This chart from Clusterstock (via Carpe Diem) shows the cost of college tuition comparison to historical housing prices and the Consumer Price Index (CPI) over the same period. The CPI is designed to track our cost of living by estimating the average price of consumer goods and services purchased by households. Everything was normalized to 100 starting in 1978.
While housing went up 4x at its peak (~400), college tuition has gone up over 10x. Instapundit Glenn Reynolds says the higher education bubble is about to burst:
It’s a story of an industry that may sound familiar. The buyers think what they’re buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.
Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they’re buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn’t.
Yes, this sounds like the housing bubble, but I’m afraid it’s also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it’s better for us to face up to what’s going on before the bubble bursts messily.
The college tuition prices being tracked in the chart was done by the CPI for US cities for “College Tuition and Fees”. According to this BLS.gov link, this tracks actual expenditures by households, and not some measure of median college tuition, which is often just the “retail price” before various forms of financial aid and/or scholarships.
Another hot topic is the rapidly rising cost of health care. Well, college tuition CPI beats that too, from this Wikipedia chart:
I know that I’m scared to imagine what college will cost in another 20 years. Dealing with this issue will be tricky, with huge amounts of easy government credit being given to 18-year-olds that are being told by everyone (including parents) that it is totally worth it. For many people, it will indeed be worth it. For others, not so much.
In my humble opinion, it also seems obvious that this trend can’t survive forever. But will it burst like a bubble? Perhaps if the government turns off the loans suddenly, but that seems unlikely. I like Reynold’s idea that there may be an educational revolution with the internet, online coursework, and changing educational standards.
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It would be interesting to know where all that money for tuition is going. Is it administration costs? building costs? professor costs? With the internet, it seems like the increase of cost should actually be less than the CPI.
With regard to college costs, I wonder how the amount of state and federal funding for higher education has changed in the same period.
one of my favorite posts ever!
I have a college degree and I think I need it to do engineering.. however I probably didn’t need the phy ed, music appreciation, relaxation, etc. that I took. I understand there is some value in “well rounded” education but I also submit that maybe we do not need that anymore.. or rather maybe we cannot afford that anymore.
I also like the idea of running college and maybe high school all year-round to get more use from the infrastructure that is in place.
obviously the upward trend cannot continue forever.
It is true tuition is skyrocketing, and along with today’s job market, I can only encourage our nations youth to put in some time with the military. A 4 year commitment can teach valuable principles, instill discipline, and ultimately prepare you for college.
I am speaking from experience. After 6 years of military experience, I will be exiting this Christmas. I am enrolling into a university for the Spring 2011.
In addition to the tens of thousands of dollars I have accumulated and saved (all while funding Roth IRAs and my TSP), the GI Bill will cover 100% of my tuition costs (Covers instate tuition, up to the most expensive tuition for a public school in the state). I will receive a $1,000/yr allowance for books. I also receive a ‘housing stipend’ every month, which is dependent on the zipcode in which the university you attend. Being in northern Virginia, this comes to about $1950/month.
GI Bill benefits are for 36 months.
Of course, there are risks attributed to joining the military, just as there are in anything you do (i.e. driving to the grocery store). I am about to return from my 6th combat deployment serving as an army Ranger medic. (My tours are about 3.5 months each)
So, I can afford not to worry about tuition costs too much. I have been able to do internet college courses while serving (Up to $4500 per fiscal year), but I do prefer the brick and mortar institution and interaction with other students.
However, it is true to say that education via the internet may soon change the way higher education is undergone.
For example, I have spent lots of time at the Khan Academy while deployed. With an internet connection, I have more than enough to learn and prep myself for the classroom when that time comes.
If any of you have children that need/want tutoring, or if you want to brush up on things that you used to know, trying visiting the Khan Academy online. It’s free.
http://www.khanacademy.org
Lots of good financial/banking information to be learned there as well. 🙂
Hope some of this info is helpful! Take care fellow readers!
I am a young college professor at an Ivy League school, and I don’t really fully understand this. For one thing, the salary of the average college professor has not kept up with inflation over the last 20 years. My father was a college professor at a community college, and when I was growing up we lived next door to lawyers and doctors (in a house that was as nice as theirs). Boy was I surprised to get out of 5 years of grad school only to find out that things have changed a lot in terms of salary because of globalization (on the downside for me). My kids will certainly not be able to grow up in a lawyer-doctor neighborhood.
