Scrambling for Dollars
Warren, who is now Homewood's associate director of development and alumni relations, has a three-year-old son named Daniel. Were Daniel old enough to follow in his father's footsteps this year, he wouldn't be doing so for three grand. Instead, his tuition would be a whopping $22,680. Had tuition increases merely kept pace with inflation, the tab this academic year would have been only $10,844.
Obviously, the list price of admission to Homewood has soared since 1973. And a typical family income, especially in the middle and working classes, has not kept pace. Not even close.
Ever-higher tuition is not unique to Hopkins. During the last 15 years, according to the College Board, tuition has nearly doubled at both private and public American four-year colleges and universities, in constant dollars. In that same period, median family income has increased less than 10 percent. There are those, such as the Rand Corporation, who predict that by 2015, in what could be Daniel Warren's senior year, tuition will have doubled again. Prediction based on extrapolation is a chancy business--remember how many futurists said we'd all be on a four-day work week by now?--but the precedent for tuition doubling every two decades is sobering if you're a parent, or a university administrator. In a recent letter to alumni, Hopkins president William R. Brody devoted three of its four pages to discussing Hopkins's price tag.
Soaring tuition has received its share of media attention, critical comment, and occasional derision. It's been the subject of a national commission appointed by Congress. Not all of this attention has given due consideration to context. When reporters want to get the public's attention, they cite tuition at universities like Harvard, Princeton, Yale, Stanford, and Hopkins. Yet only 5.5 percent of the nation's full-time undergraduates attend such schools, according to the College Board. Nearly three-fourths of the roughly 5 million students in college pay less than $8,000 annually in pursuit of bachelor's degrees.
"We tend to define costs in a most peculiar way," says Barmak
Nassirian, a policy analyst at the American Association of State
Colleges and Universities. "People don't think of the price of
new cars in terms of what a Rolls Royce costs. But the price of
elite colleges has captured center stage in people's minds."
Also, tuition increases have slowed during the 1990s, scaling back to a figure closer to inflation. Schools have increased financial aid, to ease what college administrators concede is "sticker shock"; many students at elite schools like Hopkins receive substantial discounts, getting back as much as all of their tuition in grants. When discussing the rising price of a college education, it is important to recall that the actual price often is substantially lower than the list price.
Terry W. Hartle, senior vice president for governmental relations and public affairs at the American Council on Education (ACE), says, "What sticks, what the public understands, is the posted price. They don't ever think about the net price. And we have never found a way to convey to people that the posted price is not what you pay. Have you ever seen a major news article that has talked about net price? No, and you never will."
But Hopkins administrators still face significant concerns. The university has dropped behind its competitors in financial support for undergrads, largely due to Hopkins's comparatively small endowment. Families of prospective students now negotiate like sports agents, playing one school's financial aid offer against another's, seeking the best price, which usually is not Johns Hopkins. The long-standing tradition of admitting students solely on merit, then finding a way to fund everyone who wants to attend, is imperiled as more and more students require assistance to meet the ever-higher tab. Hopkins undergraduates who receive financial aid average $16,600 in debts by the time they receive their diplomas.
Hopkins's response, in the words of one administrator, has been to build "a bigger tin cup." When the Johns Hopkins Initiative reached its goal of $900 million last May, nearly two years ahead of schedule, the trustees moved quickly to raise the bar to $1.2 billion. President Brody established the first priority for the additional $300 million: to increase endowment for student financial aid so that, he said, "no student--graduate or undergraduate--will turn down an invitation to Johns Hopkins for lack of funds, and to ensure that our graduates are not burdened by unreasonable debt."
Will such efforts be enough? Who is being priced out of the market? Should families save like mad from the day their kids are born, or hope instead that some sort of relief will appear in the future? How does Hopkins parcel out its limited financial aid dollars? And why have costs, which drive tuition increases, gone up so quickly?
Johns Hopkins Magazine took a detailed look at these questions, and others. The answers are complicated.
Hasn't Hopkins always been
Yes, compared to the vast majority of American colleges and
universities. Hopkins is an elite research university, and those
are expensive beasts. If it is to remain on a level with other
research-oriented schools like Stanford, MIT et al., Hopkins must
purchase and maintain the latest and best technology. It must
operate state-of-the-art facilities; hire and retain the best
faculty and researchers, who don't come cheap; and attract the
best graduate students, which means it must have the money to
fund teaching fellowships and graduate research. All of which
costs big money.
