OT: Why does a college degree cost so much?
Very detailed and insightful piece from CNCB that does a great job addressing the question:
"With the total level of student debt outstanding at more than $1.2 trillion, parents, students and researchers are now asking: how is this sustainable? And why does college cost so much?"
With plenty of great charts, facts and figures covering public and private, every state, most major schools - 26 schools in Michigan, for example.
My University tuition was less than my Jesuit high school tuition - about $250 a semester.
http://www.cnbc.com/id/102746071
Politically incorrect answer . . . it's a bubble that is way out of line with the rest of the normal world in terms of high salaries and lots of overhead positions.
But for now, the demand is still there because of the perception that even though it is way overpriced for what it should really cost, it will pay off on a personal level once you have that degree. And it's very easy to get the loans to pay for it.
But this is starting to change. Graduates are finding out that they can no longer justify the cost in many cases. But they are still stuck with thoese easy loans that they can't pay back.
it's the one thing that when most people "buy", price is essentially no object, so the normal market forces are out the window.
If you're sick enough, you'll go bankrupt to pay. Higher ed isn't that extreme, but pretty close to it. Like you say, people still will pay almost anything they have to, to get their ticket to the American dream punched.
Another factor is the rapidly increasing demand from overseas for the "prestige" of an American college education. And they are willing to pay full price, which keeps subsidizing the overspending bubble. And that's not likely to decrease anytime soon.
So, you have a lot of inbalances at work within an artificially insulated environment. (Much like health care currently is.)
Your core argument is correct, but there's a very big difference between healthcare and college: healthcare costs are essentially unknown, so there's no comparison of prices between care providers. Consumers don't include price in their decision because they don't know it. Yes, for terminal cases you'll pay anything for the best care. But for a broken foot? This type of care is a commodity and prices should be known, and there should be a cost/benefit to the individual for choosing higher/lower cost of such a service. Doesn't work that way today. You either have insurance or you don't, it's either covered or it's not; consumers don't compare prices of the providers. Massive distortion of the market.
Colleges don't have that issue, prices are well known and considered. The easy loans distort the market, but consequences of that decision are known.
Here's why:
Alhough faculty salaries now mirror those of most upper-middle-class Americans working 40 hours for 50 weeks, they continue to pay for teaching time of nine to 15 hours per week for 30 weeks, making possible a month-long winter break, a week off in the spring and a summer vacation from mid-May until September.
http://www.outsidethebeltway.com/do-college-professors-work-enough/
http://www1.salary.com/College-Professor-Salary.html
Add to that the enormous and ever-increasing amount of salaried positions that don't teach at all.
I disagree with the premise that tuition is inflated because the costs are so high. I'm not arguing that Universities aren't bloated, rather that your premise is getting the cause and the effect backwards.
The issue driving up the cost of tuition is ultimately the easy availability of student loan debt. This allows for an increase in demand for a college education at a name brand university. The increase in demand allows for the Universities to charge ever increasing fees (this is simple microeconomics Supply and Demand curves). The greater revenue from the ability to charge more allows for the bloated staffing of the Universities.
If prospective students had to save ahead of time for tuition or take out much higher rate loans that reflected the true default risk, there would be far less demand and far lower prices.
The salaries for professors and sizes of administrative staffs would adjust accordingly to what the new market dynamic would support.
I don't disagree with you. There are a lot of high-margin industries where the pricing is driven by demand, not by cost. Higher education is just one of them.
They are not "bad" for doing this, Apple does it too.
Whereas Apple will realize the demand in excess of costs as profits to shareholders, the education establishment will use it to add staff and benefits. As long as the money keeps coming in, they will keep growing their infrastructure to use it up. Much like coaching salaries will keep going up to use up the TV money that keeps pouring in from college sports.
What is "bad" is that they are outrunning their headlights, assuming ever-increasing student demand that is not going to be there. When that bubble pops, are they going to be able to adjust accordingly?
Are they going to be stuck with the education-equivalent of a 200,000 seat stadium with waterfalls and glass-enclosed private suites . . . with a fanbase of only 80,000 to support it?
The era in which a college degree was priced (roughly) by carefully managed cost-plus forces is long gone. It's not any different than asking the UM ticket department to slash prices to less than a third of the current price because the UM football team brings in ~$85 million in revenue on ~$25 million in costs. The football team brings in ~$85 million in annual revenue because it can. Therefore it does.
That genie is out of the bottle and it ain't goin' back, in either big time athletics or academics. Universities extract what they can, and costs will follow (see the Taj Mahal facilities at all tiers).
