Colleges are full of it: Behind the three-decade scheme to raise tuition

http://www.salon.com/2014/06/08/colleges_are_full_of_it_behind_the_three_decade_scheme_to_raise_tuition_bankrupt_generations_and_hypnotize_the_media/

by ph0rque • 12 years ago

119 101 12 years ago

salon.com

daveqr• 12 years ago

"Democrats today worship education" Well, they worship credentials, any way.

carsongross3• 12 years ago

When it ends it be non-linear: the debt system that we've built our economy and currency on is going to eventually throw up all over itself as we reach Keynes' "long run" and, at that point, experience consumers simply won't have the choice to screw themselves with unproductive debt.

EDIT: And, of course, the elephant in the room is the fascist government/corporate cooperation on student debt, which is now larger and more important than credit card debt in the overall economic credit environment. You kill student debt growth, you kill debt growth and, in todays insane economy, that means you kill growth period.

n0rm• 12 years ago

"Road to Serfdom" indeed.

aliston2• 12 years ago

I'm not sure what you mean by "throw up" but my prediction is that a large portion of these education loans will end up being forgiven. It's housing bubble 2.0 and there's just no other way around it -- millennials leveraged up after being told for years that college was the path to prosperity and simply haven't seen the prosperity. The default rate on student loans is way up because, by and large, we're not making as much money, are less likely to have a job, aren't forming households and have massive debt/income ratios in comparison to our parents generation. If the government doesn't bail us out, the pyramid scheme implodes.

Of course, it's a terrible message to send and creates a moral hazard, but that's the way the game has been played for the last 30+ years. Your best bet to make it in America is to leverage yourself to the hilt. If you succeed, the benefits are privatized and you can sail off into the sunset. If you fail, the losses are eaten by the public.

In 2007 it was the bankers, mortgage lenders, GSEs and insurance companies working together to line each others pockets. This time around its the same deal, with (in order), the bankers, student loan originators (i.e. the government), Sallie Mae and the universities. Why would things play out any differently this time around?

carsongross3• 12 years ago

It's easy to say that "they will be forgiven" but that's a huge evaporation of debt in the system: these are assets being marked at par in pension funds, etc.

Students are poor and don't vote. That's why it will be different this time.

EDIT: (I really should take more time in my replies) Also, let me say that I am in 100% agreement with you about the morality of the situation and how GenY (and GenX) were sold a bill of goods on the debt issue. But I think we are at the end of the line (in the next decade or so) and now it's a matter of who takes the most pain. I wouldn't bet on that being the banks, insurers or pension funds, and evidence so far confirms my non-bet.

bogger• 12 years ago

Your best bet to make it in America is to leverage yourself to the hilt. If you succeed, the benefits are privatized and you can sail off into the sunset. If you fail, the losses are eaten by the public.

I couldn't agree more but I would say that it applies not just in America, but in many other countries too. We are seeing it across the western world at the moment, where, because of low central bank interest rates, the virtuous savers are being burnt alive to repair the balance sheets of the wicked banks.

Detrus• 12 years ago

Why would the pyramid scheme implode? Does the college loan industry pose a systemic risk like the banks did? If students fail to become middle class from being forced to pay off debts for stupid crap, someone is still getting paid.

withdavidli2• 12 years ago

I'm very opinionated about colleges / tuition. Many people find value in it, or they justify it somehow like they couldn't get the education / experience some other, more affordable, way.

My thoughts on the solution is the same for housing increases. Get rid of the government loans. In this situation also make student loans able to discharge by bankruptcy, that way banks will think twice about it as well.

The easier it is to finance something the more people will likely buy it. Look at cars, houses, colleges, even the use of credit cards. Peope will be angry when the loans go away, because it has become a part of the American Dream along with owning a house. But this will cause a huge decrease in demand and hopefully lower the price. And maybe students will work a few years before attending college and know what they want to do in life (can't say I had much of a clue when I attended).

Another side of effect with less graduates is that maybe we can get rid of the college degree requirements (you know, the ones that require a BA in any field).

wooter• 12 years ago

thank you! Every serious economist that has ever discussed college tuition in the US acknowledges that the issue of guaranteed loans and the ability to declare bankruptcy is a major factor (whether or not they think the status quo is acceptable).

