All posts by Andrew Gillen

Andrew Gillen is an independent analyst of higher education. The views presented here do not necessarily represent the views of any of his employers (Johns Hopkins University and the Charles Koch Foundation), nor did they provide any support for this research.

Here’s Why Tuition Keeps Rising

Ice cream cake has a disturbingly short lifespan in my home. When one is nearby, I ruthlessly hunt it down and devour it. Some days, when I have biked to work or gone for a run, I easily convince myself that I deserve cake as a reward. But exercise does not cause my cake-eating. It simply provides a rationalization for what I was going to do anyway.

Silly as it may seem, my cake-eating habit is similar to colleges’ habit of regularly raising tuition. When there are declines in state funding or increases in faculty compensation or college aid budgets, colleges often feel justified in raising tuition. But colleges raise tuition regardless of what happened to state funding, faculty compensation, or financial aid budgets. Colleges raise tuition because they cannot or will not resist the temptation to do so.

 Bowen’s Five Laws

The best explanation for this tendency is provided Howard R. Bowen’s The Costs of Higher Education, which introduced the five laws of higher education costs:

  1. “The dominant goals of institutions are educational excellence, prestige, and influence.”
  2. “In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.”
  3. “Each institution raises all the money it can.”
  4. “Each institution spends all it raises.”
  5. “The cumulative effect of the preceding four laws is toward ever increasing expenditure.”

Conventional wisdom explains rising tuition by pointing to the combined effect of 1) declines in state funding, 2) increases in faculty compensation (Baumol’s cost disease), and 3) increases in college-funded scholarships and discounts (institutional aid). In contrast, Bowen’s Laws imply that colleges will increase tuition regardless of what happens to these costs and revenues. My new paper, using data from the Department of Education, finds that tuition is likely to increase by a substantial amount even if there is no change in state funding, faculty compensation, and institutional aid per student.

For instance, from 2001-2002 and 2002-2003, the typical change in tuition at public four-year colleges was $396. Statistical analysis indicates that if there was no change in state funding, faculty compensation, or institutional aid, tuition was still expected to increase by $327.  In other words, over 80 percent of the change in tuition would have happened regardless of changes in state funding, faculty compensation, or institutional aid. This finding contradicts the conventional wisdom, but is consistent with Bowen’s Laws.

Tuition Increases

Another piece of evidence that undermines conventional wisdom is the strong statistical evidence that changes in state funding, faculty compensation, and institutional aid do not have the presumed $1 for $1 relationship with tuition. At public four-year colleges, on average, tuition increases by $0.05 to $0.19 for every $1 decline in state funding per student, $0.07 to $0.40 for every $1 increase in faculty compensation per student, and $0.08 to $0.75 for every $1 increase in institutional aid per student. These estimates are generally far from the conventional wisdom’s presumed $1 impact for each.

Moreover, the statistical results indicate that the assumption of a $1 for $1 effect on tuition is not supported by the historical evidence. Using those more realistic estimates, on average, 75-91% of the change in tuition at public four-year colleges is left unexplained by changes in state funding, faculty compensation, and institutional aid.

An Irresistible Temptation

While Bowen’s Laws provide an accurate description of what colleges do regarding tuition (raise it), it does not answer the question of why colleges want to raise tuition. The answer to that question is that they want to spend more money, and they want to spend more because they are rewarded for spending more: They can recruit prize-winning faculty and top students, build better facilities, move up in college rankings, etc. But in order to spend more, they need to bring in more money, and one of the ways they can do that is by raising tuition.

This strange phenomenon stems from the dysfunctional nature of competition in higher education. The fundamental problem is that the quality of a college education is not known, which leads to two perverse side effects. First, without any measure of quality, colleges compete in a zero-sum game for relative standing based on reputation – a never-ending academic arms race. Second, as Bowen points out, without any measure of quality “it is easy to drift into the comfortable belief that increased expenditures will automatically produce commensurately greater outcomes.”

Trapped in an Arms Race

Thus, because educational quality is unknown, colleges continually attempt to increase spending under the belief that doing so will both improve their reputation and lead to better outcomes. But the goalposts are moving: their peers are increasing spending too. This academic competition puts enormous pressure on any revenue source, hence the phenomenal growth of fund-raising offices, the commercialization of research, and of course, skyrocketing tuition.

