Inflation Trajectories

[eytonxav]

The cost of college and healthcare year over year increases certainly have received a lot of attention, put this chart does a nice job of putting it into perspective and makes me wonder if the same slopes will continue over the next 10 years. It would have been nice if they overlayed gov't cpi:

 

[MichaelB]

Nice chart. I think overall CPI would be around 250%, right at the same level as food.

 

[ERD50]

What I'm interested in is - why did college costs go up at this rate? What can we do about it? What can we learn from it? Why is it different from so many other things?

Any thoughts on that?

I've heard the argument that K-12 costs have gone up because we provide so many special services compared to the past. Probably a factor, but that seems to be less so for college?

I'm surprised cars have actually come down in infl adjusted terms. We hear about the costs associated with safety, mpg, and all the features we didn't have in 1978. Maybe there is some 'hedonistic' adjustment in there? Maybe not, seems prices have somewhat stabilized in the past 10 years or so?

-ERD50

 

[rbmrtn]

What I'm interested in is - why did college costs go up at this rate? What can we do about it? What can we learn from it? Why is it different from so many other things?

Any thoughts on that?

My thought is both education and medical have something to do with them being funded by third party sources. The institutions keep raising prices because they know the students will just take on more and more loans to pay the cost, the students don't seem to be worried about paying back the loans and in the end another entity is responsible for it. Same sort of thing with medical and insurance.

 

[GrayHare]

rbmrtn +1

I was shocked to look at recent faculty/admin numbers for my old schools. Despite graduating about the same number of students, the faculty/admin is now more than twice as large!

 

[dmpi]

I went to college in the early 80s. Today's schools pamper their kids a lot more than before. The facilities are much nicer. They have orientation day for parents. The dorms are bigger and many kids have private rooms. The food is better. Everything is wired for free internet. Free computer resources are everywhere. They have workers all over the place cleaning it up and keeping it running. Forget about the days of 6 guys renting a house and eating top ramen. Those days are over.

 

[hsv_climber]

I am curious how Udacity & Coursera will affect the college price in the future.

 

[H2ODude]

My thought is both education and medical have something to do with them being funded by third party sources. The institutions keep raising prices because they know the students will just take on more and more loans to pay the cost, the students don't seem to be worried about paying back the loans and in the end another entity is responsible for it. Same sort of thing with medical and insurance.

I'm convinced that the tuition/loan deal is a self perpetuating cycle. Tuition costs are insane, especially if you break it down to classroom hour. Costs go up, we need to make more LOANS available. When they are, what the heck, let's raise tuition. I may have a distorted history, memory, or background, but I recall in the late sixties early seventies when I went to college you worked part time, your parents paid, or in my case my wife supported a lot of it. Yeah, there were loans but they were not the bulk funder of higher education as I recall. I could be very wrong, but that's my recollection. I cold not conceive of borrowing living costs for education years. Tuition maybe. But listening to these stories of people borrowing money to live on while in school...really?

 

[rbmrtn]

Forget about the days of 6 guys renting a house and eating top ramen. Those days are over.

I can't forget, I remember it well . I also worked summer jobs to pay for tuition/room/board. Never had a student loan. I left grad school with money in bank.

 

[MichaelB]

My thought is both education and medical have something to do with them being funded by third party sources. The institutions keep raising prices because they know the students will just take on more and more loans to pay the cost, the students don't seem to be worried about paying back the loans and in the end another entity is responsible for it. Same sort of thing with medical and insurance.

Good point. I wonder how much student debt there would be if the Universities had to hold it to maturity or if the debt could be discharged through bankruptcy.

 

[ERD50]

I went to college in the early 80s. Today's schools pamper their kids a lot more than before. The facilities are much nicer. They have orientation day for parents. The dorms are bigger and many kids have private rooms. The food is better. Everything is wired for free internet. Free computer resources are everywhere. They have workers all over the place cleaning it up and keeping it running. Forget about the days of 6 guys renting a house and eating top ramen. Those days are over.

I don't know about that. We toured DW's alma mater (one of the IL public colleges) when our kids were visiting schools, and she said the dorms looked exactly as they did 30 years ago.

Some of those other areas might be improved, but hey, cars have far more than they did in 1978, and they are at 95% the price.

There are single rooms/suites available, but not at the base price - you pay. Junior/Senior year, my son rented a dilapidated house with ~ 6 guys. Not sure what they ate, probably equal amounts of Budweiser and Ramen.

-ERD50

 

[Hamlet]

It's hard to get good numbers on this. I can name some drivers, but I can't quantify them.

1. Increased demand similiar to the housing bubble. Ultimately, people will pay almost anything for college now because the alternative is being stuck near the minimum wage. There are no longer a lot of paths to prosperity for starting workers that don't include a college degree. If your only hope of making more than $10/hr involves taking on $100k in debt, you take the debt.

2. There really hasn't been any increased productivity in the education field. It still pretty much involves putting a professor in front of X number of students. That professor's health care costs have gone up alot as well.

3. For many state schools, the state funds have been cut over the last decade or so. In my state (Minnesota), tuition is paying a larger percent of the costs than it used to.

What I'm interested in is - why did college costs go up at this rate? What can we do about it? What can we learn from it? Why is it different from so many other things?

Any thoughts on that?

I've heard the argument that K-12 costs have gone up because we provide so many special services compared to the past. Probably a factor, but that seems to be less so for college?

I'm surprised cars have actually come down in infl adjusted terms. We hear about the costs associated with safety, mpg, and all the features we didn't have in 1978. Maybe there is some 'hedonistic' adjustment in there? Maybe not, seems prices have somewhat stabilized in the past 10 years or so?

