Why does College Tuition out-pace inflation ?

Many people want College affordable but, tuition is increasing far faster than inflation. What can be done to curb this? More Government money is, obviously not the answer. The dynamic for Government-run Health-Care may be similar.

Government support for state schools has been cut dramatically over the past few decades, which explains much of the rise in those markets.
High prestige schools get far more applicants than they can admit, and so can raise tuition, especially since many get scholarships, which you should consider when computing the actual increase. I suspect some not so good schools raise it to seem high class. But the Times reported one college near Berkeley is cutting tuition a lot to try to attract more students - maybe we are finally hitting the top.

A lot of it is competition. Colleges and universities want to stand out and attract the best students. In order to do that you have to have something better to offer. That means better housing, better food service, better classrooms, better laboratories, better professors, smaller classes, better overseas programs, more beautiful campuses. etc., etc. and yes, better athletic teams.

It all costs money. Lots of money. These days a college or university can’t just offer an education, they have to offer a life experience.

Several reasons, in no particular order:

  1. Much of the stuff colleges do is very labor- and human-interaction-intensive, making it subject to Baumol’s Cost Disease. Simply put, it’s hard to make your workforce more efficient. You can increase the number of students in a class, but only up to a point, and there are tradeoffs – adding a bunch of huge lecture classes will depress your rankings, and it can turn off prospective students, who usually want professors to know their names and interact with them.

  2. Colleges are generally expected to provide more services than they were a few decades ago. This leads to what is often described as “administrative bloat,” but the truth is many of these administrators and staff members are actually necessary; you can’t really do without a webmaster, for instance, or without someone to handle accommodations for disabled students who might not have been able to attend college at all a few decades ago.

  3. Colleges also have to spend more on technology and associated costs (e.g., subscriptions to electronic journals and databases) than they used to.

  4. Public funding for universities has mostly moved from a giving-money-to-the-school model to a giving-money-to-the-students model, via grants and student loans. In the old days, public universities were heavily subsidized by most states, which kept costs low, but only if you attended an in-state school. Nowadays, even public schools are much more tuition-dependent, requiring them to charge a higher sticker price and to compete for students who could take their federal aid money elsewhere. And students often choose a school based on what they WANT rather than what they need, so there’s something of an arms race for amenities – better dorms, better food, better rec centers.

  5. Private universities (and some publics) have moved to a high-tuition, high-discount model where the sticker price is not necessarily what most students are actually paying; in practice, there’s often a sliding scale based on family income and how desirable the student really is to the institution. Like the other stuff I’ve mentioned, it works that way because, in a perverse way, the market demands it. People like feeling that they’re getting an upscale product at a bargain price; if those universities were to cut the sticker price to what the average student actually pays, parents might then assume the product was less-good, since they would be charging less than their competitors.

When I went to school (I’m a boomer) I don’t recall Federal loans as being a big part of things. I went to a top tier, private engineering school and you could pretty much work your way through with good summer jobs and part time work on campus.

Another interesting bit of trivia was that my four years of tuition, room and board totaled up to my first year’s salary on graduation.

Because teaching is more difficult to automate or offshore than most other jobs.

There’s nothing obvious about what’s not the answer, and what you describe as “the dynamic for government-run health care” looks strikingly like the dynamic for privately-run health care. Could it be - now, don’t get offended - could it be that you are looking at this question through a pair of ideological blinkers?

Cast aside your blinkers, which in this context (as in so many others) are a hindrance, and reflect on the fact that, in general, over the medium and longer term and frequently over the quite short term, earnings growth tends to outpace price inflation. Which means that, if you’re buying a product in while labour forms a significant part of the cost-base, all other things being equal the price of that product will tend to rise faster than inflation. Note that you can state this, and observe its truth, without employing the word “government” at any point. Governments have nothing to do with it.

The reason that earnings tend to rise in real terms is that we secure incremental improvements in productivity, which means that workers produce more, and can sell their labour for a higher price. (This creates stresses, obviously, for industries in which there is little scope to improve the productivity of labour. Wages will stagnate and business will have difficulty in attracting workers, or wages will go up to attract workers and the business will be producing the same product for a higher price, which means less demand from consumers.)

