College Is Affordable—Really

Politicians and pundits who argue that college today is financially unsustainable and functionally obsolete are not just arguing for greater efficiency and more reliance on educational technology, they are pushing for a kind of higher education rationing.  They may not have the courage to say it outright, but what they are really envisioning is a two-tier higher education system for the United States.  They unapologetically expect their own children and those of their broad social tier (affluent, college-educated and upper middle class) to go to college or university in traditional campuses, preferably academically selective ones, with a lot of amenities and student support. But other American youngsters – middle class and poorer – should rethink their post-high school options: enrolling in technical training or apprenticeship programs in lieu of a conventional collegiate experience, and, to the extent they still want or need to go to college, do so more economically, preferably online.  This line of thinking generally rests on evidence of disproportionately rising college costs, growing student loan debt burdens, and poor post-collegiate career outcomes (or the claim that even employed graduates are doing work that doesn’t really require a college education). So implementing the national goal of ever-rising levels of college attainment represents a waste of societal and personal resources.

College Clearly Raises Lifetime Earnings

This analysis is highly debatable.  On the value of a college education:  Every single study of this issue, by academic analysts and the U.S. Bureau of Labor Statistics, has unequivocally documented the lifetime economic and career benefits of graduating from college, preferably with a baccalaureate degree.  The most recent example of this literature was a study by MIT economist David Autor which showed that, even with a heavy student debt burden, the typical baccalaureate graduate realizes a huge lifetime economic gain relative to her non-collegiate peers. The BLS publishes forecasts of the U.S. labor market which show the growing proportion of jobs requiring a college degree and the higher pay associated with them.  Further, the benefits of a college education are social as well as economic.  The college-educated are healthier, live longer and have more stable family lives.  Perhaps the best evidence of college’s value lies in the enormous lengths to which America’s most affluent families go to make sure that their children have one.

Related: When Is College Worth It?

Regarding affordability: Perhaps the best way to analyze the problem is to understand what an undergraduate education typically costs an institution, not what it charges undergraduates in tuition or what it receives in state or federal aid.  The State University of New York’s highly regarded office of institutional research recently compiled a comprehensive database of college and university expenditures, including most U.S. colleges and universities, that can tell us just that.  The data is for the 2009-10 academic year, but is highly indicative even if one accounts for the modest level of inflation since then.

Take the State University of New York (SUNY).  At its comprehensive colleges (e.g. Brockport, Cortland, New Paltz etc.) the average total expenditures per full-time equivalent student (FTE) that can be attributed to undergraduate instruction came to $10,777.  Even at SUNY’s four research universities (Albany, Binghamton, Buffalo, Stony Brook), the average per FTE outlay for undergraduate instruction was $12,641.  Total inflation since 2010 is officially estimated at 8.7 percent, bringing the number for SUNY’s colleges in 2014 to $11,715 and that for its research campuses to $13,741.  To arrive at the full institutional cost, we need to add approximately $5,000 per FTE to cover all institutional overhead expenses including fringe benefits.

Not Really That Costly

What this data shows is that, while not inexpensive, the true cost of undergraduate education in a typical U.S. institution – public or private – is not inordinately high, nor has it grown disproportionately relative to the general level of inflation or the cost of other components of the service sector.  Granted, college is too expensive for most Americans to afford without public subsidies or student loans, but that is true of all levels of education in all places.  That is why higher education – like K-12 schooling – must be considered a “public good” whose benefits to society transcend those accruing only to the educated individuals, justifying some level of direct or indirect taxpayer support.

The reason that college and university attendance today appears to be unaffordable is the massive intra-institutional cross-subsidization going on, which inflates the “sticker price” of undergraduate education; for students and their parents in tuition; for taxpayers through state subsidies and federal financial aid.  In the public – state operated – sector, this cross-subsidization primarily involves support for academic scholarship and research, and graduate and professional education.  The obvious – and only appropriate – way to end this practice is to make faculty research and graduate education discrete budget categories, with their own revenue streams.   To get states to provide those revenue streams, a persuasive empirical case can be made that their economic vitality is heavily dependent on the research productivity and advanced education generated by their universities.

Related: Making College Pay Off

What about cutting back on administration, another perennial issue?  The fact is that in most public universities this won’t generate much in the way of savings.   Administrative overhead at the leanest SUNY comprehensive colleges runs between 35 and 40 percent of total outlays, which seems to be about as frugal as one can get.  The SUNY research campuses spend more, relatively, but much of that can be accounted for by their broader missions – and is offset by revenues associated with them.  If severe cuts in administration were attempted, campuses might lose more than they gain if the resulting cutbacks eroded student services (and thus student academic success), or impaired effectiveness in securing research grants or alumni and philanthropic gifts.  On many American campuses the most expensive non-academic operation is the intercollegiate athletic program, but curtailing that risks loss of alumni and legislative support.

