Why Is College So Expensive? The War on Public Universities

[marmar]

AlterNet interview with U.C. English professor and author Christopher Newfield:



....(snip)....


This past school year was a tough one at the University of California. We saw budget cutbacks, tuition hikes, employee furloughs, lower admissions rates. How do these recent events fit into your larger view of what is happening to public universities?

This is what I was worried was going to happen: aggressive disinvestment in high-quality public universities that allowed for broad access.

In most countries, a top education goes to the top 1-2 percent. The secret of us and other states -- Michigan and Wisconsin, for example -- was that you could get that kind of quality for 10 percent. You had general access to something really good that would put people in strong position as adults. The way California did it is to open admissions at the community college level with open transfer to the U.C. and Cal State if you achieve a certain GPA. If you really look at it, anyone with a high school diploma can earn a degree from Berkeley, even if you had a C- average in high school.

But last year, 300,000 were students turned away from California public colleges for lack of space. California State closed some campuses early, and the U.C. turned away more students than ever. Some community colleges even shut courses.

Further, quality is going down even as access is going down. What we saw in the headlines this past school year has followed 30-40 years of ideological attacks on collaborative development and on the public sector. ..............(more)

The complete piece is at: http://www.alternet.org/economy/147933/why_is_college_so_expensive_the_war_on_public_universities/

[ixion]

1. One word: Administrators

For them it's all a profit deal.

[Selatius]

50. Most of them are MBAs. Profit maximization, Increasing "shareholder value," etc.

Also, if they're more honest, they tell you that they pass on the costs of their paycheck to the students rather than eat the costs in the form of less bloat and less bureaucracy and more efficiency and salaries that aren't ridiculous or increase far beyond the rate of inflation.

[LibDemAlways]

2. It is now so expensive to attend a UC that tuition/fees/room and board

are comparable to paying out of state rates at public universities elsewhere. California used to have a model public education system. No more.

[Posteritatis]

38. I've got two degrees from Canadian universities..

I was looking at UC Berkeley for a graduate program a few years ago, until I noticed that one year there for me would cost more than the combined tuition from both my BA and MA. It was horrifying.

[LibDemAlways]

42. I took my high school senior daughter to visit a UC campus yesterday.

We attended a one hour information session followed by a campus tour. Interestingly, the high price tag never came up. However, by far the most crowded place on campus was the financial aide office. The line was out the door. A family can still save a lot of money in this state by taking advantage of the community college system. However, classes are getting harder to come by and it's difficult for students to get out in two years. Then, they still face the daunting prospect of paying many thousands of dollars to finish the degree, and they may not be able to do that in two years either.

Not many families can afford college to begin with, but California is pricing itself right out of the market.

[Posteritatis]

45. Yeah, it's sad to say the least

There's a lot of angst over tuition increases in Canada - it was pretty bad by our standards over the course of my undergraduate degree, where the tuition between my first and last year roughly doubled before a tuition freeze finally showed. That's plenty annoying, especially because it's generally easier to get financial aid in the US (it's more assumed up here that people can readily pay their own way).

I find it much, much harder to complain about my lot in that department whenever I read about American colleges and universities, though; the situation you guys have to deal with is tragic at the best of times.

Is tuition there by course/credit, or a flat fee per term? My undergrad was per class, which definitely helped when I had to hang around another few terms part time to finish getting all my courses, but there were also times where I'd wanted to take something but just couldn't afford it out of pocket, and a flat fee would have made that possible. I've never really figured out which of those systems would be better for the students.

[Renew Deal]

3. You can make it more affordable by gambling on your grades

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4533621

[Turbineguy]

4. A university education is expensive.

But privately run prisons are more profitable.

[Zebedeo]

5. OPM

Why Is College So Expensive? Because it is largely paid for with OPM - Other People's Money. This causes outsize inflation in tuition and other costs of college. If most students actually paid with their own money, there would be a check on demand and that would result in the price being held under control.

It is the same with health care costs.

[RaleighNCDUer]

7. So, reducing the number of students will decrease tuition levels?

Seriously?

[Zebedeo]

8. That may be true

but it is not what I am saying. What I am saying is that providing a subsidy for the purchase of a product or service increases the cost of that product or service.

Imagine if the government started guaranteeing that it would subsidize the purchase of houses by contributing $100,000 towards a citizen's purchase of any house. What would happen to housing prices? They would go up by about $100,000 per house.

It is the same with tuition subsidies, although more complicated because the subsidies are sometimes in the form of below-market loans rather than grants.

Tuition and health care costs have risen at a rate greater than general inflation rates because of this effect.

