Public No More: Why the B-School Model Works

Ann McClure's picture

Many would argue, and we would agree, that despite global competition, the system of higher education in the U.S. remains the best in the world. Still, American universities face increasing threats on several fronts: an explosion of higher education outlets globally, stagnant middle-class incomes, entry of for-profit providers, and the growing efficacy of alternative delivery modes, especially on the Web.

The biggest threat, however, is the permanent decline in public support. As all universities grapple with the realities of the current economic slowdown, public universities suffer the most as they face dwindling state support.

Reactions to reduced appropriations include cost-cutting measures such as delivering the curriculum with lower-cost, part-time faculty and distance technology. The most significant reactions, however, have been to increase tuition rates for resident students and to increase tuition revenue by attracting higher paying nonresident and international students. Controversy abounds, with those affected asking why state-funded institutions are facilitating access to nonresidents and restricting access to residents.

Most protests about rising tuition blame the increasing cost of higher education. There is much confusion here. Tuition is the price of higher education, not its cost. Costs are expenditures on faculty and staff salaries, facilities, quality, and administrative overhead. Net tuition at public universities is substantially below the cost of delivering that education.

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