The Poor Success Rate of MOOCs

What about saving money through online instruction?  Where it has been academically effective, courses are characterized by small classes (smaller in many cases than on-campus classes), intense email interaction between faculty and students and among students, detailed and rigorously-adhered to curricula, and rapid online feedback for tests and papers.  This is all to the good and increasingly – and appropriately – serves as a model for the best of traditional courses.  As such, online education is an invaluable instructional modality that can supplement the traditional campus modalities of lectures, seminars and labs.  But, aside from their not requiring physical classroom space, online courses are no cheaper (and in some cases, more expensive) than traditional ones, and are too functionally constrained to serve as the only form of instruction.

What about MOOCs?  They can serve as substitutes or adjuncts to textbooks (or televised lectures and documentaries), but they have a poor success rate as the sole form of instruction, especially for the typical – not especially well-prepared – student.  To the extent that this problem is dealt with by pairing MOOCs with real time instructors in small discussion groups, they no longer save money.

Let me turn now to a defense of the traditional college campus, challenging the new conventional wisdom that such places are becoming obsolete, manifested most recently in a debate at Columbia University titled: “More Clicks, Fewer Bricks: The Lecture Hall is Obsolete.”  Beyond the fact that campus-based undergraduate education – in terms of its true cost – is not inordinately expensive, and that (effective) online education is not necessarily cheaper, the benefits of attending college transcend what happens in the classroom.  This is admittedly a subjective proposition, but we can get some idea of these benefits by looking at the most comprehensive survey available today of how U.S. college students are faring: the National Survey of Student Engagement (NSSE) which surveys students at a broad cross-section of higher education institutions as well as those that have taken all their courses via “distance learning” (presumably online).  The NSSE survey results show that, with respect to instructional quality, distance learning (i.e. online courses) fares surprisingly well, but students for whom this is their only college experience are much less likely to persistent in their studies and graduate, and they miss out on some key aspects of campus life that can have an enormous impact on their future careers and lifetime well-being: leadership training, collaborative work with faculty, teamwork and socialization with other students, networking opportunities with classmates and alumni, community service, and – not to be taken lightly – age-appropriate social life and recreation.

That said, there are serious problems our traditional campuses must deal with if they hope to retain public support and reverse the trend of financial disinvestment.  The most critical (and, I believe, interrelated) concerns are low graduation rates and poor quality lower division level (i.e. freshman/sophomore) instruction.  Since most undergraduates drop out after their first or second years, this points to campus’ failures in advisement and other forms of support, and the consequences of their economizing on lower division courses.  The campus’ problems are compounded by the fact that anywhere from 30 to 50 percent of their newly enrolled freshmen are inadequately prepared for college level work.  That is mainly the fault of America’s high schools, but it does impose a responsibility on colleges to either avoid enrolling the unprepared, or find sure-fire ways of remedying their academic deficiencies if they are admitted.  It must be noted, however, when such students take courses online, they do even worse academically and have practically no chance of graduating.

Overhaul Financial Aid

There is no quick fix on the horizon to alleviate the financial bind in which public higher education finds itself.  And implementing the currently most widely promoted reforms (especially reliance on online instruction) would take the country backward to an even more socially stratified allocation of opportunity.  But there are steps to be taken that can clarify the nature of the higher education financing problem and, hopefully, lead to durable longer term remedies.  I suggest we begin with an entirely costless reform: greater budgetary transparency – that will reveal both the level of cross-subsidization going on and, to the extent that transparency allows us to compare expenses at similar institutions, where reasonable efficiencies can be realized.

Beyond that, I believe that both college students and institutions can benefit from a serious overhaul of the federal financial aid system.   The overall size of the federal financial aid program – student loans and grants – is large enough to make it possible for all American high school graduates who want to go to college to do so.  But certain features of the system could be reformed to broaden access, reduce post-collegiate debt burdens and motivate colleges and universities to rationalize their budgets and raise graduation rates.  I have written more extensively on this topic, but the abbreviated essence of my proposal is a) to make student loans cheaper and easier to get (thus broadening access); b) to have the loans be limited to – but also cover the full cost of – an undergraduate education, as opposed to being pegged to the tuition charged (thus facilitating full-time study and discouraging cross-subsidization); and c) to forgive a large portion of the student loan debt of college graduates (thus motivating both colleges and students to take graduation more seriously).  Obviously, such a major restructuring is a long way off.  In the meantime, I will be happy with greater budgetary transparency.

Peter Salins

Peter Salins is University Professor of Political Science at Stony Brook University and director of its graduate program in public policy.

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