Another thing is that many places, such as NYU and Columbia, (while not saying it outright) are relying more and more on rich foreign students who are very happy to pay full price and can generally pay much more than the average middle class American family. This could change down the road, but their application pool is growing (not shrinking).
what would a burst of the ‘education bubble’ look like? Since it is a service and not a property, you can not be foreclosed on when you are unable to pay your loan back.
I can see getting a loan for college to be harder and harder to get – but doesn’t that just increase the value of the degree for those who have it as you now have a harder to come by education. You could then demand more from an employer, pay back your education faster, higher pay-back rates increase the availability of credit to others.
this is the first i am hearing of an ‘education bubble’, but i’m not buying it so far.
Some, but not all, of the increase in tuition is due to states cutting back their funding of public schools. Flagship public universities typically get no more than a fifth of their funding from the state now. If you plot the total expenditures per student, I bet you would get something much flatter than the tuition rise you’ve shown above.
Cutting back of state funding doesn’t explain everything, of course, but I bet I think the tuition rise might slow as states either get out of the higher education business entirely or flatline their contributions at some small level.
Also, I think you’re right that new model – online and distance learning programs will cut into college attendance and offer a little competition for students.
But what choice do you have?
in the housing market, you can continue to rent, and not take out a loan.
in the job market, you can choose a community college for 2 years, and then what? Plus college isnt just about education, its about growing as a person, and learning what you like and who you might want to be.
A person who chooses not to go to college may find their earning power significantly limited. Unless the govt steps in and does something rash (like turning off money, price fixing, or worse), or the internet changing education, i dont know that anythign will change.
As someone who is newly expecting, this is very scary
Unfortunately, it doesn’t seem like the quality of education isn’t matching the rising cost of education.
Thanks for all the comments! My apologies for the delay in publishing, my Akismet spam filter seems overactive today.
@Nuri – You have the choice of choosing a lower-cost option when presented with multiple ones, and perhaps one day there will be some sort of online standardized tests that you can take to get “First-Semester Calculus” credit that transfers anywhere. Maybe some elite colleges will require a 80 out of 100 score, but others will only require 65/100. Just an idea.
Glad I’m out of college already. Any stats on grad schools though?
@Joe C – Checking out Khan Academy. Sounded like some Star Trek retreat initially, but can’t believe all those videos are from one guy.
@Jenna – Get someone to pay you to go to grad school 🙂 I loved being a graduate teaching assistant.
@Jonathan – Any tips on how to do that?
It’s a good question: Where does the tuition money go?
Schools have been slow in hiring new full-time faculties. Instead, they’ve been hiring part-time lecturers/instructors (with no tenure) lately, some of which are still PhD students!
Obviously, someone up top is eating the money.
There is a reason why college tuition has gone through the roof. Namely… the gauranteed student loan programs and financial aid programs that have come out over the last 30 or so years.
Schools simply charge more because they can get away with doing so now that their students can leverage such resources. Its a scam.
Similar to widely inflating health care costs. Ever since insurance coverage has become widely available to folks during last 45 yrs or so…. costs have simply skyrocketed.
If you want to see tuition prices come down. End government guaranteed student loan programs!!!
One huge area of problem is also the private/for profit education systems. What is happening is that the government is offering more and more money in terms of Pell grants. As a result, a lot of private/for profit education systems now works really hard to recruit people into their programs without considering whether the study will ever pay back for the student loan by the government.
The bubble might or might not burst, but it will definitely cost the tax payers as a large portion of the loans come directly from the government and the tax payer.
The amount of financial aid being offered by the colleges needs to be included for this to make any sense. Private schools charge a ton of money for full price tuition, yet almost no one pays full price at those schools.
This whole topic makes me want to reevaluate the thought that college is for everyone,
40 or so years ago, a high school diploma could get you a decent paying job, one to raise a family on.
Now not only do you need a college degree, you probably need a grad degree too to get an equivalent wage (i know this statement is purely anecdotal)
It feels like we something like education deflation.
And there are jobs out there that don’t need a college degree, but employers don’t hire people without degrees or if you don’t have one, there’s certain promotions you wont get.
College is expensive and getting more so. As long as top-knotch institutions have pricing power (and they do, they can and have raised prices consistently faster than inflation as per your data and still receive applications at multiples of their class admissions) they will be able to raise tuition aggressively.
And to answer a question from above, much of the expansion in budgets has not gone to number of or compensation of professors, but to the growth of administration and also to expensive facilities and research equipment, depending on the type of university.
The good news is that finanical aid has also risen at top schools and lower to middle-class earners can get much of their tuition paid without over-doing loans. If you live in a higher cost of living area and have a decent salary though you are on your own.