Note that I am not advocating any particular change in policy - just pointing out the factual answer to the question of why college costs so much, which was the question posed in the OP.

[RaleighNCDUer]

9. So, in other words, it is istitutional price gouging, not inflation that is the cause.

Just to be clear.

[Zebedeo]

10. Not gouging, just rational economic behavior. n/t

n/t

[lostnfound]

18. Explain why French, Canadian's100% subsidies for health care

don't result in higher total cost then. 1) There is a natural limiter on demand that most people don't spend time in doctor's offices if they don't have to and 2) there are also 'economies of scale' that can occur which bring average cost per unit down. By the way, subsidies of beef and sugar have made them dirt-cheap (though costs are externalized).

[Hannah Bell]

11. winger bullshit. "reducing demand" = keeping the lower classes out --

& in the case of health care, allowing them to die.

yes, paid for with opm because the bottom half of the population doesn't have any after meeting basic expenses.

[Zebedeo]

12. ??

Not sure what you think you read, but I never advocated "keeping anyone out" or "letting anyone die." Just explained why costs have risen faster than the general inflation rate in these two industries.

[Hannah Bell]

13. you didn't have to. it's implicit in what you said: "reducing demand"

[Zebedeo]

14. No

Do not assume.

[Art_from_Ark]

15. Actually, you said "check demand"

which seems to be some euphemism for "reduce demand". In case you haven't noticed, very few 18-year-olds have a whole lot of money to work with, even if they did part-time work in high school. Making students rely exclusively on their own money to pay college expenses, as you suggested, would put college out of reach for a lot of students.

[Zebedeo]

16. No I did not

suggest any such thing. I made no suggestions for any change in policy. I just pointed out the facts.

[Art_from_Ark]

17. Here is what you said, verbatim:

"Why Is College So Expensive? Because it is largely paid for with OPM - Other People's Money. This causes outsize inflation in tuition and other costs of college. If most students actually paid with their own money, there would be a check on demand and that would result in the price being held under control."

Sorry, but that sounds like libertarian bullshit. There is no indication that student financial aid has led to tuition inflation-- in fact, the opposite may be true. Financial aid came into being because college costs were out of reach for too many students. A university is not just professors and students-- it entails a huge support system consisting of physical plants, groundskeeping, food and dorm services, administration, public safety, updating and maintaining lab and other equipment, library services, and custodial services, among other things. All of those supporting services and equipment cost money, and costs have been rising. Aid programs were implemented to make universities more universal, by allowing a wider spectrum of students to attend despite the increasing costs. Your indirect suggestion for most students to pay college costs out of their own pocket would put college out of reach for a lot of students.

One more thing-- kids may be going to college with Other People's Money-- but once they get into the workforce, their taxes help other students to gain access to the same opportunities for higher education they had.

[BzaDem]

21. You aren't making any sense. The poster did not "indirectly suggest" that more students should pay

more out of their own pocket. They simply pointed out the (obvious) fact that subsidies contribute to tuition inflation. Your arguments about physical plants/etc are not persuasive at all, because there is no reason those costs should be rising at above the rate of general inflation.

Aid programs were implemented to make universities more universal, and no one is disputing this. No one is disputing that this aid is a good thing (even after taking into account how it bumps up prices for those who don't get aid).

[Art_from_Ark]

23. It is not an "obvious fact" that financial aid contributes to higher tuition

That is a ridiculous statement. You don't seem to have the foggiest idea of how universities work.

For starters-- just because the official inflation rate is 2% doesn't mean that all prices rise at 2% across the board. For example, prices for fuel to run the physical plant might rise higher than prices for cheap imported electronic crap. Medical care at the student infirmary rises at a level that exceeds the inflation rate because of the acquisition of more advanced equipment, or having to pay more money to retain physicians, among other things. Aging equipment in laboratories and other facilities has to be replaced, and new technological innovations often mean that newer and more expensive equipment must be acquired, if the university is to be competitive. Buildings have to be constantly maintained, and occasionally razed and replaced, and the costs for that generally exceed the official inflation rate. Libraries must keep their collections up to date, and the cost of specialized books has been rising at more than 2%.

And that's not the half of it.

[BzaDem]

46. It is absolutely an obvious fact. The fact that you don't admit it says a lot about your

understanding of economics.

And your inflation argument is bogus. Tuition inflation has been rising around 1.5-2x as much as general inflation for decades. You can list ten billion things universities have to do, but NONE of that means that tuition should rise 1.5-2x as much as general inflation for decades. You could even list TWENTY billion things universities have to do. And that STILL won't make your case.

