By Daniel Bennett
Thousands of students on more than a hundred college campuses joined together symbolically yesterday to protest sharp tuition hikes. The students pointed the finger at hard-pressed state and local governments. That was a mistake. State and local subsidies to public colleges and universities increased by 44% in real (inflation-adjusted) dollars during the 25-year period between 1982 and 2007. Had colleges managed to hold their cost increases to the level of inflation over this period, real tuition prices would be slightly less today than they were 25 years ago.
Why weren't the colleges able to do this? First, colleges are rewarded for fiscal irresponsibility and punished for not keeping up with Joneses. Because we collect very little information from colleges about student learning and educational outcomes, we know nothing about the actual value of the education taking place. So we are left to rely on arbitrary indicators such as price and prestige to decide which institutions are of the highest quality. College administrators understand this and are known to make decisions based on how it will impact their institution's prestige. The things that boost prestige (fancy dorms, state-of-the-art fitness centers, elaborate student centers, etc.) cost lots of money and do little or nothing to increase the quality of education. The colleges that avoid such elaborate upgrades in lieu of keeping costs down are perceived to be lower -class institutions. Call this the college arms race.
Next, there has been very little, if any, gain in productivity in higher education over the past few decades. Some evidence suggests that there has actually been a drop in productivity, while the information technology age has boosted productivity in nearly every other economic sector. Part of this is explained by the bureaucratic bloat on college campuses. Between 1987 and 2007, the number of senior administrators and professional support staff at public two- and four-year colleges increased by 84 percent, while student enrollment grew by only 37 percent. In this sense, administrative productivity dropped by more than 25 percent during this 20 year period, as the student-to-administrator ratio dropped from 24:1 to 18:1. Meanwhile, faculty teaching loads have diminished by a factor of up to two over the past two decades, while salaries have increased by at least the rate of inflation, not accounting for rising health care costs, retirement contributions and other forms of non-wage compensation. Rather than using technology to cut labor costs and improve employee productivity, colleges have expanded their staffs and seemingly ask less of each employee. Call this diminishing productivity.
Lastly, the federal government's role in financing college education has had opposite of the intended effect - it has contributed to the rising cost of college. By making below-market rate loans available to every student, regardless of need or credit-worthiness, the government has created the equivalent of a sub-prime student loan market. The widespread availability of cheap loans has increased the ability of students to pay for college, and the colleges have gladly used this additional money to propel their arms race, passing the extra costs on to students with the means to pay. This is not much different from the mortgage bubble that burst in 2008 and sent the entire economy into shock. Consider this - the mortgage crisis was spurred by over-inflated home prices as a result of cheap, government-back loans, many of which were made without verification of income or employment. The government's role in financing student loans is eerily similar, and the result has been the same - tuition prices have ballooned. Call this the tuition bubble.
Students have a right to be upset over the upward spiraling costs of a college education, and I'm pleased to see that they are being active in demonstrating their frustration across the nation. With that being said, they are pointing their fingers at the wrong culprit. State and local governments have been very generous with taxpayer money over the years, subsidizing public institutions to provide affordable access to the state's citizens. Of course, appropriations have been subject to the economic cycle, with increased spending during the good times and decreased during the bad. Yet it is the colleges that have not lived up to their end of the deal, choosing to engage in a reckless academic arms race and to promote productivity losses. Intervention by the federal government has exacerbated the problem. It is time for students to recognize that the problem is not the so-called decline of state government subsidies, but rather the fiscally irresponsible behavior of the colleges and the enabling efforts of the federal government that have inflated the tuition bubble.
Daniel L. Bennett is administrative director and a research and policy analyst at the Center for College Affordability and Productivity, an independent higher education think tank in Washington DC.