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In this paper the author explores how colleges whose primary mission is undergraduate education can strategically allocate resources in a way that reduces costs and prioritizes teaching and learning. He starts from a provocative thought-experiment--what would it cost to educate undergraduates at a hypothetical college built from scratch?--and uses the exercise to identify areas that are ripe for cost savings. Rather than focusing only on the conspicuous, big-ticket items that tend to dominate debates about college costs, the author argues that the real levers for increasing efficiency include rethinking student-faculty ratios, eliminating under-enrolled programs, and trimming unnecessary administrative positions. This paper also outlines how policymakers can create incentives for undergraduate colleges to pursue reforms that will make them more cost-effective. (Contains 6 tables and 19 endnotes.)

Undergraduate education is a highly profitable business for nonprofit colleges and universities. They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry's high profits come at the expense of students and taxpayer. To lower the cost of education, federal government policies should encourage competition. Regulations should not favor nonprofits over for-profits. Further, the accreditation process should be reformed so that any qualified institution can easily enter the industry. The financial-aid process should be redesigned to remove the bargaining advantage that colleges currently hold over prospective students. The higher-education industry is heavily subsidized by the federal government. These subsidies play a significant role in the high profitability of the industry and represent a massive transfer of wealth from the taxpayer to the industry. This should change. All tax credits and deductions should be eliminated immediately, as should all direct subsidies. The federal loan program should be restructured to eliminate the government subsidy and ensure that any deserving student can graduate from college without excessive debt, and eligibility for Pell grants should be tightened significantly. The net result of these changes would be greater efficiency and annual savings of $50 to $60 billion. To the extent that the federal government continues to play any role in higher education, its goal should be to ensure that all deserving students have access to higher education, not to maintain high industry profits. (Contains 3 tables and 37 notes.)

Is it possible to get an "Ivy" education for $7,376 a year? Can a college provide high-quality undergraduate education at a reasonable cost? In this paper, the author explores if cost can be reduced and quality improved through the use of new "value-designed" models of undergraduate education. A value-designed model allows one to appeal to customers seeking the greatest value. These are the students--or perhaps more often, their parents--who are looking for a high-quality product at a relatively low price. To be able to charge a relatively low price, a college must have either a large subsidy from public or private sources or low costs. In this paper, the author focuses on the cost side of providing a high-quality education. Appended are: (1) College of Entrepreneurial Leadership and Society (CALS); and (2) Estimated Operating Expenses for CELS. (Contains 53 notes.)

Foreword The cost of a college education has risen dramatically over the past two decades. Year after year, tuition and fees have increased at twice the rate of inflation, rising [...]