The Tuition Also Rises

  • By Ethan Corey

Volume XXXVII, Issue 2, April 4, 2014

corey article

Amherst College prides itself on its commitment to making college education affordable. It boasts one of the most generous financial aid programs in the country, and it is one of only a few schools that is need-blind for both domestic and international students.

Yet, fixating on the College’s financial aid program ignores an even more important part of the picture: Amherst’s rapidly increasing tuition. Increasing by $2,430 to $60,400 for the 2014-2015 academic year, the sticker price of an Amherst education is now nearly $10,000 more than the median household income in the United States and well above what the overwhelming majority of Americans (not to mention those from less wealthy countries) could ever afford.

But, you object, admissions are need-blind for all students and the College meets the full demonstrated need of every student; no one is denied the opportunity to receive an Amherst education due to lack of funds. Why complain about high tuition when the College has such a comprehensive financial aid program?

All of this may be true, but it’s extremely misleading. First, being need-blind in admissions does not mean that the College is unaware of students’ socioeconomic backgrounds when it makes admission decisions. The Common Application that all prospective students use when applying includes questions about parent/guardian educational and professional backgrounds, which, when combined with all of the other information applicants submit, provide a pretty detailed picture about an applicant’s ability to pay tuition at Amherst. For example, if both of your parents are partners at their corporate law firms and you attend a prestigious boarding school, the College doesn’t need to know exactly how wealthy you are to know that you probably won’t need much in the way of financial aid.

Lest you think this is merely an abstract possibility, consider this: only 22 percent of applicants from the Class of 2017 were from private high schools (which is generally, but not universally, a mark of affluence), but they made up 30 percent of all admitted students and 35 percent of those who enrolled. Additionally, 43 percent of students from the Class of 2017 receive no financial aid whatsoever (and 25 percent didn’t even bothering applying for aid), meaning that Amherst remains a disproportionately affluent place. It’s expensive, too: even with the College’s generous financial aid programs, the average student pays over $30,000 each year, far more than what they might pay at other institutions.

Of course, as the College loves to remind us, the “real cost” of an Amherst education is nearly $90,000, so even students who pay full tuition receive a “substantial subsidy” from the College. This figure is perhaps the biggest scam of all. Derived by simply dividing the College’s total expenditures by the number of students, this figure counts every dollar that the College spends as part of the “real cost” of an Amherst education. For instance, the $12.5 million that the College spent on renovating Pratt Field is considered part of the “real cost” of an Amherst education, even though the money came from an alumnus donation specifically designated for that purpose. Beyond that, the College’s official spending policy states that spending will automatically increase each year “by a factor equal to inflation plus the percentage growth in the endowment from prior year capital gifts,” plus an additional possible increase “to reflect the use of market growth over time.” Put simply, the more the College’s endowment grows and the more money it has at its disposal, the more the “real cost” of an Amherst education increases. However, the College’s investment policy requires it to aim to grow the endowment by an average of 6 percent per year. Thus the College is required to increase spending as its endowment grows, but is barred from using much of this growth to fund new spending, and therefore must raise tuition to cover the gap. In other words, the larger the endowment gets, the more the College charges students in tuition!

This leads to a vicious cycle, in which both the College’s endowment and tuition rise at an exponential rate. Since 1985, the College’s endowment has grown by more than a factor of ten, from less than $170 million to more than $1.8 billion, while tuition has nearly quintupled from $12,400 to $60,400 today. As the College has amassed wealth, it has demanded more from its students in tuition. This endless pursuit for growth costs students dearly: 6 percent of the endowment today is $108 million, $52 million more than the College collected from tuition!

Most of this money goes towards salaries. Nearly 60 percent of expenditures at the College are allocated for personnel costs, and by all indica- tions they are rising fast. Since 2005, the amount of money allocated towards the administration--the bulk of which goes towards compensation--has increased by over 70 percent, a net change of $5 million--more than twice the rate of inflation. Faculty salaries have increased significantly as well. In 2005, the College paid a total of $26.3 million in faculty compensation; in 2012, it paid $35.7 million, an increase of $11.4 million--a smaller increase in percentage terms, but significant nonetheless.

The argument for these increases is that they’re necessary to keep compensation competitive with our peer institutions. The problem is that all of our peer institutions are playing the same game; the same vicious cycle of growing endowments and rising tuitions occurs at elite schools across the country, increasing the demand for top faculty and administrators and creating an educational arms race.

All of this has the effect of pricing most Americans out, without necessarily providing a higher quality education. If Amherst had kept expenditures in line with 1985 levels, only increasing them for inflation, the “real cost” of an Amherst education would only be only $48,000, meaning that with the same amount of financial aid, far more low-income and middle-class students could afford to attend the College.

Amherst has the tools to end this arms race. If Amherst lowered tuition while maintaining financial aid, it could outcompete its peers for top students and pressure them to follow suit. While this would require us to spend more of our endowment in the short term, to ensure that we could still attract high-quality faculty and administrators, in the long run it would help the College (and its peer institutions) control costs and make college more affordable. Adopting a spending and investment policy that’s less about growth and more about students should be a no-brainer.