Really, Why Is Tuition Rising?

The reason for the ever-escalating cost of tuition is a matter of great public debate. The liberal think tank Demos attempts to answer this question once and for all. It pretty much puts all of the blame on declining state appropriations for higher education. I’m sympathetic, but I don’t find this argument terribly convincing.

Demos explains that:

This brief attempts to pinpoint the cause(s) of spiraling tuition by taking a deep dive into public university revenue and spending data from the National Center for Education Statistics’ Delta Cost Project Database. We find that declining state appropriations for higher education is indeed the primary driver of rising tuition, responsible for 79 percent of tuition hikes at public research universities between 2001 and 2011 and 78 percent of tuition hikes at public master’s and bachelor’s universities over the same decade. Increased spending on administration accounts for another 6 percent and 5 percent…and increased grant and loan aid has had a negligible effect, at most. Finally, the purported construction boom’s impact on tuition has been minimal as well, as we estimate spending on construction has accounted for 6 percent of tuition increases at both research and master’s/bachelor’s universities.

How’d they figure this out? Well, according to the brief, spending didn’t really increase that much in the last decade–universities cost only a little more to run–but:

Spending increases pale in comparison to tuition increases: net tuition revenue—total revenue from tuition and fees, net of institutional aid—at research institutions rose by $3,628 per student and by $2,463 per student at master’s and bachelor’s universities. These large tuition increases, coupled with slow spending growth, suggest that the cause(s) must be on the revenue side of the balance sheet, and that administrative “bloat” and student aid are at most minor contributors to tuition increases.

How did they figure this? Well, basically researchers looked at increases in administrative staff, student financial aid, and building construction costs over the past decade. They conclude, accurately, that while all of these things have increased, their cost actually hasn’t increased very much. (Campus construction is a little complicated here, since the reality is that there is a whole lot more construction spending. The authors correctly point out, however, that most of this is legally separate from tuition, and paid for by gifts and state appropriations for capital projects.) Then, researchers looked at state support for higher education over the last decade, which has declined quite dramatically, “in near-lockstep with tuition increases.”

They have figured out to this out to ridiculously mathematical, pie chart, precision:

PieChart

This seems to be missing something here, however.

Now, if colleges enjoyed more generous funding, and they had struck rules in place about how much and how rapidly they could raise tuition, as is the case in most developed counties, they wouldn’t increase tuition the way they do, sure. But that doesn’t mean tuition increases are really all about state appropriations, since tuition doesn’t don’t actually track higher education spending from states.

Colleges are receiving a lot less money relative to their total cost, but the real problem with the Demos study is that it’s far too narrow a look at college spending. Colleges aren’t really spending a lot more than they were 10 years ago, but they’re spending a hell of lot more than they did 50 years ago, when the tuition escalation really began.

MoreAndMoreAndMore

Colleges hike tuition when appropriations are up, and they hike tuition (a little less) when appropriations are down.

What they’re actually doing is probably taking advantage of an admittedly difficult situation.

Public colleges don’t get much money from the state, and they’re getting less now (relative to the total cost) than ever before. And so they have to charge more tuition. And students and their parents are willing, still, to pay every larger and larger sums for tuition. And so colleges think, well, why suffer, why not raise tuition a little more and building some buildings or higher some more administrations?

Demos has demonstrated pretty well that college aren’t spending a lot more on buildings and new administrators than they were ten years ago. That’s important, because it shows that the problem isn’t getting any worse, but let’s not let our public colleges off the hook here. They sure as hell have more high paid administrations, and more luxurious buildings, than in the 60s and 70s.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer