We recently returned from travel through central Europe.

Every time I travel abroad, I am struck by the richness of the hospitality I encounter and by the ways in which I find myself provoked to reconsider assumptions I have about others and myself. It was a wonderful and inspiring experience and a good reminder for me and Lynn of the significant importance of Susquehanna’s GO (Global Opportunities) Program.

Celebrating its tenth anniversary, GO is a defining element of an SU education. We are one of only a few universities where study away is a graduation requirement. Our program is unique within higher education in that a preparatory class, active engagement in a different culture, and a reflective experience are all parts of the requirement.

When I ask students to identify the most meaningful aspects of their Susquehanna education, GO is inevitably part of the conversation. The faculty designed the program with these learning goals:

1. Demonstrate a complex understanding of culture including the ability to develop a working definition of culture
   1. Articulate awareness of differences and similarities between their culture of origin and the one in which they are immersed.
   2. Define and recognize ethnocentrism and ethnocentric assumptions.
   3. Demonstrate critical awareness of their own cultural values and identity.
2. Recognize how their attitudes, behaviors, and choices affect the quality of their cross-cultural experiences.
3. Reflect on their personal growth, social responsibility, and the value of active participation in human society.

We are experiencing a time in which our leaders and many of our neighbors are struggling to navigate difference. With our current public discourse frequently tainted by jingoistic rhetoric and a promulgation of misrepresentations of other peoples and cultures, the goals of the GO have never been more important.

Meaningful study and travel that focuses on cultural engagement helps us to appreciate how diversity makes us stronger as a global community. It reifies the validity of competing world views; it helps us begin to perceive the profound richness of what it truly means to be human; and most importantly, it challenges us to consider new perspectives.

In the Scientific American article, “How Diversity Makes Us Smarter,” Katherine W. Phillips, Reuben Mark Professor of Organizational Character at the Columbia Business School, empirically demonstrated that diverse groups are better able to solve complex problems than homogeneous groups.

The diverse groups were more accurate because they came at the problems from a variety of perspectives and experiences that forced them to challenge each other and work out a solution, whereas the homogeneous started from a consensus position, which when wrong went unchallenged.

The most valuable lesson from Prof. Phillips’s research is that, in spite of being right a significantly higher percentage of the time, the diverse groups had less confidence in their work. The process of challenging conclusions and introducing varied views made those participants less self-assured.

These are the fundamental challenges to legitimate inclusion: in diverse communities, we are challenged by views and traditions that are different from our own; monolithic world views we have deeply held to be true may be exposed as wrong; and the best work we do across differences will not always feel as good as it is.

The answers to many of life’s most important questions lie in the margins, and for most of us that is not a natural place of comfort. Thoughtful intercultural engagement is an invaluable way to appreciate the value and strength of collaborative work across difference. It is also one of the best ways to learn to make intellectually and culturally interstitial domains places of comfort and, if we develop true cosmopolitans, home.

Some critics point to what they label as administrative bloat as the source for the rising price tag of a college degree. Most expansions in professional staff at colleges are tied to complying with the expectations of external accrediting bodies, meeting ever-expanding reporting requirements, or supporting the persistence of a student population that is at a continually higher risk of not completing.

In spite of these challenges, according the College Board, when adjusted for inflation, the average net tuition revenue at private, not-for-profit, four-year colleges has increased by only $1,390 since 2010.

In my previous installment, I outlined how discount rates (the average percentage of the reduction of the amount families pay to attend college from the published price) have rapidly escalated in recent years.

The logical correction would seem to be a recalibration of the published price to more closely align with the average out-of-pocket expense. Over the past two decades, a number of institutions have attempted this. They have typically seen a decline in applications, because consumers associate price with quality. In some cases, they have seen a short-lived increase in applications and enrollment because of media exposure, but those increases have rarely been sustainable.

It is likely that the only way to effectively reset the published tuition price would be if a large portion of a particular sector of higher education were to do so together. During the past year, there have been members of congress who have encouraged university leaders to get together to formulate such an initiative. To their surprise, we have had to inform them that we are legally prohibited from such an effort.

In 1991, the Antitrust Division of the Justice Department charged the eight Ivy League schools and  MIT with price fixing. These institutions along with twenty-three of the nation’s leading liberal arts colleges had met as what came to be known as the Overlap Group. The convening institutions, which were all need blind, meaning that they would fund each accepted student’s complete unmet need with scholarships, were seeking to make the cost of attendance uniform for each student.

