Tuesday, August 30, 2005

A short analysis of rising tuitions 

Richard Vedder describes the problem in one paragraph, and the reasons in six. The problem:
This fall's probable average 8% increase at public universities, added onto double-digit hikes in the two previous years, means tuition at a typical state university is up 36% over 2002--at a time when consumer prices in general rose less than 9%. In inflation-adjusted terms, tuition today is roughly triple what it was when parents of today's college students attended school in the 1970s. Tuition charges are rising faster than family incomes, an unsustainable trend in the long run. This holds true even when scholarships and financial aid are considered. One consequence of rising costs is that college enrollments are no longer increasing as much as before. Price-sensitive groups like low-income students and minorities are missing out. A smaller proportion of Hispanics between 18 and 24 attend college today than in 1976. The U.S. is beginning to fall below some other industrial nations in population-adjusted college attendance.
The reasons are a combination of five factors: rising demand; lack of market discipline; de-emphasizing undergraduate instruction; price discrimination; stagnant productivity and rent-seeking behavior. Competition is the answer, he says.
State legislatures have sharply reduced their share of funding for public universities, forcing some schools to slash costs, reduce bureaucracies, increase teaching loads, get rid of costly underutilized graduate programs and more. Some schools are talking of using buildings more than eight or nine months a year, or are cutting down on the use of expensive tenured faculty. Colorado is shifting funds away from institutions and into student hands in the form of vouchers, reasoning that the student-customer, not the producer, should be sovereign as in nearly every other transaction.