<p>The High Cost of Higher Education<br>
Aired: Friday, August 26, 2005 10-11AM ET</p>
<p>College tuitions are climbing to the moon, and everyone has a different explanation of where the problem lies and how to fix it.</p>
<p>Some say that universities are simply charging the maximum that the market will bear. Others say parents and students have higher expectations about what the college experience should include.</p>
<p>The one thing everyone agrees on is that college tuitions should be lower, but everyone has a different idea of how to get there. </p>
<p>Hear from some of the leading voices in this debate who will look at the statistics and try to sort out what it means to parents who are nervously eying the bottom line. </p>
<p>Those of you in Boston it is playing right now on 90.0 FM otherwise you can listen directly from the website listed above.</p>
<p>But few people pay the sticker price and for those who do their research, big discounts can be had. Our DS did his due diligence and is paying a mere 16.67% of the tuition/fees sticker price, the rest being merit aid.</p>
<p>In addition there is oodles of need based aid too. </p>
<p>Now whether merit or need based aid is keeping up with tuition increases is another matter.</p>
<p>"The one thing everyone agrees on is that college tuitions should be lower, but everyone has a different idea of how to get there."</p>
<p>Guess I'm not included in "everyone". I think private college tuitions should be HIGHER (and, maybe, much higher) - with those who do not require the subsidy not getting any, and more folks, in toto, getting "financial aid". I don't quite understand why my pitiful alumni contribution should subsidize rich kids who don't need it when it could be subsidizing scholarships for middle-income or low-income ones.</p>
<p>Costs at state universities are already too high for many low-income students. Legislatures are not going to allocate more bucks. So, again, I think tuitions are too low, and should be set at a sliding scale rate. The public purposes of public education demand that the doors be opened wider.</p>
<p>Most states--outside our Washington and a few others have an insome tax where the rich already pay more for the same services. You are advocating a form of double taxation that is unfair. You don't want state schools to become ghetto schools of the poor either.</p>
<p>I think there is no way that is likely to happen. In our state, the poor pay a far higher percentage of their income in state taxes than the rich. For the record, while I think it is a total red herring, I am in favor of double taxation - it is the state that provided the opportunities to begin with. The business community needs an educated workforce, and isn't willing to pay for it directly, so "double taxation" (it's really a non sequitur) works for them...and for me. And if the wealthy want to increase the number of applications they send to Yale, more power to them. It's a free country - let them buy their way in (as many do now). </p>
<p>In the private sector, the free market WILL rule. What I'm advocating is precisely what is happening. The list price will go up faster than costs and faster than the rate of inflation. At present, for the top 50-75 schools or so, as prices go up, demand goes up, so there's no reason why this trend won't continue. And I don't think that's a bad thing - on the contrary, I think it is a good one - good for the schools, good for the students, good for the alumni, good for contributors.</p>
<p>Public higher education is a public service as much as parks, lower level schools and highways and all state citizens should have an equal right to the use that service for the same price. If you drive out the middle-upper income students from the state schools it will begin a downward spiral for public higher education in that state. The quality of students will fall, faculty will leave for better schools, and companies will stop recruiting. You will have a hollow shell of a school.</p>
<p>Oh, come off it. No one's driving out the middle-upper income students. In fact, just the opposite is happening and you know it (there is very good data on this issue, much discussed in this forum.) But if they want to go to Yale, I say let 'em. </p>
<p>Of course, much higher business and estate taxes would do the trick.</p>
<p>You are advocating a large increase in instate tuition so there is no current comparison therefore you can't state that no students would be driven out of the system. However basic economics teaches us that as a price goes higher we will consume less of a good and/or seek cheaper substitutes. Add in the fact that middle-upper income people tend to be better informed about options--especially when it comes to education--they will most likely start looking at viable substitutes. It certainly happens when state schools increase the out of state tuition markedly--yield on OOS students goes down--a lot.</p>
