Why Higher Education Is In Trouble–In One Graph

Here’s a graph from a recent presentation by Anya Kamenetz:

U.S. Tuition Costs Over Time

The word that comes to mind is “Yikes!”

Here’s the full preso:

http://www.slideshare.net/Anyaanya/diy-u-sungard

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16 Responses to Why Higher Education Is In Trouble–In One Graph

  1. Peter Hess says:

    I don’t have figures at hand, but as the parent of a high school senior this is a topic close to home. Here are two factors that I think the chart won’t show (though the full presentation well may address them):
    - As the sticker price for college has gone up, so also have discounts, in the form of financial aid. I’m convinced that this is a policy decision made by institutions to allow more income diversity in the student population. In other words, the net cost of college tuition and fees per student is not as great as chart shows.
    - As states withdraw support, state universities more and more rely on tuition and fees to cover costs. Presumably much of the slope’s elevation comes from tuition increases at public institutions. In former times, the state systems were an educational safety net for qualified, lower-middle class students. (As an out-of-state student, I owe the taxpayers of Wisconsin some long overdue thanks myself for an annual tuition that was under $1500. Those were the days.)

    That said, and painful as it is for me to admit it as a worker in the Higher Education vineyard, much like medical care, the fact that we are largely insulated from competitive pressure to keep costs down allows tuition to increase more rapidly and steeply than preserving the quality of education demands.

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  3. Trace Urdan says:

    But this is not right. Recent College Board report shows that net increase, because of massive increases in Federal and state aid, are negligible and, at state institutions, non-existent.

    http://naicuextracredit.blogspot.com/2010/11/inflation-adjusted-net-tuition-at.html

  4. That report is only for private non-profits. I don’t know the source of Anya’s numbers, but I’m guessing it also includes a broader swath of the market. It’s hard to know whether you’re comparing apples to apples.

  5. Trace Urdan says:

    That’s just my laziness in pointing to the most dramatic findings. The increases at state schools are also negligible over the same time horizon:

    http://trends.collegeboard.org/college_pricing/

    The figures in the presentation are clearly only published list prices and do not reflect what students are actually paying. Of course it does not mean the schools are not spending more, but begs the long-asked question of whether aid dollars actually contribute to price inflation in the higher education sector.

  6. I’m trying to get Anya to provide more info on her data. We’ll see if she finds time to respond.

  7. Original source for the chart is the American Institute for Economic Research’s “AIER Cost of Living Guide” http://www.aier.org/ a publication available for a fee on their website.
    http://www.aier.org/research/briefs/2202-the-aier-cost-of-living-guide

    I’m not as interested in net increases or the impact of financial aid as I am in sticker price. Frankly, I think it’s a rotten, dishonest way to run a market (used car sales anyone?) if affordability is based on discounting, and the price you pay is dependent on your negotiating ability or facility with navigating the byzantine realities of FAFSA. There’s all kind of evidence in my book that financial aid does not get to the students who most need it to increase access the way that it should, and that students from poorer families have the most unmet need. Furthermore, as long as nominal increases go up the way it is clearly shown on this chart (and in the most recent College Board Report, tuition at public universities is up 5.6% per year beyond the rate of general inflation), no increase in aid is going to be enough, ultimately, to keep things affordable. This is an unsustainable pattern.

  8. Trace Urdan says:

    Anya —

    First, thanks for responding. But please understand that there are no evil geniuses sitting in a back room plotting to cheat students. That’s not how markets work. The reality is that only consumer pressure can place pressure on universities (whether public or private) to control costs.

    Demand remains strong because the market believe that a college education and the resulting income/lifestyle differential is worth the investment. And so, because the demand is great and the financial aid plentiful and (over the last five years anyway,) colleges and universities can raises prices and avoid tough choices on controlling cost — it’s what the market will bear.

    The reality of the current environment (not captured in either the College Board report or your stats) is that price IS beginning to matter. Second-tier private schools are scrambling for students (third-tier schools are going under) as ability/willingness to borrow has declined and increasingly we are seeing students delay or think twice about enrolling… and of course Congress is considering slowing the pace of aid growth. Going forward, as Gen Y passes into young adulthood, the decline in 18-22 yr-olds will also pressure demand.

    This will all help.The irony is that removing government dollars from the market whether as a middle-class subsidy at the state university level or in subsidized loans and grants at the federal level will do the most to control costs and lead universities to better manage their resources. If state and federal support for higher education were restricted to those that need it and not granted freely to all, we might actually see costs moderate.

  9. Peter Hess says:

    I don’t see evil geniuses, but I do see a dysfunctional system. First, regarding cost increases at state institutions, in Massachusetts, tuition increases have been moderate, but fees are increasing at an alarming rate: Annual fees for in state students (including room and board) at University of California are $29,450, at the University of Massachusetts, $20,545, at Dartmouth (a randomly selected private) $15,408.
    As Ana says, financial aid does not necessarily help the neediest students. People sometimes smugly ask why High School students are wrecking themselves (with parents urging them on) to get into top tier colleges. I’ll tell you one very rational reason why: the top schools are much more likely than middle-tier ones to meet “demonstrated need” with grants, rather than loans. As middle-lower-middle income parent, I don’t want my kid to graduate with a BA and $100,000 debt. There may be resistance growing to high tuitions, but there are precious few places to turn for relief. It looks to me like any resistance that might take place at the level of the individual consumer (and I see none) is completely futile in any case.
    Last, the premise that removing government dollars will lead to efficiencies and cost control (agreed: needed), or that moderating demand will do the same sounds to me like more of the free-market wishful thinking that is paving the road to ruin in so many sectors of US society!

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  11. It’s all about where you start the graph, isn’t it? 1978 is when tuition increases BEGIN to outpace inflation: for the decades before that, tuition increases were below the rate of general inflation.

  12. That may be, but it doesn’t change the fact that this growth rate is unsustainable.

  13. Bob Collins says:

    Unlabeled charts can be frustrating. The only labeled y-axis values would suggest that it is a log chart. Maybe the author could help us.

  14. Dexter Gill says:

    The subject of why our colleges are in trouble looks at only costs, not the base of the problem—fewer students. Why should they go to college? When I went to college ALL of my professors had worked most of their lives directly in the real world that they had now become professors in. Today that same school has “0″ professors with experience in their field. They don’t KNOW what they profess to teach. For 30 years, I hired college grads in professional fields that 85+% could not pass a 5th grade proficiency test! The college’s have become nothing more than social manipulation schools. More families/students are realizing their money is better spent on small community colleges and vocational schools. Most of the universities are bloated with overpaid administrators and fancy looking facilities that add nothing to real education. BUT if they have a fancy sports program that makes them a good school. NOT! More people are realizing what has happened and are looking for other options..

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