Tuesday, November 27, 2012

Constructing the Algorithm of College Costs

There is a lot of writing about college costs these days. The American Council on Education, for example, recently published a booklet by the two authors of the superb book, "Why Does College Cost so Much?"  attempting to explain the rather precipitous increases in tuition prices. They presented a fair amount of data and their conclusion was that the trend line on costs was declining although still faster than the underlying rate of inflation.  Over at the Hardwick Day site (One of the best consulting firms on enrollment management that among its peers has pioneered in encouraging its clients to think about enrollment questions more broadly than simply attracting students)  the President Emeritus of St. Lawrence University writes that the business model for higher education is broken. In the late 1990s I served as a member of the National Commission on College Costs, so this is an area of intense intellectual interest.
Figure from the Hardwick Day Article (mentioned above)

Colleges and universities, as the National Commission pointed out, have not paid enough attention to costs.  Part of that is their design and governance structures.   And part of it comes from what William Massey, formerly of Stanford, called the lattice effect.   Colleges and universities are constantly trying to improve themselves to the next level - in this case keeping up with the Joneses costs real dough.

All the discussion of college costs seems to have discounted two important issues.   First, many in higher education seem to be oblivious to the cost curve.  They believe that the inherent value of higher education will continue to trump the problem.   Many in those camp cite the College Board figures that suggest a college degree is worth something north of a million dollars more in lifetime earnings than a high school diploma.   Things are changing however.   The financing model for higher education is being changed quickly - that is especially true for public institutions which have seen concurrent increases in tuitions and decreases in state funding. (Not unrelated factors)   At the same time alternatives to the traditional four year degree have been popping up in all sorts of places - while many of those alternatives are downright nonsense - others have real credibility.

The second issue is more basic.   In the last decade (or more) one disturbing trend has been an escalation in the number of non faculty personnel compared to faculty.      From my perspective the trend has two causes - demands of the consumers and the costs of compliance.   Just like the car you buy is not your father's auto - the college education you purchase is not your father's college education.   Students expect all sorts of amenities that my generation did not.   Surprisingly some of the functions have been outsourced (bookstores and food service being prominent).  Even with those changes there are more people serving students who are not engaged in teaching.

Administrative creep has also been caused by the costs of compliance.   Governmental mandates to do all sorts of things have been escalating even faster than college costs.   Some of those things are simply a reflection of the changes in demand that all of us have asked for.   But a good many are attempts by all levels of government to substitute their judgment for the judgment of higher education professionals.   So higher education is asked to compile all sorts of reports on everything from how they use student aid to how they store chemicals.   Unfortunately, even when higher education recognizes a problem the heavy hand of government steps in to create a new and often redundant form of disclosure.   The last revision of the Federal Higher Education Act, had very little new funding in it but more than 170 new reporting requirements.   Reducing the problem of regulatory overburden won't eliminate the cost curve but it will help.

1 comment:

Lynn Beck said...

Excellent post, Jonathan!!