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ERIC Number: ED535460
Record Type: Non-Journal
Publication Date: 2009-Jul
Pages: 24
Abstractor: ERIC
Reference Count: 15
ISSN: ISSN-1935-3510
The Revenue-to-Cost Spiral in Higher Education
Martin, Robert E.
John William Pope Center for Higher Education Policy (NJ1)
The focus of this essay is on the persistently rising costs in higher education and the role that incentives play in pushing those costs up. Data from the Department of Education's National Center for Education Statistics reveal that the rise in higher education cost exceeds the rise in service-sector prices and even the rise in health-care costs (Martin 2005, National Center for Public Policy and Higher Education 2008). Some people argue that as long as students and their parents are willing to pay tuition, it can't be "too high." That may be true for some students, yet the inability to control costs imperils access to college by many low- and middle-income students, and the author addresses the general point in this essay. With this essay, the author lifts the lid on the black box and explores the network of incentives that lead to the chronic cost-control problem. He explores how characteristics of higher education, including its nonprofit legal status, manner of governance, competing objectives, and principal/agent issues all lead to a chronic tendency for both costs and revenues to rise. This essay reveals a perverse irony that is usually neglected in the literature: Higher revenues induce higher costs, and those higher costs are used to justify future calls for more revenue. The author calls this process the revenue-to-cost spiral. (Contains 24 notes.)
John William Pope Center for Higher Education Policy. 353 East Six Forks Road Suite 150, Raleigh, NC 27609. Tel: 919-828-1400; Fax: 919-828-7455; e-mail:; Web site:
Publication Type: Reports - Evaluative
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: John William Pope Center for Higher Education Policy