Monday, January 12, 2009

The Surprising Causes of Those College Tuition Hikes


Why has college tuition been rising so high and fast? Will college costs ever drop back to more affordable levels?

Those questions have been frustrating parents and students for years. A new report provides some surprising answers that will, unfortunately, probably only frustrate and anger them even more. At public colleges, tuition has generally been driven up by rising spending on administrators, student support services, and the need to make up for reductions in government subsidies, according to a report issued by the Delta Cost Project, a nonprofit based in Washington, D.C.

In some cases, such as at community colleges (which educate about half of the nation's college students), tuition has risen while spending on classroom instruction has actually fallen. At public colleges especially, the current economic troubles will likely only accelerate the trend of rising prices and classroom cutbacks, says Jane Wellman, the author of the report. After analyzing income and spending statistics that nearly 2,000 colleges reported to the federal government, Wellman concludes: "Students are paying more and, arguably, getting less in the classroom."

Among the more surprising findings:

    The main reason tuition has been rising faster than college costs is that colleges had to make up for reductions in the per-student subsidy state taxpayers sent colleges. In 2006, the last year for which Wellman had data, state taxpayers sent $7,078 per student to the big public research universities. That's $1,270 less (after accounting for inflation) than they sent in 2002.

    Public universities have been reining in overall spending per student in recent years. Flagship public universities' spending per student has risen from about $12,400 in 1995 to $13,800 in 2006 after accounting for inflation. But since 2002, spending at public colleges has generally not exceeded inflation.

    Increases in spending were driven mostly by higher administration, maintenance, and student services costs. Public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, up more than 13 percent, in real terms over 1995. And they spent another $1,200 a year on services such as counseling, which was up 23 percent. Meanwhile, they spent about $8,700 a year on classroom instruction for each student, up about 9 percent.

    Big private universities, powered by tuition and endowment increases, have increased spending dramatically while public schools have languished. Total educational spending per student at private research universities has jumped by almost 10 percent since 2002 to more than $33,000. During that same period, public university total spending was comparatively flat and totaled less than $14,000 a year.

That growing gap between rich schools and poor schools worries observers like Wellman. The cost of attending a public university, even after subtracting out aid and inflation, rose more than 15 percent in the last five years, according to the College Board. But almost all of the recent price increases at public universities are "backfilling for cuts in state funds," Wellman says.

Some college presidents say the report shows they haven't been raising prices irresponsibly.

"Virginia Tech" explained David Hodge, president of Miami University of Ohio. "Everybody expects us to do a lot more security. Students are coming with more physical disabilities and emotional needs. There are greater expectations for career services," he says. And that kind of administrative and support spending "is a really good investment. It helps the students."

In addition, public schools tend to serve many low-income students and minority students who need more remedial classes and extra counseling services than better-prepared students who attend elite private universities, says F. King Alexander, president of California State University—Long Beach.

One of the reasons that Duke University costs about $51,000 a year is that the elite schools are in a bidding war for top faculty and better services for students, says college spokesman Michael Schoenfeld. In addition, competition for the best students forces schools to offer bigger and bigger scholarships, which means few students actually pay the full sticker price, he notes. Duke's record-breaking flood of applications for the next academic year shows there's still plenty of demand for what private universities offer, he says.

But as more and more states facing budget crises consider further subsidy cuts and tuition hikes for public schools, parents and students are increasingly objecting to price increases for any reason. "Enough is enough," says James Boyle, president of the College Parents of America. A tsunami of applications at lower cost schools such as the California State University campuses shows that students and parents are voting with their feet. "The changing market for higher ed will cause colleges to hold down their expenses and state legislators to increase their subsidies," Boyle predicts. from:usnews

How Much Is That College Degree Really Worth?

As the price of a college degree continues to rise, there's growing evidence that the monetary payoff isn't quite as big as often advertised. The best estimate now is that a college degree is worth about $300,000 in today's dollars—nowhere near the $1 million figure that is often quoted.

"That $1 million number has driven me crazy!" says Sandy Baum, a Skidmore economist who studied the value of a college degree for the College Board last year.

Baum's research showed that college graduates earn, on average, about $20,000 a year more than those who finished their educations at high school. Add that up over a 40-year working life and the total differential is about $800,000, she figures. But since much of that bonus is earned many years from now, subtracting out the impact of inflation means that $800,000 in future dollars is worth only about $450,000 in today's dollars.

Then, if you subtract out the cost of a college degree—about $30,000 in tuition and books for students who get no aid and attend public in-state universities—and the money a student could have earned at a job instead of attending school, the real net value in today's dollars is somewhere in the $300,000 range, a number confirmed by other studies.

But, especially these days, that still makes a college degree one of the most lucrative investments a person can make, Baum notes.

Better yet, college graduates can go on to earn advanced degrees, which return even bigger payoffs. The average holder of a bachelor's degree earns about $51,000 a year, Baum calculates. But those who've gone on to earn MBAs, law degrees, or other professional degrees earn about $100,000 a year.

In addition, Baum found that there are plenty of other rewards for a degree. The quality of the jobs college graduates get is far better, for example. College graduates are more likely to get jobs with health insurance. And it is easier for them to find and hold jobs. The unemployment rate for college graduates was just 2.2 percent last year, half the unemployment level of those with only high school diplomas.

There are lots of other nonmonetary benefits as well. College graduates are healthier, contribute more to their communities, and raise kids who are better prepared academically, studies show.

Other researchers have found that the payoff of a degree is especially lucrative for students from low-income families, since the education and credential give them a chance to break out of low-paying careers.