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Brainstorm: Lives of the Mind Bob Zemsky

What Does 'College Affordability' Mean?

The second of my four horsemen of reform — the quest for an affordable higher education — is for me the most problematic. This much is clear, however: an American college education has become ever more expensive. Some would say, with fair justification, paying for a college education in this country is now obscenely expensive. But ever-higher prices in higher education are nothing new. For more than a half century the average price, even the average net price, of a year in college has been increasing faster than the underlying rate of inflation, except during the decade of the 1970s when the average prices colleges and universities charged merely kept pace with double-digit inflation.

Those who push the affordability agenda parse the problem differently, having concluded that an American higher education is either now or about to become unaffordable. As Measuring Up 2004 boldly declared, “The vast majority of states have failed to keep college affordable for most families.”

Not exactly. When something is unaffordable it means it won’t be purchased. Health insurance — and with it access to health care — is now truly unaffordable for a frighteningly large and growing number of American families. We know that to be the case because of the increasing number of American families who do not have health insurance. That seemingly is not the case for American higher education, given that in most years enrollments have continued to rise even as have the prices students are expected to pay.

Market researchers often talk about affordability in terms of the would-be customer’s “willingness to pay” for a specific product and that same customer’s “ability to pay.” Thus far most American families and most students have shown both an ability and a willingness to pay the prices colleges and universities charge. Indeed, most purchasers of higher education have, over the last decade, been shopping up, consistently choosing higher-priced over lower-priced options. The baccalaureate institutions that are hurting for enrollments are, for the most part, those with the lowest tuitions.

It is a curious conundrum. Take, for example, the case of the Commonwealth of Pennsylvania, which Measuring Up awarded a C for affordability in 2000, a D in 2002, and an F in 2004. On the other hand, Pennsylvania earned an A in completion, meaning that Pennsylvania institutions do very well in terms of retention and their capacity to graduate students within six years of matriculation — and a B for participation, indicating that “compared with other states, the likelihood of Pennsylvania ninth-graders enrolling in college within four years is high.”

Sorting through this thicket is going to take a while — or at least my next several postings.

Posted at 10:01:46 AM on May 13, 2008 | All postings by Bob Zemsky

Comments

  1. It is true that enrollments have continued to rise even as the cost does as well. However, is this true for low-income students? If you look deeper into who is actually going to college despite the rising costs, you will find that the cost of an education is “unaffordable” for these students.

    — Ginny · May 13, 12:25 PM · #

  2. If the current credit crunch that started in the housing market is any indication, I’m not sure the more traditional definition of “affordable” (as in “able to pay”) will work for Higher ed. We are just learning that many people bought homes that were not “affordable” by borrowing obscene amounts of money. The same may very well be true of tuitions. Students (and their parents) are borrowing obscene amounts of money to “…buy up” to a higher quality of education, but we may not fully know how “affordable” those borrowing decisions were until years down the road when default rates start to climb.

    — Quig · May 14, 06:04 AM · #

  3. I am glad to see Mr. Zemsky attempting to address the issue of college “affordability” in it’s full complexity. It is indeed a “thicket” of seemingly contradictory claims, much like healthcare in many ways. As is often the case in “real life,” political slogans and Congressional hearings will probably just obscure the issues. I look forward to future postings on this subject from Mr. Zemsky.

    — Bill Davis · May 14, 07:26 AM · #

  4. Thought #1: RE: Post 1: Isn’t that pretty much the definition of a low-income person – that he or she isn’t able to afford a lot of things? I don’t think it’s a human rights violation that a low-income person (or an upper-middle income person) can identify things that he/she cannot afford. I can’t afford a lot of things. The societal concern comes in when the things I can’t afford are essential to a basic quality of life (health insurance, versus a 50” TV). So, is a college degree essential to a basic quality of life? Probably not, for a significant percentage of the citizenry. For some, they have gifts or strong aspirations in certain professional areas or topics. Those are the students who need financial support, no matter what their home income. We should not measure success merely by the percentage of citizens who choose higher education, let alone can afford higher education. Thought 2: I met a student on Monday at a $40K+ institution who is paying less than I did 25 years ago. Sample of 1, but remember that there’s a difference between the sticker price and the tuition bill, and that more reliably than a car or (now) a house, this is a purchase that pays you back later.

    — hieddoc · May 14, 08:46 AM · #

  5. I never see mentioned in questions about the cost of a university education all the non-academic elements that it takes for a university to compete for enrollees: lushly landscaped campuses, posh student centers, free newspapers, state of the art gyms, etc. As long as universities have to out-do each other in terms of “accommodations,” the cost of an “education” will continue to rise.

    — pat · May 14, 10:04 AM · #

  6. A thicket it is—both defining what affordablity and measuring it, and proposing solutions. I look forward to your take these. My 2 cents on this (what I could fit in an Op-Ed) is in the following link.
    http://www.examiner.com/a-1240172~Douglas_Lamdin__Low_cost_higher_education.html

    — DL · May 14, 10:26 AM · #

  7. Thanks for the comment #4. I should have been more clear in my comment. The real issue is that a college education was once “affordable” for low-income students. However, the combination of rising tuition costs and insufficient federal financial aid has made college “unaffordable” for this same group of students.

    — Ginny · May 14, 01:01 PM · #

  8. The affordability of higher education is indeed not only a matter of ability to pay, but also the desire to pay. Consumers operate along indifference curves, making consumption choices (rational for their own situation) among possible goods and services that maximize their utility. These target points along the curves are always changing as our market baskets of goods also change.

