Tuesday, September 25, 2007

Why Colleges Are Expensive

The cost of college has increased faster than prices in general over recent decades. After spending eight days visiting four colleges--all good liberal arts schools--that my daughter is interested in, I have at least two pieces of an answer as to why.

1. Such schools practice extensive price discrimination, I think more than in the past, so tuition substantially overstates the real cost. Judging by some figures I got at one school, the average student receives scholarship support equal to about a quarter of tuition.

2. The quality of what students get, and thus the cost of providing it, has gone up.

I should add that I have no idea whether the quality of the education has gone up--knowing that would require some reasonable measure of what students know coming in and what they know going out. But the environment in which they are educated is more luxurious, and more costly, than it was. A few examples:

All of the schools, so far as I could tell, provide the equivalent of free taxi service in and near campus, usually from the security department, to any student who calls in and says that he is worried about his safety--and in some cases to any student for any reason. Details vary, and in one case the service was provided by the town rather than the college.

The food service ranges from better than I remember to luxurious.

At one college, practically every floor has not only a resident assistant (student) but a "Wellness advisor" (also student--these are jobs with which students help pay tuition). The same college had both an "Office of the Consultant for Sexual Misconduct Services" and a "Gender and Sexuality Center," in different buildings.

At one college, when I asked about help for students finding summer jobs in their field, I was told that students could volunteer as unpaid interns--and receive a stipend from the college.

The college athletic facilities were more like a high end athletic club/fitness center than what I remember--and I went to Harvard, the richest school in the country then and now.

Expenditure on services arguably related to education has increased too. There are writing centers, where students doing papers can go to get help from (paid) upper classmen. There is the equivalent for math. Class sizes are very small. How much good this does in terms of outcomes I don't know. But I expect it makes the learning experience pleasanter.

To be fair, all of these were high end schools--six top liberal arts colleges, one top university (not all visited on this trip).

The general impression was of a gold plated education--cost no object. It isn't surprising that it's expensive.


Anonymous said...

I saw much of the same while visiting my alma mater recently to recruit students for my employer. Lots of new construction designed by big name architects, shiny new facilities, etc.; most glaringly out of place was the new pool and health club facilities (at a school with no particular athletic reputation to uphold).

jimbino said...

All in all, our colleges and universities have taken a page from the Roman Empire before the Fall and from the British Empire before 1939.

May they return to reason and normality with less upheaval and misery!

Arthur B. said...

I would consider all the things you described as bads. Why would I pay for a high-end gym knowing that I'll never use it (no matter the guilt)? I'd rather get a cheaper tuition and pay to join a gym if I want to.

This type of offer is actually reminiscent of price floors, is there such as thing for colleges?

Anonymous said...

I think part of the explanation is on the supply side here. Sometime between the 1960s and now tuition went from being funded by parents to being funded by banks through student loans. Present value of future earnings potential for college grads now is much larger than what parents can save or pay for.

Aaron Krowne said...

I echo most of Martin's comments and put the blame on financing. There were not only banks here, but also government involvement through implicit and explicit guarantees, in a system that operates much like the quasi-government housing market.

And what happened there?

Hmm... home prices got way more expensive than people could ultimately afford, as well.

Sure, the homes got more luxurious, but it was the financing that drove the provision of luxuries.

I suggest that the same thing is going on in "higher education".

My own higher education was paid for mostly through loans, grants, and part-time work. It was a fairly run-of-the-mill state polytechnical school education, and I lived inexpensively. I still left with about $20k of debt.

I remember being completely undeterred at the cost of college because the financing was so easy to get and because it wasn't immediately apparent how much expensive it all was beyond just tuition (tution amounted to probably less than half my costs). But I was surprised when I got out and had so much debt, and with salaries having come down so much in IT, the debt burden was actually formidable.

We haven't had an economy as much as a debt bubble in the past couple decades as, and University education is no exception.

Arthur B. said...

So a possible explanation is that a college with a gym offers you a way to pay for your gym with cheap credit while a college with no gym doesn't.

Anonymous said...

I don't see where all the money is going. Yes, a "gold-plated education," but nothing compared to the increases in prices. I've been meaning to look at the budget.

Mark said...

It doesn't surprise me at all that top colleges are providing more services, and charging higher prices to pay for them. What does surprise me, however, is that the market doesn't seem to be providing a variety of products. Where are the colleges that provide a high-quality education with no frills for a low price?

Peter Bessman said...

My thoughts are here: College Educations and Designer Fashions. I tried to create a link, but that didn't seem to be working.