Lowering the Cost Barrier

President Lawrence S. Bacow grew up in the Rust Belt in the 1950s and ’60s, before it was rusty. His hometown of Pontiac, Michigan, boasted three General Motors plants: GM Truck and Coach, Fisher Body, and Pontiac. Oddly enough, life in a manufacturing boomtown gave Bacow a unique perspective on the value of higher education. “If you graduated from Pontiac Central or Pontiac Northern High School,” he says, “you aspired to get a good job in the automobile industry, which gave you job security and tremendous benefits. You could lead a very good middle-class life without a college degree.”

Today, of course, those plants have vanished, and with them the idea that a high school diploma is sufficient to achieve the American Dream. As manufacturing jobs have moved to lower-wage countries, Bacow says, “what remains are higher-value-added jobs that require higher skills to perform. This has increased the demand for education.”

Statistics bear him out. Between 1960 and 2009, the Bureau of Labor reports, college enrollment rates among sixteen- to twenty-four-year-olds rose from 45 percent to 70 percent.

But as the demand has soared, so has the price of a degree. A few more figures, if you please: Bloomberg News reports that state funding for public colleges and universities has dropped from 50 percent of those institutions’ revenues two decades ago to 30 percent today. The amount charged to students for tuition, room, and board at public institutions jumped 32 percent in real dollars between 1998 and 2008, according to the National Center for Education Statistics; the increase at private institutions was 24 percent. As always, poorer families are taking it on the chin—especially because the federal Pell grants on which 9 million lower-income college students rely cover a dwindling share of costs (the maximum grant covers 32 percent of average tuition and fees, down from 50 percent in 1980).

All of this has Larry Bacow convinced of one thing: the United States must find ways to make higher education more accessible and more affordable. After stepping down from the presidency of Tufts on August 1, he will spend much of his time working toward solutions. Besides serving on nonprofit boards and on the visiting committee for Harvard’s Kennedy School of Government, Bacow will spend the 2011–12 academic year as president-in-residence in the Higher Education Program at the Harvard Graduate School of Education. He will join the Harvard Corporation on July 1, and will remain a member of the President’s Board of Advisers on Historically Black Colleges and Universities. And he will collaborate with other education leaders to study how information technology can open up entirely new avenues to higher learning.

In an interview with Tufts Magazine, Bacow made it clear that economic competitiveness is not the only reason to improve access to a college education. But it’s a darned important one.

TUFTS MAGAZINE: You’ve said that access to higher education is one of the biggest challenges to American competitiveness. How do you mean?

PRESIDENT BACOW: We used to have the most highly educated workforce in the world—with a higher proportion of college degrees than any other nation. But between 1997 and 2008, the U.S. educational attainment rate went from third to tenth worldwide, and Korea is now the global leader. President Obama has set a goal of reclaiming our number one position by 2020. To do that, we’re going to have to substantially increase the percentage of people in our population with college degrees. And that means increasing access to college.

Where does one begin?
Well, we can’t solve all the issues of access within the realm of the colleges and universities themselves. One challenge is to ensure that our K–12 education is as good as it can possibly be, equal to the best in the world. And we have a long ways to go. But assuming we get kids well prepared coming out of high school, and that they want to go to college, we need to make sure that the opportunity is there for them. College has to be affordable to students and their families.

And it’s not.
Unfortunately, we find ourselves with an ever-increasing demand for a more educated workforce at exactly the time that our public higher-education institutions find themselves strapped for the resources to make the kinds of investments necessary to educate that workforce. If you read the higher-education press on almost any day of the week, it is dominated by stories of colleges and universities in financial crisis—about state appropriations being slashed. That means higher costs for students.

Tuitions at private institutions have risen, too, of course.
When I was a student at MIT, we used to have a protest called the annual tuition riot. I’ll never forget the slogan that was painted on all the signs my freshman year, in 1969. It read: “$2,150 is too damn much!” Two thousand one hundred fifty dollars was too damn much. Back then, people kept saying, “These increases cannot go on forever.” But they’ve continued to go on. And what’s interesting is that it doesn’t seem to have curbed the demand for this very high-end form of education that’s provided at the MITs and Tufts Universities of the world.

What has happened—which I think is a cause for concern—is that institutions like ours are becoming affordable only to those families who can pay the full price, without financial aid, or to those families who qualify for financial aid. What’s being left out is the middle. Over time we’re going to wind up with a bimodal distribution of income at these institutions, and that’s fundamentally unhealthy.

Why does tuition always rise? Can’t institutions cut costs instead?
In higher education, unlike many other areas, fixed costs are truly fixed. By that I mean the cost of owning and operating and maintaining physical plant. It’s not as if we can sell off buildings or close down sections of the university in the way that businesses can save money by selling off divisions or closing branches.

Even our so-called variable costs are essentially fixed. Colleges and universities tend to be collegial enterprises. It’s very, very difficult to lay people off in collegial enterprises, even when tenure is not a consideration. So to balance their budgets with diminished resources, the only thing institutions can do is increase tuition. That in turn affects access.

But surely there are frivolous expenditures that could be cut. Aren’t some institutions competing on amenities instead of academics?
Higher education is a very competitive business, and like all competitive businesses it is responsive to the marketplace. And the marketplace in many cases is looking for additional amenities. I always say, “We know how to make higher education less expensive. It requires bigger classes, less student-faculty contact, less hands-on learning, simpler facilities, fewer course offerings.”

