Degree Inflation Of Another Sort, Ctd.

by Patrick Appel

A professor writes:

There are many reasons for the rising cost of higher education; here are the ones I think are key (and that need to be part of the discussion):

1.  State support of public universities have plummeted. As recently as the 1970s states provided from 40 to 70% of the cost of big state universities.  Now they are virtually all below 30% and some well under 20% (e.g., U Colorado).  Public universities are now state-assisted at best. The difference is made up in tuition.

2. As the knowledge driven economy pays folks with skills more money in the market place, top faculty in many disciplines cost a lot more than they once did:  Chemists, neuroscientists, engineers, law professors, business, and so on.. all can make lots of money in industry, outside universities.  But universities drive innovation and new markets, so they need to have folks at the top of the game training the next generation in these fields (and creating new products, see 3 below).  If faculty in these fields are not paid amounts that at least approach competitive salaries outside academia; higher education will become like secondary education --not attracting the best which may well lead to an outcome of US higher education being middling internationally instead of near the top.   Given the knowledge-driven economy, this would not be  good.

3.  The US invests in basic, translational, and much applied science research (in all fields --from math to nursing to biochemistry to kinesiology to public health etc)  in universities.  Although the federal government is a big financial player here, universities have to provide the infrastructure. Science is like football, you think it's a money maker (tickets, TV rights are like big government grants), but the cost of being big enough for all that may mean you end up in the red.  This is a fundamental policy question.  How should this country do science, train scientists and generate the knowledge and ideas that lead to new products and successful market competition?   Currently, we  do it through universities in a loose freestyle that is open-ended and highly generative. But we could do it in some top-down (perhaps seemingly less wasteful) focussed way, but we really have to know what we are doing.  (think soviet 5-year plans, they could have been great if the planners were prescient).

4.  Health care is itself a big factor.  Universities are typically self-insured and they provide among the best health care in the country, for all their employees.  This is a cost that is skyrocketing, just as it is for every other business. I would love to see the rise in tuition plotted with the health care costs removed!

5.  Schools now offer more and bigger financial aid packages.  The tuition listed is the list price.   At most privates, a very high percentage pay a discounted rate (the rich subsidize the less well off).  At most big state schools, a substantial proportion  get a discounted rate. People need to plot the average tuition paid! not the the list price.

6.  Finally, there are lots more students.  But I do not think this is the big one.

Another professor:

29% of any tuition increase at my university is allocated to financial aid (almost all of this in the form of grants).  So if we increase nominal tuition by $100, we only actually see about $71 of it, as we give $29 back to the students.  If we need to raise revenue by 4%, we need to raise nominal tuition by nearly 6%.  \I'd be interested in whether the graph tracks the "sticker price" on tuition (equivalent to the $100 I just described) or the actual average tuition paid ($71) .  My guess is that actual tuition paid has risen at a much, much lower rate than that shown by the graph.  For those with the ability to pay full rate who don't have the scholarly chops to get aid based on their talents, tuition increases have been very large. But for those with talent and need, my guess is that the top-tier universities provide steep discounts.

A parent:

I think that modern medicine and changing social norms (getting married later, multiple marriages and mixed families, etc.) in all socioeconomic groups, the wealthy even more so, has led to a step change in the age of parents. This means that a upper-middle class parent sending their 18-year old to college might be 55 or 60 now; when I went off to college almost all of my peers had parents under 50.  So today's couple will have been in the workforce for maybe a decade longer, which translates to higher incomes to offset education costs.