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The Future of Independent Higher Education
This is an abridged version of remarks given by St. Lawrence President Daniel F. Sullivan at a seminar sponsored by Hardwick-Day/The Lawlor Group in Minneapolis on June 13, 2008.

I begin my last year as St. Lawrence’s president I keep returning in my thinking to four themes that have been at the center of my recent writing and speaking on American higher education – uncompleted work on which I wish we in independent higher education had made greater progress. I want in this essay to pull them together for you – and me. They are:

• A liberal education is the best higher education for students in the 21st century.

• It remains in my view a critical goal that all Americans who can benefit from higher education gain access to it, for the enhancement of their life chances and quality of life, and for the benefit of the public interest.  Some “hard-to-see” institutional and government practices inhibit and reduce this desired access.

• The pattern of price competition that operates in higher education today is making it less likely that we will get to a better place on the issue of access in the near future, and failure on the part of independent higher education to come to grips with some of the ways in which our own practices inhibit appropriate access threaten our future.  Is our tax exemption in jeopardy?

• Because of their efficiencies, high-tuition independent residential liberal arts colleges are in many ways more cost-effective than alternative models.  We need to help the nation understand how that is.

Liberal Education and America’s Promise
Let me begin with the vision of higher education to which I believe we should be working to help able students gain access, regardless of backgrounds, fields or chosen higher education institutions. Called “Liberal Education and America’s Promise,” it is described in the Association of American Colleges and Universities’ (AAC&U’s) inspiring report Greater Expectations: A New Vision for Learning as a Nation Goes to College.   Greater Expectations, in very brief summary, calls for all students to become:

• “Intentional learners who can adapt to new environments, integrate knowledge from different sources, and continue learning throughout their lives”; 

• “Empowered learners through the mastery of intellectual and practical skills” by learning to “communicate effectively orally, visually, in writing, and in a second language; understand and employ quantitative and qualitative analysis to solve problems; interpret and evaluate information from a variety of sources; understand and work within complex systems and with diverse groups; demonstrate intellectual agility and the ability to manage change; [and] transform information into knowledge and knowledge into judgment and action”; 

• “Informed learners” by “investigating human society and the natural world” to learn about “the human imagination, expression, and the products of many cultures; the interrelations within and among global and cross-cultural communities; means of modeling the natural, social, and technical worlds; [and] the values and histories underlying U.S. democracy”; 

• “Responsible learners” because “the integrity of a democratic society depends    on citizens’ sense of social responsibility             and ethical judgment.”  Their liberal education should foster “intellectual honesty; responsibility for society’s moral health and for social justice; active participation as a citizen of a diverse democracy; discernment of the ethical consequences of decisions and actions; [and] deep understanding of one’s self and respect for the complex identities of others, their histories, and their cultures.”

AAC&U (whose board I chair) calls “for a new national commitment to provide an excellent liberal education to all students, not just those attending elite institutions and not just those studying traditional arts and sciences disciplines.”

Last year AAC&U released the results of a major survey of American business leaders – mostly chief executive officers of companies of a variety of sizes.1  It is obvious from the survey results that the responding business leaders have a vision very close to that of AAC&U and almost as far as one can get from those who advocate for a first-career-oriented kind of education.  I am heartened by this as I look to the future, as I am heartened by what I perceive to be a growing understanding of this critical message among the parents and students I encounter throughout the admissions recruitment process at St. Law-
rence.  This is a good thing for the future of the kind of independent higher education in which I have always been involved, and it is a good thing for the future of St. Lawrence, but there is a very long way to go.

“Equity and Excellence in American Higher Education”
Some “hard-to-see” institutional practices, especially at elite independent colleges and universities but also at the nation’s public colleges and universities, inhibit access by able but low-income students – a truly lost opportunity for the wealthiest nation in the world.

In a truly seminal book, analyzing the extensive Mellon Foundation database, Bowen, Kurzweil, and Tobin show among other things that:

• The wealthiest colleges and universities – those that can best afford the financial aid necessary to enroll large numbers of low-income students – in fact enroll the smallest percentages of such students.  In their attempt to seek or maintain the highest possible competitive position with regard to academic reputation and to maximize the peer effect where good students educate each other – a real benefit to students at very selective institutions not to be minimized – these institutions seek to maximize their students’ average test scores, the proxy for student quality that most allows comparisons across institutions.  Test scores and high school achievement, of course, are highly correlated with family income – the higher the family income, the higher the test scores and high school achievement.  Students with anything but high test scores do not, in general, apply to these institutions because they are unlikely to be admitted, so low-income students are underrepresented in their applicant pools.