Of course, attending a university that maintains its status as a top-ranked research institution benefits many of the undergraduates who face those daunting tuition bills. Focused, ambitious students choose Hopkins because they know they can do genuine research right away. Notes Theodore Poehler, vice provost for research, "Seventy percent of undergraduates do research. It's great. It's part of the essence of this place. People are philosophically committed to it."
Another major factor in Hopkins's steep price is its status as a private institution. The subsidy it receives from the state of Maryland (in fiscal 1999, $14 million, out of a total university budget of $1.7 billion) is much smaller than the subsidies paid to schools in the Maryland state system. This year, the state will pay public universities an average of $6,834 per full-time student. The subsidy provided by the state to Hopkins comes out to 16 percent of that figure, or little more than $1,000 per student. Simply put: a state school must recover much less of its costs through tuition, because the Maryland taxpayer is picking up a big part of the tab.
Doesn't Hopkins receive hundreds of millions from the federal government in research grants and contracts? Isn't it the leading recipient of federal research dollars? Yes it does and yes it is. But that money doesn't go into the general fund to defray the cost of educating English and anthropology majors. It is earmarked for specific research projects.
Even if Hopkins and other universities could use federal research dollars to offset the cost of tuition, Poehler says, there's no surplus to spread around: "The money we get for research doesn't actually cover the full cost of the research that gets done. The costs incurred exceed the funds to do research. Therefore, you're kind of losing money." Part of this shortfall has to do with the overhead, or indirect costs, associated with research. These include the price of maintaining buildings, servicing equipment, and paying administrators. The federal government reimburses Hopkins for indirect costs after negotiating an annual rate with the university. For 1997, that rate was 68 percent of the direct cost. However, says Poehler, Hopkins's indirect costs are actually higher. The school has to make up the difference.
Author Charles Clotfelter studied 15 years of rising costs at research universities in his book Buying the Best: Cost Escalation in Elite Higher Education. In that book, he attributes nearly half of the cost increases at four institutions similar to Hopkins (Duke, Harvard, Carleton College, and the University of Chicago) to "attempts to provide higher-quality service or to undertake new activities." That is, elite schools spend money in pursuit of excellence.
ACE's Hartle notes, "The biggest cost-driver at a place like Johns Hopkins is the fact that scientific knowledge in most disciplines doubles every eight to 10 years. When you look at a field like biomedical research, where Hopkins has been very active, the doubling occurs far faster. Universities, as the principal repositories and transmitters of knowledge, have no choice but to keep up if they want to remain vital in the next decade. Keeping up means that you have to do a lot of things that are expensive."
Michael McPherson, president of Macalester College in Minnesota and author of Keeping College Affordable: Government and Educational Opportunity, adds, "From a faculty member's or an institutional leader's point of view, it's always easy to think of many things that would make education still better, and if they have the money, they'll do it. It's interesting that the universities and colleges that have followed this approach, and spend tons of money, are the ones where students are clamoring to get in."
So yes, Hopkins has always been a pricey place. But during the last few decades, the price has gone through the proverbial roof.
What happened? Why has the price gone up so much faster than inflation? The short answer is that costs shot through the roof first, and have continued to soar. There are several reasons for that.
During the past 20 years, Hopkins faculty salaries have outpaced inflation; while the Consumer Price Index (CPI) went up approximately 150 percent from 1977 to 1997, a full professor at Homewood earns nearly 200 percent of the average $35,000 he or she took home in 1978.
At comparable private universities today, a full professor pulls in an average annual salary of about $95,000, while a full-time instructor makes about $40,000, according to a report by the American Association of University Professors (AAUP). The averages at Hopkins are similar: about $91,000 for a professor and $46,000 for a full-time instructor, according to university data supplied to the AAUP. Many faculty members must raise part of their salaries through grants or clinical income.
To attract and retain top-notch faculty, Hopkins has to pay the price, says Poehler: "Faculty costs go up higher than the rate of inflation. We need to counter or meet what other institutions are going to pay. You've got to bargain with people or you're going to lose them. If we don't, the University of Texas will, or Princeton, or Harvard. But when you do that it drives costs up. And when you lose them, it drives costs up. Competition for first-rate faculty is always acute."
