<p>Knowing that you've often predicted (suggested) that elite colleges should allow free-market bidding to drive the price up for wealthy students, I'd thought you'd be interested in confirmation that colleges are actually discussing this option. This blurb from an article in today's Swarthmore Daily Gazette discussing last weekend's alumni council meetings:</p>
<p>*Two members of the Board of Managers also came to speak to Alumni Council, namely Jed Rakoff '64 and Secretary Cynthia Graae '62. Rakoff was "very pleased to report that Board meetings have been boring beyond belief... it means that the college is in very good shape and there are no immediate issues dividing us," but warned that "the ever-rising cost of a Swarthmore education... may lead to a very serious crisis ten or twenty years from now." As Graae humorously noted, the price of a college education is in some senses "becoming a giant Ponzi scheme." If the cost of tuition continues to rise faster than the rate of inflation, the college may have to make radical decisions.</p>
<p>The alumni asked Rakoff and Graae difficult questions about what was driving the rising costs and what the college was going to do about it. This latter question sparked a fascinating discussion; two ideas that have been rejected by the Board so far include progressive tuition for the super-rich and eliminating tenure. These ideas are both considered "too dangerous to experiment with." If Swarthmore took either of these steps alone, it would risk losing prospective students and faculty to peer schools.*</p>
<p>Look at two hypothetically identical colleges, one with an average faculty service-length of 20 years and one with an average of 10 years. The college whose faculty averages 20 years of service will have higher costs. Due to compounded raises over a period of time, the salary costs of older professors are higher. It's a signficant issue because faculty and staff compensation is such a large percentage of the overall expenditures (56% at Swarthmore). </p>
<p>Tenure creates two constraints:</p>
<p>a) Few professors retire, making it difficult for the college to maintain a stable mix of young (lower-cost) and old (higher-cost) professors.</p>
<p>b) It is difficult to adjust the distribution of faculty slots to match changing demands for course and department offerings. For example, creating a new Arabic program means adding tenured slots, not redistributing slots from programs with declining demand. Unless the school is steadily increasing both its enrollment and endowment in lockstep, additional slots put pressure on budget allocations.</p>
<p>This is becoming an acute problem as the aging "baby-boom" generation now dominates the tenured faculty slots at elite colleges.</p>
<p>Schools are responding to these issues in two ways that I have seen. Some (including Swarthmore) have instituted attractive retirement packages in order to give them some needed flexibility in tenure-track faculty slots. Others have shifted the teaching load dramatically away from tenured slots to non-tenure track adjunct and contract professors.</p>
<p>The aging of the baby boomer faculty who were all appointed at the same time is compounded by the lifting of retirement age and the lack of incentives to retire. In fact, there is a real disincentive, especially as regards health care which is a major consideration for older people.</p>
<p>":two ideas that have been rejected by the Board so far include progressive tuition for the super-rich and eliminating tenure. These ideas are both considered "too dangerous to experiment with." </p>
<p>Actually, all schools are experimenting with "progressive pricing" now, by raising "the price" of tuition at rates higher than inflation, and then offering additional financial aid to those who can't pay it. But since it is like the proverbial frog dropped into the warm but soon to boil pot, the customers just don't know it yet.</p>
<p>As tuition rises, the number of applicants increases. Adam Smith would not have foreseen this; Thorsten Veblen would.</p>
<p>In some of the sciences, and in the university's colleges of business, medicine and engineering many (most?) untenured professors make considerably more than tenured professors in the liberal arts. Plus professors in these fields often require large start-up research grants from the universities.</p>
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Actually, all schools are experimenting with "progressive pricing" now, by raising "the price" of tuition at rates higher than inflation, and then offering additional financial aid to those who can't pay it.
