Nov. 15

Who Should Be Ashamed?

Even as they scramble for positions on some lists ("best colleges,” “top grant recipients” and so forth) colleges have lots of lists they want to stay off of: AAUP censure, NCAA probation, and others.

Looking for a job?

See all 169 new postings

Browse all job listings:

Faculty: 2,694
Administrative: 2,046
Executive: 153
FEATURED EMPLOYERS

The idea that colleges would take steps to avoid being on bad lists is behind a measure drawing bipartisan support in Congress — and infuriating many college officials. A measure in the bill to reauthorize the Higher Education Act would create “watch lists” of institutions with tuition increases above the average for their sector. The hope is that colleges may moderate increases to avoid ending up on the list — or be exposed for faulty management if they do. Rep. Howard P. (Buck) McKeon, a California Republican who has been pushing the idea for some time, issued a press release that said the watch lists will “shine a spotlight on excessive tuition increases.”

The legislation comes at a time that many in Congress are also raising questions about large college endowments and asking if the wealthiest colleges couldn’t somehow spend more of their endowment or other funds and minimize tuition increases. But a review of existing data suggests that the colleges that would end up on the watch list aren’t terribly wealthy. Rather, they seem to fall into two groups: public institutions in states where appropriations are tight, and private colleges whose operating budgets are tuition driven because endowments are small.

In fact, while many experts believe that colleges — and especially the wealthiest ones — can do more to control their own costs and, in turn, what they charge to students, they point to lots of problems with the dividing lines this bill would draw.

Take the colleges with mega-endowments — the places some think could afford to be free. Of the wealthiest 10 private universities (a club you need about $5 billion to join), not a single one of them would end up on the watch list. The average tuition and fee increase for private, four-year colleges this year was 6.3 percent and the top 10 in endowment wealth didn’t have a tuition rate that hit even 6 percent (five were in the mid-5 percents, and the rest were lower still).

Among the institutions that would certainly not need to worry about ending up on the watch list is Princeton University, which this year froze tuition (although it had a healthy increase in room and board charges, which don’t count for getting an institution on the watch list).

But if Princeton has nothing to worry about it with regard to the watch list, Saint Peter’s College, in Jersey City, does. Its tuition increase this year is about 6 percent, just below average, and some years the college is above average. So in theory, this is the kind of institution that might be motivated by a watch list and want to stay off of it.

But Eugene J. Cornacchia, the president, says flat out that the watch list would by necessity have no impact on decision making — although it could hurt the college. Like many of the private colleges that would end up on the list, Saint Peter’s is tuition driven. About 90 percent of its budget comes from tuition. So the idea that the college could decide to go down a bit to avoid being on some federal list just isn’t realistic, Cornacchia said.

“Our 6 percent tuition increase does not give us any latitude,” he said. “It was the minimum amount needed to accomplish what we need to do. It’s not like we could do away with even.1 percent of it,” he said. Cut the budget, “and it would mean layoffs or reductions to students.”

Comparing Princeton and Saint Peter’s illustrates the latter’s president’s frustration. As far as the legislation is concerned, they are in the same category.

But by endowment, Princeton had $13 billion (a year ago) while Saint Peter’s has $32 million. Full professors at Princeton earn more than twice what those at Saint Peter’s are paid. About 7 percent of Princeton students are eligible for Pell Grants (a good proxy for low-income students) while about 40 percent of Saint Peter’s students are. In fact, only 1 percent of Saint Peter’s students don’t receive aid of some form from the college. (And even with the fact that Saint Peter’s had an increase this year, its tuition and fees total of just over $24,000 is much less than Princeton’s total of $33,000.)

Cornacchia stressed that he doesn’t begrudge Princeton its success and wishes it well at achieving its mission. But that Princeton’s ability to skip a tuition increase could set up Saint Peter’s for looking bad by comparison in some federal formula is a flaw, he said.

“That’s the problem with these kinds of lists that come out. I think of the No Child Left Behind disaster, and we’re again developing all sorts of lists based on data which may or may not be related to anything based on education, and it stigmatizes institutions,” Cornacchia said.

The gap between Princeton and Jersey City isn’t by any means unique. Go to other states known for wealthy private colleges and the situation is the same — the famous institutions with large endowments will not turn up on the list. In Massachusetts, there is no danger of Amherst, Mount Holyoke, Smith or Williams ending up on the watch list. Harvard University and the Massachusetts Institute of Technology are safe, too. The colleges close to the average or above it (those that would make the list) are the colleges whose endowments are small by comparison and in many cases they are colleges that educate many first generation students — places like Pine Manor and Emmanuel Colleges or Suffolk University.

Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, said that his state shows the flaws in basing a watch list on percentages. “The smaller schools will get hurt,” he said, because they are more dependent on tuition, and more vulnerable to sudden increases in expenses, such as energy costs. It is the colleges with the smaller endowments (which are more likely to end up on the watch list) that have the least flexibility, Doherty said.

“The notion that there are efficiencies that colleges are not trying to pursue currently is just a fallacy,” he said.

Some colleges with much larger endowments say that there are other flaws in the percentage approach. Grinnell College, with a billion-plus endowment that tops all other liberal arts colleges, added 15 percent last year to the regular tuition increase and imposed the higher expense on this year’s freshmen only (although it will carry on as more classes enroll). The extra funds are being used to forgive more student debt, to change financial aid formulas that students said previously didn’t cover the real costs of books and other expenses, to add new scholarships and so forth.

The question for the college as students arrived in the fall was whether the changes — and the higher sticker price — would scare off low-income students. Russell K. Osgood, Grinnell’s president, said that the striking thing was that the class didn’t change at all — more than 85 percent qualifying for some kind of aid, just as in previous years. To Osgood this suggests that students and parents look beyond sticker price and realize what a small share of students and families pay full price and the percentage increase associated with it.

“What I conclude from the whole thing is that parents and students are quite sophisticated about the net cost of a college,” he said. The idea that Congress is somehow saving students from colleges with high percentage increases doesn’t make sense when students realize they might be getting something valuable as a result, he added. “All I would say is that I think Congress should take into account that there are all different sorts and kinds of colleges and to identify a watch list based on a single criterion strikes me as unwise or unjustified.”

The Picture for Public Colleges

If the key factor private college leaders predict would keep a college off the watch list is wealth, the key factor public college leaders predict is the wealth of a state in a given year. If the watch list existed this year, there would be plenty of Michigan public colleges on it — with a collapsing state budget and significant cuts, colleges have imposed tuition increases, some of them double digit.

Michigan State University, which took pride a few years back in multiple years of minimal tuition increases, is up nearly 10 percent for state residents.

Terry Denbow, vice president of university relations at Michigan State, noted that trustees at Michigan State are elected in statewide votes and decide on tuition in open meetings. “The transparency and accountability of pure democracy, quite literally, are alive each time tuition is set.”

Denbow said that the university’s record makes clear that when state appropriations are available, tuition increases are minimal. And when tuition increases are needed, the university has increased financial aid budgets by an average of 4.5 percentage points above the tuition increase.

Putting Michigan State (and most of the rest of public higher education in the state) on a watch list wouldn’t really accomplish much, he said. “This would impose an unnecessary burden, administratively and otherwise, built upon a flawed process and homogeneous scorecard for declaring winners and losers,” he said.

Similarly, California State University could be headed toward a tuition increase in the 10 percent magnitude — the kind of percentage that might land an institution on the watch list.

Patrick Lenz, assistant vice chancellor of the system, said that in recent years, Cal State has had increases in the 10 percent range and years of no increases at all. In the latter, the state finds itself taking in more money than projected and “buys out” any tuition increase that would be needed. In years like this one, when reports of the depths of California’s deficit continue to increase, the opposite happens, he said.

“I’m really not sure the point of this watch list,” he said.

California State’s tuition and fees for a year (many Californians who believe in the state’s no-tuition philosophy insist on calling the total entirely fees, but it is similar to tuition and fees elsewhere) are well under $4,000 for a year (a figure that is well under the $6,185 average for public four-year institutions). Lenz said that it is legitimate to compare universities on costs, and that Cal State maintains a list of 15 institutions it looks at for comparison purposes — a group that includes University of Nevada at Reno, Arizona State University, Georgia State University and George Mason University. Cal State costs $500 less than anyone else in the group, Lenz said.

Part of the concern is that colleges wouldn’t just get branded was institutions that need to be watched, but would have to spend more money as a result. Each institution would have to create a “quality efficiency task force” that would have to analyze the ways in which the institution is operating “more expensively to produce a similar result” as its peers. Institutions whose percentage increases would place them on the list would be exempt if they are in the bottom quartile for their sector or if their dollar increases don’t top $500 over three years, an exemption expected to help many community colleges, where the average increase in actual dollars this year was just $95.

Sandy Baum, a Skidmore College economist and senior policy analyst at the College Board, said that there are many types of colleges that would not change behavior because of the watch list. The wealthiest colleges — those seen by some as contributing to an “arms race” in which new programs and fancier facilities multiply — will be able to continue that arms race without getting on the list, she said. And colleges without much money (either private institutions or publics in tight budget cycles) have real constraints on their prices.

