University fees the Princeton way

John Boorman described the process of making a film as turning money into light. The same could be said of higher education. It might aim to create general enlightenment, but it runs on money.

Someone has to pay: the student, the taxpayer, the college or, usually, a combination of the three. How those costs get distributed depends on many assumptions about what higher education is for, who it benefits and how it relates to ideas of social justice.

For the past three years I have been teaching for the spring semester at one of the world's top-ranked universities, Princeton, in the US. It is unquestionably an elitist institution, but it has also come up with some radical ideas about the place of money in education.

The dominant idea about the funding of higher education in the US is that it is primarily the responsibility of the students and their families. The students are the customer, and the education is the product for sale. The US is much farther down the road now being travelled in the UK and opening up in Ireland: student loans. For most students – those whose parents can’t afford to pay large fees upfront – getting a college education means taking out a substantial loan that is in turn guaranteed by the federal government. The loans allow the students to pay ever-rising fees, even at state-run institutions.

This system has begun to look awfully like the Irish housing bubble, as the availability of credit pushes up the price of the asset. Take one of the best public colleges in the US, the University of California at Berkeley. In 1987 annual tuition fees for a student from outside California were €4,000. By 2010 they were €22,000. The current estimate given to parents thinking about sending their newborns to Berkeley in 2032 is €56,000 a year. Even now a four-year degree with fees, books and living expenses costs €153,000.

Increasingly, US economists are wondering whether, to continue the housing-bubble analogy, student loans might not be the new subprime mortgages. The total of outstanding student debt passed $1 trillion (more than €700 billion) last year. Close to half of US 25-year-olds now have student-related debt, with an average outstanding figure of more than €14,500. Already, 12 per cent of these loans are classed as delinquent.

Reluctant to pay
So what's the alternative? There is obviously a need for much more substantial public funding, but governments, in the US and elsewhere, are increasingly reluctant to pay for higher education.

This is where Princeton’s system is interesting. As a private institution it has no reasonable expectation of large-scale public funding. So this leaves just the two options: either students pay or the institution pays. Princeton has increasingly adopted the second option. There is a radical conceptual shift: the ultimate responsibility is not left with the students and their families; it is taken on by the university.

Traditionally, any student wanting to get into an Ivy League university had to jump two formidable hurdles. First, she would have to have the academic and other achievements to get in. And, second, she would have to have the money. Attending Princeton currently costs, between tuition fees and living expenses, €43,000 a year. The first requirement favours the rich; the second all but precludes the poor. What the university has done doesn’t make the first hurdle any lower, but it virtually eliminates the second.

The big shift was entirely to separate the process of being admitted to Princeton from the ability to pay the fees. Students are admitted first, and only then does the university ask whether they can pay. The basic principle is that everyone who is admitted should be able to leave the university without having racked up a debt to pay for a degree. If the student’s parents are wealthy enough to pay the full cost, they do so. If not, the university funds all or part of the cost, to whatever extent is necessary.

This is not a scholarship system: nobody is required to go through any further academic test to get financial aid. The money is a grant, not a loan. This year about 60 per cent of Princeton undergraduates are receiving grants, and the average grant is €29,000. Student from low-income backgrounds can expect to have all their tuition fees, housing and food fully funded.

This system means that the average real cost to a student of attending Princeton has actually fallen, from €17,000 in 2001 to €13,000 this year. Unsurprisingly, the proportion of students from low-income backgrounds has risen even more sharply in the same period, from one in five to one in three.

That’s a much better proportion than at Irish public universities. It is, for me, the great surprise about coming to Princeton: although some students certainly give off an air of privilege, a lot of them are from very ordinary backgrounds.

This doesn’t make the question of money disappear. Princeton is spending €96 million this year on financial support for students – money it in turn raises from its endowments and from donations from alumni. No Irish university or institute would be able to raise this kind of cash, and, given the level of state funding and the very different traditions of private philanthropy in the US, there is no simple way to transfer the Princeton model.

Two things are nonetheless relevant. One is the growing perception at many of the top US universities that student loans are not the way to go and that universities themselves must assume a responsibility to keep students out of debt.

The other is that the Irish higher-education sector is increasingly being asked to emulate the best universities in the US, in everything but funding. In Ireland there is a growing tendency to think of the student as a paying customer. At the elite American universities there is a rapid move away from that consumerist model of education.