The moral of the story is that tuition increases because colleges are trapped in an endless academic arms race to spend as much as possible, and raising tuition is one tool that allows them to spend more than they otherwise could.

For each time period in the figure below, there are three bars with the same cumulative height equaling the change in tuition for that time period for the typical student (all values in these charts are enrollment weighted averages).

Change per student, 4-year public colleges

The first bar (dark blue) in each time period is the observed average increase in tuition during that time period (“Change in Tuition”). For example, in 2003, this value was $396.

The second bar for each time period consists of four components. The first three strictly enforce the conventional wisdom, meaning that tuition is assumed to increase by $1 for every $1 decrease in state funding per student (shown in the light red bar – “Change in Appropriations per Student*(-1)”), every $1 increase in faculty compensation per student (light blue – “Change in Faculty Compensation per Student”), and every $1 increase in institutional aid per student (light green – “Change in Institutional Aid per Student”).

The last component of the second bar (light purple – “(Assumed) Unexplained Change in Tuition”) indicates how much of the actual change in tuition is left unexplained, assuming the conventional wisdom is true. For example, in 2003, state funding per student fell by $302 per student, faculty compensation fell by $44 per student, and institutional aid increased by $35 per student. Assuming the conventional wisdom is true, this means that tuition should have increased by $293 (302-44+35 = 293). This leaves $103 of the $396 increase in tuition unexplained (396-293 = 103).

The third bar for each time period does not make any assumptions about the impact on tuition of changes in state funding, faculty compensation, or institutional aid. Rather it uses regression analysis to determine each factor’s correlation with tuition, which is then multiplied by that time period’s change in the variable to yield a more accurate estimate of the impact on tuition. For example, for 2003, the regression results indicates that a $1 decline in state funding per student is correlated with a $0.07 increase in tuition, so the impact of the change in state funding on tuition that year was $21 (the $302 decrease in state funding per student multiplied by the -0.07 correlation), shown in the red portion of the bar (“Impact of Change in Appropriations per Student”).

This same process is applied for the change in faculty compensation per student (blue – “Impact of Change in Fac Comp per Student”) and the change in institutional aid per student (green – “Impact of Change in Institutional Aid per Student”). The purple portion of the bar (“(Statistical) Unexplained Change in Tuition”) is the amount of the change in tuition that is left unexplained. In 2003, this was $368 out of the $396 change in tuition that year.

This figure clearly illustrates that there is strong evidence that changes in state funding, faculty compensation, and institutional aid are not able to adequately explain changes in tuition. The key evidence is the size of the light purple and purple components relative to the total change in tuition. Those bars indicate that a substantial portion of the change in tuition is unexplained even enforcing the assumption that the conventional wisdom is correct that changes in state funding, faculty compensation, and institutional aid all have a $1 for $1 effect on tuition.

On average, 25-33% of the change in tuition at public four-year colleges is still left unexplained even when assuming there is a $1 for $1 effect. The conventional wisdom does particularly poorly when state funding increases substantially (implying tuition should fall). For example, 99% of the change in tuition at public four-year colleges in 2006 is unexplained even after accounting for changes in state funding, faculty compensation and institutional aid.

For more details, see the full paper here.

Default on Student Loans? Bad Idea

Writing in The New York Times, Lee Siegel encourages students to follow his example and default on their student loans. The four biggest problems with his piece are:

  1. Siegel is the wrong case study

Even if you are of the opinion that college should be free and student debt is immoral, Siegel is the wrong poster child to make your case. As Jordan Weissmann at Slate writes, “Lee Siegel is an award-winning critic and an unrepentant leech. After pursuing not one, not two, but three degrees from an Ivy League university [Columbia University], he chose to default on his student loans at taxpayer expense, because he felt that paying them back would have hampered his ambitions of becoming a writer….”

Successful cultural critics that went to one of the most expensive schools on the planet for three degrees do not evoke much sympathy. Moreover, as Megan McArdle points out, “He offered not one good reason that he couldn’t pay his student loans; the best he could do was to say he didn’t want to pay them.”

