That Wasn’t Supposed to Happen…

(The title of this blog post is taken from the title of the blog post I link to immediately below.)

"Why are enrollments falling at community colleges and rising at higher-priced four-year universities?"

https://www.insidehighered.com/blogs/confessions-community-college-dean/wasn’t-supposed-happen…

Not at all of them...

My alma mater, a small, relatively prestigious (in its part of the country) liberal arts college has just enrolled its smallest entering class since the early 1950s. Total enrollment is on a course to decline from around 2300 to around 1600-1700 over the next few years. And this comes on the heels of major construction projects, leaving the school with what are potentially redundant facilities and higher operation and maintenance costs. Meanwhile, full-cost tuition will break the $50,000 barrier for the 2019-2020 academic year. That's up from $33,000 in 2009-2010--a 67% increase in tuition during a period in which the CPI rose by 19%.

Since I matriculated there in 1965, tuition has increased 33-fold (from $1500 to $50,000), while the CPI has increased only (roughly) 8-fold.  Room & board was about $900; I spent about $150 on textbooks for the year (the last time I taught intro econ, in the spring of 2018, the price of a new copy of the textbook I used cost $175; my intro econ book, in 1966, was $7…but there’s more to the increasing price of textbooks than simply inflation).  I had about $40 per month for personal spending.  So, in 1965-66, one year of college was about $2900; let’s round that up to $3000.  If college costs had increased at the same rate as prices in general (a factor of 8), one year of college at a reasonably selective small liberal arts college would cost about $24,000. 

In the upcoming academic year, the total cost (with no financial aid) will be about $65,000.  That is roughly the median family income in the US.  For a family to pay the full cost of attending my alma mater and spend half of its pre-tax income—they’d need an income of $130,000—which is at the 80^th percentile of the income distribution—only 20% of the households in the US have incomes higher than that. 

So what about attending Indiana University, as an in-state student, paying the full cost today?  Roughly $25,000, up from roughly $1500 (or half the cost of my school in 1965 and 40% of the cost today)—a relative bargain, I suppose, although that cost is up by a factor of 16—twice the rate of inflation.
(All the above data is readily available through judicious use of a search engine.)

I am fully aware that institutions of higher education are subject to what is known as “Baumol’s Disease.”*  That does not mean that we should just accept that the price of attending college in the US must rise at the same rate as the costs of providing a college education—and, indeed, we have not.  But we have relied too much on debt to finance the current pricing structure, in effect shifting the cost from the present to the future.  What we need is to expand support for higher education—through taxes for public schools and, implicitly, also for private schools (through the use of tax-financed grants).  Private schools will (and should, really) remain more expensive.  But if a selective private liberal arts college cost families/students only $24,000 per year and public universities cost them only $12,000, then advanced educations would be much, much more affordable, and the promise that we thought, in the 1950s and 1960s, we were making to our citizens about education would again become a reality rather than, increasingly, a pipe dream.

*Named for William Baumol, who presented the first rigorous analysis of the problem:
https://en.wikipedia.org/wiki/Baumol%27s_cost_disease