Just as in the world of competitive sports, today's celebrity professors are wooed by prestigious universities. This year, for example, former U.S. poet laureate Mark Strand left Hopkins's Writing Seminars faculty to join the University of Chicago. One of the primary factors Strand cited for leaving was a better salary: he says that his pay jumped from $82,700 a year to about $146,000. As a parting shot, Strand, who has been both a MacArthur and Guggenheim fellow, told the Baltimore Sun: "Hopkins should check their coffers, see what kind of money they have and buy me back. I can be bought."
Says McPherson, "If you want the 'best' graduate programs and the most Nobels, you've got to pay. The payoff of these investments for undergraduate education is far from clear, but again the fact is that students gravitate to the places that win at the prestige game."
Hopkins's annual outlay for faculty salaries has doubled during the past 10 years, hitting $208.6 million in fiscal 1997. In that time, the total number of full-time faculty members--a range that includes full professors, instructors, and visiting faculty--has grown by more than 600 to about 2,400, reports show. Despite this growth, Hopkins is not spending a bigger chunk of its budget on its teaching staff. Faculty salaries as a percentage of the overall budget have remained close to constant over the last decade, according to the university operating budget. Since 1987, faculty pay has totaled about one-third of all staff costs, and less than 20 percent of the overall budget.
Administrative salaries have also risen. According to the College
and University Personnel Association (CUPA), median salaries for
administrators nationwide rose 4.6 percent for fiscal '97-'98;
the CPI for 1997 was 1.7 percent. Executive paychecks led the
way, with a median gain of 5.9 percent. CUPA found that the
raises were higher at private than at public schools. At
Hopkins, salaries for non-faculty employees have risen an average
of 4.1 percent over the last five years. Because that figure
includes all non-faculty, it's unclear what the increase has been
for more senior administrators. Hopkins pays its top executives
comparatively well. For example, former Engineering dean Don
Giddens earned about $186,000 in 1997, a salary in the top 10
percent of engineering deans' pay at public and private schools
surveyed by CUPA, which publishes a list of salary ranges for
positions, some of which have counterparts here. Dean of the
School of Nursing Sue
Donaldson made about $154,000 in 1997,
coming within the top 3 percent of nursing school deans, the
1997 national survey shows. And the number of top Hopkins
administrators has increased. In 1988, the number of corporate
officers and deans listed in university reports totaled 61. Ten
years later, the number stood at 75.
When Student Financial Services director Ellen Frishberg started at Hopkins nine years ago, she had one notebook that contained all the regulatory information she needed for processing student aid. "Now I have a credenza filled with books and 23 bookmarked [World Wide] Web sites," she says. In departments across the university--from security to occupational health to the auditor's office--administrators today must comply with a wide, complex, and ever-growing range of state and federal regulations. Often that means hiring and training staff to institute costly reporting systems. Stanford University president Gerhard Casper recently estimated that as much as 12.5 cents of every tuition dollar at his institution goes to supporting regulatory compliance.
Often, say Hopkins administrators, though the intent of new legislation may be laudatory, the cost to the university can be high. Last year, Congress passed the Taxpayer Relief Act of 1997, which included an educational-incentives package for middle-income college students and their families. At Hopkins, roughly 18 percent of undergraduates will be eligible to receive such tax credits, estimates Frishberg. To comply with the legislation, her office must now collect and submit information to the IRS on every student--a process, she estimates, that will cost Hopkins hundreds of thousands of dollars. Says Hopkins president Brody, "This imposes a huge burden on us, for which we get no cost relief. Where is that [money] going to come from? You either eat that and cut something else out, or you raise tuition."
There's an additional cost of increased regulation: litigation. With each new statute comes the threat of the university being sued for non-compliance. When Estelle Fishbein came to Hopkins in 1975 to establish the general counsel's office, she hired one additional lawyer. Today she has a staff of seven attorneys, who handle questions and cases ranging from laboratory safety to intellectual property to Medicare reimbursement rates. Says Fishbein, "Everybody is afraid to do anything without talking to a lawyer these days." Many of the cases that actually end up in court involve former employees, she says. With the advent of legislation concerning gender equity, affirmative action, and the Americans with Disabilities Act, she says, "We've seen a marked increase in litigation surrounding the termination of employees who allege discrimination as the motive for their firing."
