The Value of a Higher Education Is Intangible Gettysberg College President Katherine Haley Will argues that while college costs are high, they are not unreasonable.

The Value of a Higher Education Is Intangible

Katherine Haley Will is the president of Gettysburg College.

As a college president and parent of four daughters who are in or have recently graduated from college, the relative costs and benefits of higher education are meaningful issues in both my professional and personal lives.

Questions about the cost of higher education are understandable. It is a significant, once-in-a-lifetime investment.

Many of the questions about the cost of education are based upon the tempting premise that business economic models apply to higher education. If one uses corporate economic models, the natural question arises: Why can't higher ed. be more businesslike and control costs better?

Certainly, we should expect that the finances of colleges and universities be managed with appropriate business practices -- and in 99 percent of the cases, they are.

But the economic models that apply to the corporate world fail to provide an accurate picture of the economics of a college or university education.

Economists who study higher education, like Gordon Winston, identify colleges and universities as "donative commercial non-profits" -- that is, institutions that charge a fee, but where the fee does not cover the cost of the product. These economists point to a number of differences between corporations and colleges/universities. In the simplest terms, businesses are motivated to maximize profit and minimize expenses. They sell a product for a fee to customers. Economies of scale are available to corporations -- the more they produce, the lower the per-item cost, the higher the profit. Businesses want repeat customers, based on satisfaction.

A "donative commercial non-profit" is unlike a business in myriad ways. To begin with, customer choice and motivation are different. There is no "perfectly informed customer" for higher education. Parents and students tend to base their decisions on reputation and hunches. Moreover, college is a once-in-a-lifetime decision: There is no opportunity to be a repeat customer.

Also, higher education relies on "customer-input technology" -- that is, who your fellow students are influences the quality and value of your education -- both in the classroom and throughout your life as you call upon the networks of fellow alumni and the prestige of your institution in your work and private life. Having smart, successful fellow students not only makes your education more stimulating, it also links you to a group who will be valuable throughout life.

The relationship between volume and cost is also different in higher education than in a business. Students, unlike products, are subsidized by university donations (endowments and scholarships); more students often mean more costs, but not much more income.

While tuition is considerable, the investment doesn't pay the true cost of education. At Gettysburg College, tuition and fees cover a fraction of the cost of educating students. The rest is subsidized by gifts from alumni and endowment funds. And good public education costs just as much as private education -- it is just subsidized significantly by taxpayers. On average, students pay just 1/8 the cost of public education themselves.

Although tuition provides only a fraction of what education costs, colleges do all they can to reduce the burden faced by students and their families. At Gettysburg, approximately 75 percent of our students receive some form of need- or merit-based financial assistance. Last year, the average award package was more than $22,000.

Another fundamental difference between the business model and higher education is that the benefits of college cannot be fully known or realized for 20-30 years. Higher education is an investment in human capital.

Higher education is labor intensive, and even more so at independent liberal arts colleges like Gettysburg, where we deliberately keep the ratio of students-to-faculty low and class size small to enhance student-faculty interaction, as well as interaction among students. Classes are taught by professors, not graduate students, and the curriculum is dedicated to teaching undergraduates.

Even so, tuition remains a significant investment, but there are few better investments. Twenty years ago, college grads earned on average 1.5 times more than those who did not graduate; today college graduates earn twice as much as non-graduates. And the intangible value of education, the deepening and enrichment of one's experience of the world, is incalculable.

Clearly, drawing conclusions about higher education using corporate economic models will not lead to enlightened public policy. As the economist Winston points out, colleges and universities not only are driven by economic forces unique to their sector, these institutions tend to be highly idealistic in their motivations. Dedication to access for students of all socio-economic levels, to public service, to educating citizens for a democratic society -- and to ideas and ideals -- all serve to make America's system of higher education the best and most diverse in the world.

Our institutions are inspired and inspiring. Do we want it any other way? Can we imagine -- do we want to imagine -- an investment in future generations and our democratic ideals in terms of assembly lines and packing students into the largest classrooms we can build?

The real benefits of higher education are difficult to calculate: to learn how to learn and how to flourish as a free human being for a lifetime; to be a good citizen in a democracy. I believe that the benefits of America's system of higher education far outweigh any simple calculation of costs, and I know the parents and students and alumni of America's colleges and universities seem to agree.

Sources: Gordon C. Winston's Why Can't a College be More Like a Firm? and Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education.

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