Buddy, can you spare a fee?

January 19, 1996

Fees to pay or not to pay? Stephen Romer sounds a note of warning on the US experience

Influential parties in United Kingdom higher education are beginning to think the unthinkable: students will have to start paying their tuition fees - and soon. Last April the National Union of Students voted against a motion which would have confirmed their commitment to free university education and announced a review of new methods of finance.

More recently a Liberal Democrat working party suggested fee payments as a means of financing expansion. Senior officials of elite universities light up at the mention of top-up fees. The Conservative national policy group on higher education proposes fee payment facilitated by a voucher system.

However, if the recent history of tuition fees in the United States is any guide, there would be several major disadvantages. In public and private colleges tuition fees have been associated with rapid inflation (rising in excess of 250 per cent over the past 15 years), the development of cartels, a marketing war based on spurious statistics, maltreatment from politicians and a kind of "Greed is Good" philosophy among university bureaucrats.

Rises in US tuition over the past decade have squeezed out students from low-income households, forced others deeper into debt and made it impossible for students to work their way through college.

At the City University of New York, the largest urban university in the US, fees for full-time students doubled to $5,000 in the five years to 1993. The vast majority of CUNY students have to work at least part-time to support themselves and about 40 per cent work full-time to get by. Their jobs are unskilled and low paid with long hours - preventing them from doing well at college. So they fail and this temporary work turns into long-term, dead-end careers.

Politicians are tempted to raise fees at public colleges to pave the way for vote-winning tax cuts. In New York, the Republicans have taken office at both city and state levels in recent years. Traditionally, CUNY and its state counterpart SUNY have been relatively cheap. However, under the new administrations led by Mayor Giuliani and Governor Pataki fees have already risen by more than $1,500.

In the US a bachelor's degree normally takes four years and its total cost at a private college can easily exceed $10,000. In the Ivy League universities the annual bill for tuition plus board and lodging will be well in excess of $25,000.

In 1989 Massachusetts Institute of Technology and the eight Ivy League colleges were accused by theJustice Department of having fixed their prices. For more than30 years, they had engaged in an anti-competitive practice known as "overlapping" which violated the anti-trust laws. The universities would meet annually, pool information about applicants and fix the level of student aid to be offered.

They argued that this practice was to ensure that money was not used for unnecessary competition in attracting the best candidates. In the event all except MIT backed down and abandoned it. MIT continued (with some success) to argue that the provisions of the Sherman Antitrust Act are irrelevant to universities because they are not commercial firms but charities.

Since the mid-1970s, colleges have raised average tuition by about 300 per cent, from roughly 13 per cent of average household income to more than 20 per cent. According to the 1996 edition of the magazine Money Guide: Best College Buys Now, freshman year tuition at MIT costs $21,612 and campus lodging an extra $6,150. Harvard charges $20,865 for annual tuition and $6,710 for room and board; Cornell charges $20,066 and $6,762; Columbia $20,262 and $6,864.

However, there is financial aid for some students in these colleges. Private colleges tend to allocate an average of about 8 per cent of their budgets to such aid. For example, Brandeis University in Boston, at $,685 all in, is one of America's most expensive universities. But 54 per cent of Brandeis students receive some form of financial assistance or loan, including the college's own grants and scholarships which come to an average of $6,303 across all students in the university.

There is a kind of Ivy League among public colleges where bargains are to be had. The University of Texas at Austin looks good at about $11,000 a year (less for Texans) fully inclusive. US News and World Report (September 25, 1995) offers rankings of national universities in a league table based on the quality-of-education-for-the-money-paid. The winner is either Brigham Young University at Provo, Utah or, if you can avail yourself of the average amount of student aid forthcoming, the somewhat more glamorous California Institute of Technology.

But for the third successive year in Money the New College of the University of South Florida tops the value for money chart. Although obscure it is a relatively cheap state college, small enough to have a SSR of 11:1 and apparently very satisfying on several other academic indicators. Forty per cent of graduates go on to higher degrees - the national average is per cent. And when students enrol, they have SAT scores about l50 per cent of the national average.

These consumer guides have become so crucial in attracting students that some colleges, including the New College of the University of South Florida, have been exposed (by the Wall Street Journal) as having cheated in their returns to Money and US News and World Report; they have been caught inflating their SAT scores.

If the inflation rate of the past two decades continues for the next two, the cost of putting a child the baby born in 1995 through a four-year Ivy League education will approach half a million dollars. The rest will search for a value-for-money deal in an environment more appropriate to the sale of secondhand cars than to applications for a university education.

Stephen Romer is a lecturer at the University of Westminster.

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