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The Tuition Trap

How College Tuition Got Out of Control

September 2023

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There was a time when a college education was considered a surefire path to a better life.

Nearly eight million World War II veterans receiving an education as a result of the G.I. Bill. i

Around 80 million people in need getting to go to college thanks to Pell Grants.ii

But today? We’ve all heard the horror stories.

Skyrocketing tuition.

Young people drowning in student debt.

Expensive degrees that don’t seem worth the paper they’re printed on.

It all leads naturally to one big question: Why is college so expensive?

But what if we told you that part of the answer to that question is … because no one actually knows what college costs?

[OPENING SEQUENCE]

What does it take to get a college education in America?

These days … you might need to sell a kidney.

For the past decade, around 3/4 of Americans have consistently said that the cost of college is too high.iii And while we can’t say this for certain, our guess is that the other 1/4 are just Elon Musk’s kids.

These worries, by the way, have data to back them up. At both public and private colleges, inflation-adjusted tuition rates have quintupled over the course of about 50 years.iv Today, the average tuition for a freshman at a public university is about $10,000 a year. At a private university, it’s about $35,000 a year.v

And that is … pretty weird. Because it’s happening at the same time that all kinds of other essentials of life have actually been getting more affordable.vi So, why is college so different?

Well, actually, the key might lie in the comparison with those items that don’t break the bank. Because what do things like TVs, and cell phones, and computers have in common? They’re easy to comparison-shop — which tends to keep prices down. This laptop’s more than you need? Save $300 and buy one with fewer bells and whistles. That TV is overpriced? Buy one on sale on the other side of town. Companies can’t charge you that much if they know that you can get a better deal somewhere else.

Now, sure, people try to comparison shop colleges. That’s why you make campus visits and compare tuition costs. But here’s the problem: It’s almost impossible to really compare tuition costs — because most colleges make it impossible.

Here’s what we mean: All those scary-high dollar amounts we referenced earlier … aren’t actually what you’ll pay in tuition — at least not usually. They’re just the sticker price. But, thanks to scholarships, grants, and other forms of financial aid, most students wind up paying a lot less.

If you look at the 20-year-period from 1996 to 2016, the average sticker price for a four-year public college increased by 144 percent. But, after you factor in aid, the average price students actually paid increased by only 77 percent.vii

Still not necessarily affordable, but at least a little bit of an improvement, right?

Hang on a second, it’s about to bite us in the ass.

The problem is that most students don’t find out how much financial assistance they’re going to get until they get accepted to school. And even then, 91 percent of schools still don’t clearly tell them the bottom-line number that they’ll have to pay.viii Which means there’s basically no way to compare prices until it’s too late to be useful. The effect: Well ... how much do you think plane tickets would cost if they could wait until you were boarding to stick you with the bill?

So, this is how college tuition works: a bunch of the smartest people in the country and they built the one system dumber than how we buy cars.

Now, a lack of transparency and competition is a big part of the story of why college is expensive — but it’s not the whole story. Some of the blame falls on the government, which — and this is going to sound crazy — may be making college more expensive by trying to make it affordable.

Yeah, we know. [SCREAMS INTO PILLOW]

Research from the Federal Reserve has found that for every dollar the government gives in subsidized student loans, tuition tends to go up by 60 cents.ix Because when the government makes more money available to pay for tuition, the colleges are perfectly happy to charge more money for tuition.

And there’s one other group that probably deserves some blame here: everyone who thinks a college degree is the only way to have a good life. Because one of the other reasons that college is expensive is because of high demand; because so many people want to enroll. And one of the reasons that so many people want to enroll is that society has started to expect people to have a college education even for jobs that probably don’t need them.

In fact, research has found that there are millions of job listings in America where employers ask for a college degree — even though the majority of people already working in those kinds of jobs don’t have one. x And in many cases employers report that the workers who didn’t go to college perform just as well as those who do.xi

That’s one of the reasons that governors from both political parties have started removing requirements for their state’s employees to have college degrees.xii In Pennsylvania, it was determined that a bachelor’s degree wasn’t actually necessary for 92 percent of state jobs.xiii

So, we’ve got a lot of work to do. Colleges need to be a lot more transparent about what they charge. The government needs to be a lot more careful about how it tries to help. And employers need to recognize that there are millions of talented Americans out there without a college degree.

And then once all that’s done … we’re coming for you, car dealerships.

Sources

  1. 75 Years of the GI Bill: How Transformative It’s Been  U.S. Department of Defense 
  2. "What To Know About Pell Grants" (Danielle Douglas-Gabriel)  Washington Post
  3. Education — Gallup 
  4. "Why College Is Too Expensive — And How Competition Can Fix It" (Preston Cooper)  Foundation for Research on Equal Opportunity
  5. Ibid. 
  6. "Chart of the Day ... Or Century?" (Mark J. Perry) — American Enterprise Institute
  7. "Why College Is Too Expensive — And How Competition Can Fix It" (Preston Cooper)  Foundation for Research on Equal Opportunity
  8. Financial Aid Offers: Action Needed To Improve Information on College Costs and Student Aid — U.S. Government Accountability Office
  9. "Credit Supply and the Rise in College Tuition: Evidence From the Expansion In Federal Student Aid Programs" (David O. Lucca, Taylor Nadauld, and Karen Shen) — Federal Reserve Bank of New York
  10. "Dismissed by Degrees: How Degree Inflation Is Undermining U.S. Competitiveness and Hurting America’s Middle Class" (Joseph B. Fuller and Manjari Raman) — Harvard Business School
  11. Ibid.
  12. "Governors From Both Parties Scrap Degree Requirements for State Jobs" (Alexandra Marquez) — NBC News
  13. Governor Shapiro Leads the Nation on Eliminating College Degree Requirements, Expanding Job Opportunities — Pennsylvania Governor’s Office

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