Any parent who lies awake wondering how to put a son or daughter through college must wonder why the cost is rising so fast - to $25,000 a year at elite private colleges and universities, to $8,000 even at a state-supported institution like mine in Columbia, Mo.
If society is to control the rising cost of higher education, it is important to understand the answers.But most lawmakers and policymakers are misled by standards of measure that betray an inadequate grasp of the financial challenges we face, especially at major research institutions.
Even people who sound sophisticated about education costs insist on comparing them with the Consumer Price Index; they seem unaware of a more valid gauge, the Higher Education Price Index. Even this index understates the problem.
To have a good price index, economists need a "market basket" of products or objects that remain constant.
The education measure is made up of indices related to faculty, technical and staff salaries, the costs of energy, etc. The items it measures and the weight of its separate indices haven't changed since 1983.
But for just that reason, the index does not take account of the fast-changing circumstances in which colleges and universities find themselves.
Though it has run 25 percent ahead of the Consumer Price Index over the past decade, the Higher Education Price Index drastically underestimates the institutions' true costs of doing business - costs over which the institutions often have no control. Consider a few items.
- Need-based student aid. University dollars spent on scholarships based on need have soared in the past few years.
At Vanderbilt, where I was provost, such aid has gone from $3.8 million to $14 million in eight years. Such aid goes up when tuition does. But it would rise even if tuition were constant: Increases in the cost of food, housing and books directly affect financial need.
- Diversity. Four-year colleges and universities increased their minority enrollment by 36 percent in the 1980s, almost three times as fast as overall enrollment. Minority students tend to be less affluent, and more aid is necessary to attract and keep them.
- Libraries. Universities are moving rapidly toward the electronic library of the future, involving an investment of millions of dollars. This is not reflected in the index.
- Changes in federal relations. To save money and crack down on abuses, the government is changing the way it reimburses universities for the indirect costs of research. This costs the leading institutions millions of dollars a year. None of this is reflected in the index.
- Cost-sharing in research. Since World War II, the government has paid the full costs of basic research in universities. In recent years, pressure has been put on the institutions to share the costs, direct and indirect.
- Technology. The leading universities are under great pressure to be on the cutting edge of technology, not only in research but also in the classroom. Institutions that replaced their computers every 10 years now try to replace them every two years. This change is not reflected in the index.
- Deferred maintenance. During the high inflation of the 1970s, almost every university tried to put off noncritical spending. Most made the mistake of postponing needed maintenance and repairs. Now those costs are coming home to roost. But they are only partly mirrored in the index.
The Consumer Price Index should never be used in discussing the costs of higher education. The Higher Education Price Index, produced by a private organization called Research Associates of Washington, is not much help.
We need a new or drastically changed index that reflects the true costs of doing business, not just the price of constant products.