MONEY U? MAY 1, 1997 TRANSCRIPT

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Chelsea Clinton, President and Hillary Clinton's only child, has decided to go to Stanford, one of the nation's elite schools. It will cost her almost $31,000 a year to attend, but will Chelsea and the millions of students planning to attend college this fall get their money's worth? After a background report, Margaret Warner leads a discussion of the raising cost of college.

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A RealAudio version of of this segment is available. NEWSHOUR LINKS: February 10, 1997 Experts discuss President Clinton's plans for college tuition assistance. December 26, 1996 A NewsHour panel scrutinizes the Democrat's plans for the 105th Congress' education initiatives. EXTERNAL LINKS: Financial aid links for higher education.

MARGARET WARNER: Chelsea Clinton has ended months of speculation about her college plans. The White House announced yesterday that she'll attend Stanford University in Palo Alto, California, this fall. Stanford is pricey. It charges $21,000 a year for tuition. And with room, board, and books factored in, a total bill for one year tops $31,000. But all the elite private colleges that Chelsea Clinton considered were similarly expensive: Harvard (tuition, $21,000; total cost, $30,000).

SPOKESMAN: Harvard University was found in 1636.

MARGARET WARNER: Princeton (tuition, $23,000; total cost, $32,000); Yale (tuition, $23,000; total cost, $30,000); Brown (tuition, $23,000; totol cost, $30,000); Georgetown (tuition, $21,000; total tuition, $29,000); or Wellesley (tuition, $21,000; total cost, $28,000). Any one of them would have cost her parents plenty. Only about 1 percent of the country's college-bound students, however, choose a four-year college with tuition in the $20,000 range.

There are less expensive choices. Chelsea Clinton could have chosen a public college in her home state for a much lower price. Arkansas State University, for example, charges just $2,000 a year for tuition, with total costs of $5,000 annually. And nearly 80 percent of America's college students choose a public institution. Still, college costs have soared everywhere. The Timemagazine survey last month reported that over the past 20 years college tuition has increased, on average, twice as fast as the overall cost of living. Private colleges and universities, for example, today charge an average of $12,000 per year for tuition. That's more than four times the $2700 tuition cost of 20 years ago. Public colleges and universities have quadrupled their average tuition fees too from less than $700 20 years ago to more than $2800 today. And in the Ivy League the tuition price tag has gone up more than fivefold, from about $4,000 twenty years ago to more than $20,000 now. On Capitol Hill today two members of Congress urged a commission be appointed to study the rising cost of college.

REP. BUCK McKEON, Chairman, Committee on Education: There's a great deal of conflicting information floating around the country with respect to college costs. This commission will be comprised of seven individuals with expertise in business and business cost reduction programs, economics, and education administration. Their job will be to analyze this information and give us a true picture of why costs continue to outpace inflation and what can be done to stop this trend.

MARGARET WARNER: Are college costs too high? We have four perspectives. Three come from college presidents: Tom Gerety of Amherst College, a private, four-year institution in Amherst, Massachusetts, where a year's tuition is now $21,640; Samuel Speck of Muskingum College, also a private, four-year institution, in New Concord, Ohio--Muskingum cut its tuition nearly one third this year from $13,850 to $9,850; and Yolanda Moses of City College of New York, a public college in New York City where tuition is $3200. They are joined by economics professor Ralph Reiland, who teaches at Robert Morris College in Pittsburgh. He has written extensively on the issue of college costs. Welcome, all of you.

Ralph Reiland, is college too expensive today, and by what measure?

RALPH REILAND, Robert Morris College: (Pittsburgh) Well, probably the best way to measure it would be the--how more expensive it is for the average family. And the way you can measure that is the--in the last 15 years tuition prices have gone up about three times what the value of a family's income is, adjusted for price.

MARGARET WARNER: You mean as a percentage of their income?

RALPH REILAND: Right. In the last 15 years.

MARGARET WARNER: But do you think--I mean, a lot of things have gone up--do you think value--the parents are getting value for that?