    In the Great Depression telephones were considered to be luxury goods, and thus one of the first things that would be given up in a time of economic hardship. Today, the telephone is not only found in virtually every home, but in almost every shirt pocket, and at phone rates that would have made a Depression era person faint, even adjusted for inflation.

    Health Insurance became popular during World War II because it was a non-cash benefit that could be offered to workers whose wages were frozen due to the war production effort. Now, 65 years later we commonly refer to receiving paid health insurance as a basic human right.

    College tuition was reserved to the wealthy before WWII. With the advent of the GI Bill after the war, higher education was opened up to a more general public. This opening has continued to broaden since then with the National Defense Student Loans enacted in the panic after the flight of Sputnik, and a whole host of federal and state loan and grant programs.

    Students and their families continue to function as consumers, making rational choices about higher education. As they consider their own indifference curves they decide whether to save/spend for education, for a summer home, a second (3rd, 4th, 5th) car, etc. They may choose to borrow the funds and arbitrage their own savings, taking advantage of a difference in interest owed and interest earned. They may decide that a career that doesn’t require a college education is a better choice. The possibilities are endless.

    With all of this economic activity going on, the current political discussion about education affordability is less than helpful. Zemsky points this out clearly when he speaks of high reputation/high tiution schools prospering in a time when affordability is supposedly an issue. If tution really were unaffordable, people would not pay it, and it would drop as schools struggle to fill seats. Instead, we have waiting lists, and an education inflation rate that is consistently above the economy’s inflation rate. There is certainly more to the issue of affordability than merely government funding of higher education. Until the discussion recognizes all of these issues we’ll be left with the current simplistic view.

    — Michael · May 14, 02:31 PM · #

  9. Michael’s is a typical the-operation-was-successful-although-the-patient-died, freemarket analysis: the invisible hand of the market insures not only that people get what they pay for, but that people should get ONLY what they can pay for—be it a new Lexus, a Starbucks latte…or health insurance or a first-class higher education that corresponds with their abilities. “Less than helpful” = discomfitting to those of Michael’s persuasion

    1. Many tuition-charging private colleges take Federal money. Any insitution taking Federal money has a few public-responsibility issues to which to answer, among them accessibility.

    2. Health insurance for employees may have “become popular” (you gotta love the freemarket notion of health insurance as “popular,” like, oh, reality TV) as a wartime wage-freeze make-good, but it is something that every Western industrialized country provides its citizens far more widely than does the U.S. Here, health insurance has turned into a goldmine for middlemen at HMO’s, and leaves about 45 million Americans without it. The freemarket view of this is, of course, “tough toenails.”

    3. Michael’s typical American family figuring out how to pay for a college education is not, naturally, very typical. Most American families do not have second homes, three cars, or even savings (aren’t we instead wallowing in per capita debt?) to “arbitrage” (freemarketese for “wipe out”).

    4. The chances of Michael’s un-typical family deciding “that a career that doesn’t require a college education is a better choice” is just about nil.

    5. Many people (I’d venture somewhere around half) aren’t paying tuition because they can afford it, but because they’re terrified at the consequences of not sending their kids to college and are willing to go into hock for it. And even if they do, the kids themselves often have to go into additional hock (student loans; isn’t there a figure on the average student-loan debt with which college students graduate these days?) to get their degrees.

    6. As for the “political” nature of the discussion on affordability: it might help politicians as much as colleges and their students. I don’t hear a lot of people with any common sense saying, “If we couldn’t afford an ongoing war in Iraq, we wouldn’t be conducting one, would we?” (Not if, apparently, we couldn’t put a couple of trillion on the Federal MasterCard that those college students whose families can putatively afford tuition will have to pay off some day.)

    7. Colleges themselves think that they need a little diversity in class as well as race in order to provide an all-around education to their students. That is, white, black, Asian and latino students who all come from families with Lexuses in the driveway and who all dress from J. Crew constitute an uninstructively homogenous student body. If kids from blue-collar families are to attend those colleges, that “less than helpful” discussion of affordability must be continued.

    8. At a time when tuition at private colleges is going through the roof, state governments everywhere are both raising public-college tuition precipitously and cutting back on public-college spending. That helps.

    9. Finally, the question is: does this country want a two-tiered system of higher education, where the (comparatively) wealthy populate the best schools and those not so flush populate crumbling, underfunded public ones? To those of Michael’s persuasion (you know, people who think of health insurance in terms of its being “popular” or not), this kind of economic Darwinism probably represents the world as it should be. Talk about “less than helpful.”

    — LuckyJim · May 16, 07:49 AM · #

  10. Zemsky takes a simplistic perspective that ignores the basic premise of the affordability argument. Those that are concerned about affordability are focused on those populations who have not traditionally enrolled in higher education. While the upper middle class and the rich continue to enroll in college in increasing numbers we still have large numbers of poor who are not. Likewise, recent personal economic gains among upper class workers have not been met with comparable gains among the poor. Therefore while the rich have been able to easily absorb the increased costs for college, the poor have been further priced out.

    Zemsky needs to get out of his Ivy League box and take a look around.

    PS: It is also poor practice to rely on the Measuring UP scores to make your arguments. It is even worse to try and draw correlations between the scores.

    — DT · May 19, 09:32 AM · #

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