Why does a college degree cost so much?

[Stinger92860]

http://www.cnbc.com/id/102746071

I thought this was an excellent article with excellent information.

Although only a small part of the article, there were the following paragraphs on the impact of college sports on the cost of attendance.

The rising cost of college sports including generous coaching salaries—has also raised concerns, especially when tuition subsidizes money-losing programs and increases the financial burden on students who don't take part in athletics. (The costs of intercollegiate sports are included in the "Student Services" category in the chart below, except for those operated as self-supporting auxiliary enterprises.)

"At many colleges, it's a significant cost," said Kelchen. "The biggest subsidies are at these small Division I programs that are trying to make their way up the ladder and get into the big time."

Still, though pricey amenities and big-budget sports programs get a lot of attention, they're the exception, not the rule among universities, say higher education experts.

 

[CL82]

Federal subsidy and readily available loans, particularly those that don't require immediate pay back.

 

[upstater]

Federal subsidy and readily available loans, particularly those that don't require immediate pay back.

I can point to a litany of recent studies that show this isn't the case. Federal loans top out at 5k per year (can't go above it) and only 39% of students have them. This means the price met by federal loans is 5k x .39 per student.

Here is what the article says: "While the price of a college degree has risen, the cost of providing a higher education has remained relatively stable."

Tuition has skyrocketed, but expenditures have not.

Last I looked at this, I saw a study that showed U. Cal's tuition shot up by over 1000% in less than 2 decades. Costs? The budget went from 1.2XB in 1991 to 1.6XB in 2011. That tracks under inflation. So why the gargantuan rise in tuition? State expenditure per student dropped from $16.5k to $9k. That almost covers the entire tuition increase right there. California spends about half as much money per college student as it spends per kindergartner.

 

[CL82]

Without the availability of loans, both federal and private, many, if not most, students would not be able to pay ever escalating tuition and market forces would bring down the cost or create alternatives. JMHO.

 

[SubbaBub]

1. Academia doesn't exist for efficiency sake. It is meant to explore the boundaries of knowledge and test ideas that may not be suitable for or are prepared to exist in the world of politics and commerce.

2. University has become a gatekeeper to not just the middle class, but any gainful employment.

3. Competition for dollars means schools spend a lot to attract students, faculty, endowments, grants, and gifts.

4. The arms race for new facilities and programs is overheated.

5. Parents will pay just about anything for their kids to succeed.

 

[upstater]

Without the availability of loans, both federal and private, many, if not most, students would not be able to pay ever escalating tuition and market forces would bring down the cost or create alternatives. JMHO.

I guess I gotta look for the studies now. Because you really need to break things down more.

1. 85%+ of the schools in America are private.
2. Average tuition is $8.Xk
3. $5k is the max for Fed loans per year.
4. Poor and lower middle class qualify for Pell Grants: $3k

When you look at these numbers, the question of need/loans is largely met without going to the private loan area.

The big blowup in student loans comes from the huge amounts going to poor/middle class students at private schools, and even bigger, 15-20% is now the size of the calamitous for-profit market. A huge rip-off.

So just ignore the 15% and focus on the 85% of public schools. Because for students in need, loans plus pell grant covers tuition entirely.

If you look at where the federal loans cap used to be 30 years ago, $4k, you know that a 25% rise in student loans over 3 decades to $5k was not the cause of the tuition surge.

The big change in student loans is that kids went from paying $1-2k outright for tuition with no loans to taking out $5k in loans a year. But that has little to do with the rise in tuition.

Market forces? If you really want market forces, wouldn't those be community colleges? No one is stopping people from going there, and if you can't get a federal student loan or pell grant, and you have no money from parents, you are forced to go there. But the rise in federal student loan caps has been minimal over 30 years. I took out loans in the 1980s and well remember the caps from then. So while the total amount of student loans has ballooned, I bet you that the student average for federal loans has maintained the same level relative to inflation.

A majority of public college students take loans right now (60%), and of those, the average debt after graduation is $26.Xk.

Check out the data here: http://ticas.org/posd/map-state-data

Interesting graph here:

Over that 13 year span, the average student took out $21k in loans in 99-2000 and $25k 13 years later. That's well below inflation. Using a CPI calculator, the amount borrowed in 2000 should have increased to $29200 in 2013 if it tracked inflation. And yet, while borrowing rates at publics were tracking below inflation, tuition was rising well above the--by multiples.

I think we agree that loans (of the non-federal or non-subsidized variety) definitely contribute to the rise of tuition at private and even for-profit schools, especially since there is no state subsidy to cut at such places, but as for public schools that make up more than 85% of the total schools in America, student borrowing has tracked well below inflation. While tuition has skyrocketed.

 

[IMind]

My own take on why tuition has risen at private northeastern Universities is simply to get more money out of those who can afford to pay. My guess is the average out of pocket cost for those who receive financial aid hasn't changed much at all. I'm quite sure the amount of financial aid given has gone up just as rapidly as the cost of tuition. My alma mater now "gives" more in financial aid to the average student than it cost to go there when I was a student in the late 90s. I think the segment that really gets squeezed the most by this are those in the middle. Those that make enough that they don't qualify for financial aid (or very much beyond loans)... but not enough that ~$59k per year is viable.

 

[upstater]

My own take on why tuition has risen at private northeastern Universities is simply to get more money out of those who can afford to pay. My guess is the average out of pocket cost for those who receive financial aid hasn't changed much at all. I'm quite sure the amount of financial aid given has gone up just as rapidly as the cost of tuition. My alma mater now "gives" more in financial aid to the average student than it cost to go there when I was a student in the late 90s. I think the segment that really gets squeezed the most by this are those in the middle. Those that make enough that they don't qualify for financial aid (or very much beyond loans)... but not enough that ~$59k per year is viable.

