Higher Education Monopoly

July/07/2013 5:12AM
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Tuition costs go up because they can. Harvard has a valuable brand and they can charge accordingly. They will enrol only a small percentage of applicants. Supply and demand. Harvard could triple their tuition rate and still meet enrollment goals.

Is the brand worth the price? Do Harvard graduates do better in the workplace than graduates from colleges that cost less? Does Harvard create the superior graduate, or was the student superior as evidenced by the Harvard acceptance? Do the students maintain the Harvard brand or is it the faculty that makes Harvard a premium brand?

It will be interesting to watch what happens at Purdue University. The new president is none other than Mitch Daniels, the former Republican governor of Indiana. Not a popular choice to run a public university where he might be the only non-student Republican on campus. As Daniels has done in every job, he promptly announced a $40 million budget cut and did not raise tuition rates for 2014. This appears to be his plan for the next several years.  Cut expenses and hold or reduce tuition.

Is there that much waste in higher education? Common sense would suggest there might be. There has been no incentive to manage costs at any college or university. Just raise tuition to cover the budget. Students just get bigger student loans, no problem.

But, isn’t this the gist of the problem? Graduates get hired first from schools with the best brands, like Harvard. Harvard sets the price  for tuition rates. Lesser brands step down from the elite schools, but raise rates accordingly.

And so it goes. University presidents come from academia. They have run nothing, like our current president. They add waste and cost to their budgets. Tuition’s go up to cover increasing inefficiency. Student loans go up to cover that waste and poor management. It’s happening at every college and university, so there is no price gap for better-run schools.

It’s a cycle that seems impossible to break.

But, watch Purdue, under the unique leadership of Mr. Daniels. Maybe we will all learn a lot from him. Perhaps good higher education can be delivered at much lower costs–if someone actually cares and acts. It would be nice to deliver that instead of delivering no better education at much higher prices with that cost taking kids and grand kids years to pay off in student loans financed with our tax dollars.

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