Rundles wrap up: The ever-higher cost of higher education

Reasons from the increasing cost of college

Recently I read an obscure newspaper article about how the U.S. Selective Service System this summer sent military draft registration orders to 14,000 Pennsylvania men born between 1893 and 1897. Obviously, the military isn’t looking for guys in the 117-to-121-year-old range; the computers just mixed up the “18” and “19” as computers are wont to do. But it struck me that 100 years from now, computers from the Federal Student Loan program might be sending default notices to people born between 1993 and 1997, and they wouldn’t be computer errors: The recipients in the 22nd century, at ages 117 to 121, will most likely still have balances on their college debt.

Such is the state of higher education today.

There is something like $1.2 trillion – yes, with a “T” – in outstanding student loan debt in this country, and the number is rising precipitously. At the same time the cost of college has risen astronomically over the last 30 years, outpacing the overall inflation rate and even another astronomically inflated sector, medical costs.

Also in that time, the number of people attending college has risen quickly – up nearly 140 percent in 40 years. When I went away to school – 1970 – 1976 – it was said that something like 22 percent of high school students would go to and graduate from college; that figure now approaches 50 percent. This increase in demand, according to basic economic thinking, is one factor determining the increase in price.

Another reason for the increase in college costs – especially in Colorado – is the drastic cut in state support for higher education over the years. Forty years ago, the state of Colorado paid approximately 35 percent of the budget at the University of Colorado, for instance; that figure is now about 5 percent, and Colorado now famously ranks 49th out of 50 states for in-state support of higher ed. Tuition paid by students (and families) must directly make up the difference.

I have heard people argue that other factors driving up college costs include: the emphasis on athletics; the cost of educators in an ever-escalating arms race for talent among universities and between academia and the private sector; and the increase in administrators.      

But I can’t help thinking that the single largest factor in the rising cost of college is the drastic increase in the availability of student loans. Trust me – financial aid offices are much more highly staffed and adept than the placement and career development offices. In other words, the most important thing to colleges – businesses in their own right – is income, not outcomes (nor perhaps even education). This also explains the explosion in for-profit universities – the fastest-growing post-secondary schools in the nation.  

Student loan availability has made college more accessible to more people, particularly minorities and those from the lower economic strata who historically didn’t attend college. But the very thing that opened up the ivied doors threatens to slam them shut: College is too expensive and the debt too high. It’s an unsustainable system.

It reminds me of something. Hmm … let’s see. Easy credit and a narrative of a better life? The mortgage market pre-2008? Gotta love the way that turned out.

Categories: Finance, GenXYZ