College costs/prices

Coming Clean on College Costs

All too often, especially in lean economic times, students and families disregard private institutions out of hand because of the perceived cost. But in the battle for talented students, private liberal arts colleges will win the day by showing students and families considering higher education that “private” doesn’t mean “expensive.”

A few weeks ago, my institution, Juniata College, released a new policy, guaranteeing our students the ability to graduate in four years, or the fifth year is on us.

Well, from the reactions of some of the public universities in Pennsylvania, you might have thought I had suggested eliminating college sports. The fact is, private liberal arts colleges excel at giving students the tools to maintain momentum toward graduation within four years.

National statistics bear this out. The National Association of Independent Colleges and Universities says nearly 80 percent of students at private colleges who finish graduate in four years, compared to about 50 percent at public institutions.

Juniata did not decide to guarantee that almost all our students will graduate in four years as a cheap marketing ploy designed to take shots at state universities. Rather, it’s a call to arms for all colleges and universities to start their own affordability comparisons.

Our numbers have been splashed across newspapers and read over the airwaves. You can Google them at will. They are: Juniata’s tuition of $28,920 per year goes down to $13,786 per year once our financial aid package kicks in. That makes the four-year bill, after we add in yearly education-related fees, $60,536.

Compare that with what U.S. News & World Report noted in the November 5 issue: “Since it is now taking the average public university student more than six years to graduate, the cost of a public college degree is now more than $90,000, about 25 percent more than it was for the freshmen of five years ago.”

When we compared our figures to the publics, we also added a cost not many people talk about: the earnings a person would have made if he or she had graduated on time. Based on a very conservative annual earnings estimate of $21,000, two extra years in school will “cost” an extra $42,000 above tuition.

So, if you consider lost earnings, that “state school” education isn’t looking so affordable, is it?

Juniata was able to make our “four years and out” guarantee because our “Jun-ique” educational mission and curriculum gives our students great flexibility in accomplishing their goals.

Instead of traditional majors, we use programs of emphasis, in which students can design their own educational plan. If they change their minds about a career path once (or even twice), they won’t lose momentum by taking new prerequisites. Our study abroad programs -- 40 percent of our students study abroad -- focus on programs that offer courses and credit applicable to our students’ programs. Finally, we use internships within our curriculum to offer students academic credit and experiential learning without sacrificing extracurricular time or activities -- 85 percent of our students have at least one real-world internship.

And before anyone sniffs at our flexibility as somehow a lack of “standards,” that favored panacea of bureaucrats everywhere, our results speak for themselves: 96 percent of graduates over the last five years either secured employment or went to graduate school within six months of graduation.

In 2006, 96 percent of those Juniatians who graduated, did so in four years or less. Over the past few years, 92 percent of our graduating students have done so in four years or less. In our system, in which two faculty members advise students throughout their college career, there is very little retracing of steps and no wrong turns -- mainly because our curriculum is highly adaptable.
In reality, our guarantee isn’t much of a gamble because we are already succeeding beyond many of our private college peers and well beyond the state universities. Instead, it makes policy the good work that has long been practice at Juniata.

To those forward-looking institutions willing to take the challenge with us, to do everything we can to ensure the affordability of a great education, let us put our numbers on the table and let our constituents decide.

Author/s: 
Thomas Kepple
Author's email: 
newsroom@insidehighered.com

Thomas Kepple is president of Juniata College, an undergraduate liberal arts college in Huntingdon, Pa.

In Need of a Persuasive Story

Late last year I was in Washington, D.C., listening to government officials and policy analysts discuss the state of higher education in America. The tone of those conversations, as has been the case since the advent of the Spellings Commission, was troubling. I left with the clear impression that there is widespread distrust of colleges and universities in Washington on both sides of the political aisle.

That means suspicion of higher education is not a partisan issue and that the era of accountability and cost sensitivity will not end when the Bush administration leaves town. Key public officials like Massachusetts Sen. Edward Kennedy and California Rep. Howard P. (Buck) McKeon will probably continue to rail about rising college costs. And the higher education sector will probably continue to be hampered by its inability to tell a believable story about why tuitions keep increasing at rates higher than inflation.

To a certain degree, suspicion and distrust of colleges and universities are problems of the higher education sector’s own making. College and university leaders, most of whom were faculty members at some point, have the professor’s reflex against simplified explanations. Professorial skepticism toward neat, tidy, simple (but often inaccurate) answers is understandable and admirable. But politicians and reporters like to hear coherent and compelling narratives that are easy to understand and easy to retell to their constituents and readers. Higher education has often failed to grasp this. And it shows in the explanations higher education gives about the rising cost issue: They are all too often defensive or obfuscating -- leaving the public scratching its head in perplexity.

The stories being told in Washington about higher education, as everyone working at a college or university knows, are not flattering. The dominant stories coming from the mouths of politicians and the pens of reporters portray America’s colleges and universities in an arms race to out-compete each other on rankings, wealth, prestige, student diversity, scholarships and financial aid, faculty compensation, teaching loads, and non-academic facilities. College professors are depicted as disinterested in students and eager to have decreased teaching responsibilities. College administrators are pilloried as overpaid, unnecessary bureaucrats -- although, ironically, government intervention nearly always requires colleges to hire more administrators to comply with the reporting requirements imposed by legislators. And who hasn’t read or heard stories of dormitories overbuilt in the image of four-star luxury hotels or of million dollar-climbing walls? Tales of the latter have become the stuff of urban legend.

The dominant meme describes American colleges and universities as institutions driven by their own self-interest rather than by the interests of students or of society. Lost in the debate is any sense of the public’s interest in anything other than the politics of resentment, which builds its persuasive case through portrayals of colleges and universities as bloated, elitist, inefficient, unworthy of tax payer support, and lacking the ethical high ground. If only colleges and universities were run like a business goes a common critique that warms the hearts of the for-profit higher education sector and its key Congressional supporters like Ohio Rep. John Boehner. Applying business principles is the panacea according to this simplistic but seductive narrative that has put colleges and universities on the defensive since the beginning of the Reagan administration.

Magazine and newspaper articles increasingly depict a college education in business terms, as a consumer good to be purchased. Customers (students and their parents) are encouraged to seek the best deal, to bargain, to devise strategies to pay the lowest price for the highest quality. The ubiquitous so-called merit scholarship, which in most cases is nothing more than a price discount to lure another customer, makes it nearly impossible for any five parents with children at the same college to know how much the others are paying. The situation is akin to the airline industry where invariably no two seats on the same plane are sold for the same amount.

The emphasis on cost to the paying customer casts a college education squarely in the realm of commodity. And to be sure, there has always been an inherent commodity aspect to the experience of getting a college education. Most American colleges have never been free, and historically most students have entered college seeking upward economic and social mobility. But too much emphasis on college as commodity, voiced by students or by colleges, corrupts higher education, leading colleges and universities to be seen primarily as businesses churning out product rather than as places that inspire, enlighten, and uplift society. Even the colleges themselves have encouraged this kind of thinking to justify why students and parents should be willing to pay the rising cost of college--as institutions often cite studies showing a $1 million lifetime earnings advantage for college graduates over non-college graduates.

On the issue of rising tuitions, colleges and universities, as they have exuberantly embraced marketplace paradigms, have let themselves get defined as money-driven, price-gouging wealth-accumulating firms rather than as cathedrals of learning. This has happened because colleges and universities have not been bold in telling their collective story. Instead, colleges and universities have let themselves end up in the defensive position of rebutting the unflattering stories and simplistic caricatures about why college costs so much. Those stories and caricatures, when left unchecked, undermine the public’s trust in higher education.

There are potential opportunities for colleges and universities to begin shaping the story from within higher education rather than simply reacting to stories from without. But the first step is to craft accurate, uncomplicated, and believable narratives.

The case for the small liberal arts college offers one starting point. Providing an education at a small liberal arts college is a highly individualized process. The liberal arts college classroom is more akin to an artisan’s workshop or an artist’s studio than to a factory floor or an assembly line. If higher education must be forced to adopt the language of the business transaction, then perhaps the small liberal arts college must make the case, as Reed College’s President Colin Diver often has, that consumers always pay higher prices for, and are more willing to make sacrifices to afford, handcrafted goods in comparison to mass-produced goods. Diver’s argument is compelling because it is self-evident to most consumers that craftsmanship is synonymous with quality.

