College Costs

Demand Value in Higher Education

[Editor's Note: A version of this post ran yesterday in the Albany Times Union]

The College Board reports tuition is up nine percent this year in inflation-adjusted terms, despite declining prices throughout the economy and stagnant median family income. Parents want to know why the sharp increase and why college costs so much in the first place.

The answer, in a word, is demand. Until we channel higher education demand in a more rational direction, tuition will continue to outpace inflation, grant aid, and family income.

Higher Ed Watch readers know that demand isn't the only factor driving tuition. College supply is relatively limited. Higher education is slow to embrace productivity gains seen elsewhere in the economy. Most important, states cut higher education funding to balance budgets, and colleges backfill those cuts by hiking tuition. Banks act as enablers, supplying big student loans to anyone willing to borrow.

But at its base, tuition rises because suppliers, including those who finance them, take advantage of high, under-informed, and often irrational consumer demand. As families shop colleges this fall, they would be well served to focus on value. The Department of Education can help by protecting consumers from the worst deals. We need a lemon law for colleges that cost too much and deliver too little.

Reality Check: The Privatization of Public Higher Education

By Travis Reindl

For the better part of the last decade, the higher education community has debated the question of whether public colleges and universities are on the path to privatization. Will state support for public institutions sag to the point where they are not really public? Should these institutions be given greater autonomy to do things like build buildings and raise tuition? This conversation usually follows the ebb and flow of the state budget cycle, intensifying understandably during downturns.

The current state fiscal meltdown, which has prompted steep funding cuts and tuition hikes for higher education, has breathed new life into the issue of privatization. College presidents, researchers, and even campus newspapers are pondering whether the current fiscal slump is severe enough to force a revisiting of the state-campus relationship. The old joke among college presidents about their institutions moving from state supported to state molested is enjoying a comeback on the conference circuit.

Having watched this conversation for the better part of a decade, I've come to realize that a reality check is in order. To evaluate these claims, I believe that there are several important questions that need to be answered:

  • Are we really that close to losing the "public" in public higher education?
  • Is there some threshold below which a public university can or should be relieved of its public mission?
  • Does it matter if major public universities become quasi-public enterprises? Will they operate any differently than they do now?

A Penny Saved for College is a Penny Not Borrowed for College

While I usually leave it over to our friends at Higher Ed Watch to discuss the latest hullabaloo in the world of student loans, something in today's Wall Street Journal stopped me on a dime. From WSJ:

New numbers from the U.S. Education Department show that federal student-loan disbursements-the total amount borrowed by students and received by schools-in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion.

Gulp. For many families, financing higher education without piling on too much debt was already a steep proposition. Like everything else post-financial crisis, it's gotten even more difficult. Job losses, home equity losses, market swings, stagnation in federal aid, state budget strains, and tuition increases have resulted in increasing uncertainty and hopelessness over household budgets, and a dramatic spike in the amount of money students are borrowing for college. Much can be blamed on the economic mire in which we find ourselves. But the point remains: many students and families are taking on unsustainable levels of debt, and it's affecting important life decisions. And in turn, it's affecting our ability to jumpstart the economy.

Before a long Labor Day weekend of despair sets in, however, this author offers hope to drink in: There are ways for Congress, the Obama Administration, States, and the financial industry to collaborate and give families a way to escape crushing levels of debt. The tonic? Targeted and meaningful savings incentives.

Guest Post: Five Questions for Colleges

By Travis Reindl

Every year, colleges and universities send reams of data to the federal government, on subjects ranging from campus crime to research by foreign nationals. Yet, there's still a lot we don't know about our system of higher education. Congress and the executive branch bear some responsibility for this state of affairs, continually adding to an already massive and uncoordinated regulatory structure. But some higher education leaders are also on the hook here, having fought efforts over the years to bring more transparency to colleges' admissions and financial aid practices, as well as their performance in educating and graduating students.

This is no longer acceptable. Higher education is a major enterprise in the U.S., representing three percent of the total Gross Domestic Product (GDP) and employing more than 3.5 million Americans. Taxpayers also play a big part in this enterprise, contributing $21 billion toward federal student grants and billions more for research grants and contracts. Given that, it is troubling that we can't get better answers about who's getting into college, what happens to these students, and how much it costs to educate them.

