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BOB KATZ: The topic for this morning is Higher Education, Rising Costs-- What Does the Future Hold? There's already a lot embedded in that because among other things, I think it embodies the rising costs of operating research universities like this and carrying out several missions.
And there's the costs in the sense of the pricing, the cost to people who attend or otherwise participate in what we do, and how those two do or don't even match up or what cross-subsidizes what, and so forth. So there's a lot to get into.
We have four terrific members of the panel and one traffic cop. I'm Bob Katz. I'm the vice chairman of the board. I've been a trustee for 12 years. I was a graduate of the College of Arts and Sciences in Government. Many of you know me as the long-time-- some might say too-long-time-- head of the Annual Fund, a job I am now out of, and Paul Salvatore is in, thank god. But I'm also perhaps best known as Margaret Mitchell's straight man--
[LAUGHTER]
--a role I will reprise one more time, I'm told, tomorrow. To my far right is Kent Fox, the provost of the university. I think everyone in the room knows Kent. He is invoked on a daily basis in discussions and decisions involving Cornell's revenues and expenses. And before he became provost, he was the Silbert Dean of Engineering here at the Engineering College at Cornell.
Michael Lovenheim is an assistant professor in Policy Analysis and Management, also known as PAM. He studies the economics of higher education, focusing on how students make college choices, what factors affect their progression through higher education, the role of individual and institutional resources in driving student higher education outcomes, and the effect of students' post-secondary investment decisions on future labor market outcomes.
Rana, next to Kent, is an assistant vice president at Stanford, where she has worked for 16 years in the areas of financial aid, budgeting, human resources, accreditation, student learning assessment, and institutional research. As an administrator with an operations research background, Rana has a great interest in measuring the social, educational, and economic aspects of academia. And as I'm sure you all know, Rana is also a trustee of Cornell University.
And Ron Ehrenberg is the Irving M. Ives professor of ILR and Economics, as well as the Stephen H. Weiss Presidential Fellow, and a director of the Cornell Higher Education Research Institute. Ron has been involved in thinking about research and writing about the economics of higher education from the perspectives of a professor or researcher, a Cornell vice president, a Cornell trustee, and now a trustee of SUNY as well.
So having given you those credentials, you will see why I've happily accepted the role of traffic cop and time keeper. I will try to keep it moving along, but otherwise allow the participants to participate. The way we're going to do this is I'm going to offer each participant an opportunity to say a minute or two of something they would like to throw out on the table on this subject to inform and be part of the conversation.
There is an awful lot that one could and, in the end, would cover if you wrote a fully formed conceptualization or treatise on the subject. As I said, there are the expenses of the university. There are the component expenses of education, research, and impact or outreach, whether they are or should each be self-sustaining.
And to what extent are they, or to what extent do different revenue streams cross-subsidize between them? How much of that total revenue needs to be, or should be, or currently, for that matter, is out of tuition as opposed to out of something else?
What the need-meeting commitments we have on the financial aid side of tuition means, where they're driving us, where they're going, how we administer them, and whether that's all changing-- how much of sticker price tuition that we charge actually drops to the bottom line as revenue, where that's going, or has been coming from, and is going.
And if we're talking about pricing, what I just said was it would be more of a concept of the average. And more biting at where the rubber meets the road is at the incremental tuition dollar as you increase sticker price. How much of that incremental dollar drops to the bottom line or doesn't because that's actually a different number?
How many people, in fact, pay sticker price versus something else, where that's trending in numbers and divergence between the continuum of what people actually pay to come here, and whether we have a view as to what that should be-- how financial aid is financed. How much of it comes out of tuition as opposed to something else?
Do we have a view of what that should be? Do we know where it's trending? Is that a number we are or should be trying to manage? And what about new paradigms of either thinking about the expenses of running the place or finding new revenues not currently in place, which could or would change all of these concepts, or at least proportionalities going forward?
So that's just a bunch of things that occurred to me as I was on an airplane. I'm sure I'm missing some, and there are quite a lot there. My idea here is to ask each of the four participants to do a minute or two on some aspect of those ideas or their own to get some-- I don't know what the right metaphor is, but some spokes of the wheel on the table, understanding that their each only going to do a spoke, not their entire philosophy, and then have a conversation among themselves.
I'll try to nudge it along. And then somewhere along the line, we'll open up the microphones and make it a broader conversation. So with that, Ron, do you want to lead off?
RON EHRENBERG: Well, I want to tell you how we got here. I was on budget committees at Cornell since the late 1970s. We always increased tuition by more than prices. And basically, that's because we have this goal of being as good as we can on every dimension of our activities so we have a tremendous quest for resources.
Up until the late '70s, we actually had a formal policy at the university of increasing tuition by the amount that median family income went up. And if you have a given set of financial aid policies, and you're basically increasing tuition by about the same amount that median family income is going up, then your financial aid budget will go up by roughly the same amount.