RALPH REILAND: I think they're getting less value. For one thing there's a dumbing down in colleges. There's reports that, for example, you can graduate from the schools that U.S. News--that the top 50 schools in the survey by U.S. News & World Report, 41 percent of them you can graduate now without taking one math course; 78 percent you can graduate without taking a Western Civics course. They're probably getting less value, especially considering the salaries the students get when they get out. Ten years ago we had about 10, 12 percent of students earning--working in jobs that were always done by high school students. Now we're approaching 25 percent of college students are doing high school work.

MARGARET WARNER: And what do you--

RALPH REILAND: Because there's an oversupply of students in the market. I'm sorry.

MARGARET WARNER: I'm sorry. And what do you think contributes to this--this increase in college costs that was just documented?

RALPH REILAND: Well, the primary two reasons are that costs are going up three times faster than family incomes. His faculty compensation--I shouldn't say this--but faculty members, that faculty compensation is just about double the Consumer Price Index, but worse than that is the bureaucracy in the universities, and I shouldn't say this either with my dean there, but that's gone up six times faster than the number of personnel compared to the number of students in the last 10 years. And then on top of that, down lower on the scale, there's just rampant waste. For example, should I say more, or--

MARGARET WARNER: Please do. Give us an example, and then I'm going to let them answer you.

RALPH REILAND: Well, for example, there's 10 hours of average work per week by a professor with 22 weeks off, and at the same time, in Pennsylvania, for example, in the 18 state schools, we paid over $100 million last year for those same professors to be on sabbaticals to study. A real cost-efficient program I'd say, why can't you study the 20 or 30 weeks you're off per year, instead of sticking the taxpayers with that bill. That's one.

MARGARET WARNER: All right. Let me go ahead now and I'll get our other guests to answer some of your bill of particulars. Tom Gerety, from where you sit, why do you think, why is college so expensive?

TOM GERETY, Amherst College: I think it's so expensive because it's worth a lot, and I think this talk of rampant waste and professors not working is just false. At a place like Amherst we're trying to offer the very best education in the world on a personal basis with some of the best professors in the world. If you're talking science, if you're talking technology, if you're talking writing, if you're talking any of the fundamental skills that will carry these young people through their lives. It's a much more expensive venture than it was, and they need to be educated to compete at the very highest level in the world. Amherst happens to be a good example on bureaucratization because we have one of the thinnest bureaucracies in the country and have had it for a hundred years, and yet, we're amongst the most expensive schools. I think that's because we offer one of the best values. Ralph is just wrong about the salary expectancies. As you know, Margaret, the salary expectation of young people graduating from top flight schools has skyrocketed in the last number of years. One of the great problems of our society is that the highly educated can have--have expectations life-long of much greater incomes than the less highly educated. That's the kind of society we have now, and we need to educate for worldwide competition at the top level. And that's why it's so expensive.

MARGARET WARNER: Yolanda Moses.

YOLANDA MOSES, City College of New York: Yes.

MARGARET WARNER: CCNY is a lot less expansive, but you've still had increases. Why?

YOLANDA MOSES: Well, I think as Dr. Gerety said, the cost of education has gone--has gone up. We were free for many, many years, and we've had to keep up with inflation; we've had to be competitive in terms of the salary market for our faculty, and we've also tried to provide the best quality education, given our mission, which is a mission to be a public institution, and to provide the best quality education for people who couldn't afford to go to the Amhersts.

MARGARET WARNER: But why does that require increases greater, much greater, than the rate of inflation? I mean, all businesses have to compete and so on. Why, for colleges, is it double or sometimes triple the rate of inflation?

YOLANDA MOSES: Well, I think it has to do with the programs, and I think all colleges are not overprices and not expensive. I think as long as we have a range of choices in this society you're going to find people buying what they think is a better value, and they're willing to pay for that.

MARGARET WARNER: All right. Sam Speck, you at Muskingum, as we said, cut by a third, cut your tuition. Why did you do it, and how did you make up the difference?

