Barron’s Mailbag
1025 Connecticut Avenue, NW
Washington, DC 20036

To the Editor:

Most college presidents would love to live in the economic fairytale land envisioned by Jonathan Laing ("Old College Pry," March 4). In his world, private colleges could just check the Consumer Price Index or the annual increase in family incomes. Then they could set their tuition accordingly, without concern for the real-world costs they incur. Our colleagues at public universities would be equally happy to live in a world where their tuitions could be kept low, even when state governments slash funds for operating budgets. Unfortunately, college presidents have to operate in the real world, balancing tuition increases against increased operating costs, while remaining sensitive to the challenges families face in sending their children to college.

The cost of salaries and health care, library acquisitions, information technology, and facilities and equipment upkeep are running at rates significantly higher than the Consumer Price Index. Unhappily, an uptick in the rate of tuition increase is largely unavoidable--especially when other college revenue streams slow during a slumping economy. However, private college presidents remain committed to keeping student out-of-pocket costs as low as possible, without sacrificing academic quality.

In recent years, significant changes in student aid policies at private colleges have made more students eligible for institutionally provided grant aid, and increased the amount of aid they receive. At the same time, the average rate of tuition increase at our institutions is less than half of the double-digit increases that were common in the late ’80s and early ’90s. (At some colleges, tuition increases in recent years have been the lowest in decades.) Since 1990, institutionally provided grant aid has increased 188 percent—more than twice the 76 percent growth in tuition.

In many ways, colleges resemble other organizations that must deal with economic realities. Since the last recession, private institutions have improved operating efficiency while maintaining their academic quality. They have streamlined administration and outsourced more campus services. They have entered into collaborative partnerships with other colleges that allow them to jointly purchase certain goods and share services, while maintaining their distinct institutional identity and mission. These efforts, along with the prudent management of endowment earnings during the bull market of the late ’90s, have enabled most institutions to weather the latest economic downturn, without resorting to the high rates of tuition increase seen 10 years ago.

In other ways, colleges are completely different from for-profit firms. Most manufacturers price their products to cover production costs as well as to make a profit. But the price of tuition at a private college is actually less than the cost of delivering education. No student pays what the college spends on him or her.

The heated competition private colleges face from one another, and from state universities and the growing for-profit sector, will ensure that they continue to act in the most cost effective and academically responsible way possible. Their commitment to quality, personal attention, and student aid ensures that they will remain an attractive option to millions of students.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities