Cost of a College Education

I’m not quite sure how it happened, but over the holiday period, I became a little fixated on why the cost of a college education in the US is so high. I therefore did quite a bit of reading regarding this issue. In this post, I intend to lay out some contributing factors to the ever-increasing cost of a college education. Let me stress that I am not any kind of expert on this topic (far from it, in fact!) and also that the lack of transparency when it comes to university budgets makes it difficult for anyone to get a good grasp on what is truly driving costs up. It will probably take a piece of investigative journalism akin to the excellent TIME magazine article on the rising cost of health care in the US by Stephen Brill to be able to answer this question effectively (pdf!).

First of all, here is a table showing the average “sticker price” of the cost of a university education in the US as a function of time (adjusted for inflation). The table was obtained from the College Board. Click the image to enlarge.tuition

You can see that, startlingly, the cost of education as well as the cost of room and board have both increased dramatically since the 1975-76 school year in real terms. Schools often stress, however, that students rarely pay the “sticker price” after financial aid has been doled out. This is true, but it is difficult to know the exact numbers on this.

The $64k question is why the cost has increased over time. To try to answer this question, during the holiday, I read the book Why Public Higher Education Should be Free by Robert Samuels. Samuels also writes the popular blog Changing Universities. I have to say that I found the book quite partial to the author’s point of view without an adequate use of data. That being said, the book did have many redeeming qualities. Samuels highlighted several problems with undergraduate education in the US that were particularly interesting. The main thesis of the book was that the main drivers of cost increases at universities do not contribute to an improved undergraduate education and that US public institutions need to refocus on educating undergrads to drive costs down.

According to Samuels, the increasing costs are mainly due to the following (all of these reasons are debated by various authors, so it is difficult to know for sure whether these are correct):

  1.  Room and board cost hikes due to amenities on college campuses such as recreational facilities
  2. Increased salaries for administrators and star faculty (here, Samuels does have figures to back his claim up, as the salaries for public institutions in the US are publicly available)
  3. Athletic budgets which on most college campuses actually lose money rather than being profitable
  4. Spending on graduate students
  5. Administrative bloat
  6. Reduced state spending on higher education
  7. Running a university like a business

It may not seem obvious why the last item may contribute to rising costs of education. However, Samuels points out in the book that during the financial crisis of 2008, Harvard lost at least $8 billion of its endowment and the entire University of California system lost approximately $23 billion due to their investment strategies. Furthermore, the limited resources at universities are allocated away from the core mission of undergraduate education by hiring and paying people (such as financial analysts) to do jobs not central to this mission.

There needs to be a refocusing on undergraduate education at universities, which is surprisingly neglected on many research university campuses. Professors often complain about “having to teach” and administrators are not trained educators. While research is of vast importance and should not be neglected, professors lack almost all incentive to invest a lot of time in the education of undergraduates.

Finally, while there are other reasons that have been cited as contributing to higher costs, such as the increase in technology and IT staff on college campuses, it strikes me as strange that undergraduates are still able to be taught for free (at least tuition is free) in countries like Germany, where similar technological expansions have occurred. If the priority at US public institutions is to educate undergraduates, it seems that the rising cost of education is a solvable problem.

Let me again stress that while I am no expert on how to run a college campus or on the issue of why the price of a university education is increasing, I agree with Samuels in thinking that that the incentive structure at research universities does not adequately value educating undergraduates, who are ironically paying the largest cost.

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8 responses to “Cost of a College Education

  1. Yep. Gotta stop spending on those graduate students…

    “Administrative bloat” also gets thrown around a lot, and I think it’s often a signal of “things I don’t like”. For example, I think it’s a reasonable request that someone is around to ensure all research with animals treats them as reasonably as possible, but that is certainly bloat by some perspectives. Or you could complain about people who are spending time making sure that grant money is spent appropriately–but others could reasonably demand that if they’re paying for something, they want oversight.

    Confessions of a Community College Dean talks a lot about this, and mentions problems of 1. Health care costs for employees 2. state mandates like ADA compliance (and 3. IT, as you mention).

    And having worked in one European institutions, I’ll state that one of the big cost-saving measures that I’ve seen was massive 1k+ person courses. This does not good pedagogy make, but certainly keeps labor costs down.

