Tag Archives: price

Should We Charge Different Fees for Different Majors?

Rick Scott.jpg

In the first couple weeks of any survey course in the
principles of economics, students are taught that prices are determined by the
interactions of consumers (demand) and producers (supply). Prices for many
things, such as oil, or of common stocks, constantly change with the frequent
shifts in the willingness of consumers and producers to buy or sell the good or
service in question.

Yet the price of college–tuition fees–seems to be
determined differently. For starters, tuition fees change but once a year, not
constantly. Universities are like restaurants, with “menus” giving prices for a
variety of different offerings, with the menu changing once a year.  For many schools, however, the listed price
is not what economists call an “equilibrium” price–a price equating quantity
demanded with quantity supplied. Rather, thousands are turned away at the
listed price at selective admission universities.  Also, massive price discrimination exists, so
many customers–often a majority–pay less than the stated or sticker price.

Amidst all of this, schools typically charge students the
same regardless of their major. A committee advising Florida Governor Rick
Scott has recommended a move to differential pricing–majors would pay
differing amounts. The goal is partly to entice students into the STEM
disciplines (science, technology, engineering and math) on grounds that our
future would be enhanced by having more scientists relative to, say, English
majors or anthropologists. By making STEM tuition fees lower, we will encourage
enrollment expansion in those fields. Ohio University’s Board of Trustees
recently considered (but did not yet adopt) a multiple-price approach, and
other schools are doing so. 

Continue reading Should We Charge Different Fees for Different Majors?

The 12 Reasons College Costs Keep Rising

When asked the question, “Why do colleges keep raising tuition fees?” I give answers ranging from three words (“because they can”), to 85,000 (my book, Going Broke By Degree). Avoiding both extremes, let’s evaluate two rival explanations for the college cost explosion, followed by 12 key expressions that add more detail.

Continue reading The 12 Reasons College Costs Keep Rising

The Hidden Cost of University 2.0

university 2.0.jpgWe have entered a new digital era that appears to have made the traditional trappings of higher education–e.g., fixed curricula, going to lectures, even physically attending a college or university–about as necessary to getting a college degree as the telegraph is for sending messages. Out with hierarchy, structure, and the top-down approach to higher education. In with collaboration, more student input, and above all else, greater interactivity.

Let’s call this disruption University 2.0, which promises to be every bit as revolutionary to higher education as Web 2.0 has been to the Internet.

In the old days (Web 1.0), the Internet was largely a passive medium through which users viewed web sites created by others and had little or no input on content or design. In the new era of Web 2.0, users interact, share information, add or modify content, and collaborate in communities, such as social networking sites, blogs, Twitter, and wikis.

Continue reading The Hidden Cost of University 2.0

The Loan Defaults Are Coming–Here’s What to Do

coins for college.jpgNo modern-day Paul Revere is taking a midnight ride to warn about this, but the defaults are coming. Many are already here. They are coming from student loans given to the wrong students for the wrong reasons. The portfolio of federally guaranteed student loans passed the one trillion dollar mark in early 2012, and it continues to grow. The portfolio consists not only of loans for students from low-income families currently in college but also of hundreds of millions of dollars of education loans taken out by students who graduated from college or quit before graduating that have not been fully repaid. Such loans were extended either by the Department of Education directly or by financial institutions like Sallie Mae and banks and guaranteed by the United States Treasury. The total size of this loan portfolio exceeds the total credit card debt of the American population.

Continue reading The Loan Defaults Are Coming–Here’s What to Do

The Tuition Story That Never Dies

student-loan-programs.jpgSome commentaries on higher education appear year after year, almost unchanged. One of these hardy perennials is the story that tuition and fees don’t come close to paying for the actual cost of educating college students. In his popular book, The Economic Naturalist, Cornell University economist Robert Frank claims that tuition payments cover only a fraction of the total cost of students’ education. The Dartmouth College Fund defends what it refers to as a wacky business model: selling its product at a discount, and then–begging for money. Similar articles are here and here.