Today's students and professors use computers and the Internet for virtually every aspect of the teaching and learning process. To keep up with changing classroom demands, institutions like Hopkins must buy millions of dollars of computer hardware and other equipment, and update older buildings to handle cable and telephone lines, reconfigure classrooms, etc.
Eisenhower Library. More than 10 percent
of its $6-million acquisitions budget is spent on accessing
electronic databases, journals, and other online resources, up
from 1 percent seven years ago. The library puts out another
half-million dollars each year to buy software, as well as
network servers and other hardware, a "substantial increase" over
the last several years, according to library director James Neal.
"Technology has changed so dramatically, we are going to have to
continue to invest," Neal says--particularly "in support staff
needed to help people use the new technology."
In Homewood's centralized computer department the annual budget of $3.5 million has already jumped nearly 44 percent since 1991. Homewood Academic Computing administrators fear they will lose valuable staff unless salaries increase over the next few years. "We expect a significant growth in salaries just to be competitive," says Judi Wood, acting director of the department. "Salaries for [our information technology] staff are 13 to 20 percent less than market. So we face a crisis of losing them."
In the Whiting School of Engineering, administrators hope to create one or two new high-tech classrooms offering computer-aided design, as well as video technology and software for professional presentations. As many as 350 students would take a technical communications course annually, an offering that could be expanded in a professional lab. "Students will need to present data when they go into the industry, so they need to have these kinds of capabilities," says Candice Dalrymple, Whiting's associate dean for external programs.
Dalrymple is also chair of the Hopkins Committee for Electronic and Distance Education, a group that has reviewed electronic offerings at other universities, and is urging Hopkins to commit more money for upgrades in electronic equipment and computer-oriented training for faculty. "There is a crying need," Dalrymple says. "Underline that, put it in capital letters, and bold it."
These days, college students look for services, activities, and amenities that their counterparts 20 years ago had not dreamed of--from climbing walls in the athletic center to 24-hour-a-day security in the dorms. At Hopkins today are 170 student groups, ranging from the Gay and Lesbian Student Alliance to the Bengali Cultural Association to the Hopkins Science Fiction Association, that receive university funding, more than double the number 12 years ago, when Susan Boswell began as dean of students. "We've seen tremendous growth in the arts," she says, pointing to the recent addition of six a cappella singing groups, a student-run film series, and the planned construction of a student fine arts center (estimated to cost $12 million).
At the student counseling center, six full-time psychologists and three part-time consulting psychiatrists counsel students, who have not been reticent about using such services: one in three members of the class of freshmen entering in 1992 visited the center for individual therapy sessions during their time at Hopkins, according to a survey conducted by center director Michael Mond. The career counseling center has also seen marked growth. Last year it offered more than 80 career planning workshops, up from 20 just two years earlier. Students are clamoring for more, says center director Patricia Matteo.
Administrators know these things matter in the competition for prospective students. When shopping for colleges, Rozalin Davoodnia '00 looked for schools with well-established community service programs, and was impressed enough by Hopkins's offerings to apply. For Michael Sachdev, a sophomore from Allentown, Pennsylvania, who visited such schools as Columbia, Dartmouth, and Princeton, the quality of the residence halls was a deciding factor. "You want to be comfortable," he says. "Everyone told me that Yale is so dingy. I don't care if it is Yale--I didn't even want to look at it."
There's a price tag attached to each new offering and service. The cost of providing off-campus security jumped from an estimated $60,000 in FY '89 to $410,000 in FY '98, no doubt related to the addition of 24-hour-a-day security in off-campus residence halls.
Like other colleges and universities, Hopkins has become caught in a tuition/financial aid spiral during the 1990s. "The public doesn't quite understand that a big chunk of financial aid is funded out of tuition," says Brody. "For every dollar that you raise tuition, you have to increase financial aid. So for each dollar you increase, you get less and less net revenue."
Approximately 38 percent of incoming freshmen this year received Hopkins grants; the average grant was $15,000. That is, for those students, the net tuition price was not $22,700, but $7,700. Undergraduates will receive approximately the same grant for each of their four years, provided their families' financial circumstances do not change dramatically.
In the past decade at Hopkins, the cost of financial aid has grown more quickly than sources of revenue--including tuition. Between 1989 and 1995, Hopkins's total undergraduate tuition and fee income increased 92 percent, from $32 million to $61.5 million, while the university's grant aid to students increased 123 percent, from $5.5 million to $12.4 million.
