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University of the 1%


©Ed Stein

Commentary by Ed Stein

Education Secretary Arne Duncan called for colleges and universities to begin addressing the escalating cost of higher education. It’s about time. The cost of a college degree, even at state-supported universities, has for decades grown faster than inflation, and is becoming unaffordable to the student of average means. States strapped for cash in this downturn keep cutting higher education budgets, placing an ever-greater burden on students, many of whom now graduate with the crushing burden of huge student loans. If something is not done to slow down the rate of tuition growth, a college degree will become another luxury enjoyed only by the wealthy.

This chart illustrates Stein’s point:

I was struck by this chart because it illustrates the severity of college costs inflation by comparison to health care cost increases. Even if not currently affected by college costs, any one can see the impact of rising health costs. Now multiple by two and imagine having to pay tuition. College costs are rising twice as fast relative to inflation… Wow!
- Iron Filing

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13 Comments

  1. Richard wrote:

    Remember, choosing to go to a private college is a choice people make. No one forces anyone to pay more and possibly go into debt to go to college.

    One might go to a community college for a year or two, transfer to a state university for the final years and not end up with too big a debt or possibly no debt.

    The choice to go to an elite, private and expensive school so that one’s degree will have “more leverage” upon completion is a gamble. Taking on the debt to do this is also a gamble that the possibly more meaningful degree will get one the kind of job that will make paying off the debt easier.

    I have no problem with individuals assuming responsibility for these gambles and when they pay off, I say good for them. But, to shuck responsibility when the gambles don’t work out and then blame the 1% sounds like a double standard to me. If the gamble works out many of these folks eventually join the 1% and don’t look back.

    Saturday, December 3, 2011 at 6:47 pm | Permalink
  2. Iron Filing wrote:

    Elite education is a gamble not available to many in the middle class and if someone’s family is wealthy, there is not much risk to taking that gamble so it’s not really a gamble for them.

    Public college costs have been rising even faster than private.

    I wouldn’t disagree with the last paragraph of your comment if the playing field were relatively level. The advantages that wealthy families have are perpetuated from generation to generation.

    I paid my way through college without parental help. I don’t think many could do that today. How is it a double standard for me to advocate for decreasing college costs for other folks? It seems to me it is society that is shucking responsibility by not doing more to help level the playing field for youth so they all have a chance to advance on merit rather than unequal opportunity.

    Saturday, December 3, 2011 at 10:15 pm | Permalink
  3. ebdoug wrote:

    My son graduated from Amherst,MA in 1993 at a cost of 8K a year which included room and board. Scholastic scholarships and finacial grants paid the rest. Plus my low income. I was told that if you have a low income, the private colleges are less expensive with the grants from the trust funds.

    Sunday, December 4, 2011 at 4:22 am | Permalink
  4. Richard wrote:

    IK: I too payed my way through college and graduated, both undergrad and graduate school without debt. Went to a community college and then the University of Oregon for both undergrad and graduate school (with a GTF so I made a bit of salary on the deal).

    I too want college costs lowered for everyone but private colleges are businesses and they have the right to charge whatever the market will bear. I agree, their market is generally wealthier families but in fact, many of those kids who go to those colleges are demonstrating at OWC rallies to have their college loans forgiven or lessened. And, I think you’re wrong: many students who are going to the likes of BU and Harvard are doing so on student loans which are considerable. These students might have gone to UMass Amherst (cheaper) or many other less expensive schools.

    Had they graduated into a better economy some if not many of them would have joined the 1%.

    The piece of this issue that sticks in my craw is that many want the perceived leverage that comes with degrees from private schools and when that leverage doesn’t pan out they’re blaming other people.

    The other piece that bothers me is that everyone has the choice to go to a community college for a year or two to save some money but few take it thinking that this route is only for people who don’t get into 4 year schools. Again, the assumption is you get what you pay for and so, go to the more prestigious and expensive school and your degree will mean more. This is no doubt true so one can take it to the bank on the upside but someone has to be responsible for the downside.

    Sunday, December 4, 2011 at 8:23 am | Permalink
  5. TJ wrote:

    This debate is getting sidetracked by a public vs. private debate. The reality is that ALL college tuition rates are rising much faster than inflation. Replace private with all four year universities in the graph above and it might not be quite as dramatic, but it will tell the same story. The worst part is extrapolating the graph further – if this continues and college tuition continues to double every 10 years what will it be like for a child born today? This is a problem – a big and growing problem – that isn’t going to go away by saying that kids can go to community college or saying that going to a private university is a choice.

    (I agree community college is a good option, but it has nothing to do with the main problem. The cost of a college education is growing too high regardless of whether there are viable alternatives or not.)

    Sunday, December 4, 2011 at 9:19 am | Permalink
  6. Richard wrote:

    I agree TJ, the cost of a college education is growing and most people (99%) can’t pay for it without going into debt. My point, more simply is that how much debt is influenced by which college one chooses which is influenced (possibly) by how much “leverage” one wants one’s degree to have.