  1. Siegel offers bad financial advice   

Defaulting on student loans is bad financial advice the vast majority of the time, particularly for current students. If you default, 15% of your pay can be garnished, whereas if you enroll in the new Income Based Repayment plan, your repayments are capped at 10% (and your credit isn’t ruined).

  1. Siegel is confused about predatory behavior

Siegel writes that the consequences of defaulting are overblown, as the “reliably predatory nature of American life guarantees that there will always be somebody to help you, from credit card companies charging stratospheric interest rates to subprime loans for houses and cars.”

So according to Siegel, when you are free to shop around among credit card companies and mortgage lenders and are not forced to accept any of their offers, those making the offers are predatory. But taking out a student loan with no intention of paying it back is just?  To me, if anyone is being predatory in this situation, it is Siegel.

  1. Siegel distracts attention from the good ideas to address college costs and debt

Perhaps the biggest problem with the op-ed is that it distracts from productive ideas. There are plenty of potentially good ideas for dealing with college costs and student loan debt. Just to name a few, Susan Dynarski, Matt Chingos, and I have all put forward ideas that would be much more productive than encouraging people to default on their student loans.

Defending Income-Contingent Student Loans

Last week George Leef argued that my recent case for income contingent lending (ICL), a type of student loan where the monthly payment is a function of the student’s income, was off base. One of his main points was that if ICL is such a good idea, “Why do we not find “income-contingent” lending in other markets?”

Other types of loan payments generally don’t need to be income-based because they have collateral that can be repossessed if the borrower stops making payments. Since an education is intangible and can’t be repossessed, traditional student loans don’t have collateral. ICL remedies this by converting the future earnings of the borrower into the collateral for the loan. Far from being a deviation from normal lending, ICL just brings the standard concept of collateral to student lending.

George’s real problem with ICL, however, is that it would “help to keep the higher-ed bubble inflated a while longer” by shielding “students from the rigors of thinking through both the benefits and risks of borrowing for their education.”

Au contraire. It is the current system that deprives students of the tools necessary to rigorously evaluate the wisdom of borrowing. The information available to students about what they can expect to learn in college is all but nonexistent. In addition, the information about what they will earn after graduating is insufficient, with broad industry averages and subjective voluntary surveys being the only sources of even mildly useful information. To top it off, the government will lend to anyone at the same interest rate regardless of their college or major. In short, asking students to think rigorously about the risks of borrowing after we’ve withheld the three tools most necessary to do so is like asking Michelangelo to paint the Sistine Chapel without using scaffolding, brushes, or paint.

ICL with private lenders won’t fix the dearth of information about learning and earnings, but it will address the lack of price signals sent by interest rates. As I mention in the original piece:

The main advantage of private lending is that interest rates would no longer be one-size-fits-all. Currently, a stellar student in a field with many job opportunities (e.g., nursing) pays the same interest rate as a bottom-of-the-class student in a field with dismal job prospects (e.g., law) despite differences in the riskiness of lending to these two students.

With private [ICL] lending that would no longer be the case, and the stellar nursing student would be able to obtain a lower interest rate than a slacker law student.

A 30 percent interest rate on a loan for a D student studying underwater basket-weaving at Last Resort University will do more to curb inappropriate borrowing than anything else.

Let’s Tie Our Hands on Student Loans

Odysseus, in Homer’s Odyssey, orders himself tied to the mast of his ship so he can hear the beautiful song of the Sirens without risking the usual gruesome fate of those who sail too close to the singers.

This lesson – if you know you are going to make a bad decision you should tie your own hands to prevent it – is one that Washington should heed when it comes to student loan interest rates. There are now at least six different proposals to deal with the scheduled interest rate increase from 3.4% to 6.8% for some student loans. Fortunately, four of them are trying to applying Odysseus’ lesson, though unfortunately, the other proposals are getting much more attention.

This is more than a little bizarre, since policymakers have not determined whether the government is making or losing money on student loans (the current numbers do not answer this question accurately) and how much we want to (and can afford to) pay to subsidize student loans. In other words, policymakers are arguing over the best route to take, despite the fact that they have no idea where we are right now or where we’re trying to go. Predictably, this results in a political circus, as exemplified by two recent examples.

