Way Too Much!

By Watson Scott Swail, President & CEO, Educational Policy Institute/EPI International

An article in today’s The Chronicle of Higher Education, “Hey, Students, Your Education Costs More Than You Might Think,” discusses how Hamilton College’s cost per student is over $63,000.

Hamilton College is a private liberal arts college based in Clinton, New York that serves 1,812 students with a cost of attendance of about $54,000. Hamilton has an endowment of exceeding $600 million, with a 27 percent acceptance rate and average SAT scores in the lower 700s. They have a four-year graduation rate of 84 percent and placed 17th on the US News and World Report top liberal arts schools, number 24 on the high school counselor rankings, and, get this, number 20 on the “best value schools.” Really.

In addition, 70 percent of the students are White, with only 5 percent Black and 5 percent Hispanic. Take away the 7 percent Asians and the 5 percent “international” students, and realistically you have a university with 1:10 diversity ratio (I don’t count Asians in this demographic). One Hamilton student wrote on the collegeprowler.com website: “We’re pretty white.” As well, only 12 percent of Hamilton students receive a Pell grant, meaning “poor,” in the federal sense.

Arguably, Hamilton is an excellent school with excellent students and excellent faculty and facilities. That isn’t up for argument. But their “cost” is over $63,000 and over 42 percent of students receive need-based aid (averaging $33,381). “Poor” students at Hamilton may come from families with seven-digit incomes. Given the diversity (or lack thereof) and high SATs, one could bet that much of this aid goes to what we would traditionally label is the higher end of middle-income earners.

Further, only 41 percent of students at Hamilton borrowed (2010) and the average debt load of the 2010 graduating class was only $16,982. Using rough calculations, if the average outstanding COA is $30,000/year, with cost of $120,000 for four years, I am surprised that only 41 percent of students borrowed only an average of $17k. To me, this likely means that most of the families were able to pay out of pocket for whatever wasn’t picked up by institutional, state, and federal financial aid. That’s significant because it tells us more about the clientele.

As with many private institutions with resources, Hamilton is able to provide excellent institutional aid. Coupled with other aid, Hamilton College may be affordable to many students who would not otherwise be able to afford a college like this.

But the example of Hamilton, and the hundreds of institutions like it, begs certain policy-related questions.

The first is simple: at what point is the “cost” (framed from an institutional point of view) so hefty that it is beyond the pale of appropriate? At what point does someone point to Hamilton and say that their delivery model of education is inefficient and out-of-line with reality? I simply can’t fathom how an institution should cost $63,000/year. Even students at Hamilton could not believe their tuition did not cover the full cost of their education. Nor can I.

This leads to this policy question: when this cost is so high, at what point should the federal government strip an institution of federal Title IV aid? While Hamilton is a private institution, it receives millions of federal financial aid. In fact, about $4 million/year. Sure, this pales to the approximately $25 million provided by Hamilton each year, but it still represents $4 million of taxpayer funds which doesn’t buy us diversity or equity to any extent.

Too many of our institutions are pushing the Chivas Regal model of charging increasingly out-of-touch tuition and fees because they can. If a college like Hamilton can charge over $50k/year and still not cover costs, I’d suggest a revolution in their management practices. Because they can charge so much, they continue to spend far too much. That’s not the message we should be driving to our institutions, because this arena holds with it a lot of penis envy: they all want to be like the Ivy’s. But they can’t. Endowments rule as these institutions, and with over $600 million for a very small school, this is nothing to brag about. This is when competition doesn’t work in the market place, because the higher education model, at least in the upper elite, is that competition raise tuition and fees, not lowers it. It does so based on perceptions and our continual fear that there is never enough and we have to pay top dollar to beat our colleagues and friends. The Higher Education Arms Race continues.

The students at Hamilton just held “Stop Day” last month, representing the day 2/3 of the way through the school year when their tuition and fee charges stop paying and other donors are footing the bill. The students send letters to donors. How nice. Of course, I would be much more impressed if these students, who, by virtue of their parents’ resources and social class are able to attend this prestigious school, would perhaps reflect on this situation (this is liberal arts, right?) and take a stand. But they don’t because they are the chosen few that luckily got into Hamilton. I understand that.

But what type of student are we molding at institutions like Hamilton? And what payback to we get, as taxpayers, for the infusion of federal financial aid?

Something to think about.

Have a great week.

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