There may, however, be a group of private colleges that are in between — not totally tuition dependent, but not with billion-dollar endowments either. Some of those institutions, she said, might be motivated to try to carve a bit out of tuition increases to stay below average on price. But Baum said it was hard to predict.

Ronald G. Ehrenberg, director of the Cornell University Higher Education Research Institute and editor of What’s Happening to Public Higher Education (Praeger, 2006), said the key question for colleges would be whether being on the watch list had an impact on the behavior of potential students. For colleges that have desirable qualities, he doubts that it will.

“If you the student are trying to make a decision to go to X vs.Y, and X is a shamed institution on the list and Y is not, is that going to affect your decision at all, if X promises you more in terms of educational opportunities and potential for earnings and graduate school education. In a way, I don’t think it’s any different from the way continuing raising high tuitions have not kept the number of applications to selective institutions from going up,” Ehrenberg said.

The potential benefit of the watch list may be rhetorical, he added. “If this is just a way of calling attention to higher education about trying to be efficient and hold down costs, maybe it will serve some useful function,” he said.

Just about everybody interviewed for this article — including several who didn’t want to be quoted for fear of attracting attention to their institutions’ rates — said that there are colleges, public and private, charging too much and deserving of more scrutiny. The problem, they said, was that the proposal advancing in Congress appears likely to point fingers in the wrong direction.

Baum said that the proposal reflected the wide consensus that the problem is real. “I’m sympathetic to the idea we have to do something to slow this down,” she said. “I don’t know that anybody has a good answer to what the best approach is.”

— Scott Jaschik

Want it on paper? Print this page.
Know someone who’d be interested? Forward this story.
Want to stay informed? Sign up for free daily news e-mail.

Comments

Many public colleges don’t have authority for setting tuition rates — their rise in tuition is often a function of state politics and state budgets. It doesn’t seem like good policy to penalize those public colleges for something they have little to no direct control over. No, these colleges shouldn’t be off the hook, they still need to become more cost efficient — but a shame list isn’t a progressive way to motivate colleges to make this change.

Nick Hillman, Tuition setting authority also matters, at 7:45 am EST on November 15, 2007

The economics of aid are screwed up

If 99% of St. Peter’s students receive institutional aid, aka a discount from the college, then their tuition number of $24,000 is meaningless. Couldn’t they achieve the same result if they reduced their tuition to $20,000 and gave aid to only 90%?

Anya, at 8:10 am EST on November 15, 2007

Kudos to the author

This article should be mandatory reading for each of the Members of Congress and their staff that have anything to do with the HEA reauthorization.

What makes for easy politics is often the most intellectually lazy way to solve a problem, or worse, the most intellectually dishonest.

This article is spot on in its analysis.

Excellent work!

Skeptic, at 8:30 am EST on November 15, 2007

Two comments:

First, to Anya — that would assume that the 9% you mention can afford $20,000 without aid — unlikely in an institution that attracts such high numbers of first generation and low income students.

Second, isn’t it ironic that Princeton costs students $9000 more but is considered less wasteful than St. Peter’s? Factor community colleges into that picture and you can find that an institution charging $107 a credit is seen as supremely wasteful if that number was $100 the year before, though still tens of thousands less than Princeton or its comparable institutions.

Don’t get me wrong — I am not suggesting that the institutions can be compared so easily. Instead, I am suggesting that the use of a percentage of tuition increase as a measure creates this type of false comparison.

Karen, at 10:00 am EST on November 15, 2007

Why High Tuition Works

At St. Peters, it’s not necessarily irrational to give aid to 99% of students. First of all, that aid might include loans or work-study, so maybe it’s not just grants. Secondly, the discount approach works in two ways: a) by charging high tuition, people think that the college must be really good and therefore want it more. Call it the Whole Foods effect, where anything overpriced is deemed to be high-quality. b) the Bargain effect. By raising tuition and then offering aid, students and parents think that they’re receiving a bargain, and therefore regard it as a greater value (in the long term, students who receive financial aid also may be more likely to contribute to the college as a way of “giving back").

John K. Wilson, collegefreedom.org, at 10:00 am EST on November 15, 2007

More costs

This is a terrific article and the comments by the St. Peter’s president reflect the position many of us small private institutions find ourselves in. I just wanted to add a couple of other cost drivers to the list. When we participated in the Delaware faculty cost and productivity study, we learned among other things that personnel cost as a percent of our direct instructional expense was in the high 90s, and yet our salaries are below average. Health insurance cost has played a large role in this. Also, we’re afraid that although the push for comparable figures on student achievement was defeated this time, it won’t go away. This means we will have to pay for standardized tests and surveys that are not proportionally priced for small institutions—the test companies sometimes give us a break, but not a proportional price. We pay more per student than a large institution would. This expense is far less than health insurance, but it is an insult when they’re asking us to cut costs.