Last week The Chronicle of Higher Education ran one of these stories “Hey, Students, Your Education Costs More Than You Might Think,” referring to Hamilton College.

First, some background. From the story:

Continue reading The Tuition Story That Never Dies

Why They Seem to Rise Together:
Federal Aid and College Tuition

It’s called “the Bennett Hypothesis,” and it explains–or tries to explain–why the cost of college lies so tantalizingly out of reach for so many. In 1987, then Secretary of Education William J. Bennett launched a quarter century of debate by saying, in effect, “Federal aid doesn’t help; colleges and universities just cream off the extra money by raising tuition.” Now Andrew Gillen, research director of CCAP–the Center for College Affordability and Productivity–has tweaked the data and produced a sophisticated “2.0” version of the hypothesis. It’s filled with heavy math, game theory and terms like “inelastic fairly vertical curves.” You probably won’t read it. We know. But it’s important. So here are some smart people who have read it, and have something to say: Peter Wood, Hans Bader, Richard Vedder, George Leef and Herbert London. image for mtc.jpeg

Peter Wood: They Are Insatiable

Long before I knew it was called the “Bennett Hypothesis” I knew that colleges and universities increase tuition to capture increases in federal and state financial aid. I attended numerous meetings of university administrators where the topic of setting next year’s tuition was discussed.
The regnant phrase was “Don’t leave money sitting on the table.” The metaphoric table in question was the one on which the government had laid out a sumptuous banquet of increases of financial aid. Our job was to figure out how to consume as much of it as possible in tuition increases. This didn’t necessarily mean we were insensitive to the needs of financially less well-off students. A substantial portion of the money we captured would be reallocated as “tuition discounts” or “institutional aid.” That is to say, just as Andrew Gillen observes, we combined Bennett Hypothesis-style capture of external student financial aid with “price discrimination.” And we did all this in the pursuit of educational excellence. It was a large private university in the shadow of world-ranked neighbors and it was attempting to pull itself up in the world of prestige and influence by its bootstraps. There were townhouses that needed buying; laboratories that needed building; faculty stars that needed hiring; classrooms and residence halls that needed refurbishing; symphonies that needed performing; grotesque modern sculptures that needed displaying; and administrators that needed chauffeuring. So long before I heard of “Bowen’s Rule,” I was also familiar with the idea that “in the quest for excellence, prestige, and influence, there is virtually no limit to the amount of money” a university could spend. Familiar as these ideas are, I have never seen them as well elucidated as Andrew Gillen has in Introducing Bennett Hypothesis 2.0. If there is a fault in this remarkable policy paper it lies in the modesty of the title. Gillen has provided what by all rights should be a foundational document for any further analysis of the vexed issue of how federal (and state) financial aid interacts with the pricing strategies of colleges and universities. Gillen’s sophisticated revision of Bill Bennett’s idea explains many of the perplexities of the data. Yes, Pell Grants do not drive tuition increases the way general tuition assistance does. Yes, many colleges prefer to increase their selectivity rather than expand capacity. (He doesn’t mention, however, the strategy of doing both at once by creating highly selective “honors programs” and remedial tracts at the same institution.) Price discrimination in the form of variable tuition discounts ensures that no ordinary observer can figure out what is happening when federal aid mixes with pricing strategies. One of Gillen’s most compelling observations, however, is what he calls “the dynamic story,” which he introduces by way of game theory. This is his explanation of why a college cannot plausibly sit on the sidelines as its competitors raise tuition and use the increased income to raise their standing. Gillen’s theory, though highly plausible, remains to be tested. Let’s hope that comes soon.

