College tuition in the United States

The term college tuition refers to fees that students have to pay to colleges in the United States. Pay increases in the U.S. have caused chronic controversy since shortly after World War II. Except for its military academies, the U.S. federal government does not directly support higher education. Instead it has offered programs of loans and grants, dating back to the Morrill Act during the U.S. Civil War and the "G.I. Bill" programs implemented after World War II. Developed countries whose national governments directly support higher education tend toward more moderate patterns of change in college tuitions and different forms of controversy.

Causes

Bubble Theory

Main article: Higher education bubble

Study comparing college revenue per student by tuition and state funding in 2008 dollars.^[1]

The view that higher education is a bubble is controversial. Most economists do not think the returns to college education are falling.^[2] In a financial bubble, assets like houses are sometimes purchased with a view to reselling at a higher price, and this can produce rapidly escalating prices as people speculate on future prices. An end to the spiral can provoke abrupt selling of the assets, resulting in an abrupt collapse in price — the bursting of the bubble. Because the asset acquired through college attendance — a higher education — cannot be sold (only rented through wages), there is no similar mechanism that would cause an abrupt collapse in the value of existing degrees. For this reason, many people^[who?] find this analogy misleading. However, one rebuttal to the claims that a bubble analogy is misleading is the observation that the 'bursting' of the bubble are the negative effects on students who incur student debt, for example, as the American Association of State Colleges and Universities reports that "Students are deeper in debt today than ever before...The trend of heavy debt burdens threatens to limit access to higher education, particularly for low-income and first-generation students, who tend to carry the heaviest debt burden. Federal student aid policy has steadily put resources into student loan programs rather than need-based grants (see graph), a trend that straps future generations with high debt burdens. Even students who receive federal grant aid are finding it more difficult to pay for college."^[3]

Cost shifting and Privatization

See also: Privatization and Private university

One proposed cause of increased tuition is the reduction of state and federal appropriations to colleges thus making them shift the cost over to students in the form of higher tuition.^[4][5] This has mostly applied to public universities which in 2011 for the first time have taken in more in tuition than in state funding^[5] and had the greatest increases in tuition^[1]. Implied from this shift away from public funding to tuition is privatization, although the New York Times reports such claims are exaggerated.^[5]

Student Loan

Another proposed cause of increased tuition is U.S. Congress' occasional raising of the 'loan limits' of student loans, in which the increased availability of students to take out deeper loans sends a message to colleges and universities that students can 'afford more,' and then, in response, institutions of higher education raise tuition to match, leaving the student back where he began, but deeper in debt. Therefore, if the students are able to afford a much higher amount than the free market would otherwise support for students without the ability to take out a loan, then the tuition is 'bid up' to the new, higher, level that the student can now afford with loan subsidies.^[6] One rebuttal to that theory is the fact that even in years when loan limits have not risen, tuition has still continued to climb.^[7][8] However, that may not disprove this proposed cause: It may simply mean that other factors besides 'loan limit' increases played a part in the increases in tuition.

Lack of consumer protection

A third, novel, theory claims that the recent change in federal law removing all standard consumer protections (truth in lending, bankruptcy proceedings, statutes of limits, etc.) strips students of the ability to declare bankruptcy, and, in response, the lenders and colleges know that students, defenseless to declare bankruptcy, are on the hook for any amount that they borrow -including late fees and interest (which can be capitalized and increase the principal loan amount), thus removing the incentive to provide the student with a reasonable loan that he/she can pay back.^[7][8] Under this theory, it would be more profitable for the lender if the student defaulted (due to the increases in the amount of the loan after fees and interest are capitalized), and thus there is no free market pressure-type motive for the lender or the college to help the student avoid default. This is especially true because the government, if it is the lender or guarantor of the loan, has the ability to garnish the borrower's wages, tax return, and Social Security Disability income without a court order.^[9] Some have called the Federal Government 'predatory' for making loans which will have such a high default rate, since the default rate for Student Loans is projected to reach 46.3% of all federal loans disbursed to students at for-profit colleges in 2008.^[10][11]

Additional factors

Other factors^[4] that have been implicated in increased tuition include the following:

• The practice of 'tuition discounting,' in which a college awards financial aid from its own funds. This assistance to low-income students by the college or university means that 'paying' students have to 'make up' for the difference: Increased tuition. This factor becomes more pronounced in modern times, since more students nowadays are going to college, which means that there are less State and Federal grant funds available per student.

