Business Officer takes the pulse of leaders on prevailing attitudes toward the cost of higher education in America—and gathers their thoughts about how attitudes might be reshaped.
By Margo Vanover Porter
Can the average American family afford college?
Business Officer recently asked university thought leaders, association executives, and student advocates to think out loud about affordability and access and to share their ideas for resolving this complex issue.
A few prevailing themes emerge. Some mention technology and online learning as possible saviors. Others wonder about the need for an entirely new, less-costly business model within higher education. Several ask, "Who better than students to find solutions to their generation's woes?"
On the following pages, you won't find ready-to-implement strategies. What you will discover are thoughts and perspectives that may be just the spark you need to ignite innovative answers of your own.
Student Debt: Keep a Sense of Proportion
The costs of operating a college have been rising for a long time, says Richard Ekman, president of the Council of Independent Colleges (CIC), a Washington, D.C.–based association for leaders of small and midsize private colleges. "What's changed in the last few years is the ability of prospective students to pay for college."
He attributes this to two factors: "First, demographics show that a larger share of 18-year-old students is coming from low-income and first-generation segments of the population," he says. "Second, family finances aren't what they were before 2007."
The institutional response has been to rein in tuition, he says. "The rhetoric that colleges are unconcerned is just wrong. Net tuition and fees—what a family actually pays—at independent colleges have actually declined by 3.5 percent over the past five years, after adjusting for inflation."
He also cites the enormous commitment by private institutions to raise scholarship funds, which he estimates are equal to six times the amount of federal aid their students receive.
Contrary to published reports about skyrocketing student debt, he insists that the distribution of debt is following rational principles. "It's not nearly as egregious as extremists say. Students with the lowest family incomes pay the least amount for college."
"You have to have a sense of proportion," he continues. "The average amount of debt is $20,000. That's the cost of a modestly priced car that loses its value in five years. Given that a college graduate earns on average $1 million more over a lifetime than a high school graduate, that's not bad."
Course of Action
Blend online with traditional classes. "There is something to be gained by doing more business online, but I'm very wary of the zealots who think we can convert the entirety of higher education to an online approach," he cautions. "The idea that a perfectly good, mostly live classroom education coupled with an intensive residential experience could be transferred to 100 percent online is irresponsible. Yet, people who ought to know better are advocating exactly that."
Counter the myths. "After the New York Times last spring did a series on student debt that used sensationalist, exaggerated examples as if they were typical, CIC put together a packet of information, 'Student Debt: Myths and Facts,' " he explains. "We sent it to all CIC member presidents and said, 'Give it to your board members. Give it to your local newspaper editors. Do everything you can to get the word out.'"
And they did. The result: Lots of articles with the correct facts, which deflated some of the myths about student debt.
"We have to counter the hype," he declares. "We have the facts. We have certainly repeated the arguments. Nonetheless, politicians and journalists consistently get it wrong. Only by pressing our case and countering the myths will we see changes."
How to Maximize Value
When talking about affordability, people are really referring to the student loan debt burden, says Andy MacCracken, executive director, National Campus Leadership Council, Washington, D.C. The NCLC is a network of student body presidents working for a voice in national dialogue on issues affecting college students.
"If the cost of college were going up at the same rate as family incomes, it wouldn't be as much of an issue because it wouldn't leave our students with a trillion dollars of debt burden," he says. "It's important to look at college affordability based on not just the sticker price, but on its economic effect on the student and family."
Although he read the Time magazine article indicating that the majority of Americans believe that colleges are more expensive than they're worth, MacCracken chalks that up to a sign of the times because "half of young people are underemployed, unemployed, or graduating with burdensome debt."
He believes that legislators in state capitals should not be asking whether or not to invest in higher education. "When lawmakers are prioritizing what money they'll spend, higher education should be a no-brainer," he says, "because it is an economic imperative and has significant return on investment. We need to steer away from the question, 'Is it worth it?' and say, 'It is worth it, and we need to invest in it.'"
MacCracken can recite numerous studies that illustrate the positive economic impact of public dollars spent on higher education: For every dollar that the Michigan legislature invests into its three research universities, $17 is contributed to the gross domestic product for the Michigan economy. In Virginia, every dollar invested in higher education returns $13 in GDP and $1.39 in tax revenue.
"When looking at this from a public policy perspective, you can't ignore the heavy return on investment," he adds.
Course of Action
Work with student leaders to identify opportunities to maximize the value of the college experience. "If the issue is grappling with perceptions, students are the most important group to work with to address perceptions head-on," he says. "If the current students are excited about what they're doing and believe the college experience will really shape their lives—without breaking the bank—that's where the conversation starts."