[Art_from_Ark]

56. Your argument is heavily flawed

Your naive assumption about the inflation rate fails to take into consideration that, among other things, inflation does not rise or fall at the same level for all goods and services. In addition, there are various indices used to measure inflation. One of the most commonly used is the Consumer Price Index. Since the CPI is used to determine Social Security disbursements, the government, particularly in today's atmosphere of deficit hysteria, has a vested interested in announcing a CPI that is rather low but which may not necessarily reflect economic conditions that people in the real world must live with.

Your argument also fails to take into consideration that a university is not a static, monolithic entity but rather is a dynamic institution which is always in a state of flux. Any good analysis of economic conditions must include variables. The budget of a university is determined by any number of variables, including state funding if it is a state school, as well as endowments, donations, research grants and user fees, and these monies can vary widely from year to year. Universities can also issue bonds for improvements, which must generally be repaid at a rate that exceeds the inflation rate. A university's revenues can also be affected by the number of students enrolled, including the number of out-of-state students. For example, if the number of students remains the same but out-of-state enrollments decline, then the revenue generated from tuition at a state school will also decline in the absence of tuition/fee increases.

Expenditures can be heavily influenced by such factors as the number of faculty and their status, the cost of energy and other basic utilities to run the university, as well as salaries for administrators and wages paid to hourly workers. Public universities rely heavily on minimum wage workers, and the recent increase in the minimum wage from $5.85/hour in July 2007 to $7.25/hour in July 2009 represents a 19% increase in just 2 years, which far outstrips the inflation rate for that time.

And this does not even take into consideration expensive state-of-the-art equipment that universities must be constantly acquiring in today's world to stay competitive, as well as increased maintenance costs to ensure that this equipment runs smoothly.

[Zebedeo]

37. Correct on all points

It is an obvious fact for anyone who has a rudimentary understanding of basic microeconomics. It is almost so obvious that it doesn't bear mentioning, but apparently there are some who have posted in this thread for whom it is not so obvious.

[eomer]

39. It is an obvious fact for anyone who has a rudimentary understanding of basic microeconomics and...

a knack for missing the bigger picture.

It is a public university and therefore there is no reason that tuition has to be or should be based on supply and demand. As a matter of public policy we could decide that tuition would be zero, if we wanted to, even if every kid in the country wanted to go. If there ended up being more demand than supply we could decide who gets to go on any basis we wanted to, like some combination of merit, geography, affirmative action, and so on. Or we could put back the higher marginal tax rates on wealthy people and drastically increase the supply. These are all public policy decisions that ought to be decided by us in a democracy, through representatives who actually represent our interests. The reason it has devolved into running public universities like a business is because our representatives have been bought by commercial interests. In other words, the current business-oriented approach is a rightwing, Reaganomics, neocon invention that completely fails to serve the interests of the broad majority of people in the country.

[Melissa G]

48. Oh look, Rational thought! So glad to see you back, eomer!

:hug: What a pleasure! :hi:long time, no type...

[eomer]

49. Hi Melissa, it's great to see you!

... to type with you, I should say.

:hug:

[Raineyb]

57. And apparently you skipped class on the day they discussed public goods?

Public goods exist for things that the private market can not or will not provide because there's no money in it for them. There is absolutely no reason that a public good such as education should be subjected to market whims of supply and demand.

There is no reason to "check demand" by pricing higher education out of the reach of even more people.

Furthermore, in countries such as Denmark and Finland not only are the universities free for those who choose to go that route, but the government pays a stipend for people to actually attend and yet they don't have the problem of costs running amok. Your "obvious fact" is ideological bullshit.

[Zebedeo]

36. When you have to manufacture an "indirect suggestion,"

in someone's post in order to find something to criticize about the post, maybe you should stop and think about what the poster actually said, and respond to that.

I made no "indirect suggestion for most students to pay college costs out of their own pocket." I made no policy proposal at all. I pointed out an economic fact - that subsidies tend to contribute to inflation. You can deny this fact all you want, but it will not make it any less true. It is dictated by the laws of supply and demand.

As I illustrated in another post in this thread, if the government subsidized the purchase of housing by contributing $100,000 to every purchase of a house, what would happen to housing prices? They would increase by about $100,000 per house! If the government offered to pay half of all medical bills, what would happen to the price of health care? It would double! Why? Because the subsidy artificially increases demand. When demand increases and the supply stays the same, the price goes up. That's just how it works.

If you think that I am a blue-blooded rich person who resents paying inflated prices for my kids to go to college as a result of financial aid policies - - - you would be dead wrong. I was a recipient of financial aid when I went to school - both loans and scholarships. I would not have been able to afford school without financial aid. I am not advocating eliminating financial aid. I am simply pointing out that the answer to the OP's question of why college is so expensive is because the person making the decision to purchase the service is often not paying the full price himself/herself. He/she is spending, to a greater or lesser extent, other people's money (OPM), and any time that a purchaser of goods or services is using OPM, the price will inevitably rise.