Nor is it a stretch to claim that a liberal arts education is the product of craftsmanship, the result of a slow, labor-intensive process that produces individually unique student learners whose lives have been transformed for the better by four years at the institution. One enduring image of the small college education has the eminent 19th century Williams College professor Mark Hopkins on one end of a log and a student on the other end. The Hopkins image came to symbolize the intimate small college transmission of knowledge from sage to student.

Colleges that Change Lives, by the former New York Times education editor Loren Pope, has garnered a following due to its message that small costly private colleges, like Earlham and Reed, perform a kind of educational alchemy not easily broken down into bottom-line terms but somehow able to deliver on the promise of the book’s title. Pope’s book has drawn attention to 40 colleges that are not the household names invoked by politicians trying to make hay out of critiques of higher education. Yet Pope’s 40 colleges are collectively one example of the kind of compelling story that, if told more often, might help private higher education regain the public’s trust.

When justifying the high cost of college, is it enough to assert, as countless presidents of private liberal arts colleges have, that the actual production costs of educating a student are sometimes double the tuition charge? I do not think so. In fact, I suspect that the public hears such arguments and imagines that higher education is wasteful. After all, what product costs twice as much to produce as its sale price? What firm survives producing such a product? Discerning consumers wonder how much of that double-the-sticker-price true cost pays for the hidden costs of fund raising, public relations, student recruiting, and athletic programs; that is, enterprises not regarded as being at the core of most colleges and universities, but precisely the areas that many people immediately associate with the runaway cost of higher education.

Rather than change the subject when politicians rail about the so-called non-academic costs that get passed on to students in the tuition bill, colleges need to hit the issue head on. Straight talk about non-core costs might be appealing to the public and disarming to higher education’s critics. There are potentially persuasive ways to justify the non-academic costs of running a college or university. For example, why not just assert that the expenses incurred by college fundraising and endowment management enterprises are examples of how colleges gather non-tuition revenues to keep their tuitions from rising even higher? College leaders can say with authority that those revenue-chasing expenditures, rather than being cited in the cost of educating a student, might more appropriately be charged off against the endowment and fund raising returns. The public might then understand that, without the marginal dollars netted through fund raising and endowment returns, tuitions would be much higher.

Similarly, colleges can justify their public relations and recruiting expenditures as the price of bringing in quality students and faculty as well as the price of enhancing the perceived value of the degree the student will earn. Finally, colleges can argue that they provide their students a unique lifetime affiliation that accrues benefit long after the last tuition check gets paid. How many firms can say that about their product?

And if none of those arguments work, colleges can do what they have been loath to; that is, point to the students and parents in the consuming public and say, in the words of an old Toyota commercial, “you asked for it, you got it.” That’s right. College tuitions have gone up because students and their parents expect more from the college experience than ever. Meeting those expectations does not happen when institutions run in place to hold down costs. To get less expensive colleges, the public will have to accept less expansive college degree programs and facilities. There is no evidence that the public is willing to do so; nor should it. In any case, both are points that higher education needs to make early and often.

Candor and transparency about the costs they charge is something colleges and universities will have to practice soon enough as Congressional interest in a “College Access and Affordability Act” has made it into the next reauthorization of the Higher Education Act (HEA). The next HEA will call for colleges to provide students and their parents with more transparent and detailed explanations of the costs they charge. The emphasis on explaining and justifying costs will, in the hopes of some members of Congress, influence colleges to hold down future tuition increases.

Higher education has already taken notice of suggestions in Congress that massive college endowments ought to be taxed and that the nation’s wealthiest universities should draw upon their billion-dollar endowments to eliminate tuition altogether. Perhaps as a result of such rhetoric, Harvard and Yale have announced increased financial aid for families with incomes between $120,000 and $180,000. Expanding eligibility for generous grant aid to families with upper middle to upper class incomes, notwithstanding all the mostly good publicity it has brought to Harvard and Yale, raises as many concerns about college costs as it addresses.

For example, are Harvard and Yale’s expansive new financial aid policies just a veiled price discount (like merit scholarships elsewhere) for families that can afford to pay? And is it not obvious to Harvard and Yale that expanding financial aid eligibility to encompass families in the top 5% income bracket -- based on the argument that if they need help everyone does -- is the latest evidence that colleges and universities charge amounts beyond the reach of most American families? Many of us in higher education, while we applaud Harvard and Yale’s increasing interest in providing access, wonder how candid those universities will be about their motives as they defend the new initiatives going forward.

Making a candid case regarding college costs is an approach I have seen work for Reed College. In information sessions, when I have justified Reed’s tuition charges using images of artisans and craftsmen to describe what goes into a Reed education, I have seen the description resonate with audiences. I believe that those audiences have responded positively because they understand that they usually pay more for individually tailored and handcrafted items that have an inherent quality advantage built into them. Just as most people recognize the value of seeing or being part of a live, rather than a recorded, performance or of getting a poem or artwork created specifically for them, rather than receiving a mass-produced card, they understand the value of a handcrafted education.

The students and parents I speak to seem to appreciate that Reed addresses the high cost issue directly and offers an explanation that sounds consistent with the values and the day-to-day academic life of the college. They also seem to understand that a small college like Reed provides a highly personalized education -- where every student has the apprentice scholar experience of a thesis -- that cannot easily be replicated at a lower cost. The idea that life changing goes on in addition to degree acquisition is a powerful closer -- to use sales parlance -- for Reed.

In the midst of brick throwing at colleges over rising costs, Reed has chosen to make its here-is-why-we-cost-so-much case by citing the value of its handcrafted education. The approach works for Reed because it reflects the college’s mission and communicates institutional values. But the approach also works because Reed has constructed a narrative about college costs that makes sense and sounds believable rather than like defensive back pedaling or dissembling. Perhaps by tying their explanations of rising college costs to their distinctive missions and identities other colleges and universities can craft similar persuasive narratives.

Author/s: 
Paul Marthers
Author's email: 
newsroom@insidehighered.com

Paul Marthers is dean of admission at Reed College.

Real Progress (Finally) on College Affordability

After a decade and then some of commissions, studies and stern warnings, Congress is poised to finally take concrete action to hold down the rising cost of a college education. A notable consensus has emerged among lawmakers of both political parties and major elements of the higher education community that sunshine and transparency are the best first steps to empower consumers and address the college cost crisis. While agreement among these parties is a feat in itself, this achievement is even more extraordinary considering the staunch objections of a few short years ago.

Today, the U.S. House of Representatives will vote on the College Opportunity and Affordability Act, a bill that will lift the veil on rampant tuition increases and hold individual colleges and universities accountable for their role in pricing students out of the dream of a higher education. The legislation couples strong consumer-driven disclosure with meaningful data comparisons so that higher education consumers and policy makers alike will be able to better understand the phenomenon of rapidly rising tuitions.

After shining a spotlight on the problem, the bill encourages solutions by requiring institutions with the greatest tuition increases to form Quality Efficiency Task Forces, whose purpose is to identify what is driving the cost increases and what can be done about them. The bill also calls on states to do their part, recognizing that for public institutions in particular, state support plays a critical role.

Keeping college affordable has been a priority of mine since I came to Congress. I earned my degree later in life, an experience that has helped keep higher education at the forefront of my agenda throughout my political career. And in the 15 years I’ve spent in the U.S. House of Representatives, rising college costs have consistently topped the list of “what’s wrong” with higher education, at least in the view of American students and families.

Even the most casual observers of American higher education recognize that there are no easy answers to the college cost crisis. The quality of our institutions has long been linked to institutional diversity, consumer choice and academic autonomy. At the same time, public and private colleges and universities alike are heavily subsidized by the public in the form of taxpayer-funded financial assistance. There has always been a tension between postsecondary independence and public accountability, a balancing act that is particularly tenuous when it comes to the question of appropriate federal intervention into hyperinflationary college prices.

In the lead-up to the 1998 Higher Education Act reauthorization, I thought the most appropriate solution was to enlist higher education experts. In doing so, we established the National Commission on the Cost of Higher Education. In simplest terms, the Commission recommended that colleges be required to disclose more detailed financial information, while also self-examining to identify strategies that would hold down costs. These seemingly modest recommendations were given a cool reception, to put it mildly.

After swiftly rejecting the Commission’s proposed reforms, the higher education community pledged to deal with rising tuitions independently. Lawmakers were given assurances that colleges and universities recognized the pressing need to hold down costs, and would act accordingly, without intervention. Unfortunately, it seems the college affordability gap has only grown wider in the decade since.