• According to Mark Kantrowitz, a recognised expert in this area, "The most significant contributor to tuition increases at public and private colleges is the cost of instruction. It accounts for a quarter of the tuition increase at public colleges and a third of the increase at private colleges."

• Kantriwitz' study also found that "Complying with the increasing number of regulations – in particular, with the reporting requirements – adds to college costs," thus contributing to a rise in tuition to pay for these additional costs.

Recommendations

Based on the available data, a number of recommendations to address rising tuition have been advanced by both experts and consumer and students' rights advocates:

• Colleges and universities should look for ways to reduce costs of instructor and administrator expenditures (e.g., cut salaries and/or reduce staff).^[12][13]

• State and Federal governments should increase appropriations, grants, and contracts to colleges and universities.^[12][14][15]

• Federal, state, and local governments should reduce the regulatory burden on colleges and universities.^[4]

• The Federal Government should enact partial or total loan forgiveness for students who have taken out student loans.^{[13][16][17][18]}

• Federal Lawmakers should return standard consumer protections (truth in lending, bankruptcy proceedings, statutes of limitations, etc.) to Student Loans which were removed by the passage of the Bankruptcy Reform Act of 1994 (P.L. 103-394, enacted October 22, 1994), which amended the FFELP (Federal Family Education Loan Program).^[13][19][20]

• Cut lender subsidies, decrease student reliance on loans to pay for college, and otherwise reduce the 'loan limits' to limit the amount a student may borrow.^[13][21][22]

• Regulatory or legislative action to lower or freeze the tuition, such as Canada's tuition freeze model, should be enacted by federal lawmakers:^[23]

• More research should be done: Recognised financial expert, Mark Kantrowitz, issued the following recommendations^[4]:

• "The National Center for Education Statistics should increase the frequency of the National Postsecondary Student Aid Study to annual, from triennial, in order to permit more timely tracking of the factors affecting tuition rate increases. Likewise, NCES (National Center for Education Statistics) should take steps to improve the efficiency of the data collection and publication for the Digest of Education Statistics, so that all tables will include more recent data. The most recent data listed in some tables is five years old."

• "The US Department of Education should study the relationship between increases in average EFC (Expected Family Contribution) figures and average tuition rates. In addition, it would be worthwhile to examine how historical average EFC figures have changed relative to family income when measured on a current and constant dollar basis for each income quartile."

• Lastly, in order to offset the costs of tuition, some colleges help students in job searches and job placement after graduation.^[24]

Historical trends

The first chart compares standard undergraduate annual tuition and fees charged by major U.S. public, U.S. private and Canadian public 4-year college, showing both current U.S. dollars during the years from 1940 to 2000 and U.S. dollars adjusted to the year 2000 by using the U.S. Consumer Price Index series.^[25][26][27]

Tuition at the University of Toronto tracked close to inflation rates during the entire period.^[28] The University of Iowa had rapid increases in tuition during the 1950s and then tracked close to inflation rates since that time.^[29] The Massachusetts Institute of Technology (MIT), among the most expensive of the private U.S. educational institutions throughout the 20th century,^[30] had continual large tuition increases, dipping slightly below inflation rates only during the World War II years.^[31][32]

Over the 60-year period charted, the inflation-adjusted, long term, annual increases in tuition at these institutions were 0.4 percent for the University of Toronto, 1.4 percent for the University of Iowa, and 2.1 percent for MIT.^[33] Other institutions in the same categories differ in details but not in general patterns.^[34] The results of the trends are that over the 60 years shown, adjusted for inflation, the tuition at the University of Iowa increased by a factor of 2.3 and that at MIT by a factor of 3.6, while tuition at the University of Toronto rose only about 30 percent.^[35]

Recent trends

This chart compares average undergraduate tuition and fees charged by about 600 U.S. public and 1,350 U.S. private, non-profit 4-year colleges during years from 1993 through 2004.,^[36] both unadjusted and adjusted to the year 2004 by using the U.S. Consumer Price Index series. Data were not available for years 1994, 1995 and 1999.

