Why College Is So Expensive

Over the past quarter century we’ve lived through the fantastic acceleration of a good thing – the spread of capitalism has cause the price of almost everything to drop through the floor.

Compared to what they cost just a generation ago, look at the price of sending a message across a long distance, storing and listening to a recorded performance, document management, logistics, even energy.  In 1980’s terms, virtually everyone in the developed world is now fabulously rich.  And yet, some very important things in modern life have resisted this trend toward cheap.  One of the most important examples is a college education.

Of all the great Medieval institutions, the University is the one that has translated most successfully into our time.  While some of the others: Monarchy, Feudalism, trade guilds, and the Catholic Church have struggled to maintain some relevance, college is even more important to an ambitious young person now than it was in the 15th Century.  And it is perhaps more expensive now than it was then.

Someone who went to college in the 1950’s or ’60’s might have paid for it with a job. You could still do that now if you had determination, a strong work ethic, and a part time job earning $60-70K a year before taxes.  Not very realistic for the average non-pop-star eighteen-year-old.

The problem of financing college demonstrates how modern capitalism has driven down the cost of almost everything while driving the price a few things right into the stratosphere.  Why does college cost so much?  Because the single most expensive thing in a modern capitalist economy is the attention of a human expert, and the traditional college experience is built around that resource.

Do you want actual attention – in person – from someone who has learned something complex at a high level?  Whether it’s a lawyer, doctor, scientist, or a professor, you better bring your gold card.  And a couple of other cards too just to be safe.

Want to be in a relatively small class (forty students or less) in which you can learn, say, advanced genetic engineering from someone who has mastered the subject and speaks English?  Not cheap.  Want to cut the cost?  You could try to learn that subject in a recorded online class, a video, or in a book in a room by yourself.  Let me know how that works out for you (and stay away from my genes).

And the instruction isn’t the only value you’re paying for.  Do you want the experience of being surrounded by other people pursuing the same goal? Want to share your questions with them, learn from their experiences, benefit from their network of contacts?  Who has time for that?  In a modern economy direct human interaction is very costly.

The cost of college is a problem because it dampens social mobility.  The wave of new college graduates created by the post-WW2 GI Bill expanded the public imagination.  We came to recognize that a growing pool of educated people can have a healthy impact on the economy and politics and we looked for ways to open more access.

Over time our economy has evolved so that the experience, skills, and connections of a college education are almost mandatory for a middle class existence.  There is a very real difference in life prospects between those with and without that experience.  How many people do you know who have an Ivy League education?  Your answer will probably depend on whether you have one yourself.

But Harvard just doesn’t scale.  And in capitalism, scalability is everything.  What can we do about this?  Not much.

We could stop using colleges as research facilities so that professors can focus more on teaching.  But if we do that, where are we going to get pure science done?  The old research labs have been gutted (see Avaya for example).  This move would have a pretty serious cost, even if it drove down tuition.

Some say we should stop subsidizing tuition with financial aid, but we really did that a long time ago when we started the shift toward loan-based tuition.  Take it any further and we can stop pretending we care at all about rewarding merit.  And the funding scheme won’t change the underlying costs.

We could encourage the development of new alternatives.  Take a close look at the University of Phoenix and you’ll see the most probable future of higher education for most people.  This is not the classic university model, but it can deliver some of the value of that experience and it can scale.  This model is vulnerable to scams though, and if we let this area of innovation be overrun with grifters it will cost us all dear.  Some education businesses are already resorting to housing bubble tactics (recruiting the homeless, for example).  Key warning sign – Goldman Sachs is investing in these businesses and my GOP is lining up to protect them.

Community colleges are doing a lot to fill the gaps.  By focusing more closely on job skills rather than humanities they provide a faster return on investment.  But tight state and local budgets are hitting these institutions hard just we they are needed most.

We can probably expect that the inherent costs of the traditional university experience will begin to erode its relevance over time.  Those costs won’t drop, but the centrality of college as we’ve understood it in prior generations may decline until it’s more of a niche experience, like a summer hiking in Europe, rather than the core credential for middle class life.  It’s hard to imagine an alternative outcome.

But in the meantime, the cost of college should be a greater political issue because if its role in one our most frustrating problems – the skyrocketing cost of health care.  That’s a subject for another article.


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