The first is Senator Elizabeth Warren’s proposal to lower the student loan interest rate to 0.75% from 3.4% (scheduled to increase to 6.8% next month). The ostensible rationale is that 0.75% is the rate the Federal Reserve charges banks for lending at the discount window. This is a seriously flawed idea. Three key determinants of the interest rate for any loan are the length of loan, the chance of defaulting, and how much collateral is pledged. Loans from the Fed discount window are often for one night, are given to the same “lenders” who have a long histories of repayment, and are required to have collateral pledged.

In contrast, student loans are typically not repaid for at least a decade, have no collateral pledged, and result in a 13.4% default within three years. Why anybody would think discount-window loans and student loans should have the same interest rate has stumped most analysts. Brookings scholars Matthew Chingos and Beth Akers said it best when they concluded:  “Sen. Warren’s proposal should be quickly dismissed as a cheap political gimmick.”

Continue reading Let’s Tie Our Hands on Student Loans

The Four Lessons I Learned by Taking a MOOC


Very few people who enroll in MOOCs (massive open online courses) tell us about the experience. I just took one and learned these lessons:

Lesson One: Professors need to start phasing out in-class lecturing now.

Based on my own experience as a student and as an adjunct professor, the vast majority of professors spend much of their time in class lecturing. I suspect this will not last in the age of MOOCs. Not that the lecture will become obsolete–indeed, the lecture as a pedagogical tool has had amazing resilience. Lecturing arose because books were once both rare and prohibitively expensive, and lecturing made it necessary for only one person to read while others took notes. Of course, the printing press, VHS tape, and YouTube have all shattered this justification for the lecture, yet the lecture survived. I’m betting it will survive MOOCs as well. 

Continue reading The Four Lessons I Learned by Taking a MOOC

What Do Professors Really Think?

From the blog The Quick & the Ed 

The Undergraduate Teaching Faculty The 2010-2011 HERI Faculty Survey , a survey of faculty at four-year universities by the Higher Education Research Institute (HERI) at UCLA, contains some interesting findings.

  • Almost a quarter of professors at four-year universities do not consider teaching their “principal activity” (pg 19)
  • The median teaching load is 2 courses per term (mean = 2.5) (pg 20)
  • One-third have paid sabbatical leave (pg 22)
  • Over 60 percent of professors spend 0-4 hours a week “advising and counseling” students (pg 27)
  • 56.2 percent of professors spend 8 or fewer hours a week teaching (pg 92)
  • 63.2 percent of professors spend 12 or fewer hours a week preparing for teaching, including grading (pg 92)
  • 62.7 percent of professors identify their political beliefs as “far left” or “liberal”, 11.9 percent say they are “far right” or “conservative” (pg 36)
  • 42.6 percent of professors have received an award for outstanding teaching
  • Only 16.5 percent believe the statement “Faculty are rewarded for being good teachers” is very descriptive of their institution (pg 96) 47.3 percent have “Considered leaving this institution for another” (pg 95)
  • 36.7 percent agreed “strongly” or “somewhat” with the statement, “Most of the students I teach lack the basic skills for college level work” (pg 97)
  • 71.3 percent agreed that “To increase or maintain institutional prestige” was of “highest” or “high” priority (pg 98)
  • 55.2 percent agreed “strongly” or “somewhat” that “The chief benefit of a college education is that it increases one’s earning power” (pg 98) [AG: Given the disproportionate number of op-eds by faculty declaring this to be untrue, I was (pleasantly) surprised by how high this number was.]

Note, I am very skeptical of the HERI survey numbers for part-time faculty. For example, the survey reports that less than 11 percent of part-time faculty earn less than $50,000 from their institution (pg 187), a number that seems much too low to me.

Andrew Gillen is the research director at Education Sector.

A Short Reply to Charlotte

Charlotte Allen‘s response to my recent piece on the denial of accreditation for Ashford contains some good material, but some misunderstanding. My piece is not about whether the Ashford decision itself was flawed–I never stated that WASC was wrong to deny Ashford accreditation and flatly stated: “It is certainly possible that Ashford doesn’t deserve accreditation…”

Rather, my piece was about whether accreditation is a credible system for making such determinations (which I argue it is not) and only talk about the Ashford decision because “it is pretty unusual and gives us a rare glimpse into accreditation.”

