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April 17, 2011, 9:45 am

Colleges are too cheap

Tuition fees, though high, nowhere near cover costs. U.S. colleges
need more gifts, more efficiency, still higher fees. A loan system that would
make higher tuition fees possible would cause a substantial change in the
economics of higher education.

Editor's Note: Every week, Fortune.com publishes favorite stories from
the Fortune magazine archives. In the September 1957 issue, Fortune
editor Herbert Solow explored the potential of a federal student loan
system that could allow universities to increase tuition rates to support a
ballooning college-going population and pay their faculty more than what he
describes as "shamefully low pay" (Any of this sound familiar?). As high school
students across the country make their college choices this month, many of the
challenges Solow describes below still resonate, with several public university
systems resorting to tuition hikes to absorb state budget cuts
and student loan debt surpassing credit card debt for the first
time last year, as recently reported by
The New York
Times.

By Herbert Solow

FORTUNE -- The mixed U.S. system of public and private higher education must,
within a decade or so, greatly expand its resources and improve its
methods, or a presently muffled suggestion of broad-scale federal intervention
will become a roaring demand. A commission of the influential National
Education Association has affirmed that "increased federal aid
seems essential." And Congress has before it a number of bills to expand
Washington's role through, for example, vast programs of scholarships or
student loans. President Eisenhower's Committee on Education Beyond the High
School recently declared that Washington should have no permanent economic role
in the system -- that is, "not yet." Federal action should be limited to the
"residual," said the President's Committee. But this will be the case only if
the traditional system can cope with emerging requirements. To do so, it will
need a revolution in operations and financing.

Students studying at a library at Harvard University in
1957.

Requirements are prodigious and growing. Annually there is a leap in the
percentage of Americans who want a higher education. Moreover, there has been
the well-known birthrate explosion. Only two years ago President Nathan M. Pusey
of Harvard somewhat breathlessly reported that he expected an enrollment on U.S.
campuses of five million by 1970 (Fortune, September, 1955). But
already so many young Americans are heading toward campus admissions offices
that the estimate of 1970 enrollment now tops six million -- about double
today's enrollment.

As the President's Committee puts it, the higher-education system's resources
are strained, its quality is jeopardized, and its plans are so inadequate that
it is "in no shape to meet the challenge" of 1970. To provide twice as much
quality education and operate on the basis of the resources that now appear
likely to be available in 1970, the system must sharply increase the efficiency
of non-teaching operations (housekeeping, administration, etc.). With the
present limited facilities for producing college teachers, it is impossible to
double today's faculty of 250,000 by 1970 without a collapse of quality. So
teachers will have to handle more students while maintaining teaching quality.
And in any case, for what educators call "the oncoming tidal wave of students,"
vast increases in funds are indispensable.

Discussion of ways and means is subject to an important limitation -- lack of
reliable key statistics. There is risk in any sweeping statement about the
highly diverse U.S. system, with its 1,800-odd universities, technology
institutes, colleges, and junior colleges, its $8 billion plant, its unbalanced
$3 billion annual budget for instruction, and its nearly $2 billion annual
budget for more or less self-supporting items, such as dormitories and contract
research projects. The campuses --about 500 of which have fewer than 250
students each and a dozen of which have 20,000 or more students each -- are
public and private, metropolitan and semi-rural, church-run and lay-run, general
and specialized, coeducational and segregated, excellent and mediocre. Little is
true about all of them-except that they need more money.

This article starts with two assumptions:

1. Of late the share of total enrollment enjoyed by private institutions has
fallen from 50.3% (average for 1947- 51) to 42.9% (1956). It is assumed that a
continuation of this trend would weaken the role of private institutions in
maintaining standards for the entire system of higher education, and that it is
desirable to find ways and means for the substantial expansion of the private
schools.

