com estimates that students save an average of $150 per semester by using its service and receive 40-70 percent of the original purchase price for the textbook. 28 Another example is an online non-profit book swap site, CampusBookSwap. com, sponsored by The Student Public Interest Research Groups’ (PIRGs) Make Textbooks Affordable campaign. The site allows students enrolled in a particular college or university to buy and sell textbooks from each other. Two hundred fifty campuses are currently registered on the site. 9 Book Swaps Although not all faculty members are aware of it, their actions and choices can have a major effect on textbook affordability. Several institutions have developed faculty guidelines pertaining to selecting and ordering textbooks. 30 Many states have also proposed or implemented legislation or state recommendations that require or encourage faculty to be proactive on affordability. 31 Due to academic freedom issues, states and institutions cannot impose strict regulations pertaining to faculty selection and use of texts.

However, they can develop guidelines that provide information to faculty and encourage them to act in the best interest of students whenever possible. Faculty guidelines recommended by states and institutions include: • Submit Textbook Orders on Time. Faculty can make textbooks more affordable simply by turning in their orders to the bookstore by the requested deadline. This allows bookstores enough time to find used textbooks, comparison shop for the best prices, and avoid Solution #2: Utilize Faculty Textbook Guidelines 13 additional shipping fees.

In addition, it enables bookstores to offer higher buy-back prices to students for textbooks that the bookstore knows will be used again. • Retain Textbooks for a Longer Period. Faculty can commit to using the same textbook for multiple terms or years so that students have the opportunity to purchase the text used rather than new, and receive a greater return upon buy-back. • Know the Price of Textbooks. College faculty can become more knowledgeable about the retail prices of available texts in their discipline and consider price when making a selection. 32 • Consider Less Expensive Alternatives.

Among textbooks of equal quality, a faculty member can select the least expensive. Faculty can also seek information on low-price alternatives, such as custom and no-frills textbooks. • Use the Same Textbook for Multiple Courses. Faculty can work with others across the department who teach the same course in order to jointly select a text in order to increase the supply of used books. • Retain Older Editions. Faculty can communicate with the publisher about differences between old and new editions of a textbook, and continue to use the older edition if the new one does not contain significant changes.

This would enable students to have continued access to used textbooks. 33 In addition, other guidelines seek to prohibit faculty from selling their complimentary sample copies of textbooks,34 receiving royalties on textbooks they have authored when used for their own courses, and assigning a textbook if they do not plan to use at least 50 percent of its content in the course. Solution #3: Provide Key Information to Students and Parents Educating students and parents is an essential component of making textbooks affordable.

While returning students are more likely to be prepared for textbook expenses and know how to reduce expenses, incoming freshman and their parents are often ill-equipped for this task. Although colleges include textbooks in the cost of attendance, many new students and their parents do not understand that they need to plan for this expense because college is often the first time that students are responsible for buying their textbooks. Two steps can be taken to ensure that information is made readily available: 14

First, information can be sent early to students and parents about the amount to budget for textbooks, as well as information on available alternatives, such as Internet textbook sites, online book swaps, offcampus bookstores, and the use of library reserves. This information should be provided to all students, but a particular effort should be made to provide it to incoming freshmen and their parents. Institutions can better assist students with this process by posting links to online book swaps and Internet vendor sites on the bookstore or college websites.

Second, information about textbook selection for courses can be made available prior to the start of the term. Many colleges have begun making course syllabi and textbook lists available online. 35 This information usually includes textbook edition information and ISBNs – numbers used by the publishing industry to identify each edition and printing of a textbook. Having this information available early allows students more time to comparison shop and ensures purchase of the correct edition of each textbook. Send Information Before Term Starts Post Textbook Lists and ISBNs Online

Offering textbooks and other course materials on reserve at the campus library is already a well-established practice and an excellent way to provide students with free access to necessary or supplemental materials. However, libraries often face budget and space limitations when it comes to reserve textbook volume. In addition, libraries often cannot purchase for reserve a quantity of textbooks reasonably proportional to course enrollments. This makes immediate reserve availability an uncertain prospect for most students. College administrators, libraries, and faculty have implemented several ways to deal with these limitations.

