Quantifying cost and quality: The National Commission on the Cost of Higher Education

Academe, Jul/Aug 1998 by Flower, Ruth

THE STORY ABOUT COLLEGE COSTS IS A STORY ABOUT "sticker-price shock." As the baby boomers who went to college in the late 1960s and early 1970s prepare to send their offspring to college, they are finding themselves amazed at the prices of the late 1990s. In April 1996, Erik Larson wrote in Time that the price now charged by his alma mater, the University of Pennsylvania, sent him reeling. He paid $3,796 a year for tuition in 1976; to send his three daughters there at current prices, he would have to pay $21,130 a year for tuition and fees-for each daughter. Newsweek touted the $1,000-a-week "price tags" of elite universities in its cover story, "Those Scary College Costs." The Philadelphia Inquirer joined the chorus with a series of detailed articles headlined "Higher Education: How High the Price?" (See table.)

The college-cost scare heated up in 1996. While the media wrote up anecdotes, Congress reacted by proposing antidotes, ranging from price controls to preachments. College presidents and financial officers scurried to justify their price structures to their boards, state legislatures, and the public.

The price shock created a choice environment for the nurture of pet theories on "what is wrong with higher education today." Ironically, in a country that rightly celebrates its own higher education system as the best in the world, plenty of pundits were ready and willing to circle the wagons and shoot inward. Critics happily took aim at faculty members, who have been the mainstay of this truly laudable system of colleges and universities; at research programs that have expanded the boundaries of knowledge in each generation; and at liberal arts programs that have consistently turned out graduates who not only function in the workplace, but also understand how to read, think, and evaluate information in the world. Politicians and political writers felt free to answer serious questions about college costs with their own first guesses: "It must be the faculty. They don't teach enough classes." "They're paid too much." "They're always engaged in some arcane and useless research." "We need more productivity."

To its credit, Congress didn't settle for guesses. It established the National Commission on the Cost of Higher Education to make recommendations related to college costs. And to its credit, the commission, which consisted primarily of college administrators and education consultants, decided at its first meeting to research the questions about college costs and to base its conclusions on that research. Perhaps Congress should have expected such a fact-based methodology from a commission extracted from academe, but the results of the research surprised and dismayed the commission's political sponsors. Even before the research was complete, congressional leaders called press conferences to denounce the commission's early findings, which belied the scare headlines and eschewed simplistic solutions. After seven meetings in summer and fall 1997, the commission issued its final report, Straight Talk about College Costs and Prices, in early 1998. 1

Findings

Costs have been going up. The commission distinguished carefully among the concepts of cost (to the institution), tuition (the "advertised price"), and price (what the student and family actually pay). Between 1987 and 1996, the cost of educating a student (the institution's cost) increased by more than half. When inflation is taken into account, the real increase during that period ranged from 35 percent for public universities and four-year colleges to 55 percent for private institutions.

Tuition has been going up much faster than costs. During the same decade, the average tuition at all types of institutions roughly tripled. Keeping up with inflation accounts for only about a third of that increase.

College is still affordable. More than half of all full-time students at four-year colleges attend schools that charge less than $4,000 a year in tuition and fees.

Education is a subsidized "product. "Nearly every college and university in the United States sells its major product-educationat a price that is far less than the cost of "production." Therefore, every student's education is subsidized-in addition to individual student aid packages-by endowments at private colleges and by institutional tax support at public colleges. In 1995 private and public subsidies totaled more than $82 billion.

The number of students receiving financial aid increased between 1987 and 1996. Although the number of federally guaranteed or direct loans increased by 87 percent, the amount loaned per student increased just enough to keep up with inflation. Similarly, the number of students receiving Pell grants increased by about 25 percent, but the amount received per student went down by 13 percent, when the grants are adjusted for inflation. The number of state grants did not increase significantly, and their value decreased slightly during this period. Institutional aid-student aid given by the colleges themselves-nearly tripled during this period, even after adjusting for inflation.