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Richard Vedder: Market Discipline, Please

Andrew Gillen masterfully demonstrates that Bill Bennett is right–federal financial aid programs lead to higher tuition. The implications of this and related financial aid effects are profound:

1. The intended income transfers from taxpayers (and, increasingly bondholders) to students have been largely diverted to college coffers; swelling payrolls and leading to armies of new university bureaucrats, million-dollar college presidents, an academic arms race and other pathologies;

2. This, in turn, has thwarted university productivity growth and helps explain why higher education is vastly more expensive than in most other major developed countries;

3. The goal of helping low-income students has not been met, and a lower percent of recent college graduates come from less affluent students than was true in 1970 when Pell Grants did not exist;

4. To the extent that these aid programs have increased enrollments (read Gillen), they have added to the growing disconnect between labor-market realities and student job expectations, creating armies of college graduates who are bartenders, taxi drivers, etc.

5. Enrollment increases, in turn, have contributed to a dumbing down of higher education and to declining standards.

What to do? The federal government needs to wind down its financial aid commitment. Restrict eligibility for aid to truly low-income students. Impose performance criteria for aid recipients: mediocre students will lose aid. Make the college absorb some of the risk for loan defaults–a lesson we should have learned from the financial crisis. Give Pell Grants as vouchers directly to students, not schools. Reinstate private lending options. Unveil new human capital contract approaches that reduce debt reliance. Downsize and reinvent federal programs and allow market discipline to operate more.

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George Leef: Will Politicians Pay Attention?

William Bennett is no economist (in fact, he once told an interviewer that he never reads books on economics) but his instinct on the connection between federal aid and rising college costs was pretty accurate. While higher education establishment defenders have often tried to dismiss Bennett’s insight, it’s basically correct, Gillen shows.Not always, however. Gillen argues persuasively that student aid targeted at low-income students who otherwise wouldn’t have gone to college contributes little or nothing to rising costs because the institutions cannot “capture” the additional funds. That finding doesn’t mean that it would be a good policy to increase this kind of aid, of course.Government student-aid programs that are universally available, however, do lead to rising college costs. Gillen has worked through various differing scenarios to show how increasing student aid is apt to influence college officials. Particularly important in that regard is his emphasis on looking not just at short-run effects, but also what he calls “the dynamic story.” Here’s what he means. Even if some schools decide not to raise tuition when government aid puts more dollars in student pockets, those that do will spend the revenues gained on the zero-sum game of gaining prestige. Since most colleges won’t want to keep falling behind in that arms race, they’ll eventually give in and raise tuition. Not always, however. Gillen argues persuasively that student aid targeted at low-income students who otherwise wouldn’t have gone to college contributes little or nothing to rising costs because the institutions cannot “capture” the additional funds. That finding doesn’t mean that it would be a good policy to increase this kind of aid, of course.Gillen concludes that the only escape from Bennett 2.0 is for the nature of competition in higher education to change–away from seeking greater “prestige” and toward competing for consumer dollars by offering better value. He’s right and the rumblings of disaffection with mere credentials and the search for real education seems to presage just that.I applaud this work, but will it make any difference? After all, it is clear beyond any doubt that raising the minimum wage is counter-productive, but politicians keep doing that. Why should Gillen’s demonstration that the more politicians try to make college “affordable,” the more costly it becomes be any different?

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Hans Bader: Ever-growing Bureaucracies