However, in this 3 page article it isn't even mentioned once. Instead, he jumps immediately into the trendy topic of inequality. He might as well have just tweeted #1% #wealthgap #taxtherich

cheald2• 12 years ago

It's Slate - you can pretty much expect "#1% #wealthgap #taxtherich" by default.

larrys2• 12 years ago

"and the ability to declare bankruptcy is a major factor"

However you can't typically discharge student loans with bankruptcy, in the US at least:

http://www.nolo.com/legal-encyclopedia/student-loan-debt-ban...

wcummings• 12 years ago

What positions require "BA in any field"?

bsilvereagle2• 12 years ago

Last I heard, in some cities you had to have a BA to be a barista.

evan_• 12 years ago

I've heard this about substitute teaching.

ebiester• 12 years ago

In many cases, HR.

However, it is often a soft requirement. When comparing two resumes for an entry level position, the college graduate gets the benefit of the doubt. Four years as an assistant manager at Burger King, Subway, and a call center is seen as less valuable than a BA in lit.

cheald2• 12 years ago

Most anyone that requires a BA in a specific field will accept a BA in a different field if you talk to them.

It's a filtering mechanism that lets them reduce their applicant pool so that they spend less time and money filtering unqualified applicants.

Roboprog• 12 years ago

Absolutely! Let's get rid of the loans (like the ones I had to take to finish school in the late 80s), and go back to modest grants (like the ones I received in the early 80s) to pay for school.

Having been in college in the mid 80s, I got to watch first hand the defunding of higher education by Reaganism. Granted, "prop 13" in California started defunding schools 2 years earlier. I wonder if all of the boomers and WWIIers realized what they were getting back in 1980.

Of course, it was only in the 90s that I (personally, at least) could look back on the 80s and realize what a disaster Reaganism was visiting upon the US.

* unions busted * regressive income tax structure (i.e. - FICA/Medicaid rates greatly increased, counterbalancing "normal" income tax with high bottom end rate) * increase in immigration * increase in "free" trade * defunding of education and other public infrastructure

None of these were good for rank and file workers. As a result, the choice in the 21st century is pretty much "college", or "prison", due to the ability to find a job at all, or likely not. So, yeah, colleges (the leadership parasites in charge) are grabbing all they can, because that is the culture now.

lukasm• 12 years ago

Just a cap would help. Ideally non-constant e.g. average salary of a uni grad.

jcalvinowens4• 12 years ago

Get rid of the government loans.

I'm going to make an argument I imagine many here will disagree with: perhaps the solution to the cost problem is to have publicly financed post-secondary education?

Imagine this: the US government tells colleges it will pay $N per semester on behalf of any student who meets certain qualifications to attend that college. Colleges would be free to refuse to accept this, but with the exception of the Harvard/Yale type schools, any college that did refuse the public tuition would cease to exist because nobody would go there. As long as we can come up with a value for $N that keeps colleges funded without making them rich, it would work. I would submit that the ideal value for $N is much lower than the current average tuition.

How do you pay for this? Take it all out of military spending. There would be plenty left over, I assure you.

Another side of effect with less graduates is that maybe we can get rid of the college degree requirements

I would argue that there are definite benefits to a more educated population. Just because a certain group of people are going to end up with jobs in a field that don't really require post-secondary education doesn't mean that society as a whole isn't better off when those people are more educated.

I'm of the opinion that many of the problems the US faces right now are more or less the direct result of an uneducated body of voters.

tehwebguy2• 12 years ago

Only if that $N cap must cover a minimum of near 100% of the salary could that even have an impact, IMO.

Without minimum coverage it's just a subsidy that will drive the cost of college up even more since every student would be able to afford a minimum of $N. It's virtually identical to the current loan landscape.

Example (broad strokes):

  Student Grant / yr     Minimum Coverage
              $5,000                 100%
             $10,000                  98%
                 ...
             $50,000                  90%

Couple this with removing government backed student loans for undergraduate altogether and now you've got a reasonable out-of-pocket maximum spend per student per year. In this table it would be $5k for a $50k school - if the school wants any gov help they have to manage their own tuition costs.

Obviously this would be sort of a disaster at first and these numbers are probably silly, I have no clue what the process of coming up with these numbers and adjusting them (somewhat less than 1200% over 30 years) would even look like.

Shivetya• 12 years ago

No.

First off too many people who do not need a college education are pouring money into one. Second the United States, nor any country needs the numbers of college educated people they already have.