As you state, subsidies that are intended to help the students just enable the customers to bid up the price of a "must-have" product. Perhaps the high underemployment rates of recent college graduates will start to bring the perception of the value of a college degree down, and tuition will follow. Moreso at lower tier universities, I would think.
Excellent point.
Easy availability of loans for school leads to higher tuition, then the proposed solution is increased government assistance (loans, grants, etc.) which is what directly leads to the problem in the first place. It's a vicious cycle.
That's just one part of it. Colleges and universities compete for students (aka customers) the best ones they can. They compete extensively for the students with the highest aptitude who are most likely to graduate and become successful alumi bringing prestige and donation revenue back to the school. To attract the best and brightest, peer schools are in an arms race not just to provide the "best educations" but to provide the best amenities. This means nice campus facilities, dorms, gyms, health centers, rec centers etc. and lots of student services. As more students are going to college the more buildings are needed and the more administrators are needed to managed and provide services. The price of this arms race is reflected in rising tuitions.
to do much more than they used to.
I think if the choice was REALLY in the hands of students, most would choose the lesser transparency of the olden days (prestige based on word of mouth, etc) in exchange for the drastically lower tuitions of yesteryear.
College used to be a slam-dunk financial decision for just about everyone. These days, I think you had better be good and in a reasonably lucrative field for it to make financial sense.
I'm a little confused here--you linked to an essay that attempts to refute the claim that professors aren't working enough hours. The author of the piece describes the claim as "mindnumbingly ignorant," then goes on to explain why professors' workloads are much greater than simply their time in the classroom. There is a lot to chew on, but one key point is that time in the classroom is a *fraction* of a professor's workload. We spend hours on grading, class prep, advising students, and serving on numerous committees.
This doesn't include the time we spend on our research/professional development: researching and writing books and articles, reviewing books, giving conference papers, reading manuscripts, etc. And many of these activities (especially the research, but also some of the class prep and service) take place throughout the year. "Spring break" is not a time for me to go to Aruba or Cancun--it is a time to grade essays, proofread articles, etc. Same for the summer.
As for the salary, of my 6-8 good friends who graduated with me from Michigan, I almost certainly have the lowest income. This is not to say that I am unhappy with my job--it is just to point out that the *perception* of faculty salaries and the reality are quite different.
I'm a young college professor with an average teaching load, and during the first three years of my career I worked far more than 40-50 hours a week--even factoring in summers and holidays. Outside of celebrating major holidays (I confess, I'm no Jim HARBAUGH), I spent almost every waking hour of my first couple years of employment teaching, meeting with students, prepping, and--during the summers--researching and writing furiously. I rarely went to bed before midnight, and I was working moments before my head hit the pillow. Adjusted for inflation, my salary is pretty much equivalent to what my dad was making at my age, and my dad was a blue-collar worker with a high school degree. I have plenty of friends in academia whose experience is identical to my own; in any case, we didn't pursue teaching because we thought it was in our best interest financially. Now, this isn't to say that there aren't some older professors at colleges and universities that aren't living fairly comfortably with a light work load, but this is the exception, and it takes twelve years of college education and a couple of decades of work experience to find oneself in that position.
In the end, I'm exceedingly skeptical of the fact that the basic structure of a professor's hours of employment is contributing in any significant way to the skyrocketing costs of education--costs which, from my perspective, are an enormous problem.
If anyone think that professors are 'on vacation' whenever they're not teaching, they have an incomplete idea of the job.
There is a lot of down time.
The article quotes Montgomery College which is just down the road from me. Those parking lots are completely empty before 9:00 AM and after 5:00 PM. And they are totally empty many days of the year for a wide range of holidays and breaks.
And no, those teachers are not off creating innovative curriculums and teaching methodologies when they are not at the school. They're just plain off. They are making $88,000 (and that's just the average) for a workload that is decidedly less than their peers in the non-education bubble. It's a big controversy around these parts.
Does this apply everywhere? No, but we can't say it's not happening. There are some real bubbles out there that are not going to be sustainable.
OK, now we're gauging professors' workloads on when the parking lots are full?
Little secret: A lot of us who work in the academy don't have to be on campus to do our work. People work from home, coffee shops, libraries, etc.--I don't have to be in my campus workspace, nor will I always be most productive when I'm there. If you think we're "just plain off," you're sorely mistaken.
Little secret: There are a ton of academics who are not working from home, coffee shops, libraries. They are just simply at home or the coffee shop or the library.