Grocheio, Asst VP Planning and Institutional Effectiveness at Shorter College, at 10:10 am EST on November 15, 2007

Nick, would it make more sense, then, to have a STATE watch list?

kgotthardt, at 10:20 am EST on November 15, 2007

Addressing symptoms, not causes

Although a “Wall of Shame” may be a flawed concept, as Scott Jaschik’s excellent report makes clear, one shouldn’t fault lawmakers for at least wanting to create incentives for improving college efficiency and productivity. As the article notes, cutbacks in state appropriations to public universities are a key driver of tuition increases.

However, state subsidy and tuition charges only impact the revenue side of a public university’s ledger book, and have nothing to do with the expenditure, or cost side. What concerns legislators, as well as university administrators, are the rising costs of academia. The real issue, to me, is why costs increase so rapidly?

One reason is that universities are among the least efficient institutions in society. It takes a year to hire a dean or provost, and decisions that in business would be made by a manager or small working group are made by large committees. In academia, “efficiency” and “productivity” are fighting words, and anyone who utters them is seen as potentially assaulting academic freedom and impinging upon faculty autonomy. To be told that one has a “business-like, bottom-line attitude” in academia is an insult, not a compliment. Lawmakers look at universities and see hidebound passive-aggressive organizations that wilfully reject criticism, to the point of arrogance.

The culture of academia is both subtle and complex. In one sense, that culture is the great strength of American universities, because it really does protect academic freedom and the free exchange of ideas. But there is a tradeoff. The culture is also an important source of the cost increases, which inevitably rise much faster than inflation and lead to growing college inaffordability.

Thus “watch lists” and other blunt instruments may be well-intentioned, but they’re trying to fix a disease by treating only the symptoms. A real cure will require a more sophisticated understanding of the causes. The challenge is to reform the practices of academia in order to lower costs and improve efficiency, without throwing the baby out with the bathwater. So far, nobody has figure out how to do that.

Jim, at 11:05 am EST on November 15, 2007

Oy!

My own (state) university sits in a state whose support of higher ed is in the bottom three. We are beyond efficient, to the point of almost killing our staff, and our peer institutions according to Delaware data have tuitions roughly double ours. Our inability to increase tuition beyond state strictures prevents us from doing many of the things our peers do to improve quality. Now Congress want to say that if by some miracle we were ever allowed to adjust our tuition to is proper level, staff ourselves adequately, and give the taxpayers of the state a better institution, we would end up on a watch list and be labelled as profligates? It is to weep...

Simplex Scholasticus, at 11:05 am EST on November 15, 2007

99% aided

99% aided probably means a lot of that aid is loans, which don’t cost as much as grants. If the 99% aided figure was all grants, the school would have no net revenue from a tuition increase.

Colleges sometimes do one-time tuition cuts (see www.finaid.org/questions/tuitionfreeze.phtml) which reduce tuition and aid lockstep, but then tuition starts increasing again at the same old rate. They are more publicity stunts to gain market share at colleges that have unused capacity than any attempt to address the structural causes of tuition inflation. The reality, as this article points out, is that colleges do not have much choice in the amount of a tuition increase. They are much more heavily dependent on utilities, facility costs, health insurance and other cost centers that increase faster than inflation.

Mark Kantrowitz, Publisher at FinAid.org, at 11:20 am EST on November 15, 2007

If you observe the patterns of tuition increases & tuition reductions offered through financial aid packaging, a definite “Robin Hood” effect emerges. Yes, the cost of tuition has been rapidly rising, and yes many schools offer large tuition reductions to a large percentage of their students. The end result is that the more wealthy families who do not qualify for financial aid pay the full price, which provides the universities the funds to offer larger/more grants to lower-income students who do qualify for aid. The announcements by a number of the most prestigious schools that students from families with income under certain benchmarks would no longer be expected to take out loans, was typically accompanied by announcements of tuition increases, which would ultimately be paid only by the more wealthy. This is a good/bad thing depending on your particular political leanings, but it certainly is an effective way to increase the funding available to support a larger number of lower income students and enable them to attend even the most expensive universities.

Jan, financial aid advisor, at 11:55 am EST on November 15, 2007

This entire legislation is misguided, because we should be focusing on student debt, rather than tuition prices. This legislation will do nothing to address student debt, nor restrain colleges from increasing student debt. In addition, this legislation could have adverse consequences, such as punishing the wrong schools, or restricting the ability of colleges to increase their tuition for the purpose of creating more grant aid to reduce student debt.

