Will college tuition eventually be infinitely expensive?


#1

Looking at the historical rise of college tuition versus the prices of, well, everything else…

https://www.forbes.com/sites/steveodland/2012/03/24/college-costs-are-soaring

Since 1982 a typical family income increased by 147%, more than inflation but significantly behind the huge increase in college costs. College costs have been rising roughly at a rate of 7% per year for decades. Since 1985, the overall consumer price index has risen 115% while the college education inflation rate has risen nearly 500%. According to Gordon Wadsworth, author of The College Trap

“…if the cost of college tuition was $10,000 in 1986, it would now cost the same student over $21,500 if education had increased as much as the average inflation rate but instead education is $59,800 or over 2½ times the inflation rate.”

Blunting these increases is a rise in federal student aid including tax credits and deductions. And nearly two thirds of undergraduates now receive some sort of grant aid and student loan borrowing is on the upswing. But loans must be paid back so the pain of payment is only delayed.

And noting that student loan debt is now as big as the U.S. junk bond market…

Are we just fucked? Is college going to be infinitely expensive in the future?

How the heck does this continue to work in a sane society, where people value higher education? Something has to give here … right?


#2

Well, we won’t be fucked. But our children will be. I’m still paying off my student loans. Not much left but still. I feel sorry for our offspring.


#3

Eventually you reach a point where expected returns from your college education is lower than the cost, people say fuck it and dropping attendance forces the system to change?

Alternatively, US students start going abroad for their education, to places where education + living expenses are lower than US costs while still recognized by the US as a proper education?


#4

It reminds me of Norman Augustin’s 16th Law: In the year 2054, the entire defense budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy 3-1/2 days each per week except for leap year, when it will be made available to the Marines for the extra day.


#5

Were people rational actors, yeah. But we’re not. Every kid is going to be a doctor, lawyer, or engineer in their parents’ minds. Instead, we’re going to leverage ever greater debt until it reaches a threshold of impossibility and only then will the brakes be applied to tuition.

My son is currently studying in Edinburgh (which he adores, as an aside). Last year, he was in Brussels. Mind, that’s part of his program; the U.S. school funnels the tuition to the overseas programs. However, I was interested to learn how overseas universities worked outside of that program; basically, many function as the equivalent of American state schools, where citizens of the host country get drastically reduced rates and those who come from other nations pay much higher (market-level) costs. This of course makes sense; the taxes collected by citizens go to help fund the schools, and someone who never paid into that taxation logically shouldn’t expect the same benefit.

Seems like a lot of countries seem to understand the value of subsidized education, and the US just seems to be lagging behind.


#6

A shocking departure from our heathcare plans, I know.


#7

No real problem here. Bitcoin will be worth even more than infinity.


#8

If college is cheap, who will join the military?

/cynical

(Though I think rules for joining the military have laxed too due to demand. And some Americans may not want us to end up like Germany. E.g. good education, small military.)


variable rate loan products and how the rate works
#9

Eventually you might start to get into a similar situation to US tourism healthcare, where apparently it might make sense to go take a vacation in Europe or India or somewhere with a good health system, pay for your surgery / treatment and have it still be cheaper than doing it in the US.
Only problem is that a knee doesn’t care in what country it was replaced, and where you got your education doesn’t work quite the same.

For instance, non EU students pay around 7000€ per year to attend Lisbon University. Add a few more thousand to actually live, and it’s not cheap, sure, but maybe still less expensive than many places in the US. But how much is that diploma worth once the student goes back to the States? What about a design diploma from somewhere in Italy? Etc.


#10

That’s how it works in Denmark. All education is free, books aside for Danes, but foreign students have to pay. Both Danish and foreign students gets SU though, which is monthky pay to students, so they don’t have to work too much while studying.


#11

Great questions. I grabbed a random American university in the Times World Ranking that’s in the same range as Lisbon: Hofstra University. Tuition and fees per year are about 35.000€ without any aid. Ohio State University, one of the largest state schools in the US, is much higher ranked but “only” about 25.000€ for out of state students. The University of Central Florida, another huge state school in the US, is about 19.500€ for out of state students. None of these figures include cost of living, by the way, but that can also be considerable (roughly 8.500€/year for UCF, the “cheapest” of the three schools).

As for how much that Lisbon or any other foreign diploma is worth in the US, it depends on the field of study, the school, and to a limited extent the HR department of wherever you’re trying to get hired. Some do quite well, others… not so much.

Interesting!


