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Why is tuition rising?

March 11, 2012, 3:49 pm

It troubled me when President Obama scoldingly said, “We’re putting colleges on notice: you can’t assume that you’ll just jack up tuition every single year”. The UC has raised tuition, but it hasn’t been on its own initiative; it’s been because the state has cut funding to higher education.

Now Robert Frank riffs on Obama’s comment, attributing rising tuition to rising faculty salaries.

To recruit professors, universities must pay salaries roughly in line with those made possible by productivity growth in other sectors. So while rising salaries needn’t lead to higher prices in many industries, they do in academia and many other service industries.

As they say about the International Jewish-Zionist Monetary Conspiracy, if there is one I want my share.1 I don’t think rising faculty salaries are the primary cause of increasing tuition costs.

Frank’s colleague Ronald Ehrenberg has been more eclectic – and I think more persuasive – in attributing the rise of tuition costs.

These include the aspirations of academic institutions; our “winner-take-all” society; the shared system of governance that exists in academic institutions; recent federal government policies; the role of external actors such as alumni, local government, the environmental movement, and historic preservationists; periodicals that rank academic institutions; and how universities are organized for budgetary purposes and how they select and reward their deans.

Or consider this report:

  • The main reason tuition has been rising faster than college costs is that colleges had to make up for reductions in the per-student subsidy state taxpayers sent colleges. In 2006, the last year for which Wellman had data, state taxpayers sent $7,078 per student to the big public research universities. That’s $1,270 less (after accounting for inflation) than they sent in 2002.
  • Public universities have been reining in overall spending per student in recent years. Flagship public universities’ spending per student has risen from about $12,400 in 1995 to $13,800 in 2006 after accounting for inflation. But since 2002, spending at public colleges has generally not exceeded inflation.
  • Increases in spending were driven mostly by higher administration, maintenance, and student services costs. Public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, up more than 13 percent, in real terms over 1995. And they spent another $1,200 a year on services such as counseling, which was up 23 percent. Meanwhile, they spent about $8,700 a year on classroom instruction for each student, up about 9 percent.
  • Big private universities, powered by tuition and endowment increases, have increased spending dramatically while public schools have languished. Total educational spending per student at private research universities has jumped by almost 10 percent since 2002 to more than $33,000. During that same period, public university total spending was comparatively flat and totaled less than $14,000 a year.

I wonder what Mark Thoma himself thinks.


1Or half-share, if you insist.

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