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.
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):
- Room and board cost hikes due to amenities on college campuses such as recreational facilities
- 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)
- Athletic budgets which on most college campuses actually lose money rather than being profitable
- Spending on graduate students
- Administrative bloat
- Reduced state spending on higher education
- 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.