College Costs, why?

[HawkeyeNFO]

Really, it's basic economics: Put more money in the hands of buyers and prices go up.

Higher education costs have been rising far faster than health care costs for years. In this case, the education establishment is gorging itself, feeding from the endless flood of student loan money made available by the government and put into the feeding trough by naïve student borrowers. Most of the costs have been hoovered up by administrators, like our state university president at 2.5x the salary of just a few years ago. Now over $1M. Thread lock imminent, I suppose.

Yup. Supply and Demand. More students wanting to go to college, armed with federally mandated loan programs, and the supply of colleges couldn't keep up. So the prices go up.

Note that the trends are changing in the past couple of years though. Fewer students than before, and some of the smaller colleges are in serious financial trouble. The other by-product is that the degrees aren't worth as much as before, because more people have them.

 

[Time2]

I think it is generally accepted that administrative bloat and country-clubification of campuses are big causes of the increase in excess of normal inflation. Some might argue that the proliferation of new boutique/vanity "studies" curricula also contributes. Student loan programs have been a great enabler - basically enabling rent seeking by the universities to hoover up the money.

I think he said, the easier it is for students to pay with taxpayer (government) money thrown at them, the more universities can charge.

i.e. the price goes up the more the taxpayers subsidize it.

 

[razztazz]

I would look at a Community Collage for the first two years, and a State University for the remainder.

https://www.collegetuitioncompare.com/best-schools/suny-university-colleges/

I was able to simply test-out of everything. Initially I tested out of the first two years of college. I was in the military so it was free for me to kill off all those pesky bs credits. I know it would cost something to a normal person but would also save wampus time. I was 30 yrs old, hadn't taken a single college course in 12 years, and went to a pretty off-the-rack Catholic high school not some fancy prep type school for geniuses.

After years of hearing about college this and college that and how important it is blah blah... I decided to see if I could punch out a few credits for appearances sake. My impression was, any reasonably well-educated high school student can likely test-out of most of those courses, especially if they haven't waited 12 years. I mean really. I saw what a joke "a college education" really is. I mean the way it is always sold. What did what's his name call that... "false consciousness."

Many if not most schools permit this. My GF who went to medical school said her college had that program for most majors that didn't have lab requirements.

 

[MichaelB]

It is basic economics. Alex Tabarrok of GMU has written extensive on this, mostly blog posts on the Marginal Revolution website. See some blogposts here.

The driver is called “Baumol cost disease”. In effect, university prices are so high basically they can. Things like administrative burden, high salaries, continuing campus construction, etc are not cost drivers, they exist because the U’s have the money to pay for them. There has been virtually no productivity improvement in higher education in over a century and perhaps even a decline.

IMHO, the only thing that might help contain prices is requiring universities to accept liability for a meaningful part of student debt. Right now they are the single biggest advocates for taking on that debt, yet suffer no consequences if the debt cannot be repaid.

 

[njhowie]

^ This is a very good option. Just be sure to verify CC courses will transfer without restrictions.

Agree. My family has experience with this. Sis went this route 40 years ago, and did well. It was a good opportunity for her to boost her grades, get a little more mature, and have a part-time job to save some money. After the two years and getting her AA degree, she transferred to a prestigious/expensive west coast university (where I was doing my graduate studies) for 2 years to complete her BS.

At the end of the day, the issue with school tuition comes down to supply and demand. No matter what they do with the cost, the demand is still there. Take the demand away and they will find a way to curtail their spending and amount charged. At the same time, as far as the country club environment many have created ... I worked in the registrar's office when I was an undergrad. When I visited 25 years later, the registrar was one of the secretaries I had worked with. I dropped in to see her and asked about the development of the campus, what they were doing, and the escalating tuition. Her response was simply "It's what our peers are doing, we have to do it to stay competitive". So it boils down to Keeping up with the Joneses.

The money supply needs to be cut off somewhere in the pipeline. Once that happens, maybe we'll see some changes to curb spending.

 

[OldShooter]

... IMHO, the only thing that might help contain prices is requiring universities to accept liability for a meaningful part of student debt. Right now they are the single biggest advocates for taking on that debt, yet suffer no consequences if the debt cannot be repaid.

A quicker way might be to throttle the student loan money based on the cost structure of the school. High % of admin and non-academic facilities costs = capped availability of loan funds for that school. Also could throttle loan funds based on the economic value of the degree sought. IOW keep the kids from borrowing amounts that will be infeasible to pay back based on the average pay of the current degree holders. This makes perfect sense if you view the loan funds as a taxpayer investment in future GDP growth, not so much if you are majoring in something that does not result in marketable skills.

