Today, the average annual cost of college tuition is upwards of $32,000 for private universities and $23,000 for public universities. For “elite” universities the number is closer to $50,000. We have $1.2 trillion dollars of student debt and $1 trillion in federal student loans. Millennials suddenly cannot very easily pursue that thing which is so important to our country’s prosperity: higher education.
How did this happen?
Once upon a time, higher education was affordable. During the 1960’s and 70’s, annual tuition was about $10,000 for private universities, $2,000 for public universities, and $1,000 for in-state students. Students paid their way through college with the money they made from their summer jobs. Washing dishes, bartending, baby sitting – these were viable options for paying for one’s tuition. In certain circumstances, truly low-income students could obtain small loans from the National Defense Student Loan Program. However, this program was so narrowly focused and small in scope that it did not significantly affect the market. Students worked and learned, and our country had a golden age of higher education.
But in the late 70’s and early 80’s federal aid subsidies were expanded tremendously. The most significant of these was the 1978 Middle Income Student Assistance Act, which provided financial assistance to not just low-income families, but middle-income families as well. This act set the ball rolling on a dangerous path of bloated federal assistance programs aimed at making college more affordable. Indeed, after 1978, financial aid programs were not just relegated to low-income individuals applying to cheap schools, but to virtually any middle-class individual applying for any school, regardless of the tuition. Universities responded to this large availability of federal money by increasing tuition. Why? Because universities knew that an increase in tuition would be covered by overly-generous federal aid programs. Pre-1978, if a university were to increase its tuition to say, $30,000 a year, almost nobody would apply. But afterwards, universities could charge a high price, the federal government would subsidize prospective students for that higher price, and there would be no drop in enrollment. Former Secretary of Education, William Bennett, first articulated this development in what became known as the Bennett Hypothesis: “Increases in financial aid . . . have enabled colleges and universities blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase.”
Though there has been substantial debate over the truth behind the Bennett Hypothesis, new evidence seems to confirm its validity. In 2015, The Federal Bank of New York found that for every additional dollar of federal financial aid spent, universities raise their price by 55-65 cents. Further studies have demonstrated that increasing university-specific scholarships or discounts simply results in tuition increases to cover and “hide” the lost dollars. The intentions of these federal assistance programs are certainly noble, but the results have been disastrous.
A number of smaller factors have also played a part, however.
The technological boom of the past 20 years has greatly increased the demand, and thus the wages, for skilled workers. These skilled workers solve problems with their brains rather than hands, a trait that can only be attained by a college degree. (You certainly don’t need a college education to perform these “high-skilled” tasks, but a degree shows proof of concept.) In fact, The Bureau of Labor Statistics reported that in 2014, the median salary for someone with a bachelor’s degree was $70,000, while workers with a high-school diploma only earned $35,000 a year. In case you skimmed that, that’s a 100% difference. Numbers like these, as well as the ease with which once can attain federal assistance, only increases the demand for higher education. Like any good, increased demand means increased prices, which in this case, is tuition.
But this increased tuition has done little to actually better the quality of higher education. Indeed, though wages (tuition) and prices typically rise with productivity, higher education itself has changed very little in the past few decades. Yes, classrooms have some cool new gadgets, but students still primarily learn the same material, through the same methods, with the same quality of teachers, as they did during the 70’s. And let me make this clear – there’s nothing wrong with that. The system works. College students learn a tremendous amount from quality teachers in creative environments. That’s why there are no news headlines that read, “College Graduates Are Less Qualified than their Parents.” No, our problem isn’t education. It’s money.
But with rising tuitions, where does the money go?
Most of the new money being brought in goes to two places: hiring more administrative staff and improving the décor of the campus. Administrative costs have increased by 60% in the past 20 years, and with increased enrollment, this is perhaps justifiable. Updating facilities and constructing new buildings is also defensible, as it can be argued that these things attract better students and more qualified teachers. Plus, with little ability to actually improve the classroom experience, where else would the money go? It could perhaps go to professors, but it hasn’t; wages have barely increased since the 1970’s, and professors don’t seem to mind. (Ever heard of a professor protesting “stagnant wages?”) After all, they work the same hours and teach the same number of students as they did 40 years ago. No, the universities are not the culprits in this giant mess. Like any business, they adjust their prices based on the demands of the market. Unfortunately, bloated federal aid programs and increased demand for higher education have distorted the market, allowing universities to charge premium prices without a loss in customers. This problem is important, and it needs to be fixed.
In short, a combination of failed government programs and market-driven increases in demand is responsible for the absurd prices of higher education. As a current college student, my education is similar to that of my parents; I just pay a hell of a lot more for it.
Mason Vierra | firstname.lastname@example.org