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The fastest-growing expense at Penn and nearly every other university is financial aid. Although the percentage of Penn students receiving aid has remained stable at about 45%, the amount of money each one gets has soared; the average grant totals $13,485.
All in all, well-heeled parents who pay the full freight at Penn help support not only other, needier students but also the tuition reimbursements of very comfortable professors. They pay again through federal taxes to help cover the costs of federal financial-aid programs. And if they live in Pennsylvania, they pay yet again, through taxes that not only produce the $36 million state appropriation that went directly to Penn last year but that also subsidize the state's public colleges and universities.
But there is hope for us baby-boom parents. Schools nationwide have abandoned the Chivas Regal ethos of the 1980s as they cope with sharp increases in demand for financial aid and the first signs that some high-caliber students are choosing to attend flagship public universities rather than go into eternal debt.
Penn too has begun drawing in its belt. Rodin says she hopes to cut as much as $50 million from the school's administrative budget during the next few years. She stresses that Penn has frozen its room-and- board charges for the past two years, taking advantage of new efficiencies in residential and food-service operations. But the costs of providing a premium education--everything from complying with new federal regulations to keeping up with changes in automation--have skyrocketed, she says. Even the expense of data has risen sharply. An online index of physics abstracts, for example, costs Penn $50,400 a year; when the index was just a series of books, it cost $7,748. "None of us anticipated it," says Rodin. "When it's electronic, we're charged for every hit."
Tenure remains sacred; so does tuition reimbursement. But John Fry, executive vice president for finance, questions whether Penn's reimbursement program should cover graduate as well as undergraduate studies, a generous benefit not often provided at other institutions. "We want to be market competitive," he says, "but at the same time, we shouldn't be excessive."
Can Penn ever cut its tuition? Probably, and without the loss of a single program. In October the board of Penn's medical school debated eliminating tuition entirely. To ease the cost to undergraduates, Penn could resolve to spend annually a full 5% of its endowment or boost the amount to, say, 6%, a level some universities consider normal. With its $2 billion endowment, Penn, if it increased its spending just 2 percentage points, could generate an extra $40 million, enough to reduce the tuition of each undergraduate by $4,000. Harvard, with its $9 billion endowment, is in an even more advantageous position. A 1-percentage-point increase in endowment spending would yield an extra $90 million, enough to cut its base undergraduate tuition nearly in half.
A far trickier question--one that shows the Chivas Regal effect hasn't quite burned off--to pose to a university executive is, If you could cut tuition without sacrificing anything, would you?