what happens when the tuition bubble pops?

Paying for College
1

<p>I've always wondered...a lot of people keep talking about how colleges are overpriced and are fueled by a price bubble....but what will happen when the bubble pops. I can imagine that when the student loan bubble pops, some loan companies will go bankrupt and the federal budget will take a hit and maybe we'll even go into another recession.</p>

<p>But what if it reaches a point where, say, college is so expensive that colleges can't provide the financial aid necessary to support most of its students? I'm sure a few colleges will be fine, but what will happen to the rest?</p>

2

<h2>Americans, unable to attend colleges, will desperately seek low-knowledge jobs. The economy will turn upside down as waiters/waitresses, janitors, and trash men become the most competitive source of income. American intellect will drop, and along with it, the United State’s position as a superpower. Finally, China will rule the world and everyone will be happy. </h2>

<p>On a serious note…I have no idea…Pretty sure the government will do something about it before that happens…maybe…</p>

3

<p>About 75% of college expenditures go to personnel (salaries and benefits) and financial aid, so tuition will drop if and when these costs drop. A period of deflation could make this happen, but wages would also go down. The era of living beyond our means (spending more than we take in as taxes) is likely coming to an end; when our foreign financial supporters decide that we won’t be able to pay back any more added debt, watch out!</p>

<p>Wow, that was doom and gloom! :(</p>

4

<p>what would be the best case scenario? other than not really having a bubble…</p>

5

<p>The best case scenario is that common-sense principles return to college pricing. Upper middle-class families will be able to attend the colleges that they can afford, and families who chose not to save or plan for college will have to make do with what they can instead of expecting financial assistance at the expense of full-pay families. Student loan money will flow less freely, reducing the ability of colleges to price out higher-income families and the rich kid/scholarship-kid dominance of elite colleges will be replaced by equilibrium (equal distribution based on ability to contribute).</p>

6

<p>i suppose the difficult thing about that is how to implement it…</p>

7

<p>*i suppose the difficult thing about that is how to implement it…
*</p>

<p>Not really- we paid EFC for oldest to attend a private LAC- not a lot of debt left from that & I think she is nearly paid off as well. Youngest is currently attending instate univ, that is a little more expensive ironically, but still manageable.</p>

<p>The * smart people* are already looking for colleges that are good fits and affordable- plenty out there right now.</p>

<p>However, people who are swayed by the * hot name* or by * the shiny* will be going into debt for something they think they can’t live without.</p>

8

<p>@Bedouin- </p>

<p>So the rich get richer and the non-rich largely stay in the same class as they are uneducated and can only get low paying jobs?</p>

<p>The only way that your scenario would work would be if the price dropped so low that students were once again able to pay their own way by taking on few loans. Other than that, it would just lead to a worse situation for our job market as a ridiculous amount of talent would go to waste (more than already does).</p>

9

<p>Businesses, Governments, K-12 schools are all under pressure to deliver more with less. One reason why colleges are not being price competitive is that there is a lot of Federal aid that is available (including the access to loans) and the marketing hype that a good degree is worth the price.</p>

<p>When (not if) schools suddenly find that they cannot attract the type of students they want and that loans are not popular, they will have to find way to cut costs and reduce tuition. There is a lot of fat in college budgets that needs to go. The era of building dorm rooms that look like hotel rooms will stop for example. Colleges will provide spartan facilities and do everything to reduce costs and tuition. Administrator salaries will be cut.</p>

10

<p>“There is a lot of fat in college budgets that needs to go.”</p>

<p>Can you point to some budget numbers?</p>

11

<p>The concept of tenure (in and of itself) creates fat.</p>

12

<p>

</p>

<p>Yes the tenure itself creates some fat as some professors cannot be removed. Here is a US News Article</p>

<p>[The</a> Surprising Causes of Those College Tuition Hikes - US News and World Report](<a href=“http://www.usnews.com/articles/education/2009/01/15/the-surprising-causes-of-those-college-tuition-hikes.html]The”>http://www.usnews.com/articles/education/2009/01/15/the-surprising-causes-of-those-college-tuition-hikes.html)</p>

