This is a question that has been beaten about repeatedly on DailyKos. A decade ago, a mainly Republican congress wanted to get to the bottom of the question since tuition had never risen faster than in the 20 year period between 1980 and 2000. Since 2000, tuition increases are outpacing inflation still but they have not risen at the high rate that they did between 1987 and 1996. So, I think the following study published in 1998 by congress is still largely relevant since the factors cited in that study have not changed all that much.
Here's a link to the study: http://www.nyu.edu/...
Before I get into the study itself, here's a brief review of it that captures the essence of what is at stake:
http://www.highereducation.org/...
In recent years, state governments have scaled back appropriations for higher education in a fashion that appears to have been motivated in part by a desire to punish profligate institutions. The specter of federal "cost containment" has loomed ever-present, and the political jockeying around the composition of the National Commission reflected the sense that this was a high-stakes game, with damaging outcomes for the enterprise a danger.
The well-publicized fact that two of the Commission’s Congressional sponsors condemned the first draft and forced the group to do a hasty revision, adopting a more severe tone, makes it hard to read the final report simply as an analytical document—the political overlay is omnipresent. That said, the report does contain much that is sensible, coupled with curious omissions.
Now, before I get into the study, I think some contextual background about Higher Ed is needed. One part left out of this document is a history on American university education. Gerald Graff and James Berlin have done excellent general histories of the development of American universities. We don't need to go heavily into this, but suffice it to say, the GI Bill and the Cold War pumped a lot of money into the university system and essentially constructed the system we have today, a system which is still regarded as the best in the world, a system which--despite its high costs for families--subsidizes education at a higher rate than many peer systems in the world (that is, if you take the starting basis as "cost per student," a factor that the following study goes through great pains to emphasize). Compare a top 30 public institution in the USA to one in Canada, say the University of Toronto, and you'll see that the American school is more heavily subsidized.
Since 1980, when the impact of the Cold War and the GI Bill were waning, government support for education has been cut. From 2000 to 2010, one can describe it as a gutting of public support for higher ed, with consecutive cuts of 10% or more common in the last three years alone. Some state schools, such as Pennsylvania State University, have seen state support drop to 5-7% of the total budget. PSU does not even respond to FOIA requests anymore because it has fallen under the threshold that would regard it as a public entity. In short, the number one cost driver for higher tuition has been a cut in state support and a cut in federal research. Universities, in order to preserve their programs and maintain a diverse student body, have responded in two ways. One, by reducing institutional support to faculty (ie. hiring part-timers who work much more cheaply). Two, raising tuition high. Diverse student bodies are maintained with schools sticking to a need-blind admissions policy which takes 35-40% of tuition and redistributes it to students in the form of student aid. In other words, students who are paying the full freight of tuition are seeing 35-40% of their money given to other students in the form of tuition remission/scholarship. One way to cut into tuition increases is to eliminate the need-blind admissions policies (need-blind is essentially when admissions committees are not privy to a student's financial information, and admission is granted on the basis of student academic record. Students are then graded on the basis of that record, and that grade goes to a financial aid officer who, together with a FAFSA reading of that student's financial situation, determines the appropriate amount of aid). I am not in favor of reducing tuition through eliminating need-blind admissions.
From here on, I will address the study's tuition increase cost-drivers, and at the end I will draw a couple conclusions about the future of higher education in America.
One thing I would point out is that the increases in tuition are not necessarily tied to increases in student loans. On a purely anecdotal basis, I can say that my student loans were capped at $2500 in the mid-1980s, and right now they are capped at $5500. This is almost 25 years later. Tuitions have had an exponential increase above the expansion of student loans. The commission makes note of the relationship of tuition increases to loan inflation:
Over the total time period examined, 1987 to 1996, total student aid from all sources increased by 128 percent. Although three-quarters of all aid comes from Federal sources, the largest rate of increase in aid during this period came from institutional sources, which went up by 178 percent. Within the Federal programs, the lion's share of the increase was in loan volume under the guaranteed student-loan programs the Federal Family Education Loan and Federal Direct Student Loan (FFEL/FDSL). The number of recipients obtaining loans under these programs increased by 87 percent between 1987 and 1996. Because a greater number of students received aid, Federal aid per recipient was less than the increase in aid spending. Average Pell grant awards, for example, increased 21 percent, and the FFEL/FDSL awards by 41 percent.
