Inside Penn's soaring tuition

Students have gone to extreme measures to protest soaring tuition costs. At USC, students climbed on tables, stripped off their shirts and threw money in the air in protest at a Board of Regents meeting. At the University of Warwick, a sit-in ended in Taser threats and tear gas. And while their cries that “tuition is too damn high” have fallen on deaf ears — Penn’s tuition has risen at twice the rate of inflation in recent years — research indicates that students could be right.

A New York Federal Reserve Bank study released in July found that for every dollar of aid students receive, colleges increase tuition by 65 cents in order to exploit the “willingness to pay” — or demand — of students for a college education. In response, the Wall Street Journal reported that federal aid is “enabling college institutions to aggressively raise tuitions,” and Wharton Dean Geoffrey Garrett tweeted “Do loans make higher ed cost more, not less?”

But despite these findings, Penn’s administration is skeptical that aid is the true cause of soaring tuition.

“There’s this hypothesis ... that says if you give colleges and universities federal aid to help the students pay for education, they’ll just look at that as a revenue line and keep raising prices because there is still going to be demand for their product,” Director of Financial Aid Joel Carstens said. “But the Fed is just saying they found a correlation ... and that was for non-highly selective private universities — of which Penn is not.”

Disavowing the Fed’s argument, Carstens says that the real reason Penn’s tuition is growing at four percent annually is because the costs of higher education grow at a rate faster than an average “basket of goods.” “We are a heavily people-intensive market,” he said. “The market basket of goods that it costs institutions to run is different for this industry than it is for other industries.”

Carstens’s argument is based off of research conducted out of the College of William and Mary by David H. Feldman and Robert B. Archibald. Their results are compiled in a book called “Why Does College Cost So Much?,” which sits on a shelf in the office of Michelle Brown Nevers, vice president of Student Registration and Financial Services. Feldman and Archibald show that the cost of dentists, physicians, professors and other high-paid professional service providers grow faster than inflation.

Penn President Amy Gutmann agrees and says that in order to maintain Penn’s prestige, the University must continue to invest in the best professors. “The real costs of a Penn education are significantly higher that the tuition that we charge. We have a very highly educated workforce, and we are committed to recruiting and retaining the very best faculty, many of whom who could write their ticket at any place,” Gutmann said. “More than half of our costs are our talent base — our faculty and our staff. “

Penn’s administrators argue that tuition growth is crucial for Penn to run effectively — tuition represents 35 percent of Penn’s operating budget. In terms of affordability, Penn’s financial aid budget has grown at twice the rate of tuition and the net cost of a Penn education — tuition minus financial aid — has been flat or declining annually.

“Penn has exhibited outstanding stewardship of our resources. I know that for people unfamiliar with the economies of higher education, it looks as though this is somehow [just] an improper escalation in the costs of higher education,” said Provost Vincent Price. “But the bottom line is those are real costs, and they represent changes in real services, and were it not for growth in our endowment ... and other sources, those escalations would be even higher.”

Students don’t seem convinced. Last year, Students Organizing for Unity and Liberation held a Student Debt Demonstration in which they protested Penn’s lack of affordability by donning placards with the amount of debt they’d taken out.

“For a university to promise low-income students, who are mostly students of color, the option to go to this school and be able to graduate debt-free with a no-loan grant or scholarship aid package, this is something that must be adhered to,” then-College senior Breanna Moore said following the protest.

Students point to Penn’s $200 million annual budget surplus, billions of dollars of construction spending and Penn’s successful fundraising campaigns — Penn raised a record $510 million last year — as evidence that Penn could do more to make college affordable.

Data compiled by the Institute of Educational Services shows that five of the eight Ivy League universities — Harvard, Yale, Princeton, Brown and Cornell — have lower tuition fees than Penn. According to the federal government’s “College Scorecard,” Penn students on average take out $20,407 in loans — the highest amount among all Ivy League universities.

“University housing is not affordable compared to other housing in Philadelphia,” said Wharton junior Bennett Sultan. “[But] I don’t see Penn hemorrhaging money from any of its programs.”

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