Why Are College Costs Rising?

According to this article, they’re rising for two reasons neither of which has much to do with classroom education. The first reason is that in public institutions of higher learning the subsidy they’ve been receiving from state and local coffers has been going down. As costs rise, so do tuitions:

The main reason tuition has been rising faster than college costs is that colleges had to make up for reductions in the per-student subsidy state taxpayers sent colleges. In 2006, the last year for which Wellman had data, state taxpayers sent $7,078 per student to the big public research universities. That’s $1,270 less (after accounting for inflation) than they sent in 2002.

and the second reason is that other costs are rising fast:

Increases in spending were driven mostly by higher administration, maintenance, and student services costs. Public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, up more than 13 percent, in real terms over 1995. And they spent another $1,200 a year on services such as counseling, which was up 23 percent. Meanwhile, they spent about $8,700 a year on classroom instruction for each student, up about 9 percent.

If the grants for education included in the big stimulus package make up for shortfalls in state and local expenditures, well and good. If they’re used to increase the salaries of administrators, it will merely build additional costs into a system that’s already over-burdened.

All of this happening when a college education isn’t the ticket to the secure, good-paying job that it used to be and student loans are becoming harder to come by places students in a dilemma: is a college degree really worth pursuing any more?

4 comments… add one
  • Drew Link

    At the risk of being too literal with the numbers, something doesn’t seem right with the overall numbers picture here.

    So taxpayers essentially paid $7.1K per student per year. The cost per student for core classroom education was $8.7K, leaving a $1.6K per student deficit, or tuition requirement.

    Now there is another $5.2K per in admin, counseling and maintenance.

    So at one level, tuition seems to require (above and beyond taxes) $6.8K per year. Where do I sign? That’s a steal. And whatup with those tuition numbers I see???? They seem quite larger.

    Second, I would note (and careful with comps, I know) but most businesses have a cost of goods sold in the 60% of sales range. SGA might run 15%. That’s a ratio of .25. Colleges run a ratio of 5.2/8.7, or .6 ??? (Further, college, a services business, should run a higher COGS.)

    From where I sit, (and without even disputing the teacher salaries, embedded in the classroom cost number) overhead is completely out of control. And the tuition numbers I see are wildly out of synch with the expenses not funded by taxes.

    DS inquires: will money be used to increase an already overhead heavy, and burdened system? Well, if they are this out of control while under supposed market forces, when someone simply hands them a check what can we presume?

    Second, how do we explain this apparent total inelasticity of demand for college education services in the face of tuition rising at an extraordinary rate??

    My instinct would be to look at the engine: funding sources for tuition. I haven’t done the research, but I bet government loans are the key.

    Translation: govt loans = taxpayers are uneconomically funding bloated administrative and teacher salaries/costs. And the kids only figure this all out when they graduate with those huge loan balances.

    Winners: teachers and administrators. Losers: taxpayers (when the loans default) and naive consumers (college kids)

    Look, its not like this type of scam has never happened before……

  • Kelly Link

    I think it’s time to stop viewing the ‘college degree’ as a panacea and start looking critically at what it can and can’t do. I’ll give you an example. I know a woman who in late middle age spent two years earning an associate’s degree at a local community college so she could be ‘certified’ to process insurance claims. Well, the highest rate of pay I’ve seen offered around here for that kind of work is $12 an hour.
    Is $12 an hour going to allow this woman to both make a living and service her school debt?
    And why does one need a special degree for this type of work? Whatever happened to on-the-job training?
    Look, I love pure research and study and I recognize that there are all sorts of occupations that require at least a 4-year degree. But in cases such as the one described above, I suspect that this fixation with ‘college’ is just trapping vulnerable people into a continuous cycle of debt that prohibits saving and spending- the two things economists are saying our economy needs to recover.
    I’m not sure this is a good idea.

  • Brett Link

    That’s the problem – a college degree is shifting towards what happened with High School Diplomas (or their GED equivalent). They became so prevalent that you more or less had to have one to even be considered for a lot of jobs, especially jobs at large companies. At the same time, you’ve got the Student Guidance Counselors at the better high schools (public and private), all telling the kids “Go to college!”

  • Drew Link

    The go to college or not debate is ages old. But considering that I, today, paid a plumber $500 for two hours work because of a busted (frozen) water pipe (damned global warming) tells me its not as an absurd a question as it used to be.

Leave a Comment