Making the Right Cuts in Higher Education

CBS news reported this week that a number of colleges and universities had or planned to cut their sticker prices significantly. CBS noted that the reported tuition price for independent colleges and universities was slightly over $30,000 per year – or up about $1,100 since last year.

These numbers translated into a 2.9 percent increase or the lowest collective tuition increase in 40 years.

Consumers need to think through a number of points before applauding this decision as a panacea to address high sticker prices.

First, the CBS report confused cost and price. Independent colleges and universities offer approximately $19 billion in aid to current and prospective students. For most students, this lowers the cost of attending an institution. Yet it may not change the sticker price that is typically misrepresented as the cost to attend a college.

Second, students graduate with about $28,000 in debt on average. This level translates into the price of a fully loaded midsize car payment.

While this number is too high, it is still manageable. Students and their families must ask themselves if going to college is worth the equivalent in this example of paying off a new car on very generous repayment terms.

The grossly inflated numbers typically reported in the media in fact are the combination of undergraduate and graduate debt, often the high debt associated with attendance at medical, business, and law schools. This is a serious but separate problem.

Third, consumers will vote with their feet. The cost to benefit ratio works against attendance at a four-year institution. We have already seen examples of students who choose attendance at better sticker priced institutions like community colleges, where roughly 50 percent of the college going population lives.

Finally, it is important to think about whether cutting tuition makes sense across the board, particularly when market forces already produce adjustments. The dramatic drop in annual tuition increases illustrates this point.

It may make sense at particular institutions to lower tuition prices. Presidents, faculty and trustees have a responsibility to know their institution and what pricing strategies will work for it.

An even larger question looms in the debate over high tuition sticker prices. The issue is that the outcry over tuition only addresses the revenue side of the balance sheet. For colleges and universities to remain relevant, innovate, and thrive in the 21st century, these institutions must look first at their expenses.

Any discussion of expenses must begin logically with an unwavering commitment to the educational enterprise. What is most important is that the education enterprise must support the relationship between faculty and students upon which learning – in whatever form and with whatever technology – occurs.

In the debate now raging over how technology improves an education in which students come to college learning differently than the faculty who teaches them, learning will be a negotiated experience between both groups. History suggests that higher education will adjust to new approaches, technologies, and strategies.

What must change is the way that higher education finances itself. With each passing day, it becomes more of an expense and less of a revenue question.

Colleges and universities are ill prepared for this discussion. Many operate as “mom and pop” shops. Higher education breeds inertia with significant lead time between the intellectual recognition and pragmatic application of how to finance higher education. Time is running out.

There are at least two issues that senior leadership must consider.

The first is what are the core activities that we must finance? What is it that makes a particular college or university unique and differentiates it within higher education? If higher education leadership finances the enterprise by rationing revenue to some mix of people, programs and facilities, how can support be directed comprehensively to the right mix?

The second question is the more difficult one. To provide increased opportunity to strengthen the relationship between faculty and students, what can a college or university stop doing? Are there ways in which higher education can rethink its use of bonds, third-party financing, and collaborative ventures to re imagine itself and redirect support toward what matters?

In the end, the future of higher education will be based not on consumer driven and politically motivated concerns about tuition. Change will come from hard decisions made by informed leadership within shared governance. It’s time for faculty, trustee and administrative leadership to see more of the whole and worry less about the parts.

In my first presidency, the senior administrative staff presented me with an inscribed coffee mug that I still cherish. The wording reads: “We’ve never done it this way . . . but not anymore.” These words ring even more true today.

The future of American higher education will rest on the ability of leadership at all levels to see change as an investment and safeguard that protect and energize an academic culture now out of sync with the world around it.

Don’t count out America’s colleges and universities yet. It’s in their interest now to imagine the possible, beginning with how best to fund the future.

One thought on “Making the Right Cuts in Higher Education

  1. I’ve still not understood why administrators have almost universally adopted the most opaque pricing scheme possible, of unreal sticker prices with random, unpredictable discounts. I can understand it for some private schools, which have to maintain an aura of exclusivity to attract rich students. But why do public universities do it? Wouldn’t it make more sense to charge tuition at almost precisely the actual costs, then use all state funding (however much or little that is) to provide financial aid to those students who need it? The weird deals in which most of a tuition increase is redistributed to other students as “return to aid” make no sense to me.

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