Why Does College Cost So Much--And Why Do So Many Pundits Get It Wrong?

To say that American universities are too expensive is like saying cars are too expensive. What do we mean by such a statement? Are we talking about the cost of a Lamborghini Veneno (at 3.5M, one of the world's most expensive cars) or a Hyundai Atos (at $9000, one of the least expensive)? For the captain of industry, the sultan, or the magnate, there might not be enough luxury features on the Lamborghini. For the person barely hanging on to that minimum wage job with no benefits, paying $9000 for an Atos to get across town to work at Walmart every day may be hopelessly out of reach.

So is the Hyundai too expensive? Is the Lamborghini too cheap?

That is the kind of question we need to be asking of U.S. higher education, an ad hoc system that varies tremendously by state and by kind. Unlike many countries, we do not have a publiic, national university system. The range of tuition costs (elite private university? public community college? for-profit institution? online provider?) is as diverse as the students being served.

The question we really need to ask about the cost of higher education in the U.S. is "too expensive for whom--and why?" Is Bridgewater State University in Massachusetts (listed as having the lowest tuition in surveys), with its astonishingly low $910.00 annual tuition, too expensive for some who would love to be able to afford college but cannot? Is NYU (ranked the most expensive university in the US) underpriced for its target audience at $61,000? To be fair, the difference between the lowest public tuition and the highest private tuition is a factor smaller than the difference between an Atos and a Lamborghini, but the analogy still holds: when pundits insist that college costs too much they typically blur the huge price differentials, often (for effect) quoting the high tuition at private schools like NYU, not at state schools like Bridgewater. [NB: Massachusetts readers have noted that the seemingly impossible low state tuition is really impossible: Massachusetts also includes considerable "fees" on top of the tuition costs, bringing tuition closer to 8K a year; it should be noted that other schools in other states have those additional fees as well.]

When pundits argue that tuition is high they often imply that it is the high cost of tuition that is what prevents students from going to college. That too is false logic, based on sloppy economics, and is a gross oversimplification of a complex topic. If cost were the real issue, univerisites with the highest price tags, such as NYU, would be out of business, priced out of the market. But that is not the case. As America's most expensive university, NYU is also one of the most competitive and selective universities in the country. Contrary to the bad economics of some pundits, surveys indicate NYU is the single most difficult university to get into in the U.S. as well as being the most expensive. Indeed, the Admissions Office at NYU could lose its entire entering class and have to go to its second-choice students instead, and it would not lose any prestige points (grade point averages, test scores) at all. It is that selective. And it is that selective despite its high cost.

If you are a pundit pushing MOOCs as the cure-all to the high cost of higher education, you probably are not making these kinds of distinctions--in which case, you are either missing the point, haven't done your homework, or are deliberately being deceptive in order to convince people that educators are too incompetent to keep their own costs under control and corporations would do it better. I have no way of knowing the intentions behind the "college is too expensive" drumroll but I am deeply suspicious of those who think simply privatizing higher education will solve "the problem." Especially when those same pundits haven't taken the time to really diagnose, explain, and address what the "high cost" problem actually is and what contributes to it, what caused it, and what it actually means for "the public" to have an affordable educational system.

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Let's put some of these costs in perspective. A year of college costs less than lots of other things, such as prisons, for example. According to The Economist, it costs $47,000 per year for every prisoner in the California state prison system. In-state tuition at the University of California at Irvine (in the exceptionally expensive Orange County) is $12,192. With room and board, the total cost of is $29,365, according to the UCI website. That is an eye-popping cost comparison.

$29,365 does not come close to paying for all the education, all the living expenses, all the counseling and services and security and research and amenities and technology that a twenty-year old needs to live in Orange County for an academic year. To put that cost in perspective, most private pre-schools in Orange County cost considerably more than that; so does home nursing care for an elderly parent (neither of which are residential, 24/7 and they don't offer a first-class education either).

What is the social cost of low in-state tuition? To subsidize that loss, California (like most public universities in the union), now has to make up the difference through admitting as many out-of-state (including international) students as possible. Out-of-state tuition at UCI comes with a whopping $50, 628 price tag.

What is the social cost to the state of California of this system, where you need to subsidize the education of your in-state students with tuitions from students from out of state, thereby limiting the number of places available to students in your own state? It means that our public universities are also extremely selective. The median grade point average of a student entering UC Irvine last year was 4.1 on a 4.0 scale. Better than perfect. Perfect grades, perfect test scores, extra points (that's the .1) for Advanced Placement courses, an array of extracurricular honors, achievements, and civic engagements. To get into your state university, you have to be better than perfect.

And then, at the other end of the process, at job recruitment time, you have employers complain that this generation is too "risk averse." Well, yes. They have been trained to be risk averse. They have been taught that even one tiny bit of risk-taking, one mis-step on the way to college, can ruin their chances of getting into their local, affordable, state school. In our world of constant change, where no one knows what future technologies will hold, we are training our children to accept the status quo, to give the acceptable answers, not to take risks.

