Unit 3: Costs, Prices, and Affordability

A report published in 2006 by the Department of Education's Institute of Education Sciences called Costs, Prices, and Affordability focuses on the complexities of the postsecondary finance system. The report begins by offering surprising statistics to justify the need for public policy reform in higher education. Over the last 25 years, tuition and fees have increased faster than inflation, per capital personal income, consumer prices, prescription health care, and even health insurance (College Board, 2005). Absent a change in federal and state tax spending policies, the proportion of state and federal funding going to higher education is predicted to decline in every state (National Center for Public Policy and Higher Education [NCPPHE], 2005). The report also explains postsecondary finance terminology like revenue, expenditure, prices, revenue driven costs, and measures of institutional costs for better understanding of the report.

The report recognizes no single answer as to why college prices continue to rise or a simple solution as to handle public policy reform accordingly. Spending on instruction has declined as a proportion of educational and general spending in all public institutions, with the biggest declines coming in public two-year colleges. Overall spending has increased slightly in real terms, but by just slightly more than inflation at 4.4 percent at public four-year institutions. Overall spending at public two-year institutions, in real terms, is well below the rate of inflation at 2.4 percent. The report does not offer any specific recommendation to control college prices from increasing at its unprecedented rate, but does offer suggestions for places to focus discussion, such as central public policy changes, student affordability, institutional productivity and focus on public priorities, state and national capacity to sustain economic competitiveness, and public credibility and accountability.

The report does offer a few suggestions to control the unexplainable rise in postsecondary prices. An institution without a parallel focus from money to purpose and outcomes perpetuates data chases to no particular effect. Student affordability will be increased only if college prices are stabilized and more need-based grant aids get to the poorest students. Higher education institutions must stop looking at costs in context of revenues and view costs in relation to production functions. The biggest challenge institutions will face over the next decade is finding ways to enhance productivity under scenarios of slow or no growth in public revenues. The U.S. Department of Education, Institute of Education Sciences was founded in 1980. The Institute of Education Sciences' mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. The branch's budget is dedicated to establishing polices on federal financial aid for education, collecting data on American schools and disseminating research, focusing national attention on key educational issues, and ensuring access to education.

References:

College Board (2005). Trends in student aid and prices. Retrieved October 10, 2009, from http://www.collegeboard.org/.

National Center for Public Policy and Higher Education (2005, November). Income of US workforce projected to decline if education doesn't improve. San Jose, California.

United States Department of Education, Institute of Education Sciences (2006). Costs, prices, and affordability. Retrieved October 10, 2009, from http://www.ed.gov/about/reports/annual/index.html.

United State Department of Education, Institute of Education Sciences (2009). Overview. Retrieved October 1o, 2009, from http://www.ed.gov/about/landing.jhtml?src=gu.