Episode 15

How Do We Reduce the High Price of College?

We have spent 14 episodes demonstrating how colleges and universities are incentivized to spend money with no measurement of the effectiveness of that spending.  They then charge prohibitive amounts for tuition which reduces access to higher education.  So how do we fix this problem of the high cost of higher education?  How do we change how and how much colleges spend?  We will present a framework in this final episode.  I am Larry Bernstein and welcome to Charging U.

‘The dominant goals of institutions are educational excellence, prestige, and influence.”  

“In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.” 

“Each institution raises all the money it can.” 

“Each institution spends all it raises.” 

“The cumulative effect of the preceding four laws is toward ever increasing expenditure.”

Howard Bowen, Economist and College President

The exorbitant cost of higher education is having profoundly negative effects on American society and attracting the attention of lawmakers and the public at large.  It is in the interest of colleges and universities to address the issue of high cost themselves.  We saw a similar situation a few decades ago in Medicine.  There were a lot of people paying a lot of money and not getting a satisfactory result so outsiders came in and imposed their solution.  We are beginning to see this happen in higher education. Faculty and administration should not feel immune to the problem.  If health systems can be run by people without the technical knowledge of medical professionals, then universities certainly do not need to be governed by professors in order to function.  It is in the interest of the current faculty and administration to make the necessary changes. 

I have been careful to avoid comparisons with higher education systems of other countries.    The politics, economics, and expectations in the United States are unique. Reflexively imposing the way other countries do things will not work here.  We should also remember that American colleges and universities are still among the most highly regarded in the world and produce much more than their fair share of research.  But that does not mean we should avoid looking at what is being done elsewhere to see if there are some practices which would be appropriate and beneficial here.  

Many foreign colleges are not residential and do not offer the same amenities in housing and fitness as colleges in the United States do.  Those schools do not necessarily have the same social culture as those here do.  Intercollegiate athletics does not exist in the same way.  Colleges outside the United States do not duplicate the provision of supportive services, such as health care and they do not get involved to the same degree in the personal lives of their students. These are all areas that we should consider changing as it would lead to reduced expenses on the part of the school and, hopefully, lower tuition for the student. 

On the other hand, post secondary systems outside of the United States may offer less choice, may restrict access on the basis of academic performance, and offer less flexibility.  It is unlikely that those policies would be acceptable here.  As a whole, universities outside the United States do not perform as much productive scientific research as those here do.  There are many who believe that this is one reason for the greater technological and economic growth in our country.  But research here is partially funded by the students themselves, which increases their cost of attendance.  Time and resources devoted to research in most areas of the social science and humanities should be limited and diverted to teaching students.  That may sound harsh and contrary to academic freedom, but remember that only a portion of science research proposals are deemed worthwhile and funded by federal agencies.  Why would we give a blank check to social science and humanities faculty to pursue whatever topic they choose without regard to costs and potential benefits? 

Expanding the loan program and tax credits will put more money in the system which colleges and universities will seek to obtain for themselves.  Loan forgiveness will only encourage fiscal irresponsibility on the part of the schools and indifference to cost on the part of student borrowers.  Neither group has any incentive to hold the line on spending since it is all free money to them.  Any change to the loan program must be accompanied by measures which would also effectively hold down the tuition charged.  I’m not sure those measures exist. 

 Price control and regulation are not the answer.  They rarely work.  Regulation implies one way of doing things.  Colleges are varied and their respective student populations have different needs.  Some institutions have large numbers of low income commuter students who face different obstacles than the overwhelming majority of students at wealthy private colleges.  Each institution should have the option to direct resources as it sees fit to address the challenges it faces.

The University of Maryland, Baltimore County has increased the number of graduates that go on to earn PhDs.  It addresses the needs of its specific student population,  It does this by providing a good basic math and science foundation to those students that do not have this skill set when they enroll.  The first year students entering Ivy League schools already possess a solid background in math and science.  Those universities can develop and fund a STEM pathway that is different.  The institutions share the same goal of turning out more scientists, but they can go about achieving it differently.  Let the colleges determine a goal and let each one figure out the best way to achieve it.

This does bring up the point that if K-12 education were improved, then colleges would not have to spend time and resources providing remedial courses and students would not have to spend money taking them.  This would reduce the time taken to graduate and, therefore, the amount spent on college.  Preparing high school graduates better would make it more likely that they would achieve in and graduate from college. 

