Reader response – why does tuition go up and up?

If you check out the recent comments, you’ll see a post asking why tuition is increasing so fast in higher education, whether its related to Federal Aid or buildings, and what is likely to happen next.

An incredibly complex question, but I’ll give it a go.  It’s unclear that the availability of aid has much to do with tuition increases, since the increases have continued to go on even when aid fails to increase from states and the fed (although there some obvious parallels since students can access more of the subsidized loan aid if need increases as a result of the tuition expansion). 
Aside from that, what’s behind the increases?  I’d suggest there are at least three major factors:
1) Universities are very different from manufacturing organizations in that their product is human capital.  As a result, the vast majority of resources go into personnel, particularly teaching faculty.  The main index of inflation, some argue, is misleading since it’s really designed around inflation in products.  There are some measures that have been designed for higher education, but I’m in no position to judge their accuracy.  What I can say is that the correlation to the increase in a car price and the price of an education is misleading.
2) Other economists argue that tuition could rise much faster.  The argument goes that the value of an education has expanded far more rapidly than any other product.  That isn’t becuase a graduate makes so much more (which can be argued) but because the bachelor degree has become such a staple requirement for many jobs.  As that requirement increases and demand for the product rises dramatically (check out the Department of Education’s NCES site for the incredible expansion of students in higher education over the past decades) price elasticity increases
3) students want more from education than ever before, and appear willing to pay for it.  Exercise facilities, athletic fields, dining services, etc.  are now considered a basic requisite for a successful campus.  I’m sure any reader could name dozens of other examples of non-education related programs that campuses now “must” offer, not to mention the increasing cost of security, both physical and electronic.

I’ve been hearing since I entered higher education that tuition increases are unsustainable, and perhaps it’s true. On the other hand, it’s possible that the cost hasn’t leveled off at what students are willing to pay, as every increase in tuition appears to link to an INCREASE in application and enrollment. 

Mason joins many schools (the others, of course, not nearly as wonderful) in an odd position.  As a younger institution we have a smaller endownment, and we have always kept our tuition very low, particularly for the D.C. region and the high cost of living for our faculty and staff. If we take the same percentage increase as some other schools in the area, those with MASSIVE endowments they cling to and equally MASSIVE tuition, we make a far smaller dollar increase each time, since we’re starting from a smaller base.  It’s always seemed odd to me that the anger focuses so much on the percentage issue across the board, rather than on the schools with the largest dollar increases, since we all have to buy the same fuel, compete for the same faculty, etc.

For public instiutions you can’t minimize the impact of state funding on the model.  When I came to Mason the state was funding about 65% of the cost of educating our students.  Currently the state funds only about 35%, and that share is reported to soon decrease even further.  If an institution is already fat, this shouldn’t be a problem, but if the institution ran lean, kept costs down, did everything a responsible school should, unfortunately that burden inevitably falls on student tuition.

There’s also a ton of data on the impact of tenure (which I support, but it’s a factor) and the need for schools to develop third stream revenue (apart from the government and tuition).  I think the suggestion that we add a casino was interesting, but we’ll probably hold off on that project for now.

Finally, and just to complicate this impossibly complex discussion, bear in mind that operating dollars and capital (building) dollars aren’t the same thing.  Adding buildings at a time when construction costs are declining and interest rates are low is VERY smart for schools and states.  Mason has very high demand for more housing – we now have 5,000 spaces and for several years have guaranteed housing to all freshmen for four years.  We can’t, however, meet transfer, graduate, and npn-resident current student demand.  If we can afford the initial debt on housing, in the long term that benefits everyone, as huosing (like student unions, parking, athletic facilities, etc) must pay for itself in Virginia.  So your tuition isn’t actually impacted much, if at all, by the construction, and may even be brought down (one of the new buildings, for instance, is cutting edge in that it will incorporate our Engineering program AND has a floor of rental space for businesses that want to work with  – and recruit – our faculty and students.  That creates REVENUE from the building and opportunity for students in the long run. Those kind of partnerships are a hallmark of how Mason has kept pushing forward while keeping costs far below our competition.

So what’s going to happen next?  I think the REALLY expensive schools are in a bit of a panic, and are likely to make some very public moves (MORE AID!  HOLDING THE LINE ON OUR OUTRAGEOUS TUITION) that will have very little actual impact but will get a lot of press.  For Mason I think you’ll likely see some continued increases, but as before with a huge dedication to allocating a portion to student aid so that student debt levels can be held steady and access can be maintained.  i don’t see any sign that campuses will get more austere – in fact, demand seems very steady for all the “perks” even as the economy weakens.  If next year students all start demanding private jacuzzis and a personal masseuse, expect a new round of tuition jumps to keep up with the competition.  I’d write more, but my butler tells me it’s time to read some more applications while I soak in my private jacuzzi.  Be seeing you.


2 Responses

  1. Wow. Thanks for such a detailed, thoughtful response. Lots of new information to mull over. What other school could a student ask a Dean a question and get a plus 1000 word response?

  2. No other school – they all pale by comparison…but that’s just conjecture I suppose.

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