If people are willing, please share how much you are saving for college for your children if applicable. We have been putting away $400 a month in a 529 since birth and I figure that will pay around half of my child’s tuition in 20 years. Seems like a lot of money but education is pretty important to us.
I went to college for a while but ultimately never graduated with a degree. During that time I worked my way up the ranks in IT. I’ve now got a comfortable job and am evaluating the cost/benefit ratio of going back and getting my degree. The good thing for me is I plan on staying in my current field and have plenty of job experience, so I guess I could really get a degree in anything. My plan is to get the fastest (and hence cheapest) degree and then consider going for an MBA. I feel the graduate program would offer mover value for my dollar over the Bachelor’s.
I honestly don’t feel the hike in tuition is attributed to getting a better education, but more than likely due to easy credit and countless customers with the “you must go to college after graduating high school” mantra burned into their head.
@ Andy
I’ve been saving 25 bucks a month since Jonathon had the ohio 529 deal last decemberish. My wife is pregnant with what will be our first (due date in February)
I plan on upping it to at least 100 after birth, what i expect that to pay is obviously a very interesting question
@ Jenna – Jonathan is right, get someone else to pay for grad school.
If you are in the sciences or business, tuition reimbursement through an employer – though not as common as even five years ago – is more likely than other fields. If you are looking to be a full time grad student, look into graduate assistantships. Like other funding at colleges and universities, funding for GAs is down now as well but GAs bear a great deal of the work (teaching and research) in all disciplines, now more than ever.
I work at an R-1 research institution and have worked in higher ed for most of the past 20 years, both public and private, community colleges, four-year and institutions granting graduate and professional degrees. State and federal funding to schools has been declining for 30 years now, which is by far the big factor of the increase of tuition. In the ’70s, a typical public university student who was not receiving any grants or scholarships was still only paying about 30-35% of the cost of his/her education through tuition. Today that typical public university student’s tuition pays for 65-70% of the cost of the education.
I sometimes wonder if college isn’t already overpriced. With so many people emerging in a precarious financial position after graduation, unable to get a job to match what they spent for their degree.
Two observations:
1) re: Education deflation: When I was in high school in the late 80s-early 90s, I had two years of calculus before graduation. Now I see a 4th grader who hasn’t memorized times tables trying to “guess” how much values should be on a long division problem. At her age I was already doing pre-algebra (in Canada). In college, a prof who had taught a mechanical engineering course for 25 years allowed an ill student to look at his lecture notes — and we students discovered that he had cut the material covered in a 10-week term by one-third over the years. While the plural of anecdote is not data, this fits with employer complaints I have heard that kids are taking ever longer to learn “the basics” (reading, ‘riting, ‘rithmetic), and are evermore underprepared (in terms of both critical thinking skills AND social negotiating skills) for adult life.
2) Washington Monthly did an article on College Dropout Factories, which addresses the question: what happens when students can get funding for their education, but then the school doesn’t provide?
http://www.washingtonmonthly.com/college_guide/feature/college_dropout_factories.php
Having said all that, I was incredibly grateful for the Perkins loan program when I was an undergrad, as it helped me get out a bad life situation and encouraged me to focus on my education. I paid back every penny early. And then I went to grad school and got private funding to cover it. For a certain type of motivated student, these programs are a godsend, and making these funds less accessible seems to me not quite the answer. It seems more important to maintain high credentialling of the educational system, which ultimately the alumni (who have an incentive for not seeing their degree devalued by future alums) and the professors have to keep a long-term eye on.
Don’t get me started on college tuition. The coasts benefited from an over abundence of buyers of homes (most government programs were directed to people in large urban areas because housing was so expensive) thus this artificially inflated the prices of their homes which in turn allowed homeowners to take out home equity loans to pay for their kids or most often grand kids education. In the midwest we could not do the equity stripping going on on the coasts.
Lets talk about the business model of colleges. Colleges raise tuition because they can. The more expensive the college the better because your kid will then be associating with kids from the same tax bracket unless some smart midwestern kid had a scholarship got in. Another thing colleges don’t want a lot of work history they want kids who can afford to volunteer and travel. Let in the legacies, let in the kid with the rich parents who can afford to volunteer and travel, then throw a bone to some kid who really deserves it and is hungry to learn and you have a nice business model. Plus if the model starts to break down like it is now because housing is crumbling then go overseas and charge the parents of kids overseas absolutely full freight so your business model will never involve cutting costs. Then when when the education is over the legacies and kid with the rich parents can go work for the family business or go work on wall street because they only hire kids who have a liberal arts degree from certain schools to do high finance. Meanwhile the kid from the midwest can go back home and live in his parents basement while he or she rides out the recession and wonder how they are going to pay off their loans.
