Another sign that the business model for higher education is broken

The National Association of Independent Colleges and Universities (NAICU) put out a report yesterday that bravely tries to put a good spin on the tuition news:

Private College Tuition Rises at Lowest Rate in 37 Years
NAICU Washington Update

June 29, 2009

With families facing one of the worst economic crises in the nation's history, private, nonprofit colleges and universities have responded with the smallest average increase in tuition and fees in 37 years, according to the final results of a membership survey conducted by the National Association of Independent Colleges and Universities.

It is great to know that higher education has responded well to this crisis! So what is the result of this wonderful restraint?

The 4.3 percent increase for 2009-10 is the smallest since 1972-73, when average tuition and fees at private institutions rose by the same rate. The increase is slightly higher than the 2008 Consumer Price Index of 3.8 percent.

Oops!It is, of course, customary to compare next year’s academic year tuition increase to last year’s calendar year CPI increase, and by that standard the tuition increase that is only .5% above inflation shows some restraint.   However, these have not been ordinary times in the CPI world. While the first half of last year was reasonably well-behaved, the second half was much less so as jobs and equity vanished at a rapid rate - a trend that has continued to this date.   Another comparison that might well be made is next academic year’s tuition increase compared to the CPI increase over the past 12 months. Not only would that better describe today’s economic realities by including  the recent tumultuous times for the economy, it has the benefit of being almost an academic year CPI increase that we can compare with an academic year tuition increase. .

If we use this CPI increase for the most recent 12 months available (through May) for our comparison, we see a vastly different picture. According to the June 17 report of the Bureau of Labor Statistics the (unadjusted) CPI has actually decreased by 1.3% over the past 12 months.  Plus 4.3% for tuition no longer sounds restrained - or responsible - when compared to minus 1.3% in CPI! 

Whatever CPI one wants to compare the 4.3% increase to, it obviously is a very significant increase at a time when unemployment at all income levels is at a very high level, and uncertainty about economic security is on the minds of most families.  Unfortunately, for all of the NAICU  rhetoric about new “innovative affordability”ideas, this result demonstrates clearly that the higher education business model still demands price increases that are well above CPI increases.

As Stein’s Law assures us, “If something can’t go on forever, it will stop.”   A model that demands that prices always rise significantly faster than CPI clearly will break down at some point.  It is time to work harder imagining a new, more sustainable model, and to spend less time trying to defend what in the end will not be defensible .

Comments

[James Cartin]

yeah this is the policy will directly effect the students who are studying in the private institutions and the cost of their study will increase.

[Dixie Darr]

Chris Anderson's new book Free suggests that digital information should be free. Could the same be said of higher education? Is education essentially different from information?

Lloyd responds: I do think education is essentially different from information. Roughly, education is learning what to do with information - e.g. analyzing, evaluating, extrapolating, combining. Information is of minimal value without the education to use it effectively. Neither information nor learning appear spontaneously, however, so ultimately someone must pay for the person-power, the technology, etc. for the creation of both. The basic discussion, from my perspective, is who will pay, and when.