Tuesday, August 23, 2011

Colleges are Charging Huge Tuition Fees—Because They Can

As you know, I am pretty rough on the mainstream media for the lies and obfuscations it perpetrates daily in support of the status quo. But once in awhile I am pleasantly surprised to see a glimmer of truth shine though the grey clouds of celebrity worship and slavish obedience to corporate America and it’s craven political hand puppets. Such an article appeared this weekend in a Gannett newspaper from Indiana called the Boiler Station, which examined the reason why college tuition costs have exploded these past 20 years. The article’s conclusion? Universities charge ever higher tuition because the can. Here’s an excerpt:
The reason tuition has been on such a steady upward march can be found in the most basic lesson of an entry-level econ class: supply and demand.

Tuition goes up because it can -- because there currently are no market forces or legislative controls to curtail it.

"That is exactly how people in the major research universities behave," said Vance Fried, an Oklahoma State professor and author of "Better/Cheaper College: An Entrepreneurs Guide to Rescuing Undergraduate Education."

"Because there is a demand, you can raise tuition ... and people still come."
The article goes on to explain just how out of balance tuition cost increases are with the rest of the economy:
Since 1990, tuition has gone up an average of 6 percent each year -- from a low of 3.6 percent in 2000 to a high of 16.4 percent in 2003, a year when many campuses began to charge additional student fees as well.

From 1989 to 2011, Purdue University's main campus in West Lafayette has raised tuition 395 percent; Indiana University in Bloomington, 370 percent; and Ball State, 356 percent.

In that same time, the Consumer Price Index has increased 81.9 percent, according to a Bureau of Labor Statistics calculator. If Purdue's tuition increase had matched that Consumer Price Index increase dollar for dollar, the 1989 tuition of $1,916 would be $3,487 -- as opposed to the $9,478 Purdue students will pay during the 2011-12 school year.

That's even more staggering when you consider Indiana's median family income rose just 33 percent during that time.
As that last sentence states, those statistics really are staggering. It’s bad enough that tuition has been increasing at nearly four times the rate of inflation, but even worse is that it has been increasing at a mindboggling TEN TIMES the rate at which incomes are increasing. Granted the article only covers Indiana, but I would bet these numbers are fairly reflective of the country as a whole.

The article goes on to cite several reasons for the increases, from reduced state funding to huge salary increases for university professors and administrators. There are also plenty of anecdotes about families and students struggling to pay these huge costs.

Of course, this being a mainstream media article, there was still one big elephant in the room that they managed to ignore—the role that the student loan industry plays in helping to jack up tuition costs. Though nominally issued by private institutions, student loans are in fact guaranteed by the federal government, and as such are generally not dischargeable in bankruptcy. Because the lending institutions are thus fully insured against taking any losses, they have no hesitation about freely giving out whatever insane amount of money the student needs to cover their tuition nut.

This means that the real culprit in the out-of-control tuition increases is the federal government. Without student loan guarantees, there would be a natural, market-driven force holding tuition down—namely the actual ability of the students to pay back the loans. The sad fact is that the student loan program, however well intentioned upon its original creation, has become yet another corporate welfare program that sticks the bill on the taxpayer.

All of this would not be a complete disaster if the students taking out these ever-higher loans were still able to secure high-paying jobs upon graduation. More and more, however, recent college graduates, especially those in the fields of liberal arts and the humanities, are finding that they are graduating with a huge debt load into an economy with few good jobs available to them. I wrote about one such unfortunate young woman in my June 21st post, “$100,000 in Student Loan Debt—Can’t Find a Job.”

Though none of our political “leaders” will ever admit it, a sea change has taken place within the American economy since the market crash in 2008. The days when young people could spend four years self-actualizing while studying something "fun," and then still find a cubicle-dweller position somewhere that pays the bills after graduation are over.

Sadly, because there is still so much money to me made by everyone involved in this scam—from the professors, to the administrators, to the financial institutions—the truth is not being told to these kids. Instead, they will continue to be turned into debt slaves before they even are allowed a chance to get started in life by a thoroughly corrupt system that will not change its ways until that long overdue day when it finally and deservedly collapses.


  1. This year student loan debt outstanding surpassed credit card outstanding for the first time in out history. However, being federally backed, student loan debt cannot be eliminated through bankruptcy. Those debts can only be paid (one way or another) or forgiven. We are creating generations of indentured servants, and we are doing it not just willingly, but eagerly, having be sold the notion that the only "sure" ticket to a ride on the American Dream is a college education. More and more, the people who buy that ticket are being taken for a ride... just not the one they were hoping for.

  2. @bmerson - Leslie, the young gal I wrote about with the $100K in student loan debt said something very similar about the American Dream being cruelly denied her after she had done "what she was supposed to do." It's heartbreaking.

  3. @Bill - It is indeed. I suppose that if we could be objective, we would have to admit that the very idea of an American "dream" implies a situation in which we are sleeping, and from which we must inevitably awake.

    The fossil-fuel induced growth that we have enjoyed for the last 150 years was sufficiently long compared to human lifetimes that we lost the context. We missed what was obvious to those who were alive when first coal, then oil and gas, began to power amazing mechanical devices, allowing us to produce correspondingly amazing progress. It was new then and everybody knew it was amazing. But over time we lost sight of that fact. As generations passed, we let ourselves believe that because that was the only situation that we had ever known, it must be "normal". Then normal became expected, and then entitled, and, finally, perversely, somehow the result of our own ingenuity. The dream would go on because we are the dreamers and we say it must go on.

    They say that speed kills, but in this case, it's going to be more like time kills.

    In any event, we need to stop trying to live in a dream, American or otherwise, and start trying to live in reality. We have plenty of things, real, valuable things like quality of life, that would be far better targets than the American Dream ever was.

  4. Stiglitz mentions these student debts, and their long-term consequences:


  5. Most people would rather focus on reaching for the stars than getting out of the gutter.

    Degrees, certifications and other forms of formal education are only as useful as the person pursuing the education is.

    I do not wish to cast aspersions on the friend you mentioned previously by such a statement, but I do wonder how many young adults have a clear idea of how they will pursue their careers after they finish their formal education before starting on the path of higher education.

    The general consensus among the young adults I have known over the last 15 years has been, mainly, either "I'll declare my major during my second year when I know what I want to do" or "As long as I get some kind of degree I'll get a good job".

    Unless these young adults have a strong nepotistic network nothing could be further from the truth.

    For myself, I'd love to go back to school and get a BE or ME. I, however, have work experience in the civil engineering field and have extensive contacts to be able to maximize my return on such a degree even without resorting to student loans.

    Rational ignorance is the order of the day, whether it is about politics or higher education, and unless a person can rise above such ignorance they will be relegated to the hard road ahead.

  6. @MrNiceGuy - wise words. Too bad very few kids would even understand them even if they somehow heard them.