Still Arguing About the Cost Issues

Dr. Watson Scott Swail, President & CEO, Educational Policy Institute

As I sit today in my son’s high school classroom, “shadowing” his every move (and he appears to be sleeping in study block!), I am taken to write a commentary following the report in yesterday’s regarding the College Cost panel conversation at The George Washington University on Wednesday. The event happened to follow the announcement by Stanford University and Washington University in St. Louis to meet the financial need for all families, virtually eliminating tuition for families with earned incomes under $100,000.

I’ve talked about this in depth on several occasions, and, much to your chagrin, I’m going to do it again today. Many of the speakers speaking at GWU were on target during the discussion, but I’d like to point out a few of their comments and put my own spin on it.

First is Pat Callan, the president of the National Center for Higher Education and Public Policy, and also one of the convener’s of the event. Pat brought forward the completely-obvious-but-no-one-seems-to-get point that the moves by several Ivy League institutions and a few other enormously well-endowed (yes, well endowed) institutions are certainly wonderful acts of humanity (or contrition) by removing the cost burden of going to college. But, in the end, it doesn’t do anything for students attending the remaining 2,000 four-year institutions in the nation. That is, about 99.7 percent (and I calculated it) of all two- and four-year institutions.

Callan was followed by Jared Bernstein of the “other EPI,” the Economic Policy Institute, who said that these policy moves can increase accessibility if students who otherwise wouldn’t think about attending Stanford end up applying. Jared is wrong. People who seriously think they have the academic wherewithal to go to Stanford, that is, those who have an SAT of about 1500 (the 75th percentile SAT score at Stanford is about 1550) tend to apply. Remember, Stanford has an admit rate of only 10 percent—that’s 1 out of 10 admits per applicant; not very good odds, and these are all the “smart” kids. Stanford is beyond highly selective. It’s, well, Stanford! If you have the academic stuff to get in there, they probably already know about you well before you graduate from high school via the College Board and ACT databases they purchase annually from those two organizations. So, I strongly believe that these programs, while good, have no chance at increasing accessibility at any level. (On a slight aside, and while I don’t have empirical evidence, I have heard anecdotally that UVa’s outreach program, where they also meet aid for low-income families, has had a terrible time trying to find qualified low-income students to take advantage of it.)

And this all makes sense, because research clearly illustrates that the damage—measured in academic preparation—is done early in the education pipeline, not at high school graduation. The Access UVa program, like the Carolina Covenant, a similar program by UNC-Chapel Hill, are good pledges and ideas, and they should and need to continue. But the hard work has to be done much, much earlier in the public school system. These five-star need-based aid programs aren’t really about accessibility; they’re about PR. I’m glad they have done it, but come on—the top institutions in the country literally can’t figure out how to spend all their money. These institutions—let’s say, the top 10—could remove tuition altogether and still see their endowments grow. So it isn’t a stretch. I’m glad they do it; not a stretch.

I’ll also take a run at the comment by relatively-new GWU president Steven Knapp, who said the “most expensive college” label is a “problem” to institutions. That stated, GWU is now the most expensive college in the nation ($39k tuition and fee charges only; $5k more than Harvard and Stanford), and as Knapp said, “we haven’t seen evidence that our costs are deterring students from coming to our university.” And I’m not surprised.

Why? First, the students attending GWU, for the most part, are from very high-income families. It is one of the reasons they are there. GWU doesn’t have the entrance levels like Stanford (75th percentile SAT is about 1375), but has a premium price tag. People with money can and will spend anything to get their kid a decent education. Don’t get me wrong: I like GWU. I spend several years there getting my doctorate. But the “building” years of Stephen Trachtenberg have had a high cost, and the tuition and fee charges at GWU exploded over the past decade. Luckily, I had a stipend when I went there in the early 1990s, but still gagged when I had to pay taxes on the tuition gift (the taxes were almost $5k back then!). Bottom line: there is a huge population out there where money is not an object, and institutions like GWU are taking advantage of that population

The second reason GWU hasn’t had a problem is the notorious Chivas Regal effect. Yeah, the one where the price of the product must infer that the product is good. Many institutions with high prices aren’t nearly as good as they are perceived to be, although it is a difficult phenomenon to measure. Selective colleges (remembering that that’s mostly what we’re talking about here) haven’t held down costs OR prices because they have little incentive to do so. Raise tuition and your enrollments boom. Check the admit rates over time via US News and World Report and cross tab versus tuition fees.

Without doubt, a college education is an expensive commodity in the marketplace of goods and services across the country, which is the ongoing problem. But some colleges are pushing the boundaries of what an acceptable price is. At some point, one has to wonder where the sky stops and world order beckons. Alas, I expect that we will never hit a ceiling and that prices will continue to escalate at the selective colleges, which undoubtedly has repercussions at the public four-year and even two-year institutions. James Boyle, my friend from the College Parents of America, said that parents perceive that colleges aren’t doing everything to control costs. He’s right. They aren’t. And while no one in the higher ed biz wants Congress to get their hands dirty in this, they’re going to, either by demanding that a higher percentage of endowments are spent annually (which affects about 3-5 percent of institutions, my guess) or a more elaborate and broad proposal to force institutions to account for their spending and performance (aka The Colorado Model). Something is coming down this track, for sure.

I know, there goes Swail again on this thing, and I always get emails when I stand out on this issue. But come on, gang, it’s the truth. Higher education needs to do much more to keep college affordable for ALL and also start changing the perception of higher education as the bad guy. That’s going to take a lot of work. Until then, get used to the idea of a quickly expanding multi-tier system of higher education that is much more diverse (as in “bad”) than we are used to. The haves will continue to have more, and the have-nots will compete for the rest.

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