You don’t need to be a Ph.D in economics, like Gillen is, to know that government subsidies usually lead to higher costs. That subsidies drive up costs is something I learned in introductory economics, long before I got my degree in economics or worked for the Education Department. The value of Gillen’s study is to show that this conclusion logically remains true even under widely-varying assumptions about educational markets. Gillen does not discuss certain Education Department rules that drive up tuition even more directly. For example, certain low-cost schools are affected by the Education Department’s 90-10 rule, which requires that the school keep tuition high enough for students that no more than 90 percent of its funding is covered by federal financial aid. So as financial aid rises, tuition necessarily rises even faster. But financial aid is not the only way that the government drives up tuition. State and federal regulations imposed on colleges have mushroomed in recent years, requiring colleges to hire ever-increasing numbers of administrators to comply with them. (There are now more college administrators than faculty at the California State University system and many other colleges). For example, colleges in New Jersey are subject to a costly and complicated anti-bullying law that has 18 pages of required components. Colleges in some states are subject to state sexual harassment laws that are more stringent than federal law, and hold colleges liable for uncapped damages for harassment by students, effectively requiring them to create specialized university bureaucracies to swiftly investigate and discipline students, rather than relying on ordinary campus disciplinary bodies that operate at a slower and more deliberative pace. Government regulations often require that a school be accredited, a condition that accreditors like the American Bar Association use to force law schools to use racial preferences in admissions or run costly diversity and sensitivity-training programs (despite the dubious legality of some such programs and admissions preferences). Such mandates have contributed to the growth of a vast and costly “diversity machine” in college administrations. Recent Education Department guidance documents have also made Title IX compliance more difficult and costly for colleges, by seeking to force them to process sexual harassment complaints against students in ways that differ from customary college procedures in disciplinary cases, and to give certain complainants the ability to appeal a school’s finding that an accused student was innocent. Gillen cites a study showing that for-profit colleges whose students received federal financial aid charged 75 percent more than those whose students were not eligible. I wonder if some fraction of this difference was the result of government mandates tied to the financial aid, rather than the aid itself. image for mtc.jpeg

Herbert I. London: We Need Controls

My experience in higher education confirms the opinion that federal aid has an influence, a profound influence, on tuition decisions and other aspects of university finances.

Clearly not all federal aid is the same and not all college responses to aid are the same. However, there is a dynamic quality to federal subsidies that cannot be ignored. Every federal dollar given to a university will be spent. This is a version of higher education’s Parkinson’s Law. The institution expands in multiple ways to accommodate government largesse. Derek Bok, former Harvard president, said, “Universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires.”

Every dollar given to a college goes through the turnstile of institutional improvement. Teaching loads could be reduced, new laboratories might be built, an academic “star” might be lured into a newly created position. But year one in this allocational arrangement is not always related to year two. If the initial costs are borne by government aid, the future costs may put pressure on the administration to seek additional revenue, very often in the form of tuition increases.

In fact, the process tends to be self-fulfilling. Aid producers reforms; reform leads to additional expense; additional expense very often translates into upward pressure on tuition rates. While President Obama has discussed controlling college costs, he overlooks the influence federal assistance has on college affordability. Nor is there any reason to assume a change of direction. There is political capital to be garnered by demanding cost controls and, at the same time, expanding access to tuition assistance. That these conditions may be contradictory is lost on a public increasingly frustrated with the inflated cost of a college education.

What’s Wrong with the Law Schools

By Frank J. Macchiarola and Michael C.
Macchiarola

Lady Justice.jpgAs law schools have come under fire
on many fronts, the growing cost of tuition has drawn the most attention.  This
is not surprising, given the shrinking job market for lawyers and tuition
increases that have far outpaced the general cost of living for more than two
decades.  Put directly, one of us, a pre-law advisor (Frank), tells
students that if they can’t afford the cost of a legal education, without
loans, they should think about other careers.  This is generally a painful
conversation, but we strongly believe it is an honest one, particularly given
the lower-middle-class economic status of most of our students.  Debt is
choking too many recent law graduates, bringing
anger and unhappiness into their lives.  Further, the monopolistic
structure surrounding access to the legal profession, largely a result of the ABA’s law school approval
process, denies many the chance to become lawyers.  Within the last week, another law school was denied
provisional accreditation, for reasons unspecified publicly, but probably due
to the failure to meet standards that would have required greater financial
investment (and hence higher tuition) in the enterprise.

Continue reading What’s Wrong with the Law Schools

Why Harvard and Yale Had to Merge

Combined.jpg

May 28, 2020, was a good day for the American economy and a momentous one for traditional colleges and universities.  President Jodie Foster, the sixth Yale graduate to reach the White House, announced that the congressional agreement on Medicare and Social Security had finally begun to reduce the country’s debt, and the disastrous bout of inflation was subsiding, as the consumer price index inflation rate had fallen to 12.3 percent for the first four months of the year.

