Sunday, January 01, 2006

Funding higher education (Part 1)

The cost of higher education and how to pay for it are two issues that I have tried to address through this blog. In science and engineering, the approximate cost works out to about Rs. 100,000.

In most institutions, students pay less than a third of this amount, on average. In places like the IITs, where the government takes the slack through supplemental funding, there are no problems. However, places (most of which are private undergraduate colleges) where such additional funding is missing, it has been a disaster. Sad facilities and lack of qualified faculty are the immediate result. Poor quality of education, and students who lack marketable skills are the long term result. Highlighting this concern, the 2005 McKinsey-Nasscom report says only 25 % of our engineering graduates are employable, and I have called it the 25 percent curse.

It is not too difficult to agree with the general rule that in ecucation, one cannot have both good outcomes and and unbelievably low cost. IITs are a deceptive exception to this rule because, as we have seen, they get supplemental funding from the government. I would certainly not wish to argue that high fees will magically result in high quality outcomes. However, there is no doubt at all that an insistence on low cost will continue to deny us good outcomes forever. Shitty education at a low cost is still shitty.


What might one expect if the cost of education is liberalized, so that colleges and universities are given the freedom to fix their fees? A diversity of colleges will emerge:

  1. inexpensive and good colleges which attract supplemental funds either from government, philanthropists or alumni.
  2. expensive and good colleges, where all the cost is borne by students
  3. inexpensive and bad colleges.

There won't be colleges that are both expensive and bad; but we should never underestimate our system to produce this possibility. In management education, we do know of quite a few of these institutions, don't we?

Since expensive colleges would be scared to get a reputation for poor outcomes, they will find ways to attract good students, probably through scholarships. Thus, this system will also reward merit.


For all its faults, our system of secondary and higher secondary schools still manages to graduate a large number of good students, due to a combination of two things:

(a) law of numbers. At each age level, we have about 20 million people. And about 50 % of them graduate from schools.

(b) the growing awareness about links between higher education and economic prospects.

It is a shame that we are unable to provide this vast pool of talent many high quality colleges to get into. In engineering, there is a vast gap between the IITs and the next level of colleges.


Currently, even though the government mandates low fees, it is an open secret that almost all of them make the students pay a lot more in the form of 'lunch' fees, 'transportation' fees, and so on. Some corrupt managements simply demand bribes in the garb of 'voluntary' donations to their corpus (without providing receipts, of course). Thus, with our current rules, we also end up institutionalizing lack of transparency, and in egregious cases, corruption.

In most colleges, such ill-gotten money goes to line the pockets of college managements. In some (and I would guess this number is quite small) colleges, some of this money is ploughed back to improve the infrastructure. These are the colleges that have swanky computer labs and fancy buildings.


It is better for us to dump this atrocious system and go for a fair, transparent one that will produce, over time, a large number of good colleges (of both expensive and inexpensive varieties).