Back before Morty became President of Williams, he authored a paper with Michael S. McPherson, President of Macalester College, predicting future economic trends in higher education, specifically potential financial problems with liberal arts colleges.

HISTORY
Morty & Mike start off the paper by identifying what they view as two major roots of the problem:(1) increased competition in higher education as evidenced by the (earlier) rapid expansion of institutions of higher education and the (relatively recent) identification of higher education as a profitable area by venture capitalists and (2) the decline in the raw number of high school graduates between 1976 and 1993, which for those not versed in demographic history, is roughly the differences between the size of the Baby Boomers and Gen-X, respectively. Additionally, Morty & Mike note that the number of institutions that taught a liberal arts curriculum dropped sharply, though many schools continued to claim that they gave students a liberal arts education.

Morty & Mike note that demographic and economic trends bode well for demand for a liberal arts education in the future, but caution that the rapidly-rising cost of higher education in general, as well as questions of the ability liberal arts to meet the demands of modern technology relative to research universities, may start to cause students to seek cheaper and/or more job-oriented alternatives.


M&M identify the early 70’s as the pinnacle of support and size for higher education. In addition, they note that as inflation rose in the 70’s, professor salaries fell 17% in real dollar terms, and chronicle the transformation of many traditional liberal arts curricula to student bodies heavily dominated by professional and pre-professional programs. Even within “liberal arts” curricula, students have shifted away from “traditional liberal arts” majors, such as English. M&M note, to my amusement, that horror stories about English majors driving cabs once predominated, though I’d say that this is still the case, albeit with more truth and less humor about the sitution. Of course, this was written before Avenue Q revived the meme with the brilliant song “What Do You Do with a B.A. in English“… but I digress.

FUNDING
M&M then compare the funding structures of liberal arts colleges with other types of schools, and note the heavy subsidization of public schools by states, and research universities with research grants, which allows them to charge a below-cost price to the undergrduate students. They also note that there’s a scaling issue as well – research universities, at least in terms of administrative overhead, benefit from economies of scale, allowing them to manage more students without a proportionate rise in adminstrators. This, of course, cuts both ways, as it’s far easier to get access to admistrators at Williams — something I didn’t appreciate at all until I spent 2 years at Columbia at the tail end of the 3-2 program.

Not coincidentally, liberal arts colleges give back a much larger portion of their revenues in the form of financial aid, allowing them to subsidize students who might not be otherwise able to afford an out-of-state education. M&M produce data that purports to show that “Middle Class Melt” – the pricing-out of students of middle class backgrounds to public schools in favor of subisidized low-income students and rich familes who won’t be bothered by the price – is largely a myth. M&M claim that middle class families are “still finding ways” to send their children to the same institutions. However, they don’t mention that, quite obviously, this trend cannot continue forever. They also interestingly not that private schools are suffering an Upper Class melt, which, though not problematic, may have long term effects on endowment size if there truly is a “class system” rather than a “shirtsleeves to shirtsleeves” meritocracy in the US.

FINANCIAL AID & MODELS
The problem with liberal arts colleges’ funding is not in the “top tier” schools like Williams, Swarthmore, Wellesley, and I guess even Amherst. Rather, it’s in the more regionally-oriented liberal arts schools, who have to offer aid to almost all students in order to stay competitive to incoming students.

M&M identify 3 basic models of financial aid
(1)Need-blind/full need – admit without regard to ability to pay, and just fund what you need to. This is what the top tier schools are doing.
(2)Budget Stretch – schools that wanted (1), but couldn’t afford it due to applicant pool and smaller endowment, but tried the best they could to emulate.
(3)Strategic Maximization – the school plays a Maximin-minimax game of trying to admit the best students AND spending the least to do it, mindful of the fact that these goals may conflict quite a bit.

M&M claim that the number of schools doing (1) has shrunk significantly (though I’d find some notable exceptions at the top tier), and that most schools were doing (2), though many have moved towards (3).

Merit aid has also been growing much more slowly than non-merit aid, and many schools are trying to promote a combination of both – “merit within need”.

M&M note that the market has a few leaders – the Ivys, UMich/Berkeley/UVA’s, and the Little 3/Swarthmore/Wellesley – and note that the rest of the schools are playing catch-up in a sense, trying to emulate the success of the leaders by emulating their admission/funding methods while trying to close any other gaps that may exist. M&M also claim that the elite schools using option (1) seems a little self-serving and hypocritical, as given their admissions criteria, all of their awards are in effect merit awards, albeit ones distributed by need.

M&M them postulate an “average” moderately selective liberal arts college, and postulate the effects that various financial aid policies will have, compare their incoming class to the applicant pool, and several other thought experiments that are somewhat interesting. If you’d like the details, read the article, as it goes into it in some depth. However, M&M are careful to note that it’s a prisoner’s dilemma, with the overall outcome depending on how comparable, superior and inferior schools also respond.

GENERAL POLICY RECOMMENDATIONS
Towards the end, M&M make some general recommendations about how to effectively tailor aid and loans, and emphasize that colleges should be realistic about their funding/aid limits and should NOT feel required to give need-blind/full need admissions when they simply cannot afford to do so.

THE FUTURE VALUE OF LIBERAL ARTS
M&M note some demographic trends, and note that with the increasing specialization of the work force, for example in technology, that with the rapid pace of technological improvement, liberal arts has value because liberal arts is fundamentally a way of thinking and learning rather than WHAT you’re learning, as professional and pre-professional programs are, and proceed on to note that liberal arts institutions excel in the depth of education, whereas research universities excel in the breadth of offerings.

M&M then offer some closing notes, claiming that in order for liberal arts to remain viable, a college senior must have a decent shot at attending a liberal arts school if he/she wants that type of eduction.

And, as a final note, I just wanted to mention that this is EphBlog’s 1500th entry… we’ve come so far! *sniff, sniff*

Thanks, it’s been a pleasure.

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