For Harvard and Yale, the news was not so good. Although they continued to reject 93 percent of their applicants, actual enrollment was falling, and inflation had made their endowments almost worthless. A few days earlier, Shanghai University had announced it was purchasing Princeton, and rumors circulated that Stanford would close its undergraduate school, reconfiguring itself as a professional school in law, medicine, and business. As a result of the changes engulfing traditional education, Harvard and Yale announced a merger.

On the brighter side, the president of  BGU, the online Bill Gates University, crowed that the school had produced six Rhodes scholars, and there were reports that Stephen Blackwood, the founder of Ralston College back in late 2011, would start his sixth “Great Books” college, this one in Florida.

That same day, faculty members at the University of Phoenix issued a report analyzing the cataclysmic changes that had occurred in higher education over the past ten years. They traced the history back to a New York Times columnist, Ron Lieber, and two articles he wrote in 2010 and 2011. They dubbed him the “short seller” of higher education.

Continue reading Why Harvard and Yale Had to Merge

25 Ways to Reduce the Cost of College

The Center for College Affordability and Productivity today completed the release of its 240-page report, 25 Ways to Reduce the Cost of College. It offers a dizzying overview of the possibilities for increased efficiency in college operations, both on an individual and collective scale, and serves as a sure retort to the notion that current higher ed costs are inevitable or unalterable. The ideas vary in depth and quality, but among these ideas there’s unquestionably a package of reforms that could result in savings even at the most parsimonious college. The full report Is here, and in groups of five, the 25 Ways are here, here, here, here and here.

College Is Cheaper Than in the Mid-1990s? No Way

By Andrew Gillen and Robert Martin

The annual release of Trends in Student Aid and Trends in College Pricing are big news in the higher education world, and rightly so. Since Department of Education data often take a year or two to become available, these reports provide the earliest and most comprehensive preliminary look at recent developments in tuition charges and financial aid. This year’s two reports supposedly show that net tuition was lower in 2009-2010 than it had been in at least 15 years.

Sandy Baum (the main author of the reports) and Michael McPherson are puzzled by the apparent inconsistency between public perception and reality regarding net tuition increases, and ask “Why is it so hard for people to believe the numbers about declining net prices?”

The answer is quite simple. To begin with, as the College Board report points out, students and parents pay not just net tuition and fees, but room and board as well, and most of them find the price goes up each year. Even at the few institutions that guarantee the same tuition as long as students are continuously enrolled and making normal progress towards their degree, institutions manage to increase the net price students pay by increasing fees, room, and/or board.

Continue reading College Is Cheaper Than in the Mid-1990s? No Way

Don’t Pay Sticker Price, Part 2—the National Universities

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Read Part 1 here.
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In examining the gulf between sticker price and real cost, let’s consider the top 10 national universities as defined by U.S. News & World Report in its most recent rankings. Using U. S. Department of Education data, I compiled the average net prices that students from different family income groups would pay at the top 10 national universities combined.
Despite total sticker prices averaging more than $50,000 a year at these top 10 universities, net prices range from a low of $4,652, paid by students from poorest family income group, to a high of more than $35,000 paid by students from the richest category of family income.
These averages, however, mask the significant differences in net prices paid by poor and rich students at the individual institution. At Harvard, students from families in all income categories fare significantly better in terms of net price than they might at Harvard’s competitors. Harvard’s poorest students, whose parents earned $30,000 or less, paid net prices averaging just $2,170, significantly less than the average net price charged low-income students at all the Top 10 national universities.

