Going broke by degree

Alas a book upon my shelf for an age, revealed why it sat unread for so long- dry uninspired reading