Yes, it is pretty well known that such schools charge more for tuition than the actual cost per student. This is only for those that maintain need-blind policies however. If you're a top student, you're going to get aid, if you need it. But if you're mediocre, you're probably not. That being said, many schools have moved from need-blind admissions, in order to hold down tuition, but that has it's share of problems as well. Seton Hall is one such school. The net result is going to be no poor or lower middle class kids at that school.

 

[CL82]

I guess I gotta look for the studies now. Because you really need to break things down more.

1. 85%+ of the schools in America are private.
2. Average tuition is $8.Xk
3. $5k is the max for Fed loans per year.
4. Poor and lower middle class qualify for Pell Grants: $3k

When you look at these numbers, the question of need/loans is largely met without going to the private loan area.

The big blowup in student loans comes from the huge amounts going to poor/middle class students at private schools, and even bigger, 15-20% is now the size of the calamitous for-profit market. A huge rip-off.

So just ignore the 15% and focus on the 85% of public schools. Because for students in need, loans plus pell grant covers tuition entirely.

If you look at where the federal loans cap used to be 30 years ago, $4k, you know that a 25% rise in student loans over 3 decades to $5k was not the cause of the tuition surge.

The big change in student loans is that kids went from paying $1-2k outright for tuition with no loans to taking out $5k in loans a year. But that has little to do with the rise in tuition.

Market forces? If you really want market forces, wouldn't those be community colleges? No one is stopping people from going there, and if you can't get a federal student loan or pell grant, and you have no money from parents, you are forced to go there. But the rise in federal student loan caps has been minimal over 30 years. I took out loans in the 1980s and well remember the caps from then. So while the total amount of student loans has ballooned, I bet you that the student average for federal loans has maintained the same level relative to inflation.

A majority of public college students take loans right now (60%), and of those, the average debt after graduation is $26.Xk.

Check out the data here: http://ticas.org/posd/map-state-data

Interesting graph here:

Over that 13 year span, the average student took out $21k in loans in 99-2000 and $25k 13 years later. That's well below inflation. Using a CPI calculator, the amount borrowed in 2000 should have increased to $29200 in 2013 if it tracked inflation. And yet, while borrowing rates at publics were tracking below inflation, tuition was rising well above the--by multiples.

I think we agree that loans (of the non-federal or non-subsidized variety) definitely contribute to the rise of tuition at private and even for-profit schools, especially since there is no state subsidy to cut at such places, but as for public schools that make up more than 85% of the total schools in America, student borrowing has tracked well below inflation. While tuition has skyrocketed.

Thanks Upstater. I always appreciate it when you put together information. I'll look at it tonight.

It looks as if the above supports the notion that, either via grant or loan, there is more demand. Where there is more demand, if I remember my econ correctly, prices rise. Now when you couple that with a disconnect between the time of the cost incurred (tuition) and the time of payment (repayment of loan) you've eliminated a moderating force (inability to pay results in lower demand results in lower price.) I can't now, but I will take a look at the data tonight. Thanks for linking it.

 

[upstater]

I guess I gotta look for the studies now. Because you really need to break things down more.

1. 85%+ of the schools in America are private.
2. Average tuition is $8.Xk
3. $5k is the max for Fed loans per year.
4. Poor and lower middle class qualify for Pell Grants: $3k

When you look at these numbers, the question of need/loans is largely met without going to the private loan area.

The big blowup in student loans comes from the huge amounts going to poor/middle class students at private schools, and even bigger, 15-20% is now the size of the calamitous for-profit market. A huge rip-off.

So just ignore the 15% and focus on the 85% of public schools. Because for students in need, loans plus pell grant covers tuition entirely.

If you look at where the federal loans cap used to be 30 years ago, $4k, you know that a 25% rise in student loans over 3 decades to $5k was not the cause of the tuition surge.

The big change in student loans is that kids went from paying $1-2k outright for tuition with no loans to taking out $5k in loans a year. But that has little to do with the rise in tuition.

Market forces? If you really want market forces, wouldn't those be community colleges? No one is stopping people from going there, and if you can't get a federal student loan or pell grant, and you have no money from parents, you are forced to go there. But the rise in federal student loan caps has been minimal over 30 years. I took out loans in the 1980s and well remember the caps from then. So while the total amount of student loans has ballooned, I bet you that the student average for federal loans has maintained the same level relative to inflation.

A majority of public college students take loans right now (60%), and of those, the average debt after graduation is $26.Xk.

Check out the data here: http://ticas.org/posd/map-state-data

Interesting graph here:

Over that 13 year span, the average student took out $21k in loans in 99-2000 and $25k 13 years later. That's well below inflation. Using a CPI calculator, the amount borrowed in 2000 should have increased to $29200 in 2013 if it tracked inflation. And yet, while borrowing rates at publics were tracking below inflation, tuition was rising well above the--by multiples.

I think we agree that loans (of the non-federal or non-subsidized variety) definitely contribute to the rise of tuition at private and even for-profit schools, especially since there is no state subsidy to cut at such places, but as for public schools that make up more than 85% of the total schools in America, student borrowing has tracked well below inflation. While tuition has skyrocketed.

Argh, on point #1, 85%+ schools are public, not private

 

[upstater]

Are you including comm colleges and jc's in the numbers?

No 4 year Bachelors granting institutions only