How Public Universities Became So Expensive | WSJ

Summary

The rising cost of public college tuition in the U.S. has become a significant issue, with students and families bearing more of the financial burden due to cuts in state funding. While federal aid programs, such as student loans and grants, were designed to make education more accessible, research shows they have contributed to increasing tuition fees. The Biden administration's proposal to make public college tuition-free for families earning under $125,000 has mixed implications, potentially increasing demand but also offering a way to ease competition between schools. Alternative education options, like certification programs, are also gaining attention as cost-effective solutions.

Takeaways

• 😀 Tuition at U.S. public universities has increased significantly, with in-state tuition nearly tripling from 1990 to 2020 after adjusting for inflation.
• 😀 President Biden has proposed making public colleges tuition-free for families earning less than $125,000, with federal support covering a substantial portion of in-state tuition.
• 😀 Federal financial aid programs, intended to help students afford college, have contributed to rising tuition prices by increasing the demand for higher education.
• 😀 Public universities, such as the University of Oregon, rely heavily on tuition and state funding to cover their operating costs, including wages and facility upkeep.
• 😀 During recessions, states often cut university funding, which forces schools to increase tuition or admit more out-of-state and international students who pay higher fees.
• 😀 Colleges often add amenities, such as gyms and recreational centers, to attract students and justify higher tuition fees.
• 😀 The shift in funding from state taxpayers to families has been a major driver behind tuition inflation in the U.S. education system.
• 😀 The Higher Education Act of 1965 expanded federal student loan programs, creating an incentive for colleges to raise prices by offering financial aid.
• 😀 Research indicates that federal financial aid, particularly from the 1993 expansion of loan programs, accounts for more than 54% of tuition increases from 1987 to 2010.
• 😀 Private sector solutions, such as Google’s six-month IT certification program and online learning platforms like Coursera, offer alternative pathways to career training without a four-year degree.
• 😀 There is growing skepticism about whether the high cost of college is justified, with more students and parents questioning if the financial burden is worth the potential benefits of a degree.

Q & A

Why has tuition at America's public universities been increasing?

Tuition at public universities has been rising due to a shift in funding sources, from state taxpayers to students and their families. Economic downturns often lead to reduced state funding, prompting universities to raise tuition to cover costs.

How did federal financial aid contribute to the rise in tuition fees?

Federal financial aid, especially after the expansion of student loan programs in 1993, provided students with more money to spend on tuition. This increase in available funding led schools to raise prices, knowing students could pay higher amounts.

What impact has the shift to more reliance on tuition had on public universities?

Public universities, like the University of Oregon, now depend more heavily on tuition as a primary revenue stream. This has incentivized schools to attract out-of-state and international students, who pay higher tuition fees.

What role do amenities and campus features play in rising tuition costs?

Universities invest in amenities, such as gyms and recreational spaces, to make their campuses more attractive. These investments increase the cost of education, as schools pass the expense on to students in the form of higher tuition.

How did the Higher Education Act of 1965 affect college tuition?

The Higher Education Act of 1965 made federal loans more accessible, which allowed schools to raise tuition prices. With the assurance that students could access loans to pay for education, universities increased costs without losing applicants.

What is the economic theory behind the rise in tuition costs linked to federal aid?

Federal aid created a 'perverse incentive' where universities raised tuition, knowing that students would receive loans or grants to cover the cost. As financial aid increased, schools competed to raise their perceived prestige and invested more in campus features.

What impact did the 1993 changes to federal student loan policies have on tuition?

The 1993 changes expanded federal loan eligibility to include unsubsidized loans, making more money available to students. This increase in financial aid led to a significant rise in tuition costs as universities realized students could afford to pay more.

What is the economic rationale behind the idea that college degrees increase lifetime earnings?

College graduates earn significantly more over their careers compared to high school graduates. This earnings premium incentivizes parents and students to invest more in higher education, which in turn drives up tuition prices.

How would President Biden's proposal to make public colleges tuition-free affect tuition rates?

Biden's proposal could have mixed effects. On one hand, increasing federal grants could raise demand for college, pushing tuition higher. On the other hand, the federal government covering 75% of in-state tuition could reduce competition among public universities for out-of-state students.

What alternatives to a traditional four-year degree have been proposed to reduce education costs?

Private companies and universities are offering alternatives, such as Google's six-month IT certification programs, and partnerships with platforms like Coursera. These options provide low-cost training that could replace traditional four-year degrees for certain careers.