When we began the current HEA reform cycle in 2003, I knew colleges could no longer go it alone. Congress needed to do something. Building on the recommendations of the Commission, I proposed a College Affordability Index to help students and families better understand and compare tuition increases. Five years later, the details have been refined but the principle remains the same -- thanks to the bill we are about to consider, higher education consumers will finally be given the information they need to start exercising their power in the marketplace.

Luckily for students and families, Congressional action has not occurred in a vacuum. Colleges and universities have begun to recognize that the college cost crisis is not a figment of Congressional imagination, but a serious threat to educational equality and American competitiveness. The higher education community has also come to the conclusion that while congressional action is inevitable, institutions can still be the primary drivers of reform if they step up to the plate now and take a leadership role, rather than forcing Congress to intervene more aggressively.

Some in the higher education community continue to bury their heads in the sand and reject the very existence of a college cost crisis. Others acknowledge the problem, but spend more time criticizing our proposed solutions than offering creative responses of their own. Neither of these stances is acceptable.

Late last year, the Education and Labor Committee unanimously approved legislation that takes meaningful steps to keep college affordable. The bill will receive strong, bipartisan support in the House this week, and later this year our efforts to solve the college cost crisis will become law. College costs have dominated the 1998 and 2008 HEA reforms. Let’s hope that in another 10 years we will have finally changed the subject.

Author/s: 
Howard P. (Buck) McKeon
Author's email: 
newsroom@insidehighered.com

Rep. Howard P. (Buck) McKeon of California is the senior Republican on the House of Representatives Committee on Education and Labor.

Better-Than-Ivy Education: $7,376 a Year

With titles such as Our Underachieving Colleges, Going Broke by Degree, Excellence Without a Soul, and Remaking the American University, several excellent books have argued in recent years that there is significant room for improvement in American undergraduate education. As a former student, parent of students, college faculty member, and taxpayer, I share this view.

As a researcher who studies entrepreneurship, I have observed entrepreneurs successfully develop the non-traditional student market. I have wondered if the traditional student market could be revitalized by a major wave of entrepreneurially driven innovation. So, in "The $7,376 'Ivies,' " a study soon to be published by the Center for College Affordability and Productivity, I looked at undergraduate education for traditional students as if I were exploring a new venture opportunity.

I started by creating a value-designed model for a hypothetical college, and then determined its cost by developing a detailed pro forma income statement. By value-designed model, I mean a model designed for value “customers”. These are the students (or perhaps more often their parents) who are looking for “value” -- a high quality product at a relatively low price. When buying a car, they’ll take a $22,000 Toyota Camry over a $105,000 Mercedes S or a $10,000 Chevy Aveo 5. To get to a low enough price point for the value customer, a college must either have a large subsidy from public or private sources, or have lower costs. I looked at the cost side. As the title of my study suggests, I found that value-designed models of undergraduate education can radically reduce costs AND increase quality.

The hypothetical school I designed is called the College of Entrepreneurial Leadership & Society (CELS). CELS is designed for traditional, undergraduate college students of moderately selective to highly selective academic standing who want to be actively involved in the “college experience.” CELS is not for students interested in a pure vocational school or an ivory tower. Rather, CELS targets students who want to exit college a better, more mature person with a solid foundation for life and a successful career.

CELS will offer a broad curriculum that provides students with a strong liberal education, appropriate technical skill for entry level+1 jobs, potential to be general manager of an organization in their chosen profession early in their career, plus foundational skills and knowledge for life outside of work. Majors will be offered in Behavioral Science, Business, Communication Arts, Education, Engineering Science, Information Technology, Letters & Civilization (interdisciplinary humanities), Public Affairs and Science & Technology.

As a former student and parent, I think CELS would provide an extremely high quality education. You may not share this view. That is fine. The market for higher education is large with multiple segments. Several value designed models are viable, and can produce significant cost savings.

For example, a CELS with 3200 students would have a total operating cost (without room and board) of under $8,000 per student. This is the cost to the school, not the cost to the student. Price (i.e. tuition) is the cost to the student. Because most colleges are heavily subsidized by a state and or/private philanthropy, they are able to charge tuition well below their actual cost. CELS’s cost of under $8,000 is drastically below the cost of “top” liberal arts schools ($25,000 to $62,000) that cater to prestige-oriented customers. But it is also well below the $12,000 cost of public regional colleges who have many price driven customers and a less academically selective student body. So, if a CELS received the same level of subsidy as a public regional college, it could charge students about $4,000 less than the regional, even though the product was competitive with the “top” liberal arts schools.

To arrive at this low cost position, I didn’t cut corners on anything that was important to the CELS value proposition. CELS doesn’t use many adjuncts, faculty salaries are competitive with those at research universities’, a laptop is included in tuition, the Division III football stadium has a Jumbotron, etc. As the CELS example illustrates, a college using a value designed model could deliver a prestige quality product to its target market and yet have vastly lower costs .

The key to getting higher quality and lower cost is to constantly use a value mentality when designing the model. All decisions need to be made so as to maximize value to the target market. Who are your potential students and what package of benefits (primarily learning) and price is attractive to them? It is crucial to realize that different target markets may be looking for different benefits. Students at a No Frills University may not be interested in a “college experience”, but CELS students think it extremely important. Ivory Tower College students may see the study of “Knot Theory“ or “Divas, Death, and Dementia on the Operatic Stage“ as vital to their education, while CELS students will find these topics an academic curiosity at best. So how to maximize value varies from college to college.

However, there are some major techniques that simultaneously add value and decrease costs, no matter what the target market.

  • Having a coherent curriculum. A well-designed curriculum is key to both improving student learning and lowering costs. Providing a personalized education through mass customization is possible if you build upon a well-designed platform of courses for both general education and the major. While done to insure quality of learning, significant cost savings also ensue because you are reducing the number of class sections you offer. At CELS almost 50 percent of a student’s course work is a set of general education courses that are required for everybody. CELS faculty will spend a great deal of time designing these courses to insure that they provide a consistent learning experience so that every CELS student will graduate with the core general knowledge and skills for their future. The same approach will be taken in the design of required courses for the major. Given a strong platform in both general education and their major, students can use the remaining 20 percent to customize their education. They can pick specialized courses in their major, courses from other majors and off-campus learning experiences to match their individual career goals and personal interests.
  • Using appropriate teaching technique and technology. What is appropriate varies by course; but generally active learning works better than passive, and active learning can generally be done as well in a class of 100 as a class of 5. (The exception is when the students’ work product needs to be highly customized). A lecture format class of 25 students is much less effective than a class of 100 using an active learning format, but costs four times more per student to deliver. For example, Socratic case method classes of 100 have long been used successfully in major law schools and graduate business schools.
  • Consolidating majors. Intellectually fragmented arts and science majors and highly specialized professional majors are not appropriate for an undergraduate education. They also significantly increase the number of undersubscribed classes that have to be offered. In other words, rather than Accounting, Finance, Management, and Marketing majors, CELS has a Business major. Similarly, CELS has Letters and Civilization rather than English, History, Philosophy and Religion.
  • Keeping the undergraduate education mission primary. Other missions like graduate education and research can add significant costs. While good missions in their own right, they provide little if any direct benefit to undergraduate students. In addition, they have a tendency to distract attention from undergraduate education. Performing them may actually reduce benefits to undergraduate students. So, at CELS expectations for faculty research range from modest to non-existent. From CELS’s perspective, faculty can do research as a job perk, not because it is a vital part of our mission.
  • Reducing organizational silos. Disciplinary and functional silos are a barrier to providing a coordinated education that meets students’ needs. In addition, reducing silos lowers cost by reducing the number of faculty and administrators needed. For example, at CELS, faculty are in multi-disciplinary units along the lines of the majors. Individually, most faculty have some multi-disciplinary skills so it is much easy to coordinate interdisciplinary education, and you need fewer faculty. Because there are fewer faculty and CELS is not a research school, there is no need for an extra level of management (deans’ offices) between the front line supervisors (department chairs) and provost.

With a value-designed model, a college can deliver a prestige quality product to its target market at a fraction of current cost. Value designed models could radically remake higher education, however this cannot be done overnight. Most existing schools should not immediately convert to a value-designed model. New models need to be tested and refined on a small scale before wholesale adoption. Beyond that, the barriers to innovation at most colleges are probably far too high to make wholesale adoption feasible at this time.

