Powers to Obama: Cost Is One Thing, Value Is Another

Cost is one thing, value is another, and confusing the two is a mistake.

President Barack Obama this morning unveiled a plan to address rising college tuition costs by making more federal loan money available, but only to universities that lower tuition.

The concept is a form of performance-based funding, which ties rewards to desired outcomes. In this case, the desired outcome is affordability.

UT President Bill Powers reacted to Obama’s speech Friday, saying he supports the general idea of performance-based funding, provided it incentivizes the right outcomes.

“To some extent, this is what the debate in Texas has been about,” Powers said. “What are the desired outcomes: research versus teaching, high-quality education versus just the cheapest. Getting the outcomes right is critical, and the speech didn’t resolve that.”

Speaking to 4,000 students at the University of Michigan, Obama chastised universities, saying, “You can’t assume you’ll just jack up tuition every single year.” Earlier this week, Obama put colleges and universities on notice about rising costs in his annual State of the Union address.

Powers, however, cautioned that a too-rigid application of an incentive can actually cause the opposite of what it intends.

Say that University A charges $1,000 in tuition and raises tuition 5 percent to $1,050. University B charges $5,000 but keeps tuition flat. A system that penalizes University A and rewards University B would, in fact, be incentivizing a less-affordable option.

Powers might just as well have substituted University A for The University of Texas at Austin and University B for any of the many private schools and other top-flight public schools with which UT competes for students and faculty. Compared with a dozen of its peers, like the University of Michigan, UCLA, UNC, and UC-Berkeley, Texas has the fourth-lowest tuition cost. Factoring tuition and fees, UT is the cheapest in its cohort.

Both Kiplinger’s and Smart Money magazine have ranked UT among the best values in higher education.

Powers has asked the board of regents to approve a 2.6 percent increase in tuition next year, which would far from replace the deep cuts in general revenue funding the University felt last year. By contrast, the California system schools are looking at double-digit increases in tuition.

“The question should be affordability given quality,” Powers said. “Value is at stake here—not just cost.”


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