Why is College so Expensive in the US?

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College tuition inflation has risen faster than medical services, child care, and housing. While financial aid usually helps students pay far less than the “sticker price” of tuition, the net price of public four-year colleges has more than doubled over the past 20 years. 

The United States governments pay more (as a percentage of GDP) toward higher education than other "peer" countries.

According to the OECD's 2018 "Education at a Glance" report, public spending on higher education in the United States is 1.3 percent of GDP. This number is equal to public spending in Switzerland and the United Kingdom and higher than spending rates in Germany (1.2), France (1.2), Canada (1.2), Spain (1.0), Italy (0.8), and Japan (0.7).

The “total expenditure on educational institutions per full-time equivalent student" in the US is second to Luxembourg ($48,907) at $30,003. And although the United Kingdom comes in just behind the US at $26,000, most other countries fall well below these totals. 

For example, total spending on higher education in France is $16,145, $17,036 in Germany, and $12,605 per student in Spain. 

The three leading causes of tuition inflation include administrative bloat, overbuilding campus amenities, and a lack of education funding. 

Administrative Bloat

One reason college cost in the US is increasing is due to administrative bloat: when the cost and scale of a university's administrative structure either fails to contribute to the institution's core educational mission or detracts from that educational mission.

Where administrative bloat is concerned, the cost is a significant consideration. Maintaining a large administrative staff requires funding. Additionally, the growing number of non-instructional jobs at universities and colleges can be linked to the rising college tuition. 

As author Richard Vedder stated, “When I started teaching in the 1960s, there were typically around two faculty for every non-faculty support person. Today, there are more administrators than faculty at most schools.”

Overbuilding Campus Amenities

Colleges and universities battle it out to provide the best college experience for incoming students. Institutions are going out of their way to stand out from their competitors, including implementing comprehensive healthcare programs, sleek new gyms, dorms, cafeterias, and even rock climbing walls.

In 2018 alone, colleges spent $73 billion on student services and administrative costs unrelated to education.

The concept of higher education comprises two things, consumption and investment. The elements of a college experience that enhance future earnings (i.e., classroom instruction) make up the investment component. These activities increase the student’s future earning capacity.

But elements such as residence halls, dining plans, and recreational activities are consumption that contributes to a student’s well-being while they are enrolled but do not directly increase productivity, or earnings, later in life.

Lack of Education Funding

One of the biggest factors behind rising tuition might have more to do with state funding than any individual school’s spending habits.

Our current system for funding public schools shortchanges students and is generally inadequate and inequitable, relying too heavily on state and local resources (particularly property tax revenues).

Additionally, the federal government plays a small and insufficient role, funding levels vary widely across states, and high-poverty districts get less funding per student than low-poverty districts.

In the wake of the Great Recession of 2008, governments scrambled to slash state spending on several line items, including college education. And between 2008 and 2018, public funding for higher education decreased by $6.6 billion, according to the Center on Budget and Policy Priorities, a Washington, DC-based research institute.

A few leading causes of college tuition inflation include administrative bloat, overbuilding campus amenities, and a lack of education funding.


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