6 ms·

The Cost of College is Probably Going to Keep Going Up

28 points by mtviewdave 15y ago

TomOfTTB 15y ago
I think this article misses the point. The problem with our University system right now is they have a monopoly. A correct market price can only be set if competition is allowed and that only happens when everyone is allowed to compete. That's the not the case right now. The bar to gain accreditation is so high that only large universities and (relatively) dishonest private corporations can get accredited. This puts an artificially high barrier to entry for competition. If we made one simple change and accredited testing facilities instead of Universities the cost of education would plummet. What I mean by this is we as a society say... "This is what a [Insert Major Here] should know. We don't care how you get the knowledge. At University, Online, Divine Intervention, whatever. Anything is acceptable as long as you can prove you have the knowledge at an accredited testing facility." So the tests would be the same because they would be the tests students take at University now and testing facilities would have to prove they can administer those tests properly. But you could get the knowledge wherever you choose. So if you can pass the tests for a BS in Mathematics by watching Khan Academy videos that's fine. I can't even imagine how fast the cost of an education would fall if that happened.
- tzs 15y ago
  > The bar to gain accreditation is so high that only large universities and (relatively) dishonest private corporations can get accredited What stops an honest private corporation from getting accredited?
  - doyoulikeworms 15y ago
    I'm guessing guild-like political discretion.
    - TomOfTTB 15y ago
      And financial requirements. Because public universities have subsidies and donations coming in they can afford facilities required by some of the more arcane standards. Private Universities have to charge an arm and a leg and basically bury students in debt they'll likely never pay. If you aren't willing to do that you have a hard time succeeding
  - drcube 15y ago
    Nothing. They call those "universities".
- deleted 15y ago
  [deleted]
- Turing_Machine 15y ago
  Testing is the wrong approach, IMO. It's, at best, a proxy for actual knowledge, and suffers from the inherent problems of all proxy measures (the same is true for grades -- if a class is worth taking, there's way too much material to boil it down to a single letter). We've used tests and grades in the past because we had no better option, but that's no longer the case. The web lets us assemble large-scale portfolios of our actual work and transmit them to potential employers with a link. As an employer, would you rather see: a) A transcript showing that the person got an A in his CS senior design project (or got some specified score on a test). b) A link to github which lets you see the actual code that the person wrote for the project. I know which one I'd rather see. There's no real reason why a student couldn't deposit all of his work in an archive (with perhaps some sort of vetting/certification by the professor or institution), then grant access to the archive (or selected parts of the archive) to potential employers.
  - tbrownaw 15y ago
    I'd rather see a usable sort key (item a), maybe with a short description. Given that you have a position to fill, and a deadline for when you need it filled, and a large number of applicants, and other everyday work you need to keep doing... how many minutes each are you able to spend on a first-pass review of the applicants?
    - randomdata 15y ago
      As they saying goes, you get what you give. There's nothing wrong with picking someone that way, but you're essentially selecting someone based on random chance. You'll probably find someone who is adequate at the job, and if that is what you want, who am I to judge? But the recurring theme on HN is that people want to hire the best of the best. The best people are 10 times more productive, they say. It may be conjecture, maybe businesses don't want that kind of person at all, but selecting someone from a sorted list is almost never going to find you that person. For that, you're going to have to put in some effort. Anyway, it doesn't matter how you do it. The benefit of the open market is that the one who does it right will find greater success with their hire.