2. Higher education has demonstrated its economic value to the individual. On
the other hand, the social need for people with higher education, however great
in an atomic and automatic age, is finite; In selecting students, tests of
motivation, including charging a fee, are therefore relevant; not everybody has
to go to college. The important question about fees is not whether, but how
much.

The hunt for dollars

The fees that students paid for their instruction in fiscal 1957 were on the
average at least double what they were in 1940. But such fees, totaling about $1
billion, still covered only one-third of the costs of the instruction. The major
financial problem, how to make up the difference, becomes more and more
aggravated as the student body expands. Can it be solved by expansion of sources
of revenue other than tuition fees? Let us look at those sources.

Endowments, concentrated in private institutions, aren't worth over $3
billion; they have been largely shifted from bonds and the like (which, for
example, constituted 82% of Harvard's investments in 1928) to common stocks
(which now account for nearly 60% of Harvard's investments). The gain in yield,
however, still hasn't kept pace with rising costs. Whereas Harvard's endowment
yield once covered 42% of expenses, it now covers only 27. Princeton's avowed
need for gifts has risen from 4 to 24% of its current budget. Some 800
institutions have no endowments. State legislatures have been appropriating ever
larger sums for the campuses they sponsor (12 cents of the Michigan tax dollar,
for exan1ple, now goes to support state institutions of higher education as
compared to 8.5 cents in 1954). But state universities still lack the funds
needed for the job that lies ahead.

Last year non-corporate foundations (Ford, Rockefeller, etc.) broke a record
for giving as a result of a $210 million Ford Foundation grant to the endowment
funds of 630 institutions. (The principal of the Ford grant, however, cannot be
touched until after 10 years.) Beyond this it is impossible to give reliable
figures on foundation giving to higher education for any year later than 1954,
when foundations gave $50 million. The total last year was undoubtedly higher,
perhaps by 50%, exclusive of the Ford grant.

Passing the hat

Every institution, in addition, passes the hat. Professional money-raising
consultants like John Price Jones Co. and Kersting, Brown & Co. are busier
than ever on behalf of campus clients. The American Alumni Council and the
American College Public Relations Association and their members beat the drums
incessantly. Last year, annual alumni drives yielded about $47 million (alumni
also made special gifts of $65 million) as against $3 million in all in 1938.
Business corporations and their foundations were spurred on to contribute as
never before, especially by the Council for Financial Aid to Education, led by
Irving Olds, Frank W. Abrams, and Alfred P. Sloan Jr. And while the council
labored, 39 recently organized regional associations of colleges and
universities knocked steadily and insistently on corporation doors. Through the
associations, corporations could give to batched beneficiaries that have their
own prearranged formulas for sharing proceeds. Corporations gave about $110
million last year, as against $24 million in 1948.

Thanks to all these sources, U.S. colleges have kept the sheriff away. But
the absolute size of the gap between tuition fees and costs now threatens to
grow massively. So do long-neglected capital needs. According to an estimate
based on a broad survey made in 1954, there would be required 10 ten years,
in addition to income from established sources, annual new income of
$60.8 million for capital expansion and operations. Unless traditional practices
are strikingly changed, the 1970 budget for instruction alone, with the student
body doubled, will be twice the present figure -- in other words, somewhere
around $6 billion. What to do?

In recent canvasses of potential new sources of funds a radical idea keeps
cropping up -- the idea of charging students what their instruction costs. Such
a change from traditional policy might endanger democratic education and deprive
campuses of much fine talent-unless the change were linked to the expansion of
financial aid to needy students. Even now about 200,000 of the most able
high-school graduates annually renounce higher education, often for financial
reasons. So, while such innovations as higher fees are debated, there is
increased emphasis on getting more revenue from other sources.