The problem is, that’s not what the market demands. In ten years as president of Tufts, I’ve never had a student or family come to me and say, “President Bacow, increase my class size, reduce my course offerings, give me simpler food offerings in the cafeteria. It would really be OK if we had triple and quad dorm rooms”—and by the way, I lived in a quad my freshman year in college—“and as a result lower my tuition.” I’ve never heard it once. Everybody wants more, and they want us to do it for less.

How do you respond?
When I came to Tufts, I said we were going to judge every single resource allocation decision by how it helped us to advance our academic priorities. That’s been helpful to me over the years, because I’ve used it to ask people, “So how is this going to help us to do a better job of educating our students or generating new knowledge?” In many cases the answer is, “It’s not.”

You won’t find climbing walls at Tufts. You won’t find the equivalent of fancy health clubs. You won’t find concierge services in the dormitories. But at the same time, we need to understand that we are subject to the pressures of the marketplace. And all the pressure is to do more, not less.

Then what’s the solution? If tuitions keep rising, how will people who aren’t wealthy afford higher education?
One solution is increased public support. What a lot of people don’t realize is that the countries that have made dramatic gains in the education of their labor force, such as the Russian Federation, are doing so by significantly increasing their public spending on education, taxing their population to support it.

Over the last few decades in the United States, tax rates have continually fallen. During the Eisenhower years, the highest U.S. marginal tax rate—the amount owed on income exceeding $300,000—was above ninety percent. Even under the Reagan administration, marginal tax rates were as high as fifty percent. Today, the highest marginal tax rate is around thirty-five percent. So we have reduced the tax burden quite substantially, but we have not reduced our aspirations.

How do we bridge that gap between resources and aspirations?
I think different people will have different prescriptions. I personally would be willing to pay more in taxes to see that more people benefit from the American Dream. I think politicians from both sides of the aisle know that the solution to the nation’s budget challenges will require more revenue, as well as cutting some entitlements. It’s just a question of when people are going to muster the political will to do it.

Do we need some kind of “Sputnik moment” to galvanize public support for education?
Higher education in the United States remains the envy of the world. But other countries are doing their best to catch up. As we speak, Russia is creating an entrepreneurial education city outside of Moscow, to be anchored by a new university focused on science and technology innovation. You have the same thing in Abu Dhabi at the moment, with an institution called Masdar, modeled after MIT. China and India are investing heavily in creating new colleges and universities. And Singapore is making huge investments to upgrade its universities. Everybody would like to have what we have.

And the competition might do us good?
The great economist of the first half of the twentieth century, Joseph Schumpeter, talked about “creative destruction”—the idea that what makes capitalism work is competition, because it encourages innovation, which tends to destroy less efficient, less innovative competitors. We’ve seen the effect of creative destruction in manufacturing industries in the United States. We’ve also seen the United States flourish where it has been able to be innovative and creative. I think the challenge for higher education in the United States is to continue to be innovative, creative, and competitive with the rest of the world.

This will require not just investment, but also brain power and a willingness to do things differently than we’ve done before.

What kind of changes do you envision?
One thing I’m looking forward to in my next life is collaborating with some colleagues on a project to look at how we can creatively use distance-learning technologies—use them to teach courses in large-scale public institutions more efficiently as a way not only of reducing costs but also, ideally, of improving learning.

We’re still in the embryonic stage of understanding how to use these new tools. Initially, people thought educational technology meant that we were going to teach courses the same way we always taught them—we were just going to broadcast them to the rest of the world. And now people understand that technology gives us the opportunity to rethink how students learn, to provide real-time feedback. We can ask questions along the way in the learning process, and based upon the responses to those questions, we can provide the student with additional layers of understanding to supplement material the student has not quite comprehended yet. Or we can accelerate their path through the material if they’re understanding it more rapidly than might be the case with a one-size-fits-all approach.

What’s holding us back, then?
One challenge is that the technology itself is not cheap. We need to figure out how to underwrite those costs and amortize them properly. Another issue—one we’re going to be exploring in our research project—is the way our educational system is set up. Right now, it’s organized towards faculty offering semester-long courses, students registering for those courses, faculty controlling how those courses are taught. The future may require very different ways of thinking about learning, in which the notion of semesters and courses yields to much more fine-grained learning modules, which are distributed over time as students become capable of taking them and absorbing them.

How do we know there is a market for that kind of learning?
One thing that has changed in the United States is that there are now more nontraditional students than traditional students. By that I mean the proportion of students going to college who are four-year residential eighteen- to twenty-two-year-olds is being dwarfed by the number of people who are going to school while holding a job, or returning to school after they’ve done something else. People’s schedules don’t necessarily adapt well to a semester-long course that meets on Monday, Wednesday, and Friday from ten until eleven thirty, with a section that’s offered on Tuesday and Thursday from four until five. But technology offers us the opportunity to deconstruct that, and then reconstruct it in a form that is more accessible to students who’ve got an entirely different set of demands upon their time.

So technology might make higher education more affordable, but at the same time render it unrecognizable.
We can’t continue to do things in exactly the same way we’ve always done them and expect different results. I think Schumpeter’s phrase “creative destruction” says it all. We need to be creative, even if that means some of our present ways of doing things will fall by the wayside. Out of that will come new models.