Determining what option to fund college programs has been and always is a challenging activity for the administration. There are numerous factors which should be considered before deciding on a particular funding option. With continued and increasing competition in the sector of higher education, administrative bodies face the pressure of choosing what to prioritize. Providing educational services that of high quality has pushed colleges and universities, especially in the private sector, to increase their tuition fees. While that is one approach of seeking to increase revenue for an institution, it affects students’ access and choices of what higher education institution (HEI) to enroll. Therefore, an exploration of various funding options could help make clear an institution’s needs and how the particular financing alternatives help address them.
The Illinois College of Optometry (ICO) is a private institution that provides educational services to those studying optometry. The institution experiences various funding needs such as the need for an online program where students can interact with instructors remotely; with enrollment being down in 16 years, there is a need to financing to support normal operations; increasing current costs such as staff salaries, clinical expenses; and purchase and maintenance of new equipment. With such expenses, ICO needs a funding option that can help support the said financial obligations. The institution, being the largest in the United States, should have a stable source of financing to cater for native as well as foreign students interested in optometry.
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There are various funding options and one of them is for the institution to increase its tuition fees. More often than not HEIs come under scrutiny regarding the quality of services they offer to students. Ahmad, Farley and Naidoo (n.d.) explained that HEIs are required to justify their activities alongside improving their efficiency. Thus, that being the case, some institutions have resorted to increasing tuition fees hence treating students as consumers and clients. In this particular case, education is treated as a private good which explains why ICO, being the largest optometry college in America, can leverage its position and raise its tuition fees (Stange, 2013). Further, Best and Keppo (2012) noted that “Schools can use tuition prices to signal quality, and relative demand-side price in-elasticity allows them to raise prices” (p. 589). Through such an approach, the institution will likely manage to cater for the various programs and services it provides to students. However, despite the advantage of higher tuition fees, Best and Keppo (2012) identified various setbacks. The authors explained that high tuition fees increase the appeal to acquire debts because higher tuition fees force students to respond through borrowing. Thus, in the event that potential students face credit constraints, they are unlikely to enroll at ICO. Best and Keppo (2012) explained that credit and tuition prices are largely correlated in that the former influences a student’s ability to meet the demand of the latter. Thus, while increasing tuition fees could help sustain various programs and improve quality of services at ICO, there is a need to consider credit constraints on the part of students which affect the rate of enrollment.
Alongside tuition fees, government funding is yet another potential source of funding. Ahmad, Farley and Naidoo (n.d.) explained that education serves as both a private and public good. The aim of HEIs is to promote social cohesion as well as boosting economic activities and employment. Thus, the government cannot completely default on its role to finance education whether provided by a public or private college. The advantage of government funding, which is in the form of grants, is reliable to the extent that it supports an institution’s various needs. While that is the case, Singh and Purohit (2015) warned that when the government is involved, there is a possibility for conducting dishonest academic practices, under-paying of employees, and producing inadequately trained students. Furthermore, Mgaiwa (2018) explained that decreasing budget approval rates might affect access to grants by learning institutions. Tugend (2016) noted that colleges and universities are grappling with diminishing resources following the decline in state funding. On average, states are spending 20% less per student forcing HEIs to increase tuition fees. The outcome is that for students, ability to enroll will reduce while the administration and faculty will not have sufficient funds to run operations. From a political point of view, government funding is likely to raise questions regarding the state’s dedication towards promoting access to education. The case intensifies especially when one considers students from poor neighborhoods. Thus, while government funding is an option for ICO, it should consider the potential drawbacks that are associated with the said approach.
The third funding alternative for ICO could be soliciting venture capitalists to invest in the institution. ICO has ownership to a property adjacent to the main campus which can be used for real estate ventures. Lerner and Tag (2013) noted that venture capitalists help take-up part of the risk in an entity. In that regard, ICO, after acquiring funding from venture capitalists, could initiate business-oriented projects that could increase the institution’s revenue. In the event that ICO establishes a business, such as a conference center for optometrists across the globe, it can acquire an additional source of funding hence supporting its various needs. However, one ought to consider that venture capitalists are risk takers and expect some percentage of the profit that the institution would generate. Furthermore, they are also likely to influence the business decisions that ICO might choose to pursue. According to Lerner and Tag (2013), funding from venture capitalists comes along with various limitations such as undermining effective decision making. Investors might not share in the mission and vision of ICO thereby influencing the direction that the institution wants to take negatively. Nevertheless, in the event that venture capitalists are willing to support the institution in its potential business ventures, the administration, faculty and students will experience various benefits such as better pay, provision of quality academic services, and access to administrative resources and forums to promote proper management of the institution. On the negative side, some decisions influenced by investors could cut spending in some key areas such as students’ services. Politically, some investors might be partisan to a certain party and thereby affect, for instance, the structure of enrollment at ICO. This can alter the institution’s political philosophy thereby undermining its already well-established identity.
Conclusion
There are various funding options for an institution such as ICO. However, it is important to consider the benefits and drawbacks of each option to determine which best satisfies the institution’s needs. While government funding is reliable, it is vulnerable to budget cuts as is the case with some states which have cut state spending on education in America. Increasing tuition fees can signal quality in the educational services provided at ICO. The downside is that credit constraints might undermine students’ ability to access loans and hence the rate of enrollment at ICO declines. Venture capitalism can provide ICO with sufficient funding in the event that the institution seeks to establish a business. Despite investors influencing administrative decision-making, their financial support can help ICO explore various lucrative business opportunities. The idea is to create a business that supplements its already existing sources of revenue.
References
Ahmad, A., Farley, A. & Naidoo, M. (n.d.). Funding crisis in higher education institutions: Rationale for change. Asian Economic and Financial Review, 2 (4), 489-503.
Best, K., & Keppo, J. (2012). The credits that count: How credit growth and financial aid affect college tuition and fees. Education Economics,22 (6), 589-613. doi:10.1080/09645292.2012.687102
Lerner, J., & Tag, J. (2013). Institutions and venture capital. Industrial and Corporate Change,22 (1), 153-182. doi:10.1093/icc/dts050
Mgaiwa, S. J. (2018). The Paradox of Financing Public Higher Education in Tanzania and the Fate of Quality Education: The Experience of Selected Universities. SAGE Open,8 (2), 215824401877172. doi:10.1177/2158244018771729
Singh, A. & Purohit, B. (2015). Public funding and research aids for private universities in India. Public Policy and Administration Research, 5 (3), 73-74.
Stange, K. (2013). Differential pricing in undergraduate education: Effects on degree production by field. doi:10.3386/w19183
Tugend, A. (2016, June 22). How Public Universities Are Addressing Declines in State Funding. Retrieved from https://www.nytimes.com/2016/06/23/education/how-public-universities-are-addressing-declines-in-state-funding.html