What you can do about this is try to improve your efficiency of production, or increase the productivity of your workforce, so that you can produce the same product for less labour cost, or alternatively produce a better-quality product to make the higher price still worth paying.

Student loans is the actual reason. Before 1976, student loans were dischargeable in bankruptcy. This meant that if you loaned some kid a crazy amount of money for school, he could just declare bankruptcy and get rid of it. So student loans were only made for amounts of money that a student could reasonably pay off, since if they were going to take 20 years to pay off it would make sense to just declare bankruptcy and deal with a few years of bad credit. Once they were made mostly immune to bankruptcy, banks and other lenders started offering more and larger loans. Since students could come up with more money, colleges started raising tuition. And while this started small, it’s now spiraled wildly out of control. There are some factors that make college relatively more expensive, but the ability to saddle students with decades of debt is the biggest one by far.

I don’t see how student loans can be blamed. I graduated from college in 1988 with just under $20,000 in loans. I think I received the maximum allowed for the Guaranteed Student Loan and National Direct Student Loan programs. At the time, the total cost of attendance was $15,000 or so. I received about $5,000 annually in scholarships and my parents paid about the same amount directly. (In effect, the school, my parents and I each paid about a third of the cost.) I just did a Google search and found a page that claims the maximum you can get today is $31,000. That’s half the total cost of attendance for one year at many schools.

So the student loan maximums went from being about a third of the cost to one-eighth of the cost (assuming you’re able to finish in four years).

As Pantastic stated, federally guaranteed loans are the problem. Too much guaranteed money led to an arms race to attract that money. Combine that with students looking at college improperly and you have this rate of tuition cost growth.

A large part of the rising cost of primary and secondary schooling (but probably less so at college level) is the clerical cost of meeting government regulations mandating record keeping to prove compliance with regulatory agencies. And also upgrading physical facilities to meet government-imposed standards. Things like handicap access, safety, lighting, etc. It is usually cheaper to build a new building than to bring an old one up to code. Another factor would be insurance against the growing threat of litigation.

I went to a university in Louisiana, that didn’t have a single air conditioned room. Imagine how much it now costs to cool the entire campus.

Another factor is the proliferation of very highly paid administration posts.

Scroll down and look at the list of posts and salaries here:

Some are over $500,000 and many are over $250,000.

Compare the salaries of full professors at major institutions of about $125,000, and other instructors at about $50,000.

The number of administrators has increased dramatically over the number of academic staff in recent years, and more and more teaching has been offloaded on to very poorly paid adjuncts.

Administrators Ate My Tuition
New Analysis Shows Problematic Boom In Higher Ed Administrators

As others have indicated, especially Fretful Porpentine, there are several reasons. But I’m still looking for good statistics to understand how much of the tuition hikes are simply due to loss of government funding.

In 1970, 16% of the California state budget was spent on higher education. (Today, California spends more on its prisons than on higher education.) As recently as 2000 state government funding for the University of California amounted to a whopping $25,000 per student. This is no longer possible in today’s America with our billionaires being taxed into penury.

Not “one of the problems” but “the problem.” I guess the Mods should just close the thread then.

Some excellent posts by Fretful Porpentine, GreenWyvern, etc.

As an ex-prof I’ve seen first hand the astonishing admin-bloat. Something that used to be done by one manager and a couple flunkies is now a whole hierarchy of dozens of people. And of course someone in charge of that many people deserves a 6 figure salary.:dubious:

And few people understand how decimated the junior teach ranks have become. You hear numbers like 1/3 of those “adjunct” and such teachers that do the vast majority of teaching are on public assistance since the salaries are so low.

But you gotta get rid of that evil tenure because of all the gee-whiz prof salaries, right?* :smack:

For public schools, my alma mater used to be 90% state funded, 10% tuition funded. Now it’s 10% state funded and 90% tuition funded.

