As elite schools scramble to compete for the top students and attract (and pay) the best professors, they face an uphill financial climb.
A recent National Public Radio (NPR) report illustrated the costs associated with trying to stay an “elite” university.
Duke University, according to NPR’s Planet Money, charged students $10,000 a year to attend the school in 1984. That number is now $60,000. They quote a Duke University freshman as saying, “It’s staggering.”
That may be true, but Duke officials said the cost is actually a discount. The school’s executive vice provost, Jim Roberts, told NPR that the school actually invests about $90,000 per student.
NPR reports that the $90,000 breaks down this way: $8,000 for campus renovations; $14,000 goes to administrative and academic support salaries; $14,000 goes to dorms, food and health services; $7,000 goes to staff salaries; $20,000 goes to students who get financial aid; $21,000 pays for faculty; and $5,000 is miscellaneous costs.
According to numbers from Duke, more than half its students pay the full tuition price.
Duke’s situation – having to invest more and more into providing student’s an “elite school” education, is part of the reason some expect even elite universities to move eventually into more online offerings. The current business model may not be sustainable.
A study last year by professors at Boston University and Northeastern University found that college presidents in New England generally agree that to be more financially sustainable, colleges need to change their business model, lower rates and reach new audiences through online learning.
A column at The Economist noted that the business model for elite schools is illustrated by the recent donation of $125 million to Harvard by a graduate. The Economist quotes Stanford economist Caroline Hoxby as saying that elite institutions offer a “labor-intensive education to highly qualified students. They aim to cultivate a sense of belonging and gratitude in students in order to recoup their investment decades later in the form of donations from successful alumni.”
However, much like their “lower tier” cousins in the higher education world – public universities and community colleges – elite universities might find that expand the amount of money coming in to support operations, or to make up for less donations from alumni, they will need to reach a larger audience through Massive Open Online Courses or expansion of their online course offerings.
According to The Economist, such universities “might even find itself competing with vastly cheaper higher-education options That might well end up being a good thing, from a social welfare perspective.”
In another words, more students may eventually have access to even more education options.
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