But somehow, in the late '70s and going forward, the selective private universities lost their discipline. And they began to think much more about, what do we need, or what do we want, as opposed to what people can afford. And if you go back to the late '70s, our tuition was about 26% of median family income.
Today, as was pointed out in the opening session, it's more than 2/3 of family income. And so just the notion of increasing tuition by more than family income is going to lead to increasing pressure on financial aid.
But if, over time, you increase the generosity of your financial aid policies-- and universities increase the generosity of their financial aid policies because in periods of prolonged endowment growth, if you have a spending policy, which is basically based upon an average of endowment values over a number of years-- then you will be spending less out of the current value of the endowment than may seem justifiable.
And there was pressure to increase financial aid. And then early in the 21st century, information began to leak out and then become very public on the share of students that were receiving Pell grants. And it turned out that the selective private universities, in spite of their very generous financial aid policies and their need-blind admission, were not enrolling lots of relatively low income students.
And the institutions felt that that was a problem. And they increased the generosity of their policies even more. And they did this just at a time when the economy collapsed and the need of our students grew.
And so you have this situation that need of students is going up, tuition's going up by more than median family income, and the income distribution of our students shifting more and more to students who are coming from relatively modest backgrounds.
And as a result, the share of our students that receive grant aid keeps going up until we get to the point that we are today, that over half of our students-- slightly more than half of our students-- are receiving an average of $34,000 in grant aid.
And unless we can get to a point where tuition does not go up by more than family incomes are going up, progressively, the share of our students that are going to be full-paying students is going to go down and down.
BOB KATZ: Thanks, Ron. Kent? I'm somewhat alphabetical, I guess.
KENT FOX: So I approach this from not the perspective of someone that has a PhD in economics, like our first two panelists down on this end-- two, actually, of the world's leaders in this area-- or from the perspective of Stanford and a trustee and an individual who studies this from a research perspective, but as a practitioner.
And I think of cost in two ways. I think most of us think of it from the perspective of, what does it cost to come to Cornell as a student? I think about it from the perspective of, what does it cost to run the university because I'm very much involved in figuring out, with the rest of the leadership of the university, how can we raise our stature, the quality of this place, and the relative position to our competition in the context of the cost of the institution, whether it's the facilities costs, salary costs, or financial aid costs?
So from my perspective, the real burning question is, indeed, how do we recruit and get the best students here? But also, how do we raise our stature when we have these real costs as an institution? And we have this variety of revenue streams. And not many of them are increasing.
They're staying flat. And tuition is just one of those. There are other revenue streams at Cornell as well. But how do we raise our stature in the context of fairly relatively flat net revenue?
BOB KATZ: Rana?
RANA GLASGAL: Yeah, let's get this straight. I'm not a world-leading researcher economist, but I am more like Kent right now. yeah, he's a faculty member, but I have looked at the cost side. How much does it cost to run a university? I've worked on the budget, like Kent has.
And I think that my viewpoint is that universities are such wonderful places. The faculty and the students at universities create this infectious intellectual excitement, and this ambition, and this high quality of expectations. And as people who run universities-- I'm an administrator-- I want to deliver the highest quality I can to the people who really deserve it-- our faculty and our students.
But when we look at that, that costs money. Our Dean of Humanities and Sciences at Stanford has said explicitly, I expect the delivery of our administrative services to be commensurate with our standing as a university. And when you have the academic standing of a Cornell or a Stanford, well, that's a pretty high bar to set.
And again, that just is going to cost us some money. So where do we allocate our resources effectively to achieve that goal to deliver what we should be delivering to our students and to our faculty while not going crazy and causing the cost of delivering an education to go sky high?
So while we still want to strive and achieve and do great new things throughout the university, we have to remember that maybe we should be looking at programs that aren't working. We should always be assessing what we do from the smallest things to the biggest things. And if something's not working, we should have the courage to get rid of it, to dismantle it. And that's my perspective.
BOB KATZ: Michael.
MICHAEL LOVENHEIM: Thanks. So I probably less about Cornell than anyone else in this room, so I'm going to speak instead more broadly about some issues that I think are important, broadly, in higher education.
And in particular, I think one of the biggest challenges that's faced by the higher education system in the United States is how we can give institutions of higher education the resources they need to accommodate the rise in student demand for a college education that we've seen.
And that's really driven by the continuing shift of our economy towards more skill-based jobs and industries. And we've seen a large rise in the demand for college, which is proxied by the proportion of students who go to college, of high school graduates who go to college.
At the same time, we've seen a pretty precipitous decline in the proportion of those students who actually complete a four-year degree. And this is a huge challenge for the higher education system that we see these declining completion rates.
And it's maybe inappropriate that I'm saying this at Cornell because it's not a problem that Cornell in particular is facing, or the Cornells of the world. And it's really coming from the lower resource schools, community colleges, less selective public four-year schools.
