ALTBACH, GUMPORT, &

BERDAHL
CHAPTERS 12 & 16
Susan Miller & Tiffany Seaman

CHAPTER 12
FINANCING HIGHER EDUCATION: Who
Should Pay?
The funding of higher education is
large and complex and varies by
institution-type, mode of
governance, sector, and state.
There are 3 overarching themes:
Quality
Access
Efficiency

Economic, Social, and Political Context

Higher Education is:

Engine

of economic growth
Essential for most good jobs
Correlated with socioeconomic class,
Situated within a resurgent conservative
agenda impacting issues of access
Facing greater resistance of consumer to
price and debt
Experiencing decline in public revenue
Facing growing gap between cost and aid

Four Forces of Expansion

1. Projected enrollment growth for west,

southwest, and south
2. Enrollment growth from expansion of
participation and completion
3. Accretion of more and higher degrees
4. The cost expansion of the ratchet of
adding more enhancements whether
needed or even whether better (p. 321).

Efficiency and Productivity

Measured by cost per student (because

real unit is difficult to measure: student
learning)
Varies from institution to institution
Varies by institution type
Tuition increases in excess of the rate of
inflation
Higher education is a productivityimmune sector that experiences cost
disease (p. 324)

Cost Disease
Higher education requires a highly educated
(and highly paid) workforce and is laborintensive making it more difficult to increase
productivity without negatively affecting
quality. William Baumol coined the term cost
disease to describe the affect of unit costs
that will increase more rapidly in these
productivity-immune sectors than in other
sectors. Cost disease makes it inevitable that
even in a typical economic climate, costs, and
therefore tuition, will rise faster than inflation.

Other Factors that Increase

Costs:

State funding to higher education

declining
Private colleges put more revenue back
into student aid actually increasing the
list price of tuition
Highly educated employees (faculty)
require higher compensation
Technology per student
Higher ratios of faculty and professional
staff per student

Factors Affecting Future

Revenues

Price resistance from families

Debt resistance from students
Overall economic downturn
Flat or lower government support
in relation to tuition increases
Increasing cost of research
science

Who Pays?
The shifting of costs between:
Students
Parents
Taxpayers
Philanthropists

Higher Ed Revenue Policy

Questions

What should be the limits for student

indebtedness?
Should tuition reflect differences in
instructional costs (higher for research
institutions than 2-year programs)?
Should tuition reflect differences in
programs (engineering versus sociology)?
What should be the federal and state
taxpayer share to support access?

Chapter 12 Conclusions

Costs of higher education are shifting to students

through part-time work and indebtedness
Marketing will become more frenzied as schools
continue the ratchet
Public institutions will experience continued decline of
state support/Privates will experience even greater
revenue squeeze
Technology will enable greater, but not cheaper learning
American higher education is becoming more, not less,
unequal in privileging children of wealthy parents
There is a conservative assault on affirmative action,
remedial coursework, and multicultural values

Chapter 16
Markets in Higher Education:
Trends in Academic Capitalism
Commercialism is present in both
administrative and academic
aspects of universities.
Three federal initiatives:

Federal student financial aid policy

Patent law and policies that market
science and engineering
Copyright law and policies

Student Financial Aid

Federal student financial aid legislation

splits up the students and assigns different
types of aid to different types of students.
Shift in 1970s Students become
customers
Marketization of Higher Education Federal
financial aid to students
Committee

on Economic Development
Carnegie Foundation for the Advancement of
Teaching

Student Financial Aid

Students received more federal funding to

attend private institutions.
1980s & 1990s: Higher Education was
seen as more of an individual good to
justify the amount the student was paying.
A shift from grants to loans allows
students that could repay their loans to
attend more elite and expensive
institutions

Taxpayer Relief Act of 1997

Included Hope scholarships, penalty free

IRA withdrawals for college expenses,
tax-sheltered college savings accounts
Benefitted families that had the money
to spend
Used primarily at nonprofit institutions
Well-off traditional aged students ended
up paying the least for tuition.

1998 Higher Education Act

Encouraged profit taking in Higher Education

For-profit were able to appeal penalties for
student defaults on loans more easily
Surprise accreditation visits were no longer
required
No longer put for-profits in a separate category

Allowed students to share in federal aid

More government support from having a

relationship with U.S. Department of Education