College May Be Pricey, But Not Priceless

Amid the seemingly constant news about rising college costs, one recent headline stood out. The colleges profiled did not boost their tuitions at all during the current academic year.

A report from the National Association of Independent Colleges and Universities profiled 24 private colleges that decided against increasing tuition in 2012-2013. Eight schools actually lowered tuition costs. Overall, net tuition – the amount students actually pay, which can be drastically different from sticker prices – is still projected to rise this school year. However, the projected median increase, 2.6 percent, is lower than the increases of previous years.

Part of the change probably results from a demographic shift. The “echo boom,” during which birth rates temporarily rose as baby boomers had babies of their own, began to fizzle out around 18 years ago. As a result, in upcoming years there will be fewer potential college freshmen for schools to recruit. Nearly half of all universities already anticipate decreases in enrollment, according to a survey by Moody’s Investor Services. Lower demand ought to lead to lower prices.

Until recently, however, the traditional laws of supply and demand seemed to have nothing to do with college pricing. That, it seems, is also changing.

As I have written before, young people and their parents have long behaved as though, when it comes to college, no spending amount is too large. But if we treat college as a purely financial investment, it’s quite easy to overspend. A 2008 analysis of the expected earnings of college graduates found that pricey, elite colleges rarely paid off compared to their less expensive peers. While private-school graduates did make more, it generally wasn’t enough to justify the additional tuition costs.

That doesn’t mean the extra money for smaller classes, state-of-the-art labs, or access to prominent faculty isn’t worth it; but it does mean students and their parents should look carefully at what they are getting. As parents are squeezed between supporting aging relatives and paying tuition for the next generation, and as college-bound high school seniors contemplate the idea of accumulating debt in the face of uncertain job prospects, both groups are increasingly focused on the bottom line. “Families are paying more attention to the relationship of cost, price and value than they did before,” John M. McCardell Jr., Vice-Chancellor of Sewanee: The University of the South, told The Washington Post. His university, which is located in Tennessee, cut tuition in 2010.

Colleges, for their part, need to get used to the idea that they are delivering a product and that, if they want to keep their customers, they need to ensure they are offering a reasonable value. The tuition freezes are a sign that at least some of them are learning this lesson – though they may not be happy about it. In speaking with The Wall Street Journal, Donald Farish, the president of Roger Williams University in Bristol, R.I., lamented, “If we have become used-car lots, God help us all. But that seems like that is what is happening.” Farish’s school is one of those that did not raise tuition this year.

Besides the question of costs per academic year, there are legitimate questions about how much academic training is actually necessary for particular professions. Pilot programs at New York University and other medical schools are starting to challenge the received wisdom that future doctors need four years in the classroom. By consolidating the curriculum, the programs have shaved a full year from some students’ training with no apparent adverse results. Some law schools have also acknowledged that their students could probably do just as well without so much study. But, because American Bar Association rules mandate that law schools offer three years of classes, law school reform efforts have focused on allowing students to get more out of their time, rather than letting them take away the same amount and leave school sooner.

Over the next decade or so, I expect the pressures for colleges to increase value will only rise. This will be especially true if we start to see much-needed reforms in accreditation standards that would allow for-profit, online and foreign-based schools to compete on an even field with the established players.

Of course, colleges cannot simply lower prices without making corresponding changes to their operations to cut costs. For some schools, consolidating campuses, or even merging currently separate institutions, might provide an answer. For other schools, the solution will lie in ending programs like university presses that cost money without adding to student education in any direct way. At most schools, cutting costs significantly will require changes that faculty and administrators will both find wrenching.

To the extent that colleges are already beginning to respond, at least in small ways, to market forces, it is not a moment too soon for college-bound students and their parents. The experiences of discovery that accompany college education may be priceless, but colleges themselves are not.

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