And those are the schools that are soaking up the increased demand, right? So we have increasing numbers of students going to these schools and declining completion rates. A lot of the work I've done and some of the work Ron has done has shown that some of the reason behind this seems to be causally related to the low resources these students face when they go to these schools.
And so I think from a policy perspective, it's a very important question of how we get these schools the resources they need, particularly in the current political environment, where public funding is not necessarily in vogue, and how we get these schools the resources they need to adequately train the students who are already in the system for the 21st century jobs that we want them to have.
BOB KATZ: So would any of you want to follow up with each other?
RANA GLASGAL: I don't know where to start.
RON EHRENBERG: Well, I think Rana put her finger on a very, very important problem. We want to be the best in everything that we want to do. We want to have the best faculty. We want to have the best quality undergraduate education. We want to have the best support services.
We want to have the best facilities. We want to have the best support for research to attract and retain the best faculty. All of these things take money. And as Bob has pointed out, undergraduate tuition streams, at the current levels that we are increasing them in and at the current rate at which financial aid is taking away resources, are not providing a lot of the money.
So then the issue basically is-- and when I go to sleep each night, I say, boy, am I happy that I'm not a university administrator-- how do you make the hard decision about, how are we going to trade off all of these different goals? And what are the things that we really value? And what are the things that we're going to let prosper?
What are the things that we're going to shrink? And what are the things that we're just going to get rid of? And this is a decision that involves trading off both academic and nonacademic and support services. And it's decisions-- and David Skorton talked about it earlier.
How do we generate the revenue streams? And I know the trustees are looking to try to think about what alternative ways are there to generate revenue that will be productive for the university? And it involves deep questions, such as, how are we going to educate the students in the future? And are there ways that we can use technology or different combinations of faculty to simultaneously reduce the cost of delivering our education, but also increase the quality?
RANA GLASGAL: There's a lot of costs that technology brings and alleviates. Technology has two sides. We could probably talk all day about what kind of technology we can use in the classroom-- blended learning, flipped classrooms, MOOCs. There's a lot of terms out there.
And technology does have the potential to help us reduce costs and bring education to people more cheaply, but I would say in the last 20 years, technology has cost us a tremendous amount. I know it's probably true at Cornell. It's true at most universities. I know it's true at Stanford.
There are 1 million hacking attempts at our networks every day. Every day. And that means that we have to have this big infrastructure of security. And we have multiple sign-ins and all sorts of stuff. And every once in a while, somebody gets through, and that costs us a tremendous amount of money.
I think, also, that we have really high networking costs. There was an article in the New York Times about-- I think it was the NYU director of technology-- their CIO said he met a student who had 18 mobile devices that he brought to school with him. And he said the average is more like three.
Count up how many you have in this room. And if they were all connected to our wireless network here at Cornell at one time, that creates a tremendous stress on the network. So we have to spend more money for wireless access points. So that is a tremendous cost that we just don't even think about every day. But that's the flip side of the technology is how much it costs us.
KENT FOX: Technology also allows scale. And we at Cornell are pretty unique amongst our peers. We have very few part-time students. We've really not exploited scale beyond the 21,000, 22,000 students we have. So I think Cornell's engaged in a thought process about, should we have more part-time for credit students?
We could do that. Many, many, many of our peers have a lot of students. They're reaching apart from those that are on their residential campus. And technology provides that scale advantage.
BOB KATZ: Ron or Michael, can I ask you to address whether there is, subjectively, or looking from above-- does it look like there is, objectively, a theory of tuition setting that relates either to demographics of your customer base or the competitive marketplace, if you think of it as a competitive marketplace, or growth in income?
Or what elements of the university enterprise should or shouldn't pay for themselves as opposed to cross-subsidize other things, research versus education, and so forth? Or is it simply, as it sometimes comes out, operationally, we look at what our tuition was last year. We look where everyone else was. We imagine where they're going this year. And we try to stay in the same place.
RON EHRENBERG: Do you want me to embarrass the young guy?
MICHAEL LOVENHEIM: [LAUGHS]
RON EHRENBERG: Let me try to do it--
MICHAEL LOVENHEIM: Thanks, Ron.
RON EHRENBERG: The college board came out with its annual report within the last few days. And it basically said that over the last 10 years, on average, the net cost of attending higher education institutions has not substantially risen, at least for private nonprofits.
And so the real first issue is the confusion in the public eye between the posted price, the tuition level, and what people actually pay. And nationwide, for the private nonprofits, we give back over 40% of our tuition revenue in the form of financial aid.
What are the theories about price? There are absent political pressures. Some people might argue we should raise tuition as high as possible and make those people who could afford to pay it pay as much as possible and give subsidies to all of the others so as not to hold them harmless. And that will generate the most revenue for the university.
But politically, that's not going to fly. And so because of that, we get into this uncomfortable position of wanting to stay within the pack. And I will tell you, there were a number of years in the past when Cornell missed or guessed wrongly as to what the pack was going to do. And we raised tuition by less than we actually could have. We are not a high tuition school relative to a number of our private competitors.
