Why Is College In America So Expensive?”

Article written by Amanda Ripley

The easiest way for universities to make up for the cuts was to shift some of the cost to students—and to find richer students. “Once that sustainable public funding was taken out from under these schools, they started acting more like businesses,” says Maggie Thompson, the executive director of Generation Progress, a nonprofit education-advocacy group. State cutbacks did not necessarily make colleges more efficient, which was the hope; they made colleges more entrepreneurial.

Some universities began to enroll more full-paying foreign and out-of-state students to make up the difference. Over the past decade, for example, Purdue University has reduced its in-state student population by 4,300 while adding 5,300 out-of-state and foreign students, who pay triple the tuition. “They moved away from working to educate people in their region to competing for the most elite and wealthy students—in a way that was unprecedented,” Thompson says.

(emphasis added)

I’m not entirely clear on this, but by “entrepreneurial” I take this to mean that public universities directed their energies into generating money. Hence, charging more to students in general, and targeting out-of-state and foreign students.

Many U.S. colleges employ armies of fund-raisers, athletic staff, lawyers, admissions and financial-aid officers, diversity-and-inclusion managers, building-operations and maintenance staff, security personnel, transportation workers, and food-service workers.

The international data is not detailed enough to reveal exactly which jobs are diverting the most money, but we can say that U.S. colleges spend more on nonteaching staff than on teachers, which is upside down compared with every other country that provided data to the OECD (with the exception of Luxembourg, naturally).

(emphasis added)

I can’t remember if the article answers the following question, but I wonder to what degree the work of these employees relate to bringing in more revenue. If most of the work relates to bring in resources, this further strengthens my impression that the decrease in state funds lead to a significant transformation of colleges. Specifically, colleges may have had to reorient their focus and staffing to deal with new realities–namely, the need to secure more funding. In a way, this reminds me of non-profit groups. The primary goal of these organization is to provide a social service. But in reality securing resources becomes an equally important, and a neverending job. For survival and sustaining the work they do, they must constantly be on the the lookout for money. Is this what happened to public universities? It seems plausible.

(Note: I think there is a potential opportunity for a educational institution or entity to step in–one that would give more bang for the buck so to speak. However, “bang for the buck” can have two different meanings–one involving better education and the other involving better employment opportunities. I have doubts about the extent to which these are correlated in real life. One goal should be to change this. Part of the issue here is that the quality of a potential worker depends on the intelligence and abilities of the workers themselves and the quality of the educational institutions they’ve attended. My sense is that, in most cases, the importance of the former is far more significant than the latter. That is, a student that is bright and motivated is far more important than the quality of educational institutions (e.g., the quality of teachers, administrators, curriculum, etc.) I tend to think that educational institutions are more limited in what they can do with students than we think. And yet, there are really talented teachers and administrators that can make a big difference in student learning. The thing is, I also don’t think there are a lot of these teachers and administrators. There My guess is that the vast majority are competent, while at truly exceptional and truly awful teachers occupy the tail ends. It is not really reasonable to expect your child to have great teachers every for every class.

(Idea: Former or current college professors or high school teachers form their own college. (See my idea for Great Books alternative to college.) They could also form contacts with different employers and work out internships. If the students who leave turn out to be intelligent, productive workers, then the school can develop a reputation which will then attract more students. The school can possibly charge more. Once the reputation is established, a fly-wheel effect can be created–attracting better students leads to better workers which improves the reputation which leads to better students, etc. While this may lead to higher costs for students and parents, my hope is that this would still be far less than most universities. If mini-schools like this crop up all over the place, could it drive down prices for traditional colleges?

Another thought: What if the Catholic churches, like a group of Jesuits, started schools like this? The idea here is that the churches would keep prices relatively low. Protestant churches could do this, too, of course.)

Both systems (U.S. education and health care) are more market driven than in just about any other country, which makes them more innovative—but also less coherent and more exploitative. Hospitals and colleges charge different prices to different people, rendering both systems bewilderingly complex, Staiger notes. It is very hard for regular people to make informed decisions about either, and yet few decisions could be more important.

This is a real interesting point, but is the comparison apt? Education doesn’t seem as confusing as health care, particularly if parents and students want to assess the degree to which a university will enhance job prospects and future salaries. They may not have precise, detailed information, and the information they do possess may not always be totally accurate, but I wonder if the existing information is sufficient. In terms of future salaries, going to college is better than not going. Schools with good reputations are generally better. There probably are inefficiencies (i.e., parents spending more at college A even though they could have spent less at college B and get a similar outcome). What I’m wondering if is better knowledge would significantly drive down costs.

With health care, I think the situation is really different. I think understanding the differences in medical options and evaluating which doctors or hospitals are providing the best care and the best price seems far more complicated. Additionally, as important as education is, the stakes for health care can be higher as in a matter of life and death. The idea of finding savings seems less of compelling force.

