This week I want to talk to you about trends in student lending and to distinguish college costs from college tuition. It behooves students and families to wisely invest in a college and/ or graduate education. The bad news is that families pay more to go to college nowadays than 20 years ago. The good news is that the well-informed readers of this blog will be able to distinguish actual educational value from the shiny distractions of prestige-building institutions. If you know what a school has to spend money on to produce student learning, you are in a great position to identify where you want to send your children and your hard-earned money.
Based on last week’s posting it is clear that college tuitions are rising. The concern among folks working in higher education is that there does not seem to be a panacea for the cost disease (more on this concept next week). Costs are rising and schools are—particularly the cash-strapped public universities—having to balance public concerns with internal strategic priorities. The recession has shown us all how susceptible we are to modifications of the prices for basic goods and services. The consumer price index (CPI) is a measure of the prices paid by individuals for basic needs and it has been climbing. But it has not climbed nearly so fast as the measure of what colleges and universities pay.
The measure of higher education costs is known as the higher education price index (HEPI). HEPI is a constellation of eight cost factors: 1) faculty salaries; administrative salaries; 3) staff salaries; 4) service employee salaries; 5) benefits; 6) miscellaneous services; 7) supplies and materials; and 8) utilities (HEPI, 2010). HEPI was created by Commonfund Institute to measure the purchasing power of postsecondary institutions. What the folks at the Commonfund Institute are finding is that schools' purchasing power is tethered to its revenue streams. Funding the rising costs of providing an education has meant that schools have had to shift funds around, cut some line items, and raise revenues elsewhere. The point here is that there are basic costs to pay for schools to keep functioning. Discretionary costs function to raise the net cost of providing an education. Thus, the base costs plus discretionary expenses equates to the actual cost of operating an educational institution.
As the recession has worn on states have—particularly in California—cut their appropriations to public higher education. Hauptman (1990) documents the inverse relationship between state appropriations to higher education and tuition increases. Students' and families' experiences have anecdotally born out this factually documented relationship between appropriations and tuitions. My concern is the relationship between decreased state appropriations and the prestige-building of public-flagship institutions. The nameplate schools of UCLA or Cal are synonymous with high GPAs, high test scores, and very selective admissions. The public flagships are by definition public schools and exist to serve the tax-paying state citizenry. Yet, the L.A. Times reports that more California students are finding themselves excluded from state schools to make room for non-residents and international students. Gaps between costs and revenues, however, have meant that schools have had to raise tuitions or find more students to pay higher tuitions. Capital projects funded by donors and state funds have additional costs buried within that adversely affect the long-term costs for which budgets must be planned. These costs have been placed on the students and is affecting student success and student debt.
In fact, student indebtedness is rising at an alarming rate. Deritis documents the growth of student loan balances and links the growth to 1) increased overall demand for higher education and; 2) the skyrocketing enrollments at for-profit institutions. Meanwhile, the folks at EducationSector.org have reported that students now borrow up to 24% more money to pay for higher education than they did only five years ago. The big problem is that we are, according to EducationSector, "Floating colleges on a sea of debt." We know what it costs to keep an American family fed, clothed, and sheltered based on the CPI. We have an understanding of what it costs to keep the lights on, water running, and faculty fed at postsecondary institutions thanks to HEPI. However, our willingness to deficit finance an education must be tempered by the realization that a degree from a prestigious university does not certify any more learning than a degree from a for-profit institution. Our quality assurance system of regional accreditation is only just now beginning to search for ways to measure learning and hold schools accountable for producing learning.
So, when you write your childrens' tuition checks I want you to remember that what you are paying for may or may not directly fund their education. Tuition represents costs plus extras and whether those extras contribute directly to your childrens' learning and future success is an issue in which you ought to take serious interest.
Hauptman, A. M. (1990). The college tuition spiral. New York, NY: Macmillan Publishing.
Learners first, students always!
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