 

[athena53]

Another way to curb the demand- quit requiring a degree for every job. Yes, I'd like my doctor, my lawyer and my dentist to have the appropriate degrees, but whatever happened to hiring a bright HS graduate with a good work ethic? That would do for most fields.

 

[OldShooter]

Another way to curb the demand- quit requiring a degree for every job. Yes, I'd like my doctor, my lawyer and my dentist to have the appropriate degrees, but whatever happened to hiring a bright HS graduate with a good work ethic? That would do for most fields.

That thought brushes up against one of life's little mysteries for me:

We are telling these kids that a college degree is necessary to get a well paid job. This is based on data that says the current population of degree holders makes more money than people without degrees.

Fine. But if we are successful in substantially increasing the number of kids with college degrees, why would we think that will proportionately increase the number of available high-paying jobs?

Would you like a little Chaucer with that espresso, sir?

 

[Andre1969]

As the old saying goes, your mileage may vary. I just looked up the University of MD, which is where I went. For in-state, it's $11,233 per year for tuition. I can still remember my first semester, fall of 1988, was around $900/semester ($1800/yr). By spring of 1993, when I finally got out, it had ballooned up to about $1500/semester ($3000/yr).

That's a 67% jump right there, in just five years! Inflation-adjusting these numbers, that's like $4627 for 1988, and $6314 for 1993 to equate them to today.

So in real terms, it looks like it's gone up about 78% since I graduated.

Meanwhile, Maryland's minimum wage is $13.24/hr. Back in 1988, they used the federal minimum, which was still $3.35/hr. By 1993 it was up to $4.25/hr. Inflation adjusting, those would be $8.61 and $8.94/hr, respectively.

FWIW, when I started college, I was a "Service Assistant" (glorified dishwasher) at Denny's, making something like $5.25/hr. In 1993, I had two part time jobs. One, a day job, was with McDonnell-Douglas Space Systems (bought out by Boeing in a "merger of equals" that makes what Benz did to Chrysler sound downright charitable) making $10/hr, and an evening job at Hecht's (now May Company), making probably around $7.25/hr.

So, things are rough, yes. But depending on what points in time, colleges, wages, etc you want to cherry pick, it may not be that bad. Also, I don't think they had all the financial aid back then that they do nowadays. And the concept of taking out loans for your education but then padding it with the costs of food, entertainment, booze, hookers, drugs, housing, spring breaks in Florida, etc, was not as widespread as it is today.

 

[Texas Proud]

One does not necessarily have to break the bank on housing. I lived at home with my parents - DH immigrated from Europe (with a Visa), attended a City College, worked, and shared an off campus apartment with a group of young men to reduce housing costs.

Part of that is WHERE you go... if in Boston, NY, SF, LA (and even Austin) it is not as cheap as you might think...



My DD is going to be sharing a 6BR apt next year and her rent for one room is $1,200 plus utilities... she could go cheaper if she moved farther away but she is unwilling to do so... but I have a strict amount I am paying for and she will run out of my funds in her junior year...

 

[Texas Proud]

Another way to curb the demand- quit requiring a degree for every job. Yes, I'd like my doctor, my lawyer and my dentist to have the appropriate degrees, but whatever happened to hiring a bright HS graduate with a good work ethic? That would do for most fields.

I did not believe it when my sister told me this... but she said that only about 1/3 rd of adults have a college degree... it is not needed for every job..




OHHH, and to add... The University of Texas now has zero tuition for low income households.... for some reason I do not qualify even though my income is lower than what they say... part of it is we have a 529 and they take that into account... another reason not to have one...

 

[MarieIG]

Part of that is WHERE you go... if in Boston, NY, SF, LA (and even Austin) it is not as cheap as you might think...



My DD is going to be sharing a 6BR apt next year and her rent for one room is $1,200 plus utilities... she could go cheaper if she moved farther away but she is unwilling to do so... but I have a strict amount I am paying for and she will run out of my funds in her junior year...

Actually, with six kiddos and by virtue of interacting with young co-workers, I am aware that some destinations are very pricey, but they were simply not an option for us. My kiddos are done with school now - however, my limit was the equivalent of a state school. Other than the mortgage, I did not/ do not co-sign loans.

 

[Walt34]

Speaking of college housing costs, DD#1 has one who will start his Jr year in the fall and another who will be a freshman, both at the same school. She and her husband just closed on a 3BR house for them to share while they both work PT and attend classes. The hope is they can find a roommate to help share expenses.

One of my cousins did that for a daughter. He bought a townhouse about five miles from Shepherd College (now University) for her to live in, and she found three roommates whose rent about covered the mortgage. That the house was in WV also got all four of them in-state tuition rates after the first year. The lower tuition for the three roommates made paying the rent a good deal for them because it more than made up for the rent payment. A win for everybody.

