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Small college Grinnell weighs big changes to financial aid

Grinnell is a very small liberal arts college in Iowa with a very big endowment: $1.4 billion.

Grinnell is a very small liberal arts college in Iowa with a very big endowment. $1.4 billion to be exact. It's one of the wealthiest schools in the country, thanks, in part, to investment guidance from Warren Buffett, a former trustee. But even Grinnell is weighing cutbacks to control ballooning costs, joining a debate already underway at many elite private colleges.

Dr. Raynard Kington is the president of Grinnell. He's opening the conversation up to students and alumni before a decision on how to proceed will be finalized next year. Tuition, plus room and board, currently cost $50,000 per year, but many students receive financial aid.

"We have one of the lowest average debt burdens for students graduating," Kington said. The school accomplishes that through what Kington calls a "sliding scale of price." Families that can't afford the full price tag currently receive their full demonstrated need. That's college admission speak for what your family can afford, according to their analysis, plus grants and in some cases, loans.

Kington insists that Grinnell plans to stay need-blind, granting admission based on student record, without regard for their financial need. One way they may do that, increase the number of foreign students, most of whom pay full tuition.

When asked how much college could costs 10 years from now, Kington was blunt. "It will continue to cost a lot."

About the author

Sarah Gardner is a reporter on the Marketplace sustainability desk covering sustainability news spots and features.
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Thank you to all of the other professors here who echoed my confusion and outrage when Dr. Kingston blamed the high cost of a college education on faculty salaries.

I am still waiting for a thorough explanation of where all that money is going, and for an honest conversation about the reasons for skyrocketing tuition in this country and what hard choices we as a nation (and as educators) are willing to make to address these problems.

The idea that salaries of faculty and staff is what is responsible for the spiraling cost of college tuition, voiced by Mr. Kington, is disingenuous, to say the least! One has to wonder how willful that is?

The REAL reason that costs are skyrocketing are that colleges and universities have been -- and are STILL! -- involved in what amounts to a massive "arms race" to build more, bigger, and fancier facilities and buildings! They were spending right to the edge of their budgets until 2008 (as the Chronicle of Higer Education documented in an expose article) and, amazingly, have CONTINUED to do so in many respects, since then! Just look at NYU and Columbia, to name just two!

NO austerity there, while at the same time they cut back on salaries, benefits, and basic conditions for faculty and staff.

And at the same time, the upper-level of "management" and administration continues to get more and more bloated, in many cases with very highly-paid "talent" from business!

Mr Kington's rationale really seems to be self-serving and self-justifying of the practices that raise costs! (The "market is clear on the demand for services at institutions that are backed by yes, more administrators...")

All this smacks of the same kind of bad faith shown by business--blame the "market," jack up your costs at the expense of customers, and do NOTHING about YOUR OWN management style and practices which are the TRUE causes of the problem!

Like others, I was confused and really bothered by Dr. Kington's assertion that high faculty/staff salaries are the main contributors to soaring college tuition. There is a whiff of truth to this, as the rising (and rising and rising) cost of faculty/staff benefits (e.g. health insurance) certainly contributes to the cost of running a college. Dr. Kington's salary (above 500k) also plays a role, though he didn't mention that. So, yes, faculty and staff cost colleges a lot of money.

But let's not forget all of the student services and supports that have been added in the past couple of decades -- academic support centers, tutoring labs, disabilities offices, student activities offices, expensive library databases, technological enhancements to classrooms and dormrooms, healthier meal options in dining halls, etc. Students -- all of whom have unique needs and desires, and many of whom have incredibly high expectations of what a college can offer them -- cost colleges a lot of money. Then there are higher utility bills, higher maintenance costs, higher insurance premiums for buildings and grounds....and lower returns on investments, yadda yadda yadda.

ALL costs go up with time, not just faculty/staff salaries, and since colleges can't really cut costs elsewhere to save money and can't increase production to have more product to sell, tuition must rise to account for these rising costs. Dr. Kington should read Dean Dad's blog at insidehighered.com -- the guy's a genius at explaining Baumol's cost disease, which he contends is one of the big contributors to rising college costs. I'd love to see Marketplace do a thorough investigation into what's really driving tuition hikes. Dr. Kington's analysis just didn't cut it.

End subsidies for debt incured for college and watch prices tumble. Just like the housing bubble, cheap credit created major inflation in prices.

@EAM - When I was at Grinnell, all classes were taught by faculty. There were no adjuncts, teaching assistants, etc. I believe this is still the case.

