Tuition Figure More Subjective Than It Seems

Every year, Harvard's tuition goes up. This coming fall and spring students will pay over $1,000 more for their education than they did last year--bringing the grand total to exactly $32,164.

But this figure--presented with some fanfare by Dean of the Faculty Jeremy R. Knowles--isn't exactly tied to any one factor.

Tuition is not determined solely by student costs. The cost of educating a Harvard student for a year is over $15,000 more than the price students pay.

Instead, factors including competition from other schools, students' willingness to pay, inflation and precedent are combined with cost to produce a ballpark tuition figure usually very similar to that of years before.

And, while increasing costs provide a constant pressure for tuition to increase and bring in more revenue, the small exact amount of that increase seems more a subjective judgment than the product of exact calculation.

One Student: $48,000

It costs $48,000 to put one student through Harvard--including instructional costs, student services, scholarships and other factor, according to the Harvard News Office. Each student only pays about 60 percent of this. The remainder comes from a variety of sources--mainly gifts and investments.

Undergraduates paid $170.9 million in tuition, room and board this year--providing 36.4 percent of the total revenue for the Faculty of Arts and Science (FAS). In addition, FAS collects graduate student aid, $132 million from the endowment, gifts, grants and contracts, sales and others.

On the expenditure side, the FAS budget supports faculty and center research, libraries, museums, student services like House life, financial aid and other institutional needs.

It spends the largest amount--over $133 million--on pure academic costs, such as faculty salaries and benefits for other instructors.

But it is also in charge of funding the branches of the University like the libraries, which are not exclusively for the use of undergraduates and faculty members.

"There are a number of resources used by the whole University that are under the FAS administrative and budgetary control," says Dean of the College Harry R. Lewis '68. "The athletic facilities are an example."

FAS spends most of its money on services that both directly and indirectly affect its students' education. The unrestricted funds that come from tuition can be used to compensate faculty and pay for salaries, fund administrative buildings and staff, operate instructional departments, and sponsor research.

Student services like counseling, extracurricular activities, and financial aid also fall under the FAS umbrella. These costs may not directly affect academics, but they are a part of a Harvard student's complete education.

Knowles' Decision

At Harvard, the final tuition, based on an amalgamation of both monetary and social factors, is the product of what the Treasurer of the University D. Ronald Daniel calls a "dialogue" between Knowles and the corporation.

Familiar with the budgets of all the schools, the corporation guides Knowles through the process. Then, in the late spring, Daniel and his colleagues must approve Knowles's tuition value.

The corporation evaluates the numbers in the context of the inflation rate and the median family income

Were the dean and the corporation to disagree, however, Daniel says, "The buck would stop with the dean."

"Realistically after some jawboning the dean is going to be the person accountable," Daniel says. "We might register our concern or our dismay."

University officials say Knowles' decision is based in part on his evaluation of the tuition market. While they may not always admit it, all schools are watching their competition, aiming to lure prospective students with attractive tuition rates.

Elizabeth C. "Beppie" Huidekoper, Harvard's vice president for finance, says what other schools are offering does have some effect on Harvard's tuition figure.

"It would be a factor of the market, of whether we are still getting the best students," Huidekoper says.

Executive Director of Student Financial and Administrative Services at Yale Ernst D. Huff admits that Yale would want to match other Ivy League schools' tuition if they decreased dramatically.

"Certainly we would take such an announcement seriously," Huff says.

Lewis is quick to point out that tuition is not market-driven in the sense that Harvard does not charge the maximum it feels people will pay for a Harvard diploma.

"If we charged what the market would bear, I'm sure the Harvard tuition would be a great deal higher than it is!" Lewis wrote in an e-mail message.

What Goes Up...

With the cushion of a strong endowment and a successful Capital Campaign, Knowles does not currently face a budget crunch, which might require a more direct tie between tuition and per-student cost.

So now, when he sits down to determine how much the mostly static tuition will increase for a coming year, he is free to decide which outcome looks the best to potential consumers within fairly broad limits set by necessity.

Knowles has made much in the past few years of his ability to "decrease the increase" of tuition from year to year.

For instance, the tuition increase for this year was 3.5 percent, 0.7 percent less than the year before.

Median family income should rise faster than tuition to enable families to afford the tuition increases, according to Knowles.

But because the calculations which led to this trend are so subjective--and have been made easier by a ballooning endowment--Knowles is not tightly constrained in seeking this pleasant outcome.

"Above all, predictability is a virtue," Knowles says. "I want to avoid sharp changes in tuition from year to year."

The corporation and the administration are equally committed to keeping the rate of increase down, according to Daniel.

"Everbody's supportive of Jeremy's strategy," Huidekoper says.

And even in times of greater financial need, officials say they would use more endowment money before increasing tuition substantially.

"I suspect we'd be willing to let the spending rate go up a bit" before raising tuition, Daniel says.

Princeton's Example

Not all schools employ the same method to derive their tuition price.

For example, at Princeton a committee that includes students, faculty, administrators and staff--in sharp contrast to Harvard empowering Knowles, subject to approval by the corporation--determines the rate, taking numerous factors into account.

Princeton's Vice President for Finance and Administration Richard R. Spies says the University's system is too complicated simply to use expenditures as a way to set tuition.

Spies says that "in a much simpler system where tuition was the only source of income" you could lower tuition, if you cut costs.

But he says at Princeton and other universities, "the costs and charges are not inextricably linked."

The 16-person Princeton committee--chaired by the provost and comprised of the dean of the faculty, the vice president for finance and administration, six faculty members, one staff member, two graduate students and four undergraduates--makes a budget recommendation which includes the tuition price to the president of the university. The president must then approve it.

According to Spies, the committee's budget and tuition proposal has been accepted in full each of the 30 years it has been in operation.

"They have historically become the budget," Spies says.

Spies says that Princeton, like its New England counterparts, cannot extricate itself from the ongoing competitiveness of the Ivy League.

"We would kill each other for a good student or faculty member," Spies says. "We are trying to be a bit better or a lot better than Harvard or Yale."

But Spies says that tuition discrepancies right now are not substantial enough to make a dent in the competition.

"Being $100, $500 or $1,000 different isn't going to make a difference," Spies says.

While Thomas H. Wright, vice president and secretary of Princeton, acknowledges that market pressures do play a role, the competition between the Ivy League colleges is not as relevant as one might think, he says.

"There are competitive pressures, but it's not just competition among peer institutions," Wright says. "It's a concern about [students] leaving our entire set of institutions and going public."