• After making exceptions for legacies (the children of alumni families), who have a 20% advantage in gaining admission; minority groups, who have a 25% advantage in gaining admission; and recruited athletes, who have a 35% advantage in gaining admission, these institutions then admit students on a need-blind basis.  Because these institutions have the resources to meet the full financial need of admitted students, admitted low-income students can afford to enroll and they do, in roughly the same proportion that they are in the applicant pools. 

• The public and the media applaud these institutions for their commitment to low-income students because they have admitted non-legacies, non-minority students and non-athletes on a need-blind basis and met their full need, missing the fact that this approach to admitting students greatly under-represents low-income students in the student bodies of the institutions most able to afford to have them.  In reality of course, these institutions are not actually need-blind in admissions because their recruited athletes and the children of alumni have higher-than-average family incomes.  In addition, many of these institutions will dip down below their academic profiles to admit students from high-income/high-asset families that may be prospects for major gifts.  They are need-blind only for applicants who are not legacies, not recruited athletes, or not from very wealthy families – a surprisingly large fraction of their admitted students.  In fact, what they really are is quite “resource-aware.”

• Bowen, et al., urge these institutions to use their superior financial resources to seek greater socio-economic diversity in their student bodies by “putting a thumb on the scale” for low-income students in the same way they do for legacies, U.S. students of color and recruited athletes.  Hill and Winston,3 in a related work, show clearly that there are more than enough low-income, high-ability students who could thrive in the academic environments of the most selective colleges and contribute wonderfully to the sought-after peer effect to allow them to have student bodies that would mirror the overall distribution of American families socio-economically.

• Two important public goods would result from changed behavior among the elite and wealthy private colleges and universities.   1) More low-income students would benefit from the wonderful richness and quality these institutions provide if more were enrolled, and 2) everyone in America would benefit if we managed to educate a higher percentage of able low-income students.  Very importantly, these institutions– influential opinion leaders in American higher education – could do for socio-economic diversity what they did for racial diversity several decades ago when they took a national leadership role and set the racial diversity bar higher for the rest of us. 

At St. Lawrence, I am proud to say, 20% of our students are Pell Grant recipients who come from the bottom quartile of family incomes nationally – roughly double the percentage at the truly wealthy institutions I’ve been discussing.  I am also deeply aware, of course, as a president accountable to trustees, students and their families, alumni and the public at large, that each institution must, as it seeks to be or remain strong and viable in a highly competitive environment, respond as it thinks best to the incentives the market presents.  This is not a case of misguided institutional leaders intentionally trying to undermine the public good.  It is, rather, a case where pursuing institutional self-interest, as we must, results in an overall outcome that I believe is not in the public interest.  We have to fix this somehow and I am impatient with our lack of progress.

There is an equally pernicious pattern that exists nationally in the public sector of American higher education that also results in decreased access by low-income students.  That pattern is low across-the-board public sector tuition.  In every state in which the research has been done the average family income of undergraduate students in state flagship public institutions is higher than the average family income of students in independent colleges and universities in the same state.  In New York State the average family income of undergraduate students in all of SUNY’s 64 campuses is higher than the average family income of students in the state’s independent colleges and universities.  The average family income of students in CUNY (the city university) is only slightly below the average for students in the independent sector.  In New York, the independent sector has a higher percentage of undergraduate students who are U.S. students of color than SUNY, as well.

How does this happen?  The students who benefit the most from low across-the-board public sector tuition are students from high-income families, who save the price difference between the public and private sectors by enrolling in public institutions.  There is a significant financial incentive for students from high-income families to “go public,” and they do so differentially.  On the other hand, students from low-income families typically believe that private institutions are better, and so when financial aid lowers or even eliminates the price difference, they enroll differentially in private institutions.

As Jenny Wahl, the Carleton economist, shows so well, a consequence of this system
is that higher-income and therefore better- credentialed students push lower-income students out of flagship public institutions – the very institutions established to ensure access and supported by the taxes of all of us.

