Why does college/university tuition grossly outpace the inflationary rate? Especially for universities with business schools…don’t they practice what they preach? What are the facts about why this is?
I see I’ve stumped the audience! 
I WAG the real answer is because we need that damn degree, right? 
Because applications are still rising for said colleges. When the number of applicants drops sharply due to the price, they’ll be forced to back off a bit. Until then, they’re still finding the stable market price. Unfortunate, I know.
I went to a rather pricey university, and, even though I was able to combat 2/3 of the price by doing ROTC, it was still expensive. Current tuition there would prevent me from going if I were a high school senior today, though.
The way things are going, we’ll be back to having our youth taking up apprenticeships! (Sorry, Mr. Moderator…just a little IMHO levity here.)
I’ll WAG.
Education is a skilled labour-intensive service industry. Over the past - say- 50 years there has been substantial capital accumulation and technical change (at home and abroad). The main effect of this has been to lower costs in manufacturing and to a lesser extent in agriculture. At the same time there has been a considerable expansion of the services sector, due partly to increases in income (services are income elastic).
The CPI bundle is made up of goods and services. Although there are now more services in the bundle, the decreases in prices in the goods sector have been larger than the increases in weights for the services sector. Trade has also had a greater dampening effect on the price of unskilled labour than skilled.
What that means is that the price of goods has fallen relative to the price of services. Since the CPI is a composite of both, services - particularly those with very high skilled labour input shares, like education - must have increased in price faster than the inflation rate.
This year is the peak. Starting in 2009 the demographic bulge (Baby Boomers high achieving kids) will begin to lessen. Cite N.B. My prediction is that Universities will begin dropping standards before they drop prices though. IOW I bet it is **more likely **that a kid in 2018 who wouldn’t get on the waiting list at an Ivy League School in 2008 will get early admission, than that the cost of a Ivy League Education will be 10% less than it is now [in 2018 dollars].
It’s a misnomer to call the large increases in the price of education “inflation”. But lots of people do.
Properly speaking, it’s mostly called supply & demand.
In the postwar 1940s, (WAG) ~2% of America went to college immediately post-highschool.
In the 1990s the corresponding figure was (WAG) ~60%. Did we build 30 more Harvards? or expand the existing one 30x? And due to the increas in the number of 18 year olds in, say, 1996 vs 1946, the actual growth in students isn’t 30x, it’s 100x.
So demand has gone up a shitload, and supply not nearly so much. Econ 101 says that’ll cause a price increase.
And as oher have noted, the cost of goods sold has gone up too. That doesn’t necessarily figure into the price, except to set a floor. If Harvard’s cost of goods sold is really $25K per semester that just ensures they won’t sell it for less. If the demand means they can sell it fotr $250,000 per semester, they can, will, and should do so (at least if you beleive in pure market capitalism).
The rational response to this is to build more universities. The challenge is the price you can demand is a function of your prestige, not your quality. Over the long term (>50 years) theose ought to be correlated, but they aren’t really in the short term. A new private college will have little prestige.
Meanwhile, the Gov’t, through the various state colleges, universities, etc., is providing a lot of capacity at below their cost of production. Definitely not enough capacity, but enough to set the price of the middle-market product at below the cost any private operator can bear.
So the new privates are now specializing in things the Gov’t schools have so far largely ignored, such as nights/weekend intensive learning for adults who have jobs & families & still want to get teh bachelors/masters they didmn’t get fresh out of high school.
I agree with LSLGuy, it’s a supply/demand thing with prestige thrown in there. I teach at a University and we’ve capped the number of students, but a smaller private college I teach at has lots of room with a lower applicant pool. With the state budgets the way they are, the chances of a new university being built is slim.
I will say that several universities in the state of Florida have become more prestigious as a result of this supply/demand. When I went to college it was pretty much Florida or FSU (or Miami, but that is expensive), but nowadays you can get a wonderful education at several other state universities (USF, UCF, FAU, FIU, etc). They’re all actually becoming very competitive and will probably start turning away students as UF/FSU have to, maybe helping to prop up those smaller community and private colleges - there must be 100 of them in Florida alone.
Universities have two separate functions, teaching and research. Everyone here is pretty much focusing on the cost of teaching, which hasn’t really changed but where Universities make their reputations (and therefore attract students, donations and research grants) is in their research, which entails two expenses, faculty and facilities.
Although most university instructors are grossly underpaid compared to others with similar educational levels, the professors with the best reputations can get quite pricey. Not only that, a top professor will require research staffs and the like. Further, in high tech research, the labs a top professor will require are quite expensive (and even for lower tech stuff, you have to have the proper research materials). Some professors will be able to recover some of these costs through grant awards, but they still usually cost the university for facilities at least.
In addition, the cost of non-educational services to students have gone up significantly. In the past, just giving them a dorm room was enough. Now there must be student centers, tutoring facilities, student health, gym facilities, etc.
I’m in a college I&TS department and it’s fairly obvious why costs keep growing.
If you’re going to teach, you need to have up-to-date equipment. It does no good to have a five-year-old computer in the computing labs. You need to constantly upgrade your equipment, and buy new software.
There’s also perception. Sure, Office 2003 works fine for all student purposes. But if you aren’t using Office 2007, the impression is that your college is behind the times and students look elsewhere.
Faculty want newer computers to run the software they want to teach, both for presentations and so that students can use them. Most faculty use PowerPoint in class, so you need to upgrade the classrooms with projection systems. Whenever there’s a new device available – like a smart drive – you need to upgrade the classrooms (that may not sound like much, but we had to put USB hubs in every classroom due to the difficulty of getting to the back of the computer to plug in the smart drive. They weren’t expensive, but we needed to install a hundred of them).
