Paying the Piper: Why Tuition is Going Up

In these days of rising faculty salaries and falling federal funding, setting college tuition rates can be a sticky business.

"There's an old saying that we used to have that the cost of a college education was in line as long as it did not cost more than a standard Chevrolet," says John Blackburn, the director of the American Association of University Administrators (AAUA).

Today, a spanking new Chevrolet may cost $12,000. The total cost of a Harvard education is $18,200--nearly three times what it was just 12 years ago.

And students can hold little hope for relief.

Rises in annual tuition costs nationally have outpaced inflation in recent years, and experts say the trend shows few signs of slowing down.

But University administrators say Harvard students are not getting more for their money--they are just paying for a larger portion of what they get. "At this point you are, as students, bearing more of the real costs than your parents were as students 20 years ago," says Elizabeth C. Huidekoper, the director of the Budget Office.

In 1977, an undergraduate paid $6525 for tuition, room and board. Student tuition made up 22.8 percent of the University income. Ten years later, each student paid $16,145 for a year at Harvard, and tuition paid 26.7 percent of total University expenses. Tuition has recently risen between 3 and 5 percent over the concurrent inflation rate. comparing the rise in tuition to the Consumer Price Index (CPI), which measures national inflation for a breadbasket of consumer goods, is inappropriate. Instead, they say, the tuition hikes should be measured against the Higher Education Price Index (HEPI), which guages increases in university expenses. The annual index is calculated by an non-profit research firm.

The HEPI for the past several years has been about one or two percent higher than the CPI. According to Marjorie Halstead, one of the researchers who compiles the HEPI each year, it is currently heavily weighted for faculty salaries and also considers book and periodical costs, utilities, supplies and equipment.

University administrators and national researchers attribute the shift to reliance on tuition income and the dramatic yearly increase in tuition prices to a variety of sources, ranging from the high cost of library acquisitions, building maintenance and laboratory equipment to a desire to become more selective by becoming more expensive.

Halstead said that the HEPI has been particularly high in the past several years because universities are raising professors' salaries by a large amount each year.

Robert H. Scott, vice president for finance, says that one of the major sources of tuition jumps at Harvard and elsewhere is a historic lag in salary increases. "Universities tend to change much more slowly than the outside world," Scott says. "During the periods of high inflation in the late 1970s, faculty salaries did not increase. We are correcting for that now."

In 1980 the average salary of a full professor was $42,900. That figure increased by nearly $25,000 in 1986 and last year reached $73,200, according to data given by Harvard to the American Association of University Professors (AAUP).

But even with the high salary increases built in, the HEPI still doesn't match increases in tuition, says Arthur Hauptman, a researcher at the American Council on Education who is compiling a report on recent nationwide tuition increases.

"You can't explain the whole thing by faculty salaries, deferred maintenance, library periodicals or whatever is used as a cost based excuse," said Hauptman. "Part of it is a pricing decision. The market will bear a higher price."

A number of education experts--including former Secretary of Education William J. Bennett--say that schools increasingly believe that higher price tags are seen as a measure of selectivity. Officials at Mount Holyoke College, which has risen into the ranks of the country's most expensive colleges, say universities are raising tuition to seem more desirable to students. At the South Hadley, Mass. school, applications shot up as tuition rose in past years.

Harvard administrators, however, dispute this connection. "Who would want to be the most expensive school?" asks Huidekoper. This year, Harvard has the highest tuition price of all the Ivy League schools. Bennington College in Vermont is the priciest college in the nation.

Well-Endowed

At Harvard, a conservative management strategy for the endowment has contributed to the tuition increase, officials say. In recent years, the $4 billion endowment has paid for an increasingly small percentage of total expenses, and other forms of income--mainly tuition--have had to make up the difference.

In 1977, 21.6 percent of expenses were covered by the endowment. In 1986 the figure had dropped to 17.1 percent.

Although bull market gains more than doubled the endowment in the 1980s, the windfall was largely reinvested to enhance the endowment's long-term health.

"The Harvard Corporation has decided that it wants the endowment to be just as important to a student a century from now as it is today," says Scott.

Thoughout the five-year bull market, Harvard did not increase the percentage of endowment spent each year to reduce the tuition burden, until a policy shift last fall. At that time the administration raised the amount of endowment spent during the current fiscal year. However, this increase did not lower tuition hikes.

Renovations

Administrators say that maintenance and recent renovations on houses and dorms have also weighed heavily in tuition increases. Next year, administrators say they expect room and board fees will reflect these renovation costs even more.

Administrators say it is difficult to dip into the endowment to pay brick-and-mortar costs, because donors often earmark their gifts to Harvard for other projects. The Harvard Campaign, a recent fund drive, set a goal of $12 million for the houses and dorms, but raised only $300,000.

"People don't want to give money to building maintenance," said Huidekoper. "All the buildings are already named."

However, administrators say they do not expect the rises in tuitions to always be as far above inflation as they have been in the past few years.

In his official report on the financial results for the fiscal year 1987, Scott said, "Real increases of this magnitude are probably not sustainable in the future; the pattern will be closer to the historical one of a point or two above inflation."

Administrators and researchers say that the rise in tuition will always be slightly above inflation because even after universities have stopped correcting for inflation, salaries will increase by more than the CPI.

"If you just give faculty an inflationary increase then you would stay with inflation, but if you give them a meritory increase then you must exceed inflation," Blackburn said.

Because salaries comprise nearly 50 percent of University expenses, any salary change would have a large impact on overall expenses.

Another trend straining universities' pocketbooks in recent years is falling federal funding. Hauptman says that budget cuts under the Reagan administration have forced colleges to place greater financial burdens on students who can afford to pay full tuition. Scott says Harvard has experienced a similar "cost shift."

But Huidekoper and FAS Assistant Dean Candace R. Corvey offer a different assessment, saying that because Harvard is able to solicit outside gifts for scholarships and financial aid, some students don't subsidize other students. A recent FAS fund drive that hoped to raise $24 million for scholarships ultimately reaped $37.6 million.

But things could be worse. If the FAS total expenses for the 1986-87 academic year were paid only by the 9000 students with no endowment or financial aid, each student would pay about $29,000.