@ Ron – At my workplace, tuition reimbursement is an option, but you’re obligated to either work several years for each year covered by the company, or pay every cent back. And promotions are unlikely, so this works out to low-wage form of indentured servitude for the employee, while the employer still gets to claim the associated tax benefits.
People looking to employers should beware of similar pitfalls.
What’s happening is price differentiation. In the old days, most students paid tuition. Today, most students get financial aid to offset the cost, so that only the rich pay the full tuition figure shown in the graph. At the university where I am a professor, over 40% of students are on financial aid grants! Thanks to forms that strip your finances bare, schools can do what other merchants dream about: set the price according to the customer’s ability to pay. I suspect if you plotted the cost to each student instead of the stated tuition, it would look more sane.
I think Chris and plin, and Hogan have it exactly right. This bubble in college costs is due in great part to our government and the easily accessible and subsidized college loans and grants.
Want to see college costs drop quickly? Have this bloated government announce that it is cutting by 50 to 75% the amount of funding toward these loans and grants and just watch the tuition rates start dropping….Guaranteed!
This is more about student debt, but people who get debt from their undergraduate degrees are idiots. Sure, you need a college degree, but the degree from that private school often isn’t worth the incremental cost of an additional 20k/30k/40k of debt over a public school.
Take me for instance. I loved the University of Chicago. I spent all of last summer composing my admissions essays, and I applied early action and found out last december that I could be a part of the University of Chicago’s class of 2014! I was stoked. Later, I realized that it would mean about 40k$ of debt for me and significant strain for my parents. Today is the eve of me going to a non-flagship public college. I’m going to graduate in 3 years or less because I took AP classes in high school. I don’t think a high tuition price is bad, and I don’t think the bubble is going to pop, but like all things, it’s best to take rational positions in the market.
As a current distance education grad student at USC, I can say that it is certainly a different experience(less social, unconnected feeling) than living on campus in undergrad. USC actually charges $500 extra per class to take it online. You’re not saving any money by taking it online. They are making some serious $$$ by packing in more students per class.
The tuition rate is increasing at a fairly high rate, but I wouldn’t blame it all on greedy administrators/schools. States are cutting back on assistance to public schools. I noticed at my undergraduate school that everywhere you looked, new buildings were being built with creative architecture and high tech equipment in each room. Part of the reason tuition used to be so cheap was that all of the buildings used to be square, brick, and 2 outlets in each room. Somebody has to pay for the upgrades.
Considering I have been in school almost eight years to date getting a B.S and a MPH, you would think I have mountains of debt. In fact, everyone that knows my trajectory automatically assumes I must be swimming in dept, since both degrees were conducted at high-caliber, out-of-state, universities. But in fact, the only debt I carry is the small bit on my Visa, which I pay off, religiously, every month. Granted, unlike some individuals I know, I do not have money from my loans to buy nice cars, or go on fancy trips (which is how some of that money always ends up being spent). But I do not live in the red, and it is a great feeling.
The key to my lack of debt? Working my butt off from the second I was legal age to hold a job. My mother was unique in that she instilled in me as a young child that if I wanted to go some far away, fancy college I needed to earn it myself. Through a mixture of academic scholarships and saving minimum wage checks for four years, I did. Then, we I got to school, I worked there too. All four and half years. And then I worked off my Masters tuition as a graduate student researcher. Now, I am about to embark on my PhD, where for the first time they pay me to go to school, and all I have to worry about is paying my rent and food expenses every month.
It is a very bad sign that many of my peers are wallowing in debt, and have never held down a real job. Who is to blame? The colleges that demanded all the money, the creditors that wrote down their debt, or the parents that told them not to get a job and not worry about the debt…that they can pay it off when they are a doctor someday? We live in a society where it is okay to have and get things you didn’t work for. Until that trend changes, there will always be another ‘bubble’ waiting to pop.
NPR had an interview with the Pennsylvania System of Higher Education. The guy said that in the 1970s government saw a shift in the mission of higher education. Previous to this, government saw education as a necessary idea to improve society and make discoveries. However, as more students enrolled in more career focused fields, they decided to defund subsidies over time.
Public/private colleges should give students a discount for online classes as the overhead is much less.
In many cases, the instructor has more students to juggle and is only getting marginal pay increases as class size rises.