So, prior to the dramatic increase in tuition, federal sources--mostly in the form of student loans--comprised at least 75% of funding sources. In the decade being referenced, schools were providing 25% in aid, but that aid was increasing at a clip of 178% over the period. This increase in institutional student aid has by now resulted in 35% to 40% of all tuition money being redistributed to other students. In other words, institutional aid is outpacing the increase in student loans, and is thereby causing tuitions to rise even more to offset the cost for poorer students. The natural conclusion is that schools could lower tuition if they got rid of need-blind admissions. Breneman in the article I cited above sympathizes with students from families who pay the full amount:
This [tuition redistribution] is an activity shrouded in a certain amount of mystique, if not secrecy, and undoubtedly generates resentment and a sense of unfairness for families paying full freight, but who learn that many students are not. The Commission urges colleges and universities to be more forthcoming with financial data on costs and prices, but this recommendation will cause discomfort for many private college leaders. They are stuck in a difficult situation that is hard to defend on principled grounds, even though the economic forces driving their behavior are compelling.
So, Breneman characterizes the need-blind admissions policy as one difficult to defend on principle. This literally means schools are up against the wall in terms of trying to maintain a diverse population in terms of class, and if you look up schools that are doing away with need-blind policies in order to cap the tuition rise, you'll see the trend.
The study also researched the claims of certain congressman about what is driving up costs. First up, federal grants in student aid:
The Commission finds no evidence to suggest any relationship between the availability of Federal grants and the costs or prices in these institutions. Less than one student in four receives a Federal grant, which pays for less than 10 percent of the total price of attendance in either sector. And, although the methodology of financial need analysis is tuition-sensitive, the maximum Pell grant award is capped at $3,000.
How about student loans?
The Commission has found no conclusive evidence that loans have contributed to rising costs and prices. One commissioned paper suggests that Federal loan availability has helped contribute to rising prices. Another paper suggests that the capital available through loans has allowed colleges to increase their charges and allowed independent colleges in particular to maintain enrollment in ways that would not have been possible otherwise. The Commission knows of other studies which come to conclusions opposite to these. This question should be studied in greater detail and with much greater attention to empirical facts.
The members of the Commission are, however, unanimously concerned about sharp increases in student borrowing. What is unclear is whether these increases have occurred because (1) higher loan limits and the new "un-subsidized" program permit more borrowing; (2) more families are choosing to finance college expenses through loans rather than from savings or current income; or (3) the price of attending higher education has increased. The Commission's judgment is that all three factors are probably involved.
And, again, increases in scholarship:
Finally, the Commission looked at the relationship between institutional financial aid and increases in student prices. In this instance, there is slightly stronger evidence that increases in institutional aid have been one of the cost and price drivers, as institutional aid grew by 178 percent between 1987 and 1996. Since most of the revenue for institutional aid comes from tuition dollars, it seems reasonable to conclude that tuitions could have increased slightly less had institutions not been putting these revenues into institutional aid. At the same time, however, had institutions not generated revenue to pay for institutional aid, student borrowing would have had to increase to maintain access, or access would have had to diminish.
What about catering to legitimate student needs?
Students. The need to offer remedial courses to students could also contribute to rising costs. Approximately 78 percent of all colleges and universities that enroll freshman offered some type of remedial course (typically reading, writing, or mathematics) in the fall of 1995. Although it is difficult to provide national estimates of the costs, data for individual institutions exists. For example, in 1993-94, California spent $9.3 million to provide remedial courses for students on the 22 campuses of the California State University system, representing just under one percent of the system's total budget. A Florida legislative report said that, with nearly 70 percent of community college freshman requiring remedial education courses, Florida community colleges are spending $53 million a year providing this type of instruction.
Increasing accessibility for students with disabilities is also a potential cost driver. While no one argues the necessity of providing access and related services, the cost is relatively new and it is real. Estimates of the cost of complying with the Americans with Disabilities Act (ADA) range from an average of $694,000 for public two-year institutions to $12,867,000 for public research institutions.
What about administrators?
Administrators. The need to employ more administrators to cover both expanded services and larger numbers of Federal, state, and local regulations combined with higher administrative salaries is thought to drive up administrative costs.
This contention may be true for the first half of the 1980s, when administrative expenditures increased as a share of total educational and general (E&G) expenditures, but, between 1987 and 1994, administrative expenditures either remained the same or fell, as a percentage of total E&G expenditures. Another way of looking at rising administrative costs is that administrative expenditures per full-time-equivalent (FTE) student increased over 22 percent between 1979 and 1986, but less than 1 percent between 1986 and 1993, after adjusting for inflation. The expenditures for student services costs increased 16 percent during each of the two time periods in question.