Today CELS and other value-designed models should be pioneered by: 1) the social or for-profit entrepreneur interested in starting up a new independent college, 2) the successful multi-college university that wants to pursue radical innovation through a new college without disrupting their existing colleges, and 3) the existing small college that is willing to make major disruptive changes internally in order to drastically improve its value externally.

At this time, public policy makers, concerned citizens, and educators should actively encourage pioneer innovators. Then over time, many existing colleges will imitate the successful pioneers, both because the pioneer has developed the innovation and demonstrated its usefulness, and because the pioneer’s success puts pressure on under-performers to increase productivity. Thus higher education industry performance could improve dramatically overtime. However, in order to reap widespread benefits from innovation in the future, there must be pioneer innovators today.

Author/s: 
Vance H. Fried
Author's email: 
newsroom@insidehighered.com

Vance H. Fried is a professor of management at Oklahoma State University.

Wanted: Leaders Who Produce

In the next 15 years millions more of our citizens must get into and through higher education. Why? According to the statistics and numerous reports published over the last couple of years, we need an educated work force to propel the U.S. economy forward, an economy that is capable of benefiting from and working with rapidly emerging economies around the world. But yet , as Fareed Zakaria wrote in a recent article in Newsweek, “Just as the world is opening up, we are closing down.”

The numbers are in. We know what is needed for the U.S. If our colleges and universities cannot produce the millions of additional graduates, we could confront a crisis that will lead to a preponderance of “closed for business” signs unless urgent and significant action is taken.

Today, most governors, state legislative leaders, and higher education leaders understand that the path to economic security and prosperity for our nation and our states runs through the college campus. Why, then, does the task appear to be so daunting, so overwhelming?

The force of the need to educate many more millions is on a collision course with other forces confronting today’s campuses. The federal budget and many state budgets are constrained by present economic conditions and rocketing spending for defense, public safety, health care, human services and transportation. There likely won’t be a pot of gold at the end of the government budget rainbow for most colleges and universities to garner significantly more operating funds to accomplish what they are being asked to do. Plus, now -- even more than earlier this decade -- policy makers appear to be more opposed to continuous and significant increases in tuition and fees as a means to redress budget shortfalls.

As a result, productivity and affordability in higher education will take center stage just as accountability took center stage this past decade. What is the answer? Of course, there is no one right answer, but answers must be found and they must be found quickly. Collective and empowered leadership will be required on the campus, in governing boards, at state capitols, and in the business sector. No one gets a pass; no one gets to point a finger at the other.

The challenge is to focus on colleges becoming more productive by growing revenues through increased enrollments at the same time they become more efficient in offering their services. After all, both the need and the potential users are there. Most private sector businesses would be delighted to have such a need for their services and would be retooling to meet that need.

Campus and/or system leadership is the key to unlocking doors to greater productivity and affordability. After all, the citizenry will receive their education from the campus, the place where the work gets done. Higher education leaders proclaim that campuses are loaded with the intellectual capital to create and innovate. So, as higher education leaders we should not and cannot wait for government or the private sector to singlehandedly meet these challenges for us. We must take the lead. That may be our greatest public service challenge to date.

The first requirement is for campus leaders to understand and accept the reality, the necessity of meeting the country’s need for millions more educated citizens, while at the same time acknowledging the government budget constraints to do so. Many already do understand this dilemma and would welcome partners in the policy-making realm and business sector to join them in seeking positive solutions. However, if campus leaders resist the challenge and choose to not accept reality, policy makers will likely force external solutions that may not be the most desirable or related to real campus solutions.

What is urgently needed now is collective leadership from the campus, business sector, and policy-making entities to engage as peers in addressing this crisis. Campus leaders should take the first step to create the environment where constructive solutions can be found. Old ways of solving public policy issues -- such as testifying to legislative committees in an "us vs. them" manner -- will not work: such practices foster the belief that every answer must depend on some type of funding.

Yes, initially the campus may need to address some tough questions about existing practices such as the role of tenure and using more part-time faculty, but those questions already exist. Engaging faculty and administrators with policy makers and leaders from the business sector (all in the same room at the same time) will undoubtedly lead to answers that will be more broadly understood, supported, and actually capable of being successfully implemented.

Likewise, policy makers play a key role in addressing the need for a more educated work force and should acknowledge their role in addressing the challenge to educate millions more citizens. They should accept the need for an adequate funding support base for campus operations and financial aid benefiting students at all types of institutions They should discontinue reducing the percentage of the public budget allocated to higher education in order to fund other parts of the budget. They should support innovative approaches to productivity and permit campuses to redirect productivity savings. These actions will send a clear commitment to higher education leaders about policy makers’ commitment to educating many more citizens.

Major, not minor, change will need to be considered by this collective leadership to ensure an affordable postsecondary education for millions more of our citizens. Some ideas to consider putting on the table include the following:

  • Change the cultural perception of a campus as a “place to go” to be one that provides instruction and enhances learning. Make significant changes to the instructional delivery model. Consider removing traditional time constraints such as quarters and semesters.
  • Hire campus leaders with a passion for increasing productivity and student success. Hold campus leaders and departments accountable with rewards for specific, significant results. Examples could include increases in the number of courses completed and/or degrees or certificates awarded, reducing time to degree, or reducing student costs.
  • Provide financial incentives -- even in tough times -- to reward campuses and departments that make significant internal changes to meet the need to educate many more citizens.
  • Revise state and campus funding allocation formulas to focus on student success rather than attendance, and also focus funding on special initiatives to achieve specific public policy objectives. Give funding priority to departments and institutions that can accommodate increased numbers of students at least cost and reward those that graduate large percentages of those that enter.
  • Establish departmental budgets that have specific goals to create specific revenue streams and then allow them to use the revenue they generate.
  • Collaborate. Collaborate. Collaborate. Find ways for campuses and departments to consolidate administrative, student service, and academic support functions required of all campuses. Provide incentives for faculty and departments to collaborate to offer what students need anywhere, anytime.
  • Focus more on “finishing degrees” for adults who earned credits earlier in their lives but did not receive a credential.
  • Consider charging tuition and fees tied to the actual costs of instruction. Charges for large general education classes should probably be significantly less than charges for small, highly specialized classes.
  • Explore having community colleges or selected four-year colleges provide all remedial instruction for the state or region, releasing resources for the other four-year colleges and universities to focus exclusively on college-level courses.
  • Make greater use of the expertise and experiences of retirees since there will be significant numbers of them who can offer this resource.
  • Balance career education and liberal arts education opportunities. An economy based on a broadly educated citizenry will be the economy most able to adapt to inevitable and constant changes.
  • Reduce government regulations and reporting requirements. Government regulations and policies tend to “count” not “produce.” Many policy makers believe that government cannot regulate business to success. The same principle applies to higher education.
  • Use accountability measures and incentives that truly focus on productivity. Don’t use accountability measures to play “gotcha” since there is no better way to drive down productivity. Accountability measures that focus on “gotchas” will “getcha” very few results.

Making college more affordable and achieving greater productivity are not only worthy goals; they are critical to the economic prosperity of the country and states. No single solution will work for all. Together we can create collaborative solutions and adapt them as needed for particular situations and needs.

This country needs to educate millions more of its citizens during the next decade. Urgent and bold leadership and action is needed to meet this challenge. Higher education leaders should take the lead to create the setting to forge the solutions to make college more affordable and achieve greater productivity. I am optimistic that such leadership exists.

Author/s: 
Larry A. Isaak
Author's email: 
newsroom@insidehighered.com

Larry A. Isaak is president of the Midwestern Higher Education Compact and chancellor emeritus of the North Dakota University System.

Public Missions, Private Dollars and Ordinary People

You can tell a lot about institutions – and societies – by how they invest their money. This is why many public college and university leaders, myself included, are so concerned by the shameful spiral of disinvestment in public higher education in America.

At a time when our global competitors from Ireland to China are investing aggressively in their higher education systems, almost every state in our nation is headed the other direction. This pattern, now nearly three decades old, not only hampers our ability to be engines for economic prosperity, it also threatens our historic -- and essential -- role in creating opportunity for students who have traditionally looked to us as their gateway to success.

Varying degrees of recovery in state funding for public higher education in the last two years offered a glimmer of hope -- until the current economic slow-down. Forecasts of further financial turmoil and economic uncertainty are dramatically undercutting states’ general revenue budgets nationwide, and that surely will mean further belt tightening for campuses that have long since run out of notches on their belts.

