Doesn’t Anybody Get This?

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

This week I had the privilege of presenting with my colleagues Jay Goff of Saint Louis University and Kim Landis of EPI at the AACRAO SEM Conference in San Diego. In preparation for the 3.5-hour workshop, I updated my retention and student success slides. In particular, I spent considerable time re-upping my tuition and fee forecast originally created in 2006 for my Retention 101 workshops. This revision was predicated, in part, by last week’s release of the College Board’s Trends in College Pricing, a publication I used to co-author with Larry Gladieux in a prior life.

I will quickly cut to the chase and then document my thoughts and caveats about the meaning of these data. Bottom line: after adjusting for inflation (big caveat coming…), tuition and fee charges at public four-year universities will double from $8,244 to over $16,000 by 2029-30, or in 18 years. At public two-year colleges, tuition and fee charges will double from $2,963 to about $6,000 by 2033-34, or 22 years. And the $28,500 average tuition and fee charges of 2011-12 will double in 21 years (2032-33) to over $56,000 (see below). These numbers all come at the very same time that the Project on Student Debt announced that the average loan debt of college seniors rose to over $25,000, up 5 percent from the previous year.

Following is my brief Q&A with myself.

Question 1: But Scott, how can you possibly forecast something as volatile and politically-charged as tuition and fee charges?

Answer: Forecasting is tricky business and it can only be taken as a possible future. When I first cast these data, I did three various scenarios to show low-, mid-, and high-forecasts. But that just confused people and 25-years out it was such a wide gap it didn’t seem meaningful. Using an “average,” hoping that people know it is just that—an average that can be lower or higher than reality—was my way to go. Understand, however, that to conduct this forecast, I took 25-years of historical data to determine the average annual increase, beyond inflation, and used those to forecast the following 25 years. Simple calculations, but it is the best we can do. True, we cannot say what state and federal policies will do in the future, nor what markets and sectors will do. We never can. Averages seem to be as sound as anything else.  There is no indefinite integral that will be more accurate.

Question: But your forecast doesn’t really take into account the skewing by large increases over the past few years?

Answer: Well, yes it does, and readers should note that we had just as high increases in (a) the early 80s and (b) early 90s. In fact, this seems to be decade cyclical: we’ve seen this the past three decades almost like clockwork, where tuition and fee increases hit double digits (before inflation) before declining.

Question: But this won’t last forever. There has to be a bubble hit or something, right?

Answer: I love this question, and I had two fairly prominent people say this to me in San Diego. Surely we can’t have $16,000/year tuition and fees for public four-year universities within the next two decades. No way! Well, way. For those who think this trend cannot go on, I ask this: how has it gone along for the past 40 years? People said in the 70s, then the 80s, and then the 90s that it couldn’t go on. It does. And will. Dave Breneman, former Dean of Education at UVa and well-known economist, always told me that higher education will always rise well higher than CPI because it is a much more expensive commodity to develop. The only way this cycle of increases is contained is if we massively alter (a) what higher education “is” and (b) how we deliver it. Prices will not come down (or even modestly be curtailed) if costs are not controlled.

Economists are now talking about a bubble bursting in higher education, just like in the housing market. I don’t think so, and here is why. The housing bubble collapsed because of large federal policies aimed at massifying the market. Investors (and investment companies) played with these policies and created side products that were borderline illegal (but not illegal!!!!) that effectively created a bubble situation. Higher education has no policy or set of policies that will dramatically alter the supply and demand curve of college and university. At least not now. Currently, we have two very large foundations plus the US Department of Education pushing for more and more college graduates. They are effectively pushing the demand curve higher, therefore simultaneously pushing the supply curve. The bubble will not burst with such present demand, and there are no policies similar to that of the housing market ready to implode.

Question: So, what do you think this means?

Answer: I think we’re in trouble. I think this is incredibly serious and I am continuously flabbergasted that no one seems to take this seriously. I know, plenty of people, no less students and parents, are concerned about the “price” of college, but there is no real dialogue about college costs and pricing. We had a federal commission almost 15 years ago. We have had “blue ribbon” panels about college opportunity. And Congress has had hearings on college costs and prices. But nothing happens. Absolutely nothing happens, with the exception of continued push for higher Pell Grants and more loan availability to allow for even future increases. Yes, there is something true about Art Hauptman’s tuition spiral argument. If you keep creating policies and programs to pay for the current increases in tuition and fee charges, then there is no lack of impetus for the higher education industry to continue increasing prices (and that industry includes state governments). State governments take this SO seriously (please note the sarcasm) that they keep on raping higher education budgets and forcing, to an extent, public colleges and universities to raise tuition and fee charges on students and families. The schools themselves keep building more infrastructure which is seemingly unsustainable, thus making education more expensive. And, of course, we as consumers keep demanding more of higher education, too, also pushing up the cost.  We are all to blame.

This trend is untenable. We keep building a more and more expensive higher education system when we should be producing a less-expensive system. We completely have this wrong and no one seems to get it. Listen, prices will continue to go up, and for those who do not believe it is sustainable, guess what? You’re wrong. It is completely sustainable because we’ve designed the perfect system for sustainability of increased pricing. We have this organism that just wants to keep growing. There is enough penis-envy in the higher education world that every president wants to keep catching his or her competitors. That’s the game. They want to be someone else. Talk about mission creep. All it does is create a vicious AND sustainable cycle.

Wake up, everyone. This is serious. We are forcing people, through laudable outcries that if you don’t go to college you are worthless to our society, and then tacking on their back huge amounts of debt that will only increase. Student loans, like mortgages in England (and soon the US), could be passed on to future family members because they become too large to repay. That or we grossly modify the income-contingent loan program (and it is interesting that the president did tinker with ICLs last week).

And this dialogue has not even dealt with cost of attendance: only tuition and fee charges. What will the COA be at a public four-year college in 18-years from now? Try $34,000, in TODAY’S dollars. Yes, that’s like pulling out $34,000 of your hard-earned money for one year of college. Public college.

Get it together, people.

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