BOB KATZ: Michael.
MICHAEL LOVENHEIM: Yeah. I agree with Ron. There doesn't seem to be a unifying theory of how universities should set prices. And I think we are hamstrung by a couple difficulties. First, it's very hard to know what students are actually paying for college. So this is difficult for researchers because we want to know this.
It's difficult for-- universities know it better, but you don't know the price distribution that students face as well as you might want. It's very difficult for students, especially students that don't have a facility with the higher education system and the opaque nature of the pricing scheme.
So I think any theory or any pricing system would want to account for those factors, but I think we're operating, for the most part, in darkness with respect to a lot of these core parameters. It's very hard to know what to do, to be honest.
And it's very hard. I'll just speak from a researcher's perspective as well. It's hard for researchers to know what the universities want to do. So when you think about an optimal pricing scheme, you want to optimize over some objective function. And universities have multiple objectives.
And I think meetings like this are where some of those objectives get outlined, but it's hard for the researchers to know what those are because your tuition scheme would be-- if all you want to do is raise the maximum amount of money possible, you do what Ron suggested, right?
And you eliminate financial aid, perhaps, and just let in rich students, but obviously, that doesn't accord with the desires of the university. And I agree with that. So there's a balance between raising money and diversity issues. And it's hard to know what universities-- what their preferences are in order to say what they ought to do. And I think that's holding back, I think, a real rigorous study of that issue.
KENT FOX: One way to look at tuition is the impact on students. And all of us here are part of a university that's just a handful that have need-blind admissions. We have aid that is need-based. And then thirdly, we meet full need. We don't even have a budget for aid. We will give as much aid as necessary to meet the full need of those students.
And so we look at debt, for example, at graduation time. And a Cornell student at graduation time will have had an education where the sticker price is $0.25 million dollars at graduation time for all fees, all end costs. And the average student at graduation time will have a debt of $9,000. And less than 1/2 have any debt.
And of those that have debt, about 45% have debt. And those have an average of about $20,000 in debt for a $250,000 investment in their education. I wish I could buy something for $250,000. I'd have to have more debt than $20,000, at least based on my personal finances.
So the impact on the students-- 1/6 of our students here have come from families with income of less than $60,000-- 1/6. And those students can come to Cornell without any debt. So we're in the stratospheric collection of universities that have financial aid of this type. But still, even at Cornell, it's important.
RANA GLASGAL: Yeah, my favorite-- Bill Massey is a higher education researcher, like the folks on my left. And at a conference, I heard him say that the Ivy Leagues and their ilk-- Stanford, MIT-- were just a pimple on the elephant that is higher education.
BOB KATZ: Right.
RANA GLASGAL: A very attractive pimple.
[LAUGHTER]
KENT FOX: Try to get that out of your mind.
[LAUGHTER]
BOB KATZ: I've had that said--
RANA GLASGAL: We love our little pimple.
BOB KATZ: I've had that said to me as well in conferences. Numerically, we're not a rounding error on higher education. The institutions that do it the way we do-- when you look at the state systems and so forth, the numbers, we are statistically unimportant as numbers.
We think we're far more important for other reasons than sheer numbers. But if I could pick up on two things that were just mentioned, Ron, I believe the number-- constant dollars, the actual average price places like us have been charging has stayed pretty much fixed in the $28,000 to $30,000 a year.
If you take the number of students, divide it into the actual net tuition revenue, look at it over the years, that's about what it's been. I don't think it's even increased at the rate of inflation-- perhaps just about the rate of inflation.
Ken said we have no financial aid budget. And that's an interesting thing to imagine, particularly when you realize the financial aid budget out of a $2 billion Ithaca enterprise is 20% of it or something like that. It's not a budget because we admit students without regard to financial demographics.
And by the way, if you've been reading around the newspapers, even over the last several months, as recently as this week, several institutions that say that-- it's starting to crumble around the edges as to whether they're really doing that--
RON EHRENBERG: They're becoming need-aware.
BOB KATZ: Hmm?
RON EHRENBERG: Need-aware.
BOB KATZ: Need-aware at the admissions level. And you have Wesleyan blatantly increasing the proportion of the class they are going to be taking because they can be fully tuition-paying in order to remain need-meeting as to the rest.
There are a lot of things going around the edges, but the reason we have no budget is need-blind admissions process produces a group with certain financial demographics. We don't take into account admitting them. At the financial aid side, we then say the only characteristic we take into account in terms of awarding financial aid is the one we paid no attention to in admitting them, which is their financial demographic.
And then we have this commitment to meet need. And god knows there are rooms for different people that have different ideas of what need is and what meeting is, but nonetheless, over at least the near term we've set out there, what we think it means-- and it operates on itself and produces a number, which is really not so much a financial aid number as a how much tuition can this cohort of students pay us?