Presumably the ceiling on alumni giving has not been reached. At present only
20% of alumni respond to solicitation, so there is a large untapped source.
Yale's annual take from alumni has risen from $509,000 in 1949 to $1,737,000, an
increase of 240%; Yale is now aiming at $2 million a year. Almost every
institution will intensify its alumni drives. While the economy expands,
corporations will increase their giving. Last year corporations made
tax-deductible philanthropic contributions of all kinds to the amount of almost
$550 million, or 1.26% of their profit before taxes (as against the 5% that the
income-tax law encourages them to give). Perhaps they will never give 5%, but
educators hope that as more and more corporations adopt philanthropic policies
for a variety of business reasons, the share going to higher education may top
$200 million.

Trade unions have begun contributing, though mostly in the form of earmarked
scholarships. Churches are seeking more money for campuses under their
sponsorship. Soon, too, as a result of a pioneering promotional campaign now
being run by the Advertising Council, and follow-up drives envisioned by alumni
and other organizations, the general public may be asked for annual gifts.
Legislatures will be pressed for bigger appropriations, although the state
universities will be in vigorous competition with demands for highways,
hospitals, and welfare services.

The federal government may help by paying full costs of research services
that it obtains from universities, which, in many cases, the government does not
now do. Washington can help in other "residual" ways: by making further easy
loans on income-producing facilities like dormitories; by extending to
lecture-hall and laboratory construction the matching grants-in-aid arrangement
now available to hospitals; by revising the income-tax laws to intensify
encouragement of individual giving. These, at any rate, are among the
suggestions made by the President's Committee.

Upgrading operations

Colleges may be able to affect some economies. An instrument of growing
importance in improving campus housekeeping operations is the management survey.
Yale cut operating costs by $400,000 a year on the basis of recommendations made
in 1950 by Cresap, McCormick & Paget, the leading campus management
consultant. This firm and others have since surveyed about 150 institutions, and
an analysis of 50 cases shows that each survey paid for itself in operational
savings, through improved budgeting, centralized accounting, application of
machine techniques to records, reorganizing dormitory service, establishing
maintenance standards, converting to offset printing, installing automatic
telephone equipment, improving purchasing, and improved use of plant space.

Tuition fees are shown in this chart as a percentage of
all teaching costs. On the average, students in all types of institutions of
higher education pay only 33 percent of teaching costs. The closest that any
class of students comes to covering teaching costs with its fees is 62 percent,
the average student contribution in private liberal-arts colleges. (The figure
for faculty salaries is slightly inflated because, owing to prevailing reporting
methods, it includes some expenditures for faculty-related requirements like
assistants, secretaries, stationery, etc.)

Most plant space is used wastefully, especially in afternoon and evening
hours, on Saturdays, and in the summer. One way of using it more intensively
would be to divide the academic year into four quarters, instead of two
semesters, including the summer months, which are usually a down period. In
fact, the four-quarter idea has been advanced as one way of improving
educational methods and raising quality, quite apart from the economies involved
in better use of plant. Clarence H. Faust, formerly a dean at the University of
Chicago and now both president of the Fund for the Advancement of Education and
vice president in charge of education for the Ford Foundation, has outlined a
plan that would give students an assignment to study independently off the
campus for one-quarter of each year. This would increase the number a given
plant could handle.

Would the system detract from the quality of education? Dr. Faust believes
not. "The pressure of numbers may be the occasion for important improvements in
college education," he says. Dr. Faust rejects the old assumption that the only
way to learn is in a group, taking a formal course. Many educators agree that
U.S. college students show inadequate initiative because they are conditioned in
high school to study only specific assignments, and are brought up "in the lock
step of class lectures, recitations, deadlines for papers and reports, and
course examinations." Dr. Faust would reduce student-teacher contact. This could
be done by having students spend several months working on their own, after a
month or so of lectures that would identify the nature of problems involved in a
given subject and would indicate how "a sharp, sensitive, well-disciplined mind"
goes to work on the problems. A related reform would be to reduce the highly
inflated number of courses offered. Together, such reforms would dilute the
present average twelve-to-one student-teacher ratio, and so conserve faculty
labor.

Perhaps the most radical pedagogical suggestion is the use of television,
which the Fund for the Advancement of Education has been pushing
assiduously. TV can effectively present not only uniquely talented lecturers to
students anywhere, but also a wide range of audio-visual materials, including
costly equipment, art originals, operational techniques in surgery, engineering,
etc. Three years of experiment at Pennsylvania State showed that in many
subjects TV students somewhat surpassed those taught conventionally.

The great giveaway

But the U.S. higher-education budget will never be balanced by savings on
housekeeping and teaching costs. And since charity -- generous as it is -- has
fallen short, has its limits, and is an unpredictable source, serious
consideration is being given to the controversial idea of charging students the
full cost of instruction. That students get a great deal for nothing is not
generally appreciated. When, by a unique, bold decision, one eastern private
college raised its tuition fee to substantially 100% of the cost of teaching, it
simultaneously notified parents that acceptable students could get grants-in-aid
(discounts, in effect) if their families could not pay in full. One father
thereupon entered his daughter in a neighboring college, haughtily declaring
that he wanted no charity. But the neighbor's tuition charge, which Daddy
proudly paid "in full," was almost $400 under cost.

U.S. higher education is, in fact, an enormous charity. Though board and
lodging are usually charged for at cost, an insignificant number -- possibly
none -- of the three million students, even at the most expensive institutions,
pay the full cost of their instruction proper (at the exceptional college cited
above, costs have since overtaken fees once again). All get a standard discount,
its size depending on the local cost level, the institution's wealth, and how
eager the institution is to attract talented students who may lack the cash to
pay full costs. Campus cost accounting is still largely a primitive art, so that
figures must be accepted with caution, but it is probable that the private
institutions' standard discounts average about $500 a year, those of state
institutions about $800.

Moreover, the many worthy students who find that the discounted tuition fee
is still too high for them seek and often get an extra discount in the way of a
grant or scholarship. The business of giving scholarships was once more or less
hit or miss. An increasing number of institutions are turning to a central body,
College Scholarship Service, for help in determining which students should get
aid and how much. This ensures a fairer system of scholarship awards, but it by
no means decreases the worries of the institutions as the 1970 hordes approach.
Somebody, after all, must finance the discounts, which, on the basis of present
practices, could top $4 billion by 1970.

Alma professor

The people who chiefly finance college discounts are the teachers. The
college teachers of the U.S., says the President's Committee, "are subsidizing
the education of students, and in some cases the luxuries of their families, by
an amount which is more than double the grand total of alumni gifts, corporate
gifts, and endowment income of all colleges and universities combined. This is
tantamount to the largest scholarship program in world history." The teachers
make this contribution, not always cheerfully, by working for shamefully low
pay.

At Brown University, for example, where the pay scale is above the average,
assistant professors get less than the $6,000 offered by industry to many of
Brown's engineering students as starting pay. State institutions, sometimes by
politicking behind the interference of victorious football teams, achieve better
average salary levels than private institutions. Yet a full professor's salary
at the average large state university in 1954 was only $7,000, less than that of
a locomotive engineer. More than a score of institutions pay full professors
less than $3,000. Half of all faculty ranks earn below $5,600. There was, in
fact, a drop in both the absolute and relative pay status of college teachers
between 1904 and 1954. Between 1940 and 1956 college teachers' purchasing power
rose -- but only 12%, while that of industrial labor rose 64%, that of doctors
96%. Had professors' salaries held their own, top men at leading institutions
would be getting over $15,000 today. But even at Harvard, richest of all the
institutions, the average pay of full professors is only $13,000.

The rising faculty bill

In the view of the President's Committee, institutions will have to boost pay
by 100 to 125% to hold and attract first-rate talent. What will this cost? Well,
let us assume that professorial productivity will be increased by one-half,
raising the student-teacher ratio to 18-to-1 and thus, incidentally, further
justifying better pay. Even then 134% of the present faculty (or a total of
335,000) would be required in 1970 to handle the doubled student body. With the
average salary around $11,000 after the projected raise, the 1970 faculty might
cost two and a half times what the faculty costs today, or close to $4 billion.
Were other factors unchanged, this would mean an addition of $500 million to the
projected $6-billion instructional budget. And where would it come from?