To take another example: Why is the cost of rental car insurance (the kind you buy at the Hertz counter) so high??? It is outrageously higher than the cost of insurance through regular auto insurers. It can be more than $50 per day, which is $18,250 per year -- some 10 or 20 times what "fair value" for the insurance would be. Why is it so ludicrously high? Because of all the business travelers that are paying with OPM. The individual traveler makes the decision of whether or not to buy the insurance. But his/her company pays the expense. The traveler could choose not to buy insurance, and take the risk of being liable for damages in an accident, but why? If the traveler was paying for the insurance, he/she would be sensitive to the cost of the insurance, and this sensitivity to cost would have the effect of keeping the cost reasonable. Hertz could not charge unreasonable prices for insurance if most of the people making the decision of whether or not to buy insurance were paying with their own money. But, in my experience and observation, most renters of cars at airports (or at least a substantial percentage of them) are business travelers whose companies pay the cost of the insurance. So Hertz can get away with charging much more than they would otherwise be able to charge.

It is the same dynamic that can be observed in any circumstance in which the person making the purchasing decision is not paying with their own money.

[RaleighNCDUer]

26. The REAL reason costs have risen faster than inflation is because

they are being handled by 'financial officers' - MBAs who have been taught for the past generation to only look at the bottom line and maximized income, rather than sustainable health for the business. These are people who, as CFO of a hospital, think the hospital is there to make money; who, as director of finances of a university, think the university is there to make money. Nevermind making people well, or educating them. These are people who have been trained since day one to look no further than the next quarter. They are the same people who drove the finance industry into a ditch, and US manufacturing off a cliff.

And before you make any comeback about "their responsibility is to the shareholder" - how well off will the shareholder be when the short-sighted policies cause their industry, their investment, to collapse as we've seen happen twice in just the past ten years?

The end result of this is ONLY the wealthy will be able to afford either healthcare or higher education.

maybe that was the plan all along.

[BzaDem]

47. That is a bogus argument. TONS of industries only look at the bottom line and maximize income

and they don't grow at multiples of the rate of inflation.

[BzaDem]

20. Acknowledging the role of subsidies in increasing tuition is not the same thing as wanting reduced

subsidies.

You make an argument that we should not reduce demand/subsidies, as that will keep lower classes out. I fully agree that we should not reduce subsidies. But that doesn't contradict the fact that subsidies do play a role in increasing tuition.

[eomer]

24. Your fact is not necessarily a fact.

It is a fact only if you accept the premise that tuition for public universities must be set or should be set based on supply and demand. It doesn't have to be and it shouldn't be. As a matter of public policy tuition at public universities should be set at a low level.

And the premise you're accepting is a rightwing, free market, neocon premise. So please think again about it, in a broader context.

[eomer]

19. No, it is due to "pressure to run universities like a business".

The UC professor interviewed in the OP article cites "pressure to run universities like a business" as one of reasons they are getting so expensive. Further, he believes "that conservative elites have long targeted higher education because of its role in creating a more empowered, democratic and multiracial middle class."

These are public universities; there is no reason they have to be run like businesses. They don't have to, and shouldn't, price themselves based on free market principles. Their primary mission should be a great education at a low cost (or better yet, free) to as broad a cross-section of society as possible. I think the UC professor is right that the result we see is due to an assault on the very idea of a public university because it creates a more egalitarian and democratic society.

[JVS]

29. "These are public universities; there is no reason they have to be run like businesses"

One of the reasons public universities are being run like this is that the states have been cutting their contributions for decades. When the state refuses to fund the university, the university has to fund itself just like a private institution.

[End Of The Road]

33. +1000!! YES!

Rising tuition costs are directly related to cuts in funding by state legislatures.

And it's only going to get worse as states' budget woes increase.

[eomer]

34. Agreed.

And the states cutting their funding of public universities is all part of the neocon sickness that we're infected with. It's the realization of Reagan's theories, which have been and continue to be a slow-motion train wreck with us and our children and grandchildren as the victims.

[End Of The Road]

40. In Texas, the pressure to run public universities as businesses...

comes from the state legislature, not the universities' administrations.

And the ideas the statehouse comes up with are absolutely horrifying.

[eomer]

44. Florida here...

need I say more?

[Confusious]

22. 1945 GI bill

Millions of men come home from WW2 and go to college on the government dole.

Kinda blows your theory, doesn't it.

