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$10,000 degree push has led to innovation in pricing but not cost control

What Will $10,000 Get Me?
May 9, 2012

$10,000 may not be able to buy as much as it used to, but Texas politicians and higher education administrators think that with a little experimentation it can buy a pretty good bachelor’s degree.

That was the challenge issued by Texas Governor Rick Perry in his February 2011 State of the State address, when he called on the state’s public universities to provide a bachelor’s degree for $10,000 or less (for a full four-year degree, books included), a challenge that was met with both criticism and praise from inside and outside the state. Since his announcement, however, a number of Texas universities have responded to the call, offering a range of $10,000-degree programs and receiving significant public attention in the process.

But while the governor's call led to experimentation, particularly with the pathway to a degree, the result has been mostly niche programs that don’t address the costs of educating students and can’t be broadly replicated. Most of the proposed inexpensive degree programs take advantage of community college and dual-enrollment high school credit – which are cheaper to students than university credit – and are not available to students in most disciplines. This leaves experts questioning whether the much-heralded $10,000-degree programs are really all they are touted to be.

The problem, economists say, is that providing a quality college education is expensive. Until universities start to address cost drivers in higher education –  including a highly trained, expensive labor force; a student body that expects certain services; and employers who expect graduates to be trained in specialized technologies – then the chances are minimal that universities can offer quality degrees for most academic disciplines for a cost anywhere close to $10,000.

“If you say can you provide a quality education for a price to the student of $10,000, that’s one thing,” said David H. Feldman, an economist at the College of William & Mary and co-author of Why Does College Cost So Much?,  noting that various forms of subsidies can drive down the price of a degree. “But if you’re talking about getting costs down to $10,000, I just don’t see how you can do that.”

Pricing at the Margins

When Perry issued his challenge in 2011, he wanted the state's universities to "leverage Web-based instruction, innovative teaching techniques and aggressive efficiency measures" to drive down the cost of a degree. But so far the proposals simply tinker with the way universities price the degree, not the costs.

The most recent university to announce a $10,000 degree was the University of Texas of the Permian Basin. Last week the college’s administrators announced the Texas Science Scholars program, which will provide a $10,000 degree to a select group of students who come into college prepared for college-level mathematics and science; wish to study chemistry, computer science, geology, information systems, or mathematics; and agree to complete college within four years. Tuition for those students will be capped at $2,500 a year, compared to an average of $6,300 for most students.

Permian Basin can offer the less-expensive degree because it has excess capacity, said William R. Fannin, the university’s provost and vice president for academic affairs. The university just completed construction on a new science building and does not fill its existing classes. The college can add students without much added cost, since it will not have to increase the number of faculty members or add extra buildings to accommodate more students. As a result, the average cost of educating a student drops, and those savings get passed on to the students in the $10,000-degree program.

Fannin said part of the reason for offering the inexpensive degree is to attract qualified students from across the state who might not otherwise look at the university, which is located in West Texas quite far from the state’s major metropolitan areas. In that respect, it is similar to a merit scholarship program. “It is a unique situation where we’ve built the buildings to handle 5,000 to 6,000 students, and the Legislature wants students in these particular areas,” Fannin said. “We could naturally grow, or we could use that capacity by having degrees that might attract students from across the state.”

But while the Science Scholars program is a good deal for those students, who end up paying less than the average cost of educating a student, the rest of the student population -- including students in those exact same majors -- ends up paying more and subsidizing students in the program. While those students would be paying the same if the extra students weren’t added, they don’t get to share in the benefit of a lower average cost.

Feldman said funneling the benefit of expansion to a subset of academically qualified students, in a method similar to merit scholarship programs, will tend to benefit students who don't necessarily need the tuition reduction at the expense of other students. “If I was one of the other students, I would not be happy,” he said.

Fannin said he understands that objection but said he views the pricing structure as similar to the current set of pricing discrepancies found in higher education. After merit scholarships and federal and state aid, the chances that two students sitting next to each other in class pay the same amount in tuition is minimal, Fannin said. He also understands that the program is not sustainable. At a certain point, if the university keeps growing, it will have to add more space or more faculty members, and the cost of adding more students will go up. He said the college might at that point choose to continue the program by limiting spaces and increasing the qualifications for incoming students. The program also can’t be replicated easily at other campuses, which may not have extra space or faculty members.

Same Price, New Paths

Permian Basin isn’t the only institution following through on the governor’s call. The Texas A&M University system is working on several options, most of which rely on transfer partnerships with community colleges where tuition is significantly less expensive.

Texas A&M University-San Antonio set up a degree program in cooperation with Alamo Colleges in which students can receive a bachelor of applied arts and science for $10,000. Through the program, qualified high school juniors can enroll in a dual credit program, through which they can receive up to 60 hours of college credit – half a bachelor’s degree – for free while still in high school. Those students can then enroll in Alamo College for 27 credit hours for $1,782 and finish their degree with 36 credit hours at Texas A&M-San Antonio for $7,722.

Partnerships and transfer agreements between universities and community colleges are nothing new, but few are designed with the goal of keeping the price of a degree under a certain dollar figure.