The justification for this effort was that the participating institutions wanted students to choose the school they believed was the best fit rather than the one offering the best deal. In theory, with all need met, aid packages should have been comparable, but without consistent tuition and fees, that was not the case. The Ivies signed a consent decree, but MIT went to court armed with amicus briefs from sixteen national educational organizations. MIT ultimately prevailed in 1994, arguing that their efforts were not anticompetitive because they aimed to save students money rather than inflate their expenses.
This led to Congress passing the Improving America’s Schools Act in 1994. Section 568 of the Act states that is not unlawful for two or more need-blind institutions to agree or attempt to agree to: 1) award financial aid only on the basis of need; 2) use common principles for making the need determination; 3) use a common aid form; and 4) share, on a one-time basis, certain aggregated data about their admitted student pools. Student-specific data may not be shared.

The 568 Group was formed in response to the Act. This group of need-blind institutions share the permitted data, but they and other institutions do not have the ability to meet to discuss pricing strategies.

For higher education to make industry-wide realignments of price, aid, and out-of-pocket cost, we will need to work with the federal government to create a provisional forum that allows us to collaborate on our pricing models. Such an effort could de-escalate pricing and lead to a more consistent financial model for universities that would also be more understandable to consumers.

We regularly hear about the broken business model of higher education. It is in need of being fixed, but it didn’t break. The contemporary components of the operational side of colleges and universities all stem from a history that did work at certain times in history. The problem is that the ratios have all changed for external and internal reasons that have led to practices that are unsustainable for many institutions.

It is the current model that has led Harvard professor, Clayton Christensen, to predict the bankruptcy of half of America’s colleges and universities in the next 10 to 15 years. He is wrong, but the current discourse around the economics of higher education has given him much more airtime than he would have received a decade ago.

American higher education has a wide range of funding models: private not-for-profit, public, and for-profit being the principal categories. The private not-for-profit institutions include religiously affiliated and independent institutions. Religiously affiliated institutions range from associations of little more than founding histories and no financial support to significant ecclesiastical oversight and concomitant funding.

Aside from some institutions that receive religious funding, most institutions receive revenue from tuition, room, board, fees, gifts, grants, endowment income, contract services, and state and federal funding.

Students who attend private institutions may receive state and federal funding in the form of grants and loans. These include PELL grants and, in many cases, limited state support for students who stay in state to attend private colleges. Over the past few decades the percentage of operating revenue for state-sponsored colleges and universities has dropped dramatically. For example, last year, the state appropriation to the University of Virginia represented 8% of its budget.

Rising interest in “free college” as part of the current presidential campaign conversation is founded on an incomplete understanding of how limited the federal government’s involvement in education is and how little states actually support their namesake universities. {An extended commentary on the “free college” movement will appear in an installment later this month.}

The components that have warped the business model include dramatically expanded access to a college education, especially for students with limited means that once precluded post-secondary education; the high cost of innovation; a decline in public funding when adjusted for inflation; and a decreased willingness of families with the capacity to pay to invest in the best educational opportunity available to their students rather than “the best deal.”

Financial aid is typically awarded in two categories: need-based and merit-based. Many institutions, like Susquehanna, are deeply committed to providing access to meritorious students, and we provide substantial financial aid packages to students whose families do not have the economic capacity to fund their attendance. For our most financially challenged students, some aid is provided through federal and state programs, which when combined with institutional aid makes it possible for these students to complete a life-changing college education.

The historic model of institutional scholarships was that endowment funds and current gifts would offset the discount associated with each scholarship. This meant that the discount had a funding source. That practice remains true at the very wealthiest schools, but at the vast majority of institutions, only a small portion of financial aid is funded. At my institution, about 11% of institutional aid is generated from endowed funds.

The remainder of that aid is tuition we waive in the form of a scholarship. This practice is often regarded as new, but there has been a long tradition of colleges waiving some tuition from poorer students and making up revenue from the students who required less aid. At Susquehanna, this was a foundation practice. Students enrolled in the Missionary Institute (an original core component of the University) paid no tuition. Part of their education was underwritten by gifts from the church, but most of the cost of operations was made up from the tuition paid by students in the Classical Division and the Female Academy, which were the liberal-arts branches at the time.

During the Great Depression, many colleges and universities supplemented operations in creative ways. Illinois Wesleyan University, where I used to work, accepted produce and livestock in lieu of tuition from students who no longer had the traditional means to attend.

After the much more recent Great Recession, endowments took dramatic hits and many families were suddenly unable to continue underwriting the cost of education they had before the market fell and unemployment rose. Most private institutions undertook significant measures to help their students complete their programs by discounting their tuition at higher levels while having shrunken endowments unable to directly fund these expanded aid packages.

Because the economic recovery has favored those with the resources and incomes to invest, average families have not seen an equal share of the boom. These families have seen virtually no increase in their ability to pay for college over the past ten years. Tuition and fees have increased steadily, and in many cases the discount rate has grown to accommodate all of the increase, resulting in an escalation of the overall discount rate.

All of the pieces of the model that worked historically have not been aligned with the economic division we have experienced over the past decade, and our commitment to providing access has exacerbated this challenge.

That is how we got here. In the next installment, I will address the challenges of the present situation and potential solutions.