Alternatives to Across the Board Tuition Hikes
While the cost of tuition has continued to rise well above the cost of inflation at institutions of higher learning across the country, it may be inevitable that a tuition increase is necessary, but a straight percentage-based increase may not offer the desired results. There are alternatives to such tuition hikes that would be a benefit to both the school and the student body. Many viable solutions exist, but some are, obviously, more radical than others. The solutions discussed below are geared to provide a working alternative to the same approach to tuition increases.
The most palatable of solutions regarding tuition are, generally, the easiest ones to sell to the public. These are usually the most conservative in nature and the ones that affect the fewest number of people. The two approaches that follow have worked well in government and business and can just as easily be applied to the tuition revenue problem.
Tiered Structure Method
Universities and colleges
already use the methodology behind the tiered approach. It just needs
to be extended to affect more undergraduate programs. Consider that
nearly all majors are treated equally under the current tuition
structure. With the exception of a few minor course fees, an
engineering or accounting student pays the same tuition as a student of
philosophy or psychology. Is this fair and equitable?
It is
readily accepted that a law student, medical student, dental student or
pharmacy student will pay a higher tuition for their education. Tuition
for these students is justifiably high since the level of expertise
provided by the teaching staff comes at a much higher cost than faculty
in other departments. However, when compared to the average starting
salary for anyone in these fields, the tuition seems very manageable.
The future reward far outweighs the cost.
This same concept
needs to be applied to the undergraduate system. Future reward should
be factored into current tuition. The average starting salary for
accountants, electrical engineers, and computer science professionals
well exceed the average starting salary for a liberal arts major.
Accounting, finance, economic, chemical engineering, computer science,
mechanical engineering and electrical engineering graduates can easily
enter the job market with a starting salary of $45,000 - $60,000. This
is a substantial pay premium given to business and engineering
disciplines. Now, it is only a matter of changing the public perception
of the tuition associated with these disciplines—tying future reward to
current tuition. This will then more than justify an increase in the
business and engineering areas while allowing the majority of academic
programs to remain unaffected or, indeed, discounted slightly.
A
simplistic model of how such restructuring could happen is easy to
understand. Given an enrollment of 20,000 students paying an average of
$3000 a semester for tuition will generate revenue of 60 million
dollars. Now, suppose the same 20,000 students are split into two
groups: 14,000 regular and 6,000 business/engineering students. The
14,000 students continue to pay $3000, but the 6000 business/engineering
majors pay an increased tuition of $3500. This will generate revenue
of 63 million dollars, representing a 5% increase over current tuition
while only affecting 30% of the student body. Likewise, the tuition
could be raised another $100 for the 6000 business/engineering students
and lowered $100 for the other 14,000 students. This provides a break
in tuition for 70% of the student body, but still generates the same 5%
tuition increase for the university.
The increase will
initially cause some dissent amongst the students in those fields so
affected, but the arguments are easy to deflect. Their tuition will
increase $1000 to $1200 dollars a year, but the starting salary for jobs
in their chosen majors will generate between $10,000 to $30,000 a year
higher than the non-affected majors will. Even if they graduate in five
years with an extra burden of $1000 to $1200 a year tuition increase,
this only amounts to $5000 to $6000 during the course of their academic
career. This amount is easily offset by just the first year of higher
wages they will earn. The public perception of business and engineering
majors will increase because of the newly appreciated value that they
bring to the marketplace and the idea will eventually be embraced by the
community in the same way that tuition for medical, law, dental and
pharmacy programs are substantially higher.
Recommended Reading
Further Reading:
Diminished Returns Method
Another very conservative
method is to invest more time and money into population/cost studies at
the university. Just as a business must find it's optimal price point
for a good (that is, seeking the price that will sell the number of
units to generate the most revenue). Revisiting the numbers in our
hypothetical situation shows those 20,000 students at $3000 tuition a
semester generates 60 million dollars. Will raising the tuition
across-the-board actually help? What if a tuition hike to $3500 a
semester drops the enrollment to 17,200 students? This generates
approximately the same 60 million in revenue. This example allows for a
drop in enrollment equal to the percentage of increase in tuition.
Reality may prove the enrollment to decrease even more. Likewise, a
tuition cut may generate more students, but when the factors of more
resources to teach more students are factored in, there is only a small
change in revenue.
Studies comparing tuition increases and
enrollment changes at other national universities would prove to be
invaluable in establishing the proper rate of tuition that would
generate the most revenue. There is a point where the price of tuition
forms a perfect equilibrium with enrollment to generate the most
revenue. Whether or not this optimal approach will lead to the desired
increase in tuition would be unknown. What is known is that an
arbitrary increase or decrease in tuition without properly understanding
how enrollment will be affected could be financially devastating. It
is up to the trusted leadership of each college or university to decide
the proper balance of risk versus reward, but to also be prepared to
initiate the kind of visionary leadership that their respective
institutions so desperately need in these financial times.
Solving
this problem will not be immediate, nor will it be easy. The rise in
tuition is clearly needed as reflected by both economic indicators and
budget cuts universities are facing, but if students cannot afford to
learn than these increases are futile. Any tuition increases must be
approached carefully.