Continue reading A Short Reply to Charlotte

What’s Wrong with Accreditation–A Textbook Case


The world of higher education is abuzz with the news that a
for-profit university, Ashford University, whose Iowa campus holds accreditation from the
North Central Association of Colleges and Schools, has been denied
accreditation by the Western Association of Schools and Colleges (WASC) for its
online headquarters. Denial of accreditation for schools that already have it
is pretty unusual and gives us a rare glimpse into accreditation and a detailed
example of what’s wrong with the existing system.

Continue reading What’s Wrong with Accreditation–A Textbook Case

Does Tuition Go Up Because State Funding Goes Down?

Gary Fethke’s recent op-ed Why Does Tuition Go Up? Because Taxpayer Support Goes Down in The Chronicle of Higher Education is an enjoyable read. Rather than dismiss the opposing side’s argument with straw men, as is so common these days, Fethke presents it faithfully and gives it due consideration, which is a breath of fresh air.

Having said that, I have to disagree with Fethke’s main point. He argues that “rising tuition is the obvious consequence of declining state appropriations…” and that “Students are required to pay more because taxpayers are paying less–it’s that simple.”

Continue reading Does Tuition Go Up Because State Funding Goes Down?

Yes, College Professors Can Work Harder

David C. Levy’s Washington Post article, “Do college professors work hard enough?” set off quite the firestorm. His basic point was that we currently “pay for teaching time of nine to fifteen hours per week for 30 weeks,” but that

If the higher education community were to adjust its schedules and semester structure so that teaching faculty clocked a 40-hour week (roughly 20 hours of class time and equal time spent on grading, preparation and related duties) for 11 months, the enhanced efficiency could be the equivalent of a dramatic budget increase…

Continue reading Yes, College Professors Can Work Harder

The Tuition Story That Never Dies

student-loan-programs.jpgSome commentaries on higher education appear year after year, almost unchanged. One of these hardy perennials is the story that tuition and fees don’t come close to paying for the actual cost of educating college students. In his popular book, The Economic Naturalist, Cornell University economist Robert Frank claims that tuition payments cover only a fraction of the total cost of students’ education. The Dartmouth College Fund defends what it refers to as a wacky business model: selling its product at a discount, and then–begging for money. Similar articles are here and here.

Last week The Chronicle of Higher Education ran one of these stories “Hey, Students, Your Education Costs More Than You Might Think,” referring to Hamilton College.

First, some background. From the story:

Continue reading The Tuition Story That Never Dies

The Student Loan Debacle–What a Mess

Until recently, much talk about student loans was fact-free: There simply weren’t publicly available figures worth paying attention to.

The official balance of student loans from the NY Fed were unreliable:

There was a bucket of random obligations called “Miscellaneous”, which included things like utility bills, child support, and alimony. And it turns out that if you went burrowing in that miscellaneous debt, there was actually a pile of weirdly-categorized student loans in there. [AG: And these mis-categorized student loans were not included.]

Continue reading The Student Loan Debacle–What a Mess

A Simple Solution to a Big College Problem–SURs

What is the college graduation rate in this country? Correct answer: nobody knows. All the statistics you’ve read about are at best partial truths. We basically track graduation only for “traditional” students. The problem is that these “traditional” students are no longer representative – most college students are now “non-traditional”: 38 percent of students enroll part time; some full-time students start again after some earlier post-secondary work; and a good many students who transfer to another institution are counted as dropouts. In fact some important news arrived today–one third of all college students transfer before graduating, so our statistics on college completion are even more unreliable than we thought.

The fact that we spend hundreds of billions of taxpayer dollars on higher education and can’t determine something as basic as a national graduation rate is a dereliction of duty. The solution to this problem is deceptively simple: turn to Student Unit Records. SURs are straightforward – they are databases that assign each student an individual number so that their educational history can be tracked. With a SUR, the pace of part-time students could be accounted for, and transfer students would no longer vanish, making it possible to calculate an accurate and meaningful graduation rate.

There’s a second advantage from having a SUR: it would allow a better understanding of each college’s and even each program’s performance. For example, while post-college earnings are certainly not the only thing that matters, they are an important consideration for many students. Matching educational records from a SUR with earnings data from the IRS would allow for accurate employment outcomes to be published for each college and program. Such information would help students make better decisions which would in turn help discipline and focus colleges. This can’t be done without a SUR.