One possible source would be tuition fees, if raised to realistic levels. The
question of raising fees is under lively discussion on most privately controlled
campuses, and during 1957 over 65% of all land-grant colleges and state
universities favored some raise. If all institutions set tuition fees at the
level of true costs, six million students in 1970 might provide $6.5 billion in
revenue, enough to cover the projected faculty bill and all other direct costs
of instruction (such as use of classrooms, equipment, etc.).

Such a drastic change in financing -- or any major fraction thereof -- would
have to be put into effect on a wide front. Unless public institutions raised
their fees substantially, few private institutions would dare to; the private
schools could not permit much widening of the present average gap of $500
between their stated fees and those of their public competitors, lest they lose
many talented students. Even among private institutions, any substantial fee
raise would probably have to be undertaken simultaneously by all the competing
institutions in any given group ("groups" are, for example, large universities,
technology institutes, New England colleges, etc.).

Raising tuition fees to match costs, unless there were compensating aid to
desirable, needy applicants, would tend to jeopardize democracy in education and
to turn campuses into clubs of rich and not always talented students. But if
tuition boosts were followed by boosts in special discounts to the talented
needy, much of the revenue gain would be canceled out. The current stated
tuition fee at Rensselaer Polytechnic Institute is $1,200, a rise of $200 over
last year; but one-third of the increment will be swallowed up by the increased
student aid that R.P.I. feels it must provide in order to maintain the caliber
of its student body.

Credit as aid

Of late, support has begun to mount for one plan of student aid that might
provide a partial solution to this problem. This is to introduce installment
paying and credit into higher education on an order of magnitude never tried
before. Students who wanted to pay cash would, of course, be free to do so, but
what is being considered now is a loan fund that eventually could take care of
everyone, if everyone wanted to use it.

Chairman Devereux C. Josephs of the President's Committee, who was an
investment banker, then president of the Carnegie Corporation of New York, and
is now chairman of New York Life Insurance Co., finds "obvious advantages to all
concerned in borrowing toward an education." Josephs argues: "If all students
capable of winning admission to an institution could have access to loans,
irrespective of capacity to win scholarships, pressure would be removed when
most appropriate and responsibility and independence promoted. " The committee
itself has suggested that private foundations do something about "creating new
regional or national mechanisms for supplying credit to students through their
colleges at low interest and on flexible repayment terms."

Who will borrow?

There might well be many lenders and borrowers. College training today is
quite another commodity from that dispensed in early U.S. colleges, which were
set up primarily to produce preachers and teachers, whom society, then as now,
esteemed but underpaid. Today a college education is an investment that adds an
average of $100,000 to graduates' lifetime earnings.

Retroactive scholarships could be provided to cover educational debts of
those who become teachers, preachers, or members of other poorly paid
professions. Princeton University has some scholarships of this type now, and
some states with programs of teacher-training tuition loans forgive the debt in
return for teaching service after graduation. Women, too, might present a
special problem since they seem convinced that men would not be anxious to marry
debt-encumbered college graduates. Yet many women now get to college with the
aim of a gainful job at least for a time, during which they could liquidate part
of their debt. (In the Belgian Congo, the relatively few African women who get a
primary education are the object of keen rivalry among educated African
men.)

Will students in general borrow money for higher education? According to the
U.S. Office of Education they now raise only 1.5% of their funds by borrowing,
and it is also true that some student loan funds now theoretically available go
begging. But these facts may mean little. As long as discounts in tuition are
available, a sort of Gresham's law operates against students' taking loan money.
Also, some loan money is so hedged about with requirements as to place of
residence, personal habits (non-smoking), age, course of study, creed, parental
membership in an organization, emergency nature of the need, etc., that only a
few students can qualify. Some loan funds have a ceiling of $100, require
repayment in a few months, or exact over 6% interest. Many institutions (in
New York State over 40%) have no loan funds at all.

