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We have to ask ourselves why college is so expensive. When some people read articles like this, they call for more government aid to students. "We need to help

We have to ask ourselves why college is so expensive. When some people read articles like this, they call for more government aid to students. "We need to help young, hard working students from unprivileged backgrounds to pay for college!" Their hearts are certainly in the right place, and it isn't an unreasonable idea at first glance. However, could this idea be part of the problem? Maybe giving people free money for college isn't the best idea. There are four ways to spend money: 1) You spend your own money on yourself 2) You spend someone else's money on yourself 3) You spend your money on someone else 4) You spend someone else's money on someone else When you spend your own money on yourself, you are very selective with how that money is spent. Not only do you gain from what you buy, you also lose money you could use to buy other things. The other three situations are ones in which being selective isn't as important to the spender. Why does this matter? When people pay for college themselves, we are in situation 1; they have an incentive to choose a college they can afford while still being a great place to learn. When a student gets free money proportional to tuition, they can choose a school that charges ridiculously high rates for tuition. (Student loans are a middle ground. They are still spending money on themselves, but people the age of college students tend to be more frivolous with loans than money they earned, so they are still less interested in the price.) The more students that get free money for college, the higher the cost of college becomes, because the equilibrium price of college gets distorted. If all student aid disappeared tomorrow, then certainly the cost of college would decrease. If colleges get more money, then where does it go? Certainly not directly to education. It goes to fancy buildings to impress donors, and supporting the ultimate cash cow: government research grants. It goes to inflating the administrative staffs and inflating the salaries of the highest ranked members of that staff. If it was possible to pay for college on minimum wage, I wonder why we ever changed the system.