However, if we’re not evaluating education strictly on future salaries, then I imagine evaluating the schools can be a lot more difficult. But I wonder how many parents and students would really care about this, especially relative to future salaries?

Instead, more than three-quarters of students attend nonselective colleges, which admit at least half of their applicants. No one knows for sure how good these colleges are at their core job of educating students. But in one of the only careful, recent studies on adult skills, the OECD’s Program for the International Assessment of Adult Competencies, Americans under age 35 with a bachelor’s degree performed below their similarly educated peers in 14 other countries on the test of practical math skills. In other words, they did only slightly better than high-school graduates in Finland. America’s college grads did better in reading, performing below just six other countries, but dropped off again in another test, scoring below 13 other countries in their ability to solve problems using digital technology.

If American colleges are not adding obvious and consistent academic value, they are adding financial value. Americans with college degrees earn 75 percent more than those who only completed high school. Over a lifetime, people with bachelor’s degrees earn more than half a million dollars more than people with no college degree in the U.S. In fact, no other country rewards a college degree as richly as the United States, and few other countries punish people so relentlessly for not having one. It’s a diabolical cycle: Colleges are very expensive to run, partly because of the high salaries earned by their skilled workers. But those higher salaries make college degrees extremely valuable, which means Americans will pay a lot to get them. And so colleges can charge more. As Carey, the End of College author, summarizes: “Students are over a barrel.”

Still, the return varies wildly depending on the college one attends. One in four college grads earns no more than the average high-school graduate. Associate’s degrees from for-profit universities lead to smaller salary bumps than associate’s degrees from community colleges, which are cheaper. And two-thirds of students at for-profits drop out before earning their degree anyway, meaning many will spend years struggling with debt they cannot afford to pay off—and cannot, under U.S. law, off-load through bankruptcy.

(emphasis added)

I don’t really have much to add, but this touches on what I commented on right above this.

And college is a service delivered mostly by workers with college degrees—whose salaries have risen more dramatically than those of low-skilled service workers over the past several decades.

College is not the only service to have gotten wildly more expensive in recent decades, Feldman and Archibald point out. Since 1950, the real prices of the services of doctors, dentists, and lawyers have risen at similar rates as the price of higher education, according to Feldman and Archibald’s book. “The villain, as much as there is one, is economic growth itself,” they write.

I’d like to know the forces that have driven up the prices of these services.

(Note: I worked on this post at several different times, sometimes between large intervals of time going by. By my last addition, I had forgotten a lot of details in the article and commented mainly on the excerpts I quote above. This may have lead to some significant errors on my part.)

One thought on “Why Is College In America So Expensive?”

  1. (Note: The first post are notes on the an article from the Atlantic. I started the thread as a repository of notes for the article, but I’m converting it into a general thread exploring the reasons U.S. colleges cost so much to attend.)

    David Frum, who writes on the Atlantic, wrote a recent article on how the Democrats can prevent Bernie Sanders for taking over or dividing their party. Or to put it another way: Frum suggests a way that Biden can siphon off a lot of support for Sanders.

    He has a relatively intricate way of pinpointing a potential Sanders weakness, which I won’t go into that here (but it is worth reading), except to boil it down. Basically, Frum believes that Sanders has attracted voters who are bogged down college debt (and I would assume parents who worry about college costs), but Biden can peel these voters away from Sanders because a) they’re not fanatical Bernie brothers, and b) Bernie doesn’t have a substantive, realistic plan to address this problem. (Frum isn’t entirely clear on this last point, but I assume this is his take on Bernie’s approach.)

    But what makes Frum’s article relevant to this thread is his concise description of why colleges cost so much. Here it is:

    Here’s the core of the college-education problem: Over the past generation, states have diverted funding away from transportation and higher education to prisons and Medicaid. (The complex trend was explored by Inside Higher Ed in 2015 in a series of charts.) That redirection of state funds has shifted costs from taxpayers to students. In response, the federal government and the private sector have encouraged students to borrow to pay their tuition costs. Student debt has replaced state spending. State spending has shrunk in large part because health-care costs have surged. More and cheaper debt will not remedy the problem, which will continue to get worse as health-care costs rise. Only health-care cost discipline can save the promise of higher education.

    I don’t know if I agree with Frum or not, but it’s an interesting and plausible theory, or so it seems to me. Frum links to a report (by Demos, a left-leaning New York public policy think tank) which has a good graph, which shows 78% of cost increases come from decrease of state funding. This seems in line with other articles I’ve read.

    What’s interesting here is that Frum ties the cost of higher ed to the cost of healthcare. Decreases or control in health care costs can lead to decreasing or controlling the costs of higher ed.

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