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Higher education in Michigan has become increasingly inaccessible to disadvantaged socio-economic groups and an increased financial burden on middle class families. Since 2000, net tuition (the inflation adjusted price students pay after accounting for aid) at Michigan's four-year public universities has increased 54 percent. The result: Michigan's four-year public universities charge residents roughly between $750 and $1,300 per course or $250 to $480 per credit, and that is not counting the state subsidies already collected through taxes. Given that the private sector, as discussed below, has demonstrated it can provide the same services at a lower cost, it is hard to see how the state is justified in charging its own residents so much.
The National Center for Education Statistics estimates that 20 percent of all students attending four-year public schools take at least one remedial course. In addition to remedial courses, colleges also offer a large array of introductory courses designed to prepare students for the heavier, more demanding upper-level college work. This past fall Michigan State and Western Michigan universities together had more than 5,700 students enrolled in what can be considered either remedial or introductory math and English courses. While not particularly resource intensive, these courses are very costly to students, ranging from $750 to $1,300 for a three-credit hour course.
This raises two important questions. If beginning students are taking rudimentary courses that do not require the expertise of a Ph.D. to be taught well, why are students being charged so much? Also, if the content of these courses is fairly basic, why do colleges think they are in the best position to deliver these courses in-house? It is plausible that a third-party provider could deliver courses with comparable — or higher — quality at a much lower cost, with the savings being passed on to students, taxpayers and the universities.
The Center for College Affordability & Productivity (CCAP) estimated the cost to the university to deliver one credit hour of instruction to a student from both Michigan universities and alternative providers. Michigan schools have a fairly opaque system of budget disclosure when it comes to this level of detail. From public records one can see how funds are generally divided up among departments, but the data is not sufficient for a detailed marginal analysis. Therefore, we are forced to employ several techniques to determine a range of possible costs, as depicted in the chart above. The upper bound for each university's estimated cost is based on the out-of-state credit hour fee; this calculation assumes that as non-profit entities, the schools would charge what it costs on average to provide one credit hour of instruction. A midpoint was generated dividing the total expenditure on instruction by the number of credit hours generated by a school. Lastly the lower bound was generated by assuming the marginal cost of offering a remedial or introductory course is the cost of the salary of lecturers, who are the lowest paid instructor group; assuming a teaching load of 15 credits a semester and average class size of 25.
The difference between the upper and lower bounds are severe, but the lack of budget transparency in Michigan's public universities makes a more accurate analysis difficult, and with the accounting practices in use it is quite probable that even the universities themselves do not have any better idea of what their marginal costs for a remedial course are. The implications for students are particularly disturbing. If our upper bound is right, universities are terribly inefficient in that they are failing to deliver courses in a cost effective manner, costing the state in excess of $500 per credit hour. If our lower bound is correct, the situation is even worse. It implies the schools spend very little, less than $65 per credit hour to provide the course, and are charging their students much more than the cost of provision. The schools would essentially be fleecing their own students to generate extra revenue, using the extra income to subsidize student recreation centers and out-of-state graduate students, among other things. Either scenario is unacceptable. Fortunately, there is a solution.
Firms in for-profit education have proven to be able to deliver consistent, high-quality education at a fraction of what it costs non-profit institutions. Richard Ruch, who served as a dean at both not- and for-profit schools, estimates the cost to the institution of educating a student at a for-profit school is 59 percent cheaper than at public schools. CCAP looked at two for-profits that could be utilized in Michigan. Straighter Line offers Web-based courses and personalized tutoring. Students who are in need of remedial instruction to get their math skills up to speed can get the same course content from Straighter Line for a mere $99 a month, without any subsidy from the state. Moreover, Straighter Line offers 24/7 one-on-one tutoring with its courses. Charter Oak State College and Fort Hayes State University are two public schools that have implemented Straighter Line with success. For those opposed to the online approach, University of Phoenix has brick and mortar establishments in Michigan and also provides education more cheaply than the public universities. These two for-profits are just examples of the many for-profit providers who could help Michiganders save money on remedial and introductory college credits.
College administrators will likely balk at this proposal, claiming that their costs and pricing are, in fact, competitive or that a for-profit operation could never replicate what they offer in the classroom. But that claim is tough to evaluate because opaque accounting keeps the public in the dark as to what the true costs of remedial college education. Given the results of our analysis, colleges and universities should look into these costs to ensure that they are not fleecing their students or being wildly inefficient, especially when affordable alternatives are so readily available.
Jim Coleman is a research associate at the Center for College Affordability and Productivity.