As an aside, I offer a counter-intuitive argument about administrators. Here's a faculty member who believes the drive for efficiency and business models is larding universities with unneeded administrators:
http://news.stanford.edu/...
Those who urge universities to become more efficient, he said, emphasize that they are in competition for scarce resources and that they need to pay increased attention to their customers -- the students or the eventual employers of those students -- to survive. This has led, he said, to an increased role for the administration, for development officers and public relations, and a reduced role for the academic establishment -- a "reduced role of the disciplines, reduced role of the research, reduced role of doctoral education, reduced role of the general faculty."
At Stanford, March said, the faculty "delegate to administrators all these minor issues of money, as long as they don't bother us. By the time they start bothering us, we've lost the capability of being involved in the activity."
Back to the study. What about faculty?
Faculty. Many believe that the labor structure and tenure system of college faculty drive up college costs. It is true that higher education is a labor-intensive industry and that changes in policies that affect the number of faculty required to teach courses as well as the types of faculty hired (part-time vs. full-time, tenured vs. non-tenured) have an impact on an institution's cost of providing education.
There is little evidence to suggest, however, that changes in faculty hiring practices or workload have driven up college costs in the past decade. In fact, there has been movement in the opposite direction. In an effort to control costs, institutions have hired more part-time and non-tenured faculty and increased the number of hours faculty spend in the classroom: the proportion of part-time faculty and staff employed by colleges and universities increased from 33 percent of all instructional faculty and staff in 1987 to 42 percent in 1992. In the same period, the percentage of instructional faculty and staff with tenure declined from 58 to 54 percent. And, the reported number of student contact hours at all institutions increased from 300 in 1987 to 337 in 1992.
Faculty sizes have been cut in half almost everywhere in the last few decades. Many faculty members remember their department's heyday in the 1970s when they had 50 members due to the Cold War, and these departments have been reduced to 25 members or less now. There's been a steady increase in responsibilities as well. Breneman cites a fear about part-time faculty taking on too much of the teaching load, a real concern not only for students who do not have as much access to part-time faculty, but also the faculty themselves who on average earn less than $3k per class. And yes I know some part-timers who have taught 10 classes at 4 different schools in one semester at average pay of $1.8k per class. The poor students.
For the first time, colleges are this year having more undergraduate classes taught by part-timers than full-timers:
http://www.insidehighered.com/...
Nationally, adjuncts and contingent faculty — we call them ad-cons — include part-time/adjunct faculty; full-time, nontenure-track faculty; and graduate employees. Together these employees now make up an amazing 73 percent of the nearly 1.6 million-employee instructional workforce in higher education and teach over half of all undergraduate classes at public institutions of higher education. Their number has now swollen to more than a million teachers and growing.
What about facilities?
Facilities. Growth in higher education enrollments over the past 30 years has meant that colleges and universities have had to construct new classrooms, laboratories, and dormitories to accommodate students. Serving students with special needs has also meant that higher education institutions have had to redesign classrooms, dormitories, and other public spaces.
Looking to the future with regard to campus facilities' needs does not provide a rosy picture. A 1997 study completed by the Association of Higher Education Facilities Officers, the National Association of College and University Business Officers, and Sallie Mae estimates deferred maintenance costs for all campus facilities to be approximately $26 billion. Facilities could thus become a major cost driver in the next decade.
What about technology? (Personally, I find this to be one of the great unmentionables. This year my university got rid of its 6 year computer renewal program--ie. faculty get a new computer every 6 years--and it saved a hefty chunk of the budget. Tech costs, labs, smart classrooms, etc., have skyrocketed costs. Think about this in terms of rehabbing schools. Where I live, smart classrooms are going up everywhere with federal grants, the costs are enormous).
Technology. The percentages of courses using technology in a variety of capacities has risen significantly just since 1994. Institutions must provide equipment for faculty and students as well as the infrastructure to accommodate it. Given the age of many campus buildings and the state of the infrastructure to support this equipment, this expense is substantial.
To cover the costs of technology, some campuses have instituted mandatory computer/instructional technology fees, thus passing on some of the costs to students. These fees ranged from an average of $55 per student in community colleges to $140 in public universities. It appears that increasing costs for technology almost certainly translate into higher prices charged to students.
What about regulations? BP anyone? Glass-Steagall? Sorry to joke about this:
Regulations. The number and types of regulations with which colleges and universities are asked to comply have grown rapidly in recent years. Complying with these regulations costs money. The Federal government regulates colleges and universities through a maze of mandates covering personnel, students, laboratory animals, buildings, and the environment. Stanford University, for example, estimates that the university incurs approximately $20 million a year (or 7.5 cents of every tuition dollar) in costs related to complying with a range of regulations.