The spiral, Brody says, "has to do with the social theory, if you
will, of how universities have decided to price their tuition.
There are some families who can pay full freight. Universities
have felt that as long as the marketplace will support it, you
should [charge what universities currently charge], and then
rebate it through financial aid to those families who are not
able to pay the full price." A tongue-in-cheek bumper sticker
that used to be in the office of Frishberg may sum up this
philosophy best. It read, "Robin Hood was right!"
One cause for this spiral has been a decline in government support. At Hopkins, the fraction of financial aid paid for by federal funds dropped from 8.5 percent to 6.5 percent between 1991 and 1997, according to dean of student enrollment Robert Massa. During the same span of years, state funding for financial aid also declined, from 7.7 to 4.5 percent. Scrambling to make up for the loss of aid, Hopkins and other colleges and universities must now pay for a larger fraction of the financial aid bill out of institutional funds.
Why not simply lower tuition and thus reduce the need for financial aid? Says McPherson, the president of Macalester, "A few colleges have tried big price cuts. This grabs headlines but is probably not very sensible as a general policy. Crudely, [you can] divide universities into two groups: those that could recruit enough qualified full-pay students to fill the class, and the rest. There are maybe 100 private universities and colleges in group one. These places use financial aid to meet institutional goals, like equity, diversity, and equal opportunity. For the rest, much of financial aid is a way of cutting the price, selectively, to those who are less willing or able to pay full price. This is of course exactly what businesses do--for example, airline fares. Viewed as a business decision, differentiating price according to ability to pay and the attractiveness of the student to the school makes pretty good sense." Hartle of ACE adds, "By any rational economic argument, private research universities should be charging much more than they're charging, because there are many more people willing to pay whatever the price than you can accommodate. But because we are affected by the public interest, this would be a short-sighted and foolish strategy."
Okay... so costs have gone way up. Have universities raised tuition so fast because that's the readiest source of cash with which to pay those costs?
Yes. Schools may not like admitting that, but it's hard to come to any other conclusion. At Hopkins, the university's own 1995 report, "Student Aid at Hopkins: Trends and Challenges in a Changing World," said, "The reasons tuition has been rising are tied both to its ready utility as an income stream for universities [emphasis added] and to general patterns of rising costs and strained resource revenues." In Buying the Best, Charles Clotfelter observed, "Applications to the nation's most selective colleges and universities increased rapidly [during the 1980s], suggesting strong demand for this kind of college education.... In this environment, the leaders of these institutions could not fail to realize that they could raise tuition without undue harm to their continued ability to make highly selective admissions decisions." People have been willing to pay, and Hopkins and its peers have been willing to charge, what the market will bear.
Which should not be construed to mean universities have been gouging the public. Despite steady increases in tuition, Hopkins (and almost all other universities, private and public) still can't recover the true costs of educating an undergraduate for a year. For example, at the Krieger School of Arts & Sciences, tuition amounts to only 65 percent of operating costs (in the general funds budget, which excludes grants and contracts). "Everybody, essentially, receives a subsidy," says Robert Massa, dean of enrollment management. Public institutions can use taxpayer money to make up the difference. Private institutions like Hopkins rely on endowment funds and gifts. When those don't stretch far enough, increasing tuition is all that's left to do. Tuition is the most easily adjusted source of revenue--particularly for Hopkins, which does not have the sort of huge endowment that other schools can tap to pay their growing bills.
As of May 31, the Hopkins endowment stood at $1.37 billion. That's a good piece of change, until you need it to run an elite research university. Harvard, Yale, Princeton, MIT, Stanford, Columbia, the University of Chicago--all have significantly larger endowments (see chart on p. 22). Princeton's endowment is more than four times the size of its Hopkins counterpart, for instance, and Yale's is more than five times as large. Endowment generates investment income that can be dispersed each year to cover some of the costs of running the institution. The bigger the endowment, the larger the investment income; the larger the income, the fewer the costs that must be met by tuition revenue. The converse applies to Hopkins: with its small endowment, it has to rely more heavily on tuition.
So what have been the ramifications of
Besides shocked parents?
One of the most serious effects has been the strain put on middle-income families. A family with a combined income of $40,000 to $90,000 "is the toughest family to help," says financial services director Frishberg. Those who earn less qualify for various sorts of financial aid. Those who earn more usually have the resources to pay for a Hopkins education. But the folks in the middle face a conundrum. They're too wealthy to qualify for money earmarked for the disadvantaged, and too poor to just write a check for tuition. "I see people in that bracket getting squeezed out," says Frishberg. She calls it the "middle-class melt."