The growing loan idea

But when colleges have substantial loan funds, make them broadly available at
low interest and for long terms, and promote their use, borrowing becomes more
popular. Here are some cases in point.

In 1930 friends of the Massachusetts Institute of Technology put up
$1,450,000 to start a loan program. It has since grown 80% through its own
operations. Requiring neither collateral nor a co-signer, M.I.T. will lend up to
$4,400 to cover tuition charges for four years. Interest was cut in 1949 from 2
to 1%, which has been adequate to cover losses and expenses. Payments are
scheduled at the rate of $50 semi-annually, beginning six months after finishing
studies. Since the start, M.I.T. has lent about $4,150,000. Only $14,700 has
been written off and maturities now past due come to only $26,000. Thirty
percent of all loans have been repaid ahead of due dates. Last year M.I.T. lent
over $450,000 to 700 out of its 5,800 students, gave only $370,000 in
scholarships.

Harvard Business School, a two-year graduate institution, has largely
abolished extra discounts. Any needy student can get a $2,500 loan, repayable
six and a half years after graduation at 4.5% interest that begins accruing
after graduation. Further aid is available on proof of inability to get family
help. This, called an "advance in aid," bears no interest but carries a moral
obligation to repay. Last year, of $560,000 provided in student aid, $350,000
was in loans, $135,000 in advances, only $75,000 in scholarships.

In professional schools, of course, the student's eventual income is in
relatively plainer sight than in a liberal arts college, but the loan idea has
also worked well for liberal arts undergraduates. Harvard College offers an
example. In 1948-49 Harvard gave nearly $500,000 in extra discounts, lent only
$10,000 on a long-term basis. No freshmen could borrow, others could borrow only
up to $400. Interest was set at 4.5%, accruing immediately. Today, freshmen are
eligible along with others for loans at 3% that begins accruing after graduation
and completion of military service, and the ceiling has been raised to $1,800
(45% of the four years' stated tuition charges). Repayment is required at the
rate of $10 monthly after graduation and completion of military service. In
1956-57 the college, while giving over $1 million in scholarships, lent about
$225,000. In short, in eight years scholarships have doubled in amount, loans
have gone up over 2,000%.

HELP in Massachusetts

Thus loans can be made attractive and, as their popularity grows, new funds
are becoming available. Last year the Massachusetts legislature, observing a
rise in student aid demand, created the Massachusetts Higher Education
Assistance Corporation, a private body authorized to lend money to students or
to approved educational institutions, and to receive tax-deductible
contributions from banks, railroads, utilities, and other corporations.
Massachusetts also legislated limited adulthood for any minor who wants to
borrow for higher education and meets certain formal requirements. By July 1,
MHEAC had received contributions of $91,000, mostly from business corporations.
MHEAC has not made direct loans but under its Higher Education Loan Plan (HELP)
it has undertaken to guarantee 80% of loans made by commercial banks to eligible
borrowers, up to 10 times the corporation's capital. The banks will lend
unsecured loans of up to $1,500 to a student, with simple interest at a lower
rate and with longer repayment periods than commercial banks ordinarily require
for personal loans. The interest charge while the student is in school is 0.5%
above whatever the Boston prime rate on unsecured commercial paper may be. The
student agrees to pay up six months after graduation, but the bank agrees to
extend the time on request, at 4.5% interest discounted.

During its first four months operation, the Massachusetts corporation
guaranteed loans of more than $110,000 made by 68 banks to 283 students. New
York State, early this year, adopted a similar measure, and a bill introduced
into Congress by New York's Senator Jacob Javits would authorize the Secretary
of Health, Education and Welfare to grant states $100,000 annually to set up and
run HELP corporations. The Javits bill would also create a federal HELP program,
provide free insurance for up to $750 million of student loans, and grant
lenders the difference between student interest rates and those prevailing in
the open market.

