The Biden administration’s announcement that up to $20,000 in student loan debt would be canceled for borrowers would bring welcome relief to millions,, But that relief will do nothing to slow the rapidly rising cost of going to college.
According to National Center for Education Statistics data, in the 1963–1964 academic year, the average annual published cost of in-state tuition and fees was $243 at public four-year institutions and $1,011 at private four-year institutions. This does not include room and board.
According to data from the National Center for Education Statistics, if the published cost of college remained in line with inflation, annual tuition and fees would be $2,076 at four-year public universities and $8,624 for the 2020-2021 academic year at private institutions. Constant dollars, or income adjusted for inflation.
But in the 2021-2021 academic year, the average price tag for in-state tuition and fees at a four-year public institution was $9,375, and at private four-year institutions, it was $32,825. With student housing, that cost skyrockets – some schools are charging more than those who can afford it,
Why is college so expensive?
“There’s no single answer,” says Beth Akers, author of “Making College Pay” and a senior fellow at the American Enterprise Institute. “You can ask a lot of different people and they have many different reasons.”
However, said Philip Levine, an economist at Wellesley College, the sticker price an institution lists on its website and net worth may be too far off. Net worth is what students pay for after need-based aid and merit scholarships. Net worth has risen sharply in public institutions where state funding has not kept pace with the increase in value.
The government does not track the net worth paid by students in public versus private institutions. But according to the College Board, students in private institutions get, on average, more financial aid. And the net worth families paid for tuition, room and board at private colleges was approximately $33,720 at private institutions, compared to $19,230 at public colleges for the 2021-2022 academic year.
Over the past two decades, the published cost of tuition and fees at private four-year institutions has risen much more rapidly than pure tuition. According to the College Board and National, over the past 20 years, their sticker prices have increased by 54% in inflation-adjusted dollars, even though the net tuition prices — which students are paying after factoring in grants and scholarships — grew only 7%. Center for Education Statistics data analyzed by the Manhattan Institute.
For many public institutions that are seeing a reduction in state funding, the financial picture is worse. The published value for tuition and fees at public four-year institutions has increased by 102%, adjusted for inflation, with net tuition and fees in public four-year schools running 115% higher over the past 20 years.
“At times we underestimate the rising cost of college,” Levine said. “Because most of what we do is focused on the sticker price.
But most students do not pay the sticker price in public or private schools, he said.
“Public institutions have shifted away from funding to collect revenue through “taxpayer support and through individual tuition fees,” Akers said.
Levine said that students from upper-middle class and affluent families, which often include the governing and media classes, pay full price.
“The anomaly is that high-income families pay that price,” Levine said.
Administrative costs and facilities
The number of administrative staff added to higher education institutions has outpaced the recruitment of teaching faculty in recent decades.
The number of administrators in higher education institutions grew twice as fast as the number of students in the 25 years ending 2012, as did the number of students, the New England Center for Investigative Reporting found by analyzing federal data.
And from 2010 to 2018, spending on student services increased by 29% and spending on administrative tasks increased by 19%, while spending on instruction increased by only 17%, according to the American Council on Trustees and Alumni’s 2021 According to the report of
Colleges and universities have become more widespread in the services they provide, and in general, students are taking advantage, saidThe former governor of Arizona and former secretary of the Department of Homeland Security, who was president of the University of California system for seven years.
Napolitano, who is now director of the Center for Security in Politics at the University of California, Berkeley.
“The point is that over time, as universities have absorbed the cost of providing not only the academic teaching and research aspect of a college education, but also all kinds of ancillary or allied services that go with it, I Have done too. Seems to have added to the cost.”
But administrative expenses don’t account for most of the increase in the college’s sticker price, Akers said.
Then, there are headlines about luxury amenities for students, like lazy rivers at Texas Tech University, or climbing walls at the University of Maryland. But those additions are also easy targets, and still don’t come close to explaining the sticker price increase for college, Akers said.
Higher education is competitive – Harvard and Princeton will always compete for the same select pool of the most promising students in the country.
“It’s also the case that in some ways higher education doesn’t look like a normal market,” Levine said.
In a normal market, everyone pays the same price. “Not everyone pays the same price in higher education,” Levine said. At many schools that can offer low salaries, and at some of the most elite schools in the country, including Harvard, Yale, and Stanford, students who are accepted and whose family income is less than about $60,000 get a free ride.
A lack of price transparency into what the net worth will be to a potential student is also something that distorts the market, Levine said, because most college applicants don’t know exactly what they’ll pay until they accept. are not made, commit to a university and apply for aid.
Levine created a tool, MyinTuition, through which students can estimate their net tuition costs based on factors such as their family’s savings and investments, their GPA, and their SAT scores. He built the device when he was trying to figure out how much he would pay for his children’s college education.
But their website does not cover most higher education institutions, and the calculator is only an estimate, and is not binding.
Then there are student loans.
“People claim all the time the fact that we have allowed people to borrow so much that the price is going up, and I think there is some truth to that,” Akers said.
“It’s not really a basic economic argument that the availability of credit drives up the price, but I think it’s a plausible thing.”
Millions of Americans will continue to attend college and incur mountains of debt to do so because the financial – and even social – benefits of attending college still generally outweigh the financial costs, each. noted.
“Returns are important for graduating from college,” Levine said. “And the simple calculation would basically indicate that for the typical student, attending college certainly pays off relative to its cost.”
But “that doesn’t mean it pays for everyone,” Levine said.
According to statistics from the Social Security Administration, men with bachelor’s degrees earn about $900,000 more in average lifetime earnings than their high school graduate counterparts. Women with bachelor’s degrees earn $630,000 more in their lifetime than women with only a high school diploma.
And a 2021 study from Georgetown University found that high school graduates earn an average of $1.6 million over the course of their lifetime, compared with $2.8 million for those with a bachelor’s degree.
So, over a lifetime period, spending $100,000 for a college education is a relative “deal” with those returns, Akers said.
Millions of people will continue to pay more and more for college as long as the benefits generally outweigh the costs. But at some point, “market forces will continue to push the price up until it’s worth it,” Akers said.
Napolitano is skeptical of Republicans’ argument that universities would use the Biden administration’s student loan forgiveness as an opportunity to raise prices significantly.
“I think any college president who relies on the assumption that loans will be canceled in the future is living in a fairy land,” she said.
Are there any solutions?
Akers said the solution to addressing rising college costs is in contrast to the student loan cancellations that the Biden administration is doing.
“I don’t want to end subsidies,” Akers said. “I don’t want to end the student loan program.”
But graduates who are able to repay loans should be required to do so, she said.
One way to reduce costs would be to cut down on the time it takes to obtain a college degree. If students are able to obtain college credit for coursework while still in high school or middle school, this will reduce the time it takes to pay for four-year colleges. For example, Napolitano believes that state governments should encourage students to attend community college and attend less expensive community colleges while they are still in high school and beyond. , so that they can transfer those credits to a four-year institution.
There should be more avenues to get good, well-paying jobs, Akers said, adding that he thinks “there’s going to be a natural improvement,” and more employers are dropping the requirements for college degrees. Few companies have started doing this in today’s tight labor market. Apprenticeship programs and trade should be celebrated, he argued, adding that political and social leaders also needed to celebrate those paths.