27.4.05

BUNDLING AND UNBUNDLING. The Chicago Tribune takes another look at Jacuzzi U.
David Kalsbeek, vice president for enrollment at DePaul, said a college culture is beginning in which students expect and demand a level of service.

"The general public is increasingly inclined to see tuition as an investment," he said. "What institutions are drawn to do is guided by student expectations."

As in the business world, where branding and company recognition are paramount, schools have adopted a business mentality and are striving to differentiate themselves.

"The puzzling thing is that as these kinds of [amenities] are increasing in their frequency on the national level. We all have mounting concerns about the affordability of higher education," Kalsbeek said.

"This will end when the public balks at the price of institutions. It will reach a threshold where parents and students will be unwilling to pay the tuition."

But students are paying, and schools are finding a number of ways to build new recreation centers and increase comforts. Some schools rely on hefty endowments, alumni donations or student fees. Others, especially state schools, search for grants or state funds.
Economists say "investment in human capital" for a reason. Higher tuitions are not a bad thing per se; in fact, the higher tuitions might elicit more effort from the students who enroll. If there is to be a rebellion, it will be as parents and students discover that there is no premium to a degree from a name university with lots of amenities, compared with a less famous university offering more austere surroundings. (I wonder what Wisconsin has done with Tripp and Adams Halls, the 1929 fortresses I called home for three years.)

The story continues with an exploration of the modified Demsetz auction universities use to pay for some of these amenities. (In a traditional Demsetz auction, the company that offers to provide a monopoly service such as electricity for the lowest price gets the right to operate the Power Company; what universities do is sell the monopoly rights for a lump-sum fee.)

The buildings often house businesses, such as salons, fast-food restaurants and bookstores, that pay top dollar to rent space, [Tony] Pals [of the National Association of Independent Colleges and Universities] said. Because these conveniences attract students and prompt them to spend money and stay on campus, more student money is put back into the school."

In the long run, it will more than pay for itself," Pals said.

That is, if it doesn't run afoul of the law. Illinois, seeking to end the sale of pouring rights to pop companies in the common schools, may be outlawing Northern Illinois University's sale of monopoly rights to Pepsi.
The relationship between NIU and Pepsi has always resulted in guaranteed lucrative benefits for both sides. The 10-year contract Pepsi and NIU signed in 1998 assured a yearly minimum of $400,000 from Pepsi in exchange for "exclusive pouring rights" on campus.

NIU annually allocates $50,000 to $200,000 of its guaranteed Pepsi money to different school programs and scholarships, Albanese said. Athletic scholarships, student life initiatives and the Undergraduate Special Opportunities in Artistry and Research program have each received $50,000 per year from the Pepsi contract. The Centennial Scholarship has regularly received $200,000 of yearly Pepsi money, and the school has regularly distributed $50,000 of its Pepsi money to improve undergraduate teaching, Albanese said.
Public policy question: is the contract a division of gains from trade, or a division of monopoly rents?

SECOND SECTION: The Cincinnati Post examines the amenities at the local universities, including Catholic institutions where the faculty might have to take vows of poverty, but the students live like the Medici. Kimberly uses a red No. 2 pencil to comment.
A note to all those Millennials who demand the same private bathrooms and vegetarian meals that they got at home: College dorms are supposed to be yucky for the same reason that your parents aren't supposed to wait on you hand and foot when you're a teen - it's so that you eventually want to grow up and move out and take care of your own precious self. College is something you leave for something better. And unlike at home, you won't get to hang around for years for free if you get hooked on those comfy dorm rooms.
The comments are worth your perusal; apparently there are others as disgruntled with the expense-preference behavior and misdirected focus on retention as am I.

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