Why has college gotten so damn expensive?

Do you think it is because increased aid has led to a moral hazard with colleges driving up the price? Do you think it’s because of the government? Because of demand? Something else?

I am not an expert, just a person making a WAG.

More people are going to college. More students = more faculty and staff. Which means more office space, laboratories, and lecture halls. More students = more dormitories, computer labs, dining halls, etc.

I also think people want their universities to be more than just a school. They expect the big athletic center and exciting student life activities. They want the library to stay open 24/7, and shuttle buses to ferry them around the sprawling campus. More diverse student bodies also require more services (assistance for handicapped students, for example).

To attract a better quality of student, even lower-tied colleges are pulling out all the stops to become competitive. Good students go to schools with big-name faculty, and big-name faculty command big-time salaries and state-of-the-art research facilities. And with the current economic climate being the way it is, more students also flocking to fields that are in demand. To woo people in these fields to instruct their students, universities have to offer competitive salaries.

My understanding is that the administrative side of secondary education has been steadily growing for years and since the administrative side is the one that’s approving budgets, there’s no one to say no, as it were.

The above is all true, but don’t forget to consider the role of cheap money. The supply to the demand, as it were. Without rivers of student loan money - from banks, private lenders, and especially federal and state governments, well, college would probably cost a lot less. It’s an inflationary environment, and those cause rising prices.

Well…why shouldn’t it? If you think it’s overpriced then here is a perfect opportunity to go into business for yourself, build a college, under cut the prices of those expensive universities, steal their students and market share and rake in the big bucks while putting the thumb in the eye of those over priced universities. :stuck_out_tongue:

No, I think it’s that nasty ‘market economics’ stuff in action. Pretty much what Smiling Bandit and the others have said. People want more from their university experience, they want more services and a richer experience, and there are a hell of a lot more of them, plus there has been literally floods of cash to enable pretty much anyone who ever even thought about college to go there. It’s a recipe for rising rates. Also, contrary to what appears to be the popular wisdom, we are an incredibly rich society, which means that more people than ever can aspire TOO go to college. As with any bubble though, eventually there will be a correction…folks will stop going, or they will avail themselves of cheaper alternatives and the bubble will pop.

That’s certainly part of it.

This too, especially if you put ‘supply and’ in front of ‘demand’.


Same reason the rent is too damn high.

Demand is exceeding supply, more than most other goods. I don’t know how much foreign students feed that system, but keep in mind that the US has, arguably, the best universities in the world, and an increasingly wealthy student population from developing countries is competing for some of those spots.

Possibly the most expensive universities in the world too.

Most things in the US (including rent) are more affordable than they are in most other countries with the exceptions of health care, and education. I think the main reason is that in other western countries health care and education costs are subsidized by the government.

As an observer (I have attended 3 universities), I have observed a few things. Colleges and universities have to be about the most inefficiently run institutions in the world:
-physical plant-many of these places have a lot of old obsolete buildings. Some are NEVER used at all! But they all must be kept heated and lighted (for some unknown reason). And, many older schools (like Harvard and Yale) have buildings so old that they cannot be retrofitted-they use tons of energy, and cost a fortune to maintain. Any talk of tearing them down is met with “they are historic”
-inefficient use of human resources: you pay to have professors teach-but most of the time, courses are taught by graduate assistants. Plus, emeritus professors get full salaries-but do almost nothing-why not cut them back a bit?
-innumerable vacations and off days-faculty members work about 28 weeks/year
As for endowments-DON’T get me started-Harvard has over $36 BILLION-the income from this is over $5 billion/year-why do they keep raising tuition?
Answer: because they can!:smack:

Bloated administration.
Fewer government subsidies.
Increased cost of liability insurance.

Consistently? That’s 14%/year. I very much doubt it.

Having graduate students teach strikes me as a cost-lowering measure, whatever else it is. Why do you cite it as inefficient?

As for emeritus profs, are you sure they get full salaries?

Harvard and Yale are not typical, so it’s not really useful to bring them up in a discussion about why college in general has gotten so expensive.
Much that I have read points to one of the main reasons college has gotten so expensive points to decreased government contributions (especially, but not only, to community colleges and state universities). Since they get less money from the state, they have to make up the difference somehow, such as by increasing tuition.

Education is subsidized by our government, in the form of cheap loans. It’s an inherently inflationary situation.

It calls to mind how companies overpay for CEOs, and how sports teams overpay for superstars. In the buyer’s mind, the incremental value of making the “right” buy is huge, the right CEO generates millions/billions of profit, the right superstar makes your team a playoff contender, and the right school sets you up for a great job and a great future.

Choosing a second tier school because the tuition is $10,000 less seems foolish if you expect the better school to set you up with a better job. Cost ceases to be a decision point, you can just borrow more, and pay it back with your better income.

If you don’t choose on price, then there’s little pressure on the business to keep their prices low, they put their focus on the other factors that drive decisions.

