Why Does College Cost So Much?

http://www.forbes.com/2010/08/01/rising-cost-education-opinions-best-colleges-10-feldman-archibald.html

by cwan • 16 years ago

19 25 16 years ago

forbes.com

rick888• 16 years ago

It's funny. Academia is much like most governments: Very inefficient, bloated, and wasteful of money.

Locke16893• 16 years ago

That's actually the exact opposite of what the article said:

Our story of rising cost is devoid of bad people making bad decisions. This means that there are no simple fixes, like price controls, that would not also reduce the quality of the education we offer.

tokenadult• 16 years ago

That is the opinion of the author of the article, but the opinion may be mistaken.

sliverstorm• 16 years ago

With the scrutiny and cuts schools are facing, I find it hard to believe academia is as bloated and wasteful of money as government.

(of course it will be a little bloated and waste a little money- every establishment does, unless it's brand-spanking new)

lionhearted• 16 years ago

It misses the big and obvious one: Grants and loans cause price increases. This is pretty much well accepted by economists, but a simple example:

Imagine Warren Buffet announces that he'll pay anyone who buys a used car $5000. What will happen to the price of used cars? It will go up.

Imagine Warren Buffet announces that he'll lend anyone who wants to buy a used car $5000. What will happen to the price of used cars? Again, it will go up.

There are lots of reasons for it, but a lot of 18 year olds just don't understand what the loan application they signed for $40,000 for the upcoming year's tuition really means, since they've never earned or spent $40k before. Unfortunately, student loan debt is pretty much the only kind that can't be discharged by bankruptcy, so students are stuck after getting it. And college prices keep going up.

njharman2• 16 years ago

> There are lots of reasons for it.

Really? Provide some.

muhfuhkuh• 16 years ago

"Imagine Warren Buffet announces that he'll pay anyone who wants to buy a used car $5000. What will happen to the price of used cars? It will go up."

Now that you've compared apples to oranges, here's an apples to apples rebuttal. The Cash4Clunkers program not only didn't raise prices of new cars, it didn't raise prices of used cars (since if millions were clunking their old car, that car would be pulled from the market entirely, causing a dearth of used cars available).

Now, the problem with college is that basically everyone needs to graduate from one fare better in this economy. The numbers in this recession speak for themselves: The unemployment rate for people who have no high school diploma is over 12%, ones with a HS diploma is ~9%, and ones with a college degree is 4.5% and holding steady. You're twice as likely to get a job with a degree as someone who finished HS, and almost 3x as likely as a HS dropout.

I guess, along with Cocaine, cigarettes and booze, college is price inelastic.

chopsueyar2• 16 years ago

I really don't see how that is an apple to apples rebuttal.

The parent is talking about receiving $5,000.

Cash4Clunkers required one to take their old car, trade it in, and purchase a new car.

So, not only did you have to already have a used car, you had to be able to qualify to finance a new car or have the cash for a new car.

Additionally, the trade-in car was destroyed, with no parts scrapped. All engines of perfectly functioning vehicles destroyed. Entire fully-functioning vehicles destroyed.

That is a much smaller subset of people than "anyone who wants to buy a used car."

Back to the other stuff...

"You're twice as likely to get a job with a degree as someone who finished HS, and almost 3x as likely as a HS dropout."

I don't see how you can use an unemployment rate to determine the likelihood of finding a job in the current economy based on education level....maybe educational level most likely to be laid off, but that is still a stretch.

Higher level education is expensive because it is subsidized.

Look at the housing market. Harder to get a mortgage now, yet rates are at an all-time low, and property prices are at historical lows.

I guarantee if anyone were able to get a mortgage, even at 20%, housing prices would drastically increase.

shadowfox• 16 years ago

I must admit I didnt follow this completely. Do you mean that because Buffer pre-announced he will lend $5K to people, the prices of cars will increase to accomodate this $5K?

px• 16 years ago

Easier money will increase demand. Higher demand puts upward pressure on prices.