In 2005, the University of Wisconsin, Madison, implemented a textbook initiative to supplement the library reserve program as recommended by a 2004 university textbook taskforce. The program specifically focuses on making high-priced textbooks available, that is, those that cost more than $100. Funded by a special gift account through the university development office, the program costs $1,500 to $3,000 per semester in addition to the regular reserve budget. The program makes an effort to place these highpriced textbooks at multiple libraries around campus, particularly at those with extended hours.

Over time, textbooks have averaged between 30 and 50 student checkouts per semester. Certain math and science textbooks had between 300-500 checkouts over the past two years. 36 Another approach is to place some course material on e-reserve through the campus library or course website. E-reserves are chapters, articles, or entire texts made available online with free access to students. 37 Solution #4: Increase Library Resources Textbook Reserve Programs Faculty Use of E-reserves 15 Donations of Textbooks to Libraries Other efforts include the donation by interested parties of textbooks to the library.

A policy of the campus bookstore at the College of San Mateo is to donate a copy of each major textbook to the library using bookstore revenue. 38 Bedford, Freeman, and Worth Publishing Group has donated copies of its textbooks to college and department libraries after learning of the needs of low-income students. 39 Rutgers University has recommended that faculty donate copies of complimentary textbooks for library reserve use. 40 Although not common due to high start-up costs, another approach is to create a textbook lending library. The 1914 Memorial Library at Williams College, in operation for nearly 100 years, is an example.

The purpose of the library is to reduce textbook expenses for students who receive financial aid. The library serves about 900 students and is estimated to save each of them $200 in textbook expenses. As a supplement, each student on financial aid receives a $60 voucher to purchase any necessary textbook unavailable through library holdings. If a student requires a textbook that costs more than $100, the voucher may be converted into an Expensive Book Voucher that will pay for the book, regardless of price. At semester’s end, students must give the textbooks purchased with vouchers to the library.

The 1914 Memorial Library is open for one month at the beginning of each semester exclusively for the use of financial aid students. Any textbooks that remain in the library after the first month are made available to the general student population. The library stocks 35,000 textbooks and related course materials. 41 Textbook Lending Libraries Solution #5: Adopt Alternatives that Lower Price Publishers, bookstores, and institutions have multiple methods at their disposal to lower the price of textbooks. Publishers can produce low-price options by altering either the format or content of a textbook.

Institutions and bookstores can work collaboratively to form buying consortiums for custom texts. Finally, bookstores and the institutions affiliated with them can work together to reduce textbook profit margins. Format alternatives, known as no-frills textbooks, include paperbacks, limited color texts, spiral bound versions, and loose-leaf hole-punched versions. No-frills textbooks are cheaper than regular textbooks, usually by 25 to 50 percent. 42 However, while certain types of no-frills textbooks can enter the used book market, others, such as loose-leaf textbooks, have no resale value.

Faculty selection of no-frills textbooks is often dependent on publishers providing information on such options. Examples include Thomson Higher Education, which offers no-frills textbooks through the Thomson Advantage Program. These textbooks are one-color, text-only books that sell for 25 percent of the price of a traditional textbook. 43 All of the major publishers offer no-frills options. 44 No-frills Textbooks 16 Content alternatives, known as custom textbooks, are created when a publisher combines specific chapters from one or multiple texts and other forms of educational content into a single custom text.

Eliminating portions of books that will not be used allows publishers to sell custom textbooks for lower prices. Faculty enjoy the ability to select the exact materials needed and students appreciate paying only for what will be used. 45 Due to consumer demand and new technology that reduces production costs of custom textbooks, custom publishing is one of the fastest growing areas in the industry. 46 Drawbacks to custom textbooks include the fact that they have little or no buy-back value and that such books can only be created currently from the materials of one publisher, rather than from multiple publishers.

Publishing representatives at the study hearings reported widespread industry offering of custom texts. Bedford, Freeman, and Worth Publishing Group offers a new program called Bedford Select, a database of course materials that allows faculty to select content for a custom textbook that can sell for as little as $20. In addition, other Bedford, Freeman, and Worth custom publishing programs enable faculty members to integrate their own material into the custom book.

