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Higher Education and Student Debt: Why is Education So Expensive?

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The ability to go to college has long been held as a high water mark of success, so much so that an undergraduate degree is an oft-mentioned predictor of professional success and income. Among other major life choices, the decision to get a higher degree has been seen as a total win-win. The world will be your oyster with a Bachelor's under your belt, so the logic has always been.

Unfortunately, just as the Great Recession called into question fundamental American institutions and values like home buying and retirement, it has also called into question the affordability and accessibility of college – just as President Obama has made increasing college attendance a cornerstone of his education policy.

Over the last thirty years, college tuition has steadily risen. The cost of tuition at many colleges literally prices out many families who want to send their kids to college. If they do not receive grants or scholarships, these students are obligated to take out loans or give up on a higher degree. Either decision can limit a student’s professional or personal options in the future.  

But why is higher education so expensive in the first place?  

This query can lead you to some pretty cynical answers, many based around government funding.  

First, it is helpful to distinguish between public universities and private universities, which each have different funding structures. Over 80% of all college students go to a public college, so the majority of this discussion will focus on public institutions. Nonetheless, many of the reasons why public college tuitions have increased apply to private institutions as well.

Funding for public universities comes from, as the term suggests, the state and federal government. Yet starting in the early 1980s, shifting state priorities forced public universities to increasingly rely on other sources of revenue. For example, in the University of Washington school system, state funding for schools decreased as a percentage of total public education budgets from 82% in 1989 to 51% in 2011. In other states, public funding has decreased by at least 10% and is likely to continue downward in the coming fiscal year. 

But why this "shift in priorities?" U.C. Berkeley English professor, Christopher Newfield, in his new book Unmaking the Public University posits that conservative elites have worked to de-fund higher education explicitly because of its function in creating a more empowered, democratic, and multiracial middle class. His theory is one that blames explicit cultural concern, not financial woes, for the current decreases in funding. He cites the fact that California public universities were forced to reject 300,000 applicants because of lack of funding. Newfield explains that much of the motive behind conservative advocacy for de-funding of public education is racial, pro-corporate, and anti-protest in nature.  

In the wake of the Civil Rights movement, sexual revolution, anti-war efforts, and an increase in government regulation of industry, the conservative movement took aim at public education as a source of left-wing agitation. In 1971, Lewis Powell (before assuming his post as a Supreme Court Justice) authored a memo, now known as the Powell Memorandum, and sent it to the U.S. Chamber of Commerce. The title of the memo was "Attack on the American Free Enterprise System," and in it he called on corporate America to take an increased role in shaping politics, law, and education in the United States.

His ultimate objective, as outlined in the memo, was to purge respectable institutions such as the media, arts, sciences, as well as college campus themselves of left-wing thoughts. At the time, college campuses were seen as “springboards for dissent,” as Newfield terms it, and were therefore viewed as publicly funded sources of opposition to the interests of the establishment. While it is impossible to know the extent to which this memo influenced the conservative political strategy over the coming decades, it is extraordinary to see how far the principles outlined in his memo have been adopted.

The de-funding of state colleges and universities came in many forms, ranging from conflicts over academia to budget struggles. Attacks on humanities curriculums, political correctness, and affirmative action shifted the conversation on public universities to the right, creating a climate of skepticism around state funded schools. State budget debates became platforms for conservatives to argue why certain disciplines such as sociology, history, anthropology, minority studies, language, and gender studies should be de-funded because of their so-called promotion of anti-establishment sentiment. Gradually, these arguments translated into real- and often deep- cuts into the budgets of state university systems.

Public universities have, to the chagrin of many of us, increased tuition to make up for this gap. Just in the last year, the University of California system has increased annual tuition by more than $1,000, due to overall budget cuts. This uptick in tuition resulted in university-wide strikes. To compensate for these budget shortfalls, some public schools, which were primarily designed to educate in-state residents, began to enroll more out-of-state students as they are charged higher tuition rates. In 2009, the University of California at Berkley reduced the number of admitted Californians by 15% while doubling the number of nonresident and international students admitted.  