You can see this melt reflected in changing demographics. In 1989, 24 percent of incoming freshmen came from families with incomes in the $50,000 to $75,000 range. In 1997, just 16 percent of freshmen were from families in that bracket. (These income figures are not adjusted for inflation.)
"The middle-income students, yes, are being lost at Hopkins and other places," says Massa. And they are going to public colleges and universities.
"It used to be that financial aid would close that gap between public and private universities," says Frishberg. But private universities like Hopkins now cannot compete with the aid that many public schools offer students. "[Middle-class parents] tell their kids, 'Forget it. You can get just as good an education at Berkeley,'" Frishberg says. "We lose really bright kids to the University of Maryland, where they get full scholarships."
The number of Hopkins students from lower-income families is holding steady, supported by Hopkins grants, Pell grants, and other forms of financial aid. Paradoxically, the number of students from families earning less than $40,000 now exceeds the number of students in the middle-income bracket (17 percent vs. 16 percent, in 1997).
Hartle warns that soaring tuition hurts the poor regardless of financial aid provisions: "It probably discourages the poor from even seeing college as a realistic possibility. We've done a fair amount of analysis about what the public thinks it costs to attend universities. They invariably overestimate the price and underestimate the amount of aid that is available. And the people who [do this] by the widest margin are low income and minorities. I think attending an institution like Johns Hopkins just drops off the radar screen for them, when their kids are fairly young."
Other elite universities are taking steps to help middle-class
families. Yale is exempting up to $150,000 of a family's savings,
home equity, and other assets when figuring the amount the family
should pay--up from a previous limit of about $40,000 (which is
approximately Hopkins's limit). Princeton is phasing in $6
million a year, mostly from its endowment, to increase financial
aid for middle-class families and eliminate or reduce home equity
for most parents making less than $90,000 when figuring family
Massa calculates that if Hopkins eliminated home equity from its financial aid applications and reduced the size of the loan burden for middle- and lower-income families, it would require $120 million more in endowed funds to make up the difference. Hopkins can't afford to take such steps, says Massa, because the endowment for financial aid just isn't there. Of the approximately $547 million in unrestricted endowment funds, only a fraction can be devoted to earning money for financial aid; what can be used generates an average of $405 per undergraduate, according to Massa. (The actual grants are higher, in part, because not all undergraduates receive aid.) Compare that to the university's peer institutions, the COFHE schools, which average $1,430 in financial aid per undergraduate. Among these 31 schools, Hopkins ranks third from the bottom. What doesn't come from the endowment must come from other income, principally tuition.
Another worrisome effect of soaring tuition is the amount of debt undergraduates are willing--or feel compelled--to take on. In financial aid packages today, schools offer much less in grants and much more in loans. A study by the College Board showed that by 1995-96, loans made up about 60 percent of student-aid packages, while grants have dropped to 40 percent, a reversal of the average percentages in the mid-1970s.
At Hopkins, says Frishberg, "I see students getting into very, very bad debt. I see families and students getting into debt out of desire, not necessarily out of reasoning. It happens on the margins. It's not necessarily a trend. But there will always be people who buy a Mercedes even though they can't afford it." Often those students--some saddled with a $40,000 debt by sophomore year--drop out. Frishberg counsels such families to think twice before burdening themselves or their children.
Last spring's graduating seniors on financial aid came out of Hopkins with an average debt of $16,600 (slightly above the national figure for private four-year institutions of $15,300). By the time this year's freshmen earn their diplomas, that figure is expected to jump to $20,000.
At Hopkins's medical school, where the average total debt for last spring's graduates is $67,848 (and 10 percent of students had debts in excess of $100,000), many newly minted physicians are feeling the pinch of recent changes in federal loan programs. Beginning in 1993, the government stopped allowing a two-year deferral on interns' and residents' repayment of federal loans. That means many medical residents now face monthly repayments in the range of $1,000--at a time when they are earning salaries in the $30,000 range. "If you're making a physician's salary, [repaying $1,000 per month] is no problem," says one recent graduate. "But if you're earning a resident's salary, that's concerning."