But like the Permian Basin program, the Texas A&M-San Antonio program is limited to a specific academic discipline. It is also highly limited in the number of students it can attract. Students must be ready for college-level work as juniors in high school and must be interested in pursuing a degree with a focus in information technology.

Texas A&M University-Commerce has also announced a program that would keep tuition under $10,000 if students complete 60 hours of credit at a community college before transferring into the university.

Because they rely on specific partnerships with local community colleges, the A&M programs, like the Permian Basin program, cannot be easily replicated at other institutions. Thomas Lindsay, director of the Texas Public Policy Foundation’s Center for Higher Education, a think tank with significant ties to Perry, said the lack of transferability is not necessarily a problem, since the idea of experimentation and partnerships is what is going to be replicated at other institutions. “Replicability is going to depend on the mission of each place,” Lindsay said. “Different schools have different missions, and strengths, and partnerships. Not everybody is going to do what San Antonio can do, but the kinds of partnerships San Antonio represents are what is replicable.”

Costs of Educating

Feldman and his co-author Robert Archibald, also an economist at William and Mary, said Texas' public universities could offer degrees for $10,000 or less if they had sufficient subsidies.

In 2009, the University of Texas system spent an average of $21,247 per student per year, and the Texas A&M system spent an average of $25,092, according to the Delta Cost Project. Even those institutions that focus primarily on undergraduate teaching and did not spend much on research and public service, such as Permian Basin, still spent more than $15,000 per student per year.

If a university such as Permian Basin wanted to offer a bachelor’s degree programs for a total of $10,000 or less without significant change to the cost of educating students, almost 85 percent of the degree would have to be subsidized in some form. At Permian Basin, the UT campus that had the largest percentage of its budget come from state appropriations in 2009, state appropriations still only made up about 60 percent of total revenue in 2009. And state funding has dropped since then.

State funding isn’t the only way to subsidize a degree. Many state universities rely on internal subsidies to keep down costs for some students, using the tuition revenue of full-paying students to help cover the costs of those students who cannot pay. Because of financial aid programs, low-income students in particular can already obtain degrees for less than $10,000 out of their own pockets. At the University of Texas at Austin, which spends the most per student of any university in the University of Texas system, a quarter of students were paying less than $2,500 a year in tuition after financial aid. But even those subsidies have come under fire in some states.

Economists say that if a Texas university is going to offer a $10,000 degree without significant subsidies – either by the state, corporations, or other student – it is going to have to significantly change the traditional model of higher education.

A handful of Texas institutions have started to fundamentally rethink the costs of educating students, with the most high-profile example being the University of North Texas at Dallas, which is working with a team of consultants from Bain and Company, a management consulting firm known primarily for working with Fortune 500 companies, to create a campus with dramatically lower instruction costs. “The one thing at the forefront of everything we do is what can we do to drive down the cost of instruction and the time that it takes to complete a four-year degree while maintaining quality," said John Ellis Price, the university’s president and CEO, in an interview with Inside Higher Ed in October.

Western Governors University, a regionally accredited nonprofit university that uses a competency-based model that is less expensive than traditional teaching, expanded into Texas in 2011. While this is significantly less expensive than traditional models, the average Western Governors graduate still spends between $14,735 and $21,890 on a bachelor's degree.

While those models might inform other efforts to maintain costs, they have not been embraced by the state's major public universities. But the University of Texas and Texas A&M University systems have recently begun to explore new ways of measuring faculty and university productivity and efficiency in an effort to control expenses.

Lindsay, whose foundation has praised the various efforts to create $10,000 degree programs, recognizes that widespread change in the pricing of college degrees is still years off. “Until universities really reach the breaking point, we’re not going to see the kind of fundamental change that’s required,” he said. “It’s not in their DNA, especially given the role of faculty members in the system of governance. They might nip along the edges, or do symbolic things, but there’s not going to be fundamental change.”

Quality Control

The idea of lowering the cost of educating students raises quality concerns for many in higher education, particularly faculty members at Texas universities. Costs are typically reduced by bringing in adjunct faculty members, increasing class sizes, reducing student support services, and adopting online programs, all of which could reduce the quality of the education offered, they say.

“I am not sure that it is mathematically possible to get a $10,000 degree anywhere without shortcuts like dual-credit courses or discounted online courses,” said Cary D. Wintz, a history professor at Texas Southern University and a member of the executive committee of the Texas Faculty Association. “I wonder what education a student will attain with that $10,000 degree.”

Wintz also said he was concerned about access to the $10,000 degree, since many of the proposed programs require students to test out of developmental education programs. “Students without college-level reading, writing, and mathematical skills will not be able to get a degree for $10,000 -- unless we decide to create courses that do not require such skills,” he said.

Feldman said he worries about the push to reclassify high school credit as "dual enrollment," since there are already concerns about the quality of education at many high schools. While he said what students learn in college is important, completing a four-year degree signals something else about an individual that can’t necessarily be taught in a classroom. Making a degree too easy to obtain might diminish that signal.

Feldman also said a negative reputation could also affect similar universities that might not be offering an “easy” degree but perceived to be of similar quality. “There is a substantial fraction of the ‘state university ats’ whose signal could be eroded as the result of a couple institutions,” he said.

 

 

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