Rising Costs

01.30.12

The Tuition Gouge

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Andy Ferguson, author of a terrific book about the madness of the American college application process, offers a negative review of President Obama's college tuition proposals:

Details of the administration’s plan make it clear that the president isn’t too terribly cheesed off at American higher education after all. For every demand of “transparency” and “accountability,” he offers more of the kind of aid that has helped make it possible for schools to raise tuition in the first place. Beyond the billion-dollar piñata, the president wants to double the number of work-study jobs, keep guaranteed loan rates artificially low, and steadily raise the maximum award for Pell grants and loosen eligibility requirements. Whenever you see phrases like “investment initiatives to incentivize innovation,” you know some bureaucrat is getting ready to throw money.

Yet Ferguson agrees that the President has identified a real problem.

Obama is both correct and clever to identify surging tuition prices as a major concern. He’s correct as president, because the tuition crisis is intimately related to the larger crisis of quality and waste in higher education, which is quickly becoming a national disaster. (Adjusting for inflation, we spend 40 percent more on higher education than we did a decade ago, with no increase in quality.) And Obama is clever as a presidential candidate, because the affordability of college has caused a widespread anxiety that his opponents have left politically unaddressed.

The anxiety is everywhere and well grounded in reality. Writing in Inside Higher Ed, Hamid Shirvani, a president in the California State University system, calculates that the average tuition at a public four-year university in the United States increased three and half times between 1980 and today, adjusting for inflation. And there’s no end in sight. Two years ago, tuition rose 7.9 percent from the year before. Last year tuition rose another 8.3 percent. Unconstrained by market pressures, private schools have been gouging their customers at a similar pace.

But if the President does not have the answer, who does?

Ferguson proposes two solutions:

1) Cut federal direct aid to college students: these extra dollars enable the cost inflation.

2) Get out of the way as market systems offer alternative forms of higher education.

Clayton Christensen, a professor at Harvard Business School, notes that 10 percent of college students took at least one online course in 2003; 30 percent did so in the fall semester of 2009. And he predicts 50 percent will be taking online courses two years from now. Already several online universities, such as Western Governors University, are offering cheap and reputable degrees.

I wonder whether these ideas will deliver anything like the results that Andy would like to see.

As more and more Americans get a college degree, it becomes more and more apparent that there is no longer such a thing as "a college degree." Employers have become much more shrewd—or anyway, more opinionated —about what counts as a college degree.

We're seeing rising returns to some kinds of college education, but not to all—in fact, the average wages of college graduates declined slightly in the five years leading up to the financial crisis of 2008.

Under those circumstances, a degree from Western Governors University may not look like much of a bargain, even if cheap—and University of Michigan's ability to extract higher fees may well remain intact even in the face of supposedly intensifying market pressure.

In a winner-take-more society, more people seem ready to pay more to gain the credentials they think will lead to their children winning, or at least, avoiding losing.