What Factors Contribute to Cost Increase in Higher Education - Research Paper Example

What Factors Contribute to Cost Increase in Higher Education Education is, by far, the most important tool for the development of a society. It is a sign of prosperity and serves as a catalyst for any country’s propagating economy. In today’s technological world it has become inevitable for any individual to pursue for a higher education in order to achieve higher standards of living. It is the most important bridge apart from motivation and determination that join dreams with reality. Unlike older days, the global niche has become more and more competitive. It is a race; survival of the fittest. The more skilled and educationally equipped the more chance you have to fight and survive. Catching up with the technology is one way higher education enhance economic development as graduates are better equipped to use new technologies. It is a complete cycle as higher education provides better job opportunities which in turns run the economic engine providing more capital which can be collected back as taxes and used to further improve the framework of higher education. (Bloom et al 2006). Concept that higher education plays an important role in the economic development and institutions can stimulate productivity was first introduced by Theodore W. Schultz. He introduced the idea of Human capital and its link to modernizing economy which flourished into complete Human Capital Research Program influencing many researchers and policy makers. (Teixeira 2006).The nations have long realized the significance of higher education and much has been done to build a solid infrastructure that can extract and polish the skills of an individual. But the capital required to obtain such qualifications is on the rise making it difficult for a middle class family to afford. According to the US statistics shown by Institutional Characteristics Survey tuition fee charges remained relatively stagnant in the 1970s. But there was a considerable increase in fee charges between 1980 and 1990. This increase not only had a great effect on the student and parents but also on education policymakers. In the same survey it was noted that rate of increase was greater at public institutions as compared to private institutions. Despite increase in tuition charges, number of students continuing on to higher education after finishing their high school has raised from 49% in 1980 to nearly 62% in 1993. During 1992-93 full time students attending a public school received financial aid on an average of 29%. The aid was greater for families with poor income about 80% and less for high income families about 10%. (Livingston 1995). Some enthusiast believes that higher education should be free. Many would agree that this statement is misconstructed. Even though sometimes consumer may not have to pay for a product but someone else in the background is bearing the cost. Going through a lot of literature I realized that it has been debated extensively but the question is still the same: who should pay? (Johnstone et al 2010). Before we can answer this question we need to understand different policies which provide the revenue that fuel the education system. The most common and classical model is General Tax system. In this policy, the funds are collected via general taxes imposed on every individual of the country. This model has served well over the decades but in general violated the beneficiary pays principle. Although university graduates mostly contribute in this revenue collection, a large proportion never attended the university and still has to pay. However, this policy is in line with equal opportunities for equal abilities principle. Second plan that provide funds to higher educational system is implementation of tuition fees and scholarship combination model. Institutions take a considerable amount of tuition fee to compensate for the operating cost. This is line with the beneficiary pays principle but defies the principle of equal access. This model favors the rich community who can afford to pay the hefty amount and gain access to higher education but it might be out of reach for students with similar abilities belonging to a middle class family. This injustice is partially compensated by scholarships but their availability is limited and selection criteria may lead to subjectivity. The third model is a universal student loan program or deferred fee payment. In this plan all students can obtain loan for their education without or minimal interest. Once graduated, student has to return this fee debt after reaching a certain earning threshold. (Desrochers et al 2010). Fourth proposition is based on beneficiary pay principle institutionalizing in the form of graduation tax. The advantage of higher education in relative earning is quite evident. According to OECD report the gross earning for people aged 25 to 64 with tertiary education relative to upper secondary education range from 24% in Denmark to 135% in Hungary. (Dietsch 2006). According to this principle graduates earning more than a specified threshold should may some funds to the university as graduation tax. This model is a bit different from deferred fee payment as the amount payable able is not only the fee but part of the actual income. Many researchers and policy makers believe that this model can become self financing. In order to attain that level the revenue must cover the cost of those who reach to that earning threshold as well as those who cannot. To understand the present increase in the cost of higher education we first need to understand where the revenue comes from and how it is spent. We have already discussed the source of these revenues. Now we will try to dissect its distribution and how it is spent in an institution. In any institution most of the capital is utilized on instruction and research. It includes faculty salaries, sponsored or organized research centers and administration of academic departments. Other sectors include academic support, student services, institutional support, scholarships and plant operational maintenance. (Desrochers