Wednesday, October 29, 2008

A Commendable Act by GWU

by Daniel Bennett

Inside Higher Ed reports on the so-called "elite dilemna" that is occurring at George Washington University, one of the most expensive private institutions in the country, with published anunal tuition and fees in excess of $40k. The dilemna involves the declining number of national merit scholars and honors students enrolling at the GWU. Some proponents for increased merit-aid argue that the univeristy needs to increase its efforts to attract more "elite" students to campus in order to boost the prestige of the university. One implication of such an action would be an increase in the average college entrance (ACT/SAT) score, which would improve the university's ranking.

Instead, GWU is focused on directing financial aid toward continuing students that may be struggling to keep up with high tuition charges. The retention effort is valid, as the prospect of current students transferring to lower-priced institutions is real. The potential negative effects of rising attrition are nontrivial, including a decreased income stream from tuition due to lower graduation & retention rates, which would decrease the prestige with a likely drop in the rankings game. Another long-term effect is a potential decline in alumni giving, not only from fewer graduates of the school, but also large student debt burdens that inhibit a graduate's ability to donate to his alma mater.

GWU's strategy to lower its average student debt is commendable for several reasons.
(1) It understands the current economic conditions and the public concern over the rising cost of tuition and student debt levels. As a high-priced private institution, it realizes that it relies heavily on tuition revenues and it must maintain, if not increase, enrollment levels to finance its operation. By offering a discounted net tuition, in the form of need-based aid, GWU appears to understand the law of demand: lower its price and increase the quantity demanded (enrollment).

(2) By not succumbing to the pressure of the academic arms race (ie- spending more on less), it is increasing its efficiency and better serving the public's desire to increase college access. The trade-off being the potential decline in "prestige".

(3) It is demonstrating rational self-control and exemplifying a long-term strategy of sustainment.
Every yin must have a yang. The negative aspects of GWU's strategy include:
(1) It still has a sticker price exceeding $40k, which in itself will deter many potential applicants who are unaware of the availability of the needs-based aid.

(2) Faculty may get upset at the lack of elite students in the halls and leave, which is only a negative if you consider the high cost of recruiting replacement faculty.

(3) If it is planning to increase enrollment, will the quality of the education diminish to accommodate less academically talented students?


Jane S. Shaw said...

I have a hard time understanding why George Washington University is so high on the list of the most expensive schools in the country. Yes, Washington DC real estate is high but . . .

capeman said...

It's so expensive because they can get enough people to pay the freight.

Here's a list of the 10 most expensive schools in the country (as of a couple of years ago). Most of them might come as a surprise: