Tuition-pocalypse

If Duke wants to continue its arms race with other top universities, it must continue to push the envelope on the academic talent, services and opportunities available to students. As available resources spiral upward, revenue must follow suit.

This is why, in a repeat of recent Duke and higher education history, the Board of Trustees approved a 4 percent tuition increase. This increase is in lock-step with peer university increases, which usually center around 4 percent, and is a necessary step in the University’s continued growth. But it is also a fateful one, which cannot be continued indefinitely.

Right now, elite universities operate on a high fee, high service model, like the health care and butlery industries. Tuition increases are driven by competition over faculty, increasing financial aid costs and, most prominently, perpetual student life enhancements. To stay at the top, Duke lures faculty from peer institutions, offers competitive scholarships and builds new dormitories, laden with giant televisions. This is just the beginning: The plans for New Campus—Duke’s next elaborate construction project—testify to the never-ending costs that universities face.

These tuition increases come with a price. Middle-income families, who are already disadvantaged by the current tuition and financial aid situation, will take the brunt of future increases. Duke already slights middle-income families more than other universities, like Harvard University, whose financial aid packages drop off significantly when combined family income is more than $150,000; the analogous number for Duke is $100,000. This disservice is only exacerbated when tuition increases faster than inflation, pushing more families into the middle group: those who cannot afford to pay full cost, but do not qualify for heavy financial aid.

It would be great if Duke could match tuition increases with even greater financial aid increases to make up for this gap. But this is not sustainable. The University’s estimated financial aid expenditure next year is $120 million. Compare that to the $230 million for undergraduate aid raised by President Richard Brodhead’s groundbreaking, four-year financial aid campaign—and it is not hard to see that financial aid expenditures will eventually outrun our ability to pay for them. Likewise, Bruce and Martha Karsh’s $50 million donation in 2011—the largest ever single gift to financial aid—would not fund half a year of aid.

This is not sustainable. Increasing tuition costs force us to increase financial aid through greater endowment spending or by earmarking more of the annual budget for financial aid. But spending more on aid just means we either have to spend less somewhere else or raise tuition even more to cover the gap. In short, something has to give.

If tuition costs rise and aid comes up short, Duke will lose some of its relevance. The world-class university down the road, which has a slew of academic departments just as famous as Duke’s, has an instate tuition of $7,000. It will not be long before students who cannot afford the inflated cost of an “elite” education realize how compelling their flagship state university is. As tuition rates diverge, Duke and its peers may lose out on a qualified and diverse applicant pool.

The dilemma here seems inescapable—we can either lose our competitive edge now, or later. But the only way to address this situation is to face it head on.