It's a means-based number. Then we have a total amount of tuition we say we need as revenue to operate the place as one of the main streams of revenue. And the sticker price then becomes an outcome, in effect, of those two numbers. Because if you can get x dollars out of this group and you have to end up with y dollars total, and you have only this other group that's going to pay the sticker price, that tells you what the sticker price is.
So you have this specter of very big factors, both in an enterprise way, in a mission way, and at a human level of the people we care about most, which is the student body, which we're here about, which one can say is not actually being managed to particularly numerical targets.
We don't have a view, as far as I know, whether 40% versus 30% versus 20% versus 50% of sticker price tuition going to fund financial aid is either a good idea, a sustainable idea, the idea we embrace and want to stay at, improve, not improve, where we want it to be in 10 years. It just happens to us. And that's the way I see it. That's my non-participant--
RON EHRENBERG: Let me try to be a little bit provocative, which is to say that the focus on undergraduate tuition and financial aid is just the tip of the iceberg, that our financial models are breaking down. And there are a whole set of issues that a university at the start of the 21st century has to seriously think about.
And making some judgments about what appropriate tuition and financial aid policy-- that's part of it. But part of it is-- and Ken can talk about the comparative study that he did, to the extent that it's public, about what Cornell does relative to other universities, and areas where we could expand and generate more revenue.
And then there are the whole issues about the cost structure. And if we can't afford to be world-class in everything-- and I'll just give you an example. Before 2008, the way that people looked at administrative-side funding was, you would do a comparative study in an area.
And an area would be-- I like to make fun of Mary Opperman, who's a friend of mine. The area would be human resources. And you'd hire a consultant. And a consultant would come back and say, on a per student basis, or a per staff member basis, you are spending less than the median of your peer group.
And then the administrator would go in to the provost and the president and say, look at all the wonderful things that we could do. We could have retirement counseling and get rid of people like Ehrenberg. We can have employee assistance programs. We can have educational programs to facilitate mobility of students.
And yes, we want to be as good as we can in everything. And so we do it. And it was only after the financial meltdown that Cornell and other universities realized, no, we can't do that. And maybe we can't be world-class in administrative functioning. Maybe the things that we should be world-class in are the academic and the student support thing.
And the student support thing is very, very important. When the original Pell Grant legislation was passed many years ago, part of the bill, the appropriation, called for grants to colleges who were enrolling Pell Grant students because they understood that disadvantaged students economically needed more support to get through.
That was never authorized. Or maybe it was authorized, but it was never appropriated. And as Cornell moves to attract more students coming from disadvantaged background, the importance of our support services for students increases dramatically.
BOB KATZ: I'm going to open the questions in a little while, but I'd like to give each of you one more chance to say something rounding out before we do that. Michael, do you want to add any--
MICHAEL LOVENHEIM: Yeah. I'll cede my time to questioning. I think this is a good discussion, so I don't have much to add.
BOB KATZ: Rana, you want to add something to what you've said so far before we--
RANA GLASGAL: Well, one of the things we were going to try and get to today-- and maybe some of your questions will be about this-- is where are we going? What's going to happen in the next 10 to 20 years? And I like to quote Yogi Berra, who said, prediction is always difficult, especially when it involves the future.
And actually, I don't think Yogi Berra ever said that, but it sounds like something he would say. So my viewpoint is that we are going to be tinkering around the edges. We're going to be trying things that will make us more productive, that will lower our costs, but we'll probably also have things that increase our costs.
So I think it's going to be a time where we are very conscious of that sticker price that's out there that many of you in the audience are paying. So therefore, we have to be cost-conscious, like Ron's paper said. By the way, I work for the Mary Opperman of Stanford. And I showed them that paragraph in your paper.
I said, look what it says about HR. And I think that we at Cornell will continue to be that little speck in higher education that can need-blind. I hope we can continue to do that budgetarily, but I think we're in an era where we can't just continue to spend and spend and spend. And that's our challenge as administrators, faculty, and trustees-- to make sure that we preserve the Cornell we love for the future.
BOB KATZ: Kent, any thoughts before the microphone?
KENT FOX: Yeah, I just mentioned, even though we're in this amazingly elite and, I would argue, important group, there are some common issues we share across the board. For example, one of those is how much our government is going to invest in scholarship and research.
I would argue a lot of the nation's economy has been driven by that. And the forecasts for the future don't look good there. And that will affect all of the very best universities around the country. So there are some issues that we share with hundreds of really good universities, and others that were pretty distinctive-- just the handful we share.
BOB KATZ: OK. So we're going to go right, left, right. The line's slightly longer there. Could you just remind us who you are and your connection to Cornell, what school you came out of? And if you could keep it to a question rather than a speech, then I'll say, you can also ask a follow-up question after you get a reply.
ELIA COLON-MALLAH: Certainly. My name is Elia Colón-Mallah. I'm a graduate of the College of Agriculture and Life Sciences '88 and the veterinary school '92. I'm a veterinary technician educator at SUNY Suffolk.