He gives two examples of ways institutions can increase their value:
- Help students tap into available scholarships. "Right now the student government at Kent State University is working very closely with university administration to provide better access to additional resources and to help students find the help they need," he says. "That's an example of a small-scale strategy that has real impact on individuals and families grappling with finances."
- Provide students with cocurricular transcripts upon graduation. "Students active in organizations and extracurricular activities gain soft skills that employers are looking for," he says. "Universities can officially account for professional growth gained through campus activities, recognizing such skills as leadership, management, and communication skills. A cocurricular transcript increases the value of a student's education and complements the resume." He reports that Virginia's Marymount University is already offering cocurricular transcripts and that Purdue is investigating it.
"These are two examples of small things that can make a difference and add value to a college education."
Invest in Education, Urges Student Body President
Aaron Starks believes in the value of a college degree, but he worries about its escalating price tag.
"Receiving an education is paramount and will place you in a more comfortable spot," says the student body president of Salt Lake Community College (SLCC), Utah. "Research tells us that. But the ideology that we're going to continue to raise tuition—and accompany that with higher interest rates on student loans and decreasing federal funding—is a tragedy. If we want to start building our future and prospering economically, we have to invest in education. We have to explore options to help students not only to enroll but also to complete their degrees."
Although he started out in a four-year institution, Starks enrolled at a community college after finishing a two-year mission stint for the Church of Jesus Christ of Latter-day Saints. "I had 10 different options of universities and colleges in the area," he recalls. "I chose SLCC because of affordability, location, and opportunity to get involved."
And did he ever get involved.
As the current student body president, Starks receives paid tuition for his one-year term. He is also a member of the steering committee of the National Campus Leadership Council and completed a paid legislative internship for the Salt Lake Chamber of Commerce.
"The community college has provided not only affordability but also a schedule that is more convenient than at a four-year institution," he says. "I have been able to do the majority of my prereqs here so I will have a lesser load and spend less money at the university." He plans to transfer to the University of Utah next fall to complete an undergraduate degree in political science and economics.
Course of Action
Students, in conjunction with administrators, should invite policy makers to their campuses. Classifying state funding as "the nucleus of the problem we face on campus," Starks believes that policy makers need to personally hear from students about their plight and to visit the colleges and universities that their constituents attend.
"What resonates with the legislature is not a signature, is not a ballot drive," he says. "It's voter registration and students giving their personal testimony of how education has affected their lives. The more we can develop the perception that education is a public good and not a private good, the more beneficial to students, colleges, and universities."
Campuses nationwide need to hold voter registration drives or other special events that help students get involved in finding funding solutions for their education. "If we're going to change the way education is viewed and funded and ultimately control the future of education, we need to start at the polls," he insists.
"Students have to make their voices heard. We have to be vocal. We have to be passionate. Until that happens, we will see minimal changes in higher education."
Three Trends Create Triple Whammy
Three dynamics have contributed to the spotlight on higher education costs, according to William B. "Bill" Stephan, vice president for engagement, Indiana University, Bloomington.
- Over several decades, state appropriation for higher education institutions has declined precipitously.
- To maintain their quality, public institutions increased tuition and fees. "Now, you have students and parents who are bearing a disproportionate burden relative to the cost of higher education," he says.
- In today's global environment, corporations are demanding a higher level of skill and educational attainment in the workforce, making a baccalaureate degree or higher a prerequisite for success in a very competitive marketplace.
"The need to have a degree has never been greater at a time when states have been disinvesting in higher education," says Stephan, who serves on the NACUBO Board of Directors and is a member of the board's communications committee. "Colleges and universities, challenged to maintain quality, are having to increase tuition and fees. It's a triple whammy, causing this issue to be front and center everywhere you look."
In his opinion, the scrutiny on higher education isn't all bad. "Frankly, the pressures that colleges and universities are experiencing as the result of decreasing appropriation or investment have caused us to take a hard look at how we operate and how we can generate more efficiencies, which is probably a healthy undertaking," he explains. "There probably came a point when colleges and universities were becoming a little too complacent. This has caused us to run a little faster and jump a little higher when it comes to ways to stretch our dollars."
Of course, he quickly points out that sooner or later all 50 states will have to up the ante on education. He hopes it is sooner.
"In the context of a very competitive global marketplace, how can we offer a promising and hopeful future—with meaningful jobs and careers—to the next generation?" he asks. "You very quickly recognize that education is key. Investments in education, K–12 and higher education, are absolutely critical. We will not have an environment that offers a hopeful future to our next generation if we don't make strategic investments in education. If you look at what's happening around the world and at countries that are heavily investing, we are shirking a fundamental responsibility."