[eilen]

25. I disagree

University education has become more expensive because of feature creep. These institutions whose core mission is to educate have instead adopted real estate development as their focus in effort to be "more competitive" to attract more students.

Look at NYU.

[Taitertots]

53. "Check on Demand" Meaning less people will be able to attend college

People with the marginal ability to pay(not rich).

What you are describing is called the problem of moral hazard. The problem is that when more people can attend college it isn't a moral hazard, it is a net public gain.

[HiFructosePronSyrup]

6. Huge demand?

[lonestarnot]

27. I'm looking at two reasons, at least here in AZ. Bigots in charge doing whatever they want to

incoming students. Kid forced to pay $270 for nothing, a tour and a lunch and a class extension of that tour required to pay for a p f class required mind you to graduate. Ridiculous. Little cities run like those two in CA taking all the dough.

[mike r]

28. Colleges buy land they don't know how they'll use:

http://www.google.com/hostednews/ap/article/ALeqM5idpNtOxZaCq51MPyEPP1J9-yhrqAD9I2JSO81

Colleges buy land they don't know how they'll use
By MARC BEJA (AP)

NEW YORK — Colleges and universities are buying up chunks of land at bargain prices, sometimes without a clear idea how they'll be used...

The schools are banking on future growth to make their purchases good investments. In the interim, many are leasing the properties they're not using until they need them.

It's good that colleges are looking years or even decades ahead, but investing in real estate can be risky, academic research analyst Jane Wellman said.

"People who just lost their shirts in the last real estate crash know the risk of real estate as an investment portfolio," Wellman said. Colleges "are banking that now is the low point in real estate, and it may not be."

[bvar22]

30. In the 50s,60s, and 70s it was possible to attend a State University

and graduate Debt Free if one was willing to work a part-time job.
The top marginal tax rate was 70% - 90% for those years.
I wonder if there is a connection?


We could have affordable State University Education again if we had a political party that represented the Working Class.

[gkhouston]

31. +1. n/t

[PA Democrat]

41. My parents put three of us through great public universities.

My family was middle class, my mom didn't work. My siblings and I contributed to the costs with part-time jobs (minimum wage) and we all graduated debt-free. Tuition at those same universities for three children today would cost more than $325,000. How many middle class families can afford that in today's economy without incurring significant debt?

[Peacetrain]

32. Reagan.. simple as that.. Reagan

The public universities used to have grant support.. that made it affordable to anyone willing to do the work.. are you ready for this.. (shows my age) but my husband,, the first year of college at University of Minnesota in 1967.. it was under 100.00 for tuition for the quarter. (I think they were on quarters at that time.. maybe they still are)

[bvar22]

35. Reagan.....AND "Centrist" Reagan Democrats...

...who accepted and promoted Reaganism as the new Status Quo when the Republicans were thrown out of office in 1992. The "New Democrats" refused to undo the damage done under Reagan....


a lot like NOW.

[alfredo]

43. Oh my, we don't want a kid from the working class

competing for jobs that only the gentry should have access. Leo Strauss believed the poor and middle class are too morally and intellectually deficient to handle higher thought, so it is for their own good to price them out of the market.

[yellowwood]

51. My Observation

Just from my experience and observation:

Tenured professors who "teach" only a few hours a week, I once had a history of education professor whose class consisted of showing videos.
Too many administrators
Overpaid administrators
Huge, costly athletic programs. When I went to University, I never had time to spend a lot of time going to "games." Now, when I get my alumni flyer, so much of it is devoted to athletics. I wonder who are the targets for these programs? The alumni? Don't they ever grow up?

[a la izquierda]

52. don't blame professors...

(not that i think anyone will). but as a soon-to-be-phd in history, i know i'm not going to make enough to pay my loans off in 10 years. it's okay, i don't do it for the money.

[aikoaiko]

54. Tuition and most fees are free at GA public universities if you graduate high school with a 3.0 GPA

And you even get $300 worth of books per semester.

If you move to GA and pay for your first 30 hours and maintain a 3.0 GPA, the scholarship will kick in for your final 3 years of courses.

But what the author writes about state support is also true of GA universities in that the proportion of state/tax payer money provided to universities is shrinking while attendance is climbing, equipment prices are soaring, salaries are increasing (slightly) to remain competitive.

[DailyGrind51]

55. I used to work for a university, and, believe me, it costs a great deal to "keep the doors open"!

You know what it costs to heat and supply electricity to your home, imagine what it costs to do the same for several campus buildings, plus supplying them with electricity and plumbing. And, there is the most expensive cost of salaries and benefits for faculty and staff. If the university also has a medical center, the annual "cost of doing business" becomes exponentially more expensive.