Why Is College in America So Expensive?

All told, including the contributions of individual families and the government (in the form of student loans, grants, and other assistance), Americans spend about $30,000 per student a year—nearly twice as much as the average developed country. “The U.S. is in a class of its own,” says Andreas Schleicher, the director for education and skills at the OECD, and he does not mean this as a compliment. “Spending per student is exorbitant, and it has virtually no relationship to the value that students could possibly get in exchange.”

.. One reason for this difference is that American college students are far more likely to live away from home. And living away from home is expensive, with or without a lazy river. Experts say that campuses in Canada and Europe tend to have fewer dormitories and dining halls than campuses in the U.S. “The bundle of services that an American university provides and what a French university provides are very different,” says David Feldman, an economist focused on education at William & Mary in Williamsburg, Virginia. “Reasonable people can argue about whether American universities should have these kind of services, but the fact that we do does not mark American universities as inherently inefficient. It marks them as different.”

.. It turns out that the vast majority of American college spending goes to routine educational operations—like paying staff and faculty—not to dining halls. These costs add up to about $23,000 per student a year—more than twice what Finland, Sweden, or Germany spends on core services.

.. The business of providing an education is so expensive because college is different from other things that people buy, argue Feldman and his colleague Robert Archibald in their 2011 book, Why Does College Cost So Much? College is a service, for one thing, not a product, which means it doesn’t get cheaper along with changes in manufacturing technology (economists call this affliction “cost disease”). And college is a service delivered mostly by workers with college degrees—whose salaries have risen more dramatically than those of low-skilled service workers over the past several decades.

College is not the only service to have gotten wildly more expensive in recent decades, Feldman and Archibald point out. Since 1950, the real prices of the services of doctors, dentists, and lawyers have risen at similar rates as the price of higher education, according to Feldman and Archibald’s book. “The villain, as much as there is one, is economic growth itself,” they write.

.. In this public system, the high cost of college has as much to do with politics as economics. Many state legislatures have been spending less and less per student on higher education for the past three decades. Bewitched by the ideology of small government (and forced by law to balance their budgets during a period of mounting health-care costs), states have been leaving once-world-class public universities begging for money. The cuts were particularly stark after the 2008 recession, and they set off a cascading series of consequences, some of which were never intended.

The easiest way for universities to make up for the cuts was to shift some of the cost to students—and to find richer students. “Once that sustainable public funding was taken out from under these schools, they started acting more like businesses,” says Maggie Thompson, the executive director of Generation Progress, a nonprofit education-advocacy group. State cutbacks did not necessarily make colleges more efficient, which was the hope; they made colleges more entrepreneurial.

Some universities began to enroll more full-paying foreign and out-of-state students to make up the difference. Over the past decade, for example, Purdue University has reduced its in-state student population by 4,300 while adding 5,300 out-of-state and foreign students, who pay triple the tuition. “They moved away from working to educate people in their region to competing for the most elite and wealthy students—in a way that was unprecedented,” Thompson says.

This competition eventually crept beyond climbing walls and dining halls into major, long-term operating expenses. For example, U.S. colleges spend, relative to other countries, a startling amount of money on their nonteaching staff, according to the OECD data. Some of these people are librarians or career or mental-health counselors who directly benefit students, but many others do tangential jobs that may have more to do with attracting students than with learning. Many U.S. colleges employ armies of

  • fund-raisers,
  • athletic staff,
  • lawyers,
  • admissions and
  • financial-aid officers,
  • diversity-and-inclusion managers,
  • building-operations and maintenance staff,
  • security personnel,
  • transportation workers, and
  • food-service workers.

The international data is not detailed enough to reveal exactly which jobs are diverting the most money, but we can say that U.S. colleges spend more on nonteaching staff than on teachers, which is upside down compared with every other country that provided data to the OECD (with the exception of Luxembourg, naturally).

In addition, most global rankings of universities heavily weight the amount of research published by faculty—a metric that has no relationship to whether students are learning. But in a heated race for students, these rankings get the attention of college administrators, who push faculty to focus on research and pay star professors accordingly.

Likewise, the new data show that U.S. colleges currently have a slightly lower ratio of students to teachers than the average for the developed world—another metric favored in college rankings. But that is a very expensive way to compete. And among education researchers, there is no clear consensus about whether smaller classes are worth the money.

In the beginning, university administrators may have started competing for full-freight paying students in order to help subsidize other, less affluent students. But once other colleges got into the racket, it became a spending arms race. More and more universities had to participate, including private colleges unaffected by state cuts, just to keep their application numbers up. “There is such a thing as wasteful competition,” Charles Clotfelter, a Duke University professor and the author of Unequal Colleges in the Age of Disparity, wrote me in an email.