There are two main groups opposed to SUR. The first are colleges. In an unusual alliance, both the best and the worst colleges fear SURs. The bad colleges like being able to say things like “Our 9% official graduation rate ignores transfer students and is therefore not an accurate depiction of the quality of our college.” The fact that they oppose a SUR system which would allow for accurate graduation rates to be calculated tells us that they are more interested in maintaining plausible excuses than in actually finding an accurate number. Meanwhile, the best colleges are terrified of being compared to other schools on something like value added earnings. At best, such a comparison would confirm that they are indeed the best. But a comparison might show that they do not deserve to be on top, and they are terrified that some no name college will be shown to be just as good or better. Thus, for top colleges, there is nothing to gain, and potentially everything to lose from such comparisons. While colleges’ opposition to SURs are understandable, there is absolutely no reason for policymakers to indulge them.

The second group opposed to SURs are Republicans concerned about privacy violations. To an extent these were legitimate concerns as any database has potential privacy issues. But recently, convincing methods of safeguarding privacy while implementing a SUR have been developed. Republican Governor of Virginia Bob McDonnell has done great work in this area, as has Democratic U.S. Senator Ron Wyden and Republican U.S. Representative Duncan Hunter. The Republicans that have opposed SURs to date deserve credit for ensuring that privacy was taken into account, but it is now time to acknowledge that their concerns have been addressed.

America has some great colleges that are the envy of the world. But we also have some terrible colleges that waste student and taxpayer money. A SUR would help us separate the wheat from the chaff.

The IBR Student Loan Repayment Scheme is a Disaster

mixed-news-about-college-loans.jpgThe Income Based Repayment (IBR) program, which took effect in 2009, is designed to lighten the student-loan burden for some students. The basic idea is to limit monthly payments to less than 15% of disposable income. If a student makes these payments for 25 years, any remaining balance is forgiven, meaning that taxpayers essentially pay the rest off. President Obama just announced his intention to lower this to 10% of disposable income and 20 years of repayment before forgiveness. These proposed changes, as well as IBR in general, are bad for the following 6 reasons.

1. IBR treats the symptom rather than the disease.

Perhaps the most fundamental reason to end IBR is that it is treating the symptom (excessive college debt) rather than the disease (excessive college costs). IBR is essentially trying to fix the problem of students borrowing too much for college… without stopping students from borrowing too much for college. All it does is say that the government will pay for some portion of it in the distant future. To steal a line from Wolfgang

Can We Measure the Value of College Teaching?

By Robert Martin and Andrew Gillen
AP_professor_lecture_480_1sep10_se.jpgA popular notion within the academy is that teaching quality cannot be measured, but this is an article of faith, not a demonstrated fact. Very few institutions have made a systematic effort to measure teaching quality, largely because the faculty is opposed to it and administrators have little incentive to discover true teaching value added. Faculty view their conduct in the classroom as beyond judgment, while for deans, knowing how serious some teaching problems are is a kind of trap: this obligates them to fix those problems in an environment where very little can be done. Further, if some professors are identified as truly exceptional teachers, their peers may resent it and the exceptional teachers may expect higher compensation in return. So, most administrators choose to leave that sleeping dog alone.
One consequence is that colleges and universities scrupulously avoid competing on the basis of teaching metrics; choosing instead to compete on the basis of things that signal or imply quality, such as scholarly research, elaborate facilities, stately campuses, athletic teams, and extravagant entertainment. This competition accounts for most of the excess cost of college and for the decline in teaching quality.
The central issue here is the quality of undergraduate teaching. Students, parents, and taxpayers are most concerned about that question. In undergraduate education, quality is the amount of new knowledge acquired by a student as a result of taking an individual course or attending a particular college. The new knowledge in each case is the human capital value added by the professor and the institution. The value added includes both discrete new knowledge and the ability to integrate and apply that knowledge. If students, parents, and taxpayers know what to expect in terms of value added, they can make their own subjective valuations of the other services offered by the institution.

Continue reading Can We Measure the Value of College Teaching?

