What If Colleges Seemed To Care About Spiraling Costs?

With its $34 billion endowment growing at the rate of nearly 20 percent a year thanks to astute investments, Harvard University is probably the richest university on earth. But that didn’t stop Harvard from raising its undergraduate tuition 3.5 percent for the 2008-2009 academic year, to a record $32,557. When you figure in room, board, and student fees (which also rose 3.5 percent over last academic year, according to an official statement from Harvard), the total cost of attending Harvard this year is $47,215.

That mind-boggling figure, approaching the U.S. median household income of $50,233 in 2007, is actually par for the course among private universities, according to data aired at a round-table discussion on college affordability convened last week by Sens. Charles Grassley, R-Iowa and Rep. Peter Welch, D-Vermont, and reported on in the New York Times. Welch noted that tuition at private colleges and universities has been rising at twice the rate of per capita income. “If the cost of milk had risen as fast as the cost of college since 1980, a gallon would be $15.”

The discussion, involving two dozen college presidents and policy experts, came in the wake of congressional proposals to force universities, which enjoy tax-exempt status, to operate under the rules governing private foundations, which are obliged to spend at least 5 percent of their endowments annually. According to a survey cited by Grassley, universities earned an average return on their assets of 17.2 percent in 2007 but spent only 4.6 percent. Institutions whose endowment exceeds $1 billion spent less than poorer institutions—just 4.4 percent of their assets. Some observers have pointed out that the richest universities—Harvard, Yale, Stanford, Princeton, and the University of Texas make up the top five, and numerous other institutions have more than $1 billion in assets—could easily afford to subsidize their students’ tuition and related costs entirely without feeling financial pain. Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity, testified before Congress last fall that Harvard could offer free tuition to its entire student body for just $300 million, a fraction of its investment return for 2007.

The prospect of congressional control over how they spend their money has led many wealthy universities, led by Harvard, to expand their financial aid packages beyond the typical scholarship aid to the very poor. In the past, comfortably upper-middle-class but far from wealthy parents were obliged to exhaust their savings, mortgage their homes to the hilt, and sell off vacation cottages and other assets before Ivy League schools would give their offspring a nickel toward tuition, room and board, and fees that might exceed one spouse’s pre-tax income. Now, many elite universities (the figures here are from Harvard) have stopped figuring in home equity in making financial-aid decisions, allowing those with family incomes of less than $60,000 attend for nothing, and requiring households with incomes of less than $180,000 but more than $120,000 to pay no more than 10 percent of their incomes (which could still be hard on parents with more than one child attending an Ivy League school).
Nor have expensive private universities ignored the propaganda, or as trendy linguists say, the “framing” front—figuring out what language might persuade prospective students and their parents how to live with ever-increasing college tuition and related expenses. In August, as the Grassley-Welch discussion group was preparing to meet, the National Association of Independent Colleges and Universities issued a report summing up the opinions of several focus groups of parents it had convened in the spring on the subject of developing ways to make expensive education more palatable. Amusingly, this slogan did not go over well: : “you get what you pay for—a high-quality education costs money.” The association settled on this kinder and gentler version: “A quality education costs—and we will help you pay for it.” This was also the stance of the college presidents trying to justify tuition increases at the Grassley-Welch roundtable: last week. Anthony Marx, president of Amherst College, maintained that while his college might charge nearly $50,000 a year to educate his students, it was in fact spending $80,000 a year to do so.

To sell themselves more effectively, it might behoove private colleges and universities to think less about framing and more about why out why the costs of operating their institutions have outpaced inflation by two to one—and to act accordingly to cut that $80,000 spent per student to something more reasonable. The National Center for College Affordability and Productivity issued a report last year pointing out that private colleges, which typically pride themselves on their small classes and superior teaching, have let their non-teaching staffs balloon, to the point that their numbers exceed those of professors and instructors on many campus. In 1976, the center noted, there were three non-teaching employees for every 100 students at the average college; now there are more than six. Getting rid of some of the legions of counselors, affirmative action specialists, “sustainability” experts and others who fill out university payrolls might make parents happier via lower tuition bills than slogans about quality education. It also might help keep the would-be congressional regulators of endowments at bay.