Marky Marc, at 1:30 pm EST on November 15, 2007

What About The Costs of Government Mandates

I work at small tuition driven private college. Anong all the costs factors that have already been enumerated let me share a specific example of the cost of federal mandates under the ADA. We have two hearing impaired students enrolled this year. Both need significant accomodations and the total cost of those accomodations will exceed $75,000. Our tutition is $28,000 this year and one of the students mentioned above receives a signicant institutional grant (read tuition discount).I believe in the ADA and we are doing the right things to help these students to be successful but for a tuition driven institution these mandated costs can be significant. I share this to show that simple formulas that mat get college’s on a atch list do not take into account everything that impacts a college’s operation.

A Concerned Enrollment Manager in CA.

E Schoenb, at 1:55 pm EST on November 15, 2007

Unnecessairly confusing

This all unnecessarily confusing. The surge in tuition has come with a surge in grants (yes grants, NOT loans). This is simply a collective collusion by the higher education industrial complex to take from those according to ability and giving to those according to need.

Imagine going to a car dealer and finding out that a typical new car costs $100,000, unless your family income is low enough so that the car would be free. Same thing here, case closed.

Now, what is baffling is that the same people who want “more affordable” college costs want to end this robbinhood scam. I don’t get it, they should be HAPPY that the most productive in our society are getting soaked.

ACF, at 7:20 pm EST on November 15, 2007

Require information; expect performance

As usual, academia has not explained WHY its costs have, and continue, to rise ABOVE the average rate of inflation.

The answer is simple: there is NO commitment by academia to (1) control its costs and (2) increase its productivity. The usual excuses: “we’re different; it is someone else’s fault; tenure rules; union contract; Bush is an evil Nazi; etc.”

Bull. As long as there are taxpayer-supported student loans, colleges will just raise prices (Vedder, Ohio U). There is no incentive, much less commitment, not to raise prices.

What is needed:

Require more information from independent third-parties (e.g., CPAs), over a 20-year period. Cost information, as well as loan burden (not just averaged, the entire range of students), faculty salaries, staff salaries, headcount, graduation rates, actual job salary information and job placement data (not the ginned-up data from Placement), for starters.

Students and their families deserve the facts — “the truth.” Require academia to quit playing silly games with that data, much of it paid for by taxpayers.

BTW: about “Grinnell College, with a billion-plus endowment that tops all other liberal arts colleges.”

Grinnell is really an exception. A founder of Intel and local whiz kid was an alum and trustee. Warren Buffett was a supporter. Hardly a typical college.

Buzz, at 9:15 pm EST on November 15, 2007

Colleges as car dealers?

For about the 849th time, I’ll address the college financial aid vs. car dealer analogy. No, they are not the same. When you go to the car dealer to buy the car, this is largely a private transaction between you and the dealer. There is no public interest — other than perhaps if you are buying a gas guzzler, or a car that pollutes excessively.

There is, however, a public interest when somebody attends college. Society benefits in both pecuniary and non-pecuniary ways when individuals attend college (and of course, we know the individual benefits also). This is at least in part why we have large public subsidies for higher education, whether it is private institutions (benefiting from 501©3 non-profit status, as well as appropriations in some states) or public institutions (favorable tax status as well as public appropriations from states and some local governments).

Thus, the decision on the part of institutions to discount based on the student’s family circumstances is in the public interest, and it is very different from the transaction of purchasing a car.

Don Heller, Professor at Pennsylvania State University, at 9:15 pm EST on November 15, 2007

college tuition and shame list

Let’s generalize Dr. Heller’s point by stating what should be the obvious, but which has been elided so far: Everyone is discussing the cost of education, but no one is quantifying the benefits.

Next, who can state what the rate of inflation “should be” (speak normatively) in a market where the inputs and the outputs are somewhat non-quantifiable.

If a professor is paid 10% more this year than last, and the knowledge he imparts to each of his students earns them EACH (the leverage effect inherent in teaching) 10% more per annum, is he underpaid or overpaid?

If the rate of increase of knowledge is so rapid and so deeply impounded in products and processes such that only an intellect at the bleeding edge can produce incrementally usable and differential knowledge, what is that intellect worth? How much should we pay that person versus last year?

If the US puts a higher priority on putting foreign citizens into black plastic bags than on educating its own citizens, should we bid up the price of plastic bags and bid down education?

R.Will, College Tuition, at 10:00 pm EST on November 27, 2007