Additionally, tuition has increased at research universities, in part, to fund expensive research that has no alternate revenue stream.

Other revenue streams have been created to further supplement the decreased state funding to public universities, which are beginning to make the idea of “public” education an ambiguous one. Many universities have relied on private sector methods of revenue generation such as the formation of private corporations, patents, increased marketing strategies, corporate partnerships, campus rentals, and for-profit e-learning enterprises. To cut costs, public universities have employed non-state employee service contractors and have streamlined their financial operations. 

As tuition has increased, however, financial aid to students has not always kept up. Federal policy has shifted away from a long-term commitment to need-based grants, instead focusing on increasing the availability of student loans to all students. Without access to need-based grants for those who cannot pay off student debt, the economic inequality between students will only compound.  

While tuitions have steadily increased, this has not translated into an increase in faculty salaries or more robust spending. In a report by Mary Ellen Flannery titled “Is the U.S. Falling Behind Higher Education?” she remarks that faculty salaries have been cut across the world in recent years. Meanwhile, in a report by the Delta Project, a non-profit that studies post-secondary education costs, the increase in tuition at public universities has not meant increased spending at all. Simply put, the increase in tuition has gone towards offsetting state budget cuts.

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While public colleges and universities have been forced to find new revenue streams and increase tuition, community colleges have seen even larger cuts. One third of all students are enrolled in community colleges, the biggest higher education sector in the United States, and many of the touted increases in college enrollment are at community colleges, which now serve over 1.6 million more students now than ten years ago. Despite the increased enrollment, community college budgets have been increasingly slashed, decreasing the amount of money spent on students by nearly 3% since 1999. To add insult to injury, many of the students that enroll in community college need additional academic support and financial aid, making the budget cuts even more alarming.

Private colleges’ tuition has skyrocketed in the last ten years as well, as the smaller recession of 2001 and the Great Recession have shrunk endowments and decreased giving. Unlike public schools, private colleges have increased spending as they have increased tuition, yet have precipitously priced out many students from low or middle income backgrounds, thus decreasing diversity in the student body. Private colleges, too, have looked to alternate revenue streams to supplement their budgets and maintain their rankings and reputation.

Average Annual Percentage Increases
Inflation-Adjusted Published Prices by Decade, 1980-81 to 2010-11

Description: news/graphics/2011/10/gr-tuition-inflation-300.gif

Notes

In the past decade, tuition and fees at public four‑year colleges and universities increased at an average rate of 5.6% per year beyond the rate of general inflation. Costs at private schools, adjusted for inflation, have actually decreased.

Source: CollegeBoard
Credit: Stephanie d'Otreppe/NPR

In Privatization and Public Universities, edited by scholars Edward P. St. John and Douglas M. Priest, the editors discuss the larger implications of these alternate revenue streams. While often providing public institutions with funds necessary to maintain the academic standing and reputation of their university system, these private sources run the risk of altering the mission of the university itself. St. John and Priest caution against private funding that requires new services and programs that are not in the direct interest of the students and core mission of the institution itself. 

A remark made by economist and author of the book Why Does College Cost So Much, Robert B. Archibald, sums up the state of funding for higher education in America. “Everyone has three objectives for higher education: lower tuition, higher quality, and less government spending on subsidies. The unfortunate truth is that we can have any two of these, but we can’t have all three.”  
In a world where bachelor’s degrees are the new high school degrees and in a country moving from a manufacturing-based economy towards a knowledge and service-based economy, the failure to invest in public education will only hurt the United States.  

In a message to Congress in 1806, Thomas Jefferson, founder of the University of Virginia, wrote, “A public institution can alone supply those sciences which contribute to the improvement of the country, and some of them to its preservation.”  If we are to improve and preserve, we have only one option – stop slashing education budgets and invest in our country’s future.

 

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