In 1980, states funded nearly half of the operating budgets of public campuses. Twenty-five years later, states were covering only one-fourth of the bills, and that percentage has since fallen even further. Here in Oregon, for example, our largest public universities receive only about 15 percent of our funding from the state. Consequently, students have been forced to pick up a larger share of the cost of their education through tuition increases.

According to the College Board, tuition and fees for in-state students at public institutions went up 6.4 percent this year, to $6,585. Add in room and board, and annual costs now average $14,333. If you think that’s steep, try covering the estimated $25,200 expenses of an out-of-state student.

It will get worse. So far, 17 states anticipate midyear budget cuts that could result in midyear tuition increases for the 14 million students enrolled in universities there, according to a senior leader of the American Council on Education. Colleges and universities in other states, including my own, are already being asked to produce scaled-down budgets in anticipation of revenue shortfalls for the next fiscal year or two. Already, our neighbors in the University of California and California State University systems have announced plans to roll back enrollment by thousands for the coming academic year, and California high school seniors are scrambling to apply by newly announced deadlines at the end of this month.

The long-term consequences of these ever-shrinking budgets are troubling, indeed. America no longer risks simply falling behind educational needs in an increasingly sophisticated, technology driven global economy; we now face the prospects of being mostly privately funded and losing our public mission.

Lest we forget, that public mission is to provide higher education opportunities to students who often come from ordinary or worse economic and social circumstances, many of whom are capable of accomplishing extraordinary things. In fact, the history and the promise of this great nation is predicated on the fact that social and economic mobility have provided the dynamism that has created the most technologically sophisticated and prosperous nation on earth. Education has been the most powerful source of that mobility and dynamism. If public universities are forced to abandon that public mission for lack of funding, we are at risk as a nation of creating a permanent underclass of disadvantaged citizens who have little or no stake in our society and of losing the dynamism that has served us so well at the very moment when challenges we face relative to global economic competition have never been greater.

There are further, clear benefits to society within this public mission. The average college graduate working full time, for instance, pays roughly 134 percent more in federal income taxes and about 80 percent more in total federal, state and local taxes than the average high school graduate. In Oregon, it has been estimated that an average group of 1,000 college graduates will generate at least $62 million in state income taxes over the course of their lifetimes.

For a land grant university like Oregon State, which I serve as president, it would be easy to adopt a private mission and to keep our financial house in order. This would allow us to focus on what is good for the university in terms of reputation and financial strength, rather than considering how effectively such actions might address public needs, including access for qualified students. There is no shortage of companies that might like to support proprietary research at our university and other similar
institutions, and we could market our academic programs in high-demand fields to wealthy, out-of-state-students, charging private college tuition in the process. We could abandon teacher education programs and devote resources to those activities that attract the most outside support.

But all of the above would mean no less than an abandonment of our founding values. The Morrill Acts of 1862 and 1890 provided land and money for states to establish public campuses “to promote the liberal and practical education” of their working-class citizens. President Lincoln referred to the land grants as the "people's colleges." For more than 140 years, colleges and universities established through those initiatives have helped to create the world’s best-educated workforce and fueled a dynamic, innovative economy. Where will the most financially vulnerable students on those campuses turn if they are priced out of the most affordable option for a four-year degree – increasingly, the basic credential required to compete in today’s job market? Where will the American economy be without the enhanced contributions that education prepares them to make in the workplace? We should all lose sleep considering the answers to those questions.

Oregon State University created an innovative financial aid program this year in support of that land grant mission – the Bridge to Success Program. Combining federal Pell Grant funds, Oregon Opportunity Grant monies, donations from Oregon State supporters and operating funds redirected toward this program, Bridge to Success aimed to cover tuition and fees for some 1,500 students this fall – 10 percent of our in-state students. With the economy spiraling downward, response to the initiative escalated; aid awards were given instead to a breathtaking 2,900 students; demand surely will grow significantly next year, as will the challenges to ensure the program’s sustainability.

Other public universities in states whose economies have been hit harder than ours are feeling the pinch more immediately and more deeply. There are no easy answers for any of us, only a collective recognition that our nation’s capacity to move forward rests in large measure on our ability to find solutions. State and federal governments need to consider funding strategic investments in the enrollment capacity of community colleges and public universities to provide access to quality higher education for an increasingly diverse population of students; such students often come from ordinary circumstances but often have extraordinary potential. To do so requires more support for public higher education from existing funds and possibly new sources of revenue. There is no way around it: Public higher education needs public investment.

Our public universities have represented hope to generations of Americans. In a campaign year in which the concept of hope has become central to our electoral dialogue, we must not forget that real hope, meaningful hope, requires financial investment and that among the institutions in need of a financial rescue plan, public higher education must be a top priority.

Author/s: 
Ed Ray
Author's email: 
info@insidehighered.com

Ed Ray is president of Oregon State University and an economist.

Let Us Disarm!

It is high time for the federal government to adjust the antitrust laws to allow American undergraduate colleges and universities to “disarm” unilaterally from wasteful expenditures. Current law does not permit us to disarm because we cannot talk to each other about how to control costs without running the risk of being accused of what can only be considered anti-competitive trade collusion.

It is time for all of us in higher education to think about what it would be like to compete only on the quality of our academic programs and not on the excesses of our amenities. Why can’t we be bold and courageous enough to come to the common sense conclusion that not competing on amenities would in the long run be good for students and for those who have to pay tuition? Why can’t we temper our “capitalistic compulsion” to compete with each other in ways that only serve to drive up tuition costs? Wouldn’t we be in a position to render better service to the American public if we arrived at some common conclusions about how to reduce costs?

Colleges and universities are feverishly rushing to cut expenses because of the current and very real economic crisis. Witness all the presidents announcing hiring freezes, postponements of construction projects, furloughs, lay-offs, salary freezes and modest tuition increases. While none of my colleagues want these cuts to affect the quality of the academic program, it may, in fact, be an unavoidable result.

Yet with all this trimming and restraint, the public is not likely to see the price of an undergraduate education decrease any time soon. The traditional higher education business model does not permit it. At many, if not most, institutions the cost is significantly higher than the sticker price. At Dickinson, for example, it costs us $13,000 above the sticker price of $47,800 to educate a single student. What rational “business” begins with costs always being significantly higher than price and then tries to sustain that model by further increasing costs? The constraints higher education imposes upon itself now might well soften somewhat the threat of the current economic crisis by reducing marginally the gap between cost and price, but will do nothing to alter a business model that does not work because you cannot have your cake and eat it too.

The only way to control cost and moderate price is to perform radical surgery. Since the historic mission for many colleges and universities is to offer a liberal education that prepares students for informed participation in a democracy, the activities that undergraduate education has added over the centuries to this essentially academic intent are the most vulnerable to “the knife” -- residential life, student life, athletics. A combination of classroom and out-of-classroom experiences is now defining a distinctively American undergraduate education that is distinguished from classroom-only university programs in other countries. It is this very surgery that for-profit universities have already performed to keep tuition across their sector more affordable. Academic degrees are offered online (excepting short-term residencies on a host college campus or coursework in a modest office building); there are no residence halls; there is no athletic program; and, of course, there is no student life except conversation about coursework online. For-profit universities are already growing rapidly in enrollment and if tuition keeps rising among non-profits, this opportunity may become increasingly attractive to the American public.

I suggest that nonprofit education will be reluctant to go so far as the for-profits in altering what has evolved over the centuries as the American “model” of undergraduate education. That said, a viable first step to control costs without sacrificing the academic experience is for colleges and universities to pull back as a “sector” from the extravagances that have developed in the out-of-classroom amenities over the last few decades because of a compulsion to outspend the competition in what is most visible to the paying public -- sports palaces, fancy hotel-like accommodations, spa-like student unions, gourmet-style dining facilities, etc.

On behalf of the public and our own desire to remain a key contributor to the national ambition, we ought to disarm in at least one aspect of our activity. We should have a positive deflation of our ambitions and our competitive fever (regardless of the numerical ranking gimmicks) in those areas that are not historically related to our role in advancing knowledge.

What would happen, for example, if all of us came to the conclusion that it would make sense only to build residence halls that conform in design and purpose to the academic program of our respective college or university and to the pricing and construction standards of eco-friendly “low-income housing” that offer inhabitants perfectly livable, attractive space without extravagance? The initial cost may still be high (although not higher than luxury-hotel accommodations), but the long-term energy savings would be significant. What if we all agreed that students could, indeed, survive and even thrive in double rooms? What if we all scaled back our competition for student athletes? What if we pledged to reduce conference and meeting costs by relying more heavily on virtual technology? What stands in the way is not only antitrust laws but also our own attitudes and egos.

