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The newspaper of The Johns Hopkins University May 12, 2008 | Vol. 37 No. 34
Thinking Out Loud

William R. Brody

By William R. Brody

The Great Tuition Debate

College tuition has been rising faster than inflation for more than a few decades. And while the net tuition charge — which is tuition minus the financial aid we provide — has been growing much more slowly, middle-income families not eligible for scholarship grants (rather than loans) have been feeling the crunch. Perhaps now, in the wake of major changes in financial aid by Harvard, Stanford, MIT, Brown, Penn and several others, the day of reckoning has come at last. Many people feel it is long overdue.

Yet the fact remains that most people do not understand that tuition alone does not represent the true cost of providing an undergraduate college education. While it may be difficult to tease apart the cost of an undergraduate education at research universities (which have multiple missions of undergraduate and graduate education, and scholarly research), one can look at small liberal arts colleges having only undergraduate programs to learn that tuition covers between 40 percent and 60 percent of the true cost of an undergraduate education. The remainder of the cost is covered by endowment income and annual gifts from alumni and foundations. It is reasonable to assume that at major research universities, with their highly advanced labs, libraries and other resources, the cost of educating each undergraduate is significantly higher.

Tuition rates are set, in part, by how colleges wish to ration financial aid. This is because at most universities, including Johns Hopkins, unless you have a walloping endowment dedicated to undergraduate financial aid, a substantial source of need-based grants comes directly from tuition revenue. Much of our financial aid is effectively a rebate or "discount" on the "sticker price" of tuition. How much financial aid a college or university offers determines the mix of households (by economic status) whose children are therefore able to attend. The higher the tuition and the greater the discount rate given on tuition, the more children from wealthier families are, in effect, subsidizing those from lower-income families. At Johns Hopkins, the discount rate is presently about 24 percent, meaning that out of every $1,000 in tuition we charge, we give back $240 for grants.

The underlying problem causing these distortions is that tuition costs have risen much faster than has median family income. The details are complex, but a "macro-economic" sketch (with apologies to my economist friends) provides a simple way to understand the dynamics of tuition. If I had been an undergraduate 75 years ago at any college or university and came back today to see its campus, many of the buildings might be new, but the classrooms themselves would look virtually the same. There might be the addition of video and Power Point projectors in the classroom, signifying we are in the 21st century rather than the early 20th century, but the basic mode of how a student obtains an education would be hardly changed.

Try taking that same 75-year time trip with other sectors of the American economy: automobile manufacturing, banks, grocery stores, pharmacies, you name it. Ford Motor Co. in the Model T era has little in common with the Six Sigma and lean manufacturing plants it uses today. The labor content to produce a Ford today is a fraction of what it was in Henry Ford's era, while the labor content to produce a college graduate is the same as it was. Productivity gains have reduced the costs of making a Ford or delivering banking services or growing corn and so forth in almost all sectors of our economy. But undergraduate college education remains mostly a "hand-tooled" product. Because our labor content hasn't been reduced, the true price of a college education relative to median family income (or an entry-level Ford) has grown much faster.

You will sometimes hear claims that the real problem is that faculty are lazy, or that universities are poorly run. Despite what our critics say, colleges and universities operate in a highly competitive environment, and we are more market-driven than some would like us to be. We offer a "product" that, at least so far, has served our country and the world well, and continues to be in high demand, despite rising costs. We can readily increase faculty "productivity" by changing the student- faculty ratio (putting a lot more students in each class), but then we feel we would be significantly diminishing the quality of what we offer.

But this does not mean that colleges will not have to change. I think change is going to be forced upon us. Except for perhaps a dozen universities and colleges with very large endowments dedicated to their undergraduate mission, most of us do not have sufficient resources that will grow faster than inflation in order to offset the rising costs of education. In addition, research universities are now in a global competition for faculty with world-class expertise, so the costs of recruiting and supporting faculty, particularly in the science and technical fields, are also rapidly rising.

So what are possible solutions? Apart from growing our endowment dedicated to professorships and student financial aid, we need to examine ways to modify our model of education without diminishing the quality of our end product: a student prepared to be a citizen of the world and a substantial contributor to the advancement and well-being of society. To do this, we need to foster innovation in curricula and pedagogy. Use of information technology is one approach that is only beginning to be exploited. While I believe strongly that residence-based education is an essential ingredient for what we do, some didactic material might be more efficiently produced and delivered via online curricula, supplemented by close contact with faculty in seminar-type situations, where the greatest value is added by our faculty. In addition, we need to distribute some of the educational courses to a more broad audience via the Internet, creating another source of revenue to help offset the costs of developing and delivering educational content.

The field of education in general, and higher education more specifically, has not benefited from investments in pedagogical research. If we only had a National Institute of Higher Education that would sponsor creative and innovative research developing new ways to educate and to measure outcomes, we would all benefit. Lacking that, we have to find other sources to support and foster educational innovation.

Quality education is, indeed, expensive. But it is worth the investment. Our task is to be sure that any student who is highly qualified to attend Johns Hopkins is able to do so irrespective of his or her parents' financial situation. In the meantime, some not particularly original, but nonetheless sage, advice to parents of young children: Don't count on the costs of education falling anytime soon. Begin saving now for your children's college education.


William R. Brody is president of The Johns Hopkins University.


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