    Sunday, December 4, 2011 at 11:11 am | Permalink
  7. Mountain Man wrote:

    This graph is misleading. It shows the rate of increase NOT the starting point and not in controlled dollars.

    One reason costs for the UC and State University Systems in California have risen dramatically in recent times is that they were held artificially low for so long. If you look at the cost of a UC in 1955 and compare it to the cost of a UC in 2011 comparing REAL (controlled) dollars, there actually hasn’t been much of a meaningful increase in cost at all.

    I can’t speak to other states nor to private universities but this certainly is the case for the state-supported universities in California.

    Sunday, December 4, 2011 at 5:44 pm | Permalink
  8. Doug wrote:

    The word “multiple” should be “multiply”

    Sunday, December 4, 2011 at 6:26 pm | Permalink
  9. rk wrote:

    Interesting chart. Where would wages fall?

    Sunday, December 4, 2011 at 8:27 pm | Permalink
  10. Iron Filing wrote:

    Mountain Man, I don’t think the chart is misleading. You can clearly see that college costs are rising much faster than the cost of living.

    RK, middle class wages have remained stagnant adjusted for inflation, so wages would pretty much match the cost of living line.

    Sunday, December 4, 2011 at 9:22 pm | Permalink
  11. Michael wrote:

    Mountain Man is correct about the UC system. I can’t remember the exact details (and I don’t feel like looking it up), but it was something like the state legislature in the ’80s had placed a 2% cap on tuition increases. So despite the fact that costs were increasing at or above inflation, tuition was not keeping pace until the cap was lifted some time around 2005.

    Also, I second the notion that the graph is misleading because it presents a very incomplete picture. Specifically, it ignores one of the most basic elements of any economic analysis: demand. The number (both absolute and as a percentage of the population) of students attending college has greatly increased in the past 30-40 years (http://nces.ed.gov/fastfacts/display.asp?id=98). (Interesting back-of-the-envelope calculation…college attendance has increased exponentially, and slightly higher than inflation. That is, assuming inflation is 3% annually, starting from 1970′s 8.5M students, enrollment should have been 19.7M in 2010. Actual enrollment was 20.4M in 2009.) So keeping inflation increasing at exactly the rate of inflation the entire time would have accounted for the increased costs of students. Yes, this is simplifying things like the amount of overhead required. The other compounding factor is that, as demand has consistently been increasing, funding from the states has plummeted. So, of course tuition must increase faster than inflation.

    One more thing… A few people have mentioned the idea of going to a community college for 2 years to save money before transferring to a state school. Yes, this works for many people, but it should not be construed as universal advice. I am a CS professor at a state school, and our students that started at community colleges typically (a) do worse in our courses, (b) are less likely to graduate in 4 years, and (c) end up spending more money as a result. The pipeline for our major is rather long, typically taking about 3.5 years from start to finish. So when students come in as juniors, they often have to start at the very beginning of that pipeline. The sad truth is that, with many community colleges, you get what you pay for in STEM fields. Most of these transfers have taken 5 or more CS courses, but all of those courses are below the standards of our single intro course.

    Monday, December 5, 2011 at 8:44 am | Permalink
  12. Michael wrote:

    By the way, as a means of comparison regarding the exponential growth of college attendance… US population in 1970 was 203,211,926 (http://2010.census.gov/2010census/data/apportionment-pop-text.php). If US population also grew at the rate of inflation (3% annually), our current population would be 467,585,742. That is significantly more than our actual population of 308,745,538.

    Monday, December 5, 2011 at 8:50 am | Permalink
  13. Arthanyel wrote:

    @Michael – your argument that because demand has increased tuition has increased assumes that SUPPLY stays constant – only in a world where supply is limited does an increase in demand lead to higher prices. But supply is not constant. As demand has increased more schools have opened and more school options have opened as well (University of Phoenix is just one example). College education is not, however, something that benefits from economies of scale. Higher demand does not lead to more efficiency. And some institutions (like all the top ones) do a fixed limit on maximum supply, so they can “charge what the market will bear” as demand increases, leading to higher tuition costs at THOSE schools. Based on that we would expect tuition for “all private colleges” to rise at a slightly faster rate than inflation overall – but not this fast.

    Examining the underlying data, however, reveals the core issues. Government support for education on a PER STUDENT basis has fallen. Costs per student have risen faster than inflation because economies of scale don’t exist and many supply costs (teacher retirement, health care) have risen more quickly. The combination of inflating costs, no economies of scale, lower government reimbursement, and limited supply of the top schools clearly explains why costs are rising so much faster than the inflation rate.

    And if we don’t do something about it, then the best schools will only be for the 1%.

    Monday, December 5, 2011 at 11:56 am | Permalink