The Uses and Meaning of Tuition

Image 68751915@N05 via Flickr

Image [email protected] via Flickr

The economics of higher education are not always easy to understand, especially for those outside the academy.  The pricing model in higher education can be particularly opaque with a tuition sticker price that is often discounted significantly through some combination of need based financial aid and merit based scholarships.  In a recent Washington Post opinion piece Harvard government professor Danielle Allen attempts to shed light on these issues by making the bold claim that, “Tuition is now a useless concept in higher education.”

Her argument turns on an important and little understood point.  For many schools, “the actual cost of educating any given student for a year is greater than the ‘sticker price.’ ”  This may seem hard to believe given the high price of tuition, especially at private schools, but the labor intensive nature of education that requires the talents of many highly educated professionals often pushes the cost of a college education beyond what students and their families are asked to pay.  This is particularly true for students receiving financial aid, but is even true for many full pay students.

Therefore when a school sets its tuition, Allen argues that institutions are simply deciding how big a discount to offer its full pay students and how much financial aid it will offer those students with financial need.  By this logic, the tuition decision is really about the size of subsidies different groups of students receive but contains little useful information for students, families or the public.

2011-06-11 SJU Abbey Church003This is not quite the way the world looks outside of Cambridge, New Haven and Palo Alto.

To be fair to Allen, she acknowledges that her argument applies primarily to “the very well-endowed colleges and universities”—the Ivy League, a handful of others like Chicago, Stanford and Duke, and top liberal arts colleges.  These are schools where income from their endowments represents a significant part of their annual budgets.  I would estimate this group of elite schools to number between 50 and 100, out of over 2200 four year institutions in the United States.  (One might ask the editors of the Washington Post why they would focus precious column inches on the nuances of price setting at schools that educate only a tiny fraction of undergraduates, but that is a quibble for another day.)

The reality out here in flyover country is that tuition still matters.  Places like Saint John’s University and the College of Saint Benedict, and our many peers, are not called “tuition-driven institutions” without good cause.  When we set our budget each year, tuition is by far the single most important revenue source.  We do offer need based and merit based aid to our students.  (The latter is almost non-existent at the schools Allen writes about.)  But that aid is included in our calculations of the necessary tuition level we need to balance our budget.  The vast majority of our students do get a discount off the sticker price, through need or merit based aid, but that hardly means that tuition is a useless number

I would argue that tuition plays at least three important functions for most of higher education:

1. Annual Costs.  Tuition is correlated with costs and is required for most schools to balance their budgets.  Even at the elites, there is some relationship between tuition and costs, but at tuition-driven institutions, the pricing decision – tuition – is  directly related to the cost of providing the education for our students.
2. Inflation.  Annual tuition increases each year remind students, their families and the public that, like most goods, it almost always costs more each year to pay for the inputs to a great education—particularly the compensation for outstanding faculty and support staff.  These increases should remind legislators enamored with “tuition freezes” for public institutions that someone has to pay for the increased annual costs.
3. Education is expensive but worth it.  Finally, tuition, that in many cases has risen above average family incomes, is an accurate, if painful, reminder that higher education is an expensive product that has come to consume a greater percentage of family income over time.  Yet even as this trend is clear, education has become more important for young people seeking professional and personal advancement.  Higher tuition is sustainable over time only because of the high returns a college education still offers.

In short, it is not particularly helpful to declare tuition an outmoded concept.  This is not to dispute that college pricing and financial aid are complicated, especially for families who are new to this world.  But the solution is not, as Allen suggests, to publish five numbers to further confuse students and families.  Families care about two numbers: tuition and how much they have to pay.  While one might argue about whether the government should be in the role of dictating how institutions communicate with their customers, schools are now required to put a Net Price Calculator on their websites that allows students to input their personal financial information and academic performance to determine the approximate cost of attendance at a given school.  The CSB and SJU calculator is here.

The issue for individual institutions and the country is to focus on access, to ensure that talented students are able to get into and can afford the higher education that has become an essential ticket to a lifetime of opportunities, and not to complicate the discussion with “inside baseball” tuition minutia from a small number of institutions with large endowments—not that SJU would mind being in such a  group!

By |August 29th, 2016|Categories: Economics, Higher Education||0 Comments

Lost Boys

Image: john-daggett via Flickr

Image: john-daggett via Flickr

The financial challenges of higher education get a great deal of press and the occasionally outrageous antics of some on campuses are the subject of amusement and derision to those outside the academy. But to economists and many others, the gender gap in higher education is arguably the most important social concern for millennials and our country as it has implications for decades after current undergraduates leave the “academic bubble.”

For most of educational history, men significantly outnumbered women in higher education.  As attitudes changed and barriers to women’s education fell, the gap slowly closed. By the late 1970s women outnumbered men in college enrollment and by the early 1990s a greater percentage of young women in the workforce had bachelor’s degrees than young men, as the chart below shows:

Percent of U.S. Adults Ages 25-29 With a Bachelor’s Degree or Higher, 1969-2009

The trend continues today as nearly 60% of undergraduates are women. Since I think it is safe to say that colleges and universities are not actively engaging in discrimination against young men, this demographic reality is largely a function of the behavior and choices of young men.

Surely some of the challenges start early in their schooling where the behavior of distractible, energetic and less focused boys result in disciplinary challenges, fairly or not, while attentive and well-disciplined girls thrive. Those in the K-12 system could say much more about these challenges than those of us in higher education, but we are all well aware of the achievement gap between the genders.  (These gaps are even greater across racial and ethnic groups, but that is another topic.)

Interestingly, technology seems to potentially have made these issues worse by giving young men more choices than they had a generation ago.  A recent Atlantic article asks an important question, “What are young, non-working men doing–once they have decided education is not the path for them?”  Derek Thompson writes:

As for what they’re doing all day, Erik Hurst, an economist at the University of Chicago, is now conducting research that suggests that non-college men who aren’t in the labor market are spending a considerable amount of their time in front of screens.

In a University of Chicago faculty profile, Hurst provides more detail about his initial research into the role of technology on labor supply:

I’m…beginning with a hard look at time-use by young men with less than a four-year degree. In the 2000s, employment rates for this group dropped sharply – more than in any other group. We have determined that, in general, they are not going back to school or switching careers, so what are they doing with their time? The hours that they are not working have been replaced almost one for one with leisure time. Seventy-five percent of this new leisure time falls into one category: video games. The average low-skilled, unemployed man in this group plays video games an average of 12, and sometimes upwards of 30 hours per week. This change marks a relatively major shift that makes me question its effect on their attachment to the labor market.

To answer that question, I researched what fraction of these unemployed gamers from 2000 were also idle the previous year. A staggering 22% – almost one quarter – of unemployed young men did not work the previous year either.

What is particularly interesting about this phenomenon is how it affects the young men psychologically.  To be unemployed in a capitalist economy is normally a devastating experience.  With little income, few non-family relationships and none of the traditional professional sources of meaning and self-worth, to be out of the workforce, especially for men, is usually a deeply stressful experience.

Yet, as Thompson notes in his Atlantic article, according to Hurst’s research, the gamers “are having fun.”  Technology has made leisure so cheap “that it apparently doesn’t require a steady W-2 or 1099 to have fun.”

As Hurst describes the evidence in the University of Chicago profile:

These individuals are living with parents or relatives, and happiness surveys actually indicate that they are quite content compared to their peers, making it hard to argue that some sort of constraint, like they are miserable because they can’t find a job, is causing them to play video games. And they are having fun, Hurst emphasized. “Happiness surveys actually indicate that they [are] quite content compared to their peers.”  In the short run, not working doesn’t seem to make men miserable at all.

The issue, of course, for these young men and society, is not the short run but the long run.  Again, the Atlantic:

Cheap and abundant entertainment anesthetizes less-skilled and less-educated young men in the present. But in the long run, it cuts them off from the same things that provide meaning in middle age, according to psychological and longitudinal studies—a career, a family, and a sense of accomplishment. The problem is that these 20-year-olds will eventually be 30-year-olds and 40-year-olds, and although young men who don’t go to college might appear happy now, those same satisfaction studies suggest that they will be much less happy in their 30s and 40s—less likely to get married, and more likely to be in poverty.

The Lost Boys in J.M Barrie’s play Peter Pan and the Disney films based on the play, live in Neverland and don’t want to grow up.  For young men without a college degree, however, the U. S economy is not as gentle a place as Neverland, Captain Hook notwithstanding.  Saint John’s University and schools like it do a good job of engaging and educating the young men that choose to enroll, but we as a nation need to figure out early in their lives how to educationally engage more of our Lost Boys, both for their sake and for the broader macro economy.

By |August 18th, 2016|Categories: Economics, Higher Education||0 Comments

Faith and Reason

IMG_7917-sized1For many visitors and certainly for our alumni, Saint John’s has a special sense of place.  It is a rare combination of the natural setting of woods, lakes and prairie and the built spaces of handmade red bricks and brilliant Marcel Breuer architecture all interacting with the of people who live in Collegeville—the timeless stability of the monastic community, our deeply committed faculty and staff, and the youthful energy of each generation of students.  This magical mix makes so many Johnnies call Collegeville “home” long after they have graduated.  It is also a blend that we are careful not to tamper with.

This sense of place was certainly foremost in the mind of architect Gregory Friesen as he was tasked with renovating the iconic Alcuin Library as part of the library and learning commons project at Saint John’s.  While he certainly felt a strong obligation to preserve the spirit and design of Marcel Breuer, he also was aware of the need to have the renovated Alcuin and new Br. Dietrich Reinhart Learning Commons fit into the sense of place that is so central to Saint John’s.  To achieve this nuanced charge while also making the academic space thoroughly 21st century, Friesen went back to Breuer’s original conception which was tied directly to Benedictine and Catholic history.  The University’s central space and focal point is Abbey Plaza, where the Abbey and University Church stands on the south side of the mall and Alcuin Library on the north, with open green space in between.  Faith and reason are represented together and in conversation with each other, as has been central to Catholic teaching and preserved by the Benedictines for centuries.  There is no more succinct and beautiful manifestation of the mission of a Catholic, Benedictine university.  And Friesen is making it even better.

IMG_7923-sizedAnyone who has visited Alcuin Library knows it is a beautiful and innovative structure, with the two massive, concrete trees of knowledge gracing and supporting the building on the upper level.  There is certainly natural light in that space, but the need to have load bearing concrete walls required the windows to be relatively small and near the ceiling.  Fifty years of construction innovation gave Friesen options that Breuer did not have, and the outcome will be stunning.  The new design will open up the interior space as most of the books move to compact shelving in the lower levels, but most striking will be the natural light that will illuminate the interior, as concrete walls are replaced with glass.  A big part of the south wall will now be glass and allow visitors and students to look out at the Abbey and University Church across the mall.

As the pictures show, even in the midst of construction, the interior has a very different look and feel that is completely in keeping with Breuer’s vision and that of the monks who bravely commissioned this dream over fifty years ago.

The renovated Alcuin and new Learning Commons (which will offer similar views of the Church), will daily remind every visitor and our students that Saint John’s University is a place where faith and reason not only coexist but actively enhance on another as learning and the search for meaning are inextricably intertwined in a great liberal arts education.

 

By |July 22nd, 2016|Categories: Alumni, Kudos||0 Comments