It is quite obvious that none of this radical change could be accomplished systemically by a single president or a small group of institutions; it would take a sea change across higher education. But even if we have the best of intentions and can overcome our reluctance to change, the antitrust laws stand squarely in our way. Right now, any discussion with the intent of disarmament cannot prudently be attempted.

The federal antitrust laws were applied in the 1990s to challenge financial aid meetings among colleges that had an “overlap” in the students they recruit. The aftermath of that litigation has had the unfortunate consequence of severely limiting discussion among colleges and universities about cost and competition, at great detriment to the public. I assert that if we, as a nation, are serious about reducing the cost while improving the quality of higher education, we in higher education need a “safe” space in which to talk candidly. Congress should revisit the law and permit such conversations for the benefit of the public. We can’t disarm if we can’t talk. That is Diplomacy 101!

Let me be clear. I am not talking about encouraging discussion among institutions about faculty salaries, annual tuition charges and the like. I do, however, believe we need the will and determination to try to achieve change in those current practices that have escalated our costs. As a first step we need change from the federal government that would give us the legal means to help the public with the cost of higher education. Not to entertain disarmament leaves us with an intolerable alternative -- escalating tuition without foreseeable limit.

Leadership is also required and that probably best comes from established associations. It is time for an organization like the American Council on Education to issue that call for us and to work productively with the federal and state governments to revisit the antitrust laws to allow us to work towards affordability.

There will, of course, be those who decry any form of cooperation among those who meet to discuss cost. They distrust us. This caution is understandable were it not for the intractable crisis in higher education. If we do not find ways to reduce the cost of our colleges and universities, students will potentially seek alternatives such as for-profit universities or study at foreign universities, or be shut out of higher education. And many of those who attend our colleges and universities will be saddled with increasing debt that will burden them and/or their families for years – all at the wrong time in our economic cycle. If “self-interest” is not a consoling safeguard for the skeptics, let us request a temporary exemption of two years to allow colleges to address the exorbitant tuition issue to demonstrate that there are benefits to the public in this approach. If there are such benefits, let the exemption be extended. If not, shame on us!

Author/s: 
William G. Durden
Author's email: 
info@insidehighered.com

William G. Durden is president of Dickinson College and a member of the Board of Directors of Walden University.

Going on a Diet

For American colleges and universities, the deepening recession means that costs will be rising (because of increased enrollments as unemployed persons return to school to stay gainfully occupied) while revenues will be falling, as state appropriations, private donations, and endowment income shrinks. Political and economic considerations alike will preclude meeting the revenue shortfall exclusively through tuition increases. Colleges must cut costs. The potential severity of the recession means that the magnitude of the cuts is uncertain, but likely to be relatively large.

In such an environment, higher education institutions and their faculty may start to do some unpalatable things previously off the table. Let me list 10 possibilities:

Bigger Teaching Loads. It is a dirty little secret that teaching loads of full-time faculty have been declining for at least a half a century. At medium quality state four-year schools, in 1960 a professor would teach 9 or even 12 courses an academic year; today, the number of classes taught is more likely to be five or six. At research oriented institutions, a similar reduction has occurred, with a rare senior professor at research oriented institutions teaching over four courses annually these days (teaching loads are much higher in community colleges, however). This trend might start to reverse.

The cost per student credit hour of instruction for regular full-time faculty is perhaps an unsustainable multiple of that of adjuncts and graduate students. Related to this is another reality: the majority of non-grant funded research done today to justify low teaching loads leads to publication in third- or fourth-rate academic journals that are little read; the research is indefensible on cost-benefit grounds. Hence, the Journal of Last Resort may start to get fewer submissions as teaching loads start to creep up.

Reduce Support Staff. The number of non-teaching professional staff has doubled in relation to enrollment over the past generation. Universities have added scores of public relations specialists, wellness coordinators, diversity czars, international program administrators, assistant deans, associate provosts, and the like. Some paring of the Bureaucratic Army will become necessary. To cite one example where change could come, consider that we are in an era in which we have elected an African-American president, where Oprah Winfrey is probably our most popular television personality, and in which the last four Secretaries of State were either black or female. Do we really need an army of Affirmative Action Police to monitor the race and gender of job applicants, students or contractors?

Reevaluating Tenure. Tenure has already diminished somewhat in importance as universities resort to hiring cheaper adjuncts or use graduate students more intensively in the classroom. The prospects of several years of dismal funding may prompt more universities to go further, perhaps putting all new appointees, including ones considered potential permanent additions, on term appointments. As the demand for new faculty sharply diminishes, universities will gain the bargaining power to enter into these sorts of arrangements.

Unionization Attempts May Grow. In response to attempts to raise teaching loads and reduce or even end tenure, more faculty members may start to talk about faculty unionization, especially in the public institutions.

Moves to Increase Attainment May Slow. The Spellings Commission, higher education coordinating boards, governors and some academic cheerleaders (Claudia Goldin and Lawrence Katz’s new book The Race Between Education and Technology comes to mind) have all called on increasing the proportion of adults with college degrees, especially for those in underrepresented racial or ethnic groups. While the rhetoric supporting such moves will probably increase as Barack Obama takes office, the presence of other vast and very expensive problems may hamper the ability to move forward, although attempts will be made to include various financial aid programs for underrepresented students under “economic stimulus.”

Endowment Spending Rules Are Dead. The talk of forcing universities to spend more out of their endowments should end, if any semblance of rationality exists in Washington (to be sure, a tenuous assumption).

Cooling Big Salary Increases for Top Officials. We have entered the era of the million dollar college president (and, of course, the two or three million dollar football coach). The move to rapidly escalate salaries for top leaders will probably temporarily abate a bit, as well publicized increases become politically unsustainable for not-for-profit institutions in an era of high unemployment, stagnant wages, and continually soaring tuition fees.

A Temporary Truce in the Athletic Arms Race. Spending in big time athletic programs have been rising by double digit annual amounts in recent years. It becomes increasingly difficult to justify growing subsidies for ball throwing competitions in an era of joblessness, rising student loan debt, and growing resentment of the easy life of many hedonistic college students;

Slowdown in the Academic Arms Race. It seems the president of every mediocre American college wants buckets of money to allow that institution to get to “the next highest level,” an impossible dream for all but the very few. Financial exigencies will scale such cost drivers as building luxury quasi-country club-like facilities and hiring superstar prima donna professors who teach little but demand a lot. The abatement will be temporary, however, until such time as we find a better means of measuring institutional performance than the U.S. News & World Report rankings.

Using Technology to Lower Costs. To this point, new technologies have increased expenses. Colleges will get more serious about capital-labor substitution, using distance learning and related technologies to cut per student instructional costs. Socrates’ approach to teaching may undergo its first fundamental wide scale challenge in 2,400 years.

I could go on, but I have run out of fingers. I have not, for example, mentioned efforts to get serious about having students finish college in a timely fashion, punishing institutions with large numbers of students lingering for five or six years, and rewarding efforts to institute three-year baccalaureate degrees, as in many European countries.

I have stuck my neck out enough for one essay, and have shown, once again, that Thomas Carlyle was right -- economics is the dismal science.

Author/s: 
Richard Vedder
Author's email: 
newsroom@insidehighered.com

Richard Vedder is the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University and director of the Center for College Affordability and Productivity.

Bucking Conventional Wisdom on College Costs

A national agenda for postsecondary education in the United States is beginning to form, motivated by the goal of moving the United States to a position of international preeminence in postsecondary education by the year 2020. The size of our achievement gap and current fiscal realities present real challenges, making productivity increases in higher education imperative, to maintain access and increase degree attainment on a reduced funding base. One strategy is to improve the management of costs within higher education — reducing the need for tuition increases, improving public credibility necessary for increased public investments, and better targeting resources to those functions that pay off in terms of increased educational attainment. Managing costs will require attention both within institutions and at the state policy level — changing how funds are allocated, and focusing on the relationship between resource use and quality.

Clearly, changing postsecondary finance without a lot of new money to grease the skids will be difficult. The status quo is always easier than change — particularly change that will be objectionable to those who benefited most in the previous system. But political objections aren’t the only barrier to changing funding in higher education: A much bigger impediment comes from conventional wisdoms about college finance, truisms about costs that aren’t based in fact. The power of these myths is that they are held uncritically by people inside and outside of the academy: Governors and state budget officers, legislators, legislative analysts and fiscal staff, presidents, trustees and faculty. In the hopes of fostering a better dialog about how to improve performance in higher education, we’ve identified some we think are the biggest obstacles to change.