Continue reading Don’t Pay Sticker Price, Part 2—the National Universities

Ideals and Realities in Student Protests

On March 5th in the Wall Street Journal, Peter Robinson penned an op-ed on the California higher education budget crisis entitled “The Golden State’s Me Generation”. Robinson begins not with the finances behind the tuition hikes and protests, but rather with the framing of the reaction. He cites participants in the “Strike and Day of Action to Defend Education” casting their efforts in terms of “Freedom Riders,” “farmworkers,” and the fight for justice in the 60s and 70s. Berkeley urban studies professor Ananya Roy provided a racial angle as well, announcing “We have all become students of color now.”
“Evoking protests against the Vietnam War,” Robinson observes, “one banner carried by students at San Francisco State University read, ‘Shut It Down like ’68.’ ‘Today we strike!’ shouted a Berkeley student, ‘Today we march! Today we show solidarity with the workers!'”
This is the vocabulary of the peace movement and civil rights and labor protections of migrant workers. It demonstrates, among other things, the continuing moral authority of those causes, even though they took place 40 and 50 years ago. But there is a giant problem with invoking the movements: if you want to align yourself with the Selma marchers, Cesar Chavez et al, then you better experience some of the same sufferings and indignities that they did. If not, then the citation of such honored and sometimes martyred precursors starts to look a lot more like vanity than politics.
This is, indeed, Robinson’s conclusion: “Yet what did the protesters demand? Peace? Human rights? No. Money. And for whom? For the downtrodden and oppressed? No. For themselves.”

Continue reading Ideals and Realities in Student Protests

Why Tuition Goes Up Every Year

Middlebury College is expected to announce a plan to hold the annual rise of tuition to one percentage point above the inflation rate. This announcement will likely be greeted with praise. But why? Costs may be held down in comparison with other colleges, but the bedrock assumption here is a familiar one: tuition must go up each year; it’s just a matter of how much. In hard times, other businesses cut costs and live within their means. Colleges and universities don’t? And now we hear more calls for government to do something about it.
Like most economists, I do not like attempts of politicians and government bureaucrats to interfere in decisions of buyers and sellers by limiting changes in market-determined prices –minimum wage laws, rent controls and other intrusions into market processes inevitably lead to unintended consequences: higher unemployment, less housing and housing of poorer quality, etc. Thus I start out predisposed to oppose tuition fee caps such as introduced in many states. But my opposition to these caps has been reduced by the fact that higher education markets are hardly free of interferences to begin with, and government has contributed to tuition price explosion through its numerous ways of increasing the demand and reducing the supply for higher education services. Tuition caps at least temporarily force some universities to slow down a bit their inexorable tendency to increase spending, much of it on things at best tangentially related to the true mission of universities—disseminating and creating knowledge (e.g., the number of sustainability coordinators, public relations specialists, associate provosts for international affairs, etc. has grown dramatically in recent years).
Even these legally imposed temporary restraints on university desires to raise prices are often thwarted by various strategies – requiring kids to eat and sleep in university facilities and then raising room and board rates dramatically, or creating new fees (technology fees, lab fees, recreational center fees, parking fees, even charging more to buy soft drinks out of campus machines, etc.) But a recent article on “Inside Higher Education” suggests that tuition caps themselves are at best temporary—-after periods of capping tuition, deals are cut to end the cap, and then fees tend to explode, reaching levels equal to what they would have been had there never been a tuition freeze. It is almost as if tuition fees are going to rise 3 percentage points more than the inflation rate, and nothing can change that. Call it the natural rate of higher education inflation.

Continue reading Why Tuition Goes Up Every Year

How Will The Colleges Cope?

Dr. Macchiarola, chancellor of St. Francis College in Brooklyn, delivered these remarks on February 5th at a one-day conference in New York on “The Future of the University.” The conference was sponsored by the Manhattan Institute’s Center for the American University.

If I were making this presentation a year ago, I would not have some of the deep concerns about the future of the university as I do today. Certainly the changes that are occurring within the university today are due, in large part, to some of the real difficulties the university faces in adapting to forces that are internal to it. The presence of the deep economic recession that we face today – and that will be with us for some time to come – significantly adds to the uncertainties that today’s university has to confront. It puts solutions to a considerable extent beyond the scope of what some universities can actually manage.

