AEI Study Highlights Strategies To Cut College Costs

June 24th, 2011

Over the past two decades, the cost of a college education has risen dramatically. Tuition and fees have increased at twice the rate of inflation, rising more quickly than market goods or services and outstripping the growth in family incomes. In his new study, Opportunities for Efficiency and Innovation: A Primer on How to Cut College Costs (published by AEI’s Future of American Education Project), Oklahoma State University professor Vance Fried finds that this dramatic rise in college tuition costs is due to the ways in which traditional colleges and universities organize and allocate resources, and not due to lavish university facilities and extra student services.

“Higher education insiders sometimes point to the increasing cost of auxiliary services like student housing and big-time athletics as a major cause of large tuition increases. This is a red herring,” notes Fried. “Football, good food, and hot tubs are not the reason for runaway college spending. Rather, the root cause is the high cost of performing the instructional, research, and public-service missions of the undergraduate university.”

To identify areas ripe for cost savings, Fried creates a provocative experiment: what would it cost to educate undergraduates at a hypothetical college built from scratch? Fried concludes that undergraduate colleges should consider five major cost-cutting strategies:

1. Eliminate or separately fund research and public service
2. Optimize class size
3. Eliminate or consolidate low-enrollment programs
4. Eliminate administrator bloat
5. Downsize extracurricular student activity programs
“Rather than focusing only on the big-ticket items that tend to dominate debates about college costs, Fried argues that the real levers for increasing efficiency include rethinking student-faculty ratios, eliminating under-enrolled programs, and trimming unnecessary administrative positions,” explains Andrew P. Kelly, AEI research fellow and editor of the Future of American Higher Education Project. “His recommendations are a must-read as states look to rein in college costs.”

Vance H. Fried is the Riata Professor of Entrepreneurship at Oklahoma State University and author of Better/Cheaper College: An Entrepreneur’s Guide to Rescuing Undergraduate Education (Center for College Affordability and Productivity, 2010). His research focuses on entrepreneurship in the higher education industry, entrepreneurship and public policy, and venture capital. Before joining the faculty at Oklahoma State, Fried worked as an attorney in private practice, executive of an independent oil company, and investment banker working with small- and mid-cap companies. He is also a certified public accountant.