Solutions: can Reed do anything to contain costs?
"Cost containment" is the mantra of the health care industry today. Do educators have anything to learn from that experience? Certainly we have much in common; both industries face a national outcry against rising costs and declining access. We in higher education shudder, however, at the prospect of a system of "managed education" along the lines of managed health care--a system that would tie government-funded student aid to student/faculty ratios, graduation rates, and courses with optimal enrollment levels.

That said, we are doing all we can to streamline operations and contain costs in ways appropriate to our institution. Many colleges have done this by narrowing their focus, recognizing that they cannot be all things to all students. We've already defined our "niche" at Reed: an excellent institution offering a classic liberal arts and sciences education at the high end of the quality and cost continuum.

Some of the ways we're making the best use of resources include a consortium with other Oregon independent colleges that minimizes the costs of everything from toilet paper to disability coverage and employee assistance for faculty and staff members. We share an orchestra with Lewis & Clark, and library services with Portland State University and the University of Oregon.

In response to cost pressures in the future, Reed may one day offer other cost- shaving options. But we will avoid economizing measures that compromise the quality of a Reed education.

Will tuition keep rising indefinitely?
The combination of factors operating on higher education in the last 20 years created a dramatic "spike" in tuition relative to the cost of living. Will this continue? It's not inevitable.

Looking forward, I see some trends that would continue the upward pressure on college costs, and others that may offset it. Among the upward-pushing trends:

A growing need for financial aid. As the American economy divides further into "haves" and "have-nots," lower-income and middle-income families will need more assistance, and that burden is likely to be borne substantially by colleges. Those with hefty endowments have the spending power to respond. Princeton (whose endowment per student is $775,773, compared with $166,969 for Reed) recently announced that its aid to students with family incomes below $40,000 will henceforth be completely in the form of grants rather than including any loans. The ripple effect of this new policy is already being felt; both Yale and Stanford have announced their own variations. Could Reed do something similar to help needy families? While our endowment and annual gifts are growing, such a move at present would still necessitate $770,000 more in revenue annually.

The growing expectations of our "customers." "Prospective students visiting college campuses today expect to see gyms equipped with state-of-the-art exercise equipment. . . a complete range of course offerings, dormitories wired for computers, and specialized counselors who can advise on personal as well as career and job placement matters," NCCHE observes. Students, it notes, also take for granted more and more curricular specialization and "entire disciplines that did not exist a generation or two ago." Education costs inevitably rise as schools scramble to meet these expectations.

What factors might help offset an upward cost spiral?
An increased federal commitment to educational access. Washington, D.C., recognizes that to move forward in the "learning economy" we have in America today, citizens need to be better educated. There is support in Washington for college tax credits and other forms of federal aid to education. As a citizen and an officer of Reed, I celebrate that. When the government pitches in with, say, tax credits, it helps students on aid and those who pay full price. And it helps colleges flatten the slope of tuition increases. More fundamentally, we are all better off in a society with higher levels of educational attainment.

Growing differentiation of colleges and universities. Traditionally, colleges have prided themselves on the breadth of their offerings. But caught in the crossfire of cost versus quality--and the exploding need for job-related training--many are rethinking their strategy. A recent study by the University of Pennsylvania finds that colleges are sorting themselves into more identifiable market segments.

Think of American higher education as a bell curve stretching from trade schools to research institutions, with the American public jumping up and down on the bulge in the middle. The public is demanding more choice and this is pushing out the ends of the curve, creating greater differentiation between schools. Differentiation will allow colleges to define their roles more sharply and to focus on what they do best; this increase in efficiency should help control costs.

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