ctdonath 15y ago
Supply and demand. So long as enough people are willing to pay a high price (thru whatever means conceivable, including compelling taxpayers to foot the bill) the price will keep rising. When enough people stop agreeing to such high costs, it will stop.
- CWuestefeld 15y ago
  I'm surprised that Mr. Drum is so economically ... unsophisticated. And the quotation he opens with is downright stupid; no conspiracy or nefarious intent is needed to explain the phenomenon. As you say, it boils down to those basics. One would expect that as prices rise, fewer people would attend college. However, as Americans wail that college costs are too high, the government attempts to "help" by subsidizing the costs through various means. But given the number of applicants, colleges still need to limit enrollment to their actual capacity, and the way to keep some people out is by raising prices, allowing those at the lower margin (in terms of their desire to attend) to drop out of the running. But I think that the accounting for the benefits (and opportunity costs) of attending college is way more complex than just looking at differences in income. There is also a person's feeling of personal accomplishment or growth; the student's (or their parents) status; signalling of group membership; and so on. And it seems that a college education is a product whose elasticity is very low. As a society, we've come to view it as such a significant marker for job ability and for social status that we've grown increasing convinced that it's a necessity, and thus colleges must raise prices even faster to keep the enrolled population (i.e., quantity demanded) manageable.
- matwood 15y ago
  (thru whatever means conceivable, including compelling taxpayers to foot the bill) This is the key. The day student loans are reigned in is the same day prices will fall. I know someone who works in admissions for a small school. Oddly enough their tuition prices are almost exactly what the majority of students can qualify in a loans plus the lottery education money. All one has to do is look at all the crappy for profit school that have popped up. There is big money in selling people on spending a lot of money on a junk degree. What's amazing to me is that many of these non-accredited schools are more expensive then the local accredited colleges. What they have though is much better marketing.
onemoreact 15y ago
This ignores the opportunity cost of working while in collage for many students collage does cost 75+k / year. The average collage student could probably make ~20+k/year, but some people can earn 40+k/year and still decide to pay for collage.
- streptomycin 15y ago
  No, it doesn't. > Now, there's some controversy about whether the college wage premium is really that high. For the time being, though, there's certainly a widespread belief that a college degree is worth about a million bucks. And as long as that belief persists, people are going to act as if the market price of a university education averages $75,000 per year. It's not about actual opportunity costs and actual value, it's about perceived value.
  - randomdata 15y ago
    Although a little awkwardly worded, I believe what the parent meant is that the cost of education is actually higher than the tuition makes it seem, because of the lost opportunity. If you can earn $40,000 at a job, but instead elect to take a $20,000 job and go to school at the same time, the cost for that year is tuition (let's assume that $75,000 figure) plus another $20,000 in opportunity costs, or $95,000. $115,000 for the year if you decide to not work at all during that time.
  - onemoreact 15y ago
    The author ends with: given that universities are most likely still charging a lot less than their market price even after years of stiff tuition increases, my guess is that we're in for yet more pain one way or another. When you include opportunity costs and risks of not finishing in 4 years many collages's tuition costs are vary close to the value they provide. With some degrees being a net economic gain and other a net economic loss. Granted all of these numbers are hard to calculate but there is simply less headroom than his analysis suggests. Edit: It looks like there is a bug where I can up vote this post.
