The Not Broken, But
Seriously Bent Higher-Ed Business Model
Part Two: Where Can
We Go from Here?
Some critics point to what they label as administrative
bloat as the source for the rising price tag of a college degree. Most
expansions in professional staff at colleges are tied to complying with the expectations
of external accrediting bodies, meeting ever-expanding reporting requirements,
or supporting the persistence of a student population that is at a continually higher
risk of not completing.
In spite of these challenges, according the College Board, when
adjusted for inflation, the average net tuition revenue at private,
not-for-profit, four-year colleges has increased
by only $1,390 since 2010.
In my previous installment, I outlined how discount rates
(the average percentage of the reduction of the amount families pay to attend
college from the published price) have rapidly escalated in recent years.
The logical correction would seem to be a recalibration of
the published price to more closely align with the average out-of-pocket
expense. Over the past two decades, a number of institutions have attempted
this. They have typically seen a decline in applications, because consumers
associate price with quality. In some cases, they have seen a short-lived
increase in applications and enrollment because of media exposure, but those
increases have rarely been sustainable.
It is likely that the only way to effectively reset the
published tuition price would be if a large portion of a particular sector of
higher education were to do so together. During the past year, there have been
members of congress who have encouraged university leaders to get together to
formulate such an initiative. To their surprise, we have had to inform them
that we are legally prohibited from such an effort.
In 1991, the
Antitrust Division of the Justice Department charged the eight Ivy League schools
and MIT with price fixing. These
institutions along with twenty-three of the nation’s leading liberal arts
colleges had met as what came to be known as the Overlap
Group. The convening institutions, which were all need blind, meaning that
they would fund each accepted student’s complete unmet need with scholarships,
were seeking to make the cost of attendance uniform for each student.
The
justification for this effort was that the participating institutions wanted
students to choose the school they believed was the best fit rather than the
one offering the best deal. In theory, with all need met, aid packages should
have been comparable, but without consistent tuition and fees, that was not the
case.
This led to Congress passing the Improving America's Schools Act in 1994. Section 568 of the Act states that is not unlawful for two or more need-blind institutions to agree or attempt to agree to: 1) award financial aid only on the basis of need; 2) use common principles for making the need determination; 3) use a common aid form; and 4) share, on a one-time basis, certain aggregated data about their admitted student pools. Student-specific data may not be shared.
The 568
Group was formed in response to the Act.
This group of need-blind institutions share the permitted data, but they and other
institutions do not have the ability to meet to discuss pricing strategies.
For higher education to make industry-wide realignments of
price, aid, and out-of-pocket cost, we will need to work with the federal
government to create a provisional forum that allows us to collaborate on our pricing
models. Such an effort could de-escalate pricing and lead to a more consistent financial
model for universities that would also be more understandable to consumers.