Want to be a high-flyer? It'll cost you

October 6, 2006

Business $43,380 Medicine $31,779 Law $31,765

US universities increasingly apply variable fees to those subjects that lead to mega-bucks earning potential, says Stephen Phillips, and the same may well happen here if the fees cap is lifted.

Students embarking on an MBA programme at Stanford Business School will fork out $43,380 (£23,000) in tuition fees this year. It's enough for a down payment on a house, but senior associate dean Dan Rudolph says it is worth it. "We're aware that it's a very large sum," he concedes. "But people find it an excellent investment."

Alumni of the two-year course include the chief executives of Microsoft, Nike, GlaxoSmithKline, Pfizer and BP.

Most graduates earn 50 to 100 per cent more than when they started work, says Rudolph, "but the bigger deal is the earning trajectory ten years on, when they get that venture capitalist, senior corporate vice-president or CEO job they'd never have got otherwise". He adds that Stanford gives generous financial assistance to many students.

John Aubrey Douglass, senior research fellow at the Center for Studies in Higher Education, University of California, Berkeley, says that elite private campuses have been at the forefront of applying variable fees - most commonly for business, law and medicine - since the 1960s.

But in their eagerness to raise cash, publicly funded institutions are catching up fast. At Berkeley, home of the US's top-ranked public business school, students from California are paying $23,984 in tuition fees this year. Those from outside the state pay scarcely less than their Stanford peers - $35,159.

Fees for colleges of business, law and medicine affiliated with public institutions are typically much higher than those for other courses. In the private sector, where fees across the board are high, there is not such a big difference in rates. In Hi gher Education Management and Policy , Douglass and David Ward, president of the American Council on Education, an umbrella group for US campuses, state that average fees for law and medicine were $16,629 and $20,542 respectively across 14 leading public campuses in 2003-04. This compares with average undergraduate fees of $7,059 and postgraduate fees of $8,369. Among a sample of 11 private institutions, law and medicine fees in the same year averaged $31,765 and $31,779 respectively, versus undergraduate and postgraduate averages of $26,191 and $28,224 respectively.

US experts say that fees are being driven higher by public universities' need to plug gaps in their income caused by shrinking public funding. Fees for students attending their local state universities rose by a third between 2001-02 and 2004-05, according to government figures released last year.

The US offers a glimpse of what the UK sector might look like if a future government lifts the £3,000 cap on top-up fees. US fee strategies demanding that students bear a greater burden of the cost of higher education are part of a global response to declining public financing.

Differential fees at US public campuses were introduced in the 1980s for career-oriented postgraduate professional courses.

"The ability to charge differential fees has been enhanced by the rise in adult students attending professional schools," Ward says. "An individual who has worked at IBM for eight years before returning to university is not as outraged by tuition fees as a kid straight from high school."

Donald Heller, an associate professor at Pennsylvania State University's Center for the Study of Higher Education, says rates are partly linked to the remuneration graduates command.

Leading professional schools also wield "considerable power" to charge what the market can bear because they are competing for a global pool of students and are less governed by offering affordable access to locals.

There has also been growing price differentiation within undergraduate curricula.

Business, science, information technology and engineering students at Penn State will pay $13,338 this year, versus $12,592 for other students. The University of Michigan, which has had differential undergraduate fees for at least a decade, is this year raising tuition fees for undergraduate engineering courses by 7.7 per cent, compared with an average increase of 5.8 per cent for other subjects.

But, unlike professional courses, undergraduate courses are not seriously considered vehicles for competitive fee-setting.

Differences are fine-tuned within a small range, Ward says. "There's enormous restraint" because of concerns about distorting students' academic decisions at a formative stage, he says. "You don't want the poor taking history and the rich business."

Instead, rather than being specifically aimed at raising revenue, variable undergraduate fees seem driven largely by cost considerations - equipment-intensive fields or subjects demanding close supervision and correspondingly high contact time, for instance, cost more.

In a similar vein, a growing number of campuses are introducing escalating undergraduate fee schedules whereby charges increase as students proceed from general study in the first two years to more specialised courses. Penn State bumps up undergraduate fees by $946 in the third and fourth years.

In the UK, concerns about differential fees centre on whether they would create greater inequality between prestigious research-led universities and others. True, says D. Bruce Johnstone, professor emeritus of higher and comparative education at the University at Buffalo, but students at research universities are able to land high-paying jobs and so are better able to pay off hefty loans and fees.

"If you're selling your medical or advanced business degree at a rate that could be higher, you're walking away from money that could be used to enhance quality and provide more needs-based aid," he adds.

Ward calls high fees "partly a redistributive mechanism", allowing receipts to be ploughed back into targeted bursaries for needy students, whereas "low fees in affluent societies amount to subsidising middle-class students", who are better prepared for getting to university, he says.

US campuses are estimated to use an average of a quarter of the proceeds from tuition fees for aid. But Heller says that there has been a move to grant aid on grounds of merit rather than need, undermining a supposed focus on increasing equity. He calculates that at least 62 per cent of grants at public universities are based on merit, compared with 45 per cent in 1995-96.

"The bulk of financial aid goes toward enrolment management - buying students with high SAT scores and grade-point averages that help institutions in the US News and World Reports rankings," he says.

Heller also fears that big fee hikes could be pricing some students out of the market. A 2002 report commissioned by Congress projected that 2 million prospective students could find higher education prohibitively expensive by 2012.

Also, middle-class parents are beginning to react to the incremental rise in tuition fees amid debate about the funding of universities. There have been recent motions in Congress complaining about the impact on middle-class constituents.

"We've begun to get a middle-class rebellion," Ward says. "For 20 years, this was a stealth process."

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