POLICY HIGHLIGHTER

Volume 15, Number 6
February 15, 2005

Going Broke by Degree: Why college costs too much

Rising tuition costs and a growing pool of college-bound students are putting issues of affordability and accessibility in higher education on the front burner. Many legislators seem to assume that solving the problem requires giving more money to public colleges and universities.

Dr. Richard Vedder, professor of Economic History at Ohio University, challenges this assumption in his new book "Going Broke by Degree: Why college costs too much." He summarizes his research:

Tuition increases at public universities have averaged 24 percent over the past two years. Universities blame it on falling state appropriations. The truth: tuition increases have exceeded the inflation rate for over 20 consecutive years, including years of large increases in state/federal funding. The root causes of the problem: the non-market, non-profit nature of universities; huge increases in federal student loans and grants that increase education demand and allow higher tuition charges; and a decline in university productivity.

Higher enrollments and tuition fees have rapidly expanded university revenues. Since 1976, I estimate that only 21 cents of each new inflation-adjusted dollar per student has gone for instruction; the rest has gone to vastly expand non-instructional staff, increase compensation for faculty and staff, build luxurious country club-like facilities, increase subsidies to intercollegiate athletics, and support research. At many schools, tuition fees now exceed the amount spent per student on instruction. For-profit universities, like the University of Phoenix, operate well at less than one-half the per student cost of traditional universities.

Given the above, it is not surprising that higher education's share of state budgets is steadily falling. Political support for giving universities blank checks is diminishing in many states. A few states (e.g., Colorado) are experimenting with alternative funding models, such as partly voucherizing spending—giving money to kids, not institutions. Rising Medicaid costs, very slow growth in the pool of 18-24 year olds, and disenchantment with past use of funds all suggest continuing fall or stagnation in real state funding. Growth of for-profits has been explosive, as they have greater accountability and efficiency. That growth should be encouraged.

Dr. Vedder provides many recommendations for solving the crisis, including "modifying tenure, increasing teaching loads, paring administrative staffs, increasing distance learning, and cutting costly non-educational programs." His book is available at Amazon.com for $25.00.

Prepared by: Marsha Richards | Education Reform Center Director | 360.956.3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org