As Congress and the Obama administration prepare to invest billions more in our colleges and universities, they should require colleges to provide better answers to the following five questions:

A Senator's Legacy

At Higher Ed Watch, we were saddened to learn of the recent death of former Sen. Claiborne Pell, the Rhode Island Democrat whose work on Capitol Hill helped open the doors of college to tens of millions of low-income students. The Pell Grant program remains the cornerstone of the federal government's efforts to help the most financially-needy students obtain a higher education.

As Maura Casey, an editorial writer for The New York Times wrote in a moving tribute to the Senator on Tuesday, "Pell Grants have been around so long that few remember how much opposition they had to overcome or how revolutionary they once seemed."

In fact, Senator Pell -- "a wealthy New England aristocrat," as Casey described him -- had to fight an epic battle in 1972 against his Democratic colleagues in the House of Representatives and the higher education establishment to create the grant program that he first dreamed up, legend has it, on a ski slope in Switzerland. [Whether or not he had ever skied at all is a matter of much debate.]

Pell's vision was to create a new grant program to aid low-income students modeled on the GI Bill, which had helped pay for his graduate education. Under the Senator's plan, federal grants would go directly to students who could use them at the college of their choice. The idea, however, was met with fierce opposition from the leading national higher education associations who wanted the money to go straight to their member institutions. They argued that college officials were in the best position to determine which students were in most need of financial aid funds. The college groups had powerful allies on the House education committee, who fought on their behalf.

Guest Post: A Textbook Proposal for Obama

[Editor's Note: Throughout his presidential campaign, President-elect Barack Obama often talked about the need to make college more affordable for low- and middle-income students. In today's post, longtime student advocate Luke Swarthout offers a proposal for overhauling the college textbook industry that he believes will result in significant savings for students. Luke's views are his own and do not necessarily reflect those of the New America Foundation.]

By Luke Swarthout

As the incoming Obama administration prepares its policy agenda and searches for ways to help middle class Americans within the constraints of the current budget deficit, it should consider championing efforts to bring down the costs of college textbooks. This goal could be accomplished in a relatively inexpensive manner: not by more generously subsidizing the current system but by sparking reform in the way textbooks are created and sold.

The high cost of textbooks is a significant but often overlooked part of the college cost equation for millions of students from low- and middle-income families. The average student pays nearly $1,000 for books each year -- a significant sum. For students at low-cost public colleges, books can cost as much as 40 percent of tuition and fees. And to add insult to injury, students and their families are often frustrated to learn that they cannot resell their textbooks at the end of the semester because new, but substantively unchanged editions are at the printers.

Local politicians from both blue states and red states (and those in between) recognize the saliency of the issue. Legislators in states as politically diverse as California, Georgia, and Ohio have introduced bills designed to make college textbooks more affordable at their public colleges and universities.

Higher Ed Roundup: Week of December 1 - December 5

Paulson Acts to Prop Up Private Student Loan Providers

Reports Paint Dire Picture of College Affordability

Adjunct Faculty Use High and Widespread


Don't Pass the Buck

With Thanksgiving behind us, it is officially the start of the gift-giving season. Unfortunately, students at public colleges and universities across the country can already expect an unwanted present from their governors -- tuition and fee increases. At least coal could have been used for heat.

Students are going to face increased tuition burdens, both for next semester and the following academic year, because governors and state legislators often turn to higher education when they need to make budget cuts. But increasing tuition could lead more students to drop out or delay enrollment -- lowering graduation rates and stranding students with debt. To prevent these negative outcomes, we urge states to make a sustained commitment to higher education, while asking schools to reexamine their financial aid and revenue allocation policies.

The coming months are going to be gloomy for higher education funding. Several states have already announced plans for postsecondary education cuts, and many more are sure to follow suit. The governors of New York and California -- the two states with the largest public higher education systems in the country -- recently proposed a new round of budget cuts on top of ones that these colleges endured earlier this year.

Higher Ed Roundup: Week of October 27 - October 31

Tuition and Student Debt Up, College Board Says

Dept. of Ed Issues Final Rules on Public Service Loan Forgiveness


Higher Ed Roundup: Week of September 29 - October 3

Direct Loan Volume Soars in Response to Credit Crunch

Spellings Presents Plan to Shrink the FAFSA

Ed Dept. Underestimates Improper Payments to Lenders, IG Reports

New IRS Form Questions Colleges on Spending, Endowments