Anger as US tuition fees reach new high-water mark

Backlash looms as critics decry lack of checks on soaring cost of higher education, writes Jon Marcus

August 28, 2008

After three decades of increases at more than double the rate of inflation, the cost of attending an American private university has reached a politically unpalatable new height. This autumn, one year of tuition, room and board and mandatory fees will surpass the US annual median household income of $48,023 (£25,800).

It is a milestone the universities may have hoped would pass without notice. But a backlash appears to be looming against a sector long insulated from the need to cut costs by the fact that demand for higher education in the US, except at the lowest-ranked institutions, such as state and community colleges, has consistently exceeded supply. Elite private universities, and even some public institutions, accept as few as one in ten applicants.

"At some point we (will) get to a threshold of anger that will force something to happen," said Richard Vedder, distinguished professor of economics at Ohio University, a public higher education institution. "We're not quite there. But we're getting closer."

And it is not only the private universities, including the Ivy League institutions, in the frame. The rate of increase in charges at many public universities has been just as high - and in some cases even higher - because their previous main source of support - state government allocations - has fallen.

Legislators, who oversee public universities, want accountability. And both private and public universities, their critics say, are paying dangerously scant attention to the tide that is rising against them.

"There's this sense of entitlement that's pretty shocking," said Jane Wellman, director of the Delta Project on Postsecondary Education Costs, Productivity and Accountability, a nonprofit organisation investigating the reasons for the continued sharp rise of tuition fees. "We've let them get away with it."

Since 1988, the average cost of an undergraduate degree at public and private US universities has risen by 375 per cent, far faster than the 1 per cent increase in median family income in the same period. And the economic advantage enjoyed by graduates is weakening.

"A college education still gets you more (money) than not having one, but it hasn't been rising lately," said Jared Bernstein, a researcher at the Economic Policy Institute, a non-partisan think-tank. Since 2000, the average wage has risen only 2.5 per cent in real terms, he said. "Tuition goes up that much every 20 minutes."

Universities claim to be trying to control costs, but critics are unconvinced. "If I were the president of a university, I would have a rhetoric about cost reductions to keep students happy, parents happy, legislators happy," said Dr Vedder, author of Going Broke By Degree: Why College Costs Too Much.

"There's no stockholder interest to face up to so there's no real incentive to cut costs. In most of the traditional American economy, people are driven to cut costs, but in universities those incentives don't exist."

The number of administrative staff in US universities has tripled in the past three decades. And for 11 years in a row they have received salary increases above the rate of inflation. Presidents of elite private universities, and even those of some public institutions, now receive an average of close to half a million dollars a year, plus free housing, expense accounts and generous benefits.

Even before tuition hit its latest high, critics of American universities were provoked by the case of Benjamin Ladner, the former president of American University, a private university in Washington, DC.

A report commissioned in 2005 for the university's board of trustees questioned more than $500,000 of Dr Ladner's personal and travel expenses, including a family engagement party and travel for his personal chef to London, Rome and Paris. He received a $3.75 million severance package when he resigned.

Both public and private universities are exempt from income tax, while donors benefit from deductions allowed for charitable giving.

"It seems to me that universities and colleges ought to see the tax exemptions they have as a social compact, and in exchange provide the best education to the greatest number of students at the lowest cost, instead of a good education to a lesser number of students at the highest cost," said Senator Charles Grassley, the leading Republican on the Senate Finance Committee and universities' most outspoken congressional critic.

The senator has proposed legislation requiring all universities to spend at least 5 per cent of their endowments annually, as it requires of nonprofit foundations, to help reduce or at least control student fees.

But universities have resisted calls for reform. Two years after the report of the Spellings Commission on the future of higher education, there has been little progress on its recommendations for making universities more affordable and accountable.

Secretary of Education Margaret Spellings warned higher education officials in July that, if universities do not change, change will be imposed. "In the absence of continued leadership in education, others will step in," she said.

Those repercussions began almost immediately. Just hours before adjourning for its summer recess, but in time for lawmakers to proclaim that they had taken action to hold down university tuition in this election year, Congress voted to require the annual publication of a list of the institutions with the highest percentage increases in their tuition and fees.

But some fear that without any sanctions, this alone will not be enough. Universities, say some observers, have an emotive trump card: parents' desire to find a way to pay for their children to go to the university of their choice. "Colleges play on people's emotions," said Dr Vedder, who was a member of the Spellings Commission. "Parents will do anything for their children. And universities are wonderfully adept at tapping into these emotions."

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