29 May A model to combat rising college fees

An academic education in the United States is becoming increasingly expensive and leaves many college graduates highly indebted. A lot of thought leaders are now questioning the value of getting an MBA (see Wall Street Journal).

According to the National Center of Education Statistics the costs for both private and public colleges and universities have been rising steadily over the past three decades.

The most expensive university is the private Columbia University in New York, which charges $47,426 per year (see U.S. News). In the past three years alone, costs have been rising about 15% nationally, also due to budget cuts in certain States (see USA Today). Spending about $35,000 per year on a 4-year degree will incur total costs of about $140,000, not including living cost and personal expenses. A typical Bachelor graduate enters work life with about $24,000 in debt (see American Student Assistance).

Where possible, parents save hard to allow their children to attend college; the premium over a high school diploma is about $22,000 per year (see Collegeboard). This is a tough burden, especially if a family wants to send two or three children to one of the top universities. I’ve heard from many parents that their entire savings are for their children’s education.

A model from Switzerland – University of St. Gallen

Governments obviously could simply pay all the fees, as they do in Sweden (college education there is for free). This, however, is not possible in debt-laden, recession-hit or poor economies. A model from a Switzerland might offer good advice. One of the top business schools in Switzerland, the University of St. Gallen (HSG), charges students much less than its American counter parts do without solely relying on government funding. Domestic students pay CHF 2452 per year whereas foreign students are asked for CHF 4252. This is less than 1/6th of what a college in the United States would cost. The University, however, receives less than half of its funding from the government; the rest is procured on the market.

The HSG runs 31 institutes, most of which are managed independently (see University of St. Gallen). A professor wanting to create his own institute usually gets an office and an assistant, paid for by the university, but has to obtain his own funding if he wants to expand. Institutes do that by providing consulting and research to the industry (about 40% or CHF 73m of the funding in 2011 came from businesses) and government bodies (see NZZ). Apart from a source of funds this approach also fosters the entrepreneurial spirit at the university and ensures that professors have real-life experience in creating and managing businesses.

The approach seems very successful. The prestigious Master program Strategic International Management is ranked first among European business schools by the Financial Times. It also has a top ranking in terms of value (salary three years after graduation vs. course cost). Their top Master programs are entirely in English–maybe an option to consider for my American friends.