Looking Back, Going Forward: The Carnegie Commission Tuition Policy. The New Millennium Project on Higher Education Costs, Pricing, and Productivity Working Paper

In thinking about the design of public policy for higher education finance, it may be instructive to look back at the evolution of finance policy and how it has worked over the last three decades of U.S. higher education. The vehicle for this exploration is the tuition policy framework developed by the Carnegie Commission on Higher Education published in 1973. This seminal work outlined an economic framework for formulating policy on higher education finance as well as specific recommendations for tuition and financial aid policies. The Carnegie Commission conducted a comprehensive review of revenue and expenditure trends in higher education and developed eight recommendations on directions for the future financing of higher education, including the role of student tuition as a source of revenue. An often-remembered recommendation was that resident student undergraduate tuition charges should average one-third of the institution's total cost to educate a student. This Commission's perspective on finance went well beyond this controversial recommendation to include a general framework to guide decisions about higher education finance between the states and the federal government, public and private institutions, and undergraduate and graduate education. The central findings of the Commission's 1973 work can be clustered into: (1) a framework for thinking about higher education finance and the role of tuition as revenue; (2) an analysis of revenue and expenditure patterns to determine "who pays"; (3) an examination of personal and societal benefits accrued from investment in higher education that highlights "who benefits"; and (4) recommendations on optimal pricing policies and overall strategy changes in investment in higher education. The Commission's recommendations were never implemented across the board, but they were influential in framing discussions about finance in higher education. The recommendations of the Carnegie Commission may not be practical in the current environment, but the framework and principles that guided the work are enduring and should be helpful to today's leaders as they struggle with difficult decisions and look for guidance on "best practice." (SLD)