Student Trust and its Antecedents in Higher Education

Introduction The Problem In the last two decades, the higher education environment has undergone drastic changes. The U.S. National Center for Educational Statistics (NCES) reports that enrollments declined between 1992 and 1995, following a healthy growth period (2% to 5%) during 1985-1992 (NCES, 1997). This decline concerned administrators, causing many of them to market their programs more aggressively. Enrollments then stabilized and have increased steadily since 1996. This recent growth trend is likely to continue as 240,000 additional students are expected to attend college for each of the next ten years (Der Werf, 1999a). However, because of the strategies employed to reverse enrollment declines, the intensity of competitive activity among colleges and universities increased. Increased competition led institutions to spend even more money to recruit and retain students. Per student expenditures, measured in 1994-95 constant dollars, rose from $11,900 in 1986 to $14,500 in 1997 (NCES, 1997). These additional expenditures were funded through debt financing, which increased in 1998 by over $7 billion (Der Werf, 1999a; 1999c). Expenditure increases are anticipated during periods of declining enrollments, but they are not expected to continue as enrollments rise, and although a portion of these expenditures is designated for future increases in enrollment, a close examination of the expense accounts corroborates the increased competitive intensity among institutions of higher education (McCollum, 1999). According to the Institute for Higher Education Policy (IHEP), the primary reason underlying expenditure increases is related to two broad factors, namely: increased marketing efforts to recruit and retain students and greater competition for other sources of revenue (e.g., philanthropic funds) (Gose, 1999; IHEP, 1999). Analyses conducted by McPherson and Schapiro (1998) confirm that institutional aid accounts for one of the largest categories of spending increases per FTE student, benefitting both private and public educational institutions (Gose, 1999). Increased marketing expenditures are used to manage enrollment mechanisms and to maximize the quality and quantity of student populations and the revenue generated (IHEP, 1999). In addition, McPherson and Schapiro (1998) provide evidence that institutions increased spending to differentiate their programs from competitors by enhancing their "prestige" and "quality" images. While these expenditures benefitted institutions by reducing tuition sensitivity and by increasing demand, they contributed significantly to higher debt levels. Appropriations from government sources have not kept pace with increasing expenditures, forcing schools to depend more heavily upon other sources of revenue (Selingo, 1999). Between 1992 and 1995, revenue from government sources increased only 12.4% and 22.7% for public and private schools (NCES, 1997). Reduced appropriations, along with public criticism of tuition increases, necessitated increased fund-raising efforts and the accompanying, associated marketing expenses (Davis, 1997; IHEP, 1999). As a result, revenue from gifts, endowments, and other sources rose by 68.3% and 48.7%, respectively, for public and private schools from 1992 to 1995 (NCES, 1997). Faced with rising marketing expenditures, institutions have primarily relied on three cost cutting strategies to control costs: greater use of cost deferral strategies, such as hiring freezes and reduced maintenance; strategic cost reductions, such as pooled purchasing and changes in benefit structures; and cost restructuring, such as eliminating low enrollment courses and replacing full-time faculty with part-time faculty (IHEP, 1999). Though useful in the short run, strategies such as reducing the proportion of full-time faculty, which plummeted from 78% in 1970 to 60% in 1993, and regulating the salary of instructional faculty, that declined from 1970 to 1995 in constant dollars, may be counterproductive in the long run. …