Conventional wisdom #1: Spending increases in higher education are inevitable, because there is no way to improve the productivity of teaching and learning without sacrificing quality.

The belief in the inevitability of rising costs may be the most damaging truism of all, as it affects the way that institutions budget and plan. The common approach to building the base budget is a case in point. It starts with taking last year’s budget and adding to it the replacement of any prior year reductions, salary increases, benefit increases, and costs of inflation for supplies and equipment. Institutions can get a 5 percent increase in overall funding and still claim – and believe – that their budgets actually were reduced, since they should have grown at least that much to get to a zero base. Small wonder that policy makers and the public are coming to doubt that colleges and universities are trying to control spending, and that they place their own institutional ‘bottom lines’ ahead of public needs for higher education.

Moreover, faculty labor productivity is only one part of the higher education cost pie. Spending on faculty is a minority of all spending in most institutions, a proportion that has been declining in all sectors for the last two decades. This has happened as institutions have shifted to more part-time and non-tenured personnel, who now do more than half of the teaching in higher education.

Has this hurt quality? It’s hard to tell: Rates of degree and certificate production have not gone down; in fact, they’ve increased slightly in most types of institutions. This doesn’t mean that shifting to part-time faculty and increasing the use of technology is the only or maybe the best way to increase labor force productivity in higher education. Institutions could do a lot more to increase the cost-effectiveness in their faculty investments, using the opportunity of faculty turnover to translate faculty lines into more productive uses. This doesn’t mean getting rid of full-time and tenure-track positions, but it might mean trading a senior tenured position in classics for two junior level assistant professors in first year writing courses.

Institutions also can put more resources into salaries if they find ways to reduce the explosive growth in benefits costs. It could be argued that even if increases in faculty compensation costs aren’t inevitable, they are still desirable because faculty deserve to be appropriately compensated, and competition for faculty means their pay will rise over time. That may be true, but this places this argument in the "nice work if you can get it" category, rather than an immutable requirement for basic functionality. In a national environment of stagnant wages and declining productivity, there’s no immediate reason why higher education should be allowed to increase costs more than other major sectors of the economy.

Conventional wisdom #2: More money means more quality, and quality means higher performance.

Another enduring myth of higher education finance is that money buys quality, and since quality is the ultimate goal of every institution, higher quality means better performance. If quality means reputation, we could buy this, since in our highly stratified system of higher education, spending correlates with common measures of institutional prestige, such as admissions selectivity, class size and faculty reputation. But if quality means getting more students to a degree with acceptable levels of learning, it’s something else entirely. There is no consistent relationship between spending and performance, whether that is measured by spending against degree production, measures of student engagement, evidence of high impact practices, students’ satisfaction with their education, or future earnings. Instead, the research shows that the absolute level of resources is less important than the way resources are used within the institution. This shouldn’t be surprising: similar findings have emerged from research on K-12 finance and effectiveness. It’s good news for institutional and policy makers wanting to improve performance within higher education, since it means that leadership and intentionality matter more to educational performance than money alone.

Conventional wisdom #3: Among public institutions, state governments are now minority shareholders in higher education, and as a result public policy goals should take a backseat to market rules to steer institutions.

State funds have declined as a proportion of revenues among public institutions and tuition revenues have gone up. Even so, the taxpayer is still the single largest funder of the core educational functions of instruction, student services, and academic support in most of the country. The institutions are still public institutions, perhaps more analogous to private-non-profit institutions than agencies of state government, and as such they have the same responsibilities to ensure that their resource allocation decisions meet the standard of serving the public trust. Presidents of research institutions are most likely to make this argument, because they compare state revenues against funds for federal research, auxiliary enterprises, teaching hospitals, and and public service. Almost all of the funds for these activities are restricted as to their uses, and cannot be used to pay for the general academic support of the institution. Even with as little as 20 percent or 30 percent of total unrestricted revenues, state government can drive a major change agenda by focusing on goals and performance and paying attention to public accountability. Look at the example of shareholder reform in the private sector, where shareholders with as little as 3 percent of the voting stock have been able to leverage huge changes in management performance.

The "privatization" argument is also used by college presidents (and others) to justify executive compensation packages in higher education that rival those paid in the private sector. Colleges and universities should be able to recruit and retain the best and brightest leaders, no argument about that, and they should be paid appropriately. But it is simply bogus to use diversification of revenues as a basis for salary and benefit packages that bear no relation to real institutional performance or, more particularly, to the role of the president in producing that performance. Excessive compensation packages have been corrosive both within higher education and with policy audiences: damaging to faculty and staff morale, inexplicable to parents and students who are paying higher tuitions while they see class sections being cut, and detrimental to the argument that higher education institutions are social investments in the country’s future.

Conventional wisdom #4: Colleges and universities cannot be expected to invest in change or to pursue state priorities without new money. A corollary is that any reductions in funds must be replaced before funds can be considered as “new."

This argument presumes that institutions are operating at 100 percent efficiency, which is simply not true for any organization. Evidence that institutions are on the “efficient frontier” in terms of resources used to generate results should be required before this assertion is swallowed – evidence that few colleges or universities can find, since relatively few of them look at spending in relation to performance. To be sure, it is hard to make budget cuts at the huge levels now being forced around the country without having to cut into core capacity. But not all expenses are equally high priorities for any institution, and in this budget climate the standard for efficiency has to be set by looking at spending against performance in light of current priorities.

Conventional wisdom #5: Instructional costs rise by the level of the student taught – e.g., lower-division students are cheaper than upper-division students, graduate students are more expensive than undergraduates, and doctoral students who have been advanced to candidacy are the most expensive of all.

Higher spending levels don’t necessarily mean higher “costs." It means these activities are more expensive because we’ve always spent more money on them. The higher costs are only partly intrinsic to the specialized nature of upper-division and graduate coursework that require smaller class sizes. Institutional spending preferences including subsidized faculty time for departmental research are the primary reason for increased costs at higher levels. The senior faculty (who are the most expensive instructional resource) typically teach the upper-division and graduate classes; lower-division classes are overwhelmingly the responsibility of junior faculty, part-timers and, in research universities, teaching assistants. Spending patterns also reflect historic funding advantages for institutions with a research and graduate educational function, since departmental research is counted as a cost of instruction. And finally, upper-division costs are higher in part because institutions lose so many first and second year students to attrition. The marginal costs of adding more upper-division students to courses that are under enrolled are very low. If retention is increased, then the unit cost of upper-division instruction will decline simply because class sizes will be larger.

A corollary to conventional wisdom #5 is that lower-division students are cash cows, necessary to generate the resources to support the more expensive upper-division and graduate students. Retaining students is a better financial strategy than continuously recruiting more entry-level students, nearly half of whom never make it to a degree or certificate. While the direct costs of instruction are lowest for lower-division students (although as noted above they don’t have to be) new students actually cost the institutions more administratively than continuing students. The costs to recruit admit and enroll first-time students are around $700 per student in public institutions, and over $2,000 in private institutions, according to surveys by the National Association for College Admission Counseling. If all of the costs are counted, first-time students may well end up being ‘negative’ cost centers for many institutions. Higher education can’t expect to solve its money problem by continuously spending more on each student than it gets in revenue, while hoping to make up for it in volume.

Conventional wisdom #6: Institutions can make up for lost public subsidies by increasing research revenue.

Since money from students and states is harder to obtain, many institutions and states are looking to the federal government as a source of revenue. Stimulus funds are a short-term source for some, but funding from research grants has long been a preferred option, both because it is a new revenue stream and because pursuit of such funds aligns so well with the academic culture.

While there may be reasons to pursue federal research funds, their contribution to unrestricted institutional revenues isn’t one of them. Research grants almost never pay for their full costs; either overtly or covertly they require institutions to bear part of the cost. The cost of faculty time for research goes up significantly, typically in the form of reduced teaching loads to allow faculty to pursue research opportunities. The institutions -- and states, and students -- pay for this, so costs per student increase even as the amount of faculty time available for teaching goes down. Institutional and policy makers share responsibility for supporting this "mission creep," as does the federal government, which has limited reimbursements for the indirect costs of research administration for years.

Conventional wisdom #7: An expansive undergraduate curriculum is a symbol of quality, and necessary to attract students.