    - 15y ago
knowtheory 15y ago
It's shit like this that reminds me that we're entering a new Dickensian era. Is the point of educating a populace solely added economic productivity?
- drumdance 15y ago
  That sounds noble, but it's really about what the students are purchasing, right? The most popular major is business. (Though IMO it's not a very useful major.) Psychology is #2. http://www.princetonreview.com/college/top-ten-majors.aspx http://www.princetonreview.com/college/top-ten-majors.aspx I think there should be a major in "applied psychology" because so much of success in the white collar world is understanding and motivating co-workers.
patrickgzill 15y ago
Is it not the case, that there are many college grads looking for work and not finding it? Would this not serve to reduce future demand, since obviously, graduating doesn't necessarily result in better job prospects.
- matwood 15y ago
  That may be true, but the last time I checked stats college grads unemployment rate was half or better compared to no college.
rtperson 15y ago
Valuation doesn't work the way this guy thinks it does. If I buy a hammer and use it to build a house that I then sell for 300K dollars, it does not stand to reason ipso facto that my hammer now costs 300K dollars. Yet this is exactly the level of reasoning that goes into his valuation for a university education. The hammer costs what supply and demand say it should cost. And with universities, you have a case of increasingly plentiful supply for most materials chasing relatively stable demand. So market reality dictates that prices will fall, if not now then eventually.
- johno215 15y ago
  Agree. But, I am not convinced college tuitions will fall. Demand is increasing. Just in the last 10 years enrollment has increased 30% and is still increasing. Any ranked university/college does not have trouble filling their enrollment goals with their current tuition. Although there may be some delayed price pressure from higher prices causing lower caliber students to enroll, thus decreasing the ranking of the school, and thus reducing what they can charge. In addition, most american try to achieve a middle class lifestyle at a minimum. And culturally a middle class lifestyle entails the children having a college experience (and its associated costs).
- wlesieutre 15y ago
  No, but it does mean that accredited hammers were only available for $100,000 and up, it would still make sense for you to buy one. The problem isn't that you can't get educated outside of the university education system. It's that people assume that someone with a college degree is educated, and someone without one isn't. I consider that no more accurate as assertions that grade school students haven't learned anything unless they can pass a standardized test, but I don't think there's an easy solution. For the near future at least, college degrees will continue to be the main criteria for guessing if someone's qualified for a lot of jobs.
  - skybrian 15y ago
    Accreditation is a barrier to entry, but it's not insurmountable. The supply can still go up, particularly if prices are expected to rise.
jdeibele 15y ago
The article didn't mention the fact that student loans are not discharged in a bankruptcy. There are far too many students who go to school, find out it's not for them, but are stuck with students loans that must be paid. There was an article on here a few months ago with a graph showing the growth of administration versus faculty in the University of California system. Starting from a low (5-10%) ratio of administrators:faculty it's now reached at least parity. Imagine being able to buy a house where you don't have to pay for it until you move. And offering that only to 18-year-olds. What kind of purchase decisions do you think they'd make?
iterationx 15y ago
No discussion of college pricing is complete without this graphic, http://www.collegescholarships.org/research/student-loans/ http://www.collegescholarships.org/research/student-loans/

