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.