#12

I found this discussion of cost disease pretty interesting, and frustrating:

http://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/

It starts off with a nice chart:

So, to summarize: in the past fifty years, education costs have doubled, college costs have dectupled, health insurance costs have dectupled, subway costs have at least dectupled, and housing costs have increased by about fifty percent. US health care costs about four times as much as equivalent health care in other First World countries; US subways cost about eight times as much as equivalent subways in other First World countries.

I worry that people don’t appreciate how weird this is. I didn’t appreciate it for a long time. I guess I just figured that Grandpa used to talk about how back in his day movie tickets only cost a nickel; that was just the way of the world. But all of the numbers above are inflation-adjusted. These things have dectupled in cost even after you adjust for movies costing a nickel in Grandpa’s day. They have really, genuinely dectupled in cost, no economic trickery involved.


#13

I’m guessing we stopped tracking science scores because they were too depressing.

While the chart is frustrating, it should be noted that K-12 teachers have been historically underpaid. The cost changes over time have included market adjustments to get them more in line. Still, the efficacy of the US schooling system leaves a LOT to be desired.


#14

Another handy chart:

Basically he makes the case that in a lot of these fields, it hasn’t gone to salaries. It’s hard to tell exactly where it’s gone.


#15

Yep - that’s the one I recall; the growth from the 70’s to the 90’s. And yeah - “administrative costs” as well as simple things like books and real estate probably eat up much of it.


#16

One item missing is that state/local government and higher education have traditionally better benefits per worker compared to average. So when we add in costs of healthcare per employee, costs of adding technology per student, etc, the costs of all education goes up. This isn’t that dissimilar to workers in other industries.

I feel like cherry picking costs, which will always go up over long time lengths, versus test scores, which have a limit based on max score as well as IQ, will never be a tit for tat comparison. In the same vein, the costs of my food have gone up tremendously over time, and yet my caloric intake hasn’t varied that much, in comparison.


#17

But some costs go down in real terms over long time lengths, while the costs for education has gone up tremendously. These are huge sums of money, that could be doing a lot of good in other areas. Are you not interested in why?

To go with your analogy, if you were strapped for cash, you could go back to eating cheap and simple food, not even necessarily less healthy food. Not an option in education.

The rapidly increasing healthcare costs is another interesting question.


#18

I would strongly wager that books eat up a large portion of that. But you probably have non trivial costs associated with things like computers, specifically software licensing.

But I’d also place a hefty wager that healthcare and administrative make up more than half of that increase.


#19

Sorry if I wasn’t clear, I meant the exact opposite. Some of the costs for education are tied to things that cannot be rolled back in any easy way, i.e. benefits for educators, costs of technology, etc. So to say that costs should equate to test scores 1-to-1 isn’t feasible. Especially when those test scores might not be possible considering average intelligence of students probably has not changed much.

What I meant with my food costs comparison was just that. I can’t replace everything with cheap food, because overall, all food prices have increased. It was probably a bad analogy, but that’s what I was trying to say.

As for education costs, I consider the extreme alternative, no education, a non starter. So if there is a requirement for high test scores per student, I just do not see a low cost alternative as being feasible. Something would have to drive that amazing extra education per student, Would that be better teachers (expensive,) alternative technologies (expensive,) privatization (unknown,) etc.

EDIT: I’m also saying this because I work for a large manufacturing company. The costs we have per floor worker have gone up quite a bit. Our actual output has gone down. There are a lot of factors there, but the overall cost of labor is higher, and the requirements on manufactured goods is also higher. Is education similar to that? I don’t know, but I’m sure it’s not as easy as a cost per score graph.


#20

But food prices have increased less than inflation, and education, higher education and healthcare have increased much, much, much more than inflation.

I grant that test scores can’t triple to go along with K-12 per-student education costs, but that’s kind of the point. Costs have gone up tremendously, but outcomes haven’t really changed. If you had the choice of sending your kid to the 70’s school and pocketing the extra $5000-$6000 per year per kid, a lot of families would go with the money, given that the overall quality of the education seems to be about the same.

Where are the costs going? Not to average teacher salaries, at least for the most part. Costs of teacher healthcare have gone up, but that raises the question of why healthcare has gone up so much, and even that can’t explain much of it. Is it an accounting fiction, like costs from the 70’s were pushed into the future in terms of pensions?

Anyway, K-12 costs increases are huge but tiny compared to post-secondary, healthcare and infrastructure costs. If there is a common story to tell about where these costs are coming from, it seems like there would be huge potential to make things better overall.