T Nation

Rising College Tuition Costs


Interesting op-ed in today's WSJ discussing some of the factors that have lead to ridiculous increases in college tuition over the past few years. I think the article is on the money, but I think the first factor is far and away the most important -- and you'll note, it's a characteristic shared by the medical-costs market: other people are paying for the services.

I wonder if anyone has any ideas concerning what would be the best way to control costs in this environment? The author mentions some things that are occurring already -- I wonder if it wouldn't help to actually remove government tuition assistance from the mix?

Why Does College Cost So Much?

August 23, 2005; Page A10

As college students begin a new academic year, many parents are reeling from tuition fees. This fall's probable average 8% increase at public universities, added onto double-digit hikes in the two previous years, means tuition at a typical state university is up 36% over 2002 -- at a time when consumer prices in general rose less than 9%. In inflation-adjusted terms, tuition today is roughly triple what it was when parents of today's college students attended school in the '70s. Tuition charges are rising faster than family incomes, an unsustainable trend in the long run. This holds true even when scholarships and financial aid are considered. One consequence of rising costs is that college enrollments are no longer increasing as much as before. Price-sensitive groups like low-income students and minorities are missing out. A smaller proportion of Hispanics between 18 and 24 attend college today than in 1976. The U.S. is beginning to fall below some other industrial nations in population-adjusted college attendance.

There are six factors in the cost explosion:
? Rising Demand: The "natural" consequences of a rising demand -- higher prices and a larger quantity consumed -- are exacerbated by soaring third-party payments. Since 1994, financial-aid payments (mostly federal loans and grants) have risen by an extraordinary 11% per year. When someone else pays the bills, we become less sensitive to price.

? Lack of Market Discipline: Most universities are nonprofit. There is no bottom line. Did Yale have a good year in 2004? Who knows? Its stock is not traded. Administrators and faculty are not rewarded for increasing profits by reducing costs or improving product quality. When prices rise in the for-profit sector, entrepreneurs rush to supply the good, leading to higher supply and lower prices. How many universities advertise that they are cheaper than their peers, or offer better value?

? De-emphasizing Undergraduate Instruction: Data from the National Center for Education Statistics show that most colleges (but not community or liberal-arts colleges) have reduced the share of resources devoted to undergraduate teaching, spending more on other things -- research, administration, student services (luxurious recreational and student centers), athletics, etc. Only about 21 cents of each new inflation-adjusted dollar per student since 1976 actually went for "instruction." Government subsidies and private gifts given to support affordable undergraduate instruction are often spent elsewhere.

? Price Discrimination: Universities have discovered what airlines realized a generation ago -- and they increasingly charge the maximum the customer will bear. They have raised sticker prices, giving discounts (scholarships) to those who are sensitive to price. Increasingly, these discounts go not mainly to low-income students but to talented students prized by universities seeking to improve ratings on the athletic field or in the U.S. News & World Report rankings.

? Stagnant (Falling?) Productivity: While measuring productivity in post-secondary education is difficult, the ratio of staff to students has risen over time. There are now six non-teaching professionals for every 100 students, up from three a generation ago. Unless teaching and research have soared in quantity and quality, which seems unlikely, productivity has fallen.

? "Rent Seeking" Behavior: Better Lives for the Staff: Faculties have shared in the increased income of universities. Salaries of full professors at research universities are up well over 50% in real terms since 1980. Mid-six-digit salaries are becoming commonplace for superstar faculty, coaches, and university presidents. Teaching loads have fallen (a typical full professor at a major public university is in class no more than five hours per week).

What is the solution? New forms of competition (e.g., for-profit institutions, online schooling, more use of community colleges, new approaches to certifying skills) are emerging. State legislatures have sharply reduced their share of funding for public universities, forcing some schools to slash costs, reduce bureaucracies, increase teaching loads, get rid of costly underutilized graduate programs and more. Some schools are talking of using buildings more than eight or nine months a year, or are cutting down on the use of expensive tenured faculty. Colorado is shifting funds away from institutions and into student hands in the form of vouchers, reasoning that the student-customer, not the producer, should be sovereign as in nearly every other transaction.

The cost of higher education cannot rise faster than incomes indefinitely. Change is coming: it is just a question of when, and in what form.

Mr. Vedder, who teaches economics at Ohio University, is author of "Going Broke By Degree: Why College Costs Too Much" (AEI Press, 2004).


The fact that most jobs require a 4 year degree now, regardless what the job is, is a major problem. Over half of my time in college had nothing to do with my career path. College is just there to make money and as long as business goes along with it we are screwed.

Perhaps college should be funded by business, if you hire for jobs that require a degree you pay into the fund.


That is interesting, and I've thought about this for a long time.

For businesses, your particular degree isn't all that important unless the position for which they're hiring is highly technical in its orientation.

For most people, college degrees are merely signals to businesses that you were smart enough to get in and graduate -- they basically serve as signals.

However, the value of those signals is diminished as more and more people attain the same thing -- the degree. And it's also diminished as the standards for achieving the degree are watered down, either through proliferation of schools with no or bad standards or through things like grade inflation.