The recession – or perhaps depression- has for private universities hurt their financial condition dramatically. Endowments drop and endowment income which is critical to the university’s operations fall as well. In virtually all instances this combination means that universities been tremendously impaired. Endowment income which can provide 5% of market value for operating expenses is less available and this adds to the gap between tuition income and expenses that universities must face. Endowments are affected, especially for the tuition dependant schools which require tuition to fund operations in significant ways. Well endowed universities are the exception, not the rule. Costs also increase, usually by a multiple of the rise in the cost of living. This has been almost the universal rule largely because of factors that have driven universities to give students “more and more.” The usual course of action -increasing tuition – is made more difficult by the hard economic times. Fewer students being able to afford college mean a shift to lesser charging private universities and the public ones. The factors that have operated to allow universities to grow are not present in anything like the same way. The decline in the number of high school students exacerbates the problem even further. While students may choose public institutions as an alternative, things are not going well there either. The depression has hit states hard, and while the stimulus plan may be helpful to them in the short term, they will not be able to absorb more students at the subsidized costs that they have traditionally borne. The taxpayer is being hit hard, and the state economies are as well. The public universities will have to charge more and give less. There is tuition relief by the way of increased Pell Grants and tax credits for college tuition, but there is no way that we will be back to conditions ante recession.

Continue reading How Will The Colleges Cope?

Financial Pain on the Campuses

On February 11 art-lovers packed a meeting room at Brandeis University to protest Brandeis’s plans to shut down its on-campus art museum and auction off the museum’s entire 6,000-piece collection. The list of holdings at Brandeis’s Rose Art Museum, most of them donated since the museum’s opening in 1961, reads like a Who’s Who of prominent twentieth-century American artists – works by Max Ernst, Willem de Kooning, Jasper Johns, Roy Lichtenstein, Robert Rauschenberg, and Andy Warhol, among others – and is valued at $350 million. Museum curators, especially those associated with university – owned art collections, greeted Brandeis’s decision with shocked intimations that selling the art might violate ethical obligations to donors. Elsewhere in the art world there was fear that the fire-sale prices that the Rauschenbergs and Warhols might command if dumped onto today’s anemic, recession – beset market for luxury goods could depress the value of other art collections less stellar than Brandeis’s.

One thing is certain, however: Administrators and trustees at Brandeis, a well-regarded but not overly rich liberal arts-focused research university of about 3,900 students in Waltham, Mass., saw a need to act quickly and decisively to cut costs and raise cash at a time when nearly every university in America, private and public, is being hit by the double whammy of shrunken endowments (thanks to the tanking of Wall Street) and sharp downturns in revenues from both private donors and financially strapped state governments. Brandeis, founded in 1948 and named after the Supreme Court justice Louis Brandeis, had an endowment valued at $712 million as of last June – pocket change compared to its neighbor Harvard’s $37 billion endowment – but Brandeis’s endowment is now reportedly worth only $530 million because of the market meltdown, Furthermore, many of Brandeis’s chief donors had invested heavily with alleged Ponzi schemer Bernard Madoff, a guarantee of financial wipeout. Indeed, Brandeis’s very largest donor; the family foundation of the clothing manufacturer and philanthropist Carl Shapiro, who had several campus buildings named after him, reportedly lost $545 million, nearly all its assets, to Madoff’s alleged pyramid of fraud. Although Brandeis denies investing any of its endowment with Madoff, it has admitted to serious investment losses, and its chief operating officer, Peter French, told the online magazine The Daily Beast that the university faces an operating deficit of $79 million over the next six years together with “a tapped-out reserve fund,” as the Beast’s Judith Dobrzynski wrote, and seriously strapped donors. According to French, Brandeis faced three alternatives: sell the art, shut down 40 percent of its campus buildings, or choose between firing 30 percent of its administrative staff or 200 of its 360 faculty members. Since original works of art are inspirational but not exactly germane to a college education (Brandeis had no art museum for its first thirteen years of existence), the university axed its art, not its buildings or employees – “We’d rather use Rose” to cut costs, French said.