During the 11-year period charted, both public and private, nonprofit colleges regularly posted tuition increases well above inflation rates. Peak increases for private colleges were in 1997, after the U.S. economy began booming growth. Peak increases for public colleges were in 2003, after state budgets supporting most of them were crimped by a sharp economic recession. Over this period, annual, inflation-adjusted tuition increases at public colleges averaged 4.0 percent, while those at private, non-profit colleges averaged 3.5 percent. Cumulative results over this period are average public tuitions growing 53 percent above inflation, and average private, nonprofit tuitions growing 47 percent above inflation. As of 2004, private, nonprofit colleges cost on average 3.3 times as much as public colleges attended by residents of their states.

Disproportional inflation of college costs

"Disproportional inflation" refers to inflation in a particular economic sector that is substantially greater than inflation in general costs of living. This kind of inflation for medical costs in recent decades is well known. However, that of college tuition and fees exceeds that of medical costs.

The following graph shows the inflation rates of general costs of living (for urban consumers; the CPI-U), medical costs (medical costs component of the consumer price index (CPI)), and college and tuition and fees for private four-year colleges (from College Board data) from 1978 to 2008. All rates are computed relative to 1978. ^[37]

Cost of living increased roughly 3.25-fold during this time; medical costs inflated roughly 6-fold; but college tuition and fees inflation approached 10-fold. Another way to say this is that whereas medical costs inflated at twice the rate of cost-of-living, college tuition and fees inflated at four times the rate of cost-of-living inflation. Thus, even after controlling for the effects of general inflation, 2008 college tuition and fees posed three times the burden as in 1978.

According to "College Board", the average tuition price for a 4-year public college in 2008-2009 is now $6,585 compared to 2004 where the price was slightly above $5,000. The average price of in-state tuition vs out-of-state tuition for 2008-2009 was $6,585 for a in-state 4-year college to $17,452 for out-of-state 4 year college (collegeboard.com).

Economic and social concerns

Economic concerns

Long-term price trends make higher education an especially inflationary sector of the U.S. economy, with tuition increases in recent years sometimes outpacing even explosive health care sectors.^[38] These trends are sources of continuing controversy in the United States over costs of higher education^[39] and their potential for limiting the country's achievements in democracy, fairness and social justice.^[40]

Today, some companies offer tuition reimbursement to students.

Social concerns

Besides economic effects of rapidly increasing debt burdens placed on students, social ramifications are felt. One of these is the increase in suicides directly attributable to the stress related to distressed and defaulted student loans.^{[41][42][43][44]}

Student loan debt

A closely related issue is the alarming increase in student borrowing to finance college education and resulting student loan debt. In the 2007-2008 National Postsecondary Student Aid Study (NPSAS), the median cumulative debt among graduating 4-year undergraduate students was $19,999; one quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more.^[45] In fact, for the first time in the history of America, 'Student Loan' debt has surpassed 'Credit Card' debt.^[9]

Nevertheless, there is substantial evidence that students are still getting good value for their investment in an education.^{[citation needed]} Since the mid-1980s, education has played a large part in potential wages,^{[citation needed]} with bachelor's degree holders taking home an average of 38% more than those with only a high school diploma.^{[citation needed]} While college-educated workers' wages have increased over the past two decades, those with only a high school education have seen decreases in annual salaries in the same time period.^[46]

The U.S. spends more on education than most other developed countries, and the U.S. has a disproportionate share of the top-ranked universities in the world.^[47]

See also

• EdFund
• Free education
• Higher education bubble
• Higher Education Price Index
• Post-secondary education
• Private university
• Student benefit
• Student debt
• Student loans in the United States
• Tuition agency
• Tuition center
• Tuition fees
• Tuition freeze