And my question to you is, I understand you see that there is a need and how we're going to meet this need. I want to know what you perceive as what the need is. And what are the solutions for meeting that need?
My husband teaches at the elementary school level. And he's dealing with the Common Core right now in an area where there's a lot of underserved students. And the behavior and the difficulties and the psychological issues that they face-- I see it every day in his face when he comes home with his head hanging low.
And I deal with the students that go to Suffolk. And they face various issues as well. And they come from various economic backgrounds, from very, very wealthy to very, very poor. And so as a student that came up at Cornell with many scholarships in the [INAUDIBLE] program and the prefreshman summer program, I'd like to hear what you feel the need is.
And I'm a veterinarian. And so I serve on the vet school advisory board. And so there's other things there, like food justice, and all those other issues that I see with people that have need.
BOB KATZ: By need, you mean financial need?
ELIA COLON-MALLAH: Well, I would say let's step away from financial aid, because that's pretty clear that we need that.
BOB KATZ: OK. And is there anyone in particular you want to address it to?
ELIA COLON-MALLAH: Whoever.
BOB KATZ: Volunteers?
RON EHRENBERG: The diverse groups of students would come in-- well, I'll tell you. I had a student who was a first generation student from some Latin American country. I don't remember what. And she was a single parent. And she came to Cornell. And she couldn't eat anything because she wasn't used to the cooking.
And then she had roommates who were very, very nice to her, but they were going away each weekend to New York or Toronto and inviting her to come with them, but of course, she didn't have the money to come. And then everybody was coming home, going home on fall break and Thanksgiving.
But our financial aid packages only provide money for one trip home a semester. But I linked her up with support people in the ILR Office of Student Services. And they arranged places for her to be during fall break and Thanksgiving. And then when I saw her in the spring when she'd come to New York City for an event that the ILR school put on, she smilingly told me that she was going, during spring break, to a program in a Latin American country that a religious organization at Cornell was running.
And during the summer, she was going to India with a program that the college or the university was running. So we dramatically can affect the lives of students of great disadvantage who come here, but there is the support that they need early on.
And you see the support. At Cornell, we have what is called the EEOP program in the public part and the HEOP program in the private part of the university. And these are programs where students with disadvantage are given a summer to start so that they can take reduced load the first year.
And they're guaranteed financial aid from more than four years. And there's support. So basically, academic and student service support for students who are going to have needs that other students may not have.
MICHAEL LOVENHEIM: And also, can I--
BOB KATZ: Sure, Michael.
MICHAEL LOVENHEIM: I'm just going to add something real quick to that, But. I think there's also a need. When we think about the issues with sticker price tuition and such, the fact that we have financial aid is fantastic. But I think that there's a general lack of information, particularly among low income students who are coming from areas where a lot of people don't go to college.
There's all this increasing evidence that's coming out that a lot of the low income, high ability students going to elite schools come from the cities. right? And the student from rural wherever, the first kid to go to this school in their family, their peers aren't applying to Cornell, right?
They might not be aware of the fact that when they see $60,000 of tuition and fees, that totally doesn't apply to them. And in actuality, Cornell is going to be cheaper for them than the state school that they might think to go to. And I think there's an information gap that's occurring that's very correlated with socioeconomic status.
And I think that the elite schools like Cornell can do-- I know there's some that's being done, but I think there's even more that can be done to help alleviate those problems.
REGINA LITTLE: My name is Regina Little, class of '78, College of Human Ecology. And I have quite a few stickers here. So I've been very involved with Cornell over the years. But the one that I'm most proud of is as a parent. I have a freshman class of 2017. And so I'd like to shift the conversation because I'm one of those paying sticker price.
[LAUGHTER]
BOB KATZ: Thank you.
REGINA LITTLE: Paying full freight, much to my chagrin. That's what I'm doing. But I don't know. I'm asking the question whether or not you have considered having a conversation with those parents that are paying full freight only because we have gone through an enormous process.
And I can tell you that my peers that are in that same cohort are making decisions not to have their children come to places like Cornell. So really, I'm actually shifting the conversation from talking about the lower income to talking about those that are middle class, or maybe we're considered a little above middle class.
I don't know what that means, but I do know I'm writing out a full check. And my daughter turned down several full freight scholarships to attend Cornell. And I was very ambivalent about that as well, quite frankly. And I will say that there are many parents and children that are saying, I have the money, but do I want to spend the money?
And therefore, when I know they can get a great education at another, maybe not Ivy League, but elite university, or a SUNY, or others-- and so if you want to get into the top-- and we all want to get into the top ten-- I think we really have to think about, what is it that's really going to make a child or a parent say, you know what?
Cornell is worth it. And I haven't really heard that conversation. So as a consultant, what I do-- I look at the criteria and say, OK, what's going to create the most value? And I think those conversations and those surveys and those kinds of things need to happen in order for us to make a difference.
