Looking to Wealthy Donors to Lower Tuition Costs—Is This the Answer?

St. John’s College, a private liberal arts college known for its “Great Books” curriculum and with campuses in Santa Fe and Annapolis, is slashing its annual tuition from $52,000 to $35,000 this next school year, with plans to make up the revenue loss through a $300 million fundraising campaign. Almost $200 million has already been committed, including a $50-million matching grant from the family foundation of the Winiarskis, both alumni. This plan to move from a tuition-based to a new “philanthropy-centered model” differs from the tuition resets recently announced by a growing set of higher educational institutions. Those tuition decreases come with a decrease in grants and scholarships. St. John’s plan, however, could represent a new business model for private colleges.

Why has the cost of attending a US college, either public and private, soared so dramatically in the past 40 years? Today, tuition at a private university is about threefold what it was in 1974, and public tuition has grown by nearly four times. Some observers believe that the same factor that makes our healthcare system the most expensive in the developed nation strata—the lack of a central mechanism to control price increases—makes college so costly. Both the health and education sectors rely on fee-for-service instead of pay-for-performance, are labor intensive, have costs that are difficult for consumers to discern, and have powerful institutional and professional interests that resist change.