In the New York Times today, Professor Paul Campos from the University of Colorado made the case that public funding for higher education has not declined over the past several decades, but has in fact increased significantly. The number of institutions and certainly the number of students pursuing post high school education has soared, and while per capita funding may be down, the states and federal governments are providing more funding than ever.

 

Fair enough. But why then has tuition increased so much (if the average price of a car had increased in the past 40 years as much as tuition, Campos claims the average car price would be $80,000!)? In part, he claims, because of the vast increase in administrators and their salaries – a 60 percent increase in positions between 1993 and 2009, while faculty positions grew only modestly. He does not address the decline in teaching loads for faculty, but that has also contributed to increased costs. He also cites the increasing numbers of students served and their demands for amenities as reasons for the price increase. He does say that both the increase in administration to handle increasing numbers of student is – in theory at least – defensible.

 

What he doesn’t say is that the price increase is fueled by an INCREDIBLY competitive marketplace for students, which now includes over 1500 for-profit schools offering real degrees. This is a major cost driver and it needs to be acknowledged as a primary reason for price increases.

 

Even within the traditional non-profit sector, the competition is intense — amenities for students (including food everywhere, anytime and top quality); study abroad which loses money for a college (tuition goes out, as does aid); and competition for top administrators and professors (high salaries and reduced teaching loads) – all of this drives up price. It is interesting to note that competition in the private sector typically results in decreased prices (less of a profit margin). In the non-profit world, competition typically increases prices as someone has to pay for the “enhanced” product.

 

And finally, just like cars (where prices haven’t risen as fast, mainly because there is economy of scale in production that one doesn’t have in education) a college education today is not what it was in 1970.  Study abroad, off campus study programs (such as Drew University’s four programs in NYC — Wall St, UN, Communications and Theater/Arts), internships, interdisciplinary field work programs — all of these cost more.

 

Add to this the fixed costs of technology improvements on a daily basis, benefits such as health insurance (which every industry has), federal regulations that have to be carefully monitored and executed, and an increasingly litigious society, and it totals to a cost explosion.  And a little told fact — since most financial aid is NOT endowed or funded, colleges have to charge more in order to have the money to underwrite those who cannot pay.  Back when I started in admissions and financial aid at Colgate 40 years ago, 30 percent of our students received aid.  Now at schools like Drew, Dickinson, Hopkins and Colgate, 60 percent are receiving financial aid.  And, on top of everything else mentioned above, that costs!

 

With all of this, one still must ask, is there value in what colleges and universities provide? I just have to look at my University of Rochester graduate daughter and my Lafayette College graduate son to answer that one – a resounding yes. I have written on value before and I will certainly do so again. We do need to contain our costs as much as possible, but in my book, the value is still convincingly there.

 

Advertisements

As a chief admissions/enrollment officer for 22 years, my fingernails would become predictably short during April.  Enrollment projection models, built on the average of the previous three years experience, did little to cure me of sleepless nights heading up to May 1.  With the exception of the first half of the 1990s and the final two years (2008-09), my tenure as a dean and then vice president for enrollment was admittedly (and fortunately) in times of demographic and economic growth.

Nevertheless, concerns about missing the numbers of new students as well as net revenue targets were real.  Being over target was not desirable (though tolerable, especially when counting up net revenue gains), but coming in short was something to be avoided at all costs.  In fact, during the time I oversaw enrollment at two different institutions, I undershot only once by (4%) and that was in a year when we attempted to shave 15 percentage points off of our acceptance rate.   I should have known better; that under-enrollment didn’t “just happen.”  It occurred because our success in the two previous years resulted in a major increase in applications that in turn gave us a false sense of security – that we could move the needle on academic quality without financial consequence.  It just doesn’t work that way.

Recently, Inside Higher Ed ran a story about Loyola of New Orleans “Coming Up Short” (http://www.insidehighered.com/news/2013/07/12/loyola-new-orleans-enrollment-shortfall-will-mean-large-budget-cuts).  The university missed its first year enrollment target by 30%; a month earlier, St. Mary’s of Maryland announced a decline of almost 25% from their target. The story said that these experiences “raise(d) the specter of a more widespread dropoff in higher education enrollments and revenue that college administrators have feared since the 2008 recession.”

Perhaps.  But the key, I believe, is in what Loyola’s president, Rev. Kevin Wildes, told the IHE reporter.  He said that the university tried to lower its discount rate and increase net revenue per student. “My intuition is that [we] did a much more draconian drop in financial aid than we should have. And I think the market reacted.”  Indeed it did!

At St. Mary’s, while an earlier IHE story said the college was looking into the reasons for their drop, officials did say that they experienced a 14% increase in applications.  When that happens, colleges are tempted to lower their acceptance rate significantly (US News likes that!), but that move often results in a lower yield.  I don’t know if that is what happened at St. Mary’s, but that certainly was my experience in the year I presided over a smaller entering class.

Indeed, the price tag of a four-year degree –public or private – has grown significantly while the proportion of families who are able to afford most or all of the charges has dropped.  This puts enormous pressures on institutions.  But enrollment declines in one year of the magnitude experienced by Loyola, New Orleans and St. Mary’s, Maryland are not simply the result of market trends.  More likely, these declines resulted from a fundamental misunderstanding of how the market would react to significant changes in admission (acceptance rates) and financial aid (discount rates) policy changes.

There is no question that colleges and universities must find creative ways to reduce their costs and to provide new alternatives to help families finance educational expenses.  The status quo will not work for too much longer.  But to avoid significant drops in enrollment and revenues from one year to the next, institutions must carefully assess, through modeling and consultation with colleagues, the projected impact of policy changes before implementation.  We simply cannot afford to proceed any other way.

_______________________________

Robert J. Massa was dean of enrollment at Johns Hopkins University and vice president for enrollment at Dickinson College.  He currently serves as vice president for communications at Lafayette College.