Improvement in stemming the rise of the cost of higher education would also undoubtedly involve making the college more student-centric.  That is not to say that students should be determining what is taught, but rather, that student success should be the priority when making policy. Right now, the incentive for colleges is to raise and spend money to boost prestige.  The incentive for colleges needs to be changed to increase student learning and skills.  K to 12 changes in curricula, in states like Massachusetts and Mississippi, have led to a significant improvement in student learning without significant increases in spending. Determining what is important to teach college students and implementing those areas in a curriculum would undoubtedly result in more learning in postsecondary schools. Processes should be tailored to improving outcomes rather than what is most convenient or preferred by the faculty and administration.  If what the students need is instruction in writing, give them a course in writing.  Don’t allow them to choose from a list of English literature courses offered based on the interests of the professors teaching them.  William Massey wrote, “ Professors often view themselves as autonomous agents whose job it is to pursue self-defined teaching and research goals rather than to function mainly as team members in a larger enterprise.”  This needs to change.

Colleges are also varied in the kind of graduate they try to mold.  Some focus on practical instruction with the aim of turning out large numbers of competent graduates while others are more interested in turning out a smaller number of superstars.  Each should be given the flexibility to do what it sees fit to achieve its goals.  Those goals need to be clearly stated and able to be measured objectively to determine if they have been achieved.  

There needs to be a change of mindset where all involved stop thinking that someone else will be paying the tab. The students and their families are paying for the instruction and extra services.  They need to act as if the money is coming from their pockets;  because it is!  They will continue to pay for it for the foreseeable future, despite the political rhetoric.  Instruction in financial literacy in high schools would be useful in exposing students to the idea of value (amount of benefit for a given cost), where the money to pay for institutional goods and services comes from, and especially to the realities of compound interest and the cost of borrowing. 

Many people look to the federal government for a top-down solution.  This is unlikely to occur because the federal government has no direct control over colleges and universities, other than the military academies.  It does have some financial leverage because it administers financial grants, loans, and research funding.  But attempting to impose price controls or a single set of rules on such a large and varied system is unwieldy and unlikely to work.  In addition, the number of government officials who get lucrative teaching positions in universities after completing their public service is very large.  They are unlikely to bite the hand that may feed them in the future.

Much attention is given to wealthy, selective private colleges and universities.  They are highly visible but they educate a very small proportion of college students.  Any policy designed to only affect them will not produce an effect sizable enough to cause a significant impact nationally.  Those schools also have enough money and influence to be relatively immune to most government pressures, though attaching strings to their research funding would certainly get their attention. 

States, on the other hand, do run colleges and universities.  If fact, 70% of all college students fall under their control.  They are the group that can have the greatest impact on higher education. The impetus to rein in tuition and implement cost-effective change needs to begin there.  

Each state needs to decide how much money to appropriate, how much to charge and what its priorities are, how to allocate the funds to achieve its priorities, and then measure how well it did attaining those goals. It should then use those results to address what it needs to improve upon. 

The state is in the best position to determine the needs of its specific population.  It may have a network of flagship research universities, mid-sized universities, regional colleges, and community colleges at its disposal to meet the multitude of needs of its diverse, but unique population.  Those institutions should become attractive to their own residents so that they do not feel they need to spend more money to attend a public institution in another state.  

Flagship universities have prestige and have been well funded, historically, but most still rank below many private universities.    If states can demonstrate that the graduates of their flagship state universities have acquired the same knowledge and skills as graduates of highly ranked private universities, then those elite private schools would lose their ability to command higher and higher tuitions, which would slow the cost spiral.  This can only be done if objective measures of knowledge and skills were available, widely used, and the results made public.

States need to concentrate on the smaller universities and regional institutions as well.  As large as they may be, flagship universities still are responsible for educating only a fraction of the state’s collegiate population.  Regional universities and colleges are not flagship universities and should not try to emulate them.  Spending by these institutions on intercollegiate athletics is frivolous. Because there are not large numbers of students to divide the cost of these nonessential programs, they are more expensive and burdensome to each student.   Club sports and intramural leagues can be established at a fraction of the cost.  All or a part of the financial burden can be borne by those participating, especially if the elimination of intercollegiate sports is accompanied by a significant reduction in tuition. 

Faculty at smaller universities and regional colleges should have less time set aside for departmental research.  Those schools should concentrate on providing good instruction at a low cost and developing and objectively demonstrating their ability to imbue in their graduates an outstanding fund of knowledge, critical thinking, communication skills, and, when applicable, specialty skills. This would enable larger segments of the population to improve their economic status, especially since they would not have to travel far in order to participate.  Those schools should be able to show that they are good at what they do and not be compared to large research universities.  That would be comparing apples and oranges.

