International Higher Education, Winter 2004

Affordability, Access, Costing, and the Price of U.S. and U.K. Higher Education

U.S. and U.K. higher education systems have over the past 20 years the faced steady retreat of the taxpayer in funding students and institutions. However, while the U.K. system has muddled through by reducing funding per student, U.S. public higher education has to a great extent compensated for the lost revenue by increasing tuition fees payable directly by students and their families. U.S. private higher education institutions have also levied ever-higher tuition fees as “the sticker-price,” and have used the enhanced funding to fuel an arms-race for “prestige” among universities competing over salaries for the best faculty (so-called “trophy professors”), on merit-based aid for the cleverest students, and on lavish campus infrastructure. This process has opened up an increasingly wide gap between U.S. private institutions and even the “flagship” U.S. public institutions, while leaving the best of U.K. higher education aiming at a moving target in trying to compete as a global player.

Yet, despite these high tuition fees, U.S. higher education remains affordable for “Middle America,” partly because the U.S. middle class pays rather less in taxes than its equivalent in the United Kingdom--especially given deep discounting of tuition fees and the offer of student loans to finance the final amount due (in effect, a “price-war” among U.S. institutions over clever entrants). In addition, “Rich America” is not being given as much of a wasteful public subsidy as is currently bestowed on “Rich England.” These high tuition fees, regardless of the high levels of financial aid, may deter access for “Poor America” to the very best private U.S. institutions (and to a lesser extent the best of the public institutions), compared with the accessibility of the elite U.K. higher education institutions.

Hence, if U.K. institutions were completely deregulated with respect to the capping of tuition fees or chose to exercise their theoretical autonomy and take full control of their destiny, it would be politically wise to have robust policies in place in advance that would ensure at least the same level of accessibility as at present. Oxford, for example, must also be able to demonstrate the financial viability of such access and student financial aid policies, funded (presumably) partly by charging much higher annual tuition fees (£15K) to “Rich England” and rather higher fees (£10K) to “Middle England” (taking into account affordability issues), while, of course, charging very little (if anything at all, in order to maintain access) to “Poor England.”

That said, it will be interesting to see if Oxford (and others) can make the “high fee/high aid” numbers work, given that, as already noted, it may have a larger “poor” group to finance than do its overall wealthier U.S. counterparts. In its favor, it is probably “leaner & meaner” in productivity terms than the average U.S. Ivy League school, although the contribution toward such economy that comes from keeping faculty salaries internationally low is a false economy in the medium term as Oxford increasingly fails to attract for its academic jobs the full range of good applicants and even then does not always manage to recruit its first-choice candidates.

The salutary question posed by a hostile political environment for the Oxford dons currently “on watch” is whether the potential for accelerated decline relative to the U.S. global players (with their fiercely defended autonomy and robust lobbying of government) is now so great and the “control freak” meddling of government is so likely to be at best useless and at worst damaging that the dons must take radical action for fear of otherwise themselves going down in history as the ones who steered the noble “SS Oxford” onto the rocks, rather than as just another generation of the university’s leadership that “merely” allowed the unfortunate vessel to drift deeper into the doldrums.

The 2003 White Paper
There is certainly a need in the United Kingdom to better understand U.S. higher education in the context of the highly politicized debate here about the size, shape, and funding of the system as recently fuelled by the government’s “white paper” on The future of Higher Education (www.dfes.gov.uk/highereducation). The white paper addresses enhancing the funding of higher education and institutions to allow them “to compete with the world’s best” and to avoid the “serious risk of decline” after “decades of under-investment.” Notably, as U.K. higher education by OECD norms rather belatedly massified, “funding per student fell by 36 per cent between 1989 and 1997.”

The white paper also raises the subject of ensuring the affordability for “Middle England” of the proposed increase of the current flat-rate £1100 (U.S.$1,750) annual tuition fee to one capped at £3000 (U.S.$4,500) from 2006 by “abolishing up-front tuition fees for all students” and with their repayment after graduation through the tax system then being “linked to ability to pay.” Also proposed is extending the availability of higher education to the “talented and best from all backgrounds” and improving its accessibility for “less advantaged families.”

The July 2003 report of the all-party Education and Skills Committee on “The Future of Higher Education” reviews the white paper and calls for a maximum annual tuition fee of £5000 (as also advocated by the “top” institutions) rather than £3000 so as to ensure a true market in the provision of higher education (www.parliament.uk/parliamentary-committees/education-and-skills-committee.cfm). The report expresses fears that “too great a reliance on funding through taxation will inevitably lead to greater Government control of the sector and less independence for universities,” assesses the proposed “Access Regulator” as “unnecessary,” brands the present student financial aid system as “complex and confusing,” and comments that academic salaries are “woefully low”, and refers to the sorry state of U.K. higher education as “the last of the nationalized industries.”

The government has quickly brushed off the carefully researched report and is sticking with its rather less evidence-based white paper, which seems sadly to achieve the worst of all worlds by maximizing opposition and yet at the same time watering down the degree of proposed deregulation to such an extent that, if approved by Parliament, the new £3000 fee (allowed to increase by only inflation until 2011 or so) will be of no real value in enabling U.K. higher education “to compete with the world’s best”.

Just as the United Kingdom’s “New Labour” government in its 2003 consultation document sets out “the need for reform” in terms of shifting the cost of higher education more toward students and their families, so there has been debate in the United States over the cost/accountability and affordability/accessibility of higher education since Congress in 1997 expressed the frustration of “Middle America” with the ever-increasing “cost of college” by establishing the National Commission on the Cost of Higher Education. Yet, despite the middle-class angst, an observer of the higher education scene across the OECD countries might indeed be tempted to predict a slow but steady convergence toward the U.S. norm of requiring an increasingly significant student/family contribution for the cost of delivering higher education.

A Moving Target?
The £3K per annum fee from 2006 proposed in the white paper would take the current £3300 figure over the standard three-year undergraduate degree course (which is paid in full by only some 40 percent of U.K. students) to £9K (ca.$14K) compared with, by then, for the four-year baccalaureate ca.$20/25K at U.S. public institutions, and perhaps $30K-plus at the research-oriented flagship campus within each state higher education system. Thus, the white paper is indeed aiming at a moving target in trying to keep the upper end of U.K. higher education institutions competitive in income terms with even the best of the U.S. publics, let alone the top private institutions, where annual fees are already nearing $30K. And, indeed, there is also a trend toward the semiprivatization of state flagship campus institutions (now being called “the public Ivies”), which may push fees yet higher than the ca. $7K per annum referred to above.

If U.K. and U.S. higher education systems continue to diverge on funding, they will then share certain features. The politics of affordability of higher education for “Middle America” during the 1990s trumped the politics of access to higher education for “Poor America,” which is not surprising given the relative voting power of the two constituencies. This scenario potentially will be echoed in the United Kingdom, where in response to New Labour’s white paper and its proposed £3K per annum tuition fee for “Middle England” the Conservative Party has focused on affordability, asserting that it would avoid the need to increase fees (or even levying them at all) by reducing the size of the higher education system and hence its accessibility to “Poor England” as a means of saving money.

Note: The full version of this paper can be down-loaded from the OxCHEPS web-site at oxcheps.new.ox.ac.uk, “Occasional Papers.”