WASHINGTON -- The rapid rise in college costs during the 1980s occurred as schools decided to compete for students by improving quality rather than lowering prices, a report sponsored by higher-education groups said.
Arthur Hauptman, author of the study requested by the American Council on Education and the College Board, said Thursday many feared that the smaller pool of college-age students in the 1980s would lead to school closings and mergers.
But instead, he told reporters, colleges and universities competed for students by offering more financial aid and better facilities and services -- leading to higher tuitions.
'Schools decided that this was the strategy for them to take, and I don't think that was a bad decision,' he said. 'A BMW charges more money and people buy it, even though there is something cheaper. There are many examples in the economy of industries that don't compete on the basis of price.'
At the same time, the report titled 'The College Tuition Spiral' said the smaller pool of young people prevented schools from spreading out costs over a larger number of students as they had during the 1960s and early 1970s.
Hauptman and officials of the ACE and College Board said they did not believe colleges would be able to continue raising prices at the same pace during the current decade without driving students away.
Donald Stewart, College Board president, said he feared colleges would be forced to cut back on the large financial aid packages that enabled them to attract poor students at a time of soaring tuition.
'They will have to cut corners,' he said. 'Ultimately society suffers.'
The study said college costs increased about 9 percent a year in the 1980s, about twice the overall inflation rate and faster than at any time in recent decades. College costs lagged behind inflation in the 1970s, and went up only slightly faster than inflation during the previous half century.
While college costs soared in the 1980s, median family income failed to keep pace, rising 5.6 percent a year. However, pre-tax income on stocks and bonds increased faster than the growth in college charges, the report said.
The report said tuitions increased for different reasons at private and public schools. Private colleges raised tuition mainly to improve quality, while public schools charges were strongly affected by state funding.
Hauptman said quality did not suffer at public schools, compared with private ones, because public funding wound up increasing.
The study said the largest increases in charges at public schools took place in the early 1980s, when a recession limited state revenues. Tuition increases were less severe once the economic recovery began later in the decade.
The report said many private schools raised prices 'to keep pace with the trendsetters ... a pattern that has led some observers to comment that in higher education, higher prices are being confused with higher quality.'
The report was prepared at the request of the ACE and the College Board but does not represent the position of either organization.