Tuition is going up, in part, because the other support for schools has dwindled over the last 30 years. In fact, tuition was kept artificially low for a number of years through elaborate budget slashing and financing in the wake of the ’80s. Now the burden is being increasingly placed on students and the regulations on college loans, as well as the tools students can use to work with their financing after graduation, are shoddy at best. For my part, I don’t see how it’s “cheap” credit – my loans are carrying an interest rate that is rather high.
It’s true that schools are upgrading facilities and adding equipment, however in many cases these improvements are years or even decades overdue. Often the more visible upgrades are financed by large donations and grant-related funds and not tuition. Operating costs like keeping the roofs from leaking and paying for professors and support staff are generally supported by tuition.
@Ron / Thanks for the suggestion, I’ll talk to my employer and see if we have a program for reimbursement.
I can say without doubt, that without having the dumb luck of being born in a country with a very good *public* k-12 and *public* higher education system, I seriously doubt I (or most of us) would enjoy the individual quality of life that we do.
I was born in the ’60s in the U.S. My birthright allowed me to spend my formative years learning, followed by choices (college or tech school) pursue a living that I enjoy, buy a home, change careers if I wish, etc. I seriously doubt I would have had most of the opportunities if I hadn’t been born at the right place at the right time and taken advantage.
I have serious concerns for the current generation of college students, for whom tuition is a much larger burden than for us. I was able to work a part-time job in college and left without loans in the ’80s. After getting laid off from a job in the ’90s, I was able to get a graduate assistantship to get a graduate degree without loans. As I stated in an earlier post, I work in higher ed – most students today I am in contact with (community colleges, undergrad and grad) are working part time (and sometimes full time) jobs and still needing to find loans to complete their degree. That serious handicaps them as they begin their working lives. This needs to be fixed, for all of our sakes.
P.S. – @ Jenna – for *me* grad school was completely worth it, in terms of increasing my income, opening up career opportunities, networking with others in the field, taking classes with other students are are actually interested in the class … I wish I had done it sooner.
Hogan – I was so that kid from the Midwest
I’ve been following this for some time. My guess is that the universities can hide the collapses pretty well by cutting back on salaries and features while letting in dumber rich kids instead of smarter poor ones
http://edububble.com/dpp/?p=519
Ten years ago, when I graduated high school, the top 5% of the class qualified for a scholarship to the in-state school. It included tuition and a stipend. In the course of my four years there, tuition doubled. It’s doubled again since then. What I (would have) paid for the entire semester is now approximately the price of one class. It’s completely impossible now for the average person to pay for college without loans. Yet I doubt the education is four times better now than it was then. What’s really sad is that our state constitution mandates that tuition be “as nearly free as possible.” Missed that one by a mile.
The problem with the usual logic on this issue is that the price of homes and other products is rarely subsidized by government (sure there are tax breaks, but that is about it). As the government subsidy has been slowly, or more recently quickly, withdrawn, of the tuition will increase at a rate that far exceeds the CPI; the schools costs go up at the rate of the CPI, but tuition is going up to cover the increase in costs and to make up for the decrease in the government subsidy, which was keeping many schools going. Questions about “who is getting this tuition money” need to take into account that there may not be much more money flowing into the schools, so there might be few in the university benefiting from the increase.
Colleges are going to recruit international students (which is fine) they will say it is in the name of diversity but it is really about charging the government sending the kid or the kids parents full tuition. This will make it more expensive for middle class kids because tuition can continuously be raised and the government will respond by subsidizing tuition for poorer students and the rich will just pay cash like the international students. I have no answer to this problem because I think any motivated kid who has a hunger to learn should have a shot at college and I think international students are great for any campus.
Jonathan,
You can place out of many 100-300 college courses already. The test is called CLEP, offered by College Board, and is accepted by many universities. I know it is possible to skip the first 2 years of college by testing-out.
From what I’ve read, it seem it’s colleges competing for professors and making the best facilities without regard for tuition increases, just to look more prestigious. Even state schools are trying to become exclusive and compete with the Ivy league, when they were meant to be inexpensive for in-state students (the tax payers they are supposedly serving), I’ve been predicting an education crisis for a while…Unfortunately, they have us in a bind, if we want to go to a “good” college. Maybe government intervention is required, so we don’t fall behind countries like China and India.
Danko, I think government intervention is, like almost everything else it touches, the opposite direction we should be going. Let the government step out of the way and the free market will take care of this problem.
Ahhh…so we have 3 curves. One curve is medical costs and this is going up exponentially. Another curve is education costs and it is going up even more exponentially. And we have the CPI which is going up flat and linear.
