Myths on College Costs and Prices? I Don’t Think So…

by Watson Scott Swail, President & CEO, EPI International/Educational Policy Institute

Earlier today, Elyse Ashburn of The Chronicle of Higher Education wrote about the cost of higher education in her piece, News Analysis: Higher-Education Misperceptions, Myths, and the Media. In the article, Ms. Ashburn discusses recent findings from Jane Wellman’s group, the Delta Project.

Contrary to perhaps the point of her article, I argue that the reality is this: the “cost” and “price” of the US postsecondary system (and this pertains to Canada, too) is simply out of hand, if not out of touch. It has become too costly a service for what students are now getting in return. From an ROI perspective, a BA is not nearly worth what it was 25 years ago, for many reasons, including a flood of BA and other recipients and participants in the market (from a purely economic perspective, this runs true). In the article Ms. Ashburn uses the example of MIT and Black Hills State University, whereas in a recently Bloomberg Businessweek article MIT was the best investment and Black Hills the worst. The truth: MIT will continue to have a very high ROI for students as well as investors because it is exclusive—they “choose” who gets to come in the MIT gates. And if you have a 1550 SAT score or higher, you’ll probably get in. Conversely, anyone can go to Black Hills State University, that is, if you want to move to Spearfish, South Dakota (yes, I had to look that up; my bad). Is Black Hills “the worst”? No, assuredly not at all. It just isn’t exclusive and can’t compare to MIT, arguably the best engineering and technical institution in the world. But for argument, the average ACT score at BHSU is 18 to 23 (25th and 75th percentile) on a 36-point scale. MIT’s are 32 to 35. Apples and oranges, so to speak.

But the reality is twofold: first, public four-year institutions are far more expensive than they should be at this point in time. When the average tuition (and ONLY tuition and fees) approaches $10,000, we have a problem (knowing that tuition, fees, and room and board will run you toward $20k). People are spending $80k to send their kids to a public, in-state, institution. In-state tuition and fees at Black Hills State University is $7,000 in the 2011-11 academic year, and total cost of attendance about $14,000 (and that’s conservative).

The second reality is that the high cost of public four-year institutions has and continues to force students to attend public, two-year institutions. While this can be construed as “choice,” it is often a forced choice due to financial conditions. Two-year institutions are less expensive and provide a solid education foundation. But they are NOT equivalent to public, four-year institutions–pride aside–and that becomes the crux of the issue over time.

So, I’m not sure who or what the choir is. Public higher education, and most certainly private higher education, not-for-profit and for profit, is all too expensive. And it is both a cost issue and a subsidy issue. We have reached, dare I say, a Tipping Point where we can only expect so much more government assistance in terms of direct subsidy OR student assistance via vouchers (e.g., Pell Grants, subsidized loans, etc.). Thus, it is incumbent on colleges and universities to drastically alter how we approach the service and delivery of higher education as we know it.

Our system is antiquated and simply doesn’t work on a mass scale. The pure weight of the financial schemes of colleges and universities will bring many of them down in the next decade. Watch.

Ps. I do like to state, for the record, that I am a proud degree recipient from Red River College (two-year public) in Winnipeg, Manitoba, and have degrees (too many, to be honest) from a public four-year university in Canada (University of Manitoba),  a public four-year in the US (Old Dominion University in Norfolk, VA), and a private, not-for-profit institution (The George Washington University, Washington, DC). I’ve been around. But I get the landscape. They are all different, but all have a place.

One thought on “Myths on College Costs and Prices? I Don’t Think So…

  1. Couldn’t agree more about the unsustainability of the current financial model. Glad this is being discussed here, because it is very quiet in the media, and parents and students seem to be meekly enduring a bad deal that gets worse each year. I’m just starting to take a look at the change in cost over a generation, since my oldest is going into 9th grade this year. My data point: I attended the University of California from 1977 to 1981. At that time my fees were $702/year, and it stayed at that level for all 4 years. I lived at home to economize and so got a UCLA B.S. Physics for an out-of-pocket of about $4,000 plus books (thanks Mom and Dad). Obviously the full cost was subsidized by the state as an investment in the future of the state workforce. But the subsidy evidently was easily managed in the state budget (no annual California-goes-bankrupt stories) so it couldn’t have been insupportably high. And thanks to the careers I was able to successfully pursue, I now pay around $7,000 every year to California just in state income tax, on top of many thousands more in property tax and sales tax. So I’d say those 1970’s California taxpayers got a good financial return on their subsidy. Now, after a generation of rising costs, Resident Tuition at UC for ’10/11 has increased to $10,781 per year (and $33,660 for non-residents).

    If the area of higher ed were like health care, we might be sick of hearing about unsustainable annual increases in cost. However, no one could be sick of the stunning advances in medicine since the 1970’s. Many of us I’m sure have several examples touching our own lives and families of transformative or life-saving benefits from advances in medicine, even as the costs increased.

    Unfortunately, I have no expectation that the actual learning experience my child will experience will be of higher quality than what mine was. I have no expectation that he will learn more than I did, or learn faster than I did. And the earning advantage of a degree has decreased? Shouldn’t we be getting more for a 10X increase in price?

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