References and notes

1. ^ ^{a b} "Trends in College Spending 1998-2008" Delta Cost Project.
2. ^ Claudia Goldin, Lawrence F. Katz (2008). The Race Between Education and Technology. The Belknap Press of Harvard University Press. 
3. ^ Hillman, Nick (2006). "Student Debt Burden, Volume 3, Number 8, August 2006". American Association of State Colleges and Universities. http://www.aascu.org/media/pm/pdf/v3n8.pdf. 
4. ^ ^{a b c d} Kantrowitz, Mark (2002). "Research Report: Causes of faster-than-inflation increases in college tuition". FinAid. http://www.finaid.org/calculators/tuitionanalysis.pdf. 
5. ^ ^{a b c} "Public Universities Relying More on Tuition Than State Money", The New York Times
6. ^ "Federal Student Loans: Patterns in Tuition, Enrollment, and Federal Stafford Loan Borrowing Up to the 2007-08 Loan Limit Increase". gao.gov. 2011. http://www.gao.gov/products/GAO-11-470R. 
7. ^ ^{a b} "Student Loans in Bankruptcy". lawyers.com. 2011. http://bankruptcy.lawyers.com/consumer-bankruptcy/Student-Loans-In-Bankruptcy.html. 
8. ^ ^{a b} "Student Loan Bankruptcy Options". money-zine.com. 2011. http://www.money-zine.com/Financial-Planning/College-Loan/Student-Loan-Bankruptcy-Options. 
9. ^ ^{a b} Dvorkin, Howard (2010). "Student Loan Debt Surpasses Credit Card Debt-What to Do?". foxbusiness.com. http://www.foxbusiness.com/personal-finance/2010/09/20/student-loan-debt-surpasses-credit-card-debt. 
10. ^ "46 Percent Of Federal Loans Paid To For-Profit Institutions Will Go Into Default". huffingtonpost.com/AOL.com. 2010. http://www.huffingtonpost.com/2010/12/23/46-percent-default-rate-o_n_800283.html. 
11. ^ Turner, Katrina (2010). "Subject: Default Rates for Cohort Years 2004-2008". ifap.ed.gov. http://ifap.ed.gov/eannouncements/122010CDRlifetimerate2010.html. 
12. ^ ^{a b} Kantrowitz, Mark (2002). "Research Report: Causes of faster-than-inflation increases in college tuition". FinAid. http://www.finaid.org/calculators/tuitionanalysis.pdf. 
13. ^ ^{a b c d} Watts, GordonWayne (2011). "Higher-Ed Tuition Costs: The ‘Conservative’ view is not on either extreme". ThirstForJustice.net. http://thirstforjustice.net/Higher-Ed-Tuition-Costs.html. 
14. ^ "Affordable Higher Education: Student Debt". U.S. PIRG. 2011. http://www.uspirg.org/higher-education. 
15. ^ "Fight to Protect Students and Taxpayers Moves to Senate! - House Voted to Slash Pell Grants and Block Gainful Employment Rule". ProjectOnStudentDebt.org. 2011. http://projectonstudentdebt.org/update_3711.vp.html. 
16. ^ Applebaum, Robert (2009). "The Proposal". ForgiveStudentLoanDebt.com. http://forgivestudentloandebt.com/content/proposal. 
17. ^ "Real Loan Forgiveness". ProjectOnStudentDebt.org. 2011. http://projectonstudentdebt.org/initiative_view.php?initiative_idx=8. 
18. ^ "Take Action for Real Loan Forgiveness!". ProjectOnStudentDebt.org. 2009. http://projectonstudentdebt.org/update_61909.vp.html. 
19. ^ Collinge, Alan (2011). "Private Student Loan Bankruptcy Bill... The 4th Attempt". StudentLoanJustice.org. http://studentloanjustice.org/action-room.htm. 
20. ^ "Bankruptcy Relief for Private Student Loan Borrowers Advances". ProjectOnStudentDebt.org. 2010. http://projectonstudentdebt.org/update_91610.vp.html. 
21. ^ "Affordable Higher Education: Cutting Lender Subsidies". U.S. PIRG. 2011. http://www.uspirg.org/higher-education. 
22. ^ "Commission: Private Loans are Not the Solution!". ProjectOnStudentDebt.org. 2006. http://projectonstudentdebt.org/update_8706.vp.html. 
23. ^ "Commission Calls for "Reduced Debt Burden" -- Time for Education Department to Act". ProjectOnStudentDebt.org. 2006. http://projectonstudentdebt.org/update_81806.vp.html. 
