The Inexorable Tuition Escalation

The cost of attending a college or university keeps rising without an apparent limit year in and year out.

To give a sense of the relentless rise, since the early 1980’s tuition has increased over 1000% while the consumer price index (CPI) has risen a relative paltry 240%.  From a slightly different perspective, in 1970 the percentage of the average household income it took to pay for tuition in a four-year college was 16%; by 2010 it was 36%.  As a consequence of the rising costs, students are taking on debt as never before. Currently, student loan debt totals $1.2 trillion, with over a fifth of the nation’s households incurring student debt averaging over $33,000.  Worse, the default rate on this debt is currently running 14%, higher than on mortgages, automobiles, and credit cards. Worse still, student debt cannot be discharged in bankruptcy, meaning this is exactly the type of debt one does not wish to incur.

What are the factors affecting tuition costs? Obviously there are the usual expense line items: College President salaries (RPI’s Shirley Ann Jackson made $7 million, Quinnipiac’s John Lahey $3.7, and University of Pennsylvania’s Amy Gutmann $2.5—are among the highest in the country)  administrative bloat ( the University of Minnesota has added 1000 administrators over the last decade to reach the ratio of 1 administrator for 3.5 students), and prestige facility construction (campus construction spending soared to $15 billion in 2006 which includes luxury residential halls and enhanced athletic facilities).

Some also point to all the federal government programs to make college affordable: Pell Grant, American Opportunity Tax Credit, Stafford, PLUS, Perkins loans, and Lifetime Learning Tax Credit, as the culprits behind escalating tuitions. Their contention is that universities simply raise tuitions to absorb these government subsidies. Moreover they believe if you add up the price tag of all these programs, and  spread that sum across all the tuition fees, you’d likely be able to have tuition free college for just about everybody (undoubtedly this sum would defray a chunk of costs).

Then there are Enrollment Management Systems (EMS), such a Noel-Levitz’s, that use ‘financial aid leveraging’ to maximize tuition revenues. The basic model is to first, set as high a tuition price as possible; plow resources into student amenities (as mentioned earlier, such things as rock climbing walls, workout facilities, gardens, and special housing) which might help to boost ranking, and then use any institutional financial aid to offer discounts, as small as possible, to entice wealthy students who might pay the balance of the tuition bill in full. The EMSs serve to implement and bolster rising tuition costs into the landscape of postsecondary education.  

How best to rein in these inexorable tuition increases? 

 

  1. If you’re sending a student to a college, demand accountability and productivity from the institution. One place to research how successful a college has been in getting its graduates jobs or into graduate school, with low student debt and other ‘strategic performance measures,’  is www.CollegeMeasures.org,   
  2. When talking to a college’s admission office ask about the success rate of medical school applications. Find out about the number of Rhodes, Fulbright, Marshall, and Truman Scholars they’ve produced. Be direct and insistent.
  3. When negotiating your effective family contribution (EFC), go to College Navigator and know, up front, standard financial aid packages that the school has offered, and make that your target tuition price.
  4. Write to your congressperson demanding that any college that accepts students with government loans be subjected to an annual productivity audit. As outlined in Mussano and Iosue’s book, College Tuition: Four Decades of Financial Deception, this would compare such benchmarks as “credit hours completed compared with labor costs and other expenses per student.”  

 

Holding down tuition inflation requires attention and engagement from all of us.  The first step is to look after your own self-interest, as Adam Smith instructs us, and not shy away from making demands on the institutions you might wish to attend.