Spring 1998 Journal: Higher Ed’s Impacts

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June 2, 1998

Key New England Journal Explores College Financing, Higher Education’s Economic Impact, “Town-Gown” Relations

•    New issue of New England Board of Higher Education’s Connection magazine features major articles on student subsidies and erosion of need-based student aid

•    Economic impact of New England colleges and universities pegged around $25 billion

•    Commentaries explore the “innovation economy,” marine-related industries, the ongoing search for telecommunications workers

BOSTON — Despite the widespread perception that college tuition has been rising out of control, virtually all U.S. colleges and universities sell their primary product — education — for much less than it costs to produce, according to an article to be published later this week in Connection: New England’s Journal of Higher Education and Economic Development.
The article by Williams College economist Gordon C. Winston reveals that America’s college students are “subsidized” to the tune of more than $80 billion a year with revenue from non-tuition sources such as private gifts and endowment income.
“In 1995, the average American college produced an $11,967 education that it sold to its students for $3,770, resulting in a subsidy of $8,197 a year,” observes Winston. “It’s as if cars that cost the dealer $20,000 to put on the showroom floor were routinely sold for $6,300.”
But even as the subsidy system knocks down prices for students, it presents a public policy dilemma, according to Winston. Because tuition already covers only part of the cost of educating an undergraduate, popular tax incentives and tuition-discounting schemes that encourage more students to go to college raise costs far out of proportion to the new revenue they generate.

“In public colleges, tuition covers 12 cents of every $1 of costs,” explains Winston. “So if a new student is induced by these policies to go to the average public college, for every $1 he brings in new tuition revenues, he’ll give rise to $9 in additional costs. The question then is, ‘Who’s going to pay the rest?'”
Much of Winston’s thesis was presented to the National Commission on the Cost of Higher Education and will appear in a forthcoming book titled Paying for College.
Connection is the quarterly journal of the New England Board of Higher Education (NEBHE)—and America’s only regional journal on higher education and the economy.
The new issue also features articles on merit-based vs. need-based student financial aid, the changing relationship between colleges and their host communities, higher education governance, the innovation economy, New England’s marine-related industries and the region’s demand for telecommunications workers. In addition, an expanded “Books” section includes reviews of top-quality regional journals.
Winston’s colleague, Williams College Financial Aid Director Philip G. Wick warns that the share of all student financial aid based on academic “merit” is rapidly increasing at the expense of aid based on financial need.
“Institutions use merit scholarships to boost tuition revenue,” writes Wick. “A college that charges $20,000 in tuition knows that it can realize $60,000 in additional revenue simply be replacing one $20,000 scholarship, which is need-based, with $5,000 merit awards to four students who could afford the full cost. While such a strategy works well for the institution and the four wealthier students, the financially needy student, with possibly stronger academic credentials, is left out in the cold.”
In another article, freelance writer Alan R. Earls reports that New England colleges and universities spent $14 billion on goods and services in 1995, generating a total economic impact of $25 billion, using the frequently cited multiplier for higher education of 1.8.
Earls traces various attempts to gauge the economic impact of one or another axis of New England’s academic enterprise, but finds the studies to be “limited in scope or parochial in spirit.” His conclusion: “Despite the welter of studies over the years, we are far from fully understanding the impact of higher education on the New England economy.”

Among articles in the new issue of Connection:

Higher Education Subsidies: Why All College Students Pay Less for their Education than it Costs to Produce • It isn’t often that a college education is cast as a bargain. But Williams College Economics Professor Gordon C. Winston explains how a system of student subsidies worth more than $80 billion annually gives all American college students a break on the cost of college. The subsidy system creates a predicament, however. Explains Winston: “If [as projected] 3 million more students enter U.S. colleges and universities, they will bring with them an additional $11.3 billion in net tuition revenues, but they will also bring an additional $35.9 billion in costs — if quality is to be maintained at 1995 levels — and will require $24.6 billion in additional non-tuition resources.”

Need-Based Aid: Under Siege • The share of all student financial aid that is based on merit is rapidly increasing at the expense of need-based aid, according to Williams College Financial Aid Director Philip G. Wick. “In the early 1970s, only about 50 percent of U.S. colleges and universities, public and private, offered some non-need-based or merit scholarships,” writes Wick. “Less than a decade later, 85 percent were offering such aid.”

The Buck Stops Where? Higher Education’s Economic Impact • Freelance writer Alan R. Earls takes inventory of recent reports on the economic impact of higher education in New England, such as The Colleges of Worcester: A Foundation for Economic Success, The Status of Higher Education in New Hampshire and Rhode Island Higher Education and the New Economy. Yet Earls contends that the role of higher education in the six-state region’s economy remains ill-defined. “No single definitive study has counted the cumulative flow of dollars coming from the region’s campuses,” he writes. “Nor has any quantitative study attempted to comprehensively measure the effect on New England — presumably positive — of expanded intellectual capital.”

Reshaping Town-Gown Relations • Judith Steinkamp, a planner at the University of Massachusetts at Amherst, describes improved relations between colleges and universities and their host communities. Exhibit A: The relationship between UMass and the Amherst Board of Selectmen. It’ has improved sufficiently that the two parties recently agreed to ditch a formal written agreement signed in 1995. “State universities are reinvigorating their land-grant missions,” writes Steinkamp. “Private urban universities are revitalizing local neighborhoods. All around, campus boundaries are increasingly permeable. And a rising premium is placed on communication between campus and host community, citizen participation at public meetings and collaborative planning efforts to solve mutual problems.”

Governance: Lessons for New England • Brown University Distinguished Professor Eleanor M. McMahon, the former commissioner of higher education in Rhode Island, describes how different types of higher education governance structures affect the ability of New England’s public colleges and universities to respond to state needs — and garner state support.

The Innovation Economy: Building a Better Yardstick • How do you measure something as fuzzy as technological innovation? Jennifer Montana, senior policy analyst at the public-private Massachusetts Technology Collaborative, explains how a set of 33 “indicators” — ranging from high school dropout rates to patents awarded — helps tell the story of how innovation is transforming the Massachusetts economy.

New England’s Marine Economy •  Which marine-related industries are most important to New England’s economy? Hauke L. Kite-Powell, research specialist at the Woods Hole Oceanographic Institution’s Marine Policy Center, compares the relative value of coastal tourism and recreation, aquaculture and the six-state region’s other marine-based industries.

Aquaculture, Marine Sciences and Oceanography: A Confluence • Harlyn O. Halvorson, director of the Policy Center for Marine Bioscience and Technology at the University of Massachusetts at Boston, calls for stepped-up regional efforts to encourage the growth of New England’s marine-related industries.

Telecommunications: Looking for More than a Few Good Technologists • New England’s booming telecommunications industry is threatened by “workforce bottlenecks,” according to John H. Dunn, executive vice president of academic affairs at Springfield Technical Community College. Dunn says one in seven job openings posted on World Wide Web-based help wanted services such as Career City are in the field of telecommunications — and the majority of these remain unfilled for more than 60 days, with many posted for six months or more. Colleges are failing to educate and train sufficient numbers of telecom professionals to meet the job market demand, according to Dunn, while the reservoir of skilled workers displaced by downturns in the region’s defense and computer industries has all but dried up.

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