A number of businessmen have offered ideas on how to organize massive credit
for higher education. Their common plea is for foundations or others to set up a
broad loan fund. Some specify an initial capital of about $50 million. Mr.
Josephs, whose view is in formed by his experiences in insurance and
philanthropy, and as chairman of the President's Committee, has made so me
suggestions: "Borrowing should be limited to a portion of the total cost of
education; no interest should be charged before graduation and rates should be
gentle thereafter; repayment schedules should be flexible and readiness to
modify them when appropriate should be announced. A relationship with the
borrower's college should be established so that it or the alumni association
could help maintain the flow of repayments (were repayments to drop seriously at
a particular college, further credit could be denied its students). The loan
fund should be guided by practical, public-spirited men and administered
professionally. Should some such plan become popular, it might be
self-supporting, though providing little, if any, return on the
philanthropically contributed capital. Once there is a record of experience,
notes could be rediscounted and thus the loan money available be multiplied.
Were such a plan widely used, employers would undoubtedly come around to aiding
employees with repayment commitments."

Some business judgments

In recent years Fortune has referred to the views of other advocates
of massive credit for higher education. One such, Ricardo A. Mestres, treasurer
of Princeton, found educators cool to his slogan, "Study now, pay later," but
largely on grounds of feasibility rather than principle. Another, Ernest van den
Haag, a former businessman now teaching economics and sociology at New York
University, last year expanded his ideas into a book, Education as an
Industry. He contends that a system of higher education based on credit
liberal enough to cover all tuition and living expenses would tend to increase
educational opportunity and also to equalize it. He suggests starting a loan
scheme in professional schools where "the effect of education on alumni income
is most uniform, obvious, and extensive."

Van den Haag would have the colleges lend to or, as he sees it,
invest in students after raising capital by selling bonds, or
simply endorse students' notes and rediscount them. He argues the colleges would
then "have an incentive to select for investment just about as many students as
will be able to repay no more, no less. Selecting more would be risking loss of
the investment. Selecting less would mean loss of investment opportunity..."

An early promoter of a loan plan was Sydney M. Roth, a Chicago mass-marketing
consultant who helped to establish cans as acceptable beer containers. Roth
thinks that many people are against the notion of borrowing for education for
about the same poor reason bottle-minded beer drinkers were against the can:
they hadn't tried it. He sees human earning power as a promising field for
insurance companies and other investors of capital. Edmund C. Mayo, president of
Gorham Manufacturing Co. of Providence, has proposed a philanthropically sparked
mechanism, perhaps to be called the College Education Acceptance
Corporation (the reference to the expansionist effect of automobile
acceptance corporations on that industry is evident). A. Vere Shaw, a New York
investment counselor, has made a similar proposal, which he hopes would enable
colleges to "withdraw from constant fund-raising campaigns and confine their
activity to education."

That, no doubt, is to hope for too much. But a loan system that would make
higher tuition fees possible would cause a substantial change in the economics
of higher education. And something will have to be changed if the system is not
to be submerged by "the oncoming tidal wave of students," with a resulting
general cry for federal rescue.

Also from Fortune
Classic:

Joseph P. Kennedy:
A portrait of the founder

The decline and fall of business ethics

The Life of a $725,000 Scab

Filed under Fortune Classic
7 Comments | Add a Comment

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I hope readers aren't missing (I almost did) that this is a 1957 article, as
"B" mentioned in their comment.

How about today? I am a college professor, and I'm not sure if this will
surprise anyone, but I think colleges should be more affordable.

What leads to higher costs? One huge factor for public schools is that over
the years state support to keep tuition lower has decreased further and further.
The university presidents try hard to make up the difference in creative
entrepreneurial entrepreneurial ways including partnerships with the private
sector and more and more fund-raising from alumni and private donors. But it
only goes so far. The rest of the difference has to come from somewhere.
Luckily, where I teach, they have been able to keep the increases fairly rare
(not every year or two) and the tuition still modest by national standards. But
if the state keeps cutting...