College Is Cheaper Than in the Mid-1990s? No Way

By Andrew Gillen and Robert Martin

The annual release of Trends in Student Aid and Trends in College Pricing are big news in the higher education world, and rightly so. Since Department of Education data often take a year or two to become available, these reports provide the earliest and most comprehensive preliminary look at recent developments in tuition charges and financial aid. This year’s two reports supposedly show that net tuition was lower in 2009-2010 than it had been in at least 15 years.

Sandy Baum (the main author of the reports) and Michael McPherson are puzzled by the apparent inconsistency between public perception and reality regarding net tuition increases, and ask “Why is it so hard for people to believe the numbers about declining net prices?”

The answer is quite simple. To begin with, as the College Board report points out, students and parents pay not just net tuition and fees, but room and board as well, and most of them find the price goes up each year. Even at the few institutions that guarantee the same tuition as long as students are continuously enrolled and making normal progress towards their degree, institutions manage to increase the net price students pay by increasing fees, room, and/or board.

Continue reading College Is Cheaper Than in the Mid-1990s? No Way

Accreditation: Are the Inmates Running the Asylum?

On paper, accreditation is an amazing system. Among other things, it simultaneously advises colleges on how to improve, enforces a minimum level of quality, provides needed information to policy makers, and protects colleges from government intrusion. It does all this with only a few hundred employees, and a few thousand volunteers. Indeed if accreditation actually accomplished all it claims to, it would be one of the best systems ever devised.

The only problem is that accreditation accomplishes almost none of what it is supposed to. The advice given to colleges is often inappropriate; accreditors refuse to define quality, let alone enforce a minimum level of it; the entire process is shrouded in secrecy, providing almost no information to outsiders; and while still relatively successful in shielding colleges from government intrusion, accreditors have too often used their quasi-governmental power to behave in just as dictatorial a manner. Accreditation needs to be reformed.

Read CCAP’s full report, prepared by Daniel Bennett, Richard Vedder and myself, for a detailed analysis of these problems and our proposed solutions, which would move us toward an outcomes-based quality control certification system.

The Amazing College Debt Bubble
Teaching One Student Costs Only $1,456 A Year?

News that student loan debt, at $830 billion, exceeded credit card debt for the first time has sparked renewed interest in the financing of college and its implications for students. Largely ignored in the discussion, however, is the shadow debt, which consists of unorthodox methods of borrowing for college, including home equity loans and lines of credit, retirement account loans, credit card debt, and run-of-the-mill bank loans. Because these borrowing instruments often have many alternative uses, we have to rely on surveys to determine how much of the total amount borrowed in each category is devoted to paying for college. The most comprehensive such survey is conducted by Sallie Mae and Gallup. Their findings indicate that shadow debt adds just under $30 billion to the annual borrowing for higher education (see this link for more details on the calculation). As shown in the table below, when this is added to the $96 billion in college specific loans, we can conclude that Americans borrow roughly $126 billion a year to pay for college.

CAU_table.gifOf course, there are a number of caveats to this number. To begin with, this is at best a back of the envelope calculation, and better data would allow for a more accurate picture to be painted. In addition, some of this may not be borrowing in the normal sense of the term. For instance, some well off families may pay for tuition on a credit card to receive the rewards associated with their card, and then pay off the balance immediately. There is also the fact that some of the education borrowing is not used solely for education. I knew people who used student loan money to purchase a car, or a big screen TV, and even breast implants. At the same time, not counted are informal loans from family and friends. Thus, $126 billion is the best estimate we have for the amount of money that Americans borrow for college.

Enough Blame to Go Around?

This heavy debt load is causing much suffering, and whenever there is suffering, it is tempting to blame it on some easily vilified scapegoat. The for-profits seem to be serving that function these days, and while they are by no means blameless, there is plenty of blame to spread around.

First up are students and parents. While earlier generations that paid only a few hundred dollars a semester can perhaps be forgiven for continuing to believe that college is a nearly risk-free decision financially, today’s students do not have that luxury. Exploding tuition and the related horror stories about crushing debt loads appear regularly in the media. Yet students and parents largely ignore these warnings. The views that more (formal) education is almost always a good thing and that the loans needed to finance it are “good debt” since it is an investment are both widespread and contribute to the problem. While true to an extent, these views can be and are being carried too far by some, blinding some individuals to the dangers of debt.

Continue reading The Amazing College Debt Bubble
Teaching One Student Costs Only $1,456 A Year?