In a 2012 speech, Secretary of Education Arnie Duncan summed up the national sentiment regarding U.S. higher education: “The price of college is too high.”

This should come as no surprise to students and parents who are making tough higher education decisions, focusing at once on the quality of the education as well as its cost. Many students choose to sacrifice quality in the name of affordability.

According to Duncan, tuition is becoming less affordable because institutions are not performance-oriented and thus do not use their funding wisely. But would a more efficient system really bring measurable reductions in tuition costs? Maybe not, especially when you consider that, relative to costs, the price students pay grossly understates the true cost of education.

Tuition makes up just a small portion of the cost of education at non-profit institutions: 13 percent at the University of California system, 17 percent at Stanford, 19 percent at Harvard, 27 percent at the University of Pittsburgh and 32 percent in the California State University system, to name a few. The difference is made up by endowment income, government support, and research grants.

It is unlikely that efficiencies will reduce tuition costs in any significant way. This leads us to conclude that policymakers like Duncan are focusing on the wrong priority. Some have suggested that low-performance public institutions should face cuts in state support. This would only further erode the quality of education at these institutions as they seek to make up the shortfall by increasing class sizes and using more temporary faculty. At the same time, tuition will likely rise, resulting in increases in dropout rates and student debt.

Policymakers should focus on getting the price-to-cost relationship right rather than attending solely to efficiency. The University of Pittsburgh system, for example, demonstrates that it is possible to deliver a high-quality education more economically than equally ranked peers and recover a decent share of costs through tuition.

After emphasizing the price-to-cost relationship, policymakers should ensure that cost recovery through tuition reflects quality. Higher-quality institutions should cover a larger share of their costs through tuition, even if it means higher levels of student debt. This is because students at higher-quality institutions face much lower debt repayment risk than students who attend lower-quality institutions. Unfortunately, the opposite is often true. For instance, as the numbers above illustrate, cost recovery through tuition is 32 percent at the California State University system and only 13 percent at the higher-quality University of California system.

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Tags: Arnie Duncan, California State University, tuition costs, University of Pittsburgh