24. ^ "Top 10 Job Placement Colleges: INFORMATION AND TIPS ON INTERNSHIPS AND PAID INTERNSHIP". CollegeTips.com. 2011. http://www.collegetips.com/college-money/college-job-placement.php. 
25. ^ "Bureau of Labor Statistics, U.S. Dept. of Labor". Consumer Price Index. http://www.bls.gov/cpi/. 
26. ^ Powell, James (2006). "Bank of Canada". A History of the Canadian Dollar. http://www.bankofcanada.ca/en/dollar_book/index.html. 
27. ^ To show a wide range of tuitions, the chart's vertical axis is logarithmic. The span between two horizontal lines is a factor of ten.
28. ^ "Canadian Association of University Teachers". Education Review 4(1), Sept, 2002, p. 2, Table 1. http://www.gpoaccess.gov/stylemanual/2000/chapter_txt-15.html. 
29. ^ "University of Iowa". Fact Sheet, 2005. http://www.library.uni.edu/speccoll/unifacts.html. 
30. ^ For background on the emergence of MIT and other U.S. research universities, see Geiger, Roger L. (1986). To Advance Knowledge: The Growth of American Research Universities, 1900-1940. Oxford University Press. 
31. ^ "MIT Undergraduate Association". The Tech, 1994-2006. http://tech.mit.edu/. 
32. ^ "MIT Undergraduate Association". The Tech, Archives, 1881-2009. http://tech.mit.edu/browse.html. 
33. ^ Resident tuition rates are charted for public institutions; fees are averaged; nonresident rates are typically higher.
34. ^ Note the qualitatively similar patterns in inflation-adjusted tuitions for three periods: 1940-1950, 1950-1980 and 1980-2000.
35. ^ After 1960, these patterns show gradually widening ratios of private-school to public-school tuition, but some public systems saw tuition increases similar to those of the 1950s in Iowa during different decades.
36. ^ "National Center for Education Statistics, U.S. Dept. of Education". Average institutional charges for tuition and required fees. http://nces.ed.gov/quicktables/result.asp?SrchKeyword=institutional+charges+for+tuition&topic=All. 
37. ^ Data sources listed in Uebersax, John (2009-07-15). "College Tuition: Inflation or Hyperinflation?". http://satyagraha.wordpress.com/2009/07/14/college-tuition-hyperinflation/. Retrieved 2009-07-15. 
38. ^ Ehrenberg, Ronald G. (2002). Tuition Rising: Why College Costs So Much. Harvard University Press. 
39. ^ Kane, Thomas J. (1999). The Price of Admission: Rethinking How Americans Pay for College. Brookings Institution Press. 
40. ^ Bowen, William G., Tobin, Eugene M., Kurzweil, Martin A., and Pichler, Susanne C. (2005). Equity And Excellence In American Higher Education. University of Virginia Press. 
41. ^ "Higher Ed NewsWeekly (p.57)". Illinois Board of Higher Education. 2007. http://www.ibhe.state.il.us/NewsDigest/NewsWeekly/092807.pdf. 
42. ^ "Student Loan Debt Drives Man to Suicide". Newsalert, citing The Chicago Sun-Times. 2007. http://nalert.blogspot.com/2007/09/student-loan-debt-drives-man-to-suicide.html. 
43. ^ Lewis, Libby (2007). "A Pastor's Student Loan Debt". NPR. http://www.npr.org/templates/story/story.php?storyId=11980696. 
44. ^ Collinge, Alan (2007). "Company’s march toward student loan monopoly scary". TheNewsTribune.com. http://www.thenewstribune.com/2007/06/19/90638/companys-march-toward-student.html. 
45. ^ http://www.finaid.org/loans/
46. ^ http://education-portal.com/articles/How_Much_More_Do_College_Graduates_Earn_Than_Non-College_Graduates.html
47. ^ http://www.usnews.com/articles/education/worlds-best-universities/2010/09/21/worlds-best-universities-top-400-.html

External links

• "College, Inc.", PBS FRONTLINE documentary, May 4, 2010
• U.S. Dept. of Education