Monday, September 6, 2010

Thank You, Michael Barone ...

... for this piece that reminds us that, yes, the higher education bubble is likely to burst — in part because of a flood of federal money that has left The Academy with little incentive to keep costs down:

Imagine that you have a product whose price tag for decades rises faster than inflation. But people keep buying it because they're told that it will make them wealthier in the long run. Then, suddenly, they find it doesn't. Prices fall sharply, bankruptcies ensue, great institutions disappear.

Sound like the housing market? Wait, that bubble burst a couple of years ago. We're talking about the nation's colleges and universities, which have raised tuition and fees at twice the rate of inflation for 30 years now. RIP!


  1. We talked about this with Sander Flaum on Leaders Edge today on WHDD!

  2. As someone who works at the most expensive college in the country (ouch!), I resemble that remark (ka-ching!). But seriously, folks...I have two problems with your (Barone's) analysis:

    First, High-priced colleges and universities don't necessarily sell their product with a guarantee that it will "make [people] wealthier in the long run." What we offer at Sarah Lawrence, at least, is an education that will make students better people -- happier, more creative and innovative, capable of leading productive and independent lives, interested in lifelong learning, giving back to the community, etc. If they made millions in the process, we (fundraisers) would be thrilled -- but that's not the reason students choose to come to us, and not the reason we promote.

    As for the idea that we're living off the federal dole -- huh?! Certainly not Sarah Lawrence. And I don't think that's the reason most colleges and universities have seen their sticer prices rise. Sure there's federal money for things like research -- much of it of crticial importance -- and, increasingly, for efforts at K-12 reform, but I think statistics would show that, overall, federal funding for higher education has declined (of course, along with all kinds of other federal funding except the Pentagon's budget). In fact, cuts to federal student aid programs are a big reason that more students are suddenly finding it difficult to pay for college.

    The real reasons prices have gone up are (a) because students more and more expect a high level of faculty, services, facilities; (b) colleges have to compete in an ever-more competitive market to attract and retain these students, and the faculty who can deliver the goods; and (c) prices of many things (like housing) have risen far faster than "the price of inflation," which is often a squirrely measure anyway.

    At Sarah Lawrence, our faculty, who work heroic hours and give themselves over to the students 200%, have not had raises in years and still make barely enough to afford living in the Metro area. It's pathetic. And if we want to attract really high-profile, "name" faculty, good luck. (Which is not to say our current faculty are not exceptional.)

  3. continuing...

    The fact is, students of a certain socioeconomic class, for better or for worse, have, in a strict supply-and-demand sense, been willing to pay the sticker price -- for the promise of what they get, which is a life-defining experience. But missing from this statement is the fact that Sarah Lawrence, like virtually every other college and university, has also dramatically increased its "discount rate," i.e. the amount of financial aid and outright scholarship assistance that we offer. Far more students receive financial assistance than those who don't, and the average (!) financial aid package is approximately half the full tuition. Needless to say, that requires finding more money, too -- another reason that the full tuition cost increases.

    The economic collapse has affected everyone. It goes without saying that students who a few years ago would have had the resources to pay for any education they wanted would suddenly find themselves staring at an insurmountable challenge. Even some upper-class students I know have left Sarah Lawrence because their families have taken severe financial hits. But blaming the colleges for this makes no sense. Even if this was a kind of "bubble economy," tell me who else foresaw and planned for this bubble bursting. Not the banks. Not the homeowners. Not the investors. A few marginalized liberal economists, maybe. By and large, everyone played along with the bubble game.

    Colleges and educators around the country are concerned with college affordability and accessibility, which is why many are increasing their financial aid packages; some who are able, with large endowments, to go to need-blind admissions policies are doing so. Unfortunately Sarah Lawrence does not have a large endowment, so we do what we can.

    Care to make a donation?

  4. Marshall, maybe after you read my comments you should invite me on to talk about it.

  5. Those sound like excuses for confiscatory price increases that you would not tolerate in any other sector.
    I know that there is no way that we could increase our budgets at my school at twice the rate of inflation over 30 years. We would quickly price ourselves out of the market.
    Is it a coincidence that the steep rise in higher education costs came at a time when federal dollars started to flow faster in the form of Pell Grants and guaranteed loans? That's also the same time when colleges started to hire more deans, ass't deans and VPs for this and that.
    Like housing, higher ed has been cushioned from market forces by lots of taxpayer money. The bubble will burst soon enough. The question is which will survive and which will not. Unfortunately, good schools like SLC that are expensive and have low endowments are not terribly well positioned to survive.

  6. Apparently you're not interested in debating, just blither-blathering your point of view, Terry. You have often accused me in the past of ad hominem attacks, but all you can do is take everything I said and read it as an "excuse"? That's the entirety of your rebuttal? Man, I've been too kind to you. Your arguments are flimsy, Terry, and not supported by facts (like your hogwash about "deans, ass't deans and VPs for this and that" -- where's some proof of that?). Just emotion. Better luck next time. I guess we can't count on your donation.

  7. If saying that someone's words "sound like excuse-making" is an "ad hominem attack," then you must have a very thin skin indeed. Also, show me where in my post I was "full of emotion."

    How about addressing the "fact" that tuitions are out of control and continued to rise at twice the rate of inflation even during the 90s when endowments were soaring? Or the presence of government money that distorts the market, Fred?

    You have offered no facts or numbers either, except that SLC faculty give 200%. And do you actually deny that administration has increased over the last 30 years?

    Yes, you're make excuses just as you have accused me of doing for right-wing causes in the past.

    We just disagree -- which is something you can never agree to do. Goodbye, Pal.

  8. Here, Fred. Some "facts." Check this out. It's well known but I thought I'd let you see for yourself.

    "At the top 196 universities from 1993 to 2007, a period in which college costs skyrocketed ... new layers of administrators [were] added at twice the rate of faculty and instructor."

  9. Oh sorry, I need to stop emoting ...

  10. The cost of an education today is DEFINITELY not worth the price. And I used to be a huge supporter of higher education: I hold two MS degrees - one in Communications and one in International Marketing - from private institutions.
    My niece recently graduated in three years with honors from college. She interned, worked while in school, and graduated with a 3.8 GPA. She cannot find a job in her field. She's working in retail (which is all she could find) and is $20,000 in debt from student loans. She was contemplating going to grad school, but I talked her out of it. It won't help in this horrific economy, and she'd only be deeper in debt.

    I am so glad I'm at the end of my career rather than at the beginning! When I graduated from college, I never DREAMED that we'd be facing what we're facing today in the world of work. I graduated debt-free, went to grad school that my employers paid for 100 percent, and went on to become VP at one of the organizations I worked for. I worked on both coasts as well as abroad, learned two languages (one is Mandarin... and I'm glad I learned it, because in another decade that's what we'll ALL be required to speak since China is eating our lunch economically), and traveled the world through my company affililations. Those days are OVER for young people today! If they find work in the field they studied in, they're expxected to thank their lucky stars for that opportunity. And it usually occurs only if they know someone on the "inside" who can get them the "privilege" of an inerview.
    A quarter of a million dollars for a college education?? PUH-LEEZE!

  11. Dear Anonymous, Funny you should write that. Apparently a lot of others share your view, including those quoted in a big piece in today's Washington Post.