70 years ago a high-school diploma signaled to employers that you had achieved something not everyone could do. Now illiterates graduate with alarming frequency. The value of a high-school diploma is basically nothing.

30 years ago a college education sent the same signal. Now a college degree by itself is almost worthless.

You can see certain graduate programs, like MBAs, heading the same way, though certain programs (Harvard, Wharton, Stanford, etc.) will always have cache. Ditto for masters programs like "masters of education."

What to do? Don't know really -- other than enforcing standards for attaining a diploma that would guarantee a significant number of people would fail out at whatever level those standards were imposed.


Me personally I went to school for Accounting, got out and now I make a decent salary, thing is I am barried in debt from it. Kids I went to school with who got good jobs in construction or other trades are making just as much now and don't have that debt hanging over them. When my kids are old enough I am not going to encourage college for them like my parents did for me.

There is no answer for it though, just like gas prices and in our area housing. Housing has gone up about 40K in one year, trust me salaries are not keeping up.

The only way these things change is when people stop paying for it. When enough people don't go to the schools they will listen.


My wife teaches at a university and in all honesty, these are the most fucked up places on the planet! For example, she showed me a hiring criteria for a spot in her department and the number one thing they wanted was: female. Not talent or skills. The ideal person would be a black female, whether the person was a moron or not.
Then you should see how they handle their information flow! Lost records, errors all over the place, the students having to explain things to a person working in the Registrar's office (I saw this).
I am lucky because my kids will go for free. I feel sorry for the poor working stiffs who foot the bill for these boobs, though.


I have a somewhat different take on this. First off, I agree with the WSJ article in terms of the fact that there is simply not enough accountability going on in terms of truly producing results. Is there anything that truly shows, for example, that an Ivy League school does a better job educating students? Or does it just have the reputation to attract better students in the first place? Isn't the hallmark of an educational institution how much it improve you from the time you start to the time you finish?

But beyond this, I was a political science major with philosophy and English minors as an undergrad at a Jesuit university. Does any of that prepare you [i]specifically[/i] for a particular career? Nope. But what I also feel very strongly that a well-rounded education with a strong core curriculum (economics, English, history, foreign language, religion, philosophy, math, science, etc.) goes a very long way to helping you to be a better thinker, writer, communicator, etc. (provided the school takes the notion of a well-rounded person seriously).

I can think of people who are complete aces in accounting or finance... but they cannot take their careers to the next level because they are horrible communicators or just do not have the ability to see a big picture beyond the numbers.

Just some thoughts to add to the discussion. Overall, I am just baffled at any industry that needs to cause such price increases year over year to sustain itself... because everntually, they will hit a tipping point and their entire economic model will collapse on itself. That is going to be an ugly situation a few years down the road and will be inevitable if nothing is done to change things.



No. That would accomplish nothing -- there would still enough people that could either afford it or would be crazy enough to finance it somewhere else.

I do agree with the article, and I do agree that most colleges are lazy, inneficient machines that cost too much and produce too little return.

Honestly -- and remember, I'm a professor at Stanford, one of the most expensive Colleges in the country -- I think this is much like house prices: either people smart up and they simply stop paying the outrageous costs or the Government steps in a sets a cap, like they do in Europe.

Note that, if the latter, the Government would also have to set up certain standards -- maybe an adapted ISO-style standard -- to make sure certain processes and guidelines are documented and followed to the letter. Currently, there's just too little regulation and way too much junk out there, and one would not want to leave the path open for colleges to take the easy way to cost reduction: lowering their standards.

As I said before: I'm all for small Government, but when it comes to the bare essential properties and services -- Education being one of them (along with Housing, Health, Security and Transit) -- the Government has to be the regulator. Open markets don't work well when you're playing with people's basic property and service needs -- they just get stupid and let themselves be taken advantage of.

If you don't believe in Government intervention, then if YOU want to do something about it, send your kids to Public Schools and Community College. There are some very good ones out there, and I know some very successful people that went there. The stigma has to stop. I find it profoundly offensive when people frown upon those, assuming that because they're inexpensive they must be "cheap". Nothing can be further away from the truth -- these days, in many areas THE best undergrad college in the Bay Area is The Anza College which is... a community college. Going there will save you a few thousand dollars and you'll get pretty good education. Actually, most of the professors there are also professors at Stanford... Ironically.


Guys, not only that makes perfect sense, it's already common practice. All the High-Tech companies I know -- both here in the Bay Area and East in New Jersey -- that require Advanced Degrees for certain positions already have tuition reimbursement programs for those positions.

Even for the GSB (Graduate School of Businees) where I teach, about 80% of students have their tuition paid/sponsored by their companies, or reimbursed later when they're hired. It was and still is a common practice at my old employer, McKinsey & Company (even though the rules changed recently -- now you have to stick with them for a while or they'll want their money back).


Because you had/have money issues you are going to suggest your children don't even give it a go? Many Jr. Colleges are affordable and even California State College tuition is not THAT bad. Really.

Damn if my Dad thought like you, I surely would have grown up a different person with less drive and confidence.

Sorry... just my opinion.


Exactly. Not everyone can go to Harvard or Yale. Rich people will always have things that are out of reach for the average person.

There are affordable ways to get a good education.