The resourse gap in the US is rising exponentially
by Kumar David-August 5, 2017, 6:27 pm
University education is beyond the reach of middle or working class families in the US and the UK, so students get by with large education loans. The average tuition fee at Harvard is $50,000 per year for four years; add to that living costs, accommodation and books. State universities cost over $20,000 a year for four years. At a low cost US community college a two or three year vocational oriented programme will set a student back about $7,000 per year in tuition fees. Medical schools are far more expensive. A graduate will begin life with an average debt of $35,000; the highest may be $200,000. Student debt takes seven to 20 years to pay off. Many fall behind or walk away from unbearable debt obligations. The cumulative US student debt burden at the end of 2016 was $1.4 trillion ($1,400 billion) and widening; it exceeds by double the outstanding credit card debt ($620 billion). The number of indebted graduates was 44 million at end 2016.
After adjusting for population, income and prices the situation in the UK is not much better. At end 2016 outstanding student debt amounted to GBP 100 billion and is forecast to double in six years – unless a Labour government is elected soon. The average student in the UK walks out of university with a higher debt (GBP 32,000) than his American counterpart’s average of $35,000 (GBP 28,000). By 2011 UK students were paying 66% of university costs - probably over 70% now - out of their pockets and from loans. The cap on tuition fees now at GBP 9,000 per year is set to go higher. The sharp rise in fees was initiated by Tony Blair in 1998. Blair, a devotee of transplanting mantras of the private sector into public sector institutions, put an end to low cost higher education and jacked up fees, which have step by step risen to GBP 9,000.
The Academy in the Marketplace
Most disconcerting is that the university has become a business; Plato in his Academy would shudder! Not just private for-profit institutions, but not-for-profit and public (state) universities too have to put money and success as a business venture before learning, teaching, fashioning of an all-round person and love of knowledge. The most important department in university administration is marketing and student recruitment, whatever name it goes by. Deans and Heads of Department are under pressure to enrol a sufficient number of fee paying students. Swarms of slick recruiters are sent out by British and Australian universities to conduct recruitment jamborees, seminars and the like in Malaysia, Hong Kong, China, Indonesia and the Middle East where pools of eager, not necessarily rich, parents and students are spotted. In Sri Lanka, the Education Supplements in the Sunday Times advertise colleges and courses with the same bluster as mobile phone and kitchen appliance pushers. Foreign students are a prized resource in Britain and Australia because they are charged much higher fees which helps subsidise a range of university activities.
You could well ask what is wrong with a university pushing hard to earn as much money as it can. The answer is not straightforward in an age where governments are slashing funding and the number of school leavers eligible to enter tertiary education is increasing. If I recall correctly, the total number of university students worldwide in the 1960s was two million, now it is about 200 million. Thanks to advances in society and industry in the post-war period, the polish needed to break into higher social circles and the skillset essential for employment has become sophisticated. However, while the costs of providing higher education have been rising steeply, the contribution by the state has been edging up only modestly, leaving a large gap to be bridged by student fees.
As in business and banking, the top rung of university administrators are not doing badly at all. The salaries of Vice Chancellors in the US, UK and Australia are well above the inflation trend line and match rising tuition fee trends. Colleges have provosts or vice-presidents and departments geared for local and overseas marketing. There are reasons for the price surge: overpaid business oriented vice-chancellors or presidents, too many teachers and administrators and luxury dorms. As part of their marketing strategy, colleges are promising many outside classroom services; amenities include mental health services, counselling and recreational centres. It’s an advertising gimmick as in all salesmanship; convince buyers that they cannot survive without the inessential.
At some US private colleges 58 percent of each dollar goes to student and institutional support services, compared with just 42 percent spent on instruction. On many campuses, expansion of student services has driven a 30 percent increase the higher education workforce. Students are shouldering much of these costs as the state cuts back. It’s a vicious circle with no visible way out in the US, though it may be possible to cut the Gordian knot in the UK.
Universities in continental Western Europe do not levy tuition fees, or if they do the fees are small, and for this reason they are free of a market ethos and the academic atmosphere is healthy. I have read about, seen documentaries or had personal experiences as teacher or researcher in Germany, Sweden, Switzerland, Norway and the 1960s UK. If I may make a personal statement, time spent in a university free of market place morality is a pleasure. My colleagues in Hong Kong, US and latter day UK would enjoy liberation from this bazaar. But the system does not allow them to ignore raising money for the university kitty.
Should tertiary education be entirely free?
So far I have been negative about high tuition fees, but does that mean entirely free education, as we have got accustomed to in Lanka, is a good thing? Certainly free education, from the 1940s, has made high literacy and a degree of social equivalence across classes and regions, possible. However from the difficulties created by exorbitant tuition fees one cannot infer the other extreme, a perpetual 100% free system, is best. There are to my mind three reasons why a small fee, for example to recover 10 to 20% of university gross expenses, should be considered.
The first is that gratis university education has given birth to a generation of student hooligans who do not value what society gives them. Hence while I support the principle of allocating 6% of GDP to education in the long run, a split of 5.5% from the state and 0.5% from fees may be good. I am persuaded that this will inculcate an appreciation of the benefits of edification over hooliganism.
The second reason is that we have come a long way from the 1940s and there is more money in the country now, poverty is much reduced and even lower middle class families in city and village, and most working class and peasant parents, can afford a fee of say Rs 36,000 per annum. A monthly Rs 3,000 is three day’s wages of a casual worker.
Eighty percent of families can come up with the money without difficulty, and will do so given the high social premium of university education. Rs 36,000 each from 50,000 students sums to Rs 1.8 billion, which is 0.15% of GDP (Rs 12 trillion). In round numbers, right now, the budget allocates about Rs 170 billion, or 1.4% of GDP, to higher education. I am keeping the 5.5%:0.5% ratio at the back of my mind as a guideline.
A third reason is that if students pay part of their education costs they will be more quality conscious and demand better teaching, higher quality teachers and better facilities. Right now they take anything dished out to them lying down. I grant that the issue is complicated and controversial and not easy to resolve.
On a separate note an interesting point is whether not-for-profit yields a better outcome than for-profit. I know of no comprehensive comparative study of university education, but there is a very thorough investigation of the US healthcare industry by Zack Cooper of Yale University, published in Yale Insights. I quote from "Why Is Healthcare So Expensive?" of 12 February 2016.
Quote:
"Question: Are there difference between nonprofit and for-profit hospitals in terms of their prices?
Answer: We found, consistent with the wider literature that not-for-profits behave identically to for-profits. That is, their prices are equally high, and they are also likely to charge higher prices when they have monopolies. Given that nonprofit hospitals receive $30 billion annually in subsidies in the form of tax exemption, I think we have to ask tough questions about whether or not we should be giving not-for-profit status to these large hospitals".
End Quote.
If the results for the higher education sector are consistent with those of the healthcare sector this calls for mulling over some considerations. What if not-for-profit and for-profit are no better than each other in the end results they achieve, and are equally expensive once the costs to the state are factored in? Where exactly does this leave us?
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