What beats Oxford and costs less than Harvard?

June 7, 2011

By Chris Hughes
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — What beats Oxford and costs less than Harvard? A group of star UK professors has an answer: their new, 18,000 pounds-a-year ($29,400) arts-only college. It’s like the educational equivalent of setting up a boutique investment bank.

The London-based New College of the Humanities can be seen as a free-market response to the decline in UK government support for the humanities. With a focus similar to U.S. liberal arts colleges, it will offer five arts subjects (counting economics) with one-to-one teaching. This was previously available only at Oxford and Cambridge, and even there it’s proving unsustainably expensive.

NCH also looks like a classic services start-up. Twelve founding dons own about 30 percent of the equity, with the rest held by a slightly larger number of private investors, according to a person familiar with the situation. The total capital raised so far is about 10 million pounds. This will fund a three-year path to break-even, at which point profits may be paid out.

But NCH needs brainy bums on seats. Top UK universities will be charging homegrown students 9,000 pounds a year from 2012. Parents are already asking whether U.S. Ivy League colleges might offer better value. NCH’s fees are twice as high though they will still be cheaper than the $35,000-odd tuition tab quoted by Harvard and what many overseas students pay elsewhere in the UK. Moreover, NCH expects to offer discounts for about 20 percent of students from the start.

Even with that assistance on offer, institutions need real cachet to charge so much and attract the brightest students. That takes a long time to acquire. If NCH gets there, British parents may swallow its premium pricing. But it’s still hard to see anyone turning down a place at Cambridge or University College London to pay more for NCH. And for parents whose kids don’t make it there or for non-Brits, the extra cost of Harvard or Yale may still seem justified.

If NCH works, the founding academics get the best of all worlds: an institution of their own making, with the cushion of continuing tenure at the top UK and U.S. universities where they’re already based — almost like opening a boutique while still holding a job at Goldman Sachs GS.N or Morgan Stanley MS.N. The business angels, meanwhile, get kudos and the prospect of a yield on their modest investment. But the academics are smart not to give up their day jobs just yet: the profit potential doesn’t quite match that of a financial boutique.

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