et al 2010). Practical implication of understanding this distribution is to adjust or cut funds for some of the sectors to meet any decline in total revenue. We understand that increase in the tuition fee increase in the overall cost of higher education. So what factors contribute to increase in tuition fee? According to many researchers there are two major factors. If there is a rise in overall expenditure of a university it is needed to be compensated by an increase in the tuition fee. Secondly if there is decline in revenue collection, as discussed before, it is substituted by the capital acquired by excess tuition fee. This increase in tuition to cover for revenue collection is sometime referred as 'cost shift'. Practice of cost shifting is relatively common in many institutions to compensate for decrease state or local funds. But many argue that it is not the only solution as decline in the revenue can be reimbursed by decreasing expenditure. Also the rate of climbing fee and general spending per student is not proportional. This disproportion is more in public sector than private sector. According to the statistics between 2002 and 2006 the spending rose 2.5% compared to 29.8% increase in the tuition fees in public research universities. Hidden cost of higher education is another factor contributing in elevated overall cost. According to an article in New York Times (Bernstein 2011) the current policies are making it difficult for an average American family to afford higher education while making it easier for the wealthy. It further discuss that tuition fee of American universities has increased 439% from 1982 to 2007. In order to assist such a big payment they introduced a plan to divide the semester fee and make it payable every month. This seems to be an attractive package even for those families who can pay whole amount upfront. But in the hidden perspective of this policy unintentionally raise the tuition fee. The reason behind is the 2.99% excess taxes they have to pay if payment is made via credit card but none for other mode of payments such as check or direct deposit. For example 1000 $ monthly fee will be charged for extra 299$ which annually accumulate up to 3588$. This extra cost is specially a setback for average income families who cannot afford to pay through check or direct deposit. On contrary, rich can definitely escape this burden by enjoying the luxury to pay by any suitable mean. (Bernstein 2011). There is an annual increase in university tuition fee of about 4 to 10 percent. But university offer a lock of tuition fee offer to those who can pay all four year up front. It is difficult for a middle class to pay even a year fee together, forget about paying it for all the years in front. Therefore again the poor have to bear the extra cost of annual increment in the tuition fee. So from all this we can conclude that rise in the expenditure and decrease availability of funds from other sources forces the institutions to increase their tuition fees which in turn increase the overall cost of higher education. But unfortunately the policies that aimed to assist the poor are only benefiting the rich and making it harder for the low income families to pursue for higher education. The role of federal government is very important here as they can guide the policy makers in coming up with a solution to this problem. The cost of education lifting high and out of the reach of common man is creating a void that needs to be filled. One of the solutions to this problem is e-learning. It provides a unique environment of teaching and new opportunities for the teaching institutions as well as for the students. (Altbach et al 2006). Many universities are now incorporating virtual learning courses in their curriculum. It is much more affordable and convenient. Come to think of a student sitting home with a laptop connected to a fast speed internet and getting lectures over a video conference. It is very portable learning. But many believe that it lacks that human touch. They define education as not only learning the academics but also walking through the social aspect associated with it, which is absent in virtual learning. (Wagner et al 2008). But how far this form of learning can contribute in decreasing the cost of higher education is yet to be seen. Reference: Teixeira, P. (2006). Cost-sharing and accessibility in higher education: A fairer deal?. Dordrecht: Springer. Desrochers, D. M., Lenihan, C. M., Wellman, J. V., & Delta Project on Postsecondary Education Costs, Productivity and Accountability. (2010). Trends in college spending, 1998-2008: Where does the money come from? Where does it go? What does it buy?. Washington, D.C: Delta Cost Project. Wagner, N., Hassanein, K., & Head, M. (January 01, 2008). Who Is Responsible for E-Learning Success in Higher Education? A Stakeholders' Analysis. Educational Technology & Society, 11, 3, 26-36. Bloom, D. E., Canning, D., & Chan, K. (2006). Higher education and economic development in Africa. Washington, D.C: World Bank. Glenn, M., D'Agostino, D. E., & New Media Consortium. (2008). The Future of Higher Education: How Technology Will Shape Learning. New Media Consortium. 6101 W. Courtyard Drive Building One Suite 100, Austin, TX 78730. Tel: 512-445-4200; Fax: 512-445-4205; Web site: http://www.nmc.org. Peter Dietsch. (2006). Financing higher education : the case for a graduate tax. Université de Montréal. Livingston, A. M., Miranda, S., & National Center for Education Statistics. (1995). The condition of education 1995. Washington, D.C: U.S. Dept. of Education, Office of Educational Research and Improvement, National Center for Education Statistics, Data Development Division. Altbach, P. G., Berdahl, R. O., & Gumport, P. J. (1999). American higher education in the twenty-first century: Social, political, and economic challenges. Baltimore: Johns Hopkins University Press. Johnstone, D. B., & Marcucci, P. N. (2010). Financing higher education worldwide: Who pays? who should pay?. Baltimore: Johns Hopkins University Press. Bernstein, Noah S. (2011, August). Hidden cost of higher Ed. New York Times. Read More