Wednesday, April 11, 2012

The Cost of College

I listened to a presentation yesterday by a Professor of Economics yesterday. In addition to it being interesting (yeah, I know -- economics interesting? Seriously?), the presenter hit on one of my current pet peeves -- the cost of higher education.

So here are the numbers he offered. The professor was going from memory, so he asked not to be "quoted," as he wasn't certain he had the numbers exactly right. I am, however, going to do it anyway.

1983 - present

CPI increase 150%
Medical cost increase 450%
Higher Education cost increase 750%

These numbers sound about right to me -- at least as it applies to tuition at state universities. In 1983, when I was at Purdue, it seems to me that tuition was around $1,000. $7,500 sounds like it's in the ball park for today for a state resident -- perhaps even a bit on the low side.

The economist (and remember, he is a university professor), railed at the inability of schools to manage their own costs. And I have to agree -- what are these schools doing? Are they just charging what the market will bear, and saving the difference in their endowments? Are they too busy building expensive monuments? Do they just let wages and numbers of employees grow without limit? What's the excuse for this wild cost escalation which, on the surface, can't be justified by anything I can think of?

Back in the dark ages when I went to school, most majors "paid off" quickly -- meaning that if you invested the cost of the education, it would pay back in a relatively short time after graduation. The increase in salary you could expect would allow you to pay back any investment, and make a tidy return. At the current University price levels, a prospective student should be seriously questioning whether that math still holds up. I suspect that for many majors, particularly those offered at expensive, private institutions, the answer is -- it doesn't.

Remember, prospective students, you're making a call that will impact you financially for years to come (assuming you will have to take on debt to get the degree), so choose wisely.

Which brings me to my personal pet peeve...Why are students and graduates angry with their lenders for expecting repayment of their loans, instead of angry with their schools for their complete lack of cost control. People should be outraged with the universities, and thankful for the availability of the loans. They should be demanding an explanation from their schools as to why the costs are so out of control.

Instead, they tend to get angry about the last vestige of what was, perhaps, a bad decision -- their student loan. They rail about the monthly cost. They complain about how long it will take to pay down the balance. They demand the government "forgive" their loan -- which is shorthand for saying: "I expect the rest of you taxpayers out there to pay for my education, even though you had nothing to do with deciding which degree I pursued, the school I selected, and the costs I racked up."

Our area of the country needs more trained welders. As a taxpayer, I'm much more interested in funding the training of additional welders (which might actually help the economy), than forgiving the loans of a newly minted lawyer from an expensive private institution. In general, however, I'm against forgiving anything retroactively -- these people signed the loan documents obligating them, and they (presumably) knew what they were doing. We have to take personal responsibility for our actions and stop expecting others to compensate for our mistakes.

So, there -- enough of this rant. I'm sure I've offended someone out there, and ask for my own "forgiveness" in advance. And I acknowledge I could be missing something in all this. I'd be happy for a more enlightened reader to point out the error of my ways in the comments section below. I'm open to being convinced I'm wrong, but it's going to take logic, not an emotional appeal.

1 comment:

  1. Tom,
    Thanks for posting this and I couldn’t agree more. We’re suppose to get upset with the insurance companies when our premiums or medical costs increase, and the same goes for the oil companies when the cost of gas jumps $.10. However, for some reason institutions of higher learning escape this criticism.

    I graduated from a state college 18 years ago, and at that time rates still seem fairly reasonable. I was fortunate to leave college with very little college debt, but I realize that isn’t always the case for today’s graduate. While I understand their plight students shouldn’t expect that their loans be forgiven. As you state they signed up for the loans and it’s their obligation to pay for them.