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<p>No question, they are indeed doing so. Nevertheless, that is still short of actually charging the wealthiest students either true market price or what a year at Acme actually costs to provide. As you have pointed out, there are schools that could be charging $60,000+ (or more) and still have customers lined up around the block. Some already do that on an ad hoc basis, as is evident in the articles about development admits.</p>
<p>I thought it was interesting to see a college Board of Managers actually admit dicussing an explicit policy of progressive pricing.</p>
<p>"I thought it was interesting to see a college Board of Managers actually admit dicussing an explicit policy of progressive pricing."</p>
<p>There is an explicit policy of progressiving pricing now, though it is called "tuition discounting".</p>
<p>One of the neat tricks schools can perform is to look more "diverse" by raising prices. Our alma mater is a prime example. If they raise prices enough, more of their upper income students qualify for "need-based" aid. The percentage of students requiring need-based aid goes up even as the income levels of the students goes up at the same time. Neat trick. The result is that our alma mater (and I think this is likely true at many Ivy and other prestige schools) is signficantly LESS economically diverse than it was 25 years, even though the percentage of students receiving need-based assistance has risen.</p>
<p>I think what is missing from the system are the bidding provisions I've suggested. Prestige colleges have them now, in the form of developmental and wealthy legacy admits; but why not have them publicly available, and open to all "qualified" bidders? The colleges would benefit greatly - if you assume they really need the money. ;)</p>
<p>I don't think I agree with your investigative reporting here. How do you know that a rejected idea was discussed?</p>
<p>The article said the idea was rejected. That isn't necessarily "confirmation that colleges are actually discussing this option."</p>
<p>Now, I don't know what went on in the meeting. But because I can readily, very readily, imagine a scenario where an idea is rejected without discussion. I've been in meetings like that--where a list is presented, including certain ideas meant to be examples of what you're NOT going to do. They aren't discussed. I'd want much better evidence than you're offering that this is, indeed, a topic of serious discussion at Swarthmore. Or, as you've suggested, at some unknown number of colleges. </p>
<p>As for mini's suggestion, the increase in apparent (not actual) socioeconomic diversity may indeed be a side effect of increased tuition. I've been in on too many discussions of tuition to believe that it is the motivator for tuition increases, however.</p>
<p>I don't believe that either extreme progressive pricing or ending tenure was "seriously discussed" for near-term implemention at Swarthmore. However, the two ideas must have generated sufficient chat among board members to be mentioned as theoretical options in a discussion on long-term college economics with the alumni council. Keep in mind that the entire topic was somewhat theoretical in nature as they were discussing trends 20 or 30 years down the road at a school that is, and is projected to remain, comfortably in financial equilibrium for the near-term future.</p>
<p>I do think, as Mini points out, that the concept of progressive pricing probably does serve as a backdrop for more specific discussions about increases in tuition and need-based financial budgets. I think the board is consciously aware that approving annual increases in both is, in reality, slowly trending towards more progressivity in pricing. This trend is occuring across a wide range of elite colleges and universities, although short of actually charging their wealthiest customers a price that fully covers the cost of goods and services.</p>
<p>Marite makes an interesting point about people i.e professors working for health insurance. There are probably millions of Americans who don't need the money who are working for the insurance and keeping jobs from younger folks who desperately need the income to support their families or even pay off their top 25 college loans. I've met quite a few. Another example of the stupid societal implications of our screwed up privatized health insurance system.</p>
<p>I may be hit by lightning for suggesting this, but another challenge facing institutions that offer tenure is how to compel faculty members to keep the curriculum abreast with the latest developments in the field and/or the current educational methods. All of us probably can recall a professor who rested on his/her laurels to the detriment of the students and the education they received.</p>
<p>By offering multi-year contracts, both the institution and the faculty member can benefit. The institution is better assured of having an instructor who's staying on his/her toes, and the faculty member can leave if, after the contract is up, s/he is dissatisfied with the institution.</p>
<p>Someone asked ex-Pres Larry Summers how much money it would take for rich parents to get an unqualified applicant into Harvard. He thought about it for a minute and then answered (apparently in earnest) - "50 million dollars!"</p>
<p>Many Catholic k-12 schools already do this (at a lower level, of course).</p>
<p>Instead of offering automatic discounted tuition to parishioners or for multiple children, many Catholic schools are "charging" a higher amount and then expecting the parents to demonstrate why they should pay a lower amount.</p>
<p>for example. Catholic schools used to automatically give substantial "multiple child" discounts. However, many realized that it was ridiculous to give such discounts to Doctor/lawyer/business owner families with $200K plus incomes. Therefore, such discounts are no longer "automatic" at some schools. A family must submit financial paperwork in order to get such a discount. </p>
<p>Why shouldn't private colleges (who have to subsidize the costs of each of its students with foundation money) charge the richest amongst us the "real full freight"??? Do you really think Forbes Jr's family, Trump Jr's family, or Kennedy Jr's family is going to blink at having to pay 30K more each year for a Harvard ed???</p>
<p>The problem comes in with the definition of the "richest among us." Is it based on income, income minus expenses, net worth (Steve Jobs takes $1 per year in salary), or taxes paid, and so on? I think the way this is currently handled is through alumni giving and other donations. The very rich often provide well beyond the full tuition costs to academic institutions to which they become attached.</p>