So, there are two immediately apparent explanations. Health care and those and education are becoming less efficient at an exponential pace. OR CPI isn’t measuring what it is supposed to be.
I got a couple of other exponentials for you…the commodity price index, the price of gold, and the price of copper.
Oh, and here’s one more exponential…the money supply. Hakam’s rasor demands that the simplest explanation is the most likely. So you can explain exponential increases in money supply, copper prices, gold prices, consumer prices, health care costs and education costs by greed and inefficiency. Alternatively, it can be explained by CPI not measuring actual consumer prices. What do you think is the simplest?
Indeed, another point is that many different types of inflation have been “taken out” of the CPI over the decades. Try charting housing prices or gas prices versus the CPI. It is not insignificant to point out that Social Security increases, etc, are tied to the CPI. Thus one way to solve the solvency problem in Social Security, etc, is to dramatically understate inflation. Of course, it wouldn’t benefit any politician to say that in public.
@Kevin – greed & inefficiency, of course! That’s because we all *need* to have the *best* college education we can get from the *best* possible school in order to get the *best* job, etc., etc. (Along with a “gap year” for “growth” and “exploration”, of course!)
I am amazed at the number of parents-of-highscool-seniors who have not had a single conversation with their children about the amount of loans the parents are expecting the CHILDREN to bear.
Seems like in every college-bound family, a simple conversation should be happening:
“If you select this school, you will graduate owing $X and therefore can expect a monthly loan payment of $Y, such that you will need to find a job of making $Z, just to make ends meet.”
“On the other hand, if you investigate an alternative (work-study; community college; public vs. private; deferred start, etc.), you could graduate owing [a fraction of]$X, and have that much more of your monthly income to save for a house/nicer car/travel/spend on other things.”
Seems like simple math that most high school graduates could comprehend. And, if there were fewer “buyers” at current tuition levels, insitutions would be forced to reduce their rates. Unless, of course, buyers have an irrational fear that by not paying, they will be prevented entry into the labor market in which case, they continue buy anyway (which I believe is what is happening.)
Question 1: How does the cost of me Law School Education Increase 20 percent while I’m attending the school, despite the fact that the value of the degree has decreased.
2. How could my Law professors afford to pay for school by working a part time, and I will take ten to twenty years of my profession to do the smae.
3.) Books, for reading, pens for writing, teachers for teaching, seems like all the inputs are exactly the same. Thus I ask again how has the “real” cost of eductaion septupled over 40 years while its returns have decreased.
4.) The sad part is education can be seen as economic waste. One spends four or seven years proving he’s capable of learning, because as most know 90% of what one learns in college will never be used in their job. College does not make a person smarter, the individual is most likely predisposed to be intelligent and thus, we are wasting years of valuable work experience and production for people to prove they’re smart, But now everybody goes to college and it fails to distinguish anybody. Thus we rat race for more prestigious Universities and shell out whatever they as.
Oh if I could get the 200,000$ spent on education back and invest in even a small buisness venture how better off I’d be. But hey lets loan kid 100,000$ to read some books, but mainly spend their time getting drunk, trying to get laid, and learn more bad habits
thee free market cannot solve this problem because of several market failures. 1.) perfect information. The averaged student is unaware of the long-term affects of debt and the actual value of education. 2.) education is not a scarce good, it is essentially limtless. Supply and demand operate under the principle that resources are scarce. 3.) Employer’s are operating under imperfect information example: the 40 billionaires in the U.S. were produced by no college, Harvard was second with 37 billionaires. A college Education is not like most economic goods, its actual value depends on a number of factors. Furthermore, I argue that the returns to education were in fact false. education was something that upper class individuals could first afford. Being upper class leads to more work contacts with money and resources for investing in capital. Thus, returns to education could partially be attributed o having more resources to begin with. I’m pretty certain that college students (from wealthy families) will tend to make more than their poor counterparts, and greatly more than people from Detroit whose public school system, and poverty almost ensure the poor their will stay poor
Adam Says:
“Question 1: How does the cost of me Law School Education Increase 20 percent while I’m attending the school, despite the fact that the value of the degree has decreased.”
Answer, in part, is the cost has not increased 20 percent.
Your tuition has increased 20 percent, but the true cost has not. What has happened is the aid schools receive from state and federal government has steadily decreased over the past 30-35 years. Your education – if at a public institution for sure and perhaps a private institution because some do receive state and federal aid – is still subsidized by the taxpayers. Not subsidized to the extent it was 40 years ago, but still subsidized. But that subsidy has been declining.
“2. How could my Law professors afford to pay for school by working a part time, and I will take ten to twenty years of my profession to do the smae.”