BOB KATZ: Let's see if we can get a response to that. Michael.
[APPLAUSE]
MICHAEL LOVENHEIM: So I teach a class on economics of education that I hope your daughter, you said, takes. But I always joke with my students that my whole goal in this course is to validate their life choices. And so I'm going to validate your choices, too.
So Ron's done some seminal work on this. I've done some work on this. All the evidence we have is in line with there being large returns to college quality in terms of future labor market outcomes, life outcomes. So whether that means the Cornell versus something like Cornell that's a lot cheaper-- but there are things that are like Cornell that are a lot cheaper, which is part of it.
So I think there's people on this panel who can do a better job than me at explaining what the information that's being conveyed is. But I do think that what Cornell gives these students in terms of access to researchers-- and I'm not just talking about me-- I mean the other researchers at Cornell who are doing groundbreaking work.
Access to smaller classes with in more individualized attention. I did my PhD at Michigan. And the classes there were enormous. Right? And we just don't have things like that at Cornell. And I think that has value.
And so I think there are real things that students are getting out of it. And I think it's being expressed in how our students do later in life. But how that's being communicated is another story.
RON EHRENBERG: But I think you've hit a very fundamental problem. This is actually is something that I worry about. If we continue on our current tuition path, will the middle gradually erode, and we'll be left with the university with the great wealth and great need. And that will be a very unfortunate situation.
REGINA LITTLE: Yeah.
[APPLAUSE]
BOB KATZ: If I can throw one thought into it, Rana, I've often wondered, since I don't think we do this analysis-- so the question is why not? If we need-blind in admissions because we don't think financial wherewithal is a valid or worthwhile indicator of who should be here, then why are we willing to make the place unaffordable for one person to make it affordable for somebody else?
RANA GLASGAL: And I've done some research at Stanford with parents. And I've done this same survey since the mid-'90s every four years or so. And it's about the financial stress that the parent experiences. And now, I think all the Ivy Leagues do the same survey. Those questions have been incorporated into a Ko-fi parent survey which is done every few years.
So if you get it, please fill it out. It talks about how much financial stress you have paying for your part, your parental contribution, whether it's everything or nothing. And have you had to forego certain things in your life because you're paying tuition? Has your student had to forego certain experiences, as our previous questioner elicited a story from Ron?
And so we discovered that, yeah, those people right in the middle who just maybe squeaked in a little of financial need, or maybe got nothing, applied for it, and didn't get it-- they were under tremendous stress, much more than the low income people. So Stanford responded by changing the formula.
And so it started to concentrate more on filling in that gap in the middle. And I think other schools followed suit. And some of the big changes in financial aid that were referred to earlier came about because of this kind of research and an acknowledgment that the middle was getting squeezed out.
I think with recent financial crunches that Kent experiences every day, we've eroded a little bit of that and maybe backpedaled a little because it's so expensive to do it, but at least we've made some progress there. The surveys that I've done every four years have shown that we've made a little bit of progress on reducing the stress on the middle income families.
REGINA LITTLE: Thank you.
BOB KATZ: Sir, and can we keep it short and to a question?
MARSHALL FRANK: Sure. Marshall Frank, class in 1961, Chemical Engineering, 1962. I like to change it from the cost side to the revenue side, and whether you've really considered two other areas for possible increased revenue.
One, we want to become a major research University. We're spending a lot of money of doing that. Are we getting a payoff through technology transfer to adequately justify us becoming a major resource university?
And the second question is, are we properly utilizing our summer months, where we have, let's say, less people here to provide some additional revenue that can come in, maybe going to a year-round university or some other things that could bring in additional revenue? So those are two areas I'd like to see if the panel could possibly address.
BOB KATZ: I think this falls principally in Kent's ballpark.
KENT FOX: I'll take the first one around research. I would argue that if our primary metric or goal in being one of the world's top research institutions is the payoff from what we discover, the financial payoff, then it's not worth it. It's not worth it.
So I've been at Cornell 12 years. And in that 12 years, our research expenditure-- almost all of that comes from the outside, primarily federal-- has grown from $400 million to $800 million. That includes the medical school. So in 12 years, we've doubled that number. That's revenue that comes in. And then we invest it in the research.
The amount of funding that almost every university gets back from what we call patent returns or technology transfer is just a tiny, tiny fraction of that-- tiny fraction of that-- and at Cornell as well. But if you look at other benefits, if you look at how those discoveries have changed the world, then you can make, I believe, a profound argument that even though we haven't benefited financially as an institution, we've made an impact in the world.
And I would argue that includes not just the sciences, but also the humanities and the social sciences and the arts. And then the primary impact we have our graduates, our students. There was just a survey last week, of over the past five years, what are the top 10 universities in terms of the number of companies founded by their alumni worldwide?