 

[Montecfo]

The meme shows that wages, especially minimum wage, haven’t kept up. When I went to college in the 80s a lot of my friends were working their way through with a PT job. That’s nearly impossible today. You can’t earn 50K working a couple of evenings and weekends.

I agree about AC. A couple of the newer dorms had it but not where I was freshman and sophomore years.

It is the growth of college costs, 3X inflation rate. Why? Student loans, subsidies and no accountability

 

[eytonxav]

IMHO, the only thing that might help contain prices is requiring universities to accept liability for a meaningful part of student debt. Right now they are the single biggest advocates for taking on that debt, yet suffer no consequences if the debt cannot be repaid.

Absolutely, and although the gummit did play a role too by encouraging everyone to get a college education and providing federal loans to pay those high costs, I think such loans should not be paid off on the back of taxpayers.

 

[jollystomper]

I think it is generally accepted that administrative bloat and country-clubification of campuses are big causes of the increase in excess of normal inflation. Some might argue that the proliferation of new boutique/vanity "studies" curricula also contributes. Student loan programs have been a great enabler - basically enabling rent seeking by the universities to hoover up the money.

This is true. A large part of it is that colleges are not held liable for their results. If they admit a student who is not ready for college, and that student drops out with debt, the college is lot liable. If a student graduates with a degree but cannot find a job commensurate with what they owe in loans, the school is not responsible.

At the same time, their endowments have grown tremendously, while they still solicit donations, particularly from parents/alumni. Among many of the Ivy League schools 10-20% of the endowment would cover tuition and room & board for all students. Even applying a portion of that would greatly reduce the cost. They have made some movement towards this, since in some cases, students from families earning below a certain income threshold who are admitted can attend for free. But a lot of the endowment is spent on construction that I equate to replacing a still usable sports stadium with one with more bells and whistles that does not make a difference in the actual student education.

I recall going on college tours in the early 2000s with our kids. The emphasis was on the dorms, health/social/athletic facilities, and new classroom buildings. I would was the question "what measurable track record of success do your graduates have in various career fields?" - and the answer usually was "we do not have/tack that data". I could see the emphasis on college being "an experience" and not "an education", already changing back them.

The other frustrating thing - as a parent, they expected you to contribute, but you could not get any information on what or how your student was doing without his/her permission. Even trying to get a meeting with their academic advisors could not be done without their permission. And already then they did not seem to think parents needed to know anything - unless of course their was a problem with the tuition/board payments, when suddenly they wanted to talk to you all hours of the day.

 

[Aerides]

Absolutely, and although the gummit did play a role too by encouraging everyone to get a college education and providing federal loans to pay those high costs, I think such loans should not be paid off on the back of taxpayers.

If anything it's the larger market encouragement/requirements. In the 80's, the expectation to go to college was not as high as it is today. Especially since the 08/09 recession, college-or-bust is the thing. Everyone is expected to go to undergrad school. No one expects their resume to get a read if they don't have a degree (for jobs that may not have required them 30 years ago).

Loans, whether private or public are a big factor. As are 529's, Pre-Paid programs, etc. It's not just a case of did Mom and Dad save, and/or can I get a job on the weekends - good. There are a lot more places and ways to get the money.

After that, it becomes the old supply and demand thing. More people want to go, more people can get the money to go, more applicants, colleges raise the price.

 

[eytonxav]

After that, it becomes the old supply and demand thing. More people want to go, more people can get the money to go, more applicants, colleges raise the price.

I am not sure supply and demand is as significant as some are making it out to be as the primary cost driver. In the case of college, if you can pay/borrow, there is space for you and you will not be turned away, unless you can't meet the academic standards. It's not exactly like a scarce commodity. I think colleges did it because they could and greed was in play. If that is supply and demand, OK. Also, I feel people that went to college back in the 60/70/80s were motivated to go in many cases by parents who may not have been college grads themselves, but wanted a better life for their kids. That said, IMO, the other factor that really impacted the college dynamic was widespread outsourcing and corporations wanting years of experience vs hiring kids out of college and providing OJT.

 

[athena53]

That said, IMO, the other factor that really impacted the college dynamic was widespread outsourcing and corporations wanting years of experience vs hiring kids out of college and providing OJT.

Totally agree. A friend in my age group (70) majored in English Lit. at the U. of Toronto. A major bank in NYC hired him in their Commercial Loan department figuring he was a smart guy and trainable. And he was- he had a good, long career in the field.

I bet now those banks are looking only for MBAs from a very short list of schools.

 

[CardsFan]

My own personal experience;

Northeastern Univ in Boston. Great Engineering and Nursing schools at the time (1973).

5 year Co-op plan. NOT optional for engineers. First year, 2 quarters, $600/each. Worked co-op 1Q, earned enough to pay next summer Q. After that, school 2 Q's, work 2 Q's.