<p>I just completed listening to the stream of the broadcast keynoting this thread. One area was not mentioned...and that was the cost of big time college sports. Living in Virginia with two D's in state supported schools, I have watched tuition and fees ratchet up significantly over the past few years. I also observed that, as the broadcast alluded to, the state needs to spend $ on K-12 education, increases for Medicaid, etc. But I also noted an item in the Washington Post the other day, that one Virginia state institution of higher learning was negotiating a multi-year contract with their head football coach to pay $2M dollars a year. Another Virginia state institution, a few months ago bought out the contract of their basketball coach by another 7 figure sum. (I happened to watch the team play a game leading to the playoffs last Spring---they seemed to play a pretty spirited game to me.) Something does not compute here in the value system for higher education, with the emphasis on the word "education".</p>
<p>At our state university the atheletic department is completely self supporting; no tuition or tax dollars fund it. I would imagine this is generally the case at the institutions that are paying coaches seven figure salaries.</p>
<p>MIni: I have seen you on other posts.. I initially thought you were some sort of knee jerk anti-establishment type. I did go to your website, got a sense from other posts and now I am always intrigued when you are posting ... so 'props as they say these days' to thinking about issues.</p>
<p>So my thoughts, first I am a suburban, southern, white , republican. Though I grew up a rural, lower income, democrat. </p>
<p>So, first is the view of whether education is a'right ' or some sort of entitlement' well I would say no. A big "however" though, is that as a society we have concluded -rightly I believe - that an educated citizenry is good for the society as a whole. In other words here in my suburban fantasy world -even for selfish reasons I dont want 2million uneducated, underfed, underhoused citizens down the road --they may want my stuff. :) </p>
<p>Now, mini, in other posts has made some inferences about how education was set up in the early 20th century to feed the large corporations -- I am not knowledgeable(would love to hear more) ..so I am a little out of my league, but I do truly want to hear minis comments.</p>
<p>The question becomes, what role higher education , especially vis-a-vis public universities. Low in-state tuitions are defacto subsidies to everyone. Not necessarily bad. But clearly at times 'rich kids ' could pay more to subsidize 'lower income' and thus meet the goal of an educated citizenry, in my opinion helpeing everyone including themselves. </p>
<p>As to private schools, charge away until there value is no longer balanced with demand and it will come down. </p>
<p>I do think high achievers and high quality public universities help everyone so a balance is needed. </p>
<p>"You are advocating a large increase in instate tuition so there is no current comparison therefore you can't state that no students would be driven out of the system. However basic economics teaches us that as a price goes higher we will consume less of a good and/or seek cheaper substitutes."</p>
<p>So explain how, for the past 20 years, as costs at private colleges have soared higher and higher, demand and selectivity have soared along with it? The reality is that there already HAS BEEN a huge increase in state tuitions as well, and it has resulted in MORE rather than fewer higher income attendees.</p>
<p>Your basic economics is failing you, isn't it?</p>
<p>(By the way, I am not in favor of higher income STUDENTS subsidizing lower income ones. That doesn't happen now. I am in favor, at private colleges, of eliminating the subsidy that I pay - through my annual alumni contribution and through the endowment, which represents past contributions - that subsidizes those who don't require it, and INCREASING financial aid to those who would. In the public sector, I would much prefer substantially higher business taxes, rather than wealthier students subsidizing poorer ones. The colleges currently have chosen neither, but are simply enrolling wealthier students at higher tuition rates without providing increased subsidies to lower income ones. And that's bad for business.)</p>
<p>There was a book written by Derek Bok (ex-President of Harvard) a few years ago titled: "Universities in the Market Place". In it he states, that many schools, even though there is a plan for self-sufficiency in big time athletics, do end up taking a financial hit. Let's assume for the sake of argument that a state supported school is, in fact, successful in sequestering the economics of big-time athletics from its academic mission. In times such as these when academic budgets are squeezed, the disparity between the two functions seems to be out of balance for institutions that were created with academics as a primary mission. We all know that healthy bodies, exercise and lessons learned from athletic competition are important in developing the "total person", but in this day and age, again, there appears to be a lack of balance--at least, to me.</p>
<p>Only at a relative handful of elite privates has the good been so valued that they have been able to increase tuition by great amounts without losing demand. That's because a higher than ever value has been placed on an elite college diploma--by some. There are also some demographic factos at work--a mini-boom in students. Many mid-level privates struggle to keep enrollment up and have resorted to extensive marketing and tuition discounting.</p>