And Stanford, obviously, is in that list, but Cornell is in that list. One of the top 10 universities in terms of the number of companies created by graduates. So that's another indicator.
But if I was an investor, I would not give a university $10 million because it's going to get back $100 million in research. You do it for other purposes.
BOB KATZ: Ken, do you want to talk about the throughput question-- throughput of the plant over the summer, shortening the time to degrees, other ways to-- reducing the residency requirements, whatever would--
KENT FOX: Yep, yep. So we're in the process as we speak. And your second question is incredibly timely. The academic deans, the trustees, the senior leadership of the university-- we're looking at ways of diversifying our revenue.
And we've talked about one quite a bit here-- tuition. There are a lot of others that we have, but there are other opportunities, whether it's infrastructure, whether it is the intellectual capital of our people here. And we're looking at a lot of those. We really are.
And some of those, we're going to implement. We haven't decided which ones yet. We haven't decided which ones yet, but we can definitely be more effective in how we use our infrastructure. We have opportunities for even whether we should sell off some items and then have a third party invest back.
There are all kinds of ways that we're in the process of thinking about. And those are the kinds of ways where you can both reduce costs, you can reduce capital investment, and then you can also deploy that in some other way that's more meaningful to the institution. So your second question is really timely, I think, for all universities.
CAROL ASLANIAN: Thank you. Carol Aslanian, class of 19--
BOB KATZ: You get the last question.
CAROL ASLANIAN: I know, I know. Class of '63, Human Ecology. I want to switch the conversation or the answer from the selective institutions to the other 95% of students in higher education, which are facing a different problem.
For the first year in many years, higher education enrollments have dropped by 500,000, which is not insignificant. Second, 500 private schools did not meet their enrollment goals. Students are looking more at going right into the workforce, taking on shorter-term certificate programs.
They're even going overseas, where they're finding higher education at a more reasonable rate. Do we risk the problem, do we risk the situation, that we will not have the educated society that we need so badly to keep up with times because we're outpricing the marketplace?
RON EHRENBERG: Well, Carol, I think you, of course, have hit a major social problem that our nation is facing. And for the purpose of this discussion, the interesting question-- how will Cornell respond to these social issues?
And I think that part of it is with the notion of technology, and basically, to be able to expand what we do to a much broader population, but at the same time, preserving the high quality of what we have here. As a trustee of the SUNY system, I fear for the future of public higher education.
And I fear for the future of the smaller, underfunded colleges and the implications of that for the nation, but I also fear that the solutions to those problems and the policies which the Obama administration are beginning to talk about may also have adverse effects on what is going on here.
BOB KATZ: I'll give the last question, if anybody-- with a crystal ball. Do any of you see the upward march of sticker price tuition-- maybe with fewer and fewer people paying it-- see something fundamental that's really going to bend that curve so that 10 years from now, we won't simply be further down the same spiral we're on, either because politically, the pricing power will go away, the expense model will change dramatically, other revenue sources will appear to displace tuition, or something? Or actual external funding of financial aid will arrive.
KENT FOX: I think, from a national perspective, there will be new ventures that will fill the gaps in this price structure. They may be online. They may be from private-- not private, for-profit colleges. The big growth in the US has been in the for-profit area.
I think I probably have my number wrong, but I think there are 1,000 higher ed for-profit entities now. And not all of them are great. Some are filling real needs. But I do believe one of the great opportunities we've had, or advantages in America, has been we have a whole spectrum of some 4,000 higher ed entities.
And because we're an entrepreneurial as a nation, I'm confident there'll be higher ed programs that will be at the right sticker price for individuals. They may not be the most elite of the universities. There may be something they give up in the area of facilities or individual contact, but I'm confident there'll be opportunities-- the whole price spectrum.
BOB KATZ: Anybody else want a last word? If not, I think we'll all do with lunches with the deans at 11:30. And thank you very much.
[APPLAUSE]
It seems the entire nation is talking about the economics of higher education--and with good reason: the stakes couldn't be higher. A panel of faculty and alumni experts share their predictions and opinions about this important set of issues at an October 25, 2013 TCAM event.
From families taking on debt, to the future of cutting-edge research in the face of declining federal support, to the need to compete globally for top talent, to the uncertain prospects facing graduates, higher education sits at the crossroads of many of the biggest social and economic shifts our society faces today.
What will happen in the next decade or so? How high will tuitions rise? What role will investors and investments play in university budgets? And, what role will universities like Cornell play in affecting change in this complex system of policies, pressures, and competition?
Panelists include:
Robert J. Katz '69, Vice Chair, Board of Trustees (moderator) Kent Fuchs, University Provost Ronald G. Ehrenberg, Irving M. Ives Professor of Industrial and Labor Relations and Economics Rana Glasgal '87, MEN '92, alumni-elected member of the Board of Trustees Michael Lovenheim, assistant professor in Policy Analysis and Management This event was part of the Trustee Council Weekend 2013 activities.