bequanna 13y ago
> It goes to inflating the administrative staffs and inflating the salaries of the highest ranked members of that staff. This. Bureaucratic bloat, no accountability and terrible efficiency. Many Universities are the largest employers in their state. Do our Universities exist to be Research and Educational institutions, or to employ armies of admin workers that push papers?
- dangerlibrary 13y ago
  Porque no los dos?
- HarryHirsch 13y ago
  It's popular here to blame the growth of administrative and non-teaching staff on a self-serving bureacracy, but I don't think that's the case, it is due to circumstances. The size of IT infrastructure has grown immensely compared to 30 years back, so you need people to take care of that. My department has four IT support people, and they carry a full workload. The amount of foreign students has grown, consequently you need people to keep track of immigration requirements that seem to get worse each passing year, and you also need cultural programs, you can't expect people from non-western countries to be thrown into an alien culture and succeed. The number of non-traditional and first-generation college students has grown, if the student body consists only of middle-class and wealthy people you don't need support staff for the students who teach them how to study. Then there is career services, these things are expected these days. Back when you knew the major employers, and they had a hiring pipeline at your university. There is also this competition through facilities, gyms and really fancy dorms are the norm, and those things need looking after. Anyone who proposes cutting back on administrative staff must give suggestions how to deal with all these issues.
  - jdreaver 13y ago
    Everyone pays for these services, but not everyone uses them. For example, I had to pay a ridiculous $600 per year for the recreation center fee in college. I never once stepped in that place, and they wouldn't let me not pay it. I also never used my college's career center, and I have a job. The services you listed are great; I'm not saying gyms and career centers are bad at all. The problem is that everyone in the school is forced to pay for them. The bloat comes because they get more funding than they need.
    - HarryHirsch 13y ago
      Everyone pays for these services, but not everyone uses them. Here's the deal: it's not about you, it's the university that runs the numbers and decides where the scarce funds will go. (Yes, the funds are scarce. The machinist in my old department will retire soon, and the fear is that there won't be a replacement. When he leaves it will be a disaster, there won't be custom-built instrumentation any longer.) If the rec. center attracts more tuition than it costs to provide there will be a rec. center. If the center for remedial math will prevent an unprepared student from dropping out - if three years more in tuition provides more money than running the courses then there will be remedial math. That's how non-teaching staff are allocated.
bsder 13y ago
> We have to ask ourselves why college is so expensive. Because you cannot discharge student loan debt through bankruptcy. If students could discharge their debt, loans would match risk better and decrease. In turn, colleges wouldn't be able to raise their prices as far since they would price themselves out of students.
brudgers 13y ago
In the US, few students get much free money these days. Instead they get loans which charge hefty origination fees - like 5 points, and which are almost impossible to discharge via bankruptcy...despite the fact that many of them are backed by insurance and those which are not insured typically compound interest during the time the student is in school (typically on the full principle). The bloat has not been fueled by anything but massive consumer debt foisted on those least experienced with personal finance and with the least work experience and who these days are lucky to find an entry level professional position.
- jdreaver 13y ago
  I agree. Most of those loans, however, are sponsored by the government and can't be defaulted on. No normal lender would give an 18 year old $50,000 to get a degree in anthropology, because they are unlikely to get it back. When the student is legally obligated to pay it back, then there is much little risk to the lender. If defaulting on student loans were possible, then the cost of college would decrease.
  - spikels 13y ago
    How would allowing defaults on government guaranteed student loans lower the cost of college? Cost would likely increase for most students. If loan interest rates were increased to compensate for the additional losses this would increase the cost for everyone getting a college loan who doesn't default. And since default has significant costs overall costs would also go up. Lastly this would reduce the incentive to make wise decisions on educational choices. On the other hand if interests rate remained the same then this be an would increase government subsidies and thus demand and thus costs for everyone. And again would reduce the incentives to make sound financial choices on education spending. Either way costs would very likely increase for most students and we would get a less efficient education system.
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    - 13y ago
huherto 13y ago
I think the problem is the loans. It drives prices up. Because when college prices go up, kids just get a bigger credit. It looks so far in the future, at 18 they don't really know if they will be able pay them.
Suncho 13y ago
I think a lot of the rise in tuition has to do with jobs. Society tells people they need to earn a living through a job. This makes people desperate for jobs to the extent that they'll generally pay whatever it takes to maximize their job prospects. So, basically you have a situation in which demand for the best possible education is inelastic. Pretty much everybody wants it and is willing to pay anything they can for it. If you offer students more money to spend on their education, they naturally will. That means that schools are in the very powerful position of deciding who deserves the privilege of an education. But, at the same time, they're competing with each other for the best students. If money is no object for the students, you can bet that schools will spend as much as possible to get the "best" students. Fancy buildings aren't just there to impress donors. They're there to impress prospective students. I think MOOCs will help and basic income will help. High tuition isn't a problem if you don't need to go to school. You don't need to go to school if you don't need a job and you can educate yourself elsewhere.
- FLUX-YOU 13y ago