    As for “paying the largest costs”, I’d beg to differ. At both my UG and graduate school, endowment covered more of the operating budget than tuition. For state institutions, general endowment or state money (fast disappearing, sadly) is a big cover as well.

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    • Thanks for your comment. I can see your point of view for many of your points, which is why the tone of my post was somewhat cautious. I am not sure that I agree fully with Samuels on all his points as well.

      Regarding graduate students, Samuels argues in his book that the there is an unnecessary cost increase due to graduate student teaching assignments at research universities. He also argues that undergraduates taught by 1st or 2nd-year graduate students may be shortchanged in their education.

      On administrative bloat, Samuels does have some interesting data for the University of California system. In 2006, there were 214 staff and administrators making over $200k with a collective gross pay of $58.8 million. In 2008, the number of staff administrators making over $200k rose to 397 with a collective gross pay of $109 million. These are quite staggering numbers within just a two-year span, especially considering the economic downturn in 2007.

      You are right that we should not complain about some of these cost increases. However, I do agree with Samuels about the focus of universities drifting away from the mission of educating undergraduates. If this is prioritized, the cost can likely be driven down.

      Part of these misplaced priorities comes from the universities’ incentive to maximize its national ranking. Money is then spent to increase the prestige of the university, while not necessarily focusing on undergraduate instruction.

      For example, on a recent visit to an unnamed prestigious private university, I noticed that one of the buildings on their campus was designed by world-renowned architect Frank Gehry. This no doubt cost the university a great deal of money. When I got home, I read on Wikipedia that because of the ambitious architecture, the building did not function properly and the institution proceeded to sue Gehry, resulting in further spending on legal fees. This is anecdotal and this incident occurred at a private university, but I think one can clearly see that universities have an acute (and misplaced, in my opinion) focus on maximizing prestige.

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      • Okay, playing Bursar’s office for a moment, I’m going to give each of the ~400 staff mentioned a pay-and-benefits cut to the tune of 100k/yr. Divided among the ~188000 students of the UC system, we’ve saved each student about $210, which is what I’ve paid for some textbooks.

        I mean, I’m sure the students would all appreciate the $210 back, but if I was paying 7k/yr (say I was going to UC Davis and half my tuition was covered) that would be a grand 3% of my tuition money. Maybe we’ll give some presidents and deans extra cuts, and I’ll get $300 back. That’ll be some nice beer money.

        It can be galling to see some of the salaries, but we’re not really getting to systemic issues. And as for the jump from 50 to 100M, is that simply a fact that you’re counting nearly twice as many people?

        Complaining about graduate students getting TAs and teaching some classes seems to be a silly thing when you’re complaining about costs, since graduate student labor is CHEAP compared to professorial salaries. And I can certainly name several professors who’ve taught worse than their graduate students.

        We can point to some of the dumb fancy buildings, and if I had my druthers I’d move back to brutalism myself, but again, if you spent an extra 10M for a starchitect building at a campus with a population of a few thousand, the amortized cost-per-student (say you expect a 30 year lifetime) is low.

        I’m actually not too annoyed with high-tuition and high-discount strategies (and net costs for students have *not* drifted significantly, see for example http://www.npr.org/sections/money/2014/06/25/325497878/the-real-price-of-college), because you could basically consider it a progressive tax on education. If your family makes more, then I’d consider it fair to ask you to pay more for your education, particularly since you’re getting it at significant discount anyways (I recall seeing Swarthmore quoting around $80k/yr the cost of undergraduate education http://www.swarthmore.edu/Documents/administration/finance_investment_office/FinancialReport_07-08.pdf).

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  2. Also, speaking of reduced state support: http://universityofcalifornia.edu/news/uc-educational-expenses-lower-today-20-years-ago-report-finds

    State support a third of what it was in 1990. A THIRD! Now *that’s* a systemic change.

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  3. Oh, here’s another one: http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2015/jan/1798_schoen_state_trends_2003_2013.pdf

    Employer-provided health insurance costs have generally doubled over the past decade. Taking UC as an example, the number of employees roughly matches the number of (undergrad) students, so if you consider the increase in cost to come from an increase in tuition, then you’d draw an extra $700/yr or so per student.

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