Submitted by Lynn Adler on March 28, 2005 - 4:00am
Many parents ask about the differential benefit their children might get by attending an expensive private college or university. Prestigious private institutions have elaborate facilities, luxurious appointments, constant attention to student needs and desires, and small classes. They also carry high sticker prices.
Other private colleges struggle to stay afloat financially, unable to charge enough in tuition and fees and too poor in endowment to subsidize the kind of elite-style education often associated with the words "private college." Public universities also vary dramatically in what they charge, what students actually pay, and what amenities and services they provide.
Consumers, the parents and students, struggle with the data, which are never clear, and seek to find the best possible match between a student’s abilities, temperament and style and an institution's capabilities and charges. Any reasonable judgment becomes difficult because we have no reliable method for determining the value of the educational product generated by either public or private, large or small, rich or poor institutions.
Parents and students in the marketplace for higher education seek a prestige, luxury education for a bargain price, and work to identify subsidies that will offset the real cost of a luxury education. These subsidies come in many different forms, and while much attention focuses on merit scholarships and need-based financial aid, institutions manipulate their prices and costs in other ways that disguise the full subsidy involved.
Private institutions, whose discount rates among the most prestigious institutions reach an average of perhaps 40 percent, but fall to much lower rates among less wealthy colleges, subsidize educational costs through payments from the earnings on their endowments. As a result, the price a student pays at a wealthy private institution, even at the sticker price, is less to much less than the actual cost of instruction.
Public universities also subsidize the cost of higher education. Their legislatures will subsidize tuition, providing a low rate for in-state and a high rate for out-of-state students, clearly reflecting the subsidy. Big public universities have other subsidies as well, some of which they share with their private elite counterparts. Their research enterprise supports faculty, graduate programs and facilities available to undergraduates who choose to take advantage of them. Their endowments bring better faculty and better facilities than the revenue generated from students and state could afford, and the size of the big publics and the larger private institutions allows them to cross-subsidize a wide range of niche academic specialties that smaller institutions cannot support.
Prestige public and private institutions also subsidize non-academic enterprises such as major sports programs and a wide range of cultural enterprises from theaters to rock concerts to art galleries.
What about quality? Quality in higher education at the undergraduate level is an elusive measurement. Some measure undergraduate quality by focusing on variables that measure how much is spent per student, how many students are in a class room, how high the quality of the participating student are, or similar items that speak to the nature of the process that moves the student through the system rather than to a direct measure of the value of the education delivered. The evidence to support this relies more on faith than any science.
What we do know is that like all luxury goods, small classes in elegant surroundings are surely more comfortable, more graceful, more convenient and more personalized. Like a luxury Mercedes, the expensive education, whether purchased from an elite private or out-of-state at elite public institution, may be more costly, more comfortable, more elegant, and more prestigious than an educational Chevrolet, but the luxury features contribute little to the effectiveness of moving passengers to the supermarket.
Many studies have attempted to identify a major difference in the outcomes from attending expensive private institutions or attending high quality public universities in-state at half the price. Few of these find any significant difference in the outcomes, and in most cases the differences that do exist usually appear to reflect the differences in the wealth and opportunity provided by the students’ family circumstances before they enter college rather than any particular enhancement that comes from the luxury process of education.
Universities and colleges have no magical power. The value of the education acquired at most middle to upper ranked schools (by any criteria) is mostly dependent on the commitment and focus of the student rather than on the miraculous power or luxury characteristics of the institutional process. Moreover, most colleges and universities sell a commodity product, an education that at its core is fundamentally similar between institutions. The amenities may differ -- luxury dorms, elaborate student centers, complex and fully equipped recreational facilities -- but the chemistry and English classes are pretty much the same.
Luxury is a good thing if you want it and can afford it. If someone will deliver a Mercedes for the price of a Geo, why not ride for the four years in style? Nonetheless, if you find yourself in a Geo, you will get to the supermarket at almost exactly the same time as your friends in the Mercedes. What you do when you get out of the car, however, depends almost entirely on you, not on the luxury of your ride.
Last week, the College Board released its annual Trends in College Pricing report, finding that tuition at the nation’s public four-year colleges and universities had risen 6.6 percent, which is roughly equivalent to previous years but continues to far outstrip inflation and increases in family income.
Media coverage of college affordability almost invariably takes its cues from this report, focusing on the “sticker price” that colleges and universities charge students. But tuition alone is a relatively superficial measure that hides as much as it reveals, since it responds to changes in state allocations, political factors and fund raising success.
What has gone mostly undiscussed is escalating spending on college campuses across the country. A public discussion focused on tuition – the price of the education – gives institutions a free pass on how they spend the money they raise. Furthermore, this discussion reinforces the assumption that spending increases follow some sort of natural progression. But this is not the case. Spending can and must be contained if the price of college is to be brought under control.
This message is falling on deaf ears today in part because last year was a good state appropriations year for colleges and universities. But even in bad years, public institutions are raising spending. Today, higher education is a “seller’s market.” Demand for college has never been higher, and families are willing to take on dangerous amounts of debt to get their children through.
However, the willingness of families to reach deeper into their pockets is reaching a breaking point. Recent polling by my organization, the National Center for Public Policy and Higher Education, and Public Agenda shows that the public is concerned about how colleges and universities spend their money. Most Americans (83 percent) believe that today’s colleges should be doing a much better job of keeping their costs down. More than two out of three (68 percent) believe that colleges and universities could reduce their costs without hurting the quality of the institutions.
