Your Tuition, Their Spending: Why You’re Paying so Much for College

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Christina Pan

“I am going to a private college, and I think it’s worth the money if you have a tangible and logical goal that includes your future success and paying back any student loans,” said Dilan Minutello ’19 (left). “On the other hand, many careers do not require college degrees, and trade schools are an option for anyone who doesn’t fit in a typical campus setting and wants to learn a certain specialty.” (L-R) Dilan Minutello ’19, Songhwa Seo ’19

Colleges and universities have thrived under their reputation as the centers for admirable higher education. However, the rising demand for college degrees, coupled with the rising cost of universities, has generated financial impacts that affect students, families, and other schools in a way that raises curiosity regarding how similar these schools are to businesses.

The breakdown of administration is one aspect of higher education that bears resemblance to businesses. There is a president (“the CEO”), governing boards (the link between federal and private interests), and faculty members (the employees). But even further than comparing the structure of workers is the way that colleges are run.

College was more affordable for older generations. According to the College Board, the average tuition cost of private four-year universities and colleges has increased from 15.2 thousand dollars per year to 34.7 thousand dollars per year since 1987. Public four-year establishments share a similar jump of an almost seven thousand dollar increase per year. This indicates a 129% and 213% increase in tuition costs, respectively, inspiring the question of why the fee has risen so steeply.

The jump in college tuition is not matched by a similar increase in wages. Since the 80s, wages have increased, but not nearly as quickly. In fact, college costs have increased at a rate that is eight times faster than that of wages. From 1989 to 2016, adjusted wages increased about five thousand dollars. Not only does this affect new members of the workforce, such as graduates of universities looking to pay off college loans, but it also affects families who are planning to pay for tuition: the savings that would have covered the costs thirty years ago are only a small percentage of what schools demand today. Over 44 million Americans having a staggering total of $1.5 trillion in student debt, while college presidents rake in up to millions of dollars in salary.

The highest paid college president of the 2016-17 school year was James R. Ramsey of the University of Louisville, who had a salary of $4,290,232.

For those not swimming in debt or on the verge of doing so, the advantage of having extra money to contribute to the school is massive considering the preference of school officials. “Oftentimes, donations and tied employment within the family are taken into consideration when deciding college admissions. That is not to say that merit and service is taken for granted, but it’s incredibly obvious that colleges give leeway to students offering money,” said Songhwa Seo ’19. “It has been most jarring ever since the USC scandal; I believe that many people have already accepted the fact that colleges are money hungry, including myself.”

Student debt has massive effects on the post-graduate endeavors of students. Major decisions such as saving for retirement and investing in a home are affected because of the need to repay student loans. According to the Federal Reserve Bank of St. Louis, the personal savings rate of young professionals and Americans in general was only 2.8% in April 2018. With the attraction of a busy social life and the easy access to spending with credit cards, student loans can become one more burden that graduates lump into the rest of their expenditures.

Unfortunately, financial aid isn’t a viable option for all students. “As somebody who is planning to attend graduate school, financial aid played a huge factor into my decision,” said Seo. “I come from an upper middle class family, so I stopped myself from applying to a lot of colleges because I wouldn’t be able to get significant amounts of financial aid.”

Elainee Chen ’19 shares a similar perspective. “I think financial aid definitely helps a lot, but there are still so many costs and other fees that are unaccounted for,” said Chen. “College is a really important part of our lives (if we choose to go), but if graduates end up with tens of thousands of dollars of debt, it’s hard to know if it was really worth it or not.”

The rise of college fees can be attributed to multiple theories concerning demand, financial aid, and student services.

The idea of a college education, in general, has a positive connotation. It is accompanied by the notion that more opportunities will arise in the students’ careers and social lives and that a college degree is a necessity to open these doors. The college community is a hub for social interaction and networking, and many career paths require some sort of higher, specialized education. This is why tuitions have increased: the more students want to attend, the greater the cost of college and student borrowing increases, regardless of the risk of return on their investment (40% of U.S. students don’t graduate in six years). This indicates that students believe the college experience has benefits that greatly outweigh the massive costs.

In terms of financial aid, the Bennett hypothesis was mentioned by author and distinguished Ohio University professor of economics emeritus Richard Vedder. Bills passed by Congress in the late 1970s allowed more middle income students to apply and benefit from financial aid, increasing their applications for it. “Knowing that students will get this financial-aid money, the university raises fees and takes advantage to capture that themselves,” Vedder told ‘Business Insider.’ According to the Federal Reserve Bank of New York, every new dollar of federal student financial aid increases the tuition cost by 65 cents.

Additionally, states have cut funding for higher education, forcing institutions to make up the difference themselves, which they do by increasing tuition. “Studies have shown that when state support is level or increasing, tuition is flat. But when state support declines, tuition goes up,” said American Council on Education’s senior vice president Terry Hartle to ‘Business Insider,’ referring to the 80% of American students who attend public schools.

Lastly, the rise in students also relates to an increase in student services, and with them, the increase in costs. For instance, schools desire qualified professors to teach their classes, but qualification and experience comes with a larger salary, as well as benefits and insurance. “The primary mechanism for delivering higher education at most institutions are highly educated people,” Hartle said. “Acquiring and recruiting highly educated faculty and staff costs money, especially in jobs with significant demand outside academia.” This is also indicated by the increase in class size and the amount of adjunct and part time staff, whose lower salaries and benefits would greatly save the school’s money. According to research from the American Association of University Professors, part time faculty increased from 30% to 51% from 1975 to 2011.

Student services, including counseling, academic support, and medical care are all additional costs for schools. Access to these resources are expected to be mentioned during campus tours and informational sessions. More funding has also been allocated to administration expenses and research instead of instruction. Statistics published by the National Center for Education Statistics revealed that at private, for-profit institutions, “the largest single expense category was the combined category of student services, academic support, and institutional support, which includes expenses associated with non-instructional activities, such as admissions, student activities, libraries, and administrative and executive activities,” making up 63% of the institution’s total spending.

With the emphasis put on getting a college education, the argument boils down to whether the costs are worth the supposed benefits. Many career paths do not require a four year degree, but can be based on education from specialty schools. Employers have been increasingly focused on prior work experience in the fields as well, which is difficult to acquire as a full time student. This makes schools that have incorporated work programs more desirable for prospective students.

On the other hand, the college experience is vastly different from any other; living with students and peers your age while being away from family makes for the opportunity to branch out and learn how to do things on your own. “The college experience is definitely special, as is any experience in the educational setting,” said Seo. “I don’t think that we realize how privileged we are to even have the opportunity to attend college, let alone even ponder the thought of attending a private school and obtain higher education afterwards. Not only are we gaining knowledge, but we are also gaining independence, responsibility, and life lessons that we will carry on into the crevices of our future endeavors.”

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