The Evolution of Higher Education

August 21, 2007

The New York Times recently examined several public universities
charging higher tuition for certain majors, such as business,
science/engineering, and journalism.

According to the article by Jonathan D. Glater, "Such moves are being
driven by the high salaries commanded by professors in certain fields,
the expense of specialized equipment and the difficulties of getting
state legislatures to approve general tuition increases, university
officials say. ‘It is something of a trend,’ said Barmak Nassirian,
associate executive director of the American Association of Collegiate
Registrars and Admissions Officers."

Differential pricing draws mixed reviews from experts, bloggers and
others, and some say it’s not a new phenomenon. The bigger
question, mentioned by a source in the Times story, is whether such trends are pushing public higher education toward
becoming a private good.

Education for Its Own Sake–and for a Good Job

According to the NYT story, Mark J. Kushner, dean of the College of Engineering at Iowa State University,

Do You Know What You're Worth?

said he thought society was no longer looking at higher education as a common good but rather as a way for individuals to increase their earning power.

There was a time, not that long ago, 10 to 15 years ago, that the vast majority of the cost of education at public universities was borne by the state, and that was why tuition was so low, he said. That was based on the premise that the education of an individual is a public good, that individuals go out and become schoolteachers and businessmen and doctors and lawyers, that makes society better. That’s no longer the perception.

Dr. Richard Vedder, director of The Center for College Affordability, said in a recent blog, "The notion that higher education prices should be low because education is a public good takes another hit with differential pricing, I suspect. As I have indicated elsewhere, however, I think higher education is primarily a private investment good, as well as a consumer good, not something with massive positive externalities as the higher ed apologists and romantics would like you to believe."

Kushner gets it right–studies, statistics and experts suggest higher education is increasingly the way to jobs with better salaries (see my related story here, from PayScale’s August 2007 newsletter). There’s nothing wrong with this; students are essentially buying knowledge (and in some majors, skill-sets), which they know will help them advance in the job market.

But college is about more than just getting a good job. For students fortunate enough to leave home and experience college in their late teens and early 20s, it offers them a chance to learn how to: think, be independent, deal with peers just as smart or smarter than they are, approach professors, manage time and money, and more. College is a unique, four-year chance to learn about yourself, an invaluable time when you can steep yourself in education for its own sake. At the end of the day, society benefits from well-rounded individuals who’ve had such experiences.

The Big, Expensive Picture

According to the NYT story:

Starting this fall, juniors and seniors pursuing an undergraduate major in the business school at the University of Wisconsin, Madison, will pay $500 more each semester than classmates. The University of Nebraska last year began charging engineering students a $40 premium for each hour of class credit.

And Arizona State University this fall will phase in for upperclassmen in the journalism school a $250 per semester charge above the basic $2,411 tuition for in-state students.

To give context to differential pricing, it’s worth considering how much higher-education costs are climbing overall. According to the College Board’s Trends in College Pricing 2006 report:

The data in this report confirm the widespread perception that college prices are rising much more rapidly than the prices of other goods and services. Like last year’s increases, the 2006-07 increases in tuition and fees are smaller than those of many recent years. That said, the 35 percent jump in inflation-adjusted average tuition and fees for in-state students at public four-year colleges since 2001-02 is the largest for any five-year period over the 30 years covered by this report.

Cuts in state and local funding are a major cause of skyrocketing tuition costs at public colleges, the report says.

When it comes to differential pricing, the concept isn’t new, some say. John V. Lombardi writes in the Reality Check blog at Inside Higher Ed:

While the notion of explicitly charging more for business or engineering majors than for history or English is hardly new, the desperate search for additional revenue to sustain university operations has led to more explicit pricing strategies such as this one. Partly this is because the consumers, the students and their parents, can be convinced that the extra cost of a business or engineering degree will be recovered after graduation, and the extra quality the premium price buys will be reflected in the marketability of the graduates. … All of this reflects the continued shift of parts of public higher education into the fee for services rather than the public service business.