Higher education in America, historically the envy of the world, is rapidly growing out of reach. For the past quarter-century, the cost of higher education has grown 440%, according to the National Center for Public Policy and Education, nearly four times the rate of inflation and double the rate of health care cost increases. The cost increases have occurred at both public and private colleges.
Like many situations too good to be true--like the dot-com boom, the Enron bubble, the housing boom or the health care cost explosion--the ever-increasing cost of university education is not sustainable.
Just 10 years ago the cost of a four-year public college education amounted to 18% of the annual income of middle-income families. Ten years later, it amounted to 25% of that family's average annual income.
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We're seeing articles with headlines like: "The End of Higher Education Enrollment as we Know It"; "Is College Worth the Investment?"; "Will Higher Education be the Next Bubble to Burst?"; and "Drowning in Debt: The Emerging Student Loan Crisis."
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All this happened while total federal student aid more than doubled, in constant dollars, from $60 billion ten years ago to $120 billion today. Sadly, more federal student aid simply fuels the rising costs. The cost of education tracks with the growth in federal aid; the transaction cost for students is not lowered. The federal money effectively flows directly to the operating expenses of the Universities-which seem to rise in direct proportion to the flow of federal funds.
Because all universities offer some kind of financial assistance, the nominal tuitions are not the amounts universities actually take in. Discounting, often in the range of 25% to 35% of tuition, is offered as financial aid. But even after the discounting the average realized tuition revenue at universities continues to grow.
Perry proposes $10,000 bachelor degrees - Erin Cargile
During his state of the state address Tuesday, Gov. Rick Perry said it is time for colleges and universities to lay out a low-cost path to a degree.
"It's time for a bold, Texas-style solution to their challenge that I'm sure the brightest minds in their universities can devise," said Perry. "Today I'm challenging our institutions of higher education to develop bachelors degrees that cost not more than $10,000 including textbooks."
It is a goal Perry said could be reached with online courses and "innovative teaching techniques." Patrick said offering a packaged price for what a college education will cost is a good idea. Democrats blasted the governor said it would dumb down Texans.
HIGHER EDUCATION BUBBLE - Steve Schroeder via instapundit.com
While visiting with old college friends on New Years’ Eve we did a back of the envelope calculation on the cost and value of our BA degrees in Accounting from 1981. We attended a small well regarded Midwestern liberal arts college from 1977 to 1981. Tuition, room and board was between $3,000 and $4000 per year so around $16000 for our BA. As entry level accountants in public CPA firms we earned a salary of around $17,000 per year. So we earned in salary an amount equal to the cost of a BA degree in our first year of employment. Now that same college, which my youngest daughter is looking at attending costs $42,000 per year. If she earned her BA in Accounting it would cost her $168,000. Her possible first year salary as a CPA? Not even close to $168,000. Maybe around $45,000. What a change in 30 years in the value of that BA in Accounting.HIGHER ED BUBBLE UPDATE - Glenn Reynolds
Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education. “Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent. Arizona State University, for example, increased the number of administrators per 100 students by 94 percent during this period while actually reducing the number of employees engaged in instruction, research and service by 2 percent. Nearly half of all full-time employees at Arizona State University are administrators.”UPDATE: Related: Is The College Business Model Broken?