  MOOCs will only work if they garner a reputation of providing education relevant to employers or even lead to jobs. Also important are college connections to businesses to facilitate internships. Internships can really make or break you in same cases. I know most MOOC courses are up to par. I've taken several and the introductory Python programming course at Udacity was more difficult than any of the classes from my arts degree. Right now, a certificate from a MOOC is about as worthless as a certificate I make for myself. I could take those Python skills and do useful things that would make me stand out among other candidates, but that requires a willing ear. Rare exceptions are employers who are actually aware of MOOCs and also favorable to the idea. I could sell the idea of a MOOC in an interview, even show what I've learned, but getting the interview with MOOC credentials seems very suspect unless you find that aware employer. The idea of MOOCs (free education that leads to employment) threatens colleges, but I don't think the existing MOOCs are currently having an impact on price. When they will begin to have an impact is anyone's guess.
  - Suncho 13y ago
    When you say "MOOCs will only work if..." it really depends what you mean by "work." Does it make sense for the goal of education to be jobs? Like you say, high quality MOOCs can really help people learn. The reason I mentioned MOOCs alongside basic income is because basic income removes people's dependence on jobs.
keeshawn 13y ago
I don't know anyone who gets free money for college, except for people who inherit their money or have rich parents. I feel like this is a really central part of your argument, and it doesn't hold water. Every cent we go into debt has to be paid back with interest, and the students who have to foot the bill have zero input in the hiring standards of the companies we have to work for when we graduate. I think trying to save money by cutting benefits to underpriveliged people is extremely wrongheaded. That money is an investment, it's not just set in fire and wasted. (For that, see the vast taxpayer subsidies we hand out to telecoms and dirty coal companies..)
- jdreaver 13y ago
  > I don't know anyone who gets free money for college Here you go http://studentaid.ed.gov/types/grants-scholarships http://studentaid.ed.gov/types/grants-scholarships
  - keeshawn 13y ago
    I didn't even think you were talking about grants. Are you saying grants are responsible for high tuition costs? Without grants, the gap would have to be made up in student loans. What good would that do? It would simply make students assume a higher debt burden to get the same education that society demands from them.
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    - jdreaver 13y ago
      My whole original post is an attempt to refute what you just said. Without grants, there wouldn't be a gap. College would cost less. Also, society "demanding" people to go to college is part of the problem.
      - jbooth 13y ago
        Gonna jump in here -- what makes you so sure it's grants rather than the way college loans work? I haven't done the numbers but I suspect there's like 10x as much tuition coming from loans as there is from grants -- wouldn't that make grants a tiny portion of the problem?
theorique 13y ago
We have to ask ourselves why college is so expensive. It's certainly not due to inflation in quality of education. More and more classes are taught by graduate students and adjuncts rather than actual professors (who are mostly focused on their research programs in order to earn tenure). There are probably a few factors. - increased student expectations of 'fun', leading to new facilities (dorms, student centers, etc), as colleges compete with each other for students - increasingly top-heavy administration (hey, let's add another $300K Assistant Deputy VP of Student Diversity, etc) providing a path for faculty to 'advance' in their careers - federally subsidized student loans make it less painful for colleges to increase tuition than if students had to borrow independently or pay out of pocket (this is especially egregious in for-profit education, where getting that federal money is key ... gotta get those marks, er, students enrolled so you get paid!) Essentially, it's a racket where everyone has an incentive for the price to keep rising - except for the students and their families, and perhaps the government, who's underwriting this entire disastrous bubble.
- glesica 13y ago
  - increasingly top-heavy administration (hey, let's add another $300K Assistant Deputy VP of Student Diversity, etc) providing a path for faculty to 'advance' in their careers I'd like to point out that much of the administrative bloat has occurred because of new (bipartisan) laws forcing colleges to provide more services. There are services for veterans, services for the disabled, services for victims of crimes, oversight services for grants and such, etc. My girlfriend works for a university, and much of the administrative hiring they do is directly correlated to new requirements, laws, and administrative rules passed down from the federal or state governments. So I think you're right, but don't place all the blame on the schools, just as much belongs to the political parties that like to use universities as a battlefield for whatever agenda they've got at the moment. Edit: It is especially wrong to think that the faculty are driving administrative bloat when, in fact, the faculty are the biggest opponents (and literally stage rallies against it at some schools) because every dollar the university spends on an administrator is a dollar they don't spend paying a faculty member).
  - RyanZAG 13y ago
ams6110 13y ago
You've identified a big part of the problem, but one also needs to consider the overall economic environment during that period. The chart in the blog post starts at 1980, showing that you could work 10 hrs and pay for a credit-hour of tuition. But remember, 1980 was the end of the financially disastrous 1970s. The 80s and 90s were boom decades, so parents with money in the markets were increasingly able to pay for college for their kids. This added to the demand side of the equation, along with the easy money in loans and grants, to cause the explosion in tuition. You're also right about the buildings and staff bloat. I work at a state university and see all of that happening. The IT organization is honestly twice the size it needs to be, if people were held accountable for being even moderately productive.
ruswick 13y ago
Although heavy subsidization is a major enabler of the problem, it is not the only factor. Affordable education is out there. The problem is that people have been conditioned to believe that cheap education is bad education. The problem is the students have been fed the lie that more "prestigious" schools yield better outcomes. Although this might be true in an extreme minority of situations (investment banking is one example where prestige matters), for the most part, the ranking and cost of the college don't matter at all. Everyone simply ignores selection bias and assumes that getting into the "best," most expensive school possible will improve their life. In reality, if you control for selection bias, there is no difference between the outcomes one gets from Harvard and the outcomes one gets from Suffolk. In fact, the people who make the most money out of college are community college graduates. (Obviously, this is influenced by a lot of factors, but the blanket assumption that a high-end four-year school is automatically better is clearly false.) For some reason, no one bothers to actually evaluate the value of their education critically. Instead, everyone simply buys into the collegiate cult of prestige. http://www.theatlantic.com/magazine/archive/2004/10/who-needs-harvard/303521/ http://www.theatlantic.com/magazine/archive/2004/10/who-need... http://www.huffingtonpost.com/2011/01/03/community-college-graduat_n_803627.html http://www.huffingtonpost.com/2011/01/03/community-college-g...