David Gleicher, chair of the Economics Department at Adelphi University in New York, argues that the investment in a college education has to be weighed in the context of long-range benefit: "The return on education has been rising over the last 20 or 30 years. A student, or the student's family, who advances money for a university education gets a much higher return in terms of future earnings. In that sense, the cost of tuition is not rising significantly at all. That's an explanation for why students are willing to advance more tuition money to finance a college education."
That may be true for a future cardiologist, but does the same thing obtain for a classics or German major? Says Gleicher, "As compared to what they would get if they did not have a college degree? Yes. The differential income for someone with a college degree, independent of major, versus someone without has been growing."
Financial aid is more important all the time, and the most promising students can weigh competing offers. How is Hopkins faring in its efforts to get the students it wants?
Not very well. The 1995 report on Hopkins student aid was blunt: "Stated plainly, Hopkins costs more and pays less than its competitors. The result is that Hopkins is now one of the most expensive COFHE schools for a student to attend."
When the Hopkins Office of Enrollment Services surveyed high
school seniors admitted in 1994, it found that more than 75
percent reported that Hopkins's net price after financial aid--
the amount that must be paid by students and their families--was
the highest of any school that had admitted them. From 1989 to
1993, the percentage of COFHE freshmen receiving aid increased
from 40 to 45 percent. During that same period, the percentage of
Hopkins freshmen receiving aid shrank, from 39 to 37
As a result, Hopkins loses students to competing institutions. According to the provost's report, of applicants admitted in 1994 to both Hopkins and Duke University, only 19 percent chose to attend Hopkins. Versus Georgetown, the figure was 27 percent; versus Princeton, just 4 percent. COFHE schools average a 41 percent "yield"; that is, 41 percent of students admitted by a COFHE school choose to attend that school. The yield at Hopkins is only 26 percent, third lowest among peer institutions. It would be incorrect to attribute all of those lost students to a lack of financial aid resources, but as the report states: "Clearly, many of the finest students that Hopkins admits elect to enroll elsewhere, and Hopkins's higher price is certainly one reason that motivates these students to do so. Unfortunately, it is the strongest students who have the most options, and also the ones who have the most competitive financial aid packages from other schools. It is these students that Hopkins loses more often."
Brody cautions against attributing too many lost applicants to price: "Why students choose particular universities is a complicated equation, of which price is only one of the factors. If price were the only criterion, everybody would go to Rice University, whose tuition is not quite half what everybody else's is [among COFHE schools]. But I would guess that Rice's yield relative to Princeton isn't particularly good. There's also the perception of quality. Schools are just popular at certain times, and that tends to be cyclic. My perception is that Hopkins is actually gaining in relative popularity."
The director of Hopkins's Peabody Institute, Robert Sirota, says that so far his conservatory seems to compete well: "Though this is a very expensive institution, we are able to continue to recruit students at a very high level, which tells us that we are at least competitive in our market. Having said that, our challenge is that we are competing with several institutions that have very high endowments, one of which, the Curtis Institute, does not charge any tuition. They discount their tuition 100 percent."
Where is tuition headed in the future? What steps is Hopkins taking to hold down its costs?
For the short term, at least, Hopkins intends to keep annual tuition increases to under 5 percent. The university's five-year financial plan, delivered to the board of trustees last May, projects average annual tuition hikes of 4.3 percent through fiscal 2003, though increases in financial aid may keep the net price increase lower.
The longer term trend is much harder to predict. Admits Hopkins senior vice president for administration James McGill, "My crystal ball is quite foggy."
Says Brody: "Extrapolation is a very dangerous thing. The problem is that we had two decades of superinflationary growth in costs and tuition, up to 1993. So are we now looking [ahead to] a period of deflation, or at least growth that's consistent with inflation, or are we looking at [more] superinflationary growth? I can't tell you which it is. If you extrapolate based on the '80s and you have a child today, by the time he or she goes to Harvard the tuition would be some horrendous number. On the other hand, if you took the inflation in gas prices in the '70s, you'd project that gas today would be $50 per gallon, and it isn't."
Hopkins administrators say they are doing a variety of things to make sure future tuition increases are held to a minimum. They are working to manage facilities more efficiently and to streamline administrative processes. Some services (such as the food service in the dorms) can be done better, faster, and more cheaply by being outsourced.
The savings from such efforts are limited, however, says Brody.