Price discrimination, changing nature of the economy and government subsidies. Every business wants to have as many customers as they can regardless of that customer’s income. Every business would like to be able to charge rich customers more than poor customers because rich customers are less price sensitive because of the diminishing marginal utility of money. However, this is usually impossible so whenever a rich person buys something and is charged the same as a poor person the business has left mony on the table. Businesses try to get around this by providing different levels of product. Airlines have 3 different classes of seats, GM made Chevys, Buicks, and Cadillacs, grocery stores give out coupons, etc. College’s pricing strategy is to have a huge tuition cost and then give out financial aid. They require prospective students applying for financial aid to provide them with the parents financial documentation so the school knows just how much everyone can afford to pay and they do not leave any money on the table.
The economy has been changing so that intelligence and conscientousness are more highly valued than ever. Computers have increased the productivity of smart people while robots and other forms of automation have made people who make things less valuable. Regulations have also made each person hired more expensive to companies. Thus the credential colleges provide is more valuable to the student. Colleges know this and charge accordingly.
The high cost of colleges have led to a political outcry. This results in more government loans and subsidies for college education. Colleges know this and they can either let the subsidies be kept by the student or raise their prices and get the money themselves. This is always an easy decision.
All of these reasons go into the biggest reason of all, price insensitivity. Very few people choose a college because of the cost. They choose it because of reputation, proximity, family ties, sports, amentities, or programs, but usually not cost. This is because financial aid is so complicated it is hard to compare costs. Prestige is such a big part of a college’s credential that competing on cost would send a poor signal and cheapen the value of the credential. The biggest reason is that it is not the customer’s money. It is their parent’s money or the government’s money. If they have to get a loan it is their future self’s money. When people spend other people’s money they look for quality, not value. Thus college’s compete on the basis of quality not value.

In addition to everything that others have mentioned, I think there’s a component of flat-out bad decision making. Customers (a.k.a. students and their parents) simply assume that the value of a college education is huge, because it’s the gateway to a guaranteed comfortable middle- or upper-class career. And this thinking made sense a generation ago. Since then, the job market has radically changed, so that college graduates were no longer guaranteed a good career. But the customers were not aware of this change. They still thought that a college education was incredibly valuable, and consequently were willing to pay enormous amounts of money for it. Unsurprisingly, the universities were willing to accept those huge amounts of money.

In the past few months, the topic of student loan debt and lack of employment opportunities for graduates has suddenly become a topic of national conversation. It will interesting to see whether the customers pay attention, learn about how the situation has changed, and become less willing to spend.

It’s a prisoners dilemma. No, college isn’t that good of a deal anymore. But if I were to stop going to college because of it, that’s not going to benefit me, because I won’t find a good job without a college diploma when there are so many college graduates out there also looking.
But if you don’t go to college, glutting up the job market, then college becomes better as my odds improve.

That’s an incredibly poor argument, and I’m continually surprised people make it.

If your goal is actually comfortable middle or upper class lifestyle, that college degree is necessary but not sufficient.

While a college degree is no guarantee of a comfortable middle or upper class living, the odds are stacked HEAVILY against your favor of achieving those WITHOUT a college degree.

I suppose the concept is that people should simply accept their lot in life and not even shoot for higher incomes, but I don’t subscribe to that notion.

And that’s the fundamental problem, right? It used to be you could make a reasonable living with just a high school degree, but that’s no longer true. The argument that the “value-proposition” of a college education fails because of the high cost is telling these people that the solution is simply to accept lower incomes for the rest of their lives because that’s somehow more economically efficient for the economy as a whole. Well, that’s great for the economy as a whole but lousy for the people involved.

So, is a Harvard degree (about $180,000) worth more than a UMass degree (about $60,000)?
If you invested the $120,000 in stocks, who would be ahead?

All of what you say is true. However, to analyze the situation we need to realize that a high school graduate doesn’t face a simple choice of either getting or not getting a college education. Instead, he or she faces a vast array of possibilities, ranging from private colleges charging $60,000 per year through better public schools charging a fraction of that amount through lesser universities that charge (by comparison) almost nothing through community colleges, online programs, and so forth. In years past, the general consensus was that anyone who could go to a ritzy private school should do so, because they were gateways to the best jobs. Now, people might consider whether a private university education is worth the massive price tag when compared to the other options for a college education.

Then again they might not. I don’t know. All I said was that it would be interesting to see whether all the attention on student loan debt will cause a change in buying habits.

If Business Week is to be believed, apparently the average Harvard graduate comes out ahead.

If Business Week is to be believed, apparently the average Harvard graduate comes out ahead.

I will note that the cost estimate reflects the true cost of attending the schools, as many students will receive some form of aid, whether in scholarships, grants, reduced tuition, or whatever.

Fair enough, but I doubt it. Demand FAR outstrips supply here. It’s basic economics. Even if demand fell, due to a change in buying habits, there still won’t be enough seats for students who already want to get in. It won’t lead to any reduction in tuition costs.

Improvements in economics at the state level may, however, reduce public college tuitions. Many of the recent price hikes have been due to funding problems at the state level due to the recession.