Why Is College in America So Expensive?

Applying to College
1

“The outrageous price of a U.S. degree is unique in the world. … 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.’” …

https://www.theatlantic.com/education/archive/2018/09/why-is-college-so-expensive-in-america/569884/

2

The writer of this article does not fully understand why college is so expensive in America.

The proffered conclusion is: “Ultimately college is expensive in the US for the same reason MRIs are expensive: There is no central mechanism to control price increases.”
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While true, this conclusion fails to identify the root cause of the soaring cost of a college, university or law school education in the US–the availability of money in the form of student loans.

Lenders flood the student loan market with money because they know that the loans will be ultimately repaid.

How do student loan lenders know this ? Because of a change in the US bankruptcy laws over a decade ago which made student loan debt non-dischargeable in a bankruptcy filing–except in rare & unusual circumstances–which created an almost risk free market for student loan lenders.

The soaring tuition charged by law schools illustrates this point even better than the cost of an undergraduate degree from a college or university. Law schools tend to be cash cows for universities since the costs are low as law schools typically are housed in a single building, require no special equipment such as do medical schools, and law schools are not restricted in the number of students that they can enroll (medical schools are limited by available supply of cadavers & residencies).

Overall this is a poorly done article, although entertaining, due to the author’s lack of understanding of the subject matter.

3

Same problem as in housing and health care: government interference with markets.

We’ve been over this from the theoretical point of view for decades from Hayek to Friedman, from Mises to Rothbard, from Say to Hulsmann. It will never change, as not more than 10% of Americans have heard of any of the relevant concepts and not even 5% have the brains to understand them anyway. The author is not in that group.

Full steam ahead!

4

@SatchelSF: I agree that government interference with the market is the cause of the high cost of higher education in the US.

5

The article makes some interesting points, but the conclusion that the ultimate explaination is that the US lacks price controls is extremely disappointing.

6

This sentence makes me lol: “a student at a public university in Mississippi will likely end up with similar out-of-pocket costs as a student in Sweden.” I guess it summarizes this article pretty well, how do we value education? Monetary value itself is obviously not a very good benchmark.

7

This is a poorly researched article. The article notes how difficult it is to compare educational outcomes, and rightly so. However, the college experience is also vastly different, across many dimensions, in the US than Europe (to use EU as an example).

I offer these examples, and am not making judgements either way, there are pros and cons for all systems. Generally, In the US, colleges are run like businesses, rather than as a government provided service. Even state schools are being managed more like businesses, as financials really matter—that’s why many state schools are increasing the proportion of full-pay OOS students. Our local high school (high achieving, trends affluent) GCs joke that ‘UCB didn’t give our students the time of day until the financial crisis, and now they can’t get enough of our full pay kids’. A typical bachelors degree only takes 3 years to earn in the EU, which also reduces the cost burden.

Additionally, and again, this is in general (there are no absolutes), schools in the EU offer a very different student (customer) experience. Most EU students live at home with their family, or in an apartment, while they go to school. Most EU colleges don’t provide student housing, student services (such as health care, mental health counseling) or offer student clubs/activities.

Lastly, one huge difference is that there are very limited intercollegiate sports (generally none) in EU colleges. Most US colleges, bear significant expense on a wide array of sports (intercollegiate, club and intramural), and the various related facilities.

These are just a few of the things that highlight the fairly substantial differences in educational systems. Plusses and minuses, pros and cons, across the board. Lots of options for all, including going overseas for a college degree.

8

To be fair, government interference in the higher education market can work both ways.

While current bankruptcy laws inflate the money supply for student loans which causes a rise in tuition, government regulation can be helpful in setting reasonable rates at state supported schools.

The University of Florida is an example of positive government interference in the higher education marketplace by setting annual tuition at about $6,400 per academic year for state residents as compared to the tuition at the private University of Miami which charges about $48,500 tuition per academic year.

9

Like in the comparison rich countries where the universities are lower cost and public?

