Major Survey Finding: University is Really Expensive

By Watson Scott Swail, President and CEO, Educational Policy Institute

I know it sounds like an Onion piece, but this is the major finding in this week’s release of The American Freshman: National Norms Fall 2009 (see the related Chronicle article). Specifically, the Chronicle noted the following:

About two-thirds of freshmen said they were either somewhat or very worried about their ability to finance their college educations. Those citing “some” concerns about money increased about two percentage points, to 55.4 percent, while students citing “major” concerns remained at 11.3 percent, about the same as in 2008. [WSS asks: increase from what?…poor journalistic writing!]

This must be the “duh” statistic of the year, and it’s only January. I don’t mean to knock HERI and UCLA; it’s just the survey finding, nor the Chronicle, who are just reporting. I guess my greatest surprise is that only 11.3 percent of those surveyed thought finance was a major concern, while over half of students had some concern. I would have thought that “major” would have been about 20-25 percent. Still, when 2 of 3 students find the price of college and university a concern, we should be concerned enough to start doing something about it. And we aren’t.

We talk about the price of college, but we still are not focused on the causes of these prices. Many states and provinces are in the process of deregulating legislative control over tuition and fee pricing, which historically causes massive increases in student charges. This isn’t much different than pricing and deregulation in the cable industry. We were promised that deregulation would cause prices to go down. Didn’t.

Interestingly enough, this finding comes in the same week that the Chronicle also listed the compensation of public university presidents in the US (um, kind of higher than in Canada, much to the chagrin of Canadian Presidents…). I’ve argued that I don’t think the relative salaries of presidents are out of line. The average presidential salary in the US is $436,111, up 2.3 percent from last year, and the average total compensation exceeds $600,000. Of course, that’s the average. At the top of the list is Gordon Gee of Ohio State, who earns $1.6 million in total compensation and over $800,000 in salary. An additional 22 presidents have comp packages exceeding $1 million.

Is this too much? The Chronicle was quick to note that Gee and other leaders have given large sums back to the University. In Gee’s case, about $1 million on scholarship dollars over several years (including $321,000 this past year). That is a decent thing to do. In support of Gee, he is one of the most beloved institutional presidents in the United States. He is known for turning institutions and supporting students, both in his two goes at Ohio State, but also at Vanderbilt and Brown. He is the epitome of a great university president.

The challenge, as noted by Steve Trachtenberg in his comments on the Chronicle site yesterday, is that people take note of dramatic salaries in education in a down economy. When faculty are taking cuts, seeing average CEO salaries increase makes many wonder if there is a discrepancy in how human resources are rewarded on campus. And I’m sure it isn’t lost on anyone that this all comes as we hear of the return of big bonuses to Wall Street firms only one-year removed from tanking the US economy.

In the end, salaries are somewhat relative. There are over 55,000 students at Ohio State and the total budget is $4.5 billion. So what is $1.5 million? At Old Dominion University in Norfolk, one of my alma maters, the president earns $320,000 over a $450 million budget. Is this commensurate? I think it depends upon one’s viewpoint, but I would argue it is.

The salary issue isn’t as big a deal as people make it. The problem is in perception. It showcases a much larger issue that gets to our original issue: university is really, really expensive. And it will always be expensive and continue to get more expensive. The challenge is whether we can keep it moderately affordable. And we can’t do that if we don’t get a handle on the cost side of the equation. The salaries only provide a brief snapshot of how institutions are unable to increase efficiencies and return on investment. Higher education is an expensive system and very difficult to increase efficiencies unless we dramatically change the delivery mechanisms to students. If higher education remains largely classroom-based, our ability to increase the ROI will remain stagnant. And while places are playing with distance and web-based learning, we are still only tinkering (Peter Smith of Kaplan Higher Education will be commenting on this in one of our February Education This Week submissions).

When HERI does their American Freshman Survey next year, I know what students are going to say. It’s expensive. The question is whether we have moved forward in any meaningful way to ensure that it is affordable for all students, especially those with the least fiscal resources. I’m expecting that answer to be no.

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