Accreditation:
The cost of accreditation has also increased in recent years. There has been significant growth in the number of accrediting bodies, particularly specialized ones. Currently, accrediting activities are undertaken by approximately 60 specialized agencies overseeing more than 100 different types of academic programs. Institutions report that the self-study procedures involved with these accrediting efforts overlap and duplicate one another and absorb large amounts of faculty and administrator time.
What about pizazz?
Expectations. Less concrete than the other cost and price drivers are changing expectations about quality. Prospective students visiting college campuses today expect to see gyms equipped with state-of-the-art exercise equipment and facilities. Students also expect a complete range of course offerings, dormitories that are wired for computers as well as stereo equipment, and specialized counselors who can advise on personal as well as career and job placement matters. The changing student population has also brought changing expectations to campus. Parents look for child care on campus; older students returning to college anticipate counseling relevant to their interests; and part-time students who work during the day expect courses (and administrative services) to be available on evenings and weekends. These changing expectations cost money.
Here is where I think academia should be shot in the head. We should have agreed to not pamper our students. Although even I complain about my old building and the asbestos running through my office, that doesn't mean I need a sushi chef in the kitchen. I like sushi, but it's not required.
And don't get me started on college sports, a huge waste of money. They are not profitable. Not at all. I am not against schools losing a couple million or a little more on sports, that's fine. Many div. 1 schools are losing 20-30 million a year. Div-1AAs on the other hand lose 1 to 4 million.
I can't get into the rest of the study, the analysis and recommendations since that's at least two more diaries. Besides, I agree with Breneman that the research was strong in finding cost drivers, but politically tainted in terms of recommendations.
But I will say this. We have reached a fulcrum in the rise of tuition. U. Cal's President Yudof made a startling admission recently. When U. Cal's budget was gutted by the crisis in California, he didn't respond by recommending a tuition increase to offset the loss. He announced to current and prospective students that the school would cut back on its educational mission. His words, quite literally, were, "You will not receive the education that your predecessors did even though you are paying more for it." I thought this took guts even though it was a bit of political theater. Why guts? Because schools that admit they are devaluing education get hurt in reputational ratings. See Bennington for instance. This isn't a bad thing, especially since most schools will have to take the same approach soon. Schools will stop pretending they are competing against one another.
Why do I say pretending? Go back to the article by March on university efficiency:
Colleges and universities don't compete in the same way as other businesses, he said. They still compete for students primarily on a local basis. Even among prestigious national institutions, such as Stanford and Harvard, about half the students come from no more than a few hundred miles away, March said.
"The competition that exists is to only a minor degree competition for numbers of students. It is competition, called signaling competition, [in which] we are competing for the value of the degree that we signal. That means we are competing largely for the quality of the students and the quality of the faculty."
As long as that remains the basis of competition, he said, "most of the standard steps toward efficiency -- toward improving the delivery of knowledge -- will probably hurt rather than help you" because there is no reason why efficiency will help an institution's reputation for having quality students and faculty.
Signaling competition, he said, has "led to great homogeneity with respect to the trappings of education, as weak institutions try to look like strong ones. All [college] catalogs look alike. I challenge you to read catalogs and find out which one is for which institution." But institutions do build niches based on their differing students, faculty and styles, March said.
I think he has it largely right. Just as the commission stated that we should not have price controls on tuition, there will be a natural filtering of schools into different tiers. There already is. Students should not be afraid of attending universities that charge less and offer less. Regional or satellite campuses will soon grow bigger and become the norm. In New York state, the university system is already discussing the possible lifting of the cap on tuition increases (tuition currently at 4.9k) so that the university centers that have to maintain labs and research can break away from the satellite campuses. All campuses currently charge the same amount, even though the costs per student at the four research centers are double and triple the costs at the satellites.
This is natural. There's nothing wrong with it. We shouldn't demand that U. Michigan reduce tuition (and therefore its offerings) to the level of Eastern Michigan, a really good school that is about 5 miles away.
The problem in Higher Education is one of increasingly limited resources, increasing income crunch on the middle and lower class, but it's also one of perception. We should have costlier higher performing schools and also less costly lower performing schools, and most of all, we need students to be savvier in the marketplace. Snazzy digs, athletic programs, etc., should be secondary considerations. Academic interests should take precedent. If you're ready for a first-class and rigorous education, then by all means, pay the full freight at PSU and Michigan. I think it's worth it. But it's not for everyone.