Let's not pretend that they are all slaving away when they are off campus.
Yawn.
I'm really not trying to tear down an entire profession, I'm really not. I went to Michigan for grad school and I have a great deal of respect for the teaching profession and for professors individually.
But we can't say there are not isues in the education establishment. All is not totally well. There are distortions that are not sustainable. A crunch is coming.
So your chosen whipping boy for "the education establishment" are overworked and underpaid instructors and professors who you castigate for not parking in the parking lot during business hours, sitting at coffee shops doing nothing, and having a ball during their copious "off time"?
I mean, seriously, man.
We've got a whole thread of people who actually live the life you're lambasting, telling you you're misguided on this one, and you're going on "I know these people, it's a big problem."
It's as much a problem as you've constructed in your head.
Or if you are even perceiving their workload fairly...
But they are the exception. Not the rule.
I'm just vehemently against the idea that the instructors/professors are the problem with the ballooning costs, or anywhere near the primary concern on lists of problems.
I think of my buddy whose wife had a baby three weeks ago, sitting on his couch, holding a three-day-old sleeping newborn in one hand and trying to read a book chapter with the other hand, hoping she wouldn't wake up before he got to the last page.
But, hey, downtime!
It's a nice life, especially compared with other alternatives. It definitely appeals to me, but it's not in the cards. I'm too far down other paths.
I would encourage my kids to pursue it, but I'm not sure how sustainable the current environment is. I'm sure that when things contract, the established folks at the top will be just fine, but the newcomers will be squeezed hard.
Not really. It is a very rewarding life, but it is not "nice". A lot of extra work for a salary that is similar to what many engineers make straight out of undergrad. A ton of stress. For example, NIH grants that require 100s of hours of work are awarded at less than %10 currently. Partially due to the political climate created by people like you.
I couldn't agree with your comments more Dog. The "law school industry" is already beginning to crash and burn. But for the top 20 law schools or so, the others are really looking at a grim future and failing business model.
This statement is quite misleading--though I'm not accusing you of doing this intentionally.
The article states that the average "full professor" is making $88,000. "Full Professor" does not mean "any professor who teaches full-time." It means a professor who's ascended the ranks to receive the highest position for a college educator (unless you add on administrative posibilities, such as "department chair," and even they would be included as "Full Professors"). If you click through, you'll see that "Full Professor" is listed above Associate Professors, Assistant Professors, Instructors, and Lecturers. Any of those positions can be "full-time" loads, and the former three always are. Becoming a "full professor" is somewhat analogous to making partner at a firm, and it usually requires at least ten years of teaching in a tenure-track position. I don't know this as a fact, but I'd guess that something like a quarter of teaching hours at a college are taught by full professors. Montgomery College's instructors--also full-time--make an average of $54,200 a year, and some of that is higher than the national norm due to geography and cost of living. Instructors in the Midwest would generally make closer to $40,000, at least as a starting salary, and they'd have a very low ceiling unless they received a tenure-track offer.
good work men.
Oh, the "blame the professors" meme. It's especially nice how you quoted the quoted section of the text in that link instead of the analysis that tears that quoted section apart.
Just echoes my suspicion that while everyone wants their kid to go to college, they're ambivalent, if not totally ignorant of those they expect to teach their kid once they get to campus.
After working in academia for the past 6 years, I can tell you that, on average, professors earn far less than other professions that have a similar level of prestige, education, and workload.
My counter to this is that the vast majority of individuals who teach at colleges, especially the less selective and community colleges listed in the first article, are not paid anywhere close to the $88k/yr average listed. Most are adjunct professors, making a fraction of that total with few if any additional benefits. I know this because my wife is fnishing her Ph.D. (in biology) and she and her peers are all struggling to find educational opportunities at colleges that don't pay, say, $6k a class/semester with no benefits. She ultimately wound up getting a position at an elite prep school in the city that pays reasonably, but that is atypical. And don't get me started on the absurdity of saying these high-paid salaried positions require only 15 hours a week of teaching for 30 weeks as if there aren't a myriad of other responsibilities and duties.
This professor salary boogeyman that gets trotted out whenever people complain about tuition costs drives me insane. Even if you assume that a college has 500 professors paid, on average, $100k a year (which is probably high on both counts, but whatever), that's $50MM a year in salaries. If you have 20k undergrads (which is around UM's number), the average student is only paying $2,500 toward that salary requirement. And yet, tuition at UM averages out to be, what $14k/semester per undergrad. So the issue has very little to due with salaries as it does with universities seeing this income as a way to improve research opportunties, build new buildings, fund pet projects, and all the other wasting of money you see at large entities. Hell, the last AD got crap for spending lots of money he just had because he could. Same goes for most schools.
lots of overhead positions
Ding. Google for charts that map tuition costs against teaching position and administrative positions. Teaching = relatively flat; administrative = growing; tuition tracks with administrative. Institutional bureaucracies tend to bloat over time, given the money to do so.