<p>Actually mini, most of the top schools have started to enroll lower-income students at greater percentages than ever before. Socio-economic diversity has been a huge push for schools recently.</p>
<p>" Many mid-level privates struggle to keep enrollment up and have resorted to extensive marketing and tuition discounting."</p>
<p>You see that as a problem? I thought that's the way a free market is supposed to work! Wouldn't it be great if lots of those higher income students crowding state universities would take advantage of that and open up places for those who have no other place to go?</p>
<p>Actually, though, the market for luxury goods never obeys free market principles. Just the opposite - as Veblen noted almost a hundred years ago, the prestige value of a luxury good goes UP as its price goes up - and without any change in the "quality" or the product whatsoever. Raise the price of Yale (as they are doing - they don't need me to tell them that), and it's appeal will increase, without any change in academic quality. (There are actually several private schools that used that as a strategy in the past three decades - Georgetown and NYU immediately come to mind - and had their relative prestige soar.) In the meantime, by progessively eliminating the subsidy for rich folks, my measly alumni contribution will go where it was intended.</p>
<p>"Actually mini, most of the top schools have started to enroll lower-income students at greater percentages than ever before. Socio-economic diversity has been a huge push for schools recently."</p>
<p>While I don't yet have new data on Pell Grants, I do have the new data on percentage of student populations at private universities who are paying full freight. With very rare exceptions (and even those very minor - I do have a list), even as prices have gone up, so has the percentage of full-freight customers attending. In other words, the data don't support the notion that there is a "huge push", but rather a "nudge" in the opposite direction.</p>
<p>One thing that I think has happened in the last 30 years is the idea that college, while being a public good, is also a private good. So, since it is a private good, if you have the ability to pay, you better pay since you personally benefit by a college education.</p>
<p>The problem I see with just raising tuition is the rate of return in investment starts to fall and you will eventually make it impossible for those that aren't at the top financially to afford the school, while those with financial aid, the poor, will be able to go to college. </p>
<p>I am a strong believer in the poor having access to a college education, but what about access for the middle class? It makes no sense to me to have a system where everyone is priced out except those at the top and bottom.</p>
<p>Also, the public moves slowly. They will figure out some day that paying $200,000+ for a college education doesn't necessarily make economic sense.</p>
<p>I think the discussion is proceeding at cross-purposes, along the lines of Ivy or bust.</p>
<p>Here are some stats:
UMass-Amherst: (18,720 undergraduates)
in-state tuition: $9,278
room& board: $6,517
subtotal: $15,895
plus unspecified additional costs (health insurance, activities fees, etc..)</p>
<p>Four years total: $63,580</p>
<p>Harvard (6,600+ undergraduates)
tuition: $28,752
room&board: $9,578
plus additional costs for a total cost of attendance estimated at $43k.
4 years total: $172,000</p>
<p>'The problem I see with just raising tuition is the rate of return in investment starts to fall and you will eventually make it impossible for those that aren't at the top financially to afford the school, while those with financial aid, the poor, will be able to go to college."</p>
<p>It is a good theoretical concern, but consider that (at the public's now) the very rich pay exactly the same as the middle class folks you are worried about. By NOT allowing tuitions to rise faster (they are rising anyway), and then providing aid to those who need, the middle class loses out. Of course, higher business and estate taxes could take of all of that, but that's not the way things are trending.</p>
<p>At the privates, where more than 50% of the student body receives no need-based aid, 70% of those who receive aid are in the top quintile ($100-$150k incomes). It's not like those under $100k in incomes are taking up the spaces (or the aid) - at many of the top ones, they make up around 15% of the student body. (By the way, there are exceptions - the most notable being USC, which has a wildly bifurcated student body.)</p>
<p>As to the value of the investment, now THAT'S a toughy. There is no question that it is falling. The Department of Labor says that more than three-quarters of college graduates did not need college-level skills to do their jobs. More and more jobs require college degrees at exactly a time when fewer and fewer require the skills to be obtained there. In aggregate (with huge numbers of exceptions) you can't obtain a decent job without it, and you can't get a better job with it. So everyone is supposed to "suck it up". </p>