Furthermore, Bedford’s Portable Series offers numerous smaller, less expensive volumes of anthologies, as well as “split” editions that enable students to purchase only needed portions. 47 Another way to reduce textbook expenses is through a buying consortium that enables multiple institutions and/or bookstores to work together to identify textbooks used in common and use group purchasing power to place large orders for custom textbooks at reduced prices. This option is only available for custom textbooks; leveraging purchasing power to negotiate on regular textbooks violates anti-trust regulations, specifically the Robinson Patman Act. 8 One example, the Bay 10 Buying Consortium, consists of 16 higher education institutions in 10 districts in the San Francisco Bay Area working together to identify textbooks from which they could select content for custom books. It is anticipated that this will enable them to negotiate lower prices. 49 Bookstores can also reduce profit margins on textbooks. Many bookstores are run either by commercial for-profits such as Barnes and Noble or Follett, or as institutional entities that bring in additional revenue.

Any institution-owned bookstore can lower profit margins on textbooks in order to better serve students, and independent bookstores can switch to non-profit status to make it easier to lower profit margins. Custom Textbooks Buying Consortiums Profit Margin Reduction 17 The independently operated campus bookstore at Portland State University converted from a cooperative to a nonprofit in 2005. One of the steps it took as a nonprofit was reducing profit margin on textbooks. The reduction in textbook prices provided a total savings to students of more than $60,000 last year alone. 0 Another example is the University Book Store at the University of Washington, organized as a corporate trust for the benefit of its students, faculty, and staff. Profits from the bookstore’s sales are directed toward providing significant benefits to students in the form of lower prices on course materials, annual patronage rebates, and need-based textbook scholarships. 51 Solution #6: Implement a Textbook Rental Program There are currently 25 textbook rental programs in the United States operated by both two- and four-year institutions, from small colleges with as few as 400 students to large schools with as many as 15,000 students. 2 At least five states have considered mandating rental programs or implementing pilots at their public institutions. 53 Textbook rental programs may be full or partial models. Full rental programs provide instructional materials for most courses offered at an institution, and partial rental programs offer textbooks for certain departments or courses. In addition, either full or partial programs may include a hybrid option, in which students may opt to purchase textbooks rather than rent. The majority of existing programs are full rentals, operated through the institution’s bookstore and funded by student rental fees. 4 Rental programs provide one of the most significant forms of savings to students as they instantly reduce textbook expenses. Estimates indicate that students can save hundreds of dollars each year through rental programs. 55 Rental fees can be assessed on a per book, per credit hour, or per course basis. Another option is to charge a flat fee per academic term included in tuition or billed individually at the time of rental. 56 In addition, these programs promote access and reduce textbook-related student aid gaps by allowing all students to have textbooks, not just students who are able to afford new or used books.

Rental programs can increase bookstore efficiency in that textbooks need not be ordered every semester and unsold textbooks need not be returned to publishers. The primary drawback of a rental program is the cost of program start-up, which includes acquiring and storing inventory, and establishing staff and computer resources. 57 This is especially true for institutions that are underfunded. 58 A secondary concern is that such programs limit the academic freedom of faculty as they require agreement to adopt a textbook for a prescribed length of time, usually between two and four years.

Rental programs instantly reduce price to students The primary drawback of rental programs is the cost of program start-up 18 Furthermore, in some disciplines, subject matter is updated regularly. Students who rely on rental programs may save money on their textbooks at the expense of having the most up-to-date materials available. Examples of full and partial rental programs, as well as hybrids, include: Southern Illinois University, Edwardsville (SIUE), a public four-year residential college in Illinois, began its rental program at the inception of the college in 1957.

The program currently serves 11,000 undergraduate students and stocks over 70,000 textbooks. Students can also rent supplemental materials, such as e-books, computer codes, and CDs, among other items. The program is run separately from the campus bookstore, and students have the option to purchase textbooks. Course adoption is for three years or nine terms, with certain exceptions, and most faculty participate. The rental fee for students is $8. 55 per credit hour, which translates into $128 per semester for 15 credits. Rising textbook prices have caused program costs to increase by 12 percent over the last two years.

The program spends $2. 5 million per year on textbook purchase, but expects that amount might double in five or six years due to increasing textbook prices. These increases will cause rental fees to rise by 15 percent each year. 59 Rend Lake College in Illinois instituted a partial textbook rental program in 1998 in response to student complaints about textbook prices. Prior to beginning the rental program, the institution realized that a large percentage of students were not buying textbooks or were sharing books as a result of semester book expenses roughly equivalent to tuition.