Lived at home and commuted. Worked weekends cleaning a metal working shop, and learning a little welding on the side.

Graduated with no debt, got a good job. The rest is history.

Now, current tuition is over $55k/yr VS the $1.8k I paid for the first year. That is 5 TIMES the inflation rate for the same time period.

When first out of school, I used to regularly donate back. After seeing the PRICE go through the roof, I said screw it.

 

[Stormy Kromer]

I think being a tenured college professor is a pretty good job. No heat like a high school teacher has to face.

Lots of folks outside academia also work 6 to 8 years to reach those credentials. These foks in the real world also have to work with Meeeean clients, meeeean bosses and the meeeean general public.

No tenure. Do your job or get fired.

College costs too much. Too much overhead. Sponsored by the state at public colleges and worst yet the prestige of private colleges.

That is why college is so expensive in my opinion. I've paid for two children to go to college, no student loans or forgiveness.

 

[Chuckanut]

A good friend was put through medical school by the US Navy. Upon graduation he owed the Navy four years which he served much of on a Boomer as a submariner. He then spent two more years on an Indian reservation. After that he hung up his shingle with no college debts to pay.

 

[athena53]

Now, current tuition is over $55k/yr VS the $1.8k I paid for the first year. That is 5 TIMES the inflation rate for the same time period.

When first out of school, I used to regularly donate back. After seeing the PRICE go through the roof, I said screw it.

Wow. I don't know what Co-Op jobs pay now but I'm guessing you can no longer make enough to fund your tuition 100% even if you live at home.

Agreed on donations. I quit long ago. My parents paid the sticker price, I was motivated and worked hard, I got an education in a marketable field. That university didn't do anything any other decent state U. would have done for me.

 

[Closet_Gamer]

Such a muddle with so many causes and effects.

I won't double down on the issues with debt availability driving up costs, administrative bloat, the country club college environment, decline in state funding, or disconnect between minimum wage and college prices. Yes to all of those.

A few additional thoughts:

1 - Knowledge economy

I do think part of the increase in demand is that the economy has changed substantially. In the 1970s/80s there was a greater share of the economy accessible through blue collar, high-school + trade/experience work than there is today. Those more trade-centric paths are definitely still options -- indeed there is a scarcity -- but more jobs are at desks, lab benches, and in services than previously. Education carries a premium to the extent it creates access to better outcomes. And it does ... so long as you don't spend your time/money study the negative effects of ancient sancrit eroticism on modern farming.

2 - Need for White Collar Trade Schools

The flip of the above is that we've yet to see the emergence of proper, white collar trades schools. My local school district will send you to trade school for shop and barber school. But you can't spend the last two years learning python? Learning to be a pharmacist tech? Maybe even basic nursing support? 18 year olds can take blood pressure and learn to give basic injections.

You don't need to study economics and Philosophy 101 to write code. This is re-enforced by companies requiring college degrees for even the most basic semi-technical roles.

You should be able to learn to write code for $10k and get a job doing it.

3 - Parental Denial

This conversation about college costs has been going on for nearly 30 years. Parents stick their heads in the sand, fail to save, and then fail to have honest conversations and plans with their kids. College is expensive. Retirement is expensive. You have to save and plan or you will be in a world of pain at some point. And I believe that the average student loan burden is below $35k and the vast majority is below $50k. For most people, its a car payment. Get on with it.

4 - Entitlement

After shopping for colleges with his daughter my brother summed it up as: "College is the new family trip to Disney World." There is a level of entitlement that everyone has the right to go to a big university, study whatever they want in order to be fulfilled, and then not have any burden in paying it off. Sorry ... but no one has repealed the rule that there are no free lunches.

And this obsession with Ivy leagues is self-destructive. Its like arguing about why everyone doesn't get to own a McLaren. Most people drive Toyotas and live good lives. Truthfully, my kids could have had educational McLaren's. They are both in public universities and appear to on great paths.

Ultimately, its about personal responsibility in a situation that is being made more difficult by societal priorities.

My $0.02 ... maybe more like $0.05 this time.

 

[Midpack]

I went through 4 years of engineering college at a private university in Connecticut in the early 1970's on $222/month (no dorm stay), including books. That was my G.I. Bill benefit for spending 4 years earlier in the military.

+1. I graduated Purdue BSME in 1977 and my senior year I rented an apartment with two other guys. My total spending, after tuition & books, was $400/month and that was plenty. I remember because my first real job out of college I made $1275/month and I remember thinking ‘how could I possibly spend that much!’

Colleges charge way more than inflation now because they can. Buy it seems a reckoning may be underway with lots of kids and parents questioning the payback these days, the math isn’t as clear as it used to be for many degrees.