Education Supplement: Bursting the Tuition Bubble


College tuition is, as any Occupy Wall Street demonstrator will tell you, too damn high. Average fees at public universities hit $8,244 this year, according to College Board figures, and a staggering $28,500 at private schools; add on another 13 grand if you want room and board or such fripperies as textbooks. Little wonder that State University of New York chancellor Nancy Zimpher recently warned at a White House education summit that “the general public might be reaching the tipping point” in their ability to pay for college.

The common wisdom is that universities, bloated with tenured professors, are ripe for a market correction; “higher-education bubble” now has its own Wikipedia page. Yet a deeper dig into the numbers—itemized in a pair of studies by the College Board and the foundation-funded Delta Cost Project—shows that the bubble is actually a pair of unrelated phenomena: Call them the Great Harvard Chase and the State-Funding Plug Pull.

First off, things aren’t quite as dismal as the scary headlines, especially at the private colleges with the most hair-raising tuition figures. (Sarah freaking Lawrence: $44,220.) That’s because most tuition surveys quote only “sticker price”: full tuition, without factoring in any grants or scholarships. It’s a scenario that only applies to a handful of those schools’ students—a whopping 88 percent of private-college students get some form of aid money, cutting their costs by an average of more than $15,000, according to the College Board.

“If you look at the amount, on average, that students are paying in tuition and fees, it has gone up much more slowly than sticker prices,” says Sandy Baum, co-author of the College Board study. (Starting this school year, colleges have to provide a “net cost” calculator on their websites that can show each prospective applicant how much their education will really cost them.) And because colleges are pouring much of this money back into financial aid, it effectively creates a more equitable sliding scale, with well-off students paying full price and subsidizing the tuitions of their less-flush classmates.

Still, actual student spending on college is on the rise, if less dramatically. And it’s not faculty salaries that are to blame: The Delta Cost Project, a just-completed five-year effort to track college spending, found that average full-time salaries at public universities have remained flat since 2002, while pay has increased only slightly at private institutions. And fobbing off more courses on low-cost adjuncts and part-timers has likely led schools’ faculty costs to go down, if anything.

The biggest single factor driving costs upward for both public and private schools, says Delta Cost Project director Jane Wellman, is the cost of employee health benefits, which, like in every other industry, are metastasizing out of control. “Unless we get employee health benefits under control, in public institutions I think it’s unfortunately the case that every dime in future tuition increases is going to go to health care,” she says.

At the same time, notes Baum, “colleges provide a lot of services that they didn’t used to provide. There’s a lot of counseling going on, there’s a lot of remedial education going on, there’s a lot of integrating diversity into the community. All these things take lots of people and cost money.”

More lavish—or at least, less spartan—facilities are also a factor, Baum says: “When I was in college, we had triple rooms and a phone down the hall. Nobody would go to live in a dorm like that anymore.”

They might, of course, if it meant graduating with less than a six-figure debt. But as Wellman notes, cutting spending to keep down tuition is easier said than done. “There’s a huge difference between the elite institutions that have a lot of money and everybody else.” As long as those top schools keep raising the bar on spending, “everybody’s going to be chasing the high-spending institutions if they want to hang on to the faculty and get the research contracts.” Like the Yankees and Red Sox in the American League East, the Yales and Harvards of the world bid up the cost of talent—especially for administrators, with university presidents now regularly earning the kinds of seven-figure salaries formerly reserved for university football coaches—leaving less-affluent schools squeezing their students to afford to keep up.

The result of all this has been a slow, steady climb in tuitions. College Board figures reveal that at both public and private schools, tuition has been steadily rising about 1 percent faster than inflation since the early 1980s. Around 2002, however, average public-college tuition suddenly shot upward and has continued to rise faster than private schools ever since.

The reason for this surge, Wellman says, is “overwhelmingly because they’re losing money from the states.” Health care costs are a “double whammy,” she says, sapping public treasuries even as they force public universities to hike spending. At the City University of New York, two straight years of cuts have left inflation-adjusted per-student funding below 1995 levels at four-year CUNY schools, and more than 30 percent below where they were 20 years ago at CUNY’s community colleges.

As a result, public colleges now rely on tuition money to pay more than half their costs for the first time in history, according to Delta Cost Project estimates. (At CUNY, tuition provides 35 percent of operating costs, up from 28 percent in 2002.) Students have responded with the largest outbreaks of tuition protests in recent memory, at universities from Michigan to California. In New York, when CUNY officials met in November to hike tuition by $1,500 over the next five years, hundreds of students swarmed the Baruch College meeting space, resulting in more than a dozen arrests and multiple claims of police violence.

CUNY student protestors like to note, with bitter irony, that free tuition at CUNY was uncontroversial back when the student body was overwhelmingly white and working-class. “From 1845 to 1976, CUNY was free,” says Borough of Manhattan Community College student leader Domingo Estevez, who says he was clubbed by police at the Baruch event. “The state basically has turned their back on CUNY once CUNY diversified.”

Open admission for all graduates of city high schools started in 1970 after system-wide student protests. Tuition was first imposed after the fiscal crisis of 1975 and has kept rising since, even though nearly half of CUNY students now come from families with incomes under $30,000 a year.

It’s numbers like these that lead to talk of a popping college bubble, but so far, there’s no sign of impending collapse. National undergrad enrollment jumped by 2.8 million from 2007 through 2010, according to the College Board, with most of that growth at public schools. “As people say it gets more and more unaffordable, the fact is more and more people are affording it,” Baum says.

There are several factors at work, she says. Not only has the economy driven more people to return to school, but also, increases in Pell Grants and tuition tax credits—the latter of which, Baum notes, disproportionately aid more well-off students who have taxes to deduct against—have taken some of the sting out of tuition hikes.

Wellman, though, worries that schools like CUNY might already be pricing people out, even as enrollment continues to soar. One possible interpretation: Priced-out students might be getting replaced by other students who are trading down from pricier private schools to public universities in order to save cash.

Baum and Wellman both agree that the current pricing scheme is unsustainable. Still, they aren’t sure where it will end—barring a return to state-funding levels of the past, something that seems unlikely even after Governor Cuomo’s half-a-loaf restoration of millionaires’ taxes. “As long as people are willing to pay those prices, then I’m not sure where the correction occurs,” Wellman says.

The schools with the most to worry about could be those in the middle, with neither Ivy League cachet nor CUNY prices. “A few of them go out of business every year. I think more of them might go out of business,” Baum says.

If so, the first bubble that bursts could be the very idea of college itself, with its quaint traditions like dorms, campuses, and professors. As more students find their college experience reduced to packing into increasingly crowded lecture halls, Baum predicts, “there’s going to be more online, more hybrid learning. We’re going to figure out more ways to teach large numbers of students. We have to.”