-ERD50

 

[Meadbh]

High priced universities are pricing themselves out of the market for people who now have other options to get a decent education. I think there will be a shakedown in 3rd level education in the next 20 years and the idea of college as the entry level to the work force will go out the window.

Just my opinion, after a couple of decades in academia.

 

[Hamlet]

I suspect that they are comparing the total amount spent on new cars, not each individual car.

Cars are more expensive individually, but you only need to buy one ever 10-15 years instead of every five.

I'm surprised cars have actually come down in infl adjusted terms. We hear about the costs associated with safety, mpg, and all the features we didn't have in 1978. Maybe there is some 'hedonistic' adjustment in there? Maybe not, seems prices have somewhat stabilized in the past 10 years or so?

-ERD50

 

[Animorph]

What I'm interested in is - why did college costs go up at this rate? What can we do about it? What can we learn from it? Why is it different from so many other things?

Any thoughts on that?

I've heard the argument that K-12 costs have gone up because we provide so many special services compared to the past. Probably a factor, but that seems to be less so for college?

I'm surprised cars have actually come down in infl adjusted terms. We hear about the costs associated with safety, mpg, and all the features we didn't have in 1978. Maybe there is some 'hedonistic' adjustment in there? Maybe not, seems prices have somewhat stabilized in the past 10 years or so?

-ERD50

Both require a lot of labor hours and haven't managed to change that. Online courses will be changing college costs soon. A general problem if everyone starts making the same as everyone else. Health care has the added problem of new procedures being added faster than old procedures are getting cheaper, in addition to all the oddball pricing problems.

 

[aja8888]

Granddaughter is at a dorm in Sam Houston State University this year as a freshman. When I went there to hook up her computer to the internet, I was shocked to see how small her SHARED room was for $1000/month. I think a prison cell would be roomier.

We just signed her and her roommate to an off-campus apartment that is half the price and is three or four times the size. The only utility they will pay is electricity.

 

[eytonxav]

I think there will be a shakedown in 3rd level education in the next 20 years and the idea of college as the entry level to the work force will go out the window.

Just my opinion, after a couple of decades in academia.

I agree, education will price itself out of the market at this rate, plus for kids coming out of school these past few years, the lack of jobs and measily salaries they are offered do not justify the expense of the college degree.

Still I wonder what else is behind these astronomical increases; maybe paying for the football coaches

 

[FUEGO]

3. For many state schools, the state funds have been cut over the last decade or so. In my state (Minnesota), tuition is paying a larger percent of the costs than it used to.

Same story in my state. We have a couple of good flagship public universities. 15 years ago when I started at one of these, tuition was under $3k, now it is over $8k. It has been a pretty steady 7% increase each year. State funding has remained relatively constant in nominal terms, so the brunt of the increases, even due to standard CPI inflation is felt 100% by the student via tuition. Fees also have been rising significantly (things the student governments decide should be provided to students). Fees are 100% paid by students and not subsidized by our state. So any spending increase on fees is passed on to the students 100%.

A little bit different story at the graduate level for me. When I applied to law school it was $5k/yr. When I left 4 years after I applied, it was $13k/yr. I think they also had commissioned a study that showed they were grossly undercharging students compared to what the market would bear, which led to a revenue enhancing tuition adjustment that I experienced.

 

[ERD50]

Both require a lot of labor hours and haven't managed to change that. ...

True, but College Profs must be really making out then!

But then others have pointed out that this may be the out of pocket costs to students - the actual total costs (including any state subsidies) might have risen less?

-ERD50

 

[eytonxav]

The other big education inflation factor is the cost of college text books. Seems to have way outpaced novels and other non-fictional works.

 

[samclem]

It's the third-party payer issue (and especially the subsidized loans). Lots more money dumped into the system=higher prices. The bloated faculty sizes and deluxe student services are just symptoms--the money is there, so let's attract students with it.

And is it at least possible that grade inflation and watered-down curricula is also related? ('keep that customer happy and those checks coming in")

If the schools had to hold the loans they'd at least have a vested interest in assuring their grads were wanted in the working world. And, it's about time somebody published accurate numbers on earnings for graduates of various schools/majors.

 

[Mulligan]

Both require a lot of labor hours and haven't managed to change that. Online courses will be changing college costs soon. A general problem if everyone starts making the same as everyone else. Health care has the added problem of new procedures being added faster than old procedures are getting cheaper, in addition to all the oddball pricing problems.

I recently talked to a student who was taking some online courses in addition to his bricks and mortar classes. I asked him if the online were cheaper. He said they were $25 more an hour. I would have never guessed that. Our governor a couple years ago threatened to cut university budgets if their tuition increases were above inflation rate. Well somehow magically the schools figured out how to make their budgets work with only CPI increases in tuition. I wouldn't be surprised if they worked around that problem by doubling the parking fees and implementing a campus air oxygen use fee.

 

[Katsmeow]

Granddaughter is at a dorm in Sam Houston State University this year as a freshman. When I went there to hook up her computer to the internet, I was shocked to see how small her SHARED room was for $1000/month. I think a prison cell would be roomier.

DS will be transferring there from community college in the fall. We live less than an hour away so he will be commuting. SHSU has classes in the Woodlands at the community college campus, but they actually charge more for those classes. That would be a little closer for us (about a 20 minute drive) but it irks me that they charge more for the classes there.

 

[eytonxav]

We looked at SHSU for our DD and I really liked it, also has a good football team. Unfortunately DD selected a much more expensive private school that ate into my nest egg, but at least she graduates this May and hopefully will be off the dole, unless grad school is next.

 

[REWahoo]

Did you know SHSU was originally named the Sam Houston Institute of Technology?