- nitrogen 13y ago
  The problem is the students have been fed the lie that more "prestigious" schools yield better outcomes. Although this might be true in an extreme minority of situations (investment banking is one example where prestige matters), for the most part, the ranking and cost of the college don't matter at all. When I was in high school deciding which colleges I might want to attend, the guidance counselors spent great effort emphasizing that median salaries from all schools n (where n >> 1) years after graduation tended toward the same value, even if graduates from prestigious schools had better salaries at n=1 or n=2. What I want to know is how the top quartile, top decile, etc. compare, especially for fields in which there are large companies paying high salaries, but primarily to graduates from prestigious schools.
- SilasX 13y ago
  But they're not buying -- or attempting to buy -- education. Rather, they're buying prestige and access to prestigious people, which is a positional good. And you can't simply produce more of a positional good, since it's the ranking that matters, not the absolute quality. http://en.wikipedia.org/wiki/Positional_good http://en.wikipedia.org/wiki/Positional_good
acchow 13y ago
Cumulative long-term effort is much reduced when you can turn a signal into a moat. Currently serving supreme course justices come from only 2 schools. Look at the pedigree in investment banking and top consulting firms.
tzs 13y ago
What do you mean by "equilibrium price"? I usually hear that term when people are talking about the price that equalizes supply and demand, but many of the most expensive colleges are priced well below the supply/demand equalization point, so I assume you are referring to some other equilibrium.
mbesto 13y ago
> We have to ask ourselves why college is so expensive. I think there is a more simplistic answer to this question. 1. Obama said everyone should go to college. (demand increases) 2. Supply is scarce (we don't have enough good teachers, so people are battling to go to the best university however way - money - possible) 3. If demand increases, and supplies decrease, it means price elasticity expands (prices go up) 4. Right now we are trying to increase supply but are struggling (MOOC's will save us!) So let's all go back to the beginning now and ask ourselves "Why does everyone need to go to college?" I think that's the real question to be answered here.
- stefan_kendall3 13y ago
  1.) No. 2.) False. There are waaaaaaay too many professors, to the point where most aren't tenured and make barely livable wages. There is a limited supply of universities, but it seems like most collude on prices, or at least refuse to compete on price. At any rate, universities seem to scale pretty well to handle extremely large population bodies, aside from a few statistical outliers that don't matter for this conversation. 3.) Demand has been constant for a while, along with supply. Easy credit is the driver of price change here, not a radical shift in supply or demand. 4.) "We are trying to increase supply". Education isn't what's lacking. You can learn a lot from independent study and books. What's lacking is degree factories. MOOCs aren't degree farms, so they are not an equivalent good.
  - spacehome 13y ago
    Why would universities need to compete on price if there are surplus qualified professors? It sounds like the low wages are a function of excess supply.
    - stefan_kendall3 13y ago
      Most universities staff up to handle as many students as they wish. They have a glut of students. In this environment, you would expect more universities to flood the market to capitalize on the high profit, but that isn't happening. There is an excess supply of professors, but not universities. This might be due to regulation, accreditation, high capital demand, and or the inability to create a lean university that just offered specific curricula. Is it so absurd to think a CS degree could happen entirely online and mostly asynchronously? I don't think so, but it hasn't happened well yet. So high barriers of entry + inelastic demand because easy credit = no universities created to drive down price.
deleted 13y ago
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- tbirdz 13y ago
  I don't know if you were being facetious or not, but both Bill Gates and Mark Zuckerberg were college dropouts. And of course there is the fact that most people who do graduate college don't make nearly the amount of money that those two did.
ballard 13y ago
Universities these days are sitting on huge cash reserves. And then also look at how much cash is being spent on new buildings. Buildings at Stanford were torn down are less than 8 years old.
ekianjo 13y ago
> We have to ask ourselves why college is so expensive. In the US at least, my understanding is that it's relatively easy for college students to get loans to pay for their education (I have several US citizens friends who did that and repaid their loans over the years), so this amounts to easy credit. When free money is available, prices tend to go up, and the more government steps in to provide low rates kind of loans to students, the more the universities can increase and inflate their prices because the supply of cheap credit increases. It's a well known mechanism in economics.
crazy1van 13y ago
Cheers for referencing a common Milton Friedman idea! For reference, see: http://www.youtube.com/watch?v=5RDMdc5r5z8 http://www.youtube.com/watch?v=5RDMdc5r5z8
espadagroup 13y ago
This would just be a recipe for increasing inequality among college goers. The families who can pay for the more expensive colleges will continue to do so, while you'd be taking away the opportunities for less privileged kids to go. I believe the question, "Why college is so expensive" is the right one, but I don't think this is the right solution.
nerfhammer 13y ago
Except that historically the relationship between tuition and funding is inverse! Decreased funding has gone hand-in-hand with higher tuition. http://www.theatlantic.com/business/archive/2013/03/a-truly-devastating-graph-on-state-higher-education-spending/274199/ http://www.theatlantic.com/business/archive/2013/03/a-truly-... http://i.imgur.com/5gYHQK5.png http://i.imgur.com/5gYHQK5.png
- marknutter 13y ago
  A decrease in state funding isn't the same thing as making student loans cheap and easy to obtain. As long as students can keep drawing larger and larger student loans the cost of tuition will continue to rise. After all, the Universities aren't on the hook if the student can't pay back the loan.
  - nerfhammer 13y ago
    Clearly if the relationship between funding and tuition were positive this would be taken as strong positive evidence.

