Why are college costs rising? Is it due to the government?

Discussion in 'General Distance Learning Discussions' started by ryoder, Feb 4, 2012.

  1. ryoder

    ryoder New Member

    Obama Fosters the Skyrocketing Tuition He Criticized

    This article states that some colleges have increased spending on administrative positions, not faculty, by 600% in recent years.

    The University of California at San Diego, for example, is creating a new full-time "vice chancellor for equity, diversity, and inclusion." This position would augment UC San Diego's already massive diversity apparatus, which includes the Chancellor's Diversity Office, the associate vice chancellor for faculty equity, the assistant vice chancellor for diversity, the faculty equity advisors, the graduate diversity coordinators, the staff diversity liaison, the undergraduate student diversity liaison, the graduate student diversity liaison, the chief diversity officer, the director of development for diversity initiatives, the Office of Academic Diversity and Equal Opportunity, the Committee on Gender Identity and Sexual Orientation Issues, the Committee on the Status of Women, the Campus Council on Climate, Culture and Inclusion, the Diversity Council, and the directors of the Cross-Cultural Center, the Lesbian Gay Bisexual Transgender Resource Center, and the Women's Center.
  2. perrymk

    perrymk Member

    Back in the mid-80s when I was in Miami the father to son joke was "son, you can go to a state school and I will buy you a car and get you your own apartment and give you an generous allowance. Or you can attend the University of Miami and live at home."

    I suspect a major issue in rising college costs has to do with less government (taxpayer) funding. Public educational institutions, like every taxpayer funded entity, are simply getting fewer tax dollars. If they are going to keep offering services, the money to pay for these services will have to come from somewhere. One source will be the students themselves

    Soon public colleges will be comparable in cost to private colleges.
  3. ryoder

    ryoder New Member

    That is one way to look at it, but inflation in any good or service is typically due to too many dollars chasing too few goods.
    Every government subsidy that is put into place puts more money in the hands of education seekers. Students with an extra $2k in their pockets, due to the American Opportunity Tax Credit, will purchase more education from sellers. These sellers of education increase their prices to the point of the market clearing price.
    It is economics 101. Government subsidies increase the price of goods and services.
    Think of it like this. Companies charge the highest amount they can for a product or service to maximize the return on their investment. It is normal. So when the government gives people interest free guaranteed loans, grants, and tax credits, the aggregate demand for education increases. Without a massive increase in aggregate supply, this moves the market clearing price of college education upward.

    The same thing happens with subsidies for ethanol. It causes the price of corn to increase.

    My favorite government saying. If it moves tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.
    In either case, the natural market forces are altered and bubbles occur.
  4. perrymk

    perrymk Member

    It is the simple and logical way to look at it. Simple and logical is often the primary and true. But other factors could still come into play.

    You just acknowledged my assertion that one of the causes of increased education cost is less government funding. Now you're talking about increased government funding and increased consumer cost. It's almost contradictory. If government subsidies of education are going down, and I believe they are, shouldn’t the costs of education be decreasing then? Otherwise we are to assume that whether government funds or doesn't fund, the cost will rise and the whole discussion becomes irrelevant.

    I believe you may be trying to make a political point, and this may not be the best section for it. There is an off-topic section and I believe a politics section. Perhaps we should move the discussion there.
  5. ryoder

    ryoder New Member

    Direct transfer payments like the American Opportunity Tax credit ($2000 yearly) put more money into the hands of consumers of educational services, thus driving up the price of college. I spent $27K on college costs last year so I have a vested interest in keeping the cost low.
  6. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Except that Title IV dwarfs all this, and that's what really allows tuition rates to be so high.

    Perhaps, especially since it's pretty tough to avoid political points when answering a thread that has "government" in the title! :)
  7. foobar

    foobar Member

    It's the government alright. State governments have reduced their funding of state universities to the point where you could at best call them "state assisted" universities.

    My own institution has gone from over 50% of their budget coming from state funds twenty years ago to approximately 15%. The rise in tuition over time tracks almost perfectly with the decreases in state funding. Our situation is hardly unique nationwide.

    States have reduced funding of higher education precisely because universities can make it up in tuition. K-12 schools, public assistance, and the like don't have a readily available revenue source.

