It Costs a Small Fortune

Even the most casual observer knows that higher education has become incredibly expensive. According to the College Board, between 1975 and 1985 the cost of attending a public four-year college jumped 100 percent, while at private colleges the increase was almost 130 percent. The inscription on a shirt seen recently in Boston says it all: "This shirt cost my family $50,700 . . . Harvard 1985."

The costs continue to mount. This year the average increase will be 8 percent at public colleges and 7 percent at private institutions. The annual expenses at two schools, Bennington and MIT, will top $17,000; others, including Princeton, Harvard, Yale, Stanford and Dartmouth will charge more than $16,000 each.

It is not just elite schools that cost a small fortune, The average total cost is more than $9,600 at private colleges and almost $5,400 at public colleges. Even the bastions of low tuition have given way; the City University of New York now charges a hefty tuition.

One explanation for the rapid rise in costs is that colleges are playing catch-up. Throughout the 1970s colleges held tuition increases below the rate of inflation to maintain enrollments. To do this, they deferred maintenance, abandoned building plans and, most important, held down faculty salaries.

But these strategies proved to be shortsighted. Today's tuition hikes are helping to pay for the maintenance and supplies that were forgone. They also are helping to modernize research facilities, restock libraries and increase faculty salaries.

In the public sector, the rapid rate of tuition hikes is occurring because some state legislatures have simply decided to make students assume more of the tuition burden. By reducing the subsidies given to colleges, the states save money for other activities. The difference is made up by higher tuitions. At the University of Washington, for example, tuition charges rose 17 percent this year.

Universities -- especially the most expensive ones -- also are raising tuition for all students so that those who can afford the full cost help subsidize those who cannot. Critics regard this as robbing Peter to pay Paul, but to the universities it represents a commitment to greater equal opportunity for the disadvantaged.

This doesn't mean that the colleges are doing everything to keep tuition in check. Most universities are administratively top-heavy. Guess what pays those salaries? And in some cases, schools simply are acting on bad advice. In 1982, for example, a consultant noted that tuition at George Washington University was well below the level charged by its competitors. He encouraged GW to boost its tuition sharply, lest students assume that the lower price meant inferior quality. There is more of this than is commonly recognized, but most universities that employ such specious reasoning don't advertise it.

Some observers think that federal student aid has encouraged colleges to hike tuition and push the cost onto the taxpayers. If that is true, the colleges have got it backward. In the 1970s, when federal student aid was expanding, colleges held down their costs. In the 1980s, federal student aid has been cut and tuitions have jumped sharply.

The ultimate question, of course, is whether students and their families will decide that college isn't worth the investment. The old fear that big tuition increases would reduce enrollments seems to have given way to a belief that consumers will pay regardless of the cost.

Sound familiar? For a long time American car manufacturers believed the same thing. That idea fell apart when the average car price reached stratospheric heights and a competitive option -- Japanese cars -- became available. It is hard to see where the competition for the colleges will come from, but if Sony announces plans to open a university, look out.

The other element in the equation is quality. High- quality education sells very well. In fact, perceived quality allows some schools to raise tuition at will because the demand exceeds the supply of freshman places. Since 1979, the number of high school graduates has fallen, but the applicant pool has stayed level or increased at most prestigious schools. Applications have risen 21 percent at Brown, 28 percent at Virginia, 49 percent at Stanford and 23 percent at Berkeley.

Popularity and a big price tag do not, of course, ensure excellence. On the contrary, there are indications that college quality is slipping, despite the recent run-up in costs. Several prestigious study groups have recently criticized the lack of focus and rigor in higher education. One report, by the Association of American Colleges, noted: "As for what passes as a college curriculum, almost anything goes. We are more confident about the length of a college education than its content and purpose."

Rapidly rising costs and questionable quality are a dangerous combination with no easy solutions. Because there is little agreement about what a college education embodies, rapid changes in the curriculum are unlikely. And costs will continue to rise. If Harvard's costs increase as rapidly in the next decade as they did in the last, the shirt that cost $50,700 this year will cost about $130,000 in 1995. Sooner or later, the price will become prohibitive.

Things are even more dangerous for less prestigious institutions, both public and private. If their costs continue to increase more rapidly than inflation, they will find fewer students seeking admission. Demographic pressures -- the shortage of 18-year-olds -- will accelerate the cost squeeze. As that happens, some colleges will cut programs sharply (further diminishing quality) or close their doors entirely.

The relationship between cost and quality is the same for colleges as it is for anything else. As long as students and their parents believe that higher education is good value, they will continue to buy it. But if quality does not improve and tuition costs keep ratcheting upward, America's colleges will be in big trouble.