Chancellor Q&A: Tuition

Chancellor Q&A: TuitionFebruary 03, 2001

In mid-January, the University Senate approved a Senate Budget Committee recommendation to increase tuition by 5.5 percent for the 2001-02 academic year. This increase from the 2000-01 academic year tuition would generate an additional $15.6 million. If the plan is approved by SU’s Board of Trustees in May, tuition for 2001-02 will be $21,500 for undergraduate students, $647 per credit hour for graduate students, and $25,940 for law students.

Chancellor Kenneth A. Shaw sat down recently with Syracuse Record Editor Kelly Homan Rodoski for a question-and-answer session on tuition.

Q: For most people, tuition is usually a pretty sore subject. Do you understand why?

Yes, I do understand. If you take the total expense of tuition and room and board, it’s a lot of money. There’s no question about it. But the hardship for a lot of middle- and lower-income families is mitigated by the amount of financial aid we provide. For example, there are students who are eligible for need-based grants, scholarships and federal and state grants. So it isn’t as if every student who comes here is paying $21,500 tuition. Nevertheless it is a lot of money. On the other side of the coin, however, is the question of whether Syracuse is adding sufficient value. And by the very fact that students want to come here and want to stay here, it says yes it does; and I am certain it is adding that value.

Q: How important is tuition to the University budget, and where do tuition dollars go?

Tuition is very important to our budget because it is the University’s main source of the revenue. It forms roughly 60 percent of our operating budget.

Tuition money goes for academic instruction and support, student affairs programs, student services, financial aid, operation of the physical plant and administration of the University. All together, we’re spending 75 percent of the new money (from the tuition increase) on salary and scholarship items, and the rest is to operate the University and to prepare for our space additions.

Q: The proposed tuition increase for next year is 5.5 percent. Who came up with this figure, and why 5.5 percent?

That figure was recommended to me by the Senate Budget Committee. It is safe to say that it represents what is felt to be the minimum amount needed to continue our progress. If we want to continue to have improvements, then we need to raise tuition. It is interesting to note that about half of this tuition increase goes for salaries and fringe benefits, and that is a competitive issue. We need to be competitive not only in attracting and retaining faculty and staff, but also competitive in attracting students to part-time jobs. The 4 percent salary increase improves our competitive position somewhat. And the question is do we want the very best people we can attract or do we want to settle for less? For a private school that charges a lot of money, we can’t afford to settle for less. We can’t be seen as a “pretty good” place; we need to be seen as an outstanding place.

Our general operating budget increase, a small fraction, accounts for only 3 percent of the tuition increase. That is an increase of 1.5 percent, and I dare say that’s not high. If inflation is 3 percent, in effect our operating increases are half of that, so we will have to economize to make all this work. About 7 percent will go for enhancements of academic and student affairs programs. And then you have a number of enhanced services to students, as well as the first year of a five-year plan to pay for the increased operating costs that accompany our building additions.

Could we use more? Of course, we could. This is seen as the minimal amount we need to continue, and we are sensitive to pricing ourselves out of the market and to the amount that students have to borrow. But that is an interesting question, too, because it goes back down to “Is an SU degree worth it?” Over the years, I have had a student or two tell me “I’m not sure it is.” And I will say to them, “If you are not sure it is, you should probably find a less expensive education. I’m sure it is, but if you’re not, it may not be worth the sacrifice.” If a student borrows while in school $10,000 and pays it back in 10 years, its probably going to cost about $120 a month. Is value provided for that investment? Am I getting opportunities for better jobs as a result of having gone here? Is my education worth the price I have paid? It’s really a price vs. value consideration. It’s an interesting thing–could we have fashioned a tuition strategy for this year that said “no tuition increase,” so we’ll have $15.5 million less? Could we have done that? Of course. It is just a matter of moving numbers. What we would then be is still a very high-priced university. Not 5.5 percent more expensive but still a high-priced university. And we wouldn’t be very good, because we would lose some faculty, we would not have opportunities to bring in talented students, and so we would find ourselves in a position where spending less over the long haul is more expensive for us and for the students, because the student is also buying the reputation of the University now and in the future. While I don’t like to connect that to financial matters, the truth is that quality is costly.