Because 70 percent of its students receive financial aid, the college decided that implementing a rental program would conserve institutional aid resources. Rend Lake did not sustain heavy start-up costs because it already owned the bookstore and all of the textbooks. The rental program began by offering only general education texts, but has expanded to include upper division texts. At this time, 60 to 65 percent of required textbooks are available for student rental. Student fees for the rental program are on a per book rather than per credit hour basis.

The charge per book is $28 plus a $20 refundable deposit, but students also have the option to purchase textbooks. To keep costs down, faculty are encouraged to adopt textbooks for at least three years. However, some departments such as technology and nursing do not participate as texts in those areas are updated and revised almost annually. 60 The San Mateo Community College District, consisting of Skyline College, Canada College, and College of San Mateo, has implemented a hybrid rental program, in which students have the option to rent or purchase, and faculty may opt in or out of the program.

The district book rental fee is set at 25 percent of the retail price of the textbook. At Full Textbook Rental Programs Partial Textbook Rental Programs Hybrid Textbook Rental Programs 19 Canada College, the program focus is on providing course materials for the nearly 2,000 students enrolled in the Early Childhood Education program. The goal of both Skyline College and College of San Mateo is to identify books that will meet the needs of certain courses, and then use funds raised through donations along with state and federal grants to deal with the issue of start-up costs.

All of the textbook rental titles in the district have been procured with funds raised by the bookstore. This model allows stores to get into the rental business without incurring the often prohibitive start-up costs of the program. 61 Solution #7: Improve Related Financial Aid Policies Financial aid policies impact many students’ ability to purchase course materials. Every college includes textbooks in its cost of attendance, though methods for determining how much to allocate for textbooks vary by institution and state. 62 Even students who receive enough financial aid to cover textbook purchase may still encounter difficulties.

In addition, inadequate financial aid leaves some students without the means to purchase books. Many students, particularly at two-year colleges, register for class shortly before or at the start of the academic term. As a result, financial aid for which they are eligible may not be available when classes start due to disbursement delays, leaving students without the means to purchase course materials. This delay can result in increased expense if used textbooks are no longer available at the time that students receive their financial aid funds.

Provide Vouchers, Credits, or Loans One way to address this problem is for institutions to provide emergency book vouchers or loans to students whose financial aid has yet to be disbursed. There is no risk to such loans as the institution knows prior to their issue that aid will be available to repay them. Alternatively, the campus bookstore can offer a credit until funds become available. 63 Institutions or bookstores can create need-based scholarships for students Create who lack adequate aid and are having trouble paying for textbooks.

For Need-based example, The University Book Store at the University of Washington, Textbook Grants the bookstore at Portland State University, and Canada College all offer need-based textbook scholarships. 64 Increase Financial Aid to Cover Costs Need-based aid can also be increased at the federal, state, and institutional levels, as such an increase would protect low- and moderate-income students against textbook and other educational price increases. States such as Connecticut and Illinois have attempted to address this issue through additional need-based grants. 5 20 Technology now plays a key role in providing faculty and students with new options for learning materials. Many stakeholders—from publishers to institutions to faculty—are working to use technology to create and distribute instructional materials in ways that are more affordable. Such technological innovations include electronic textbooks, no-cost online textbooks, open educational resources, and print-on-demand services. As more faculty members discover and take advantage of these options, more students will benefit.

Electronic textbooks, also known as e-books or digital textbooks, are one alternative to high-priced traditional textbooks. E-books are the replication of traditional textbooks in digital format made available to students through coded, online access. Publishers typically limit student access to an e-book to one academic term and may also limit the number of pages a student can print from the e-book. A variety of publishers now offer more than 3,000 e-books and new titles are added regularly. 66 E-books cost approximately 50 percent of the retail price of a new hard copy textbook.

These savings arise because publishers do not incur printing or production costs. Other benefits include easier updating, and the ability for students to make electronic notes in some texts, as well as search, print, and bookmark. Although e-books have been available for several years, there has yet to be a significant increase in demand for them. 67 McGraw-Hill Higher Education currently sells more than 800 different types of e-books and plans to increase the number of electronic titles. Pearson’s SafariX Textbooks Online site also offers about 800 of its most popular titles electronically.

Thomson Learning’s site, iChapters. com, makes available for student purchase individual chapters of textbooks in digital form. In addition, students can also purchase complete e-books and hard copy textbooks on that site at a discounted rate. 68 A new publisher has started offering no-cost digital textbooks to students. The company, Freeload Press, was created in 2004 to help reduce educational expenses for students. Textbooks are available online at no charge to students because the books are subsidized by academically appropriate advertisements placed at the beginning and end of each chapter.