SAMUEL SPECK, Muskingum College: First, I would want to say that there are good reasons for the cost of education going up as they went up at Muskingum. And the--the biggest reason, if you look at where college budgets have gone up, is because of financial aid. Most students today get financial aid. 75 percent of the students attending a private institution in Ohio get financial aid. The average financial aid package for room, board, tuition, and fees is over $10,000. And over 75 percent of the financial aid packages, other than loans, come from the institution's own resources. So that attempt to provide more opportunity for diversity is a key example. Another example--

MARGARET WARNER: Go ahead and give us your example. Why did Muskingum, nonetheless, cut tuition by a third, and how did you do it?

SAMUEL SPECK: We did it because price was going up faster, and every time price went up faster than income more people were unable to pay unless you increased financial aid.

MARGARET WARNER: So you were in a vicious circle.

SAMUEL SPECK: It was what they called the discounting dilemma. And we looked ahead, and we said pretty soon there's going to be a wall down there. You just can't keep doing that. And thus we decided to cut tuition by $4,000 to make the college more affordable but also to make the whole idea of pricing of college more understandable and, frankly, more equitable. And it's worked. It's worked very well.

MARGARET WARNER: How did you make up the difference? I mean--

SAMUEL SPECK: First, as I've already indicated, most students attending private institutions and public institutions, for that matter--

MARGARET WARNER: Were on aid anyway?

SAMUEL SPECK: Are getting aid anyhow. So if you cut the price by $4,000, they're going to need less aid. A second factor had to do with increased efficiencies that you're able to get with additional students. We also have been losing a number of middle and upper middle income families to public four-year institutions, and we were able to reverse that. And as a result of those factors, our net income and thus what we were able to have to provide better services to the students actually increased by a significant amount.

MARGARET WARNER: Ralph Reiland, from what you know about the economics of running a college, could most universities do what Muskingum did?

RALPH REILAND: I think they're going to have to. By the way, I'm a Muskingum graduate. I went to Muskingum from 1959 to 1963.

MARGARET WARNER: And it cost a loss--

RALPH REILAND: So I'm real proud. Yeah. I think I paid for it just by putting up aluminum siding for two months in the summer. That's all I did. And I'm real proud of what they're trying to do there. You know, I think the future is going to be for colleges, the pressure's going to be the same as it was on the automobile companies in this country, when the competition came from Japan; all of a sudden our cars go now for 100,000 miles without a trade-in. And I think with colleges you're going to see the pressure from a government that's broke. We're not going to have the subsidies there any longer, and we have stagnant family incomes, and there's going to be some resistance to--like at the top schools to pay $150,000 to somebody who teaches one course every other semester. That's just too expensive, and as far as the quality goes, the funny part is, the higher you go in terms of the, the status of the schools, the more they send other students in to teach the students. You'll find at the top universities two thirds of the classes are being taught by students.

MARGARET WARNER: All right. Let me let Tom Gerety get in. Please.

TOM GERETY: I think the discussion needs to distinguish two things here; the price that we charge to those who earn the kinds of livings that President Clinton earns--in his case, we know the salary is over $200,000 a year--and the price that we charge to people according to their need. A place like Amherst charges a whole range of prices. About half of our students pay the full price. The other half get a very extensive scholarship, averaging $15,000 just about this year. The--the second thing I say about this question of what's happening is that there is pressure on this market, and it's a good old free enterprise market, and we're seeing tremendous--a tremendous range of choices. Yolanda's school, it wasn't really free. It was just paid for by subsidies from the state of New York, which--from the city of New York, which is great.

We have a very mixed system in the United States. Places like Amherst try to do something which is very public and democratic, which is say come whatever your needs are. If you're well-to-do, we're going to charge you a portion of the total we spend. We're more expensive than our price would indicate. We spend almost $50,000 a year on the students who come to us. Some of them pay nothing, some of them pay around $30,000 a year. But I just think we need to be realistic here. Amherst is one of probably thirty or forty schools that charges that much. Muskingum charges significantly less. CCNY charges just a fraction of that. Around the country American education at the higher level offers the greatest variety and the greatest number of choices.