"Graduates are finding out that they can no longer justify the cost in many cases. But they are still stuck with thoese easy loans that they can't pay back."
I'm stuck in an interesting position, re: paying back. I have a degrading, humiliating job that is not even close to a long term solution and yet it currently pays me literally twice the wages that many of the entry level positions in the field of my degree pay. If I were to leave my embarrassing job for the job in my field of study, I would not be able to afford to make the monthly payment on my student loans, car payments, car insurance payments, cell phone payments, internet bill, rent a one bedroom apartment and be able to adequately feed myself even if I had foodstamps, which as a college student I was declared ineligible for.
Just out of curiosity, what do you do for a living? If it is so degrading that you don't want to tell, I completely understand. I just empathize with you because for now (hopefully) I have a job that pays me more than a lot of college graduates, yet doesn't require you to have double digit IQ let alone a degree. I'm working on finishing my degree, but face the possibilty that I would take a pay cut with my chosen field. That terrifies me because the longer I work there, the more I feel my soul and humanity slipping away.
The bubble has been due for a major burst for years, and you figure at some point you'll see it pop, at least for a large portion of the population. The rich will always have access to education regardless of price, and foreign money (especially from Asia) will prop up some schools. But you already see it with smaller state and private schools that struggle to admit enough students to keep their numbers up and reasonable and must rely on update dorms and student centers to encourage parents and students to plop down tens of thousands of dollars for a degree that probably won't pay for itself for years, if not decades.
I still think a useful college education is valuable despite the cost because the alternatives are more limited; sure you can get decent pay with certain apprenticeships/vocations, but they are fewer than before and not all that reasonable for much of the population (i.e. plumbers get paid a decent wage but the economy can't support a million new ones a year). And this might be a bit of a STEM snob coming out, but I remember so many kids at UM spending close to $100k to get a humanities degree so that they could panic in a year and then apply to law school, where they'd spend another $100k+ to get access to one of the more saturated job markets in America. I did the second part but at least had an engineering degree in the first part, so when I decided being a struggling attorney wasn't a great option I could go back to programming and make some money. The days of a college degree alone "proving" your value to a prospective employer are dead, and yet it seems like this misnomer has traction with a decent part of the population. Until that ends, I suspect the bubble will keep growing.
The costs are all out of line with the benefits. I wonder what it will be like when my kids (now 8 and 4) are college-age.
I agree. I have a 19-month-old and we are already dreading college for her and (we hope) one more kid. That said, a JD even from a great school like UM isn't the greatest ROI for most people unless you just want to slave through BigLaw for a decade for the chance to become equity partner, which is a very elusive goal indeed.
I think society is becoming such that there are certain degrees with real value and set of others that are, well, almost "vanity" for lack of a better word. If you accept that you're ceiling financially is probably $50k/yr and you are fine with that, then by all means study said field. But I think lots of people are getting degrees for their own sake, then falling into the MBA/JD hole when they want to "make money", and that doesn't seem to be worth it anymore. If anything, I think undergrad is still valuable to most people, but grad school, especially the professional degrees save maybe medicine, should really be curtailed for everyone's benefit.
That's nightmarish. Unless wages make a huge comeback or the student already comes from a ridiculously wealthy family, it is not worth it...
Most loans are backstopped by the government and paid directly to the University. This allows Universities to charge what they want while taking no consideration to the ability of the borrower to repay the loan since their money is guaranteed. The government could care less whether or not the borrower can repay because their loan is prevented bankrupcy write off by the borrower. This combination has led to skyrocketing tuition rates and degrees in popcorn farts.
I would curious how this is anything remotely close to the same?
Student loans are primarily gov't driven vs. houses which were primarily private (ish). Not to mention the student loans was always unsecured and priced as such compared to a secured loan against a home that had the expectation of an appreciating asset.
student loans while you can put off paying them for a bit don't have the crazy structures of interest only mortgages, 10 year mortgages with 30 year amortizations, balloon payments, etc.
Also there is no massive securitization or derivatives market like there was for the housing crisis.
I do think student loans are a problem but definitely not the same problem as before