Come up with a standard program if you must. We have standards for public education so let us have them for a college education. It cannot be that hard to establish the minimum required for each degree and then determine the cost of that education. With a standard costs will come down.

Uneducated voters, it is not from a lack of college. Public schools are not there to create critical thinkers. They are told day in and day out how the government makes it all possible. Top it off with thousands of assistance programs and why would you expect people to better?

larrys2• 12 years ago

" it will pay $N per semester on behalf of any student who meets certain qualifications to attend that college"

Well right off the top how do you define "qualifications". I mean if your answer is (and this is a question not a statement) "meets certain testing standards" or "belongs to certain clubs and does certain activities" you will almost certainly disadvantage certain students that might get accepted because the total "package" of them (as a student and a person) balances out the student body.

Then what we will have is even more of a system that feeds students in that are trained in high school only one way - to test well. This of course has already been happening with test prep however my feeling is any "qualifications" will push us more in that direction.

ruswick• 12 years ago

Yes.

This article makes the ridiculous error of totally ignoring the fact that trivial access to loans and overall exuberance around college creates NO downward pressure on prices. So long as people are willing to pay almost anything and have access to the money to do so, prices will continue to rise. In my opinion, the "spiral" is largely the fault of excess government subsidization and price insensitivity. College is sold as a magic ticket into the upper class, and most people simply will never question this assumption.

Ending the flood of government money will force people to actually question the value of education and, as many people are priced out of the market, will hopefully lead to a rise in more efficient means of education like apprenticeships and cc.

That said, the article MASSIVELY distorts the extent of the spiral because it focuses on sticker price and not on net price. Evidently, the author doesn't realize that sticker prices are so high because colleges price discriminate. Very few people pay anything close to the listed price for college. For public colleges, the average net price is one third of the list price. For privates, the percentage is higher, but that's just because wealthy people are overrepresented at private colleges. Even then, the average net price isn't even close to the list price.

For example, I attend an "elite" private school. Although the sticker price at most of these schools is between $60,000 and $70,000 a year, massive grants are given to students that mitigate most if not all of the cost. I come from a family with slightly above-average income (but still decidedly middle class) and get a $50,000 grant from my school. I have a friend who is also middle class who is being given a full ride.

So, although this article makes a few fair points, it ignores the root of the problem and fundamentally misinterprets the data.

hga3• 12 years ago

Can't believe I forgot to mention this earlier: student tuition is pure gold for colleges, because the money is not earmarked like most donations, many government sources (e.g. overhead charged on research grants), etc.

teuobk• 12 years ago

My favorite explanation of why tuition continues to rise is simple: people are still willing to pay ever higher prices. One step removed from that, the explanation hinges on student loans being too cheap and easy to get.

I've always found it baffling that anybody expected to solve the college affordability issue by making student loans cheaper and easier to get. When we do the same thing with mortgage rates, we expect the prices of homes to rise. Why do we expect any different of college tuition prices?

thetruthishard• 12 years ago

It's a free market -- tuition keeps going up because you, your neighbors, and every other American, is willing to pay for it. Prices will keep going up until people are so strained that they're not willing or able to pay anymore.

forrestthewoods2• 12 years ago

But it's not a free market. It's a market artificially inflated by the government via Federal loans, guaranteed pay back to the banks, and debt that's non-dismissable via bankruptcy. Those may or may not better than the alternative, but they sure as hell mean it's not a free market.

hga3• 12 years ago

"guaranteed pay back to the banks"

Not as of June 30, 2010: part of the Patient Protection and Affordable Care Act AKA Obamacare was using the profits from those student loans to fund it, the government is originating all "guaranteed" loans after that date.

krisdol• 12 years ago

Doesn't change the fact that you are always free to go to a cheaper college, or avoid it altogether. Even the college is free to set its own prices. I don't agree that the notion of a "free"-er market would fix this.

carsongross3• 12 years ago

Free market indeed:

http://www.finaid.org/questions/bankruptcyexception.phtml

vorg• 12 years ago

tuition keeps going up because you, your neighbors, and every other American, is willing to pay for it

The parents of international students, primarily from Asia, are also willing to pay for it. The US has recently jumped all out onto this income stream (since 2008), and if you look at how things went in countries that have been doing it much longer, like Australia, you'll realize it'll be quite a while before Asian parents aren't willing and able to pay US college tuition for their children anymore.

