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Cost of Higher Education. Where Exactly is the Fraud?

The cost of higher education has grown tremendously over the last 10 years (see the chart below). The national average data show that tuition and fees charged by private universities has grown by 170% to $38,000. At public schools the tuition increased even more. For out-of-state students the costs grew by 220% reaching $24,000. The in-state tuition at public schools remains the lowest due to state subsidies and seems the most affordable.

cost of higher education

The chart: U.S.News (July 29, 2015)

Most of the tuition money come from educational loans. The article This government group wants to crack down on college financial aid cheats reports:

“The government is getting more aggressive in trying to prevent companies from cheating students and taxpayers out of financial aid dollars.

The Department of Education is creating a financial aid enforcement unit to better police higher education institutions accused of using illegal tactics to lure financial aid funds, officials announced Monday. President Barack Obama will request $13.6 million from Congress in his 2017 budget Tuesday to strengthen the enforcement and oversight activities of the Office of Federal Student Aid.

“This new unit will allow us to respond more quickly and efficiently to allegations of illegal actions by higher education institutions,” John B. King Jr., the Acting Secretary of Education, said in a news conference, announcing the new unit. He noted that the Department will move forward with funding the new unit, even if they’re unable to secure the $13.6 million from Congress.”

Well, cracking up on outright fraud may be necessary. But isn’t the outrageous cost, that makes so many students rely on loans to pay for their education? Aren’t the loans responsible for the ample supply of money that is making the educational system more expensive and less efficient?

The increase in cost of education is outrageous. The growth by 170% for private and 220% for public schools is not even closely matching the rate of inflation, which according to official data constitutes only 58% for the same period (CPI-U index). Obviously, the reason is the easy loan money that is readily given to almost anyone qualified, without much regard to the tuition charged by schools, the field of study and ability to get a job and repay the loan after graduation. And it is natural consequence of market economy, that schools are charging higher and higher tuition and fees in conditions of abundant supply students and loan money. Instead of increased efficiency and quality inherent to competitive environment, such abundance stimulates waste and misallocation of resources on the part of schools. The claims that the money is used for salaries of professors is are simply not true. Full time professors are not very highly paid, and in large (especially public) universities they don’t constitute majority of the employees.

As reported in New Analysis Shows Problematic Boom In Higher Ed Administrators (Feb. 2014), the Universities are drastically increasing the number of administrative positions, in part to comply with multitude of imposed regulations.

“The number of non-academic administrative and professional employees at U.S. colleges and universities has more than doubled in the last 25 years, vastly outpacing the growth in the number of students or faculty, according to an analysis of federal figures.

The disproportionate increase in the number of university staffers who neither teach nor conduct research has continued unabated in more recent years, and slowed only slightly since the start of the economic downturn, during which time colleges and universities have contended that a dearth of resources forced them to sharply raise tuition…

“There’s just a mind-boggling amount of money per student that’s being spent on administration,” said Andrew Gillen, a senior researcher at the institutes. “It raises a question of priorities.”

Universities have added these administrators and professional employees even as they’ve substantially shifted classroom teaching duties from full-time faculty to less-expensive part-time adjunct faculty and teaching assistants, the figures show.

Part-time faculty and teaching assistants now account for half of instructional staffs at colleges and universities, up from one-third in 1987, the figures show.

During the same period, the number of administrators and professional staff has more than doubled. That’s a rate of increase more than twice as fast as the growth in the number of students.”

At the very least, they say, the continued hiring of nonacademic employees belies university presidents’ insistence that they are doing everything they can to improve efficiency and hold down costs.

“It’s a lie. It’s a lie. It’s a lie,” said Richard Vedder, an economist and director of the Center for College Affordability and Productivity.

“I wouldn’t buy a used car from a university president,” said Vedder. “They’ll say, ‘We’re making moves to cut costs,’ and mention something about energy-efficient lightbulbs, and ignore the new assistant to the assistant to the associate vice provost they just hired.”

The cost of higher education does not seem to be going down in the nearest future. But its growth is obviously unsustainable. How much a graduate with a degree in science or engineering can pay back? Are the cheaper high quality online degree programs are finally going to be implemented and certified? How the schools are going to deal with the decrease of the number of students due to lack of funding or competition of alternative forms of education? And finally, who is going to absorb the cost of defaulted educational loans?

See also:

This government group wants to crack down on college financial aid cheats

Chart: See 20 Years of Tuition Growth at National Universities

Consumer Price Index Data from 1913 to 2016

New Analysis Shows Problematic Boom In Higher Ed Administrators