Because it has maintained a significant budget surplus, Indiana has continued to invest in higher education, he says. "Our state has been in the position to hold the line, if not make modest increases in appropriations," he explains. "We're very grateful, particularly when compared to colleagues around the country who are experiencing double- digit decreases in funding."
Course of Action
Give tuition discounts for on-time completion. To improve completion rates and emphasize the importance of graduating on time, Indiana University is offering incentives to students. "One thing we did last year is assure students who are on track to graduate on time—i.e., within four years—that after their sophomore year, their tuition will be frozen their junior and senior years. Part of that was to try to create an incentive for those students to graduate in four years so they wouldn't incur additional costs by spilling into another year to earn a degree. We're also trying tuition discounts for summer classes," he concludes.
"Real Estate Values Masked the Pain"
When allocating blame for college affordability—or lack of it—James A. Boyle apportions the lion's share to the Great Recession and the precipitous drop in home values.
"The real estate meltdown made it difficult, if not impossible, to tap into home equity as a means of paying for school," says the partner in Boyle Public Affairs, a communications and marketing firm in McLean, Virginia. "While college costs went up dramatically throughout the 1990s and into the first part of 2000, escalating real estate values masked the pain that families were experiencing. They were able to tap into home equity to get money in real time. That is no longer available."
Parents and students are now desperate to find other funding sources, according to Boyle, who was president of College Parents of America, Arlington, Virginia, from 2003 to 2010. He continues to serve as an informal adviser to the national membership organization of current and future college parents. He is also an advisory board member of the Bridges College Council, which helps families in underserved communities in Baltimore better understand the cost of college.
"Compared to a generation ago, it's pretty much impossible to work your way through school," he says. "It isn't realistic. Even the least-expensive state schools are costly enough that students can't pay for them by working in summers and during school. Debt becomes almost inevitable."
Perhaps because of this downward financial spiral, he believes families are becoming more discerning about how they spend their education dollars. "There are not many families today who look at college just as a learning experience," he says. "Most families, rightfully so, look at college in more practical terms as it relates to the ability to get and stay in a job."
While he believes institutions seriously weigh the affordability concerns of students and families, he thinks "weighing is different than doing something about it. I don't think it's a secret that a college is trying to maximize revenue per student."
Course of Action
Be innovative in pricing models and methods of delivery. "The cost of delivery of an online course, especially core courses with a fairly standard curriculum, could be delivered in a much cheaper way and could be priced accordingly," he says. "The four-year schools may think about a pricing model where they charge more of a community-college equivalent for the first and second years. Later, when students receive more personal attention and the cost of delivery is higher, the tuition could be higher."
You Can't Calculate the Value of a Learning Environment
"Higher education has not lost its value," says Amy Lin, deputy policy and organizing director, Young Invincibles, Washington, D.C., a national advocacy organization founded in 2009 by Georgetown Law students to serve as a voice for young people ages 18 to 34.
"We travel around the country and talk to students in different types of schools, whether it's a community college or four-year university, private or public," she says. "One of the things we know, based on these conversations with young people, is that a college degree is still very important. It's very much worth the money being spent on it."
She cites a statistic that college graduates earn over 80 percent more than employees with only a high school degree. "Aside from the statistics," she says, "young people have expressed to us that going to college is incredibly valuable to them—not just because of the wages they will earn but because of the entire experience. There's a lot of value in being in a learning environment. It's more complicated than a return on investment. There's additional value that cannot be measured."
One of the issues Young Invincibles studies and tracks—besides health care—is college affordability. "We know that in the last 20 years, tuition has risen quite drastically," she says. "For four-year public schools, it's gone up by 84 percent. For private schools, tuition has gone up almost 50 percent."
She attributes much of the increase to disinvestment by states in education. "States are investing less and less money in each student," she says. "That's really what is making the cost of college less and less affordable."
Course of Action
Encourage young people to come up with their own solutions. "We did a big bus tour last spring where we went around to 20 different states and 43 college campuses, talking to young people about solving the problems of our generation," she says. "We want to work on solutions that come from people who are being affected by the issues."
For example, she urges students to organize on the state level to push their legislatures to invest more in higher education.
"When push comes to shove, we know that higher education becomes one of the lower items of priority in state budgets," she says. "We want to help students to realize their potential to push state governments to be accountable and to be empowered to create an educational future that works, without borrowing tons of money."
Her mantra to students: "If you are at a public school and you see your tuition rise, that is because the state has decided to invest less money in you. Persuade your state government to continue to invest in its students so you don't hold the debt burden."