    I've been highly annoyed at state legislatures cutting higher education funding and then railing at the universities for the resultant tuition increases exceeding the cost of inflation. The average parent and student can't seem to make the connection between state cuts and higher tuition, especially with legislators pointing fingers at the universities. The universities are in no position to be aggressive in defending themselves - that would be political suicide.
  8. SurfDoctor

    SurfDoctor Moderator Staff Member

    IMO, it is all part of a multiple bubble of education, government debt, budget deficit, money printing and a few other factors that will erupt into a full scale depression in the next few years.
  9. ryoder

    ryoder New Member

    Alot of people say tuition is going up because of a lack of government investment. That would not explain why private school tuition is increasing, however. NCU's tuition has gone up every year for the past few years and is moving faster than general inflation. They receive no government subsidies, but their customers do. This is what I am talking about. NCU's customers get tax credits, grants, and subsidized loans. NCU prices its products with this in mind.

    1. Schools increase tuition prices
    2. Government increases grants, credits, deductions and loan limits to match
    3. Goto 1
  10. Ted Heiks

    Ted Heiks Moderator and Distinguished Senior Member Staff Member

    You've got that right!
  11. AV8R

    AV8R Active Member

    The short answer is "yes," college costs are wildly out of control thanks to government intervention. The timely article "Governed by Ignoramuses," discusses the problem...

    Governed by Ignoramuses Smarter than Journalists - Page 1 - John Ransom - Townhall Finance

    In college education, the federal government is the only player left. Last year, for the first time ever, student loan obligations exceeded credit card obligations. This year, according to both Heritage and USA Today student borrowing is expected to top $1 trillion.

    “Tuition and fees continue to shoot through the roof, now exceeding $17,000 per year, rising on average 8.3 percent at public universities this year,” writes Heritage. “[C]ollege costs have increased 439 percent since 1985, despite a 475 percent increase in federal subsidies such as Pell Grants. In other words, more federal funding hasn’t decreased the cost of attending college.”

    In fact, the college inflation rate probably has much to do with the amount of federal aid available to colleges. Colleges, like every other business, raise prices when more money for their products is available.

    The cost of a college education is rising so fast that students can’t pay off loans, even with subsidized interest rates from the government. “A recent study by the Institute for Higher Education Policy found that for every borrower who defaults,” writes the New York Times, “at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.”

    The government’s solution to the problem of too much money in education is throwing more taxpayer dollars at colleges and universities.
  12. Ian Anderson

    Ian Anderson Active Member

    We all know that college costs keep on rising and there are probably dozens of reasons.
    I think anyone with time to spare could peruse university budgets from state and for-profit universities (I'm not sure if budgets for private universities are public) and figure out what the cost drivers are.
  13. Kizmet

    Kizmet Moderator Staff Member

  14. foobar

    foobar Member

    "The increase in the tuition burden is largely caused by declining state support for higher education in the past three decades. In both good times and bad, state governments have pushed more of the costs onto students, forcing many to take out big loans or be priced out of once affordable public colleges at a time when a college education is critical in the new economy. "
  15. Maniac Craniac

    Maniac Craniac Moderator Staff Member

    Since we are bringing basic economics into this, and I have a whopping resume of two CLEPs experience in studying it, I'll give it a go.

    The social directive placed upon this nation's youth to go to college as a universal rite of passage has created demand for a product that does not serve most of them very well, effectively obscuring differentiation among suitable substitutes. The increased demand could easily drive the price up, and with the social directive resounding more loudly than ever before, the demand curve has become greatly price inelastic, causing most students to become price-takers. Or something :dunno:
  16. OutsideTheBox

    OutsideTheBox New Member

    i think to many people are seeking degrees that shouldn't or don't need them, schools then compete wasting money on frills especially state schools that should be the cheapest options and the easy money from loans to help students go regardless of their ability. that is not hard to figure out you give johnny a big loan and don't review his grades and plans then he can go into debt studying navajo basket weaving or whatever and must pay it back with that much money schools can gouge for what they can get until it hurts.

    what is so sad is a college degree is often a waste for a young person they would be better off learning a trade or going to an option other than a four year or higher degree when one considers the costs and job prospects.

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