  • Which are generally paid by grants which bring in net income to colleges thanks to obscene overhead.

One thing that hasn’t been mentioned yet is the value of a college education in terms of an investment. Tuition costs are only just now approaching a level where they are as high as they can get and still be worth it. The interesting thing is what happens when it crosses that line and actually becomes unprofitable for the student. At that point, do the best and brightest just stop bothering with college? Do tuition hikes then level off and mirror the rate of inflation? Already many degrees are not profitable if you have to borrow a lot to get them. When I hear about people borrowing $50,000 to get a BA in literature I’m wondering how they ever intend to pay that back.

When I went to college in 1977 (University of Rochester, B.A. '81), the cost of tuition for a year was essentially $4000. Each year, the cost went up, faster than the rate of inflation (which, if you’ll recall, was moderately high in the late 70s and early 80s). There was a lot of discussion THEN about how tuitions were rising faster than the rate of inflation.

When I went to law school (the second time) in 1983 (McGeorge School of Law, Univ. of the Pacific, J.D. '86), tuition for a year was essentially $7000. Each year, it went up, faster than the rate of inflation (which, as you’ll recall, wasn’t so bad by then). There was a lot of discussion about how tuitions were rising faster than the rate of inflation (articles in the WSJ, etc.).

This has been pretty constantly true for both private and public schools for most of the intervening years. I was not shocked when I enrolled at Bowling Green State Univ. in Ohio in the 2000s to get my teaching license to find that tuition was substantially more than it had been when I was young (inflation-adjusted) and that each year it went up by more than the rate of inflation (which by then was pretty low).

All this means that, whatever factors are involved, they are NOT short-term economic factors. They are part and parcel to how universities have been run for decades. And since both public AND private universities are affected, it’s not something that we can simply lay at the feet of government. Yes, tuition at state universities has gone up because state government has withdrawn financing, but other factors are also at play.

One factor to consider: the rate at which demand for college degrees has expanded.

No, student loans are the problem. basically, like many other excessively lucrative businesses - law, medicine, Wall Street - there’s a disconnect between what is charged, who is paying, and what they know about comparable costs. An 18-year-old student is expected to understand how much they are borrowing, what their employment prospect will be, and how long it can take to completely pay off that debt. They know they want/need(?) a college education, and are under the misapprehension that 10 years after graduating, their alma mater will figure more prominently than job performance in how they do. Meanwhile, colleges lay it on thick about their benefits, keep adding to tuition, and know that whatever they charge, some bank will be happy to lend it to the student. That’s the problem - until students start to “just say no” and skip the college route (unlikely) tuition financed by guaranteed loans will continue to be a river of money flowing by and all the colleges will drop down their buckets and pull out as much as they can.

And… as that debt continues to grow and fester, your students will be less able to afford new house, families, etc. You think the US complaints are loud about us civilized countries and our free health care being an unfair government subsidy for industry - wait until they start saying the same about low college tuition and no student debt.

I still don’t see how student loans can be blamed. The maximum you can get is $5,500 the first year, $6,500 the second year and $7,500 in the third, fourth and fifth years. Total cost of attendance at many schools is hovering around $60,000, so these loans cover roughly ten percent of the total.

It’s not just loans, but also scholarships (both need and merit-based) and grants. There is absolutely a disconnect between who is paying and who is being educated. Anything that is subsidized by the government experiences skewed supply/demand and price factors.

But this is just one of many factors, most of which are mentioned above. The age and quality of housing is astounding compared to when I attended college many years ago. Same with meals. Same with campus services. It all costs money.

But the biggest factor is probably the percentage of high school students who attend college. The percentage has increased substantially from about 45-50 percent in 1970 to 65-70 percent in 2012. Colleges and universities have increased enrollment, but they have been able to boost tuition, room and board by more due to demand. It really looks like the trend has turned down, however, which is probably one reason that tuition hikes have moderated.

At the undergraduate level, the scholarships and grants are almost entirely from the universities’ endowments, not the federal government. And the only subsidy the government provides for the loans is to defer the interest payment until after graduation.