parennoob• 12 years ago

"Administrators...blamed students, who were supposedly demanding all manner of luxuries and would not be denied. “Students today want carpeting, they want furniture, they want voice mail,” an administrator at a Nevada university told USA Today for a 1997 story about the tuition spiral. "

I believe this is one of the biggest generally unaddressed aspects of this problems. The large public university near me has near-luxury dorms, a bunch of massive flat screen TVs in libraries and the student centers (which don't serve much of a purpose apart from broadcasting random news or campus stuff -- a couple devices would suffice) and keeps on revamping equipment / OSes in the general access computer labs (despite the fact that most students have their own laptops, and use the computer center ones for relatively mundane tasks like quickly checking facebook or typing out a Word document). The official reason given for this is, "Well, we won't be able to attract the best students if we don't offer them the best amenities."; and from all accounts, it works -- student enrollment, specially the wealthy ones, keeps going up.

As long as parents keep rewarding these lavish universities by saying, "Wow! Look how great that is. If Bobby hangs out in an expensive looking place, maybe he'll get a high-paying job by some sort of osmosis! Let's totally send him to the University of Money-Down-the-Flatscreen-Hole." instead of taking a hard-nosed look at the return on investment they are getting, this vicious cycle is going to continue.

bsilvereagle2• 12 years ago

I don't know if it's parents so much as entitled students. You may enjoy some of the discussion here: http://www.reddit.com/27h7pl/

watwut• 12 years ago

Any analysis that assumes that whole generation of students and their parents are stupid is suspect. So, two remarks:

* Wealthy students are probably choosing more comfort over price. Less wealthy but good student might have different preferences. Wealthy and good student are not synonyms.

* All things being equal, I would find it rational to choose school with better tv. All things being equal is important there.

You school, or schools in general, seem to be trying to attract the most wealthy students. Whether they are proxy for good student or not does not matter. Even if they would be the best students ever, it would still be just a coincidence. If it would be about quality of attracted people and quality of graduating people, schools would not be so eager to save on professors, adjuncts and so on.

I think the whole thing has less to do with students and more to do with administrators incentives. They seem to choose short term grow over long term whatever all too often. Preferring quality of tv over quality of staff is preferring visible effect now over hard-to-see effects in long term.

michaelochurch3• 12 years ago

Democrats today worship education, while Republicans today worship the market, neither of which faith has brought us close to a solution.

Extreme leftists cheerlead higher education under the belief that if you give the proles a leadership education, they'll eventually revolt and overthrow the capitalists. After all, the undergraduate experience was designed for aristocrats, and if people go from young aristocrat to prole in one post-graduate summer, they might be pissed off enough to take up arms and overthrow governments, like what almost happened in the 1960s student riots. It doesn't happen that way, however, so they (the extreme leftists) don't get what they want.

Lazy centrists and liberals push for widespread higher education because they believe education to be a magical fairy dust that can be sprinkled on inequality to make it go away. (In fact, tuition and credentialism and admissions-- nonacademic admissions elements being the worst offenders-- do the opposite.) They don't get what they want.

Right-wing, religious nutcases throw their weight behind religious education because they think it will help them in their losing cultural war against modernity. They don't get what they want.

The center-right, increasingly fascist, corporate elite cheerleads widespread education because it gives HR departments a sorting mechanism where the people being sorted do all the work, and pay exorbitant prices for the "privilege" of taking part in the indignity. As for this set of people (center-right), they are the ones who do get what they want.

pekk• 12 years ago

What do Democrats have to do with "extreme leftists"? There is no remotely viable Communist party in the US, not even a Socialist party. Extreme leftists do not have any power in the US.

People who don't want to go to college have always had the option of not going. The difficulty is when people want to go but it is not feasible for financial reasons. Some people think it is nice to help others do whatever it is they want to do. There is no 'extreme leftist' conspiracy here.

michaelochurch3• 12 years ago

Read the whole post. I'm not just trashing the left or "Democrats". I'm critical of all political factions on this issue and point out that the most evil faction (the corporatists) is the only one that got what it wanted.

waps5• 12 years ago

Welcome to the US, where parties that would be villified for being extreme-right in Europe are actually on the left side of the aisle, and the left side as it exists in Europe simply doesn't exist.

Welcome to the country where the major leftist party is actually arguably anti-union. In most areas it's actually quite a bit right-of-center, in economic cases it's extreme right.

If a rightist party in most European states proposed reducing a European national health insurance to the level of the ACA, they'd immediately be cordoned off and laughed out of parliament. They know this, and so it never happens.

