Sunday, August 05, 2012

Does a College Degree Have to Be So Expensive?

Most parents get sticker shock when they see the price of a college education. According to U.S. Department of Education data, annual tuition at private, non-profit, four-year colleges and universities across the country averaged $22,782 last year, and it was over $45,000 at the most expensive private schools. Public colleges and universities are less expensive than private schools, but the cost depends on where you live and which school you want to attend. Last year, the national average for out-of-state tuition at public four year colleges and universities was $16,074, and the average in-state tuition was $7,083, but the most expensive public schools charged more than twice as much.

The price of college seems to be particularly high in the Pittsburgh Region. Carnegie Mellon University had the sixth highest tuition and fees among all private colleges in the country last year ($44,010), and the University of Pittsburgh had the highest in-state tuition and fees of any public university ($16,132).

Does a college degree have to be so expensive?

Most people don’t realize that students typically pay a lot less to attend college than the published tuition would lead you to believe. On average, students at the most selective and expensive private schools in the country receive grants to cover over 40% of their tuition and fees, and 70% of those grants come from the schools themselves. If you check the “net price calculator” that all colleges are now required to have on their websites, you’ll find that a low-income family might actually pay less for their child to attend an “expensive” school than a college with a lower published price. For example, in 2009-10, even though Carnegie Mellon’s published tuition was 7th highest in the country at $40,920, its net tuition (i.e., what students actually paid) averaged only $30,178, ranking 46th among private four-year colleges in the country

Moreover, even though tuition at private schools seems to be increasing rapidly each year, many of these increases appear to be going back to students in the form of scholarships. In fact, the College Board estimated that after adjusting for inflation, the average net tuition at private non-profit four-year colleges has remained essentially unchanged over the past decade.

The situation is different at public four-year colleges; nationally, their net tuition has almost doubled over the past decade even after controlling for inflation. This is because public schools rely heavily on state and local government appropriations to keep their tuition costs low, and financially-strapped state and local governments have reduced inflation-adjusted appropriations per student by an average of 12.5% between 2006 and 2011, with 17 states reducing aid per student by over 20%.

Public higher education is particularly expensive in Pennsylvania. Last year, the state’s public colleges and universities had the second highest in-state tuition among the fifty states (only New Hampshire was higher) and the fifth highest net tuition per student. In part, this is due to low state subsidies – data from the State Higher Education Executive Officers show that Pennsylvania provided the 10th lowest state higher education subsidies per student in FY2011, and the state spent 40% less on higher education funding than the U.S. average on both a per capita basis and relative to personal income. However, it also appears that public colleges and universities in Pennsylvania have higher costs than in other states – they collected the 11th highest total educational revenue per student (from both tuition and state subsidies) in 2011. In an effort to address this, Governor Corbett has tied increases in state aid to commitments by the schools to control their costs and their tuition.

Is it possible to deliver a good college education at a significantly lower cost? Yes; in fact, right here in southwestern Pennsylvania, Grove City College has the lowest tuition ($14,212) of any private college and actually charges less than the in-state tuition of most of the public colleges and universities. It attracts a high-quality student body (its students have higher SAT scores than most colleges in the region), and a higher percentage of its students graduate (83%) than do students at most other colleges.

Reducing the cost of higher education is going to become an increasingly important priority in the future for both our region and the nation as a whole. Although getting a college education is neither necessary nor sufficient for young people to get good jobs, having a college education increases the types of opportunities that young people can pursue, and our region and our nation will be more competitive if as many of our citizens as possible have a good college education.

But if young people have to incur tens of thousands of dollars of debt to go to college, it will both limit their career choices and reduce their ability to spend money elsewhere in the economy for decades to come. So it’s incumbent on the faculty and administrators at our colleges and universities to do what every other industry in America has been forced to do – become more efficient. For example:
  • Many courses could be delivered online, reducing the need for colleges to spend as much building and maintaining facilities, and allowing more students to learn directly from senior faculty rather than teaching assistants.
  • Unnecessary administrative costs should be reduced; many of the “lean” redesign tools that have worked in manufacturing can be used in higher education, too.
  • Tuition revenues should be devoted to education, rather than social activities and sports. Over the past decade, both public and private colleges nationally have increased spending more on student support and administration than on instruction.
  • The length of time needed to complete many degrees could be reduced, and students who take college-level courses in high school should be allowed to finish their college degrees sooner.
Parents and students can help, too, by choosing those colleges that offer a high quality education at an affordable cost, rather than going deeply into debt to pay whatever a college charges. Informed consumer choice drives value-based competition in other industries, and it can help higher education become more efficient, too.

(A version of this post appeared as the Regional Insights column in the Sunday, August 5, 2012 Pittsburgh Post-Gazette.)


Anonymous Trident University said...

This article illustrates the importance of looking at net tuition instead of overall tuition costs since the difference can be quite drastic. Some students and their families may find they can afford colleges that they thought were out of reach.

4:47 PM  
Anonymous Filius said...

Grove City may be cheap in terms of their total tuition charged. But based on its Net Price Calculator, the Expected Family Contribution (EFC) is over $20,000, which is about $8,000 more than it is under federal guidelines. There's no way we can afford that.

The most we can possibly afford is the EFC under federal guidelines, which is about $12,500. But if that's all we can pay, then my son will have to take out about $11,000 a year in loans. This too is a lot more expensive than any other college we have checked out.

1:05 PM  

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