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What is the real, social cost of our current situation? The cost of not investing in public education is devastating. There are currently 450,000 students on the waiting list to get into California community colleges. The problem here isn't high cost; community colleges are a great bargain. The problem is that there's not enough funding of public education to serve the public demand in the state of California and in other states as well. Period.

The problem is not that "higher education" is a high-cost Lamborghini. The problem is that there aren't enough reliable, dependable, affordable Atos' to meet the needs of our society. Blaming the "high cost of education" misses this inescapable fact: We aren't overcharging most of America's college-age youth. We are short-changing them.

The real point here is that "college costs so much" for many different reasons. Those states that charge a lot for tuition do so because public funding no longer pays the full cost of tuition. By contrast, private schools such as NYU charge as much as the prestige, luxury brand will bear--and offer amenities, prestige, and privileges that go along with those price tags. At the high end, there is no sign that the high cost of education will reverse itself. There is evidence to the contrary: The most expensive and most prestigious private universities have not had to lower their academic standards as they have raised their tuition.

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Let me end this post with a few more facts and figures that must be included in any discussion of why college costs so much. These are simply "talking points" to keep in mind the next time someone raises the "college costs too much" argument.

Declining public funding of higher education: "One of the most important factors driving price (tuition) at public colleges and universities has been the decline in state support for higher education. According to State Higher Education Finance FY 2012, a report issued by the State Higher Education Executive Officers Association, annual revenue per student adjusted for inflation was $11,084 in 1987 and in 2012 it was $11,095, hardly a staggering increase. Over the same period, however, government support has declined from $8,497 to $5,906 per student, while net tuition increased from $2,588 to $5,189."--Economist Rudy Fichtenbaum, President of American Association of University Professors, August 24, 2013, in response to President Obama's proposal for higher education

• "States are spending $2,353 or 28 percent less per student on higher education, nationwide, in the current 2013 fiscal year than they did in 2008, when the recession hit."--Center on Budget and Policy Priorities

• "Every state except for North Dakota and Wyoming is spending less per student on higher education than they did prior to the recession."--Center on Budget and Policy Priorities

• "In many states the cuts over the last five years have been remarkably deep. Eleven states have cut funding by more than one-third per student, and two states — Arizona and New Hampshire — have cut their higher education spending per student in half."--Center on Budget and Policy Priorities

• Professors' salaries are not the reason for the high cost of those colleges that cost a lot. Over 70% of the teaching faculty at U.S. colleges and universities are "contingent faculty, largely adjunct professors, typically paid between $2000 and $7000 per course, with no benefits and no security. Stop blaming the teachers for the "high cost" of education. If you are a distinguished chaired prof at one of the high-cost institutions, you are probably paid well--although certainly not anything even close to being able to afford a Lamborghini. Adjunct professors in America do not make even minimum wage if calculated by hours of work relative to pay.

• "According to an article, “Deans List: Hiring Spree Fattens College Bureaucracy — and Tuition.” published in the December 28, 2012 WSJ, ”The number of employees hired by colleges and universities to manage or administer people, programs and regulations increased 50% faster than the number of instructors between 2001 and 2011, the U.S. Department of Education says. It’s part of the reason that tuition, according to the Bureau of Labor Statistics, has risen even faster than health-care costs.”--President, AAUP, August 24, 2013

• "More to the point, however, is that. according to the Digest of Educational Statistics, the average salary for a full-time faculty member at a public institution in 1999-2000 (in constant dollars) was $77,897. In 2011-12 the average salary for the same full-time faculty member was $77,843 (in constant dollars). So when measured in constant dollars (i.e. adjusting for inflation), salaries for full-time faculty at public institutions have actually declined."--Presisent, AAUP, August 24, 2013

• Corporatizing college is not likely to solve "the problem" of the high cost of higher education: On the contrary, proportionally, the current biggest contributor to student debt is the private, corporate for-profit college: http://www.theatlantic.com/business/archive/2013/08/which-colleges-shoul...

And for all this, public investment in higher education is still a great investment:

• Public funding of higher education is the best investment governments can make: In June 26, 2013 New York Times piece on the cost of higher education, Eduardo Porter noted: "According to the O.E.C.D., [federal, state, and municipal governments] make a profit of $231,000 on each American who graduates from college--mostly through higher income taxes and lower unemployment benefits."

• "For all the cost of higher education, on any level, the investment by students is still worth the price: In the same New York Times article Porter writes: "According to the OECD's report, a college degree is worth $365,000 for the average American man after subtracting all its direct and indirect costs over a lifetime. For women--who still tend to earn less than men--it's worth $185,000."

Because we do not have one system of higher education, because there is tremendous variety for a remarkably diverse audience, to talk about "cost" without talking about who is being served is ludicrous.

It is equally ludicrous to talk about the high cost of higher education without comparing it to the high-price tag in other arenas where the safe and productive care and treatment of humans is the goal: residential health-care facilities, boarding schools, non-residential pre-schools, health home care, prisons.

Finally, it is ludicrous to talk about the high cost of higher education without calculating the even higher cost of not training the next generation to the demanding, complex jobs that will allow them to lead fulfilling and productive jobs (and, not coincidentally, pay the tax bill for the secure future of those, right now, complaining about the high cost of higher education.)