January 21, 2016

January 21, 2016 | Commentary on Education, Higher Education

Blame Washington for Skyrocketed College Costs

In a matter of days, college applications will be due. No family can look at those applications without thinking of the opportunity college represents. But they also can’t look without thinking of the bills. A new research paper helps explain why those costs are so high.

We accept inflation as a fact of life. But as my Heritage colleague Lindsey Burke points out, there’s inflation, and then there’s college. Since 1980, according to CNBC, the cost of a public, four-year college has increased by 287 percent, while inflation in the economy overall has been just 160 percent. Only medical care — at a whopping 425 percent increase — has a worse record.
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Lots of people have tried to explain why college costs have risen so fast. Some offer the “climbing wall” explanation, which is that top colleges look more like luxury resorts. Others blame big time athletics or spiraling administrative costs.

All those explanations have some merit. Having been a professor, I’ve lamented the fact that our colleges are increasingly like our primary schools: an administrator for every teacher. And no, before you say it, the cost increases aren’t only due to spiraling costs for professors.

But none of these explanations gets to the heart of the problem. Granted, hot tubs are a waste of money and we need fewer deans. But the fact remains that schools have the money to spend, and as I’ve seen for myself, if a school has money to spend, it’s going to get spent.

That’s where the paper by the nonprofit National Bureau of Economic Research comes in. It looks at competing theories for why college costs have gone up so fast. One theory — called “cost disease” — suggests that it’s hard to figure out how to teach a better class. As a result, costs go up because productivity doesn’t increase.

The other theory is that costs go up because the money’s there. This is known as the “Bennett hypothesis,” after Ronald Reagan’s education secretary, William Bennett. He argued it was increases in federal subsidies that drove college costs up: The more aid flowed in, the more expensive college got.

The paper finds overwhelming support for the Bennett hypothesis: Changes to the Federal Student Loan Program are more than enough to explain the rising cost of college.

Now, in practice, lots of other factors probably matter a bit. But it’s revealing that two of the most inflation-prone industries in the United States — health care and higher education — are industries where the federal government is responsible for paying a lot of the costs.

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Except that ultimately, the feds don’t pay. One way or another, we pay — either through taxes or through borrowing. And in this context, that means student loans, the very program that the bureau’s paper examined. So the loans are there to meet the costs of higher education, which are driven by the loans.

Politicians like to talk about the virtues of getting more kids to go to college. That’s how they justify federal support. But that support has a big cost: tuition increases that price some families out of college and leave the rest of them with large loans to pay off.

Unfortunately, college has become a status symbol. Though they’re not willing to say it publicly, most college professors I know think we’re too eager to encourage kids to go to college. As I can attest, teaching students who don’t want to be there is no fun.

I do want people to go to college — if they’re motivated to go. But I don’t want a system that piles up subsidies on the one hand, and costs and debts on the other, and tells people they have to go to college if they’re going to be success in life. That’s snobbery. If we all had a bit less snobbery, perhaps we’d stop falling for the siren song which says that more federal dollars are the answer to those tuition bills.

Ted R. Bromund is a Senior Research Fellow in The Heritage Foundation's Thatcher Center for Freedom.

This piece originally appeared in Newsday.


About the Author

Theodore R. Bromund, Ph.D. Senior Research Fellow in Anglo-American Relations
The Margaret Thatcher Center for Freedom