bequanna 13y ago

> It goes to inflating the administrative staffs and inflating the salaries of the highest ranked members of that staff. This. Bureaucratic bloat, no accountability and terrible efficiency. Many Universities are the largest employers in their state. Do our Universities exist to be Research and Educational institutions, or to employ armies of admin workers that push papers?

dangerlibrary 13y ago
Porque no los dos?
HarryHirsch 13y ago
It's popular here to blame the growth of administrative and non-teaching staff on a self-serving bureacracy, but I don't think that's the case, it is due to circumstances. The size of IT infrastructure has grown immensely compared to 30 years back, so you need people to take care of that. My department has four IT support people, and they carry a full workload. The amount of foreign students has grown, consequently you need people to keep track of immigration requirements that seem to get worse each passing year, and you also need cultural programs, you can't expect people from non-western countries to be thrown into an alien culture and succeed. The number of non-traditional and first-generation college students has grown, if the student body consists only of middle-class and wealthy people you don't need support staff for the students who teach them how to study. Then there is career services, these things are expected these days. Back when you knew the major employers, and they had a hiring pipeline at your university. There is also this competition through facilities, gyms and really fancy dorms are the norm, and those things need looking after. Anyone who proposes cutting back on administrative staff must give suggestions how to deal with all these issues.
- jdreaver 13y ago
  Everyone pays for these services, but not everyone uses them. For example, I had to pay a ridiculous $600 per year for the recreation center fee in college. I never once stepped in that place, and they wouldn't let me not pay it. I also never used my college's career center, and I have a job. The services you listed are great; I'm not saying gyms and career centers are bad at all. The problem is that everyone in the school is forced to pay for them. The bloat comes because they get more funding than they need.
  - HarryHirsch 13y ago
    Everyone pays for these services, but not everyone uses them. Here's the deal: it's not about you, it's the university that runs the numbers and decides where the scarce funds will go. (Yes, the funds are scarce. The machinist in my old department will retire soon, and the fear is that there won't be a replacement. When he leaves it will be a disaster, there won't be custom-built instrumentation any longer.) If the rec. center attracts more tuition than it costs to provide there will be a rec. center. If the center for remedial math will prevent an unprepared student from dropping out - if three years more in tuition provides more money than running the courses then there will be remedial math. That's how non-teaching staff are allocated.

bsder 13y ago

> We have to ask ourselves why college is so expensive. Because you cannot discharge student loan debt through bankruptcy. If students could discharge their debt, loans would match risk better and decrease. In turn, colleges wouldn't be able to raise their prices as far since they would price themselves out of students.

brudgers 13y ago

In the US, few students get much free money these days. Instead they get loans which charge hefty origination fees - like 5 points, and which are almost impossible to discharge via bankruptcy...despite the fact that many of them are backed by insurance and those which are not insured typically compound interest during the time the student is in school (typically on the full principle). The bloat has not been fueled by anything but massive consumer debt foisted on those least experienced with personal finance and with the least work experience and who these days are lucky to find an entry level professional position.

jdreaver 13y ago
I agree. Most of those loans, however, are sponsored by the government and can't be defaulted on. No normal lender would give an 18 year old $50,000 to get a degree in anthropology, because they are unlikely to get it back. When the student is legally obligated to pay it back, then there is much little risk to the lender. If defaulting on student loans were possible, then the cost of college would decrease.
- spikels 13y ago
  How would allowing defaults on government guaranteed student loans lower the cost of college? Cost would likely increase for most students. If loan interest rates were increased to compensate for the additional losses this would increase the cost for everyone getting a college loan who doesn't default. And since default has significant costs overall costs would also go up. Lastly this would reduce the incentive to make wise decisions on educational choices. On the other hand if interests rate remained the same then this be an would increase government subsidies and thus demand and thus costs for everyone. And again would reduce the incentives to make sound financial choices on education spending. Either way costs would very likely increase for most students and we would get a less efficient education system.
  - deleted 13y ago
    [deleted]
  - 13y ago

huherto 13y ago

I think the problem is the loans. It drives prices up. Because when college prices go up, kids just get a bigger credit. It looks so far in the future, at 18 they don't really know if they will be able pay them.