The American public is onto something. But many institutional leaders have not been willing to look under the hood of higher education expenditures. Typically, leaders have used a range of excuses to deflect questions about spending. Some common excuses, and my responses to them, follow:
Increases in tuition reflect the high demand for postsecondary education and financial aid keeps the net cost to families under control. Public college and university leaders think there is no crisis in higher education so long as there are students and families willing to pay. But tuitions at four-year public institutions have risen 22 percent in the past five years, after adjusting for inflation, while family incomes have increased only 8 percent. What’s more, need-based financial aid is not keeping up with increases in tuition, pricing many poor families out of higher education. Continual price hikes may respond to market forces, but do not honor the public mission of state colleges and universities.
Higher education is a labor-intensive industry and faculty salaries and health care costs are behind most of the recent run-up in spending. Because institutions use humans to pass on knowledge, historically a greater proportion of their budgets have gone to salaries and benefits than in other industries. But this is not where most of the spending growth is occurring. Faculty salaries have barely kept up with inflation for the past 10 years. Last year, faculty salaries rose on average 1.3 percent after adjusting for inflation – the first inflation-adjusted increase since 2003-2004. In addition, the use of cheaper part-time faculty is growing fast, now making up 48 percent of all faculty, according to the American Association of University Professors. On the other hand, universities are spending huge amounts of money on construction – for new dorms, new athletic facilities, and new student centers– as part of an “amenities arms race.” And administrative overhead at many universities has ballooned, due to an explosion in niche student services and fund raising apparatuses. It is doubtful that these developments have improved student learning.
There is great competition for applicants nowadays, and we have to spend to compete for the best students. This is probably the most common excuse offered by leaders at state flagship universities, but they are not referring to competition with other state institutions. Rather, leaders at public research universities are increasingly viewing themselves as competitors with private research universities such as Duke and Stanford, or even Ivy League institutions. These leaders feel that they can only “compete” if they offer the same amenities and practice the same aggressive recruitment tactics, including lavish merit aid for high performing students, which takes resources away from low-income students. Instead, they should refocus on their educational mission, and the advantage that public institutions have always had: the availability of need-based financial aid and the opportunity for a great education. Prospective students seeking high quality education at low cost will be smart enough to know the difference between style and substance.
There’s no political incentive to take on cost containment. Most institutional leaders don’t want to touch this issue because it almost inevitably leads to faculty concerns that they will be expected to do more for less. Faculty will revolt, if “cost containment” means across-the-board budget cuts. In cases where institutional leaders have contained spending and reinvested savings in teaching and learning, faculty have been very supportive. The University System of Maryland is a case in point. Chancellor William E. (Brit) Kirwan got faculty support for the Effectiveness and Efficiency Initiative, which identified areas for cost savings and redirected those savings toward priorities such as increasing enrollment capacity, containing tuition increases, and improving academic programs and services for students. Even though faculty teaching loads increased 10 percent, faculty largely supported the measure, because it was focused on improving student learning.
At the state level, lawmakers and system heads don’t want to engage cost because it requires a restructuring of higher education finance. States base appropriations on students enrolled, which encourages spending on amenities and recruitment -- not students graduating.
Where there have been incentives, universities have proven capable of cost management. In the 1990s, the Illinois Board of Higher Education established the Priorities, Quality, and Productivity initiative, which re-evaluated all academic programs with an eye to institutional priorities. Elimination of duplicative programs, technology enhancements, and administrative streamlining resulted in savings averaging $36 million annually. As at Maryland, faculty came to support PQP because the savings generated were reinvested in instruction. These funds were most often used to reduce class size and reliance on graduate teaching assistants; support minority student achievement; improve technology; and expand need-based financial aid.
My hands are tied, because the biggest decisions are made at the state level. Big decisions about allocations are made at the state level, but institutional leaders have a lot of discretion about how that money is spent. While there aren’t many incentives for cost containment now, there also isn’t much oversight of spending requests. Institutional leaders have lots of room to maneuver on this issue.
Cutting spending hits disadvantaged students hardest. Cutting spending only hits disadvantaged students hardest if need-based financial aid is the first target. In fact, cost containment, if it focuses (as it should) on increasing instructional spending, boosting degree completion, and streamlining administrative processes, can make public higher education work much better for disadvantaged students. That is because these are the students most likely to have trouble completing degrees and to have the most interaction with administrative offices.
There is another major reason why colleges are not acting on this agenda. There is too little data about how spending impacts learning. In contrast to business or the military, how inputs affect outputs is poorly understood in higher education. New research being conducted by the Delta Project for Postsecondary Costs to be released next year will set the basis for looking at the relationship between spending and student success.
But the lack of data is no barrier for action. We don’t need to wait for longitudinal studies to know that more spending on full-time faculty and need-based financial aid will impact student learning more than a glitzy new dorm.
Taking a hard look at the evidence shows that it is time to focus on college spending patterns and that there is a lot college leaders can do right now to contain the spending that drives up college prices. Many of the problems originate at the state level, but bold leaders will take action regardless of incentive structures and political rewards. It is time to expect more of college and university leaders than we do now.
Patrick M. Callan
Patrick M. Callan is president of the National Center for Public Policy and Higher Education.
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?
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.
Thomas Kepple is president of Juniata College, an undergraduate liberal arts college in Huntingdon, Pa.
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.
Paul Marthers is dean of admission at Reed College.
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.
Howard P. (Buck) McKeon
Rep. Howard P. (Buck) McKeon of California is the senior Republican on the House of Representatives Committee on Education and Labor.
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.
Vance H. Fried
Vance H. Fried is a professor of management at Oklahoma State University.
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.
Larry A. Isaak
Larry A. Isaak is president of the Midwestern Higher Education Compact and chancellor emeritus of the North Dakota University System.