<p>Some excerpts</p>

<p>* * 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.
*</p>

<p>The theme in the above and below excerpts that there is a lot of emphasis on student services. Colleges are not hotels, I am perfectly OK with children staying in a dorm with adequate facilities if it is going to cost me less.</p>

<p>*
One of the reasons that Duke University costs about $51,000 a year is that the elite schools are in a bidding war for top faculty and better services for students, says college spokesman Michael Schoenfeld. In addition, competition for the best students forces schools to offer bigger and bigger scholarships, which means few students actually pay the full sticker price, he notes. Duke’s record-breaking flood of applications for the next academic year shows there’s still plenty of demand for what private universities offer, he says.*</p>

<p>Also this article in NYT talks about how staff jobs on campus have increased</p>

<p><a href=“http://www.nytimes.com/2009/04/21/education/21college.html?_r=1[/url]”>http://www.nytimes.com/2009/04/21/education/21college.html?_r=1&lt;/a&gt;&lt;/p&gt;

<p>*Over the last two decades, colleges and universities doubled their full-time support staff while enrollment increased only 40 percent, according to a new analysis of government data by the Center for College Affordability and Productivity, a nonprofit research center.</p>

<p>During the same period, the staff of full-time instructors, or equivalent personnel, rose about 50 percent, while the number of managers increased slightly more than 50 percent.</p>

<p>…</p>

<p>“Colleges have altered the composition of their work force by steadily increasing the number of managerial positions and support/service staff, while at the same time disproportionately increasing the number of part-time staff that provides instruction,” the report said. “Meanwhile, employee productivity relative to enrollment and degrees awarded has been relatively flat in the midst of rising compensation.” </p>

<p>*</p>

13

<p>What’s the connection between tenure and recent price increases? College tenure has been around since 1910.</p>

14

<p>Those excerpts don’t really mention the cost of tenure, except for the bit about Duke, which is more about recruiting top talent than the tenure system specifically.</p>

15

<p>I would think the connection would be the higher salaries, paid sabbaticals (which some school offer every 2 years!), and the almost non-existent teaching requirements. Although research brings in money to the university and adds prestige, it does not make top talent available to the students…the school then adds more faculty to cover that!</p>

16

<p>sk8rmom makes a very good point. Here is an excerpt from the Chronicle of Higher Education article</p>

<p>[Are</a> Colleges Worth the Price of Admission? - Commentary - The Chronicle of Higher Education](<a href=“http://chronicle.com/article/Are-Colleges-Worth-the-Price/66234/]Are”>http://chronicle.com/article/Are-Colleges-Worth-the-Price/66234/)</p>

<p>*Replace tenure with multiyear contracts. Despite fears concerning academic freedom, higher education will lose nothing by ending tenure but will reap major gains. We conclude this reluctantly. But tenure takes a huge toll at every academic level. Professors who possess it have no reason to improve their teaching, take on introductory courses, or, in fact, accept any tasks not to their liking. Meanwhile, junior faculty members pay a brutal price by succumbing to intellectual caution. If we could achieve only one reform, that would be it.</p>

<p>Allow fewer sabbaticals. We hear often that academics need every seventh year to recharge their mental batteries, yet we’ve found no evidence that this happens during a sojourn in Tuscany. We next hear that faculty members require relief from teaching to better conduct their research. Nearly 500,000 assistant, associate, and full professors could now be eligible for sabbaticals. Do we really need that many new books or articles?</p>

<p>End exploitation of adjuncts. It is immoral and unseemly to have a person teaching the same course as an ensconced faculty member but for one-sixth of the pay of his or her tenured colleague down the hall. Adjuncts should receive the same per-course compensation as an assistant professor, including health insurance and other benefits. Most adjuncts are committed teachers who were overproduced by Ph.D. factories, more politely called graduate schools. Finding money to eradicate that outcast group should have highest priority—higher, certainly, than building a mega-athletic complex or a new campus in Abu Dhabi.</p>

<p>Make presidents be public servants. They should say “thanks, but no” if their trustees offer them salaries of $1-million, or anything near it. Colleges contend that they must pump up what they pay to get the best administrators. We’re not opposed to talent, but higher education needs something more. The head of the Food and Drug Administration puts in a full day for under $200,000, as do four-star generals. Presidents needn’t take vows of poverty, but do they really need quasicorporate stipends to take the job?*</p>