All that said, it’s also true that state budget cuts were uneven across the country. Today, in-state tuition in Wyoming is about a third of the cost of Vermont, for example. In places where higher education has not been gutted and the cost of living is low, an American college degree can still be a bargain—especially for students who don’t mind living at home and are poor enough to qualify for federal aid. Taking into account living expenses, says Alex Usher of the consulting firm Higher Education Strategy Associates, a student at a public university in Mississippi will likely end up with similar out-of-pocket costs as a student in Sweden.

.. Usher, who is based in Toronto, is one of the few researchers to have looked carefully at the costs of higher education globally. And much of what he finds is surprising. In 2010, he and his colleague Jon Medow created a clever ranking of 15 countries’ higher-education systems—using a variety of ways to assess affordability and access. Reading the report is like peeling an onion. The first layer focuses on the most obvious question: the affordability of college based on the cost of tuition, books, and living expenses divided by the median income in a given country. By this metric, the U.S. does very poorly, ranking third from the bottom. Only Mexico and Japan do worse.

But the U.S. moves up one place when grants and tax credits are included. “Your grants are actually really generous compared to everybody else,” Usher says. Tuition is higher in the U.S., so the grants don’t fully cover the price, but 70 percent of full-time students do receive some kind of grant aidaccording to the College Board. From this perspective, sometimes called “net cost,” Australia is more expensive than the U.S.

Next, looking only at our public colleges, the U.S. rises higher still, ranking in the middle of the pack in Usher’s analysis, above Canada and New Zealand. This data is from 2010, and things may look less rosy if he were to redo the study now, Usher cautions. But still, he sounds weirdly hopeful. “The public system in the U.S. is working as well as most systems,” he says. “Parts of the U.S. look like France.”

The problem, of course, is that other parts of the U.S. look more like a Louis Vuitton store. America basically contains 50 different higher-education systems, one per state, each with public, private, and for-profit institutions, making generalizations all but impossible. The U.S. does relatively well on measures of access to college, but the price varies wildly depending on the place and the person. Somehow, students have to find their way through this thicket of competition and choose wisely, or suffer the consequences.

.. The more I studied America’s baffling higher-education system, the more it reminded me of health care. In both spaces, Americans pay twice as much as people in other developed countries—and get very uneven results. The U.S. spends nearly $10,000 a person on health care each year (25 percent more than Switzerland, the next biggest spender), according to the OECD’s 2017 Health at a Glance report, but our life expectancy is now almost two years below the average for the developed world.

“I used to joke that I could just take all my papers and statistical programs and globally replace hospitals with schoolsdoctors with teachers and patients with students,” says Dartmouth College’s Douglas Staiger, one of the few U.S. economists who studies both education and health care.

Both systems are more market driven than in just about any other country, which makes them more innovative—but also less coherent and more exploitive. Hospitals and colleges charge different prices to different people, rendering both systems bewilderingly complex, Staiger notes. It is very hard for regular people to make informed decisions about either, and yet few decisions could be more important.

In both cases, the most vulnerable people tend to make less-than-ideal decisions. For example, among high-achieving, low-income students (who have grades and test scores that put them in the top 4 percent of U.S. students and would be eligible for generous financial aid at elite colleges), the vast majority apply to no selective colleges at all, according to research by Caroline Hoxby and Christopher Avery. “Ironically, these students are often paying more to go to a nonselective four-year college or even a community college than they would pay to go to the most selective, most resource-rich institutions in the United States,” as Hoxby told NPR.

Meanwhile, when it comes to health care, low-income Americans tend to be less familiar with the concepts of deductibles, coinsurance rates, and provider networks, according to a variety of studies, which makes it extremely difficult to choose a health-care plan. “These are both sectors where consumers are too poorly informed and societal costs and benefits too great to leave decision-making entirely in the hands of individuals,” as Isabel Sawhill at the Brookings Institution has written.

Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities extract money from students because they can,” says Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” In places like the United Kingdom, the government limits how much universities can extract by capping tuition. The same is true when it comes to health care in most developed countries, where a centralized government authority contains the prices.

The U.S. federal government has historically been unwilling to perform this role. So Americans pay more for pharmaceuticals—and for college classes. Meanwhile, more and more of the risk gets shifted from government onto families, in both sectors.

At the very least, the American government could do a better job sharing information about the quality of colleges in ways everyone can understand, Schleicher says. “You can’t force people to buy good things or bad things, but they should be able to see what the value is.”

The Kids Aren’t All Right

And why should they be?

One of the problems with elite universities is that they accustom students to a sense of prestige that’s both superficial and inhibits a certain kind of risk-taking and genuine nonconformity. Obviously that’s not universally true but it is hard to move off the beaten path when the one before you seems well-lit and glittering. It’s also a truism that failure is life’s great teacher, and whatever else the beneficiaries of the cheating may get, they are being deprived of something ultimately more valuable.