Many institutions operate on the assumption that a wide selection of undergraduate courses is a core dimension of quality, and furthermore needed to recruit students to the institution. The reality may be much different. The majority of students satisfy their general education requirements by enrolling in relatively few courses. In most institutions, more than half of the lower-division credit hours are generated in 25 or fewer courses. The result is a few high-enrollment courses and a lot of low-enrollment courses.

Furthermore, there is mounting evidence that a more prescribed path through a narrower range of curricular options leads to better retention, since advising is more straightforward, scheduling easier to predict, and students are less likely to get lost in the process. A narrower curriculum is more coherent, can be better focused on learning outcomes, and is actually preferred by many students. So an educationally effective undergraduate curriculum is also the most cost-effective curriculum. Recognizing this opens up opportunities to address costs while improving attention to positive learning outcomes. Higher education doesn’t have to go to Henry Ford’s extreme (“any color you want as long as it’s black”) to take a lesson of sorts from the portions of the automotive industry who have managed to avoid bankruptcy, by bundling options and eliminating product lines to cut production costs without compromising customer satisfaction. In our own industry, well regarded for-profit institutions have satisfied customers who have had few choices in a streamlined, cost-effective curriculum. If quality is measured in terms of outcomes achieved, not appearances and status, attention to the undergraduate curriculum is a place to start looking for improvements.

Conventional wisdom #8: States can improve postsecondary productivity if they direct more students to community colleges.

If states want to make cost-effective investment decisions, they need to pay attention to what it costs to get students to a degree, and not just entry-level costs per student. Moving more students to community colleges is a case where cutting costs may actually hurt productivity if the goal is to increase bachelor’s degree attainment. Unit costs per student are lower in community colleges than in four-year and research universities. But shifting more students to community colleges won’t necessarily reduce the overall cost per degree or certificate in a given state. Nationwide, costs per degree are highest in community colleges (among the public institution sector) not because they have more money, but because they award so few degrees or other credentials relative to student enrollment.

Although transfer works well for some students, for far too many students, enrollment in a community college lowers rather than increases the probability that they will be successful in obtaining a college degree. Does this mean that states should plan to increase enrollments in public research universities, where degree attainment levels are higher? No, since this means shifting public subsidies from instructional functions to pay for research. The best way to invest in student success is to invest in institutions that put teaching and success at the front of their missions: community colleges that are effective in translating access to a credential or to transfer, or to public four-year teaching institutions.

Conclusion

At a time when improved productivity has to be a priority for all policymakers, the search for better ways to use resources that are available shouldn’t be impeded by false or unexamined “truths.” Higher education costs can be contained without sacrificing either quality or access. It can be done through management of resources, including using data to make decisions, paying attention to spending, and looking at the relationship between spending and results. Still, we would not want to end this essay without rebutting a final "myth" about higher education finance, which is that American colleges and universities are grossly overfunded, and that better management of resources by itself will generate enough ‘new money’ to pay for the nearly doubling of capacity needed to return our country to internationally competitive attainment levels. That’s not true, either: a lot of our institutions are operating on very lean budgets, and many have been increasing enrollments without getting the resources to do so for the better part of the last decade.

These are the very institutions that must serve the majority of students who need access and degree attainment. Better management of spending is a necessary, but by itself not sufficient, condition for doubling current levels of degree attainment. To do that, we need to be reinvesting public resources in higher education, beginning with public resources from state governments. In this political environment, we should not kid ourselves that we will get the public investments necessary to increase attainment unless we first attend to better public accountability for effective management of the resources we have. That will require a different way of thinking about higher education finance, beginning with the institutions and extending to government. Getting rid of conventional wisdoms that get in the way of new approaches from both sides is a good place to start.

Author/s: 
Dennis Jones and Jane Wellman
Author's email: 
info@insidehighered.com

Dennis Jones is president of the National Center for Higher Education Management Systems. Jane Wellman is the executive director of the Delta Project on Higher Education Costs.

Picking Up Crumbs

Last week, The Harvard Crimson and then The New York Times reported that, in a cost-cutting move, Harvard University would no longer provide cookies for faculty meetings, saving approximately $500 per meeting. A Harvard faculty member was quoted as saying, “We are sharing the pain with the undergraduates.” Meanwhile, due to the economic downturn, Harvard’s endowment has dropped to a mere $27 billion.

GIVE ME A BREAK!!!!

It is high time to educate the supporters of education and publications that cover higher education that Harvard’s cookie crisis, however traumatic it may be in Cambridge, is not remotely illustrative of the depth of the economic crisis being faced by the colleges that serve those who need education the most. I’m the chancellor of an open-admission, two-year college within the 14th poorest congressional district in the country; we have half as many freshmen as Harvard, yet only a minuscule amount of the resources. We have had a 35 percent increase in enrollment since 2006, yet kept tuition the same. Our state appropriations – already the 47th lowest in the nation in terms of support for higher education – have never recovered from budget cuts back in 2002. Our budget was flat last year, at best will be flat this year, and will very likely decline in fiscal year 2012.

Approximately 86 percent of our degree-seeking students receive some type of financial assistance, and many work full time while going to school. Most are first-generation college students, and a disproportionate number are single parents. Yet, we are breaking the cycle of poverty and providing future opportunities for students who, because of admission standards and financial needs, don't choose which college to attend, but whether to go at all.

Few people outside of the Ozarks know about Missouri State University-West Plains, where we don’t spend $500 every meeting on cookies! Maybe it’s time to stop drawing attention to the alleged sacrifice of doing without cookies and ask what’s wrong with a system where some institutions have that much money in the first place. Another example is Princeton University spending $5,000 each on chairs for its new library. Every time I read about something like this I want to shout that a million-dollar gift to an institution like Harvard or Princeton is a drop in the bucket, while the same gift to a two-year, rural college is a tsunami.

Who wants to endow a chair at our school? Currently we have none.

Who wants to modernize facilities for our nursing program? We have a waiting list of students wanting to be accepted into the program, but because of program limitations, we cannot admit them. This is an extremely successful program in which virtually 100 percent of our graduates find employment upon graduation.

Who wants to fund our Honors Program for an overseas trip? Many of our students have never traveled farther than 100 miles, let alone visited another country.

Let me tell you what we have cut back.

  • For 13 years we have been trying to add classrooms and facilities for the 75 percent of our students who require developmental classes before they are ready for freshman-level math and English. Last year we finally got $8 million appropriated for two buildings. This appropriation passed the legislature and was signed into law by the governor, but because of the lack of state revenues has now been withheld indefinitely.
  • Our Honors Program, which includes some of our best and brightest students, no longer visits China, a country that will have a greater and greater impact on the world in which they will live, work and compete.
  • We have closed our Center for Business and Industry Training, and we are closing one of our satellite classroom facilities.We have eliminated, consolidated, or reduced to part time numerous staff positions.
  • Our faculty and staff, who always go above and beyond the requirements of their jobs, have been underpaid for years, did not receive a raise last year, will not receive one this year, and will be fortunate to have a job next year. Compare the average salary of our professors and assistant professors, $53,333 and $40,307, to the average salary for Harvard’s professors and assistant professors, $192,600 and $101,400. While I am well aware that Missouri State-West Plains is not a four-year college with elite graduate programs, I am also well aware that faculty at two-year colleges educate almost half of the undergraduates in the United States.

While this information is specific to my campus, you will find similar examples of administrators stretching the dollar at two-year campuses across the country.

Let me recognize that Harvard is a world-class institution, and Ivy League universities provide unique educational opportunities. That is not the issue. While I concede that the “cookie cutback” and subsequent faculty comment are not indicative of all of Harvard’s programs, they do serve to highlight a very real problem – the lopsided support of different institutions within higher education.

One can make a sound argument that a Harvard education is worth more than an education at Missouri State-West Plains. But, when you remember that our campus has half as many freshmen as Harvard, that our institution is the only option for many of our students, and that our endowment of $1.7 million is just pennies compared to Harvard’s $27 billion, is a Harvard education worth over 15,000 times more? Let me put it another way – are our students 15,000 times less worthy of the benefits of higher education? We must find a way for supporters of education to contribute in a more meaningful and balanced approach. Otherwise, a growing philanthropic egoism widens the chasm between those who have and those who can’t even have the opportunity to have.

Are we just going to keep saying, “That’s the way the cookie crumbles?”

Author/s: 
Drew A. Bennett
Author's email: 
info@insidehighered.com

Drew A. Bennett is chancellor of Missouri State University-West Plains.

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