Hoxby Testifies Before Senate Committee

Kahn Associate Professor of Economics Caroline M. Hoxby '88 testified before a Senate committee yesterday in a hearing on the rising cost of college education.

Hoxby, the author of a study entitled "The Return to Attending a More Selective College: 1960 to the Present," spoke before the Governmental Affairs Committee, chaired by Sen. Fred Thompson (R-Tenn.).

Hoxby's testimony came on the first day of a two-day investigative hearing, "The Rising Cost of College Tuition and the Effectiveness of Government Financial Aid."

The hearing--which was prompted by skyrocketing tuition costs around the country--focused on the reasons behind high tuition, including the influence of federal financial aid. Another aspect of the discussion was the impact of debt burden on students' educational and career options.

Hoxby testified that tuition at top colleges is increasing in response to rising student demand.

That demand, in turn, has been fueled by three key factors.

First, recent growth in technology has created more "high intensity" jobs that require well-educated employees.

Furthermore, colleges are drawing on an increasingly informed and mobile pool of potential students.

And finally, international trade and improving technology have reduced the need for low-skilled domestic labor, making college education more important than ever.

In her testimony, Hoxby said these three factors have stimulated growth and specialization in the college sector. They have also "caused educational intensity to rise in colleges that have specialized in this high intensity education." In other words, difficult colleges have become even more demanding.

In fact, recent years have not seen an overall growth in costs but rather a widening gap between expensive top colleges and cheaper, less rigorous ones, she said.

"The college sector has become much more diverse, in order to accommodate the needs of both poorly prepared high school graduates who want education akin to high school education and highly prepared students who want high intensity college. Because of this increased diversity, tuition is more diverse," Hoxby told the committee.

However, Hoxby concluded that a college education is not less accessible than it was three decades ago--in fact, she said, the opposite is true.

"Moreover, there is no evidence that students are being forced to enroll in inexpensive colleges that are inappropriate for their level of preparedness," Hoxby said.

Those who have been affected the most are not actually the lowest-income students.

Hoxby said that "the main group of students who appear to be getting displaced from very expensive colleges is the group of students from medium-high to high-income families who have low college preparedness."

Prepared students from lower income families are replacing them, she said.

According to a news release, the Senate hearings were scheduled because Americans are increasingly concerned about high tuition costs.

Over the past two decades, tuition has more than doubled at both public and private colleges. And tuition rates have risen faster than grants, loans, state appropriations and other subsidies.

A report by the American Council on Education indicates that 71 percent of Americans believe "a four-year college education is not affordable." The cost of a college education is a top concern for 65 percent of Americans--putting it ahead of violent crimes against children, children's health care and the quality of public schools, the release said.

The presidents of Connecticut, Macalester and Rhodes Colleges also testified at the hearings, as did education authorities from various national organizations.

Witnesses at the hearing also discussed "merit aid," a form of tuition discount that allows students to bargain for prices lower than those advertised.

"Apparently, colleges and universities themselves don't have a good understanding of why tuition rates are rising so rapidly," Thompson said. "Colleges have to do more to make themselves more transparent in explaining their finances."

"At the same time, the federal government needs to do a better job of looking at tuition rates that are rising faster than the cost of living. As this committee has found with government agencies, you have to know the nature of the problem before you can work to solve it," Thompson added.

"The high cost of tuition has an intense personal impact on individual families," said Sen. Joseph Lieberman (D-Conn.), the ranking Democrat on the committee. "But if college becomes a luxury that an increasing percentage of the population cannot afford, the economic divide between the have and the have-nots could undercut the American dream and stunt the nation's economic growth."

This year, Harvard's tuition is $32,164, an increase of more than $1,000 over the previous year.

Hoxby was unavailable for comment after her testimony.