Page 40 - Crisis in Higher Education

The Higher Education Conundrum • 15

of higher learning. Students’ income and savings totaled about 11%, and
students’ borrowing was 16%, so students contributed 27% of the costs.
Federal subsidies show up as student loans, grants, and student earnings
through work-study programs. 11
It should be noted that the respondents to this survey were family
members, so these data do not include the subsidies that states and local
governments provide for their public colleges and universities. These
subsidies have declined over time but are still substantial. The contri-
butions to higher education from state and local governments for 2013
were $72.7 and $9.2 billion, respectively. State support represents about
21% and local support less than 3% of the budgets for public colleges and
universities. This support explains why these institutions have lower
12
tuition than private ones.

1.5 WHO IS THE CUSTOMER OF HIGHER EDUCATION?
In most relationships, customers are usually easy to identify. They pay for
goods or services, and they gain benefits from their use. Higher education
is different because there are two critical demand–supply relationships to
address, and students pay only 11% of the cost at the time of purchase.
Student loans, which are deferred to a future time, represent another
16%, and these loans may actually be paid in total or in part by parents
or others. This means that higher education faces a trifurcated customer:

1. Students: They participate in higher education and gain knowledge
in the process. If successful, they benefit by living better, including
higher incomes and more job satisfaction.
2. Third-party payers: Parents, other family members, friends, govern-
ments, scholarships providers, and foundations pay most of the costs
without receiving any direct benefits. Parents, other family members,
and friends are doing so for unselfish reason; they want the student
to succeed. Governments hope to support and stimulate the econ-
omy by providing a highly educated workforce. As part of their mis-
sion, institutions of higher learning offer scholarships to applicants
in financial need and/or who are well qualified. Foundations usually
have mandates to do good as described by the philanthropists who
established them.