Thursday, April 03, 2008

HRD ministry okay with IIMA fee hike

That's what the media has reported today:

After a meeting with HRD minister Arjun Singh, IIM-A board chairman Vijaypat Singhania ruled out a review, but added that enough scholarships would be available to support meritorious but poor students. Against Rs 40 lakh earmarked for scholarship, the amount now would be Rs 8.5 crore, covering 62% of students.

There are two issues here:

1. Do scholarships address the problem? Let's see... Rs 8.5 crore for 62% of students or around 360 students. That's Rs 2.4 lakh per student against the fee of Rs 11.5 lakh. On the average, qualifying students (the eligibility limit now is Rs 6 lakh of family income) would have to cough up Rs 9 lakh- nearly double the existing fee. This is the extent of help that IIMA's tuitution waiver and need-based scholarship will give- where ordinary students face a tripling of the fee, "needy" students face a doubling. IIMA's move to increase financial support is laudable but, on the average, the increase in the burden on the students remains high.

2. Should educational institutions pass on full costs to those who can afford to pay? This is taxen as axiomatic by many. But the principle that subsidies through scholarship are required only for needy students while the rest pay market-related fees is open to question. As I have said repeatedly, quality, non-profit institutions do not accept this principle. Higher education is subsidised for all. It's just that the subsidy is greater for the needy.

In the best schools, costs are seldom recovered in full through fees from students on the ground that students have the capacity to service loans. Fees cover only a portion of the costs for any student. I read that the IITs follow the rule that one-third of costs are recovered from students, one third from consulting and one-third from government funding.

At the best universities in the US, private endowments cover part of the costs for any student. On top of this, Harvard has a total exemption from tuition fee for those coming from families with income of upto $60,000 and a slightly lower subsidy for those coming from families with income of upto $100,000. And this in a culture where the family does not necessarily bear the educational costs of the child. At IIMA itself, the practice has been to cross-subsidise PGP through other income. If the IIMs do not wish to accept government funds, it would be worthwhile for them to explore fully other sources of income - consulting, endowments- that will help them cover a portion of the cost of the PGP.

Anyway, HRD minister Arjun Singh may have been convinced about the rationale for the IIM fee hike but not his precdecessor, Murli Manohar Joshi:

''It is a decision of the elite, by the elite and for the elite,'' Dr Joshi remarked, adding ''it will put a damper on Indian middle class dreams of good management education. Dr Joshi called for an audit of educational institutions built with taxpayer funds. ''It is high time there is an academic and financial audit of institutions built on public money and government mandate.''


Anonymous said...

Are the Harvard figures for undergraduate studies or for a comparable degree (MBA) in the School of Business? From what I recall, they are for the UG programmes. So, the Harvard- IIMA comparison is not strictly fair. Also, the incoming student body at IIMx is not composed of "children".

If I understand the current suggestion, Rs 4.5 lakh is scholarship and the remainder of Rs. 7 lakhs would be the student's burden. This could be met through loans, personal savings etc. Not an insignificant amount, but not entirely unfair

has some information about aid at HBS and it does look like the students bear the major cost, either through federal aid or loans.


T T Ram Mohan said...

The figures are for Harvard university- I presume they apply to all programmes.

We have no means of knowing how much of the "cost" is borne by students at Harvard. We only know what portion of the fee is taken care of by students. My submission is that only a portion of the cost to Harvard is recovered through fee.

The same applies to IITs going by figures given in the media. It appears the IITs recover only a third of the costs through fees; the rest are covered by consulting income and government funds.


Anonymous said...

I did a quick check and the amounts that you mention for Harvard are for UG programmes.
"Harvard decided that families whose income was less than $40,000 would no longer have to pay for undergraduate education, although students would still have to make some contribution though programs like work-study. It then raised the income level eligible for the waiver to $60,000."

I just wanted to point out that funding for basic UG programmes are and should be different form professional programmes like MBA/PGDx.

Of course, I have no objection to the fact that the entire burden of fees should not fall on students.


Anonymous said...

IIM-A board is driven by greed for power and money in their recent decision for a fee hike.
Being #1 institue or #1 in placements has nothing to do with fee. Are they selling jobs now? If so, say it out loud. They get the best and the brightest of the nation and whoever got them regardless of the name would see big corps lining up outside. These kids deserve what they get. As far as IIM faculty is concerned, I say give them competetive salaries, invest more in infrastructure, but that still does not account for the sudden almost 200% increase in already significant fees. After all they already had surplus last year, so where did this need to more than double it come from?
Suddenly I feel we need some change in philosophy and top management at these prestigious institutes.

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