It’s pricey, yes, but again it’s a matter of price vs. value.

Q: How does SU tuition compare with tuition at similar institutions?

To the institutions that we compete with, whether it be Cornell, Boston University, Georgetown or George Washington–the private schools–our tuition tends to be less. And our total expense tends to be less, although our room and board charges are higher than the average.

Q: About one-third of tuition revenue collected is returned to students in the form of grants and scholarships, which are distributed to students based on need and merit. This totals $104 million per year in institution-based aid given to students to help them pay the cost of attending SU. Wouldn’t it be simpler to just freeze or, even better, lower tuition?

What that strategy doesn’t reflect is the fact that there are students who pay the full amount. And so when we don’t raise tuition, we don’t get any increase from those students either. Basically, what you have is an inverted pyramid. At the bottom point of the pyramid you have a small number of people, 35 percent or so, that are not aided and are providing the money for financial aid for others. And that’s a reality in every private school. So if you don’t raise tuition, you don’t get new money. I get very few complaints from people, who are “full pays,” because I don’t think they want their children to go to a school where all students can afford to go there. They want their children to go to a place where there is some diversity–where people from different walks economically, socially and racially, interact?you are not going to have that if everybody can afford the full cost. I don’t get a lot of complaints about that because in the last analysis, their child is getting a better education, because they are bumping up against the kind of people they are going to see out in the larger world.

Q: If tuition continues to rise every year, where does it end?

I think tuition will continue to rise every year, unless there is an enormous economic slowdown. Let’s just say for the sake of argument that inflation has been rising about 3 to 3.5 percent a year. If tuition were to rise at that amount, in effect there would be no increase in real-dollar terms. Tuition nationally has actually gone up higher than that. There is an economist named Baumol who has talked about this issue, and he says that when you compare increases in expenditures between people-intensive service activities, whether they are private or public, and businesses that make products, there is a major difference in how they can control their costs. If you are building a car, you can automate a lot of it. If you have a string quartet, and you give everybody in the string quartet a certain raise, there is very little efficiency there. You might decide to have a string trio, but that is not the same. So Baumol says service industries tend to find their cost increasing a couple of percentage points above inflation.

Let me use a University example. We have an assistant professor who makes, for the sake of argument, $40,000 per year. If we give them a raise of 4 percent, how are we going to recover that cost? We can by saying we’ll put more students in a class. But we don’t like to do that because all of the sudden we see ourselves a different kind of place. Pretty soon we have 20,000 students instead of 10,000.

The second thing we could do is say the professor will teach four classes each semester. But then we get into a position where we are saying–“we don’t want you to do scholarly work, we don’t want you to be at the cutting edge of your profession, and we want you to have a teaching load more like a community college.” So we’re compromising quality either way. We define it as giving professors an opportunity to do scholarly work. And if we don’t define it that way we won’t attract the very best and brightest scholars.

The third possibility would be to hire more part-time people, and soon we would have too many part-time people doing the teaching. It’s less expensive, but is it really what we want to do? In other words, it’s not as if we have a whole lot of options to make that young professor more productive.

We hear a lot about distance education. I think distance education is going to have a far-reaching effect on all universities. I think it already is, but no one has shown that it is cost-effective yet. It’s shown that you can do a lot of things very well, and in some cases better than you can in the traditional model, but it costs a lot of money to do it right. A good example of that is the open university in England, which is a very, very fine program. It costs them millions of dollars to create a course. It’s not inexpensive to do it right. This goes back to what Mr. Baumol said: If you are in a field that is labor (people) intensive, service-minded, you are going to find it very difficult to keep costs at the rate of inflation.