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The $50,000 Question

…I was just looking over my daughter’s letter for financial support at a midwestern liberal arts college, and the sticker shock hit me: the rack rate for liberal arts colleges is hovering around $50,000 per year.

As a professor at a midwestern liberal arts college, I know too well the energy, enthusiasm and commitment of faculty and staff to the learning process and outcomes at these institutions. The intentions for learning are genuine. The commitment to teaching and learning is deep, and the sacrifice of an array of stakeholders is noteworthy. But is the liberal arts educational experience worth $50,000 a year?

The fact that private liberal arts colleges are discounting tuition substantially from the rack rate is a sign that matriculants are not willing to invest these amounts into the educational model; they have done a basic cost-benefit analysis and have determined that, without pricing concessions, $50,000 is too much.

The viability of the classic liberal arts educational model is in jeopardy. It is a very pricey proposition with less than immediately apparent returns. Can the model survive? Should it survive? Is the $200,000 investment worth the present value of a lifetime of the incremental learning benefits?

I believe liberal arts colleges have a very rough road ahead, and without a rigorous redefinition of their educational models, they will not survive. The future success of these institutions depends greatly on better utilization and integration of technology and labor resources into the learning process. More and better quality of education utils need to be generated for the education dollar. We must somehow do much better…

Spring quarter starts Monday.

2 comments (Add your own)

1. Chuck Stull wrote:
Interesting question.

Back in grad school, I did some work on this and at that time, the return to college education was fairly good– better than most financial markets. The question then was “is a private school (either liberal arts or research) worth it compared to a public university?” Our data didn’t have incomes by school type, so we couldn’t test it. Some of the literature suggests a positive return to selectivity, but not to school costs.

The discounting phenomena is also interesting. Until the Ivy League “overlap” antitrust case, discounting was rare. After that, net tuition became much more competitive; sticker prices, less so. This difference between sticker and actual price is common in many markets– cars, stereos, cameras– perhaps due to price discrimination.

Thu, January 12, 2012 @ 4:42 AM

2. Steven wrote:
Interesting question.

Back in grad school, I did some work on this and at that time, the return to college education was fairly good– better than most financial markets. The question then was “is a private school (either liberal arts or research) worth it compared to a public university?” Our data didn’t have incomes by school type, so we couldn’t test it. Some of the literature suggests a positive return to selectivity, but not to school costs.

The discounting phenomena is also interesting. Until the Ivy League “overlap” antitrust case, discounting was rare. After that, net tuition became much more competitive; sticker prices, less so. This difference between sticker and actual price is common in many markets– cars, stereos, cameras– perhaps due to price discrimination.

Thu, January 12, 2012 @ 4:42 AM

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