Why does college cost so much?
I was reading Commerce and Civilization: Claremont McKenna College The First Fifty Years, 1946 - 1996 today and I was struck by this line on p. 1. "Tuition, room, and board for fall semester came to slightly more than $500 dollars [in 1946.]"
Using this inflation calculator, I found out that tuition cost just $5440.85 in 2009 dollars. Given that tuition, room and board, now costs over $50,000 and the college routinely dips into its endowment or planned giving to subsidize the cost of educating a student at Claremont McKenna, I have to ask an uncomfortable question: Why, sixty years later, does college cost more than ten times what it did in 1946?
The reason I mention it is that today I got one of those pesky green fliers that says that I need to settle my tuition bill with student accounts or I won't be able to register for classes. What's the remaining amount of money that I owe? $5551.50, which incidentally is the cost of just one semester in 1946. Mind you, I'm on more than half financial aid and that's just one payment for this semester.
This brings me to another series of uncomfortable questions. Am I getting ten times the education that those alums got in 1946? And will future CMCers 60 years hence get ten times the education that I did?
It seems preposterous to us that this would be the case. If anything most goods have experienced deflation, not inflation, which is why computers are cheaper now and will be cheaper years hence. The free marketplace encourages companies to drive down the cost of goods over time, not bid them up. So why do college tuitions seem to be growing much faster than our ability to pay them?
Many of my friends' parents say that when they went to college, they could afford it by working during the summer times. But now, if you wanted to pay for a full year, how long do you think it would take for you to work?
Let's do a back of the envelope calculation.
Assuming you work Monday-Friday, and from May 16 - August 29, at $20 an hour, 40 hours a week, you would make just $12,800 before taxes or living expenses were factored in.
Assume now that you work 168 hours a week (24 hours in a day, seven days in a week), meaning you never slept, nor took any time off whatsoever and were paid a handsome wage of $20 an hour, you would still not be able to pay for a single year of Claremont McKenna's full tuition and room and board. You'd have only $47,040 before taxes.
Now many people argue, "hey, I'll just take out student loans and pay them back when I get a fat paycheck at my first job." But, life it seems, turns out to be a bit more deceptive. In a recession, people don't usually hire and that means you'll still have a hard time paying off those loans in a timely fashion.
Why am I mentioning this? Well, in this economic climate, many people are calling for more federal funds for higher education, which incidentally seems like the worst kind of idea. You may have even heard of the Facebook group started this past January, called "Cancel Student Loan Debt to Stimulate the Economy."
Those who favor eliminating student debt do so with the mistaken idea that it might somehow make college affordable. If history is any indication, it will make it more expensive. Economist Richard Vedder explains in his book, Going Broke by Degree: Why College Costs Too Much, that because the federal government absorbs tuition increases, colleges have little incentive to keep their budgets trim. The masterful Cato Handbook on Policy makes clear with these graphs that rising federal involvement in higher education simply drives up prices.