Colleges and universities provide a critical service to our society. However, institutions of higher education are also businesses. In our current economy, our attention is increasingly drawn to the business side of education. Rising costs, and a scarcity of funds to help those students who cannot afford them, are hurting our bottom lines – and those of many families across the country.
The Cost of Education
The process of allocating funds for operating a university or college is incredibly complex. The majority of a school’s budget comes from students’ tuition costs, but how those costs are calculated varies. Many schools advertise their “sticker price” to publications. In reality, the cost to each student is based on his or her unique needs and abilities. These qualities translate into financial aid awards that discount the listed sticker price. The net revenue generated from tuition and fees is a function of both this price and the overall tuition discount rate. This discount rate figures prominently in determining a school’s yearly budget.
How does this affect tuition? Colleges and universities need to generate revenue in order to maintain quality programs, meet payroll obligations, support infrastructure, and provide for new investments that will enhance the educational experience. As a result, budgets are set in anticipation of these costs; this influences fee structures and discount rates available to students. Generally, tuition and fees are raised on an annual basis to compensate for inflation costs to the school.
The Current Disparity
In recent years, this automatic increase has been dramatically felt, due to widespread financial restrictions on students and families. The economic recession has created a new reality or, more accurately, brought a continuing reality to light. Families have experienced a decrease in personal income, a loss in home value, a decline in investments, and overall tightening of credit. Families quickly experience increased out-of-pocket expenses for tuition if schools are not able to increase their financial aid awards. As a result, students must assume greater debt, seek low-cost options, or withdraw from school altogether. The promise and opportunity of higher education is limited for students impacted by our economic crisis. The public is rightfully demanding cost containment from institutions of higher learning.
Unfortunately, many believe the misconception that higher prices equal higher quality. Institutions with stronger reputations can generally charge more because students and families are willing to pay for the greater perceived benefits of the school. Some institutions even raised their tuition in an attempt to enhance their reputation before they increased the quality of their offerings. The results have been disastrous, with sharp declines in enrollment and retention. Even institutions that are historically in high demand are experiencing enrollment challenges as students shop for more affordable options. Practicality is replacing perception. At the center of this situation are the intelligent, diligent students who should be given a chance to further their education and skills for employment, but are not able to pursue that dream due to the constraints of our economy and its exorbitant costs.
Faced with these conflicts, colleges and universities are searching for a fair compromise in pricing that allows for revenue generation without denying or scaring away students. One possible solution is a tuition freeze. This option would allow current students to remain in school, despite financial challenges. At Westminster College, our tuition freeze has received positive reactions from families and students. Student learning and achievement are critical to our mission, so we believe that a tuition freeze for an academic year signals our concern and support for our students. It addresses our financial climate and, more importantly, our mission.
While this plan might not be feasible for every institution, modest price increases allow students to reach levels of success, while enabling institutions to operate efficiently. In addition, we shifted our aid program to focus more on need than merit. In many cases, the most privileged students receive the most aid, rather than those students who need financial support to complete a degree. Higher learning institutions need to reevaluate this system in order to truly fulfill their civic duty to their students and community. We seek to educate a diverse group of students to make a difference in the world. An institution’s practices should be in direct connection to its mission.
Our nation’s colleges and universities are at a critical juncture. The rising cost of education is marginalizing many potentially gifted and successful students who are not able to afford continuing education. Schools’ budgets are more restrictive each passing year. However, if administrators reflect upon an institution’s mission and see that its financial practices are impeding that mission, then it is not truly accomplishing its goals. With moderate tuition increases, or a possible tuition freeze, institutions display their concern for student opportunity and our society’s future. The next great leaders and voices are dependent on our actions.
Dr. GeorgeB. Forsythe, President of WestminsterCollege in Fulton, Missouri, has devoted his professional life to the felds of education and leadership training. A retired Brigadier General in the U.S. Army, he spent much of his 35 years of commissioned service at the U.S. Military Academy at West Point, serving as a Professor, Associate Dean of Academic Affairs and finally Vice Dean for Education for nine years. He came to Westminster as Dean of Faculty in 2005 and was appointed its 20th President in 2008. During his Presidency, this private undergraduate liberal arts college has been transformed into a global leadership community nationally ranked for its diversity.
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