Why Is American Higher Education So Expensive?

Why Is American Higher Education So Expensive?
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American higher education is too expensive. Even though it is the engine of our prosperity, separately and shared, it increasingly is priced out of the reach of the middle class.

This is a précis. That is an academic term for summary of a scholarly study. I want to set forth an outline as I prepare to write the lengthier piece. People are interested in the subject. They may agree with the proposition that tuition is a problem, but they disagree as they look to blame.

My hope is to be objective. Most of my work as a professor is about race and civil rights, and this issue makes people just as angry, which is either a sign of its significance or of the general mood of the public. I don’t blame students; I’m on their side. Tuition has become hyper-inflated, even as we have become accustomed in other markets to quality rising with costs falling, thanks to technology.

I list here a half dozen possible causes without detailed analysis. They are not exclusive.

First, loss of state support. Most American students who attend a four-year college are enrolled at a public one. The state appropriations for such schools has been on a downward spiral. In our “free agent” culture emphasizing “choice,” higher education is regarded as a private pursuit rather than a public good.

Second, regulation and rankings. The direct requirements of accreditation are often identified as imposing exorbitant costs while deterring innovation. The very compiling of data for compliance, in the interests of transparency, is said to reach into the millions, or $11,000 per student. Even without the government mandates, schools are compelled to compete to enhance their stature, and that struggle against peers necessitates spending money.

Fourth, executive and staff bloat and inefficiency. Also faculty compensation (including pensions) and workload. The people employed in higher education are a popular target, including from within. While administrators look at professors, especially stars who have to be recruited away from elsewhere, professors glare at the multitude of assistant and associate deans and provosts, some of whom attract greater suspicion for their corporate origins (and salary expectations).

Fifth, buildingsaccording to one news commentator, in particular “vanity” libraries. Some facilities are constructed by a benefactor. Others are made possible by bonds, which have to be repaid. Research libraries are a cost center. Academic journals cost thousands of dollars per year for a subscription to be read by a few specialists, too rich even for Harvard.

There is a better framing of the query. Almost all schools, except the wealthiest privates and the most generously state subsidized publics (which exist primarily in memory), are what is called “tuition dependent.” That means their revenues are by and large derived from students, supplemented modestly by donations and auxiliary operations (such as parking). In the non-profit sphere, a university needs to balance its budget; by definition, it does not need to show a surplus. Another means to investigate is to analyze expenditures.

In my forthcoming essay, I will elaborate. Meanwhile, institutions of higher education have resorted to a couple of dubious tactics. Neither is sustainable. They are gimmicks. (They also might provoke more outrage than is warranted: some studies suggest that the real cost of college has been stable for a decade, despite appearances.)

One tactic is “tuition discounting.” That means they have a stated tuition, say $50,000, but they then in the aggregate discount by 50%, meaning they collect only an average of $25,000. They make incoming students, and their parents, feel good by saying, “We like you so much, we’re giving you a 50% scholarship.”

The catch with this scheme is that the tuition discount rate has become too high for many schools to maintain. If you look at their financials, you have to wonder if they have a secret exit strategy. Schools that formerly offered the deal to individuals who demonstrated financial need now do so to boost rankings. Some students are paying for other students, but it’s becoming taking from the less rich to give to the less poor. They have proven a point though: at their stated tuition, people will not — or cannot — come. They have exceeded the natural ceiling for what they are selling.

Another tactic is recruitment of international students who pay “full freight.” They are among the believers in the premium charged for the prestige. They add to diversity on campus. It’s great that American students meet them, and it’s even better that they are exposed to American ideals.

A rational observer would have to wonder, however, how long until a tipping point is reached. Since some foreigners could be educated in their homelands for a fraction of what they have to turn over for the collegiate experience here, they eventually will be unwilling to come if the trends continue. There are still societies that embrace what we seem to have forsaken, the concept that everyone should have opportunity through education, if not free then for a minimal cost. There also is abundant grumbling from American undergraduates about the alien graduate students with incomprehensible accents. It may be based on prejudice, or lack of realization that guests from overseas contribute to the coffers handsomely and departments would risk closure without them (for lack of majors and TAs), but these resentments could overtake reason.

The bottom line is that those of us in higher education have not been concerned enough with bottom line. It is important for all of us who care about the future of the nation to address the high cost of higher education. But it is especially imperative for those of us in particular who care about the values we celebrate, of the possibility of human progress through intellectual inquiry, to answer the question: why is American higher education so expensive?

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