The Real Reason (?) College Costs So Much

April 5, 2015

In the New York Times today, Professor Paul Campos from the University of Colorado made the case that public funding for higher education has not declined over the past several decades, but has in fact increased significantly. The number of institutions and certainly the number of students pursuing post high school education has soared, and while per capita funding may be down, the states and federal governments are providing more funding than ever.


Fair enough. But why then has tuition increased so much (if the average price of a car had increased in the past 40 years as much as tuition, Campos claims the average car price would be $80,000!)? In part, he claims, because of the vast increase in administrators and their salaries – a 60 percent increase in positions between 1993 and 2009, while faculty positions grew only modestly. He does not address the decline in teaching loads for faculty, but that has also contributed to increased costs. He also cites the increasing numbers of students served and their demands for amenities as reasons for the price increase. He does say that both the increase in administration to handle increasing numbers of student is – in theory at least – defensible.


What he doesn’t say is that the price increase is fueled by an INCREDIBLY competitive marketplace for students, which now includes over 1500 for-profit schools offering real degrees. This is a major cost driver and it needs to be acknowledged as a primary reason for price increases.


Even within the traditional non-profit sector, the competition is intense — amenities for students (including food everywhere, anytime and top quality); study abroad which loses money for a college (tuition goes out, as does aid); and competition for top administrators and professors (high salaries and reduced teaching loads) – all of this drives up price. It is interesting to note that competition in the private sector typically results in decreased prices (less of a profit margin). In the non-profit world, competition typically increases prices as someone has to pay for the “enhanced” product.


And finally, just like cars (where prices haven’t risen as fast, mainly because there is economy of scale in production that one doesn’t have in education) a college education today is not what it was in 1970.  Study abroad, off campus study programs (such as Drew University’s four programs in NYC — Wall St, UN, Communications and Theater/Arts), internships, interdisciplinary field work programs — all of these cost more.


Add to this the fixed costs of technology improvements on a daily basis, benefits such as health insurance (which every industry has), federal regulations that have to be carefully monitored and executed, and an increasingly litigious society, and it totals to a cost explosion.  And a little told fact — since most financial aid is NOT endowed or funded, colleges have to charge more in order to have the money to underwrite those who cannot pay.  Back when I started in admissions and financial aid at Colgate 40 years ago, 30 percent of our students received aid.  Now at schools like Drew, Dickinson, Hopkins and Colgate, 60 percent are receiving financial aid.  And, on top of everything else mentioned above, that costs!


With all of this, one still must ask, is there value in what colleges and universities provide? I just have to look at my University of Rochester graduate daughter and my Lafayette College graduate son to answer that one – a resounding yes. I have written on value before and I will certainly do so again. We do need to contain our costs as much as possible, but in my book, the value is still convincingly there.



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