<p>Here is an article specifically refereing to the state universities in Texas but has some other data. </p>

<p>[Increases</a> in Professor Pay Drive Increased Tuition — Higher education | The Texas Tribune](<a href=“http://www.texastribune.org/texas-education/higher-education/increases-in-professor-pay-drive-increased-tuition/]Increases”>Increases in Professor Pay Drive Increased Tuition | The Texas Tribune)</p>

<p>*The top professors and administrators at Texas universities routinely earn between $250,000 and $500,000, while presidents and chancellors make up to about $900,000 and top coaches haul in far more, according to salary data for more than a dozen universities and university systems added today to The Texas Tribune’s public employee salary database</p>

<p>…</p>

<p>Overall, a Tribune analysis of university pay shows salaries for professors and academic administrators range widely, from middle-class level to the truly rich. But public university salaries at all levels have been on a steep upward trend line in Texas and nationally — the average salary has nearly doubled since 1994 — and that coincides, not surprisingly, with a sharp increase in tuition. The historical figures, as reported by the state’s Higher Education Coordinating Board, show that the average annual salary for a professor in Texas has ballooned from $60,695 in 1994 to $111,944 in 2010. At the same time, the average salary in the 10 most populous states has grown from $64,220 to $113,763, according to an annual faculty survey by the American Association of University Professors. (New Jersey’s professor pay is the highest this year, with an average of more than $130,000.)</p>

<p>“It’s the marketplace,” says Don Hale, spokesman for the University of Texas. “If you want a top-tier research university — and that’s what this is, which is an economic benefit to the entire state of Texas — you either play in the game or you don’t play in the game. We’re not recruiting in Austin; we’re competing with the top research universities across the country, public and private.”</p>

<p>Tier one means higher salaries, tuition</p>

<p>The rapidly rising cost of higher education, much of it driven by personnel, has caused some to question whether colleges and their students are getting their money’s worth. Costs could continue to rise as additional state universities seek to become “tier-one” schools. The University of Houston, which is in the running for that coveted status as one of the state’s top research institutions, spent $139 million on faculty salaries and wages in 2008. Two years later, that number was up to $163 million. “We have allocated $10.1 million in our proposed budget for next year for faculty and staff recruitment and retention in support of our priorities for tier one and national competitiveness,” says spokesman Richard Bonnin.</p>

<p>…</p>

<p>Because there’s no agreed-upon definition of a tier-one university, precisely what it takes to become one can be a bit murky. The term generally refers to the top national research universities, and it’s commonly accepted that a tier-one school must have annual research expenditures of more than $100 million. Another key indicator of tier-one status is membership in the Association of American Universities, an elite association of research campuses. It also helps to have a strong national reputation, as reflected in rankings like those published in U.S. News & World Report.*</p>

17

<p>If the U.S. economic situation continues its downslide, higher ed quality will indeed suffer, along with everything else. The world still values our schools; I hope we can maintain their quality.</p>

18

<p>I think that many families will not be able to send their kids away to college or to private colleges. It seems to me this is happening to a degree now. Some of the private schools that I’ve known for many years are beginning to show more kids going to in state schools and to schools that I know give good merit money. 10 years ago, no one from some of these schools were going to SUNYs. When my college son was making his decision, several kids were having to consider finances which was not the case in those circles when my oldest was going to college. The idea was to go to the most prestigious school that would accept the kid.</p>

<p>I think that what will happen is that those schools that cannot offer “discounted” tuition to enough students are going to close. In addition to offfering those discounts, the schools are going to have to attract enough full pay kids to keep on budget. I don’t think the most selective school like HPY are going to have any problem as there will be sufficient parents willing to pay full price for their kids to go there, but lesser known schools are going to have trouble. </p>

<p>When my son turned down several very good private schools a couple of years ago, we got questionnaires with many questions regarding the role finances played in our decision. This is the first time this has happened and I had other kids apply and turn down those same schools. </p>

<p>So those kids whose parents can and are willing to pay full freight will have more college choices since ability to pay would take a larger role in admissions, and those who need the most money will be limited to local, state schools unless they have something school are willing to pay for.</p>