The larger question is whether this scandal exposes how rotten the entire enterprise of higher education has become. I personally think the four-year college model is crazy — it should be three years, as it is in England. And that’s just for starters. We need to reinvent the model root-to-branch. That’s one of the reasons I’m against making college available to all: You are merely funneling more students into a system of increasingly dubious value.

Gail: Kids who can’t afford to go to college and who would benefit from college should get government funding. But the loan system is a different question. It’s worrisome. I’ve always wondered if high school graduates should have to work a year or two — volunteer programs count — before they can commit to an expensive education.

Bret: Agree completely. Frankly every 18-year-old at any level of income would benefit from a year of service of some sort. I know I would have, and I’d love to see my children take a gap year or two before college.

Gail: Our current government loan program is terrible. It helps schools grow by building up unnecessary programs and of course encourages kids to take out huge debt they’ll be dragging around for half their lives. The for-profit schools are the most egregious offenders. Many of them rake in a ton of money by making promises they can’t deliver on — great high-paying jobs that never materialize. I’m not sure students should even be able to get federal loans for for-profit schools. What do you think?

Bret: I don’t share your profound skepticism regarding for-profit schools, but I think you’re right on this point. The federal government should not be indirectly subsidizing for-profit entities, period, especially when they have a questionable track record of achieving the results they promise. Then again, I’m skeptical of federal student loans in general, because I think they help drive up the cost of tuition, exacerbating the problem they’re intended to solve.

.. Gail: What we need is so simple — strong background checks on gun purchases, a ban on rapid-fire weapons that make it easy to mow down dozens of people. But I wonder sometimes if we could up the ante. Require that everybody who buys a gun has to be able to demonstrate both an understanding of gun safety and a minimal level of marksmanship. The one thing we don’t talk about is how inept many gun owners are. You need a decent amount of skill to be able to hit a target, particularly if you’re nervous or on the move. Unless, of course, your target is a mass of people at prayer.

.. Bret: None. And it is particularly disappointing to see a Republican like Senator Ben Sasse of Nebraska, a so-called constitutional conservative, vote with the president just weeks after he delivered a statement denouncing the national-emergency declaration. It means that Republicans have no higher principle than their own political self-preservation.

So now it will be up to the Supreme Court to act to defend the separation of powers. Don’t be surprised if Chief Justice John Roberts or another conservative justice delivers the majority opinion against the president, along with the court’s liberal wing. As we both know, the Trump presidency makes for strange bedfellows.


People vs. Money in America’s Midterm Elections

They seek to restore access to a middle-class life by providing decent, well-paying jobs, reestablishing a sense of financial security, and ensuring access to quality education – without the chokehold of student debt that so many graduates currently face – and decent health care, regardless of pre-existing medical conditions. They call for affordable housing and a secure retirement in which the elderly are not preyed on by an avaricious financial sector. And they seek a more dynamic, competitive, and fair-market economy by curbing the excesses of market power, financialization, and globalization, and by strengthening workers’ bargaining power.

These perquisites of a middle-class life are attainable. They were affordable a half-century ago, when the country was substantially poorer than it is today; and they are affordable now. In fact, neither America’s economy nor its democracy can afford not to bolster the middle class. Government policies and programs – including public options for health insurance, supplementary retirement benefits, or mortgages – are crucial to realizing this vision.

.. In a normal democracy, these ideas would, I am confident, prevail. But US politics has been corrupted by money, gerrymandering and massive attempts at disenfranchisement. The 2017 tax bill was nothing short of a bribe to corporations and the wealthy to pour their financial resources into the 2018 election. Statistics show that money matters enormously in American politics.

The Banality of Change

..Trump speaks to this man’s situation and makes him feel heard. But when you think practically about which candidate could improve his life, it’s clear that Clinton is the bigger change agent.

.. To create political change, you have to work within groups and organize groups of groups.

.. Now, if you wanted to design a personality type perfectly ill suited to be a change agent in government, you would come up with Donald Trump: solipsistic, impatient, combative, unsubtle and ignorant.

.. None of us should be under any illusions. Wherever Clinton walks, the whiff of scandal is always by her side. The Clintons seem to have decided that they are righteous and good, and therefore anything that enriches, empowers or makes them feel good must always be righteous and good. They surround themselves with some amazing people but also some human hand grenades who inevitably blow up in their faces.

Passing legislation next year is going to be hard, but if Clinton can be dull and pragmatic, and operate at a level below the cable TV ideology wars, it’s possible to imagine her gathering majorities behind laws that would help people like that guy in Idaho:

  • an infrastructure push, criminal justice reform,
  • a college tuition program,
  • an apprenticeship and skills program,
  • an expanded earned-income tax credit
  • and a bill to secure the border
  • and shift from low-skill to high-skill immigration.