I still find it absolutely incredible.

TheCoelacanth2• 12 years ago

Democrats would mostly be the "lazy centrists" in the next paragraph.

adminprof6• 12 years ago

I'm a professor at an ivy league university who has gotten some insight into the budgets. There's a few things that are often not reported in the media:

1) The tuition sticker price is going up, but the actual price paid remains about the same due to increasing financial aid given to students.

2) The largest cost driven in the past decade is partially due to a successful increase in recruiting+admitting underrepresented minorities and low-income students. Because of a program called "need blind" among many universities, students are admitted regardless of ability to pay. So when more of these students come, not only are they unable to pay tuition, but the university pays them a stipend which results in a double financial cost.

3) There are administrative programs that cost money and are not flat screen TVs and new buildings, and actually benefit students at the same time! This includes funding for student organizations, undergraduate research or teaching assistantship programs, writing centers and tutors, etc.

forrestthewoods2• 12 years ago

Can you break down the numbers for #1? If Stanford is $60,000 how much if that is the actual sticker price? How much of that is being given to other students in free financial aid? As a follow-up, how fucking INSANE is it for someone who can't afford a school to take out a loan to pay for that school and a portion of that loan pay for someone else who also can't afford to go? For me to take out a loan to pay for someone else is fucking ludicrous.

On you third point, that's true but in theory those costs should not have increased 12x in 30 years. That would be remarkably hard to justify.

adminprof6• 12 years ago

I googled a bit and Stanford actually has some nice numbers posted online: http://ucomm.stanford.edu/cds/2013

It says tuition=fees is 43K/year, and Stanford provides 126M in institutional financial aid (i.e. not from the government). They had about 7K undergrads, so it looks like 18K/year per student. That's just my guess because I don't know how graduate students are counted, or other accounting anomalies.

guelo• 12 years ago

This comment is like a bad parody of the excuses in the article.

1) So are all the stats that say that students are paying more, and are graduating with more debt, lies?

2) Blaming poor people is the latest trend in elite apologias. Same with the real estate bubble, it's the poor people that blew up the economy!

3) Student orgs, TAs and tutors are a totally new thing that didn't exist before tuition exploded, oh wait.

adminprof6• 12 years ago

I was referring specifically to private research universities, which maybe account for 1% of students. Public universities have gotten more expensive, and there have been a lot of students enrolling in for-profit colleges. There's plenty of ways you can count the numbers.

waps5• 12 years ago

As for 2)

But while nobody's publicly saying so, it is true that the (not really) "poor" homeowners are responsible for the 2001 crisis. The cause of the crisis was, after all, that >2% of homeowners (mostly poor ones) stopped paying their loans because (partly it was no longer in their financial interest to do so). Which cause banks to sell CDOs that were valued on the assumption that this would never happen. Which caused some banks to get stung with CDOs.

The great crime of the elite was to offer loans to people bigger than what they could reasonably pay back. Nobody forced anyone to take the money, or hid the fact that it needed to be paid back. Too large a percentage of people just didn't abide by contracts they signed.

And they failed to abide by those contracts for the exact same reason banks try to get out from under obligations : there were losing a little bit of money.

I don't think people are blaming the poor. People are blaming homeowners who overextended themselves, or simply walked away from their loan obligations. And this is justified. They caused the crisis. Yes they were pushed into it. Does that excuse it ? I don't know.

ivystudent• 12 years ago

Thanks for your comment - it's great to get some real insight here.

#1 and #2 raise a lot of questions and I'd love to hammer it out a bit more.

Total financial aid is increasing (#1), but that makes sense given that the number of low-income students is also increasing (#2).

The better metric is financial aid per low-income student (not just per student, since that is also expected to increase given that low-income is a higher percentage of the class each year). Is that number increasing year over year? If so, shouldn't that lead to a decrease in tuition, not an increase?

---

At my university, I'm convinced #3 is the real driver of tuition increase. The number of administrators and staff is increasing spectacularly, but from the student perspective, it's not helping anyone but instead increasing frustration (e.g. if there's a problem, we're stuck escalating through more people until we reach a Dean who can actually do something). Thoughts?

muzz7• 12 years ago

#1 is essentially third-degree price discrimination. College tuition is effectively "sliding scale" with wealthiest students pay full sticker price and poor students paying little or nothing

Balgair6• 12 years ago

1) Source? I can't believe that the sticker price has gone up this much and that financial aid went up in essentially the same amount. Let's see data on this.