Low-income students get it coming and going in this picture.  They end up under-represented in elite institutions that can afford the financial aid to enroll them, and they end up under-represented in flagship public institutions as well.

It is also the case, I firmly believe, that public institutions end up with fewer financial resources with which to work because of low across-the-board tuition and therefore serve their students less well than they would like and than they otherwise are able to.  We are in an era where legislative appropriations to public higher education are under siege almost everywhere nationally.  Public institutions are under-resourced for undergraduate education and we are all the worse for it.  It is still the case today that nationally, high-achieving students from low-income families have no more chance of graduating from college than do low-achievers from high-income families.  Students from high-income families do not need the large subsidy low public sector tuitions provide them in order to induce
them to attend college.

Sadly, I don’t believe this will ever change.  Brave legislators willing to look carefully at the data and Wahl’s analysis, and then contemplate doing something about it, are very rare.  Because higher public-sector tuitions are not in the self-interest of those who benefit from the status quo, there is no public support for this kind of change.  All of this is way too bad.  It is a major challenge to our future.

‘‘Where is Aggressive Price Competition Taking Us?’’
In a truly seminal paper Gordon Winston and David Zimmerman of Williams College proposed an answer to the question: “Where is Aggressive Price Competition Taking Us” in American higher education?  I believe their answer helps us to understand what is going on with moves like the elimination of student loans at some of St. Lawrence’s wealthiest private college and university competitors:

• “‘Negative tuition’ will likely appear at the wealthiest colleges and universities – those that spend the most on their students’ education – as competition forces them to pay stipends to attract the best undergraduates.

• “The price umbrella that the wealthy and highest-cost schools now hold over the rest of higher education – the less wealthy schools – will collapse, exposing all schools to far more serious price competition than they’ve seen – or probably imagined – so far.

• “A very different price structure will emerge across higher education with higher prices charged by the poorer schools who spend less on their students and lower prices charged above.  As quality goes down across schools, price will go up.

• “Queuing for admission at the high-expenditure schools, already high, will increase even more as they become, relatively, an even better bargain – when Stanford and Yale pay stipends to their students, virtually everyone will apply to Stanford and Yale.

• “Students will continue to attend lower-quality, higher-priced schools mainly because they can’t get into a higher-quality, lower-priced school.

• “Need-based financial aid faces an uncertain future as, more generally, does all college pricing that serves, idealistically, to redistribute income.  It won’t matter at the top, where student stipends are being paid all around, but it may seriously reduce low-income students’ access everywhere else.

• “There appears to be no obvious way to reverse the spread and energy of price competition if it gains real momentum – the genie won’t easily return to the bottle.”

At first blush this seems like a bizarre forecast.  But in my view what we have seen in the last several years appears very much like the beginning of a trend toward negative tuition.  Not only are students increasingly not expected to have loans as part of their aid packages at wealthy institutions; large numbers of students receive paid internships funded by the institution and paid summer research opportunities.  Indeed, we are working toward providing more of these kinds of opportunities for students at St. Lawrence.  This pattern of an institution paying stipends for students to attend is, of course, exactly what has been in place in graduate education for quite some time.  What graduate student seeking a Ph.D. in economics, or other high-demand field, pays tuition to attend?  Indeed, most such graduate students attend tuition-free and receive substantial salaries as institutions seek to outbid each other for the best talent.

This kind of competition has some perverse and counterintuitive consequences.  We know from the analysis presented above that the wealthiest institutions end up educating the lowest percentages of low-income students.  When you put this together with the prospect of negative tuition at those very same institutions, you have the bizarre possibility that students from our wealthiest families will be paid to attend undergraduate college.  No wonder the Congress is discussing various forms of intervention in higher-education pricing.  Why should a university continue to be tax-exempt if its primary or possibly in future nearly only beneficiaries are students from America’s highest-income families, members of Congress increasingly ask?

In Pennsylvania, colleges and universities must show if challenged that they are a “purely public charity” by passing a five-fold test to achieve and maintain their state tax exemption. All five characteristics must be present:

• They must advance a charitable purpose [education, of course, has long been considered a charitable purpose];

• They must donate or render gratuitously a substantial portion of their services [this criterion has been very difficult to sort  out in specific cases – what is “substantial” given the complicated discount and subsidy structure we have?];

• They must benefit a substantial and indefinite class of persons who are legitimate subjects of charity [how might Congress or your state government define “substantial” on this criterion?];

• They must relieve the government of some of its burden [in tax-exemption challenge cases so far, independent colleges have been able to meet this test – if independent colleges didn’t exist, the public institutions in their states would have to enroll more students at greater government expense];

• They must operate entirely free from private profit motive. 