Experimentalist• 16 years ago

The extra $5k people have to spend would increase the price people are willing/able to pay for a car - and increase demand-- which would lead the car sellers to raise their prices.

wallflower• 16 years ago

> But in 2005, during a major overhaul of the bankruptcy code, private student loans were given an elevated status and thus couldn't be discharged. This didn't make sense. If we are going to have a fair bankruptcy system, private education loans should be treated the same as other private consumer debt. That's the risk lenders take, similar to the risk borne by providers of loans for cars, homes or other consumer purchases.

http://edlabor.house.gov/edlabor_dem/mt-search.cgi?IncludeBl...

> Lenders receive a 97 percent guarantee against default losses, which removes almost all of the default risk of the loan to the lender. If a borrower does not repay his or her federal student loan, the government pays the lender 97 percent of the outstanding principal and all of the accrued unpaid interest. In other words, the lender assumes default risk for only 3 percent of the loan principal.

http://febp.newamerica.net/background-analysis/federal-stude...

pizza_• 16 years ago

Demand.

Locke16893• 16 years ago

I think the downvote here was unwarranted: pizza_ makes a good point. Over the past decade or so we've seen demand for higher education explode. The motivation is simple -- those with higher education earn a higher living wage than those without, on average. Honestly, though, what's the point? We may be graduating many more people, but why? Despite the increase we have nowhere near enough people doing professional work (e.g., plumbing, welding, etc.) and a continuing lack of graduates in the significantly underpopular STEM fields. In essence, why are so many people going to college and not getting a useful education?

njharman2• 16 years ago

"those with higher education earn a higher living wage"

Well they use to, now it seems your pretty lucky to get a decent job out of college. People didn't think about whether there would be enough higher living wage jobs for the hordes of graduates.

endtime• 16 years ago

Drinking, screwing, and bullshitting about postmodernist deconstructionism for four years is pretty appealing to a lot of 18 year olds.

hackermom• 16 years ago

Because your educational system is scantily socialized.

Locke16893• 16 years ago

Maybe, but it's difficult to make that argument, partly because many of the best universities in the world are private. Introducing price controls on private universities sounds incredibly intrusive to me, but if the state were to simply subsidize education, why should the student who gets into Harvard receive 5 times as much taxpayer funds as one who goes into a state school? If we only subsidize a limited amount, how does that help the problem? My university costs ~$50k per year and people beg to pay it without gov't subsidies.

chopsueyar2• 16 years ago

Not Harvard, huh?

kevin_morrill• 16 years ago

It's actually more fascist than socialized, which is why you see "private" institutions affected just as much. By fascist I am not equivocating Nazi Germany, but rather saying the means of production are heavily influenced by government regulators. The commenter above who talks about loans hit the nail on the head. And those loans are largely backed by the Federal Government.

It would be interesting if you had to go to a bank (who also didn't have the FDIC backing) and demonstrating the probability your education will make you able to pay the debt you're about to incur. I think you'd see far fewer loans, and also better market signals for the types of majors that are worth high dollar figures.

Right now there's no significant market signal. The primary signal is whatever lobbyists can curry favor with the government to get money or more funding for huge loan programs.

patrickgzill• 16 years ago

It costs so much because those running it are insulated from competition and from being accountable - costs are just passed on to the students.

rb2k_• 16 years ago

500 Euros / semester It was even free when I started :)

(Germany)

chedigitz• 16 years ago

*official student document policy at a state university

"Make sure to print the documents, then place them in the bin, so they can be scanned into the students file"

From my 5 years working in Higher ED that phrase pretty much sums it up.

vparikh• 16 years ago

Because for most kids who are going to college it isn't about learning or preparing for a future in something valuable. It is about "learning about yourself", "gaining independence", finding a spouse, or simply getting to party for four years. You see college has become a rite of passage for many people. It is the equivalent to the high school prom.

Very few people actually go to college with a plan. And the universities take advantage of this and sale a dream. It always cracks me up when I see a family go to visit a campus and return commenting on how great the campus was, how many extra curricular activities were available and the boy/girl ratio. Ask them about the course and your typical answer is that their son/daughter hasn't picked a major yet.

I mean you as a family are about to spend $200K+ over four years and you don't know why you are spending it? Oh, sorry it is for the extra curricular activities & the nice campus.

These people deserve to get ripped off.

Why Does College Cost So Much?

Related Stories