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At The Atlantic, Jordan Weissmann writes on rising tuition costs:
Experts have attributed the rise in state school tuition to a whole host of factors, but the basic story of the past decade looks like this: State legislators are slashing funding, which requires college to either cut costs or raise tuition. At the same time, market pressures have led schools to spend more on student services, which include everything from fancy, L.A. Fitness-quality gyms to career services departments. Because of ample student loan funding, colleges often choose to up their tuition rather make hard budgeting decisions, or look for ways to increase their efficiency.
The White House wants to untangle that knot. And the place the administration has to start is state funding. During the past five years, states have slashed 3.8% of their support for colleges. That figure masks some significant gaps between states. Twenty one states spend more on higher-ed today than they did in 2007. But New Hampshire and Arizona have slashed their funding by more than 30 percent. Several large states, including Florida, California, and Michigan, also drastically decreased higher-ed spending.
Schools have “slashed funding” by a whopping 3.8%, says Weissmann. Schools were “led” into paying for amenities that aren’t essential to the overall education experience. Weissmann’s argument – which is borrowed from many others who support Big Government policies – ignores the fact that tuition prices have outpaced general inflation during both boom and bust cycles. Even when states have been flush with cash, tuition has grown several percentage points faster than general prices.
The College Board collects data on tuition inflation. While the data presented in this table ends at 2007, the trend displayed by their statistics seems to have continued through to today. The CB found that college tuition generally inflates by a 2:1 ratio over general inflation. This has generally held since the late 1950s (when the GI Bill was being widely used and at a time when the government was gearing up their foray into education subsidization.) Accepting the College Board’s (probably low) inflation figures, college tuition prices have risen by about 5% annually. Over five years, this amounts to an increase of about 34% which is far greater than the loss in state funding. The Bloomberg link provided above shows that tuition jumped 8.3% just last year – over double the general inflation rate. The gap is greater than the entire 5-year decline in state budget financing.
As is always the case in the many attempts to disentangle this policy issue, Weismann just accepts that schools are paying for amenities like stadiums, new facilities, student centers, superfluous staff and faculty, and extra programs (that end up not being very efficient uses of resources). But he doesn’t think about what spurred such investments. Could it be the actual provision of funds that are not tied to the market mechanism that is driving prices upward? Federal subsidies, guaranteed loans, and tax deductible tuition costs all distort the market and funnel money towards colleges and universities. This is a windfall for the institutions. They are like lotto-winners who never had a good use for 12 bathrooms and a yacht (they live inland), but buy such things because, well, might as well spend the money, right? And the schools aren’t checked by a market-oriented demand curve. The demand is pumped up by the grants and loans that the government will provide or secure no matter what. The government and the schools are essentially communicating back and forth, colluding on procuring the most amount of future income from students that they can.
Of course, it’s never stated exactly like that. The feds and the schools – in a bit of self-aggrandizement serving as ego-protection – think that they are doing something in the best interest of the students and the overall economy. And when it fails, blame is shifted somewhere else – usually onto the backs of taxpayers.