Challenges to independent college or university tax exemptions in the last two decades have not been successful, but the government climate is changing.  What might be the consequences if it is decided that a college or university is not – or is not sufficiently – tax-exempt?  Might government insist, for example, on a student family income distribution that meets some test?  We already know that in the eyes of some members of Congress, if an institution isn’t investing what they consider a high enough percentage of its endowment in the subsidy of undergraduate students’ education, some or all of its endowment income should be taxed.

Making all of this more difficult is that the competition among the wealthiest institutions for the best students, which necessitates higher and higher subsidies per student to attract them, is a disincentive with regard to enrollment growth.  If enrollment grows, the per-student subsidy declines; or, to look at it the other way, for every student beyond current enrollment an institution enrolls, resources equal to the current subsidy per student must be found – typically from charitable gifts –  in order not to dilute the subsidy.  In the kind of competition that exists among the wealthiest institutions, adding students seems financially irrational to them.

But from the point of view of the public interest, would it not be a good thing if independent colleges and universities with very large endowments and extraordinary fundraising success were to grow in enrollment, or were to divide their fungible assets in half and start a new and also well-endowed institution someplace else?  Some of the best undergraduate teaching in America happens at these institutions.  Wouldn’t the nation be better off if more students could benefit from that teaching?  Wouldn’t that be better than reducing the cost of attendance of their existing students or further increasing the subsidy to a student body in which low-income students are badly underrepresented?

These questions are being asked in Congress and in state legislatures across the country, and I believe they should be asked.  I would love it if we in independent higher education could find some answers on our own because we already know that we won’t like the answers proposed by government.

Cost Per Degree
If you change what you are monitoring from what it costs to have a student in a seat in a class for a semester, to what it costs to produce a graduate with a degree in a particular major, all of a sudden selective colleges and universities with high graduation rates begin to look much more efficient and cost-effective.  Furthermore, if you focus on disciplines where large public and private universities practice “weeding” rather than “cultivating,” such as in natural science and mathematics, institutions with high graduation rates and high retention from introductory to advanced courses have a huge efficiency advantage. 

Think, for a moment, about an institution that graduates 40% of its students and one that graduates 80%.  And then imagine that in the institution with the 40% graduation rate the probability of taking a second course in chemistry is only 5% whereas in the institution with the 80% graduation rate the probability is 75%.  Some species lay thousands of eggs, provide no protection for them, and only a few survive.  Others lay just a few eggs, expending less energy in egg-laying, but invest a great deal of energy and effort in the survival of the hatched offspring, and roughly the same number reach maturity in either case.  In science and mathematics education, selective private colleges and universities are more like the latter case.  I believe it is possible to show that it is actually cheaper to create a college graduate with a degree in chemistry or biology at St. Lawrence than it is at a large, low-tuition public university because the wastage is so much less. 

Large public and private institutions that do science and mathematics education in the old, mass production way should study the case of RPI carefully.  Large lecture-lab courses where only half the students came to class because classes were so uninteresting were replaced by small (roughly 20-25 student) studio classes where 90-95% of the students came to class because faculty in these classes used pedagogies of “engaged learning.”  Careful assessments showed much better learning in the new format and much better student retention from introductory to advanced courses, and even after all the capital costs of renovating spaces for these new classes were included, the costs of the two approaches were at worst comparable and at best less expensive in the studio format. 

“Expensive” highly selective colleges are actually, I believe, among the least costly institutions in America per graduate, at least in certain majors, even if you don’t take into account the opportunity costs from time delays in achieving the level of earnings graduates ultimately achieve when they complete their degrees and the multiplier they provide for the growth of the whole economy.  As an independent sector and as a nation, we need to come to understand all of this better.  If we did, I think more colleges and universities would begin to look like St. Lawrence in size and in approach to teaching and learning, and we would do better faster, as a nation, in accomplishing the kind of liberal education of which I spoke at the beginning of this essay – the best education for the 21st century.

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