Students can print directly from the website or order paperback alternatives that range in price from $9 to $35. Professors at over 1,000 institutions are using Freeload Press. 69 Solution #8: Utilize 21st Century Technology Electronic Textbooks No-cost Online Textbooks Open educational resources (OER) are the sharing of digital learning Open Educational resources at no charge over the Internet, primarily by faculty engaged in Resources course development and collaborative teaching and research. OER can be 21 OER has become increasingly popular among faculty, students, and institutions sed and adapted for non-commercial purposes by teachers, educational institutions, and students. These resources rely on open source applications, which are software programs that can be shared or distributed. OER has become increasingly popular among faculty, students, and institutions both within the U. S. and internationally. 70 In addition to instructional materials that are developed using open source software, educational content in the public domain is often included in open source applications. Public domain content is information that is ineligible for copyright protection or that has an expired copyright.

Works published prior to 1923 are included in the public domain, and works published after 1923 can be included in the public domain if copyright licenses such as Creative Commons are applied to them. 71 The Foothill-De Anza Community College District in Silicon Valley, California is providing state and national leadership as the result of its public domain policy on the creation and use of open educational resources. The policy encourages faculty to develop and use public domain and open content materials for their classes to provide affordable, high-quality alternatives to traditional textbooks.

Foothill-De Anza is also providing training for its faculty to better use OER tools and materials, and is supporting the new Community College OER Consortium. 72 The District Academic Senate for the Los Angeles Community College District has recommended that faculty use educational materials in the public domain as well as no-cost courseware, when possible. 73 Some faculty members have made the switch from traditional textbooks to online textbooks with few problems.

A widely known OER initiative is OpenCourseWare, started by the Massachusetts Institute of Technology (MIT) in 2001 to make MIT courses and course materials available online at no-cost—accessible to anyone. Over 100 institutions have partnered with MIT to share educational content, and many other efforts are underway to further develop and promote OER around the country and the world. Another well-known OER project is Connexions, through which educational professionals and others can develop their own instructional materials on-site or make use of Connexions’ existing educational materials, all of which are open-licensed.

Connexions attracts more than 600,000 users per month from 200 countries. Students and other users can read Connexions material online, print it out, or order a hard copy through a new print-on-demand service at a fraction of the price of a regular textbook. Many professors and departments are using Connexions as their main source for virtually no-cost instructional materials. 74 A wide variety of high quality OER materials exists 22 Another significant OER project is MERLOT (Multimedia Educational Resource for Learning and Online Teaching), a Web-based resource developed by California State University (CSU) and implemented in 1997.

MERLOT is a no-cost digital library and interactive collection of 16,000 online digital course materials that have been created to meet students’ different learning styles. The system infrastructure allows faculty collaboration on teaching and learning materials. Editorial boards in 16 different disciplines have been selected to carry out a peer review process to ensure high quality content. 75 Print on demand is another technological innovation that can be used to reduce the price of textbooks by utilizing a machine to digitally download, print, bind, and cover a textbook within a matter of minutes.

Many printon-demand machines can easily print 200 to 300 textbooks in one day, each of which costs only a few dollars. 76 The technology is often used by publishers to print small batches of textbooks because it is usually cheaper than traditional printing processes. Colleges and bookstores can purchase these machines to print course materials available in print-on-demand format, or those available in the public domain. The University of Texas Co-op Bookstore has a print-on-demand machine that is used to print course packs and textbooks with content consisting of materials in the public domain.

Students pay only for the cost of printing the materials, typically just a few dollars. 77 Another example comes from the University of Queensland in Australia, which has received permission from publishers to use portions of proprietary materials for a fee. The university prints custom textbooks from the publishers’ content at their print-on-demand center. The center also prints course packs and lecture notes, all at significant savings to students. 78 Print on Demand

Benefits of Short-term Solutions Many of the short-term efforts to solve the textbook affordability problem (summarized in Exhibit 1) show an emerging consensus on educational needs. These include: an interest in collaborative efforts among faculty and institutions, innovations in alternative textbook formats among traditional and nontraditional publishers and OER content developers, and the increasing use of digital technology to meet student and faculty demands for appropriate learning materials.