Suncho 13y ago

I think a lot of the rise in tuition has to do with jobs. Society tells people they need to earn a living through a job. This makes people desperate for jobs to the extent that they'll generally pay whatever it takes to maximize their job prospects. So, basically you have a situation in which demand for the best possible education is inelastic. Pretty much everybody wants it and is willing to pay anything they can for it. If you offer students more money to spend on their education, they naturally will. That means that schools are in the very powerful position of deciding who deserves the privilege of an education. But, at the same time, they're competing with each other for the best students. If money is no object for the students, you can bet that schools will spend as much as possible to get the "best" students. Fancy buildings aren't just there to impress donors. They're there to impress prospective students. I think MOOCs will help and basic income will help. High tuition isn't a problem if you don't need to go to school. You don't need to go to school if you don't need a job and you can educate yourself elsewhere.

FLUX-YOU 13y ago
MOOCs will only work if they garner a reputation of providing education relevant to employers or even lead to jobs. Also important are college connections to businesses to facilitate internships. Internships can really make or break you in same cases. I know most MOOC courses are up to par. I've taken several and the introductory Python programming course at Udacity was more difficult than any of the classes from my arts degree. Right now, a certificate from a MOOC is about as worthless as a certificate I make for myself. I could take those Python skills and do useful things that would make me stand out among other candidates, but that requires a willing ear. Rare exceptions are employers who are actually aware of MOOCs and also favorable to the idea. I could sell the idea of a MOOC in an interview, even show what I've learned, but getting the interview with MOOC credentials seems very suspect unless you find that aware employer. The idea of MOOCs (free education that leads to employment) threatens colleges, but I don't think the existing MOOCs are currently having an impact on price. When they will begin to have an impact is anyone's guess.
- Suncho 13y ago
  When you say "MOOCs will only work if..." it really depends what you mean by "work." Does it make sense for the goal of education to be jobs? Like you say, high quality MOOCs can really help people learn. The reason I mentioned MOOCs alongside basic income is because basic income removes people's dependence on jobs.

keeshawn 13y ago

I don't know anyone who gets free money for college, except for people who inherit their money or have rich parents. I feel like this is a really central part of your argument, and it doesn't hold water. Every cent we go into debt has to be paid back with interest, and the students who have to foot the bill have zero input in the hiring standards of the companies we have to work for when we graduate. I think trying to save money by cutting benefits to underpriveliged people is extremely wrongheaded. That money is an investment, it's not just set in fire and wasted. (For that, see the vast taxpayer subsidies we hand out to telecoms and dirty coal companies..)

jdreaver 13y ago
> I don't know anyone who gets free money for college Here you go http://studentaid.ed.gov/types/grants-scholarships http://studentaid.ed.gov/types/grants-scholarships
- keeshawn 13y ago
  I didn't even think you were talking about grants. Are you saying grants are responsible for high tuition costs? Without grants, the gap would have to be made up in student loans. What good would that do? It would simply make students assume a higher debt burden to get the same education that society demands from them.
  - deleted 13y ago
    [deleted]
  - jdreaver 13y ago
    My whole original post is an attempt to refute what you just said. Without grants, there wouldn't be a gap. College would cost less. Also, society "demanding" people to go to college is part of the problem.
    - jbooth 13y ago
      Gonna jump in here -- what makes you so sure it's grants rather than the way college loans work? I haven't done the numbers but I suspect there's like 10x as much tuition coming from loans as there is from grants -- wouldn't that make grants a tiny portion of the problem?