28 points by mtviewdave 15y ago

I think this article misses the point. The problem with our University system right now is they have a monopoly. A correct market price can only be set if competition is allowed and that only happens when everyone is allowed to compete. That's the not the case right now. The bar to gain accreditation is so high that only large universities and (relatively) dishonest private corporations can get accredited. This puts an artificially high barrier to entry for competition. If we made one simple change and accredited testing facilities instead of Universities the cost of education would plummet. What I mean by this is we as a society say... "This is what a [Insert Major Here] should know. We don't care how you get the knowledge. At University, Online, Divine Intervention, whatever. Anything is acceptable as long as you can prove you have the knowledge at an accredited testing facility." So the tests would be the same because they would be the tests students take at University now and testing facilities would have to prove they can administer those tests properly. But you could get the knowledge wherever you choose. So if you can pass the tests for a BS in Mathematics by watching Khan Academy videos that's fine. I can't even imagine how fast the cost of an education would fall if that happened.

tzs 15y ago
> The bar to gain accreditation is so high that only large universities and (relatively) dishonest private corporations can get accredited What stops an honest private corporation from getting accredited?
- doyoulikeworms 15y ago
  I'm guessing guild-like political discretion.
  - TomOfTTB 15y ago
    And financial requirements. Because public universities have subsidies and donations coming in they can afford facilities required by some of the more arcane standards. Private Universities have to charge an arm and a leg and basically bury students in debt they'll likely never pay. If you aren't willing to do that you have a hard time succeeding
- drcube 15y ago
  Nothing. They call those "universities".
deleted 15y ago
[deleted]
Turing_Machine 15y ago
Testing is the wrong approach, IMO. It's, at best, a proxy for actual knowledge, and suffers from the inherent problems of all proxy measures (the same is true for grades -- if a class is worth taking, there's way too much material to boil it down to a single letter). We've used tests and grades in the past because we had no better option, but that's no longer the case. The web lets us assemble large-scale portfolios of our actual work and transmit them to potential employers with a link. As an employer, would you rather see: a) A transcript showing that the person got an A in his CS senior design project (or got some specified score on a test). b) A link to github which lets you see the actual code that the person wrote for the project. I know which one I'd rather see. There's no real reason why a student couldn't deposit all of his work in an archive (with perhaps some sort of vetting/certification by the professor or institution), then grant access to the archive (or selected parts of the archive) to potential employers.
- tbrownaw 15y ago
  I'd rather see a usable sort key (item a), maybe with a short description. Given that you have a position to fill, and a deadline for when you need it filled, and a large number of applicants, and other everyday work you need to keep doing... how many minutes each are you able to spend on a first-pass review of the applicants?
  - randomdata 15y ago
    As they saying goes, you get what you give. There's nothing wrong with picking someone that way, but you're essentially selecting someone based on random chance. You'll probably find someone who is adequate at the job, and if that is what you want, who am I to judge? But the recurring theme on HN is that people want to hire the best of the best. The best people are 10 times more productive, they say. It may be conjecture, maybe businesses don't want that kind of person at all, but selecting someone from a sorted list is almost never going to find you that person. For that, you're going to have to put in some effort. Anyway, it doesn't matter how you do it. The benefit of the open market is that the one who does it right will find greater success with their hire.

ctdonath 15y ago

Supply and demand. So long as enough people are willing to pay a high price (thru whatever means conceivable, including compelling taxpayers to foot the bill) the price will keep rising. When enough people stop agreeing to such high costs, it will stop.

CWuestefeld 15y ago
I'm surprised that Mr. Drum is so economically ... unsophisticated. And the quotation he opens with is downright stupid; no conspiracy or nefarious intent is needed to explain the phenomenon. As you say, it boils down to those basics. One would expect that as prices rise, fewer people would attend college. However, as Americans wail that college costs are too high, the government attempts to "help" by subsidizing the costs through various means. But given the number of applicants, colleges still need to limit enrollment to their actual capacity, and the way to keep some people out is by raising prices, allowing those at the lower margin (in terms of their desire to attend) to drop out of the running. But I think that the accounting for the benefits (and opportunity costs) of attending college is way more complex than just looking at differences in income. There is also a person's feeling of personal accomplishment or growth; the student's (or their parents) status; signalling of group membership; and so on. And it seems that a college education is a product whose elasticity is very low. As a society, we've come to view it as such a significant marker for job ability and for social status that we've grown increasing convinced that it's a necessity, and thus colleges must raise prices even faster to keep the enrolled population (i.e., quantity demanded) manageable.
matwood 15y ago
(thru whatever means conceivable, including compelling taxpayers to foot the bill) This is the key. The day student loans are reigned in is the same day prices will fall. I know someone who works in admissions for a small school. Oddly enough their tuition prices are almost exactly what the majority of students can qualify in a loans plus the lottery education money. All one has to do is look at all the crappy for profit school that have popped up. There is big money in selling people on spending a lot of money on a junk degree. What's amazing to me is that many of these non-accredited schools are more expensive then the local accredited colleges. What they have though is much better marketing.

onemoreact 15y ago

This ignores the opportunity cost of working while in collage for many students collage does cost 75+k / year. The average collage student could probably make ~20+k/year, but some people can earn 40+k/year and still decide to pay for collage.

