1:34pm

Wed October 19, 2011
Education

Why Is College So Expensive?

Originally published on Wed October 19, 2011 5:16 pm

Many of the protesters occupying Wall Street and other places say they are upset about the rising price of going to college. Tuition and other costs have been going up faster than inflation, and family incomes can't keep up. Despite public outrage about the problem, there's little sign these costs will drop anytime soon.

If you are a veteran of a public university, the jump in tuition at your alma mater might be downright jaw-dropping. Tuition at the University of California, Berkeley, was about $700 a year back in the 1970s. Today, U.C. Berkeley students have to fork over around $15,000 per year. That's a 2,000 percent increase.

There's a simple explanation, according to Sandy Baum, who teaches at George Washington University.

"States are paying less of the cost than they used to," Baum says. She adds that as state budgets shrink, the students' share of paying for education goes up.

Competing for Talent

Berkeley's tuition increase is unusually large, but most public schools, which educate 80 percent of all college students, have seen dramatic increases. Private schools don't rely on state subsidies, and their prices have gone up more slowly in recent years. But they are still rising faster than inflation.

Terry Hartle of the American Council on Education says that's because schools are paying more for talent.

"Now we're competing in a global economy," Hartle says, "so if you want to get the best scientists, the best engineers ... you're literally competing with universities and employers from around the globe."

Not to mention the higher costs for health insurance for all of those expensive faculty and for things like counseling services, which are expanding.

Even as sticker prices climb, student aid has gone up dramatically. For students in private schools, says George Washington University's Baum, the aid increases just about cancel out tuition increases of the past five years.

Financial Aid

Baum says one reason tuition never seems to drop is that universities are not getting more efficient the way other industries are. And some conservative governors are pushing administrators to cut waste and make professors more productive.

Richard Vedder, who runs the Center for College Affordability and Productivity, says the more government aid goes up, the more tuition rises. He says limits on grants and loan subsidies would cap spiraling tuition prices.

"That reduces the demand for college, and that is going to tend to reduce the ability of colleges to raise tuition fees," Vedder says.

Many economists question that link. So does Arne Duncan, Secretary of Education, who has pushed for more college aid for low-income students.

In fact, Duncan and others argue that the problem is that grant aid hasn't risen fast enough.

"Today a federal Pell Grant covers only about one-third of what it costs for a public four-year college in state," says Lauren Asher, president of The Institute for College Access and Success in California. "In the 1980s it covered about half; in the 1970s it covered more than 70 percent."

Reduced Means

The problem is compounded because people are less able to pay. Incomes are stagnant, some parents are unemployed, and many can no longer get low-interest home-equity loans because home values have fallen.

So families have turned to federal student loans, and even much more expensive private loans.

"Private loans are much riskier than federal student loans, because they don't come with the important repayment plans, forgiveness programs and other borrower protections that federal student loans provide," Asher says.

The Obama administration has been rolling out a number of measures to help students in danger of falling behind on their federal loan payments.

Nearly a half-million students have signed up for "income-based repayment." The program limits the amount of your income that you have to pay. And officials say many more students could be signing up for this program while they're waiting for the economy to turn around.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MELISSA BLOCK, HOST:

And I'm Melissa Block. Many protesters who are a part of Occupy Wall Street say they're upset about the rising price of college. Tuition and other costs have been increasing faster than inflation, and family incomes can't keep up. As NPR's Larry Abramson reports, there's little sign these costs will drop anytime soon.

LARRY ABRAMSON, BYLINE: If you are a veteran of a public university like I am, the jump in tuition at your alma mater might be downright jaw-dropping. My parents paid UC Berkeley about $700 a year back in the 1970s. Today, they would have to fork over around $15,000 per annum. That's a 2,000 percent increase. There's a simple explanation.

SANDY BAUM: States are paying less of the cost than they used to.

ABRAMSON: Sandy Baum teaches at George Washington University. She says that as state budget shrink, the students' share of education goes up.

BAUM: They are now subsidizing students less than they used to. Students are paying more of the cost.

ABRAMSON: Berkeley's tuition increase is unusually large, but many public schools, which educate 80 percent of all students in this country, have seen dramatic increases. Private schools don't rely on state subsidies, and their prices have gone up more slowly in recent years, but they're still rising faster than inflation. Terry Hartle of the American Council on Education says that's because schools are paying more for talent.

TERRY HARTLE: Now we're competing in a global economy. So if you want to get the best scientists, the best engineers, the best information technology specialists, you're literally competing with universities and employers around the globe.

ABRAMSON: Not to mention the higher costs for health insurance for all of those expensive faculty and counseling services, which are expanding. But even as sticker prices climb, student aid has also gone up dramatically. Sandy Baum says for students in private schools, more aid just about cancels out tuition increases over the past five years.

BAUM: So, yes, the colleges are charging more than they used to, but not a lot more than they used to after adjusting for inflation.

ABRAMSON: Baum says one reason why tuition never seems to drop is that universities are not getting more efficient the way other industries are. Some conservative governors are pushing administrators to cut waste and to make professors more productive. Richard Vedder of the Center for College Affordability and Productivity says the more government aid goes up, the more tuition rises. He believes limits on grants and loan subsidies would cap spiraling tuition prices.

DR. RICHARD VEDDER: And that reduces the demand for college, and that is going to tend to have a depressing effect on the ability of colleges to raise tuition fees.

ABRAMSON: Many economists question that link, so does Secretary of Education Arne Duncan, who has pushed for more college aid for low-income students.

SECRETARY ARNE DUNCAN: We've sort of done a number of, you know, statistical and historical analysis there, but that actually doesn't seem to be based on reality.

ABRAMSON: In fact, Duncan and others argue the problem is that grant aid hasn't risen fast enough. Lauren Asher is with The Institute for College Access and Success in California.

LAUREN ASHER: Today, a Federal Pell Grant covers only about a third of what it costs to go a public four-year college in state. In the 1980s, it covered half. In the 1970s, it covered more than 70 percent.

ABRAMSON: The problem is compounded because people today are less able to pay. Incomes are stagnant, and some parents are unemployed. Many can no longer get low-interest home equity loans because home values have fallen. So families have turned to federal student loans and even, Lauren Asher says, much more expensive private loans.

ASHER: Private student loans are much riskier than federal student loans because they don't come with the important repayment plans, forgiveness programs and other borrower protections that federal loans provide.

ABRAMSON: The Obama administration has been rolling out a number of measures to help students in danger of falling behind on their federal loan payments. Nearly half a million students have signed up for income-based repayment. It limits the portion of your income that you have to pay. More students could be signing up for this program. It might be the best option while students wait for the economy to pick up. Larry Abramson, NPR News, Washington. Transcript provided by NPR, Copyright NPR.