Collaborative efforts such as online book swaps, buying consortiums, and open educational resources show the willingness of the higher education community to become engaged in solutions that have implications and effects beyond the walls of any one institution. Buying consortiums pool financial resources that would allow institutions that serve a variety of student populations to work together, holding low-income students harmless. Online book swaps and open educational resources demonstrate the existence of electronic infrastructure that could allow institutions,

Increased Interest in Collaborative Efforts 23 EXHIBIT 1: TODAY’S SOLUTIONS 1. Strengthen the Market for Used Textbooks • Used Textbook Initiatives • Guaranteed Buy-back Program • Book Swaps 2. Utilize Faculty Textbook Guidelines • Submit Textbook Orders on Time • Retain Textbooks for a Longer Period • Know the Price of Textbooks • Consider Less Expensive Alternatives • Use the Same Textbook for Multiple Courses • Retain Older Editions 3. Provide Key Information to Students/Parents • Send Information before Term Starts • Post Textbook Lists and ISBNs Online 4.

Increase Library Resources • Textbook Reserve Programs • Faculty Use of E-reserves • Donations of Textbooks to Libraries • Textbook Lending Libraries 5. Adopt Alternatives that Lower Price • No-frills Textbooks (Format Alternatives) • Custom Textbooks (Content Alternatives) • Buying Consortiums • Profit Margin Reduction 6. Implement a Textbook Rental Program • Full Rental Programs • Partial Rental Programs • Hybrid Rental Programs 7. Improve Related Financial Aid Policies • Provide Emergency Vouchers, Credits, or Loans • Create Need-based Grants for Textbooks • Increase Financial Aid to Cover Textbook Expenses 8.

Utilize 21st Century Technology • Electronic Textbook • No-cost Online Textbooks • Open Education Resources (OER) • Print on Demand • Electronic Readers • Online Collections of Educational Content 24 students, and faculty to better communicate among themselves, as well as share access to up-to-date, valuable instructional materials. Collaborative efforts enhance student access to education in two ways: by reducing financial barriers across income levels, and by making available topquality educational materials for all at lower costs.

Second, the interest in alternative textbook formats has clear positive implications for reducing expenses. Even low-tech alternatives, such as unbound texts, reduce price. Custom textbooks not only reduce price, but allow for selectivity, or modular content: students pay only for the materials they need, and faculty have greater latitude to develop appropriate course materials. This latitude allows faculty to develop materials that are up-to-date and of the highest quality possible, with less compromise than can be achieved by relying on a single text. As noted above, however, low-tech alternatives are still tied o the rising price index of traditional textbooks. High-tech alternatives present a different model. E-books and other digital and online resources, such as OER, do not have publishing, printing, and inventory costs as high as traditional textbooks, making their price index much lower. And digital resources are far more easily combined, produced, and accessed than their physical counterparts. 79 A lower industry price index and access to top quality instructional materials in formats that are increasingly convenient to ever-more technologically savvy students benefit the entire student population.

Third, the increasing use of digital technology has broader applications than price reductions. Contemporary students are the most technologically savvy and knowledgeable of all consumer groups, and colleges and universities increasingly provide computer access to even the lowest income students. Computer and Internet use is high among students. 80 Flash drives, which cost a fraction of a laptop computer, enable students to digitize and make portable papers, course materials, and even textbooks.

Many publishing groups restrict access to e-books, but others allow students to download their own copies in PDF format directly to their computer desktops or flash drives. The poorest students, and those with the most limited computer access, can still benefit from digital educational materials if they are available in print-on-demand format and their institution has the appropriate hardware. In addition, as the development of OER and other online resources show, the application of technology increases the success of collaborative efforts by institutions and faculty. Innovations in Alternative

Textbook Formats Increasing Use of Digital Technology 25 TOMORROW’S CHALLENGE While short-term solutions can reduce textbook expenses, they can be limited in their application across different types of institutions and have program costs indexed to the high and rising price of textbooks. To the extent that such solutions also rely heavily on textbook resale, they could exacerbate price increases in the long term. Their most important shortcoming, however, is that they are not designed to address the underlying structural imperfection in the market for textbooks and learning materials.

In particular, they will not transform the current supply-driven, producer-centric market into a demand-driven, college- and student-centric market fully responsive to the needs of higher education. What is required is a 21st century marketplace solution that empowers students, faculty, and colleges while providing a range of benefits for other stakeholders. Such a marketplace could make a major contribution to lowering the price of textbooks and learning materials while enhancing their quality and improving student learning.