streptomycin 15y ago
No, it doesn't. > Now, there's some controversy about whether the college wage premium is really that high. For the time being, though, there's certainly a widespread belief that a college degree is worth about a million bucks. And as long as that belief persists, people are going to act as if the market price of a university education averages $75,000 per year. It's not about actual opportunity costs and actual value, it's about perceived value.
- randomdata 15y ago
  Although a little awkwardly worded, I believe what the parent meant is that the cost of education is actually higher than the tuition makes it seem, because of the lost opportunity. If you can earn $40,000 at a job, but instead elect to take a $20,000 job and go to school at the same time, the cost for that year is tuition (let's assume that $75,000 figure) plus another $20,000 in opportunity costs, or $95,000. $115,000 for the year if you decide to not work at all during that time.
- onemoreact 15y ago
  The author ends with: given that universities are most likely still charging a lot less than their market price even after years of stiff tuition increases, my guess is that we're in for yet more pain one way or another. When you include opportunity costs and risks of not finishing in 4 years many collages's tuition costs are vary close to the value they provide. With some degrees being a net economic gain and other a net economic loss. Granted all of these numbers are hard to calculate but there is simply less headroom than his analysis suggests. Edit: It looks like there is a bug where I can up vote this post.
  - 15y ago

knowtheory 15y ago

It's shit like this that reminds me that we're entering a new Dickensian era. Is the point of educating a populace solely added economic productivity?

drumdance 15y ago
That sounds noble, but it's really about what the students are purchasing, right? The most popular major is business. (Though IMO it's not a very useful major.) Psychology is #2. http://www.princetonreview.com/college/top-ten-majors.aspx http://www.princetonreview.com/college/top-ten-majors.aspx I think there should be a major in "applied psychology" because so much of success in the white collar world is understanding and motivating co-workers.

patrickgzill 15y ago

Is it not the case, that there are many college grads looking for work and not finding it? Would this not serve to reduce future demand, since obviously, graduating doesn't necessarily result in better job prospects.

matwood 15y ago
That may be true, but the last time I checked stats college grads unemployment rate was half or better compared to no college.

rtperson 15y ago

Valuation doesn't work the way this guy thinks it does. If I buy a hammer and use it to build a house that I then sell for 300K dollars, it does not stand to reason ipso facto that my hammer now costs 300K dollars. Yet this is exactly the level of reasoning that goes into his valuation for a university education. The hammer costs what supply and demand say it should cost. And with universities, you have a case of increasingly plentiful supply for most materials chasing relatively stable demand. So market reality dictates that prices will fall, if not now then eventually.

johno215 15y ago
Agree. But, I am not convinced college tuitions will fall. Demand is increasing. Just in the last 10 years enrollment has increased 30% and is still increasing. Any ranked university/college does not have trouble filling their enrollment goals with their current tuition. Although there may be some delayed price pressure from higher prices causing lower caliber students to enroll, thus decreasing the ranking of the school, and thus reducing what they can charge. In addition, most american try to achieve a middle class lifestyle at a minimum. And culturally a middle class lifestyle entails the children having a college experience (and its associated costs).
wlesieutre 15y ago
No, but it does mean that accredited hammers were only available for $100,000 and up, it would still make sense for you to buy one. The problem isn't that you can't get educated outside of the university education system. It's that people assume that someone with a college degree is educated, and someone without one isn't. I consider that no more accurate as assertions that grade school students haven't learned anything unless they can pass a standardized test, but I don't think there's an easy solution. For the near future at least, college degrees will continue to be the main criteria for guessing if someone's qualified for a lot of jobs.
- skybrian 15y ago
  Accreditation is a barrier to entry, but it's not insurmountable. The supply can still go up, particularly if prices are expected to rise.

jdeibele 15y ago

The article didn't mention the fact that student loans are not discharged in a bankruptcy. There are far too many students who go to school, find out it's not for them, but are stuck with students loans that must be paid. There was an article on here a few months ago with a graph showing the growth of administration versus faculty in the University of California system. Starting from a low (5-10%) ratio of administrators:faculty it's now reached at least parity. Imagine being able to buy a house where you don't have to pay for it until you move. And offering that only to 18-year-olds. What kind of purchase decisions do you think they'd make?

iterationx 15y ago

No discussion of college pricing is complete without this graphic, http://www.collegescholarships.org/research/student-loans/ http://www.collegescholarships.org/research/student-loans/