theorique 13y ago

We have to ask ourselves why college is so expensive. It's certainly not due to inflation in quality of education. More and more classes are taught by graduate students and adjuncts rather than actual professors (who are mostly focused on their research programs in order to earn tenure). There are probably a few factors. - increased student expectations of 'fun', leading to new facilities (dorms, student centers, etc), as colleges compete with each other for students - increasingly top-heavy administration (hey, let's add another $300K Assistant Deputy VP of Student Diversity, etc) providing a path for faculty to 'advance' in their careers - federally subsidized student loans make it less painful for colleges to increase tuition than if students had to borrow independently or pay out of pocket (this is especially egregious in for-profit education, where getting that federal money is key ... gotta get those marks, er, students enrolled so you get paid!) Essentially, it's a racket where everyone has an incentive for the price to keep rising - except for the students and their families, and perhaps the government, who's underwriting this entire disastrous bubble.

glesica 13y ago
- increasingly top-heavy administration (hey, let's add another $300K Assistant Deputy VP of Student Diversity, etc) providing a path for faculty to 'advance' in their careers I'd like to point out that much of the administrative bloat has occurred because of new (bipartisan) laws forcing colleges to provide more services. There are services for veterans, services for the disabled, services for victims of crimes, oversight services for grants and such, etc. My girlfriend works for a university, and much of the administrative hiring they do is directly correlated to new requirements, laws, and administrative rules passed down from the federal or state governments. So I think you're right, but don't place all the blame on the schools, just as much belongs to the political parties that like to use universities as a battlefield for whatever agenda they've got at the moment. Edit: It is especially wrong to think that the faculty are driving administrative bloat when, in fact, the faculty are the biggest opponents (and literally stage rallies against it at some schools) because every dollar the university spends on an administrator is a dollar they don't spend paying a faculty member).
- RyanZAG 13y ago

ams6110 13y ago

You've identified a big part of the problem, but one also needs to consider the overall economic environment during that period. The chart in the blog post starts at 1980, showing that you could work 10 hrs and pay for a credit-hour of tuition. But remember, 1980 was the end of the financially disastrous 1970s. The 80s and 90s were boom decades, so parents with money in the markets were increasingly able to pay for college for their kids. This added to the demand side of the equation, along with the easy money in loans and grants, to cause the explosion in tuition. You're also right about the buildings and staff bloat. I work at a state university and see all of that happening. The IT organization is honestly twice the size it needs to be, if people were held accountable for being even moderately productive.

ruswick 13y ago

Although heavy subsidization is a major enabler of the problem, it is not the only factor. Affordable education is out there. The problem is that people have been conditioned to believe that cheap education is bad education. The problem is the students have been fed the lie that more "prestigious" schools yield better outcomes. Although this might be true in an extreme minority of situations (investment banking is one example where prestige matters), for the most part, the ranking and cost of the college don't matter at all. Everyone simply ignores selection bias and assumes that getting into the "best," most expensive school possible will improve their life. In reality, if you control for selection bias, there is no difference between the outcomes one gets from Harvard and the outcomes one gets from Suffolk. In fact, the people who make the most money out of college are community college graduates. (Obviously, this is influenced by a lot of factors, but the blanket assumption that a high-end four-year school is automatically better is clearly false.) For some reason, no one bothers to actually evaluate the value of their education critically. Instead, everyone simply buys into the collegiate cult of prestige. http://www.theatlantic.com/magazine/archive/2004/10/who-needs-harvard/303521/ http://www.theatlantic.com/magazine/archive/2004/10/who-need... http://www.huffingtonpost.com/2011/01/03/community-college-graduat_n_803627.html http://www.huffingtonpost.com/2011/01/03/community-college-g...

nitrogen 13y ago
The problem is the students have been fed the lie that more "prestigious" schools yield better outcomes. Although this might be true in an extreme minority of situations (investment banking is one example where prestige matters), for the most part, the ranking and cost of the college don't matter at all. When I was in high school deciding which colleges I might want to attend, the guidance counselors spent great effort emphasizing that median salaries from all schools n (where n >> 1) years after graduation tended toward the same value, even if graduates from prestigious schools had better salaries at n=1 or n=2. What I want to know is how the top quartile, top decile, etc. compare, especially for fields in which there are large companies paying high salaries, but primarily to graduates from prestigious schools.
SilasX 13y ago
But they're not buying -- or attempting to buy -- education. Rather, they're buying prestige and access to prestigious people, which is a positional good. And you can't simply produce more of a positional good, since it's the ranking that matters, not the absolute quality. http://en.wikipedia.org/wiki/Positional_good http://en.wikipedia.org/wiki/Positional_good

acchow 13y ago

Cumulative long-term effort is much reduced when you can turn a signal into a moat. Currently serving supreme course justices come from only 2 schools. Look at the pedigree in investment banking and top consulting firms.