In fact Brandeis is actually lucky to have valuable hard assets on hand to liquidate for a desperately needed cash infusion, and even luckier to have had generous donors in the past whose gifts constitute those assets. The university does not have to decide – at least not right now – whether to shrink its faculty, trim its administrative staff, reduce undersubscribed academic offerings, or deal with the costly results of an overhead-hiking campus construction spree when times looked flush earlier in the decade. Mark Williams, a senior lecturer at Boston University specializing in risk-management told the Bloomberg news organization that one of Brandeis’s problems was that it “overbuilt at the peak of the market.” In fact, according to Inside Higher Education, the Brandeis faculty recently formed a committee to review the curriculum and review such revenue-boosting or cost-cutting options as adding business and engineering programs to the university’s traditional liberal-arts offerings and replacing its existing majors and minors with (apparently cheaper in terms of faculty deployment) interdisciplinary “meta-majors” whose vague parameters have alarmed some professors, not so much because they might dilute standards or jettison, say, Brandeis’s longstanding but low-attendance courses in ancient Greek, but because they might result in eliminating entire departments and professorial jobs.

Continue reading Financial Pain on the Campuses

What If Colleges Seemed To Care About Spiraling Costs?

With its $34 billion endowment growing at the rate of nearly 20 percent a year thanks to astute investments, Harvard University is probably the richest university on earth. But that didn’t stop Harvard from raising its undergraduate tuition 3.5 percent for the 2008-2009 academic year, to a record $32,557. When you figure in room, board, and student fees (which also rose 3.5 percent over last academic year, according to an official statement from Harvard), the total cost of attending Harvard this year is $47,215.

That mind-boggling figure, approaching the U.S. median household income of $50,233 in 2007, is actually par for the course among private universities, according to data aired at a round-table discussion on college affordability convened last week by Sens. Charles Grassley, R-Iowa and Rep. Peter Welch, D-Vermont, and reported on in the New York Times. Welch noted that tuition at private colleges and universities has been rising at twice the rate of per capita income. “If the cost of milk had risen as fast as the cost of college since 1980, a gallon would be $15.”

The discussion, involving two dozen college presidents and policy experts, came in the wake of congressional proposals to force universities, which enjoy tax-exempt status, to operate under the rules governing private foundations, which are obliged to spend at least 5 percent of their endowments annually. According to a survey cited by Grassley, universities earned an average return on their assets of 17.2 percent in 2007 but spent only 4.6 percent. Institutions whose endowment exceeds $1 billion spent less than poorer institutions—just 4.4 percent of their assets. Some observers have pointed out that the richest universities—Harvard, Yale, Stanford, Princeton, and the University of Texas make up the top five, and numerous other institutions have more than $1 billion in assets—could easily afford to subsidize their students’ tuition and related costs entirely without feeling financial pain. Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity, testified before Congress last fall that Harvard could offer free tuition to its entire student body for just $300 million, a fraction of its investment return for 2007.

Continue reading What If Colleges Seemed To Care About Spiraling Costs?

Textbooks Expensive? Buy Them Elsewhere

The public furor over textbook prices shows no sign of halting, as students part with ever-larger sums for books. Before petitioning congress, all should take a look at the burgeoning number of private options for used and cheaper textbooks. Charlotte Allen pointed out several here this summer. Additional options continue to spring up.
– The Brown Daily Herald reports that Mocha, a private site offering class listings for the school now lists the prices of its required textbooks online. They link to Amazon book listings, enabling easy comparison.

– The Michigan Daily reports on another new school-specific service, mtextbooks.com

– Other options continue to emerge, as the Michigan Daily continues:

Another new site, Uloop.com, which was launched in 2007, provides various search features that allow users to locate a book, contact the seller and meet in person on campus to purchase the book.

According to Uloop co-founder Ryan MacCarthy, more than 4,500 University of Michigan students are registered on the site. Nationwide, more than 70,000 books have been bought and sold through the site. MacCarthy said the average used textbook on Uloop costs $37, a paltry price compared to the national average of $102 for a new textbook.

Sure, you could wait for Congressional hearings on Un-American textbook pricing. Or you could just spend that $37 somewhere other than the campus bookstore.