What economic and social forces are shaping the need for a national digital marketplace? What might such a marketplace look like and how would it work? What type of effort is required to design and implement it, and what role might each stakeholder play in the process? Perhaps most important, what may stand in the way of its design and implementation? The answers to these questions define what stakeholders must do to transform the market, the appropriate federal role, and steps Congress and the Secretary of Education might take to support the effort.

The Textbook Marketplace in Transition The forces of supply and demand are influencing the existing market even now, as publishers, institutions, and faculty respond to students’ needs for lower prices, better formats, and more accessible materials. Four interrelated market forces are already impacting higher education, and these changes will continue to shape the market, regardless of individual stakeholder actions: • • • • Digital technology is becoming the new standard. Technology is changing classroom needs. Prices are rising for an increasingly disposable product.

Significant changes are occurring in knowledge delivery. However, if harnessed properly, these catalytic shifts could produce a system designed to meet the 21st century needs of the end consumer, the student. Parallel to new standards for information distribution in the business and government sectors, a preference is emerging in academia among both students and faculty for digital formats. Digital course materials are portable on computers and flash drives, and are accessible from multiple locations as a result. In addition, they are more easily made accessible for students with disabilities.

From the vantage point of publishers and bookstores, production costs and inventory and storage expenses may be lowered significantly. Digital Technology: the New Standard 27 Digital resources offer potential benefits to students in all three areas of need: lower prices, new formats, and access to up-to-date materials. The proliferation of electronically dispersed materials, such as OER and other digital resources, encouraged now by various institutions, will put pressure on the current textbook marketplace to resolve copyright and fair use issues in order to meet consumer needs.

The ease and speed with which data can be transferred by email and downloading means that a source can quickly be lost in the shuffle. Thus, use of digital materials will put pressure on existing copyright laws, and all publishers will need appropriate protections. 81 The classroom/lecture/textbook format of the typical undergraduate course held sway until recent decades when digital technology began to create new learning opportunities. Not only has a distance learning industry thrived, but digital material in the form of CDs, Web pages, and streaming video has been added to the educational tool kit. 2 Traditional textbooks are now just one of many products in a shifting educational landscape. Most textbook publishers make available some version of custom textbooks and e-books from proprietary materials, and OER provides instructors with even more options. But many of today’s instructors envision an environment in which they can assemble instructional materials from a variety of print, electronic, and video sources for their students, rather than choose all materials from any one publisher. 3 Colleges and universities are also responding to student and faculty needs for digital materials by increasing technology infrastructure and digital resources, as well as encouraging the use of OER. 84 And digital technology has influenced learning patterns. Most of today’s students are comfortable with technology, and, if not, the college and university system provides the tools and motivation to make them technologically savvy because course requirements are increasingly geared toward computer use.

Digital learning offers the opportunity for “experiential” learning, or learning by doing, which is at the core of the “plug and play,” “menu-driven” digital industry that includes computers, MP3 players, mobile phones, and digital cameras. Technology and Classroom Needs A Disposable Resource, Not a Long-term Reference Students today see the traditional textbook for many undergraduate courses as a disposable resource, not a long-term reference book, in part because frequent edition updates can render it obsolete quickly,85 and the digital era has changed attitudes toward the nature of printed material.

Evidence for this is ample in the form of student demands to increase buy­ back prices for materials, the proliferation of online book swaps, and the gray market of textbook re-importation. 28 Faculty, too, have less interest in traditional textbooks, as the growing market for custom texts attests. As, in the past, many faculty supplemented course materials with library reserve items, now many more use the Internet to obtain additional materials through OER and other data in the public domain.

The predecessor of these digital course packets was the copy shop course packet, against which publishers successfully sued for copyright infringement in the early 1990s. Thus, consumer choice was only temporarily stymied, and digital media are now filling the void. As user preferences within the current market shift toward a reliance on used textbooks or available digital materials, publishers often respond by producing new editions to limit the life of used textbook inventory, or by keeping price points high even on content for custom textbooks and alternatives. 6 Ironically, the very solutions that are providing temporary economic relief to students, such as rental and buy-back programs, may be exacerbating the textbook pricing problem. Low-income students are disproportionately affected by this as financial constraints often necessitate textbook resale. In addition, frequent new editions add to overall educational expenses, yet an over-reliance by postsecondary institutions on older editions and used textbooks impedes access to up-to-date instructional materials.