Society Benefits From Well-Educated Citizens
You can't put a price tag on the benefit of a college education, emphasizes Alison Byerly, president, Lafayette College, Easton, Pennsylvania.
"Education is a public benefit," she says. "It isn't simply a matter of how an individual's student earning power is increased, but how much a society benefits by having a better-educated citizenry."
Unfortunately, she says, this argument is often overshadowed by the focus on the private benefit and how much the individual pays for that benefit.
"We all recognize that increased tuition costs at both private and public colleges have been a source of concern to both students and parents," Byerly explains. "The financial crisis sharpened people's awareness of the challenges presented by the overall business model of higher ed, which is labor-intensive. Attention by the federal government to the high cost of education has put a certain amount of pressure on both public and private institutions and has created a climate of accountability."
Byerly believes that most institutions are taking multiple steps to stabilize tuitions, particularly when compared to the increases of five or six or seven years ago. "But it's difficult to get around the fact that tuitions will continue to climb if you want highly skilled professionals, faculty, and staff working with students," she says. "It isn't simply the matter of the overall economy. The stagnation of wages and decrease in the buying power of the middle class are part of that equation. It isn't simply that tuitions have gotten higher. It's that families' wages have stagnated over the last decade."
This turn of events has caused institutions to scramble to make their case to prospective students and their families. "It's not a given that everyone will want to pay the cost of the more expensive institutions," she says. "It's not a given that everyone will recognize, without being given guidance, that education might benefit them."
For example, she says, liberal arts colleges are focusing attention on the value of a comprehensive 24/7 residential experience, and community colleges are promoting their low costs and accessibility. "Every sector of higher education is looking to sharpen the perception of the value of its particular niche."
Course of Action
Investigate how technology could alter the business model. "Every institution with which I am familiar has looked more closely at its cost structure and opportunities for additional revenue," Byerly says. "Interest in recent developments in online education reflects a hope in some quarters that technology can be used to reduce costs in instruction, which would represent a change in the business model not possible before. Scholars and experts in higher education, at this point, disagree on whether this will be a solution. The jury is still out, although there is certainly hope that technology can be helpful in creating efficiencies."
A New Definition of Educational Quality in the 21st Century
"The public perception is pretty negative for higher education," says Patrick Callan, president, Higher Education Policy Institute, San Jose, California. "We've polled on this for almost 20 years. The public believes that higher education doesn't try very hard to keep costs under control, that we don't try to be cost-effective. Because of the huge demand for college, the public tends to think we've been able to raise prices and get away with it."
The result, he says, is that Americans have lost confidence in the altruistic mission of higher education, which Callan finds disturbing. Higher education, he says, has fallen off its pedestal.
"Again, I'm talking about perceptions, not what's right or wrong," he points out. "People don't believe we're any worse than anyone else, but they don't believe we are any better. They believe we behave just like the corporations and entities they read about in newspapers that raise prices when they can, pay the people at the top a lot of money, and pass on as much pain as possible to the consumer."
He refers to a recent study indicating that Americans realize they need higher education more than ever before. "We've gone from almost 30 percent to almost 60 percent saying, 'College is necessary to be successful.' Without some training beyond high school, in most parts of the country you don't have a chance to even be in the queue for a middle-class job. At the same time, people see college prices going up and demanding a larger and larger share of personal income."
Enough is enough, he insists. "We have to get these prices under control. We have to rethink, on a long-term basis, the financing of higher education. We're operating on a model that worked pretty well for 40 or 50 years after World War II, but it's not working so well now.
"The answer is to figure out how much of this problem we should expect government to bear. What is a reasonable expectation for students and their families? What can colleges and universities contribute by finding ways to operate more cost-effectively? There's no one villain and no one knight on a white horse who can unilaterally fix this."
Course of Action
Redefine educational quality. "We have to rethink what we mean by educational quality for different kinds of students," he says. "In a sense, the argument will come down to 'What is quality and who gets to define it?'"
He doesn't accept the commonly held notion that high quality equals high expenditures. "We've become pretty defensive," he says. "We tend to equate quality with the way things have traditionally been done.
"We have to start thinking about quality in terms of student learning, not the way we produce the learning. Tools are available to us that can both improve the quality of student learning and make it much more interactive and individualized than a lecture hall. How should we deliver instruction in the 21st century?"
Noting that these generalizations don't apply to every institution or faculty member, he emphasizes that systematic change is long overdue. "We need this transformation," he says. "The ability to raise tuition and ask people to borrow more is running out of steam. We need to be more creative."
MARGO VANOVER PORTER, Locust Grove, Virginia, covers higher education business issues for Business Officer.