12. Why is College So Expensive?
Good morning, John. Since 1980, the cost of college in the US has more than tripled, rising faster even than the cost of medical care. Around 70% of students in the US will graduate with some amount of debt, and the average amount for those students is $29,000, that's $312 a month for ten years of student loan payments. Now, there are some ways in which you can pay less, and if you're interested in those, I put a link in the description, but it's an undeniable fact that the costs of education in America have increased greatly and that student loan debt is becoming a burden, so what are colleges spending that extra money on? Well, it's complicated. Let's start with the fact that since 2008, colleges have actually been spending less money per student, but students have been spending more money per student. How's that possible? Well, you might remember than in 2008, there was something of a financial crisis. State budget shrank, and so did some institutional endowments, meaning that students paid more and got less.
That trend actually stretches back even a bit farther, with the top amount being paid per student by states happening in 2001. But of course, these costs have been increasing since way before 2001, and colleges are spending way more money than they used to, so what do schools spend their money on?
Well, the first thing you think of is academic instruction, and that is still the biggest category of spending. College professors are expensive, and in some cases, you're asking them to come teach when they could be working in the private sector for pharmaceutical companies or investment banks and making millions of dollars a year, and you want those really highly qualified amazing professors teaching and so yeah, sometimes they get paid a lot. The average amount of money a college professor makes is around $150,000, but some professors make upwards of a half a million dollars a year. But during the last 10 or 15 years, during which the college costs literally doubled, the cost of instruction basically kept pace with inflation.
Part of the way schools have done that is by now hiring on as many tenure track professors and having a ton of like, part-time and grad student and adjunct professors who do not get paid very well at all. So the cost of instruction overall is definitely not where this big bump came from.
The costs that have definitely increased a lot are in a jumble of different categories that different institutions track differently and so are very difficult to tease out apart from each other, but there has been some really great and careful research done on this stuff, so here are the increases in a few categories. Operations and grounds-keeping, room and board, general administration, academic support, and a nebulous thing which has increased more than any other category among four year bachelor's degree programs, "student services", which includes everything from concerts to intramural sports to marketing to tutors. It appears that what's driving this is, in a word, sales. Colleges are acting more like businesses and treating students more like customers. Schools compete with each other, and in a world where the costs are really high anyway, it starts to look like a little fuzzy when a student's deciding between $310 payments for ten years and $340 payments. It's only $30 a month, and if one school has really nice dorms, a well supported tutoring program, nice athletic fields, a super dope climbing wall, a celebrity level professor, cushy mattresses, and local, organic produce and cafeteria salad bar,, then both the parents, who are probably footing a big hunk of the bill, and prospective students are likely to choose the more expensive option. Some of those things are worthwhile, others don't have much use beyond, like, looking pretty cool on prospective student weekend. Building and running a 30,000 person institution that has facilities that outpace the quite nice country club is expensive. Over the last 10 years, non-academic employees have been hired 50% faster than academic employees at colleges and universities, and top-level administrators who are responsible for increasing that enrollment and revenue so that there's money for everybody to spend, their pay raises have been more than double that of academic employees. The average school now has about one non-academic employee for every 10 students. There are some private schools where that ratio is more like 1 to 3.
Now, the absolutely nutso thing about all of this is that it still works, because even at these juicily inflated prices, college is still a good deal. Money spent on a Bachelor's, Associate's, or Professional degree yields a higher return than the stock market, even in dropping out of college after 18 months has a higher yield than the stock market, though not as high as graduating, so in a way, colleges are just working their way up to costing as much as the value they provide. But I think that we can all safely agree that college should not be about maximizing revenue, especially for state schools. The question isn't really whether college is a good deal, it's whether college could be a better deal. It seems a little like the increase in spending is kind of a natural outgrowth of a capitalist society and people making decisions that benefit them, at least in the short term, but it's worth asking if treating America's students like customers is, in the end, going to be a disservice to everyone. Maybe we shouldn't be selling students an experience. Maybe we should be providing them with as much enrichment and, dare I say it, education as possible. Because while it is important that college is a sound monetary investment, it is also important, possibly more important, that students get through our higher education system knowing more about the world and about themselves, and I don't think that that has to be a monetary thing, and I definitely don't think it needs to cost $40,000 a year. I don't know, maybe I'm crazy. John, I'll see you on Tuesday.