tzs 13y ago

What do you mean by "equilibrium price"? I usually hear that term when people are talking about the price that equalizes supply and demand, but many of the most expensive colleges are priced well below the supply/demand equalization point, so I assume you are referring to some other equilibrium.

mbesto 13y ago

> We have to ask ourselves why college is so expensive. I think there is a more simplistic answer to this question. 1. Obama said everyone should go to college. (demand increases) 2. Supply is scarce (we don't have enough good teachers, so people are battling to go to the best university however way - money - possible) 3. If demand increases, and supplies decrease, it means price elasticity expands (prices go up) 4. Right now we are trying to increase supply but are struggling (MOOC's will save us!) So let's all go back to the beginning now and ask ourselves "Why does everyone need to go to college?" I think that's the real question to be answered here.

stefan_kendall3 13y ago
1.) No. 2.) False. There are waaaaaaay too many professors, to the point where most aren't tenured and make barely livable wages. There is a limited supply of universities, but it seems like most collude on prices, or at least refuse to compete on price. At any rate, universities seem to scale pretty well to handle extremely large population bodies, aside from a few statistical outliers that don't matter for this conversation. 3.) Demand has been constant for a while, along with supply. Easy credit is the driver of price change here, not a radical shift in supply or demand. 4.) "We are trying to increase supply". Education isn't what's lacking. You can learn a lot from independent study and books. What's lacking is degree factories. MOOCs aren't degree farms, so they are not an equivalent good.
- spacehome 13y ago
  Why would universities need to compete on price if there are surplus qualified professors? It sounds like the low wages are a function of excess supply.
  - stefan_kendall3 13y ago
    Most universities staff up to handle as many students as they wish. They have a glut of students. In this environment, you would expect more universities to flood the market to capitalize on the high profit, but that isn't happening. There is an excess supply of professors, but not universities. This might be due to regulation, accreditation, high capital demand, and or the inability to create a lean university that just offered specific curricula. Is it so absurd to think a CS degree could happen entirely online and mostly asynchronously? I don't think so, but it hasn't happened well yet. So high barriers of entry + inelastic demand because easy credit = no universities created to drive down price.

deleted 13y ago

[deleted]

tbirdz 13y ago
I don't know if you were being facetious or not, but both Bill Gates and Mark Zuckerberg were college dropouts. And of course there is the fact that most people who do graduate college don't make nearly the amount of money that those two did.

ballard 13y ago

Universities these days are sitting on huge cash reserves. And then also look at how much cash is being spent on new buildings. Buildings at Stanford were torn down are less than 8 years old.

ekianjo 13y ago

> We have to ask ourselves why college is so expensive. In the US at least, my understanding is that it's relatively easy for college students to get loans to pay for their education (I have several US citizens friends who did that and repaid their loans over the years), so this amounts to easy credit. When free money is available, prices tend to go up, and the more government steps in to provide low rates kind of loans to students, the more the universities can increase and inflate their prices because the supply of cheap credit increases. It's a well known mechanism in economics.

crazy1van 13y ago

Cheers for referencing a common Milton Friedman idea! For reference, see: http://www.youtube.com/watch?v=5RDMdc5r5z8 http://www.youtube.com/watch?v=5RDMdc5r5z8

espadagroup 13y ago

This would just be a recipe for increasing inequality among college goers. The families who can pay for the more expensive colleges will continue to do so, while you'd be taking away the opportunities for less privileged kids to go. I believe the question, "Why college is so expensive" is the right one, but I don't think this is the right solution.

nerfhammer 13y ago

Except that historically the relationship between tuition and funding is inverse! Decreased funding has gone hand-in-hand with higher tuition. http://www.theatlantic.com/business/archive/2013/03/a-truly-devastating-graph-on-state-higher-education-spending/274199/ http://www.theatlantic.com/business/archive/2013/03/a-truly-... http://i.imgur.com/5gYHQK5.png http://i.imgur.com/5gYHQK5.png

marknutter 13y ago
A decrease in state funding isn't the same thing as making student loans cheap and easy to obtain. As long as students can keep drawing larger and larger student loans the cost of tuition will continue to rise. After all, the Universities aren't on the hook if the student can't pay back the loan.
- nerfhammer 13y ago
  Clearly if the relationship between funding and tuition were positive this would be taken as strong positive evidence.