10

There is a place for government involvement in education. That is what the pulbic institutions are for. They represent our collective responsibility to educate the next generation. The answer to the rising cost of college is not for government to set price limits, but for the tax payers to vote to better fund public institutions. From what I can see, NY is doing a decent job of it. Tuition is very low and for most is completely covered by grants. Room and board is still an issue, but for those who are able and willing to commute, you really can’t get a better deal than the CUNY and SUNY schools. For what its worth, I am a NY taxpayer and I fully support these institutions even though my own children may end up not utilizing them.

11

A top quality education can be had at world renown universities out side of the US for a fraction of the cost. Two of my three kids will be going abroad for university. GC for #3 is suggesting for safeties schools a couple of 70-80% admit rate, 60% grad rate in 6 years at $55-$60k per year schools. D3 grades will get her into several top 50 World school’s for about $30-$35k per year done in 4 guaranteed… admission for most universities outside of the US are grades alone, GC is just missing a whole world out there.

12

The US colleges had all this in 1960 when UCB charged $75/semester. They had it at my private college in 1981 when tuition was $5700/year. Sports did not increase by a factor of 10 in cost or quantity or some complex combination of the two. Federal money you did not have to pay back was easier to get. That’s not it, either.

I met a guy who as a public/private venture built new dorms for colleges and leased them to students as if they were run by the state U, was allowed to set the price and direct bill. His net worth at the time was $180 million. When everything, including college, is run like a business, there is always an eye on separating the middle class from their reserve of money and finding ways to do that more efficiently. We would need more philosophers and fewer economists to solve this.

13

But if you go outside the US for college there are things you will likely not get: small classes, individual attention, academic advising, manicured lawns, buildings in good repair etc. Those things cost money. And given the preferences of many if not most CC’ers would be unacceptable to forego.

14

@tomsrofboston makes good points. Add to that, a 3-year degree from international colleges is less than competitive for certain US jobs (IB, Consulting and more), as well as many graduate programs, med school and law school. This would not be an issue coming from certain tippy top international schools.

15

Good lord !! D1 had a couple of lectures in the first year with a 100 kids 2 classes in first year were run by TA"s, after that she never had a lecture above 20 kids and never had a tutorial above 7-8 kids, usually 3-4. OxBridge run 3 year degree programs as do most English universities… IB and consulting firms recruit the best kids from wherever, I know I am in IB.

16

@elguabo1 That’s why I specifically said my comments do not include tippy top internationals. For certain schools that have become popular with US students in Scotland, Germany and France, I stand by what I said, as one who has worked in consulting for 25 years.

17

I agree completely with one point made in the article: There is no clear evidence that smaller classes are better. In fact, I believe this depends completely on the indivudial student. My D2 works best in a slightly larger group. The idea of a huge lecture doesn’t frighten her nearly as much as tiny seminars of 5 students. She works best in a group of 20-30. Its just her nature.

18

Once again the elitist bent of CC shows. Yes Oxbridge is an exception as are other elite European schools. But for most American students looking for a less expensive alternative they are unattainable.

19

Yes, economy class education (large classes, less individual attention). May be high quality education, but not the experience that many US students want (or parents want for their students). Would you (as a student or parent) choose a university with a top quality curriculum for the intended course of study, but the economy class environment of a community college or commuter-based non-flagship state university (which may be luxury class compared to some universities in other countries)?

But also, many of the other countries’ universities are set up where the student is decided on a major on entry, with a heavily prescribed curriculum with limited electives, and little or no provision or expectation for changing major. So much less academic advising is needed (not needed for undecided students who are not present, and students in majors just need to follow the curriculum template).

20

Yet “smaller class sizes are better” is pretty much accepted conventional wisdom in the US, including in USNWR rankings that use it in ranking criteria, so that colleges game that part of the ranking by capping class sizes at the threshold sizes of 19, 29, 39, 49.