2) Again, source? What I get from this is that minorities are financial leeches, then. Is that a correct reading? (No of course not, but that seems to be a correct interpretation of this insane premise the OP stated; one I do not agree with at all)

3)Again, source? So, get rid of the student's needs and you get rid of the costs? Really, this says that needy students are the reason costs have gone up. Did you even read the original article at ALL? Over 30 years of needy students have pushed the costs up this much? That is blatantly false.

Sources for ANY of these points are needed.

adminprof6• 12 years ago

The source is me attending university budget meetings, discussions with the provost, etc. University administrators are obviously not going to be saying this in public (exactly because of how it looks, as you note). If you think you're going to see the accounting books of a private university on such a sensitive topic, you may be waiting a while. But feel free to continue believing online columnists in the meantime; it seems like you've already made up your mind.

For 3), I think you misread my statement. I just said that there are useful programs to students that cost money, and not just the usual useless examples provided by journals. The other stuff is your creative interpretation :-)

ahomescu1• 12 years ago

How would an insider provide publicly-available sources for the things he/she reveals that are inside knowledge? The GP is the source.

balls187• 12 years ago

It's my understanding is that in many (if not most) colleges, the cost for a single students tuition is exceedingly greater than what the school actually charges the student.

That is, schools make up the difference by getting grants, and getting alumni to donate.

With that model, there is no way school can continue to operate at that deficit.

aswin8728• 12 years ago

In my opinion, college is worthwhile ONLY if you attend a university that is worth the cost. In most situations, students attend a particular university wishing that it will guarantee them success at some point in their lives without researching the ranking, quality of education, etc. In terms of ROI, it is a safer option to attend a Top 50 university than a for-profit university nobody has ever heard of. The discussion shouldn't exactly revolve around whether college is worth it, but about how we can improve the quality of education across the board so that graduates are adequately prepared for the real-world.

waps5• 12 years ago

You think university is about education. To an extent, of course, this is true. However, the reason "top" universities pay off better is not the quality of education. The difference in aptitude of students easily trumps the advantage an Ivy league university has over a state college.

The real value in the university is the sunk cost of education for everyone already in the workforce. Ivy leaguers control management of most companies, and choosing against Ivy leaguers means saying they are themselves ill-educated ... they don't. So higher up jobs are more available to people who've paid the same sunk costs as the hiring managers.

It's that simple.

This will fall flat on it's face if they really open up admissions.

Alex3917• 12 years ago

The increase in tuition costs has actually been relatively small. The price for tuition, fees, room and board at public 4-year colleges for in-state residents increased from $7,400 in 1990-91 (2012 dollars) to $12,110 in 2012-13. At private non-profit institution the net price increased from $18,330 in 1990-91 to $23,840 in 2012-13.

Balgair6• 12 years ago

Source?

UC Irvine is 2x that while not on campus ($24,693.97) and much more on campus ($31,667.97) for CA residents. Add $22,878.00 for out of state to get ~46k off campus and ~53k for on campus[0].

Granted, it is a UC in Orange County, but your numbers are 1/2 to 1/3rd of the true numbers. Is the rest of the country really that much cheaper than California?

[0]http://www.ofas.uci.edu/content/costs.aspx?nav=1

muzz7• 12 years ago

What percentage of students pay full sticker price?

Spooky23• 12 years ago

This isn't a grand conspiracy. Its all about too much of other people's money chasing a large and growing inventory of academic seats.

Lots of well-intentioned and self-interested advocates have successfully made the assertion that more college == good. So Uncle Sam dumps billions into it. Kids and parents are pretty dumb at assessing long terms value.

All education is like this. When you hear about things like schools providing iPads to the entire student body, that's a signal that there is too much money floating around.

bullfight• 12 years ago

This has very little to do with some conspiracy between bankers and universities to indebt students and raise massive capital by massively expanding the university far beyond it's means.

Deep into this article the author hits on what is really at the core of steep tuition inclines. A rapidly reducing share of university funding coming from state governments turning once public institutions into defacto privatized universities.[1]

In this chart [2] UWashington lays out in 2013 dollars that total tuition per student has been around 17,000 for 25 years, however during that period the state contribution was reduced from $14,000 to $5000, while student tuition rose from $3,000 to $12,000

"This is an important shift in who pays for higher education. In 1990, the state provided nearly 80% of the funding per student and UW students paid 20% of the funds. In 2011, the state will pay around 30% and UW students will pay 70%." [3]

[1] http://www.insidehighered.com/news/2006/08/10/private#sthash...

