Higher Cost Education

August 8, 2005
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WEST MICHIGAN — Despite universally higher costs, Grand Valley State University’s per student operating costs have risen by an average of only 2 percent a year since 2001, nearly one point less than the Consumer Price Index.

In that time, GVSU state aid per student dropped by an average of 6.4 percent each year, even as enrollment grew by roughly 10 percent to a record 22,063 students. To make matters worse, the state apportions funds to GVSU according to its 1999 enrollment. Its enrollment gains since then have not been funded by the state.

As such, when the class of 2009 begins class in a few weeks, the freshmen will face tuition prices 33.5 percent higher than the class of 2005.

“We agree with the governor that more students have to go to college,” said Matt McLogan, GVSU vice president for university relations. “And we’ve done our part in admitting students, even though there is no state aid behind them, but we are reaching our capacity to do so.”

Of the 15 public universities, GVSU had the second lowest operating costs and the lowest salary increases.

In contrast, the other public undergraduate campus in West Michigan, Ferris State University, has increased tuition by 44.3 percent since 2001. The region’s largest private college, Calvin College, increased its by 27.3 percent.

According to the U.S. News & World Report and the Princeton Review, Calvin is a “Best Buy.”

Its staff to faculty ratio is a lean 1 to 1.12, average professor salary and rate of annual increases are dramatically lower than any of the nation’s top-tier private schools, and its faculty teaches more hours, according to Sam Wanner, Calvin director of financial services.

Yet, Calvin’s tuition has increased by $4,055 since 2001, twice as much as GVSU.

“Simply put, tuition (at GVSU) is going up because state aid is going down,” McLogan said.

Twenty years ago, the state paid 75 percent of a student’s bill at its public universities. This year, the state will pay 23 percent of GVSU’s per student costs.

“As a result, (higher education cost) is now a matter of the individual citizens being left to their own devices,” said GVSU President and former Michigan budget director Mark Murray.

“It may not be a state policy to shift the burden to students and their families, but that is surely the result,” McLogan added.

Jim Duderstadt, former president of the University of Michigan, believes the marketplace should assume the burden.

“The old model — where the states supported public education and the feds helped provide access with modest need-based programs like Pell Grants — is broken beyond repair,” he said. “The states just don’t have the money to support public education any more.”

“Higher education is going through a very significant restructuring, just like health care did,” he said. “The public is a third-party payer, and the market doesn’t work very efficiently because the public doesn’t know what’s going on.”

In more ways than one, Michigan’s higher education system parallels its health-care complex. Murray blames the same root cause for rising costs in both: Medicaid’s ever-growing share of the state budget.

Duderstadt believes the state should forego universities altogether, instead investing in citizens.

There is growing support for a system in Michigan to allow universities to price competitively with private colleges, with the state helping to guarantee access through need-based financial aid. “That way, you don’t provide a highly subsidized education for kids from upper middle class families that could afford to pay a little more,” said Doug Drake of Public Policy Associates.

With the low-tuition model, when the state doesn’t provide the discount, universities are forced to use other resources to keep tuition low.

At U-M, per student costs are $7,000 more than total per student revenue from state aid and tuition. The balance is paid with endowments that could fund financial aid. Likewise, the state has cut its own need-based programs in favor of per-pupil general funding.

This has created a clear upper-class subsidy at the nation’s flagship public schools, like U-M, where the average family income of an undergraduate is well over $100,000.

“Low tuition only works if the state provides adequate support to fund the universities,” Duderstadt said.

U-M has nearly met the private model. It demonstrated through its affirmative action debate that it operates autonomous of the legislature. With the latest round of cuts, state aid dropped to below 7 percent of its operating budget.

“The state is clearly the minority shareholder in a university like this,” Duderstadt said. “The state would be better off investing in the marketplace, and letting the universities compete for the market.”

There are experiments of this sort across the country. Colorado has adopted a voucher system, while Virginia has converted its three flagship universities into corporations.

Miami University of Ohio developed a transparent system using real cost as the basis of tuition, with state appropriations represented on resident students’ tuition bills as a discount.

Central Michigan University took a step toward the marketplace model with its decision to lock tuition for four years, after a 19 percent increase.

Public universities could eventually resemble Baker College of Muskegon. The region’s fastest-growing college has doubled its enrollment in the past six years. Yet, its tuition has only risen slightly higher than CPI — 12.9 percent since 2001.

Baker’s full-year tuition is roughly the same as GVSU, but unlike GVSU, tuition is its only source of revenue.    

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