Megan McArdle has an article that was published in Bloomberg this week about the growth of student fees. The setup of the article was based on a new “$4 student fee to pay for better concerts”.
To solve this problem, UCLA is introducing a $4 student fee to pay for better concerts. That illuminates a budgeting issue in higher education — and indeed among human beings more generally.
That $4 is not a large fee. Even the poorest student can probably afford it. On the other hand, collectively, UCLA’s student fees are significant: more than $3,500, or about a quarter of the mandatory cost of attending UCLA for a year.
Those fees are made up of many items, each trivial individually. Only collectively do they become a major source of costs for students and their families and potentially a barrier to college access for students who don’t have an extra $3,500 lying around.
I’m sympathetic to the argument that college often costs too much and that institutions can play revenue games to avoid the appearance of raising tuition. I also think that Megan is one of the better national journalists on the topic of the higher education finances.
However, this article is somewhat sloppy in a way that harms the overall message. I would like to clarify the student fees data to help show the broader point.
Let’s look at the actual data from UCLA’s web site. I assume that Megan is basing this analysis on in-state undergraduate full-time students. The data is listed per quarter, and UCLA has three quarters for a full academic year. I have summarized below summing three quarters into yearly data, and you can:
- Hover over each measure to see the fee description from UCLA’s fee description page;
- Click on each category that I added to see the component fees;
- Sort either column; and
- Choose which rows to keep or exclude.
- NOTE: Static image above if you cannot see interactive graphics
Some Clarifications Needed
- The total of non-tuition fees is $3,750 per year, not $3,500; however, Megan is right that this represents “about a quarter of the mandatory cost of attending UCLA for a year” ($3,750 out of $14,970).
- The largest single fee is the UC health insurance fee (UC-SHIP), which is more than half of the total non-tuition fees, it is double the amount of money that people pay with the Insurance Partnership which pretty much is insane. This fact (noted by Michael Berman on Twitter) should have been pointed out, given the significant percentage of the total.
- With the UC-SHIP at $1,938 and the student services fee at $972, I hardly consider these as “trivial individually”.
Broader Point on Budgeting
The article’s broader point is that using extraneous fees to create additional revenue leads to a flawed budgeting process.
As I’ve written before, this is a common phenomenon that you see among people who have gotten themselves into financial trouble — or, for that matter, people who are doing OK but complain that they don’t know where the money goes and can’t save for the big-ticket items they want. They consider each purchase individually, rather than in the context of a global budget, which means that they don’t make trade-offs. Instead of asking themselves “Is this what I want to spend my limited funds on, or would I rather have something else?” they ask “Can I afford this purchase on my income?” And the answer is often “Yes, I can.” The problem is that you can’t afford that purchase and the other 15 things that you can also, one by one, afford to buy on your income. This is how individual financial disasters occur, and it is also one way that college tuition is becoming a financial disaster for many families.
This point is very important. Look at the Wooden Center fee, described here (or by hovering over chart):
Covers repayment of the construction bond plus the ongoing maintenance and utilities costs for the John Wooden Recreation Center. It was approved by student referendum. The fee is increased periodically based on the Consumer Price Index.
To take Megan’s point, this fee “was approved by student referendum”, which means that UCLA has moved budgeting responsibility away from a holistic approach to saying “the students voted on it”. This makes no financial sense, nor does it make sense to shift bond repayment and maintenance and utilities cost onto student fees.
While this article had some sloppy reporting in terms of accurately describing the student fees, it does highlight an important aspect of the budget problems in higher education and how the default method is to shift the costs to students.