[2] http://imgur.com/HqVVc0P

[3] http://www.washington.edu/externalaffairs/files/2012/10/tuit...

brazzy2• 12 years ago

In this chart [2] UWashington lays out in 2013 dollars that total tuition per student has been around 17,000 for 25 years

If true, that would make UWashington a shining beacon of frugality and equality (or a really low-end university). That tuition has been massively outpacing inflation is something I have heard from too many different sources to dobut, so the question is: Is UWashington lying in that paper, or is exploding tuition something that affects only a small number of universities (and thus students), and in the latter case why don't students switch to cheaper universities?

Avshalom• 12 years ago

"Total tuition" and "tuition charged to student" are two different numbers in this formulation.

"tuition charged to student" has jumped ~9k on top of inflation to compensate for a ~9k decrease in per student state funding.

As to why students don't switch to cheaper universities? Because when it comes time to find that first job academic reputation and professional network matter at least as much and often way way more than having a particular degree.

muzz7• 12 years ago

That tuition has been massively outpacing inflation is something I have heard from too many different sources to dobut

Sticker-price tuition has. "Tuition revenue" is what students actually pay.

OldSchool• 12 years ago

It comes down to at least two things:

1. Easy (to acquire) debt drives demand

2. Education is still "Made in America" thus it cannot hide from the real devaluation of the dollar

JumpCrisscross• 12 years ago

thus it cannot hide from the real devaluation of the dollar

The trade-weighted U.S. dollar index [1], published by the Board of Governors of the Federal Reserve, shows a 1.2% annualised decline in the U.S. dollar over the past 10 years. This is sufficiently low and hedge-able as to not be a key determinant in this pricing process.

Your broader point stands, however. Education is a non-tradable good. This amplifies the effect of local idiosyncrasies, e.g. non-dischargeable federally-backed education loans, in a way which would be arbitraged away for a tradable good.

[1] http://research.stlouisfed.org/fred2/series/TWEXBp

DanielBMarkham• 12 years ago

This is terrible.

You can't argue that universities charge more because they are able to, which is common sense, and also argue that we tried the free market (whatever that means) and it was part of the problem. E-gads, what a mess.

People today have roughly the same amount of money as they did 30 years ago. The cost of college education in terms of the amount of money people directly and immediately pay has not changed. It's not like we all became millionaires. What's happened is that we switched from grants to loans, which was supposed to allocate more risk on the student and banks, then we made sure that anybody that wanted a loan could get one, so there was no immediate penalty for making a bad choice.

We took a trade with tremendous uncertain future returns -- which degree I should get -- made sure everybody could get whatever they wanted, then pushed any pain far out into the future. Then we piled on by making the entire scheme immune from bankruptcy, taking out any risk that creditors might face! It's like we just kept the grants, but forced the student to pay for his own grant in terms of future debt. It's a incredibly terrible job of policy, no doubt, but the free market has nothing to do with it. If anything, it's a nice little experiment on how screwed up you can make a market before some kind of feedback mechanism kicks in. We took the purchaser out of the mix, then we took the lenders out. The only thing left is the political system, which seems wedded to the policies that led us here in the first place. Continuing down this road of idiocy, next up we should try to take the political system itself out of the mix. Perhaps we could have a constitutional "right" to an university education?

I will agree with the author that colleges charge more simply because they can. That's the way selling stuff works. You charge more until you start selling less. I will also agree that reporters (and some essayists) have great difficulty actually looking at the problem honestly.

This is the tragedy of our times, this indentured servitude we are placing on the next generation. Somebody is going to have to be a grown-up here and tell people what they don't want to hear: it is not in society's interests to guarantee the funding of little Junior's degree in underwater basket weaving. I don't see that person or party on the horizon, but here's hoping they show up soon.

hellbanTHIS• 12 years ago

Can I get a tldr? Where is all this money ending up?

seanhandley• 12 years ago

Read the article - it's worth your time. Or if your time's more valuable, don't.

gone35• 12 years ago

I wish I could read this, but as with every single Salon.com page, every time I scroll halfway down the body, the entire second half of the article blinks and disappears completely (on Safari on iPad). That, or the page stutters helplessly for several seconds until it crashes the browser.

