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Why Has the Cost of College Outpaced Inflation?

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Guest post by Dr. Douglas Green

While summarizing Guy Kawasaki's latest book, Wise Guy, I read that his Stanford tuition in 1972 was $2,850 and that today it's $62,000.

According to the Bureau of Labor Statistics CPI Inflation Calculator, if Stanford tuition increased at the pace of overall inflation, it would be $17,007 today. That means that Stanford tuition has increased 3.64 times faster than general inflation. Other colleges are in the same boat more or less.

I suspect that few of my readers are surprised by this as it's in the news a lot. The reasons why are available, but I didn't find them neatly summarized in one place. They vary from one institution to the next, but the reasons below apply to all schools to some degree.

Let me know if I missed any.

Less Money From the States: According to Doug Webber at 538.Com, the single biggest driver of rising tuitions for public colleges by far has been declining state funding. As costs from things like health care and pensions increase, states have to find cuts somewhere to balance their budgets. State budget builders know that colleges can get away with steep increases, so college support has been slashed.

Construction and Amenities: When people from my era (late 1960s) visit our alma maters, we hardly recognize them. Specialized buildings of all kinds abound, and university fitness centers compete with the finest private clubs. Many colleges even sport climbing walls and lazy rivers. Bloated "student fees," which aren't included in tuition, may cover some of this academic bling. Such amenities attract students and professors, so colleges have to compete.

Fancy research facilities are also necessary to attract top professors and nerdy students. If you want to attract top athletes, you need souped-up facilities as well that go far beyond shiny game-day venues. Don't be surprised if the athletic department has one or more large buildings all to itself. In 2017 alone, U.S. universities and colleges spent $11.5 billion on construction, an all-time high.

Administrative Bloat: Administrative staff including fundraisers, financial aid advisers, global recruitment staff, and many others grew by 60 percent between 1993 and 2009. This is 10 times the rate of growth of tenured faculty positions. We also have more in the way of services for things like counseling and academic tutoring. Gyms and other facilities need to be supervised, cleaned, and maintained.

Student Loans: Yearly student-loan originations grew from $53 billion to $120 billion between 2001 and 2012. Meanwhile, average tuition rose 46 percent in constant dollars during that same time frame. Since students can borrow enough to pay the higher costs, schools are less inclined to keep costs in line.

College Sports: The Chronicle of Higher Education recently estimated that college athletics is a $10 billion marketplace. With very few exceptions, most colleges and universities rely on what the NCAA calls "allocated revenue." This includes direct and indirect support from general funds, student fees, and government appropriations. In other words, most colleges subsidize their athletics programs, sometimes to startling degrees.

There are a few institutions that make money off their sports programs, but for the vast majority, sports are a loser. This includes "Olympic" sports like rowing, fencing, and sailing. If your school has elite sports, your students are subsidizing them. I suspect that you will find few poor students indulging in these country-club-style activities. Polo anyone?

Textbooks: Here is another significant cost not included in the tuition. While the price of recreational books has dipped in the past 15 years, the price of textbooks has increased nearly twofold.  A reason for this is the oligopoly in the higher education publishing industry. Four major publishing companies control more than 80 percent of the market, and professors, who are less price-sensitive, pick the books.

The average cost has risen four times faster than inflation over the past 10 years. That has caused 65 percent of students to skip buying required texts at some point. Many textbooks are bundled with internet "access codes" that expire at the end of the semester. This forces students to buy books at retail prices at campus bookstores that are worthless in the resale market.

Compensation: Presidents lead the league. As of 2015, average pay for private-college presidents in the United States surpassed $550,000, with 58 presidents taking home more than $1 million a year. The average salaries for full professors at top public institutions have risen 12 percent in excess of inflation since 2000. While schools might pay $250,000 for a famous professor, top coaches make millions. The top dog (Nick Saban, football coach at Alabama) makes $11-plus million not counting outside income.

Soak the Rich: According to Adam Davidson, "A school that charges $50,000 is able to offer a huge range of prices to different students. Some might pay $10,000, others much more." Most don't pay full price, but those that do are one reason tuition goes up so fast. Rich people don't think twice about writing a fat check each year. This includes rich people from other countries and states that pay even more. David Feldman, economics professor at the College of William & Mary, tells us that "A college's sticker price is set by its wealthiest students' ability to pay."

Conclusion

If only students could boycott colleges to keep costs in line. College presidents, trustees, and politicians should feel some shame as they are the leaders in this cash grab. Perhaps the fact that the college population is likely to decrease will put some pressure on schools to control costs. One forecast predicts that there will be 10 percent fewer college-going students by 2029.

American colleges and universities are one of your nation's greatest assets, but they have been burdened with unsustainable cost increases. We all need to raise our voices and tell our leaders to stop this madness. If New York state can cap taxes for public schools at 2 percent, why can't we expect colleges to do the same?

References:

American Council President's Study 2017. Myth: College Sports Are a Cash Cow, American Council on Education, available online at http://bit.ly/2WQ9zTU.

Brown, Ann. The Cost Of College In The U.S. Has Skyrocketed. Have You Ever Wondered Why? moguldom.Com, November 27, 2018, available online at http://bit.ly/2WRYBxt.

Bureau of Labor Statistics. CPI Inflation Calculator. Available online at http://bit.ly/2HDi6Xz.

Clark, Kim. College Board Says Tuition Rose Faster Than Inflation Again This Year, Money Magazine Online, retrieved November 4, 2015 at http://bit.ly/2WGSGeu.

Jaschik, Scott. Are Prospective Students About to Disappear? Inside Higher Ed, January 8, 2018, available online at http://bit.ly/2I2PzKw. 

Kawasaki, Guy (2019) Wise Guy, Portfolio/Penguin: New York, NY.

Kristof, Cathy. What's Behind the Soaring Costs of College Textbooks, CBS News Online, January 26,2018, available online at https://cbsn.ws/2WGVb0m.

Schoen, John. "Why college costs are so high and rising", CNBC.Com, December 8, 2016, available online at https://cnb.cx/2HYPYO3.

The Scholarship System. The Real Reason Why College Costs Are So High and What You Can Do About It, April 5, 2019 available online at http://bit.ly/2WQWDNR.

TruBirch. The Astonishing Increase In The Price Of Textbooks Since 2004, Visualized, Digg, March 9, 2019 available online at  http://bit.ly/2EXb9NO.

 *Image created using Pablo.com

About Dr. Doug Green

Twitter: @DrDougGreen

Blog: https://DrDougGreen.Com

Book: Teaching Isn't Rocket Science, It's Way More Complex: What's Wrong with Education and How to Fix Some of It. http://bit.ly/2VdP82o 

 

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