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What's Driving College Costs Higher?
student debt tuition administration tenure financial aid

Colleges Compete But Don't Lower Their Prices

American universities and colleges are busily competing against other, using the taxpayer’s dollars. We trim, blend, and append two 2012 articles from (1) Pacific Standard, Aug 24, on tuition by V.E. Ferrall (Beloit College), and (2) Fresh Air from WHYY, Jun 26, on college spending by K. Carey (New American Fdn).

by Victor E. Ferrall, Jr and by Kevin Carey

In the 10 years between 2000 and 2009, while the median income of American families grew a modest 16%, the cost of attending college shot up 63 percent; more than 70% for in-state students at public universities. Even during the terrible year 2009, when family income actually fell more than 2%, average tuitions rose nearly 4% at all institutions; more than 4% at public universities. Today, the list price for a student from an average American family to attend a prestige college or university for 7 1/2 months is only slightly less than her family’s entire income in 12 months.

How do the colleges compete? By spending more on such things as luxury dorms, elaborate sports facilities, and increasing their recruiting staffs (and sending them around the world in search for full-pay foreign students). And, above all, by discounting tuition with financial aid they cannot afford to give.

80 to 90 percent of the for-profits’ income comes from federal tax dollars -- $26.5 billion in 2009.

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About two-thirds of bachelor's degree recipients borrow money to attend college, and collectively, student debt has topped $1 trillion.

The average college senior in the U.S. now carries $25,000 in student loan debt at graduation. Those figures rise when graduate degrees are figured into the equation.

"There's a good chance you're going to spend most of your 20s in a state of indentured servitude to a lender or an employer you hate but can't quit, because the loan bills,” says Kevin Carey, the director of the Education Policy Program at the New America Foundation.

Those debts will follow students around for decades. “The Washington Post has reported that $36 billion in loan debt is held by people over 60 years old."

Carey argues what drives up tuition are: colleges spend too much and state and local governments, facing budget crises, spend too little on public universities.

In the past three decades, college tuition has consistently increased much faster than both inflation and incomes, to the point where college is now four times more expensive than it was, say 20 or 30 years ago.

Where does that money go? To all sorts of things, including administrative and teaching costs, scholarships, sports teams, and elaborate new construction projects.

"[Professors] are not the beneficiaries. The number of full-time professors has shrunk across the country. He says “the percentage of all students taught by non-tenure-track professors -- adjuncts, teaching assistants -- has gone up and up and up." Less than 40% of students are now taught by tenure or tenure-track professors.

Meanwhile, university administrations have grown -- meaning colleges are now employing more provosts, deans, and assistant deans than ever before.

"Universities are run for the benefit of the people who work there. That's different than a for-profit corporation, which is run for the benefit of shareholders or a regular public agency that is run for the benefit of elected officials and the public."

"[Colleges and universities] compete with one another, so they buy things that increase their status and prestige in relation to their competitors. They're big on construction. ... They're always building things."

Online courses are being taught to hundreds of thousands of students around the world and they don't cost anything. "But people don't just go to college to learn; they go to college to get a job. That's the difference between a library and a college."

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JJS: While colleges do compete, and competition elsewhere can be seen to control prices, in the “diploma industry” competition does not work. Beyond the understandable desire for a degree from a "top" institution -- the instinct of any herd animal (as humans are) is to conform, form hierarchies, and admire those on top -- why is that?

One reason is the few universities who can charge the most tuition thereby raise the ceiling so that others -- who could still profit while charging less -- gain space to charge more. Still, it should be possible for new colleges to jump in and offer knowledge at a lower price, especially since so many thousands of PhDs are graduated every year. And if a college offered more effective teaching methods -- student-based and curiosity-driven -- then it should be able to attract students and grow its market share.

But people don’t trust unknown methods of instruction, not after 12 years of schooling where the desire to know is squelched. So subsidizing K-12 and entrenching one model of teaching results in making that model -- one above talking to many below -- the default model for higher education, too. And it’s ironic, since college graduates must learn more on their new job than they ever learned in college.

Partly at fault are employers who hire graduates from fancy places not for what they know but for whom they know. If an employee is unskilled or unintelligent but is well-connected, then they can “bring home the bacon”, which matters more and more in an economy that depends upon connections with Big Business and Big Government in order to turn a profit. And since monopoly profit is easier to gain than a competitive-market profit, the powerful businesses would not have it any other way.

Another factor is that the building of structures on campus fits into the growth industry and pleases local builders and local construction unions, a fact to bring up whenever town and gown have a dispute over something.

Another factor is that campuses are generally exempted from the property tax. Not having to pay any “land dues” each year makes it much easier to acquire more land.

But the biggest factor, alluded to in the articles above, is the student loan. That turns out to be a subsidy to universities. It’s also a bit of a boon to owners of dwellings near campuses who ratchet up what they charge tenants and buyers in accordance with all the free money floating around academia. Student debt also gets people hooked on borrowing at a younger age than before -- people used to wait until they could afford a mortgage -- so these public monies are gravy for lenders and debt collectors, especially since debt to government is by the government’s law not to be forgiven but collected by any means.

If society were to quit subsidizing schools and colleges, would education continue? It’d probably improve, thanks to competition not for prestige but for utilizing more effective teaching methods. But could students afford the teachers? Probably more easily than now, since institutions could downsize administration.

Further, if society quit all subsidies, there’d no reason to lobby, no role for insiders, so the “prestige” degree would lose its luster.

Finally, if society replaced subsidies with a Citizens Dividend, then adults of any age would become empowered to hire teachers of any topic -- even "useless" subjects like philosophy -- and teachers could afford to teach for love of teaching. Where would the funds for the dividend come from? From society’s common wealth, from all the money that society spends for the nature it uses, the spending for prime locations, for oil, for the airwaves, etc.

Getting a share of these “rents” would free people from dependence upon jobs. That could break the link between diplomas and income, so tuition would have to come down. And people could then acquire knowledge for the love of learning.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Colleges buy land without knowing how they'll use it

During this bottom, who catches a break?

Maryland Lands Have Two Different Owners

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