Larger states can offer one or more well-funded for instruction, very high quality, but otherwise lean, low-frills, very low cost public university for its residents. It would not have intercollegiate athletics, large administrative staffs, or highly developed student services.  They would not attempt to solve global problems. The savings associated with reducing or eliminating these programs can be returned directly to the students in the form of a tuition reduction.  These are the kinds of universities that, in the past, have enabled Americans to climb the socioeconomic ladder.  They need to be revived to improve access to higher education.  If students want to attend a college with lots of amenities, frills, and extra services, the option should be available, but the extra cost is on them.

The federal government can play a role in reforming the system.  It can support the collection and dissemination of data regarding what interventions led to better learning outcomes and lower costs by beginning to prioritize and fund research in the field of higher education quality.  

One the most enlightening experiences I ever had was being part of a hospital Trauma program which was being developed and then implemented.  What I learned was that improved survival and a lower complication rate were not necessarily correlated with reputation.  The factors that many people think lead to lower complications and better survival of trauma patients are not the ones that matter most.  Yes, the quality of the trauma surgeon is important, but the amount of time taken to get to the hospital, how quickly the patient gets to the operating room or intensive care unit, mobilization of the patient, reconciliation of medications, communication between providers, and many other seemingly minor details not directly related to the amount of money spent and attended to by numerous professionals have more of an impact.  It is ironic that the nation’s research institutions have spent minimal time and resources looking critically at what factors lead to improved outcomes in learning or the acquisition of skills by their own students.  Accurate information on these topics would lead to more efficient use of resources. The federal government could help encourage and fund this type of research.  

The weight of the federal government will be helpful in overcoming the entrenched interests of faculty and administrators who would be naturally resistant to change.  But the impetus for change would come from research done in their own institutions and those like them.  It would not be imposed arbitrarily by a hostile, outside entity.  

The federal government can recognize or reward state institutions that do well. Unfortunately, in the real world in which we live, that would lead to political issues, as it is unusual for one party to recognize the success of the opposing party.  But voters can and should reward success!  That would mean possibly voting for a party one does not usually vote for.  It would require citizens to use their vote to influence policy.  Voters concerned about a specific issue can exert more influence at the state level than they can at the national level. But again, that involves having objective information about cost and quality available to the public. 

Changing the process of accreditation can also lead to improvement.  Currently, accreditation of institutions is based on inputs, that is, compliance with a list of practices and regulations that the accrediting body requires.  There is no significant measure of the output of the institution.  The quality of the graduates or services provided is not heavily considered.  

Overall, the root cause of the problem of runaway college costs is the ability to charge for an unfounded basis of prestige.  So the solution is to reduce higher education’s dependence on revenue as the overwhelming factor in determining quality.  Society can and should work to change incentives to achieve a more cost-efficient, productive, and accessible system of higher education across all types of colleges and universities.  

It is in the interest of non wealthy colleges to embrace the change to such a system.  There is no way they will ever win a competition based on wealth.  Even if they win a billion dollars in the lottery or get one donation that size, they will still not come close to the treasure trove amassed by wealthy colleges.  It is futile to try winning that game.  So why not change the rules of competition?  Why not redefine what constitutes success?

The core of that new model would involve objectively measuring the value added, that is, how well colleges and universities improve student knowledge, skills, and critical thinking, rather than how much money they have and spend.  It should then make those outcomes available to the general public.   The measurements do not need to be perfect; they just need to be better than what we have now.  Additional improvements in assessing the academic growth of students can occur incrementally as the evaluation process evolves. 

Individual student results can also be reported. This would free the student from the reputation of the college and allow him or her to be judged independently.  If a student from a low cost college can prove himself or herself equal to those who attend expensive colleges, then the expensive colleges lose their attraction and their ability to command high tuition.

Unfortunately, the trend is away from testing and measuring outcomes.  It is hard to imagine how higher education can reverse the tuition spiral if there is no way to demonstrate high quality with lower cost.  Unless colleges and universities are evaluated on objective measures of student learning, they will be dependent on the dollar to pay for their programs, the cost of attendance will rise, the rich will be favored, and access to what Fintan O’Toole called “the escalator of education” will be reduced. 

After years of gathering and interpreting this information, I am led to agree with former University of Iowa President Howard Bowen, who in 1980, introduced his five laws of higher education costs:

1.  “The dominant goals of institutions are educational excellence, prestige, and influence.”  

2.  “In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.” 

3.  “Each institution raises all the money it can.” 

4.  “Each institution spends all it raises.” 

5.  “The cumulative effect of the preceding four laws is toward ever increasing expenditure.”

Hopefully, I have presented the case for why this has happened, what the consequences have been, and how we can go about improving it.

Thank you for listening to the Charging U podcast.  Please send your thoughts to larry@chargingupodcast.com  I appreciate your time and commitment.