College Tuition Part 1: why college is so freaking expensive

Wednesday, September 14, 2022

Loan forgiveness is having a moment, and while I think the most recent move is a positive step it does not address the root of the problem and is the equivalent of putting a bandaid on a severed limb. Debt, primarily student debt, is a leading cause of the racial wealth gap and if we want to see real change we have to address the root - reattach the limb if we want to stick with my metaphor.

In order to understand the solution, we have to really understand how we got here. Today we're going to talk about how college got so freaking expensive in America? Some facts:

How we compare

Americans spend 2x the amount on college tuition compared other developed countries. BUT a third of these countries cover the cost of college for students (aka keep it free for students), while one third keep the cost at or below $2,400 for students. Meaning, it doesn't have to be this bad!!

How colleges are funded

America has three types of colleges that are funded in different ways:

1. Public (i.e. state universities): 3/4 of students attend public universities. They are funded by a mix of state and local funding, tuition dollars paid by students, and federal aid. 

2. Private non-profit: Rely on endowment funds and student paid tuition for funding (not state/local funding). 

3. For-profit colleges: We don't have time for this but these are the Strayers and DeVrys of the world.

How did college tuition go up so fast?

Tuition costs have increased three-fold in the last 30 years - aka it wasn't always this bad. Over the past 30 years, faced with rising healthcare costs and requirements to balance budgets, states and local governments have been redirecting funds from education to other areas- aka defunding education (yes, when lawmakers were out here acting brand new to the idea of defunding the police they'd been doing for literal decades with education)

As their main funding source dropped, public universities did two things:

  1. Shifted costs to the students (i.e. increased tuition)
  2. Targeted out-of-state and international students who paid full tuition. 

In order to attract the wealthiest out-of-state and international students the colleges needed either 1) high rankings or 2) to pull some stunts. Both are extremely costly, let's break it down:

Rankings are helped by some costly factors:

  1. Low student:faculty ratios (very little research supports benefits of small college class sizes and this requirement is unique to American colleges) which means to be competitive colleges need more faculty members. 
  2. High amount of faculty-published research which means faculty need to focus more time on research so even more faculty are required to support the above requirement. And colleges pay a higher dollar for the all-star researchers.
  3. "Campus life" like extracurriculars and support for students which creates a whole other set of non-academic costs like directors, program managers, deans, and service providers.
Pulling stunts are costly too - these are things like national ranking sports teams (think all-star coaching staff, player facilities to attract the best athletes) and campus amenities (state of the art dining halls, fancy dorms). 

Each year as more colleges get more competitive, the ante gets upped and it gets a little costlier to keep up, adding expenses that are not covered by a system that continues defunding the colleges, and so the cost is transferred to the students.

Defunding education is uniquely American, as is entrepreneurializing (I made that word up) education, and hence we have the most expensive secondary education in the world.

The impact of rising tuition costs on the racial wealth gap

1. Lack of generational wealth and/or lack of liquid resources = Black households take out more student loans = Black households carry more student debt = Black households have lower credit = a whole host of issues contributing to the wealth gap (ex: challenges/inability to purchase a home - Black college grads are less likely to own a home than white high school dropouts). 

2. 60% of Black college students do not graduate, and while there are a host of factors that contribute to this, when researchers correct for students receiving financial support the Black graduation rate matches the white graduation rate. But again, lack of generational wealth and lack of liquidity and other systemic issues make it so Black families are less likely to be able to provide financial support at the same level as white families.

3. The majority of high achieving, low income students (in the top 4% of students) opt not to apply to highly selective colleges due to costs. This unfortunately often puts them into more debt than if they had gone to financial-aid heavy selective colleges, but this guidance is rarely available to low income students.

4. A $1,000 increase in undergrad tuition is associated with a 6% drop in campus diversity.

5. The cost of college deters many low income students from even applying to college.

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