Because you are paying a far greater share of your tuition than they were. And I think that stinks. Because I think “we” – our society – benefits as a whole when college is affordable, making it easier for those who do want to attend, whether for a class or two or for degrees. And individuals benefit as well.
“3.) Books, for reading, pens for writing, teachers for teaching, seems like all the inputs are exactly the same. Thus I ask again how has the “real” cost of eductaion septupled over 40 years while its returns have decreased.”
Your tuition is not the “real” cost. Your tuition is still only a portion of the “real” cost. However, your tuition is a greater proportion of the “real” cost that tuition was ten years ago, which was a great proportion of the “real” cost ten years before that.
“4.) The sad part is education can be seen as economic waste. One spends four or seven years proving he’s capable of learning, because as most know 90% of what one learns in college will never be used in their job. College does not make a person smarter, the individual is most likely predisposed to be intelligent and thus, we are wasting years of valuable work experience and production for people to prove they’re smart, But now everybody goes to college and it fails to distinguish anybody. Thus we rat race for more prestigious Universities and shell out whatever they as.
Oh if I could get the 200,000$ spent on education back and invest in even a small buisness venture how better off I’d be. But hey lets loan kid 100,000$ to read some books, but mainly spend their time getting drunk, trying to get laid, and learn more bad habits”
If you have a college degree, you are still in the minority (the latest goal is something like 25% by 2020 with a two- or four-year degree, which is an incredibly ambitious goal for the country.
And, as most small businesses still fail within the first year, so that quite is a reach.
I still argue that while what I learned in college (and later graduate school) most definitely affected my career path and opened up many, many career opportunities that simply would never have been there if I had not had the chance to go to school (thank you taxpayers, for subsidizing the best public k-12 and higher education systems the world has known and thank you mom and dad, for pushing me toward it), I also appreciate the things I learned in college that are not job-related. Some basic astronomy, a little Spanish, an understanding of how an automatic transmission works, the history, lit and film classes – these make life interesting and do include things I take with me into my working life, far more than any accounting or management course required for my major.
Education is still a path to opportunity and enrichment. In our country, the state and federal governments have steadily de-funded the subsidies going toward higher education over the past 30 years. I think I have made it clear that I think that is bad policy. I, too, would think twice about incurring a great deal of debt for a four-year degree. But without it, career choices are severely limited for most of us.
And much less interesting.
Great post and some interesting comments. I’m surprised at how credulous some posters are regarding funding and the long-term value of education.
If you really believe that the precipitous and wholly ridiculous rise in college costs is due to a lack of funding, you learned little in Economics 1001 and have never taken a public budgeting course. The supply of easy federal money (loans) and lax oversight have combined to make this unsustainable cost curve a reality. Furthermore, many of you are bamboozled by the term “education” itself. No one is attacking education — but it’s time to stop conflating the exigencies of the ever-expanding education bureaucracy with the concept of educational value. University administrators and state regents have little interest in paring down their organizations or exploring creative, low-cost avenues to disseminate knowledge because to do so results in less perceived prestige, authority and ultimately, reduced salaries.
Notwithstanding the bleating of the higher education-industrial complex, there is tremendous institutional resistance to any reform that would undermine the current gravy train. That may sound polemical but it’s true. I recently heard an interview on Public Radio’s “Marketplace” program where the head of the University of California system was able to make a series of unfounded assertions about educational quality, the state’s competitiveness and the “investment” in education without being challenged (as any interviewee should be) to define his terms, specify which programs or degrees are providing value, or justify his claims. It’s as if the interviewer were just so awestruck that he couldn’t summon the fortitude to ask even one probing or serious question. Perhaps one reason that otherwise thoughtful journalists become speechless on this topic is that serious examination of such claims would entail some sort of admission that their own credentials are not as impressive as they heretofore imagined? In other words, the gatekeepers of opinion leadership are active participants in maintaining an artificially high admission price to the follies.
And that’s how it’s supposed to be. Someone says “higher education” and we’re all to dutifully demand more funding and greater access, without stopping to think that maybe, much of higher education is just conjecture and drivel and that more and more funding is leading to less and less access (with attendant negative outcomes for members of lower socioeconomic classes) because it simply removes any market discipline from the process. Just because something is a public good doesn’t mean we’re being charged a fair price, and in fact, it should be apparent that we (and our children who will be paying the bill) are actually being taken to the cleaners.
