Sticker Shock at the Ivory Tower

By Susan Tifft

When the College Board released its annual cost survey showing that private school tuitions would rise an average of 9% this fall, Kellie Kenner raced for her calculator. Since the 20-year-old junior entered Emory University two years ago, her total bill, including tuition, has jumped from $13,900 to $16,100, an increase of almost 16%. Despite a patchwork quilt of aid that includes scholarships, loans and an on-campus job, Kenner's father, a train conductor, must now pay $6,000 out of pocket to send his daughter to school this year -- $2,000 more than in 1987. To help make ends meet, her mother recently took a job as a data processor. "I told my parents I'd go somewhere else," Kenner says, "but they wanted me to stay."

As their children register for the new school year, most parents, like Kenner's, are willing to scrimp and sacrifice. But they are increasingly outraged at the platinum price tags. For nine years, hikes in tuition and other fees have averaged roughly twice the rate of inflation, boosting bills at elite private schools like Sarah Lawrence and Princeton to the edge of the $20,000-a-year mark. And the spiral shows no sign of stopping. By 2005, according to the investment firm Paine Webber, the price of a college education is likely to climb to $62,894 annually.

As the bills mount, many parents suspect that institutions are kicking up their fees at will, knowing that families will pay almost anything to give their child the cachet of a Harvard or Yale degree. "It's Chivas Regal pricing," says Kalman Chany, president of Campus Consultants Inc., a Manhattan-based financial-aid consulting firm. "The most selective schools can afford to charge what they want because they've got lines out the door of people who want to go there."

College administrators vehemently reject that accusation. Increasing tuition charges, they say, merely reflect their own increasing expenses. In particular, they cite soaring costs for building construction and maintenance; salary-inflating battles to woo and keep top-flight faculty members, especially in science and business; and the dizzying price of keeping up with technology, ranging from computerized card catalogs to the latest in lab paraphernalia. Hardware and faculty often go hand in hand: when Duke lured physicist John Madey away from Stanford, it promised to build a lab for his free-electron laser research. Cost: $5 million.

Cuts in federal student aid during the Reagan years have also taken a toll, forcing schools to contribute more from their own coffers. Like other labor- intensive businesses, colleges feel the bite of rising fringe benefits. At Brown, for instance, outlays for employee health-care premiums have quintupled since 1986. Then there is the need, fostered by feverish admissions competition, to provide more and better student services -- such as tennis courts and state-of-the-art gyms.

Aggressive fund raising has eased the crunch to some extent. As many as 60 schools are now conducting drives with goals of more than $100 million; three are seeking to break the $1 billion mark. But changes in the tax code have made giving less attractive, and many endowments are still feeling the aftershocks of the 1987 market crash. "How can we look so rich, yet feel so poor?" asks Donald Kennedy, president of Stanford, which faces a projected $11 million shortfall this year.

One reason for public skepticism is that some elites convey a let-them-eat- cake attitude -- a result, no doubt, of their enormous wealth and the knowledge that they are purveyors of one-of-a-kind diplomas. Harvard, for example, cautiously spends only 4% to 5% of the annual income it realizes from its $4.1 billion endowment, the largest in the country. (In 1988 the yield totaled $184 million.) The rest is reinvested. Despite its secure position, Harvard felt the need to jack up this year's tuition and other fees 6.5%, to $19,395. "What we distribute from endowment may sound low today, but it did not in 1979," explains Harvard president Derek Bok, alluding to a period when stock returns were disappointing.

But even a Harvard cannot afford whatever it wishes. Nearly 60% of major research universities report that they are cutting back as they re-examine the long-held and costly belief that they must offer a full range of disciplines. In April, Washington University announced plans to shut down its sociology department. Columbia University is phasing out linguistics. "There has got to be more focused investment," says Robert Zemsky, director of the higher education research program at the University of Pennsylvania, which urged in a report last week that schools close marginal campuses and adopt more businesslike budgeting practices.

Calls for fundamental change and bottom-line thinking are sure to upset some in the education establishment. But the consequences of not changing are already apparent. Tired of sticker shock at the pricey privates, more and more . families are turning to state-supported schools, where the total bill this year averages $6,671 for an in-state resident.

When the Justice Department announced in August that it was investigating some 20 private colleges for price fixing in the areas of tuition and financial aid, the news elicited shocked gasps from the ivory tower. Last week the Government added six more schools to the list, including Bryn Mawr and Wellesley. Many administrators fear that if Washington concludes that students should be like baseball players -- free agents able to dicker for the most attractive aid package -- the ensuing bidding wars could boost charges for less sought-after candidates. "Do we really want to turn colleges into bazaars where students say, 'Cornell offered me so much, now what can you do to top that?' " asks one college president. In fact, such free-market decision making is already common, despite the decades-old practice among many top schools of meeting annually to discuss the aid packages being offered to their applicants.

Whatever comes of the Justice Department inquiry, there is little relief in sight for most students and their over-extended parents. The causes that drive up tuition bills today are likely to worsen in the years to come. One key factor is an imminent faculty shortage. A study released by the Andrew W. Mellon Foundation last week predicts that there will be only eight candidates for every ten teaching positions in the arts and sciences during the decade starting in 1997, a development that is certain to inflate professorial salaries. In a time-honored bit of corner cutting, some schools are already increasing student-faculty ratios. Others are thinking about involving undergraduates in teaching and putting their best professors on video.

None of these expedients is desirable. Yet higher education, like the health-care industry, must either contain costs now or risk becoming the monopoly of the wealthy, a condition that would be socially undesirable. The alternative is ever increasing prices, with the cost spread among parents, students, federal and state government, and private donors. Quality, as educators never tire of saying, costs money -- and there is no easy solution. Laments Frederick Bohen, senior vice president at Brown University: "We're talking about a bunch of lousy choices."

With reporting by Sam Allis/Boston, Michael Mason/Atlanta and Janice C. Simpson/New York