There better be a special circle of hell for whoever came up with such an abomination. Memo to all of you Web 3.0 trendsetters: Please stop ruining the web [1].

[1] http://motherfuckingwebsite.com/

programminggeek• 12 years ago

Cheap money means prices can go up and it's all based on an old sales trick... "3 easy payments of $19.95!"

That makes people feel like what they are buying is $20, or closer to $20 than $60.

Imagine you are selling an expensive piece of fitness equipment like a Bowflex or Nordick Track, or Total Gym or whatever. Those things retail for $500-1,500. How many people go to the store and drop $1,000 on a home gym? Not many. However, a lot of people buy equally expensive products via infomercials, QVC, and Home Shopping Network because of the payment plans.

Low interest mortgages and student loans spread out over a 30 year period make these huge ticket purchases more "affordable". They also totally distort the cost of the purchase.

The fact is, people make decisions to solve short term pain, not for long term gain.

The universities, credit card companies, banks, etc. are taking advantage of a system that we all built and participate in. It might not be what is best, but it is certainly our own creation and at some point society should take ownership of our own flaws, not continue to blame other people.

College and homeownership are a choice. There are alternatives. If we don't like the current system, it's up to us to change it or not participate in it.

tzs• 12 years ago

Stanford tuition from 1920 through 1993 [1]:

    Year    Tuition    Annual Growth
    1920    120       
    1930    300        9.60%
    1940    345        1.41%
    1950    660        6.70%
    1960    1005       4.29%
    1970    2400       9.09%
    1980    6285       10.11%
    1990    14280      8.55%
    1991    15102      5.76%
    1992    16536      9.50%
    1993    17775      7.49%
    1994    18669      5.03%
    1995    19695      5.50%
    1996    20490      4.04%
    1997    21300      3.95%
    1998    22110      3.80%
    1999    23058      4.29%
    2000    24441      6.00%
    2001    25917      6.04%
    2002    27204      4.97%
    2003    28563      5.00%
    2004    29847      4.50%
    2005    31200      4.53%
    2006    32994      5.75%
    2007    34800      5.47%
    2008    36030      3.53%
    2009    37380      3.75%
    2010    38700      3.53%
    2011    40050      3.49%
    2012    41250      3.00%
    2013    42690      3.49%

Note: the growth column I added is annual growth. It is the annual rate tuition would have had to rise to get from one line of the table to the next.

I don't see much support in this data for the claim many are making in comments here that government backed student loans are responsible (or even a significant factor in...) tuition growth.

It would be interesting if someone with better internet research skills than me could dig up data for other schools (in particular, it would be nice to get data from some public schools) and see what that looks like.

[1] http://facts.stanford.edu/administration/finances

chiph• 12 years ago

At my alma mater, 2 semesters of tuition, room, & board match what I paid for 3 years of attendance 25 years ago.

graycat• 12 years ago

Gee, I thought that the resolution of the issue was:

(1) Before 30 years ago or so, a student paid only about 1/3rd of what a college education really cost. The rest was from 'overhead' taken from research grants, gifts, endowment income (from gifts), government funding (say, state universities).

(2) Good students with little or no money got various forms of financial assistance -- scholarships, work-study, etc.

(3) Wealthy students still paid only the 1/3rd.

So, someone got a bright idea: Why should wealthy students pay only 1/3rd instead of 100%? So, why not let the 'list price' to the students be the full cost? Then wealthy students will pay the full cost and others will get 'scholarships' based on need and academic qualifications.

So, the 'list price' went from 1/3rd of the real cost to 100% of the real cost, that is, up by a factor of 3, that is, 300%. The rest of the increases were due to better prof salaries, higher AdFunk salaries and more AdFunks, better facilities, etc.

But if have a really good media 'story', why give an explanation that would end the suspense, interest, drama, sense of scandal, etc. and, thus, end the story? And lose the eyeballs and ad revenue? Gotta be kidding!

vampirechicken• 12 years ago

Since the majority of non-menial jobs now REQUIRE a degree (often any degree), if you want to be in the middle class, you need a college degree.

One explanation I can think of to require a degree for everything is that it proves that you can commit to a long term goal and achieve it.

The cynic in my thinks it's just a ploy to have a debt-riddle workforce who will be scared to make waves because they're always one check away form insolvency.

Colleges are full of it: Behind the three-decade scheme to raise tuition

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