Want a philosophy degree? Go for it. Political science? There’s a big, fat loan for that! Women’s studies? Go ahead and spend four years (or more) and tens of thousands of dollars. I’m not saying that everyone should be an engineer, accountant or a physicist, but come on, people! Why should any and every program be promoted as equivalently valuable to either the individual or to society?
I’m not saying that individuals shouldn’t be free to study philosophy, politics or feminism, but why should taxpayers be paying the bill? Take a look at the academic offerings at any major institution. There’s practically a degree in “Seinfeld” Studies and a self-promoting constituency that will argue until its last breath why we desperately need it.
Sidebar: I recently examined course packs for several Spring 2011 courses and found the readings to be primarily drawn from dated material wholly irrelevant to current conditions in business, media and politics. Old habits die hard. Historical review is valuable but these aren’t history courses, yet the curriculum is largely drawn from the world of the 1980s and 1990s, and probably is just a retread of the professor’s graduate research. That’s just pure laziness but of course, it’s a prestigious university so are we mere mortals to pose any questions?
Where is the money going? Well, some of it is going to programs of questionable value, which under the guise of “academic freedom” are set up to be immune from public program auditing. Much of the money is going toward ever-expanding layers of administrative fat, with deans under-assistant secretaries of this or that along with endless rules, committees and conferences — talk to any professor about that. Finally, a big chunk is going to new “programs” that don’t actually offer any degrees, such as “The Center for the Study of Entrepreneurship, Innovation and Technology Transfer.” I just invented that one, but you get my drift. There are thousands of these “centers” that claim to serve some higher purpose but really are just there so the university can expand and find something for social science majors to do other than get real jobs.
We need reform and we need it now. One way we could cut costs is to use the federal hammer to stop rewarding states for setting up multiple institutions. Each state could have ONE state university with multiple campuses. Fire hundreds of university presidents, deans, provosts, under-assistant secretaries, committees, boards of directors and registrars. And then we could have one unified system of registration and credit for any accredited institution, instead of this madness that’s predicated on a 19th century model of individual institutions all basically doing the same thing but which are unwilling to coordinate much of anything for the benefit of a modern, mobile population.
We need to think about what we would set up if we had almost nothing and had to start from scratch, because that’s what we’re going to have to do anyway. In case you haven’t studied state and federal budgets when GAAP — generally accepted accounting principles — are applied, rather than the fanciful numbers promulgated by Congress and state legislatures, the country is broke. No sane person or even a blue-ribbon panel of experts would ever design a nation’s higher education system to look like what we have now. It’s a money-sucking, time-wasting, self-justifying amalgam of overpriced administrative prerogatives that lives only because we’ve decided to let the education establishment decide what it means to be educated and what it should cost. The rest of us are supposed to look stupid and swallow their $%@ or risk being accused of undermining educational quality and societal competiveness.
Our unwillingness to set boundaries in this area mirrors our unwillingness to limit the growth of entitlements, defense, pensions and other accoutrements of our empire. It’s obvious that we need to encourage and support an educated class and ensure that such individuals have the tools and resources to study and explore the frontiers of knowledge. What’s also obvious is that the way we’ve chosen to go about this has encouraged the development of a parasitic organism which uses these goals to further its own aim of institutional growth at all costs.
Look at the numbers, do the math and for crying out loud, stop making excuses. Is there no price too great for a bloody four-year degree? Would you argue that we just need more funding and public support if universities chose to charge $500,000 or $1 million or more? Where does it end before it becomes socially acceptable say, “Excuse me?”
Let’s start from the premise that schools should be giant libraries and labs and go from there. The system as currently constructed exists to limit access and protect its turf while securing a stream of payments from the public trough. It’s time to remove the heads of the hydra and start over.
Amen Fred and well said. I couldn’t agree more. Now, how do we get the educated maroons who feed off the same trough and and those streaming from it (our elected nimrods) to actually represent we the people with our best interest in mind for once? Fred for Pres!
Thanks for the article! I guess i’m not surprised that college tuition is going up, but I didn’t realize how much it was going up. College was expensive when I was going and I can only imagine what it will be like in 20 years. I agree with @Jenna, I would be interested in what the graph looks like for grad school.
Tuition up 10x, more than twice the rate of the housing bubble and the profs don’t understand why!?
My generation took over the administration buildings to protest the Vietnam War.
This generation will need to take over the administration buildings, Wall Street, Main Street banks and Washington.
Drag some the top offenders into the streets and make them answer for this crime against our youth. Sell off some bricks and mortar….like the locker room at Penn State and start cutting tuition. NOW!
Give Jefferson’s advice meaning when he said a democracy needs frequent revolutions.