And finally, Ralph, at a school where we don't have any graduate students teaching any of our students--it's all professors, eye to eye, we are an expensive school, although we democratize it with a scholarship program--but it is not the case that every expensive school teaches with graduate students. That is a phenomenon of our universities. It's true, public and private. It's something the universities are going to be wrestling with. I think they're wrestling with it now. The liberal arts college that Muskingum represents or Amherst represents is a model that holds onto the old-fashioned ideal of teaching by conversation.

MARGARET WARNER: All right. Let me get back to Muskingum here. Do you accept what Tom Gerety seems to be saying, that the disparity say between your private college and his is really one of quality, the reason his is $21,000 and yours is half that is because they are offering more?

TOM GERETY: Not a fair question.

MARGARET WARNER: I think it is fair.

TOM GERETY: Take a shot at it.

MARGARET WARNER: Take a shot.

SAMUEL SPECK: I think you have to look at value, and there's some interesting research done by two gentlemen by the name of Pascarole and Terrazini looking at what has been ascertained about what happens in the educational process over the past 20 years. And they indicate that if you hold constant the factors that get the student to the college gate, that the factors they bring to college have a much greater impact upon where they are when they leave college than what happens to them within college; that there is more of a commodity aspect to college than the research would indicate than maybe we'd like to allow. But certainly in a college that is charging $30,000, you would expect some things to be available there that might not be available to one that's charging less. The critical issue is value. There are very high priced eastern elite institutions.

TOM GERETY: And western. And western.

SAMUEL SPECK: I'm privileged having had the opportunity to go to one--where you will find a couple of hundred students in a class.

MARGARET WARNER: All right. And Yolanda Moses, go back to the public versus private. Why are you able to be so much less than Muskingum?

YOLANDA MOSES: Well, the state of New York--like many of the state universities--decided a long time ago that part of its mission was to provide access to people for a quality public education who would not be able to afford private schools, and it has to do with a variety of missions of higher education in the United States. It's a part of what we're supposed to be doing. We might not have some of the bells and whistles, but we have basic, good undergraduate and graduate education for our students in a wide variety of fields.

MARGARET WARNER: And so use Tom Gerety's formulation. What does it actually cost you to educate a student, as opposed--

YOLANDA MOSES: Well, it costs us over--close to $5,000. But the--

MARGARET WARNER: But half of that is--

YOLANDA MOSES: Yes. The state pays for part of us. Student tuition pays for the other part of that.

MARGARET WARNER: All right. Tom Gerety, I want to come back to you and let you back in here. Do you agree with Ralph Reiland--whether you think it's fair or not--that streamlining is coming, that American education is going to have to streamline?

TOM GERETY: Absolutely. We are streamlining. We're in a period of real downsizing around the country in terms of other enterprises. Health is the greatest example, I think a better example than cars. I think all our activity will face tremendous pressures too, and Amherst, like so many others, is trying to streamline.

MARGARET WARNER: All right.

TOM GERETY: But that doesn't mean, Margaret, that we're going to end up with a one-price-fits-all approach. And the reason I thought that was an unfair question, by the way, is that it's up to students and parents, like the Clintons and others, to choose what they think is the best value for them. Many of them don't want to go far from home. Many of them want to go public. Some of them would like to go to a place like Amherst or a place like Stanford. It's--I just don't think the argument in a free market should be based on some notion of snobbery and wastage. There's a lot of consumers and a lot of journalists out there who can challenge what we're doing. I put the challenge to you all this way: America faces a world in which education is at a premium. Of course, we need to do it reasonably and economically. If we have faith in the mixed enterprise of public and private effort and in the very various sorts of institutions, I think we'll be better off.

MARGARET WARNER: All right. Thanks, Mr. Gerety, and all the rest of you. We'll have to leave it there.

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