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Posted at 01:28 PM ET, 07/25/2012

No ‘magic solution’ to college affordability

Here is a guest post from Eugene J. Cornacchia, president of Saint Peter’s College in New Jersey.
Saint Peter’s College in Jersey City, N.J. (Saint Peter’s College)

The numbers are alarming. The real cost of a college education in the United States has grown more than 100 percent over the last three decades, a rate that is exponentially higher than the wage increases and cost of living adjustments of most Americans.

The latest figures from the College Board put the average cost for 2011-2012, including tuition, fees, room and board, at $17,131 for four-year public colleges (a 6 percent increase over the previous year) and $38,589 for private, nonprofit institutions (a 4.4 percent increase over the previous year). At this rate, it is estimated that a private, four-year undergraduate education will cost $280,000 or more when today’s preschoolers enter higher education in 2026.

Perception, for the most part, has driven the national dialogue about the rising price of college. One view, held among elected officials, the media and even the general public, is that gold-plated amenities, prestige games among colleges and universities and bloated administrations are chiefly responsible for escalating costs that take an increasing share of middle-class incomes and price the less-privileged out of a college education. 

Reading the book “Why Does College Cost So Much?” (Oxford Press), written by two economists from the College of William & Mary, reaffirmed my personal view on the issue of the rising cost of college. The book points out that the price trajectory is similar to that of other service industries such as law, health care and entertainment. While it is easy to view the cost of higher education as growing faster than the inflation rate, one can reexamine the situation and question why the price of goods has gone up slower than the price of higher education.

Two factors help explain the phenomenon. Unlike the manufacturing sector, where product cost is lowered or becomes stable over time with improvements or outsourcing, higher education can’t achieve the same kinds of productivity gains. In fact, the high standards of a Jesuit education at an institution like Saint Peter’s College means that measured productivity will often go down. Increasing output at any college or university can only be achieved through measures such as increasing class size, trading full-time faculty for adjunct professors or delaying the kinds of technologies that keep research and learning at the cutting edge.

Tuition assistance in the form of merit awards or financial aid also drives up the list price and contributes to sticker shock. If institutions reduced incentives for students who have a high likelihood of attending college regardless of the size of the offer, the list price would come down and the process would be more inclusive, because students driven away by sticker shock would see a more realistic price.

At Saint Peter’s, where the $28,900 tuition in 2011–2012 was slightly higher than the average for private nonprofits, the discounting is primarily directed to students with demonstrated financial need. For many schools like us, it’s not the merit money, it’s the financial need money. People look at the sticker price of around $30,000 and think, ‘Wow, that’s a lot of money.’ But the average student is paying a lot less than that, because we give institutional aid based on family need. We’re using our resources to attract our “bread and butter” students and help them afford it because we know our education lifts people and gives them a better life prospect.

The primary factors driving the cost of education have to do with an increase in the cost of basic, essential operations. Everyone has been struggling with rising health-care costs over the last decade or two. For a while, the cost of energy was going up double digits every year, but we’ve taken steps to reduce it with conservation and green initiatives. But I think the biggest piece of all is financial aid.

Financial aid has become even more challenging in recent years, with the recession driving more requests for assistance, coupled with the elimination of state aid to New Jersey’s independent colleges and universities. Uncertainty also persists with direct state aid programs to students such as Tuition Aid Grants (TAG) and Educational Opportunity Fund (EOF) that go up and down every year. There’s no magic solution to this, and that’s why I think institutions need to find a better way to make college affordable.

I don’t think any of us have the answer yet, but we’ve done everything on our end, from trimming our budgets, scrutinizing staff levels and cutting back on all manners of waste, to ensure that a Saint Peter’s education remains affordable. Our commitment to students is measured not just in academics but also in their ability to afford the education and persist until they graduate.

By  |  01:28 PM ET, 07/25/2012

Categories:  Aid, Finance | Tags:  college affordability, financial aid

 
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