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Why Does College Cost So Much?

Why Does College Cost So Much?. The Middle States Regional Forum for the College Board February 13, 2008 Atlantic City, NJ G. Richard Wynn VP of Finance and Administration Haverford College, PA and Lois M. Johnson Assoc. VC of Administration and Finance

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Why Does College Cost So Much?

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  1. Why Does College Cost So Much? The Middle States Regional Forum for the College Board February 13, 2008 Atlantic City, NJ G. Richard Wynn VP of Finance and Administration Haverford College, PA and Lois M. Johnson Assoc. VC of Administration and Finance Pennsylvania State System of Higher Education

  2. PRICE CONFUSED WITH COST • Price • Tuition and fees, room and board • Cost of attendance • Impact of financial aid—net price • Cost of education differs significantly from price • Public institutions • Private institutions • Consumer pays less than true value of service

  3. COST OF PUBLIC EDUCATION Fund Sources Cost Structure Other Other Instruction Living State Student Other Educational Costs

  4. A non-profit organization’s costs are determined by the revenue available “Laws of non-profit costs” Dominant goal is excellence and prestige, not profits In quest for excellence, virtually no limit to dollars spent Each organization raises all the dollars it can generate Each organization spends (almost) all that it raises Cumulative effect is toward ever increasing expenditures *Howard R. Bowen, (1981). The Costs of Higher Education. San Francisco. CA: Jossey-Bass. REVENUE THEORY OF COST*

  5. “COST DISEASE” FACING LABOR INTENSIVE SERVICE INDUSTRIES • Productivity Increases: • change in output exceeding change in inputs • String quartet • Class size

  6. HIGHER EDUCATION – A CAPITAL ABSORBING SERVICE INDUSTRY • Output = graduates • Capital inputs: • computers • electronic card catalog • facilities • Quality enhancements

  7. OTHER COST DRIVERS • Program mix/mission • Student demand • State/industry demand • Regulations; Unfunded mandates

  8. BALANCING ACT: EXCELLENCE vs. COST • Efficiency • Managing Student Expectations • Partnerships • Accountability • Financial Aid

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