When I was in college in the early 70s, the classroom teaching equipment consisted of blackboards, chalk, and a podium for the professor. Today, you have a whiteboard and markers (more expensive than chalk), a computer (sometimes two if there are both PC and Mac users), a VCR, a DVD player, a projector (at least a couple of thousand dollars right ther), a device to manage the projector, network connections for people who bring in laptops, and a hub. The computer lab was a single room with a mainframe used only by Computer Science students (Computer Science, of course, requires a lot of technical expense – you need to be teaching the current programming languages, not ones that were used five years ago).
I won’t even go into classroom response systems, which are a nightmare.
On the server side, we have to purchase several servers a year, both to replace servers that are just too old and slow and to add new online services required by the various departments. Much of the server software we run have maintenance contracts (you want help if there’s a problem), which get more expensive each year. Companies that specialize in software to colleges usually charge ridiculously high rates for such things.
There are also courseware systems like Blackboard that had to be added (because the students and faculty want it).
And, of course, the students want a fast Internet connection. We keep having to add bandwidth, plus puchase equipment to ensure that happens. Students also want wireless connections in the dorms, so we need to purchase equipment for that.
The equipment needs to be constantly upgraded. All colleges upgrade all their computers on a 3-5 year cycle. We’re also continually buying new printers, and, of course, toner, and paper (we’re working on charging students for that, but the faculty expects free printing).
All this means that I&TS has to keep spending more money year after year. And similar issues affect all college departments.
Yeah, what Billdo said. Student services have snowballed, and even in non-lab disciplines, any school that offers its faculty decent research support has to drop a pretty penny on subscriptions to electronic databases and such. Plus, a classroom used to be a box with windows and a chalkboard and maybe an overhead projector if you’re lucky; nowadays it’s usually a box with a computer, VCR / DVD player, document camera, SmartBoard, and direct hotline to the tech support people who maintain that stuff.
ETA: Damn, and of course RealityChuck has given a better and more detailed answer than I have. Why don’t I ever remember to preview?
Colleges that want to gain or maintain “elite” status have to stay in the competative game of providing the best facilities and resources for faculty and students. Find me a college that isn’t in the process of building one or several new additional buildings. When those buildings go into service the maintenance goes on until it is torn down.
Personnel levels have increased in every area. Admissions offices that used to consist of one or two people and a secretary may have 20 people now. Security services have expanded exponentially. Athletic facilities oftentimes don’t pay for themselves. Concert halls and museums are all the rage.
States have cut back on funding for the state universities. The money has to come from somewhere.
Another thing worth noting is that many colleges employ the strategy: Set tuition prices high, and offer substantial financial aid to students who can’t afford the high tuition.
NPR did a piece on this not too long ago, and you’re close, but not 100% correct. What’s going on is that places like Harvard, Yale, etc., are dipping into their endowments to pick up the tab for qualified, lower-income students. They don’t want to lower tuition costs, because it makes people think that they’re not getting a good education, so the schools are coming up with creative ways to make it easier for people to afford the high costs.
One of the reasons that tuition prices have increased, that no one’s mentioned is the easy availability of student loans. It’s not hard to get one for however much you need to cover the costs of schooling, so schools are more inclined to increase tuition because they know that the kids will be able to get the cash.
The cost of an Ivy League education will be 10% less than it is now next year. They’ve actually decided to start spending their endowments (mostly due to donor pressure), so Harvard, Yale, and Princeton, for example, will be extending need-based grants covering almost the full price of tuition to more than half of their students within the next couple years.
ETA: What Tucker said.
UCF is now a lot harder to get into than FSU, and a lot of programs (computer science, Advertising/PR, business) are as hard or harder to get into as any program at UF.
And yet surprisingly the value of a degree (well, at least a two- or four-year one) continues to erode…
Oh God, please don’t say that. Every hour I spend in class costs me somewhere around 80 to 100 dollars. Y’all are gonna make me depressed.
(I know, I know, it’s my fault for picking a more expensive school. Doesn’t make it hurt less though.)
Think of it this way, it’s more expensive to sit and listen to some grad assistant prattle on about something he doesn’t really grasp then to buy a ticket to a Broadway play.
But then, maybe if some of the students really understood the cost they wouldn’t cut so many classes.
Long time prof here:
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As mentioned, new tech. PCs everywhere, plus the network, plus the staff to support them, etc. All sorts of new stuff all over the place that weren’t everyday items 40 years ago. Both in academics and administration. Very expensive.
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Bureaucracy and their staff. The administration of a typical college is much, much bigger than before. HR departments alone are now bigger than a typical administration for a college was just a few decades ago. Some of it has to do with government paperwork, but a lot of it is just the people who control the budget allocating themselves bigger kingdoms.
Forget supply and demand.
Forget research costs. Those should pay for themselves and them some. Many of the biggest universities make quite a bit of money on the overhead charged to grants. The few (and I mean very few) profs who earn headline making salaries are paid entirely from grants. The schools get around 40% additional money beyond that salary as overhead. If the grants go away, the salary drops to normal (i.e., pitiful) levels and the prof is persuaded to get more grants or go away.
2 of the last 3 departments I worked in were run almost entirely on grant money. Taking overhead into acccount, the schools made significant dough off us in order to fund multiple secretaries to the assistant to the 3rd Vice President.
If you don’t know what grant overhead is, you have no idea how universities run. Take all the real costs of a grant, salary, equipment, travel, etc. Add around 40%. That’s how much the grant giver pays. The school keeps all that to run things like for buildings, administration and such.
:dubious:
If there weren’t enough potential students out there willing to pay current prices for a university education, prices would have to come down. That’s basic economics.