EAM, in response to your accurate observations: I must assume that Dr. Kington is not an economist.
The simple explanation is that the supply of higher education is much less price-elastic than the demand for higher education. This means that the "incidence" of any government subsidies would be expected to accrue more to the suppliers than to the customers, resulting in a sharp increase in price.
This is precisely what has happened, with tuition rates outstripping inflation for years now. Anyone with a rudimentary understanding of the Supply & Demand chart would know that this result is inevitable.
If the government wants to make college more affordable, it would do much better to increase the Supply.

We were just at Grinnell for family weekend as our son just matriculated there this fall. I worked at a simlar instiution in the upper Midwest for a total of eight years so over the course of the weekend I listened cvery carefully to and processed some of the hard data/key metrics as well as the "messaging" from Pres. Kington and others.

On the expense side, 90% of Grinnell's student body receives aid--almost all of which is need-based and the average award is 2/3 of the cost of tuition. For now, they remain "need blind" including international students whom one can imagine can be needier than the average domestic student. The calculus in the previous post re: faculty (and staff) compensation does not include benefits which often approach 25-35% of salary. Also, the market is clear on the demand for services at instutions that are backed by yes, more administrators (athletic/student centers, food services that are unrecognizable to alumni from a generation ago, higher quality dorms than anyone over 30 could ever imagine, better maintained physical plants, etc.). All in all, a small private residential college that fulfills the deamnds of its market is an expensive proposition.

In my experience, the Boards at places like Grinnell take their fiduciary duty very seriously in regard to costs, value and price. The feedback they receive from peers, classmates, etc. is, if anything, amplified in Board meetings. Budgets, revenue, expenses and the informed choices behind them are all as transparent as can be. If it wasn't so, between the Board, faculty, vigilant alumni and students, there'd be hell to pay. (And in regard to the post above, there isn't someplace "where the rest of the money goes."--Grinnell is a 501 (c) (3), and behind the Board is Iowa's Attorney General's.)

The objective of an endowment--large or small--at such a place is not to subsidize those who can well afford it. People that can afford to pay are, and those that can't are being heavily subsidized. I read here that Grinnell is working to ensure that in the future they are not put in the position of having no choice but to compromise and forsake the demographic of student that is benefiting from their help today...

The value proposition of places like Grinnell isn't for every student or family, yet Grinnell and their peer institutions remain some of the most selective in the country turning away many more prospective students than they accept all over the socio-economic spectrum.

BTW, we are part of the 10% that are paying "full freight" (both at Grinnell and also Occidental) and in after- tax income terms many are surprised that we didn't qualify for need-based aid at either institution... We are resolved that it is our best investment...

Go to Canada as a foreign student, tuition is 500% less than in greedy US colleges. I got accepted to Ryerson for Aerospace back in 92 for $7,000/year (did not go due to lack of jobs). The US leads the developed world in healthcare education costs, but trails the developed world in literacy, & HC coverage.

I was also perplexed by all of the talk about the staff salaries being the primary cost of students' education, and found that the story lacked a multi-dimensional explanation of the financial aid situation. One fact not mentioned in the story is that at Grinnell, unlike at other top LACs, financial aid includes Merit money. This means that some wealthy students are given a financial break at Grinnell, whereas if they attended Vassar, Williams, or a handful of other selective LACs, they may be asked to pay a larger portion, if not all, of their tuition. Would Grinnell consider eliminating Merit aid altogether in favor of only providing financial assistance to those in real need?

Dr. Kington makes a misleading statement about the reasons for high tuition at a school like Grinnell. He says that the cost per student of $56,000 is due to the cost of paying a highly educated staff and faculty. One is apt to imagine well-paid professors raking in the dough while families scrimp and save to pay tuition. But consider: with a student population of 1600 and a faculty of about 180, faculty pay probably doesn't amount to much more than about 14 or 15 million a year, assuming average faculty pay of about $80,000. Multiply the cost per student by the total number of students, and you get almost $90 million. So faculty pay is about 17% of the what it costs to educate the students at Grinnell. Not exactly a large portion of the cost. It would have been interesting to hear from Dr. Kington a) where the rest of that money goes, and b) whether it is really necessary for it to go there. A hunch: colleges and universities have increasing numbers of administrators, while faculty size remains constant (or shrinks, for that matter). If you were to increase faculty pay (and numbers), the quality of student education would remain the same, *and* student tuition could be significantly decreased--but you would have to shrink the size of administrations. How about it?

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