The other big issue is, when I was in college, we didn't have all the fancy
support systems they have today. There is a sort of arms race between colleges
they are all to one extent or other trapped in. Some support services I'm very
glad we have today that I didn't have when I was in college, offices to help
with tutoring, career counseling, personal health crises, etc, have expanded,
and that's probably good. But do we need quite so many bells and whistles in
some parts of technology? Probably not. If you want to resist this, encourage
your kids to attend places which are a bit less 'sexy' on those add-ons, but
which have faculty who care about teaching and have an open door policy, even if
you don't have wireless at every late' serving cafe on campus (we don't, and
this is an unfair hyperbole, but you get the idea..)

Meanwhile, if the federal government would spend just a few billion less on
tax-breaks and subsidies for, say, big oil, and give that money to state for
education, states might be able to hold down public tuition a bit more...it's up
to parents and taxpayers to insist on making education a priority..we rarely
do..even when the Glenn Comission report came out around 2000 and we had a
budget Surplus, what did politicians do? Spent a bit to improve k-12 (which
makes colleges better since we would have high school graduates who are prepared
and know how to read and write..) nope, we let that opportunity
pass
www2.ed.gov/inits/Math/glenn/toolate-execsum.html

Posted By Prof D, Maryland : April 18, 2011 4:50 pm

Have you ever reviewed the composition of the general and administrative
expenses at universities? I'm currently a graduate student and after working,
I'm shocked by the number of administrative assistants in academic departments
and staff allocated to far flung non-core functions. Businesses have cut down
these expenses, but has education really taken a hard look at operating
expenses?

Posted By Kim, Durham, NC : April 18, 2011 1:32 pm

I'd draw a different conclusion. Colleges SHOULD BE RUN to ensure costs are
kept in line. The idea that educational expenses (like medical expenses) should
be allowed to grow without being tied to overall society's ability to pay should
be considered "obsolete."

Posted By David Emery, Reston VA : April 18, 2011 11:48 am

Thank you both Joy and B! These are great points! Everyting I learned, I
learned from life, not college. In fact, my experience is what helps me get
through school. I have all my classmates asking me how to do their work! Imagine
that!!

Posted By Sharon Ritchie, Yonkers, NY : April 18, 2011 11:25
am

1. Look at the length of this article! Now that's substance! Well, we at
least know the last time when Fortune published something more than 5 terse
paragraph, 1957.

2. I'd love an article like this about today's landscape. Like, why I can pay
$20k for a college education and make $50k out of school; but 6 years later the
same public school costs $50k and their graduates make $26k out of
school.

Posted By B : April 18, 2011 9:12 am

Are you kidding me? The quality of eduction in the U.S. is horrible. In
general, the system is so behind in science and math and all a degree is is a
piece of paper. I'm not using anything I learned in school (Seriously, when do
you use history in everyday life?) and I think it was a waste of money. Colleges
had better give me a VERY good reason as to why they want to keep increasing
tuition costs for providing less than par eduction. When stores increase their
prices and lack excellent customer service, do you think people will keep
visiting those stores? Heck no!

Posted By Joy, Houston, TX : April 18, 2011 8:46 am

As a student who is almost finished obtaining her BBA Degree, the College of
Westchester in White Plains, NY already utilizes space on weekends and evenings.
They call it a hybrid. Every other weekend, you attend classes and on the days
you don't attend, work is done online at home. As for colleges being cheap, I
don't think so. This program at the college costs $35,000 for a two-year
degree,(I had already obtained my AOS Degree and the college has just been
authorized to grant Bachelors Degrees) yet our graduates can't get good
jobs.

Posted By Sharon Ritchie, Yonkers, NY : April 18, 2011 8:27
am

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