The three forces described above combine to create a vacuum in terms of the way knowledge is delivered to students: there is a need for a new knowledge management system. 87 Under the traditional knowledge management model, textbook publishers collaborate with various academic authors and use a peer review process to produce a group of proprietary materials in various disciplines to be formatted and bundled according to the needs of faculty and students.

This produces a series of standard textbooks on different subjects from which faculty can choose in order to teach their courses, whether those courses are at the introductory, advanced, or specialized level. As new technologies have been introduced, publishers have been creating alternative formats, digitizing some of their material and placing it on CD, for example, but always from proprietary materials. These are the familiar “bundled” textbooks now ubiquitous in college bookstores.

But that knowledge management system is becoming increasingly unsatisfactory for students and faculty today. The market is moving toward knowledge in more modular forms; that is, in order to create up-to­ date materials, faculty and students need to be able to take advantage of the speed of digital posting and updating. Information that can be used to create satisfactory course materials is more available to stakeholders than ever before via the Internet. Publishers are much more often being displaced as the primary knowledge management system for students.

Solutions providing economic relief to students may be exacerbating the textbook pricing problem Significant Changes in Knowledge Delivery 29 The question is what will replace that part of the knowledge management system represented by the traditional textbook. Colleges and universities are already struggling with student use of the Internet for research, which is increasingly relied upon as an alternative knowledge management resource; however, not all Internet content is of 88 The inability high quality.

Students are engaged in higher education precisely because they must learn how to differentiate between knowledge and mere to develop appropriately information, and the Internet’s influence and impact on this process cannot be wished away. To do their job and deliver an education, faculty must priced course guide student use of Internet resources, directing them toward quality materials has turned faculty materials.

The inability to develop appropriately priced course materials toward collective from modular resources available across a range of publishers has turned faculty toward collective Web resources available at little or no cost, Web resources bypassing publishers altogether. Currently, some faculty develop their own content, while others use established OER websites such as Connexions, MIT OpenCourseWare, and MERLOT. 89 Universities and colleges should become more involved in developing and monitoring a new knowledge management system in order to enhance the value of education at their institutions.

Need for a 21st Century Marketplace As various market forces put pressure on the textbook marketplace, change is occurring incrementally. A key question is whether incremental, often stop-gap change will ultimately benefit students, or whether the attendant drawbacks will provide anything other than short-term relief. A paradigm shift is needed in the textbook marketplace, and infrastructure The challenge should be built so that a level playing field for an instructional materials in managing new market can be established. 90

Such a market is being developed right now resources will be in a patchwork fashion by traditional publishers, OER websites, individual to make them faculty members, and others to meet the needs of today’s students. And inexpensive students today must become technologically savvy or risk being left behind in a global, technology-driven economy. The challenge of managing these new resources will be in making them easily and inexpensively available to students. The ideal system would be accessible to students, faculty, and institutions across the country, creating a national instructional materials marketplace.

Leadership will be required of all stakeholders, especially institutions, in order to transform not only the course materials delivery system, but also the quality of education, learning, and training so necessary to U. S. competitiveness in the 21st century global economy. 30 The Future System: A National Digital Marketplace How will the emerging patchwork of digital services be transformed into a national digital marketplace with the components and qualities necessary to meet the needs of all stakeholders?

Ideally, the future system would provide a role for all stakeholders, restore a consumer-centric focus, broaden the concept of publisher and publication, protect copyright and fair use allowances, and ensure a comprehensive institutional approach. Within the current textbook marketplace, none of the short-term digital solutions meet all of these objectives. Price responsiveness and consumer choice play little, if any, role in the existing textbook market. Current digital offerings by traditional publishers remain proprietary and do not maximize consumer choice.

In addition, neither OER systems nor traditional publishers have developed a satisfactory way for faculty to blend no-cost and fee-based materials. Finally, the spate of similar recommendations issuing from the numerous recent studies of textbook expenses show that institutions are recognizing a need to play a greater management and oversight role, which a national digital marketplace would not only allow, but enable. At the center of a national digital marketplace would be an enabling infrastructure, the central entity with which groups of stakeholders—institutions, students,

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