"I must tell you that over the long run those are not going to
make the difference. What will make a difference is changing how
we educate. By necessity, that will involve using information
technology in novel and innovative ways. For example, professor
[Michael] Karweit's virtual simulation lab for engineering
students allows them to learn and explore at their own pace.
Other simulation tools in physics labs or electrical engineering
labs allow students to conduct complex experiments using computer
simulation rather than having to have elaborate and expensive
equipment. We will train surgeons in the future on computer
simulators of patients, rather than operating on patients
themselves, just like we train pilots on aircraft simulators.
It's safer and more cost-effective."
Peabody director Sirota notes that the intensive individual
instruction that his institute purveys will never have the sort
of economies of scale found in, say, manufacturing: "There is
only so much you can do to control costs in an operation that
teaches people one at a time. We are, basically, a very, very
rarified trade school. We need apprenticeship kind of training.
You can't exercise too many efficiencies in your labor force
without sacrificing the quality of what you're doing. So the
issue is to hold down non-labor costs as best you can, and raise
endowment money feverishly."
IF THE SON OF DOUG WARREN '77 is to avoid paying something like a quarter-million-dollar tab for a bachelor's degree, the upward arc of tuition has to level off. Hopkins and its peer institutions realize that they can't simply jack up the price every year to cover a new round of cost increases. State schools are successfully competing not just for middle-class kids but for the best and brightest, whom the elite institutions have always considered their own. The social contract implied by need-blind admissions and the commitment to fully fund every student who chooses to attend Hopkins has been endangered. The press has become increasingly negative. Witness Time magazine's cover story last year excoriating the University of Pennsylvania for what it charges. When The Wall Street Journal says, "Productivity is a dirty word when it comes to higher education," you do not hear a public clamor of disagreement, however misinformed the public might be.
Increasing the Hopkins endowment will help. But Hopkins and its
peers know they must do what they can to contain expenses. A
research institution inevitably runs up big bills, but
universities traditionally have not paid the sort of keen
attention to internal finances that characterizes well-run
corporations. The National Commission on the Cost of Higher
Education noted: "This Commission, therefore, finds itself in the
discomfiting position of acknowledging that the nation's academic
institutions, justly renowned for their ability to analyze
practically every other major economic activity in the United
States, have not devoted similar analytic attention to their own
internal financial structures."|
Most observers agree that a more sensible approach to government regulation would be another helpful change. Gerhard Casper of Stanford has noted that a simple bottle of rubbing alcohol, the same stuff found in any home medicine cabinet, falls under the jurisdiction of six regulatory agencies the minute it appears in a Stanford laboratory. Politicians who grandstand about cutting the size of government need to be reminded that passing the burden of governance to colleges and universities is more of a dodge than a solution.
Students may have to change their expectations, as well, if they don't like forking over a king's ransom every semester. State-of-the-art athletic facilities are nice, but hardly essential. Students demand Internet hookups in every dorm room. Is that for access to electronic scholarship? Or electronic socializing via e-mail and chat rooms? Parents who aspire to see their children graduate from Hopkins have their part to play, too. Robert Massa notes that many of them need to save more toward their offspring's education. At some point while their kids are young, they may have to forgo a nice vacation in Hawaii or a new minivan in order to put away more money for tuition.
There is little enthusiasm among universities to reform themselves to run solely on a corporate model. You do not produce scholars, thinkers, and productive citizens like you produce crankshafts or cinnamon buns. But Hopkins could benefit--and administrators seem to realize it--by mimicking corporate strategies for maximizing resources across disciplinary and divisional lines. The new dean of Arts & Sciences, Herbert Kessler, has emphasized the importance of finding ways for various departments to share technology and other resources (see interview, p. 53).
Says President Brody, "The global issue over the next few decades is how to develop more efficient and effective ways of educating students. In the end, that's the way we'll lower the cost of education. We are an institution of higher learning, not higher teaching. Teaching is not the only way we learn, and to maximize learning we need to be able to try creative new approaches, and then assess whether they are better or worse than the old way of doing things."
The ACE's Hartle summarized the situation this way: "What's really here is the need for a careful balancing act, so that the institution maintains its vitality and intellectual creativity, charges a fair price that is justifiable, but doesn't increase the price so quickly that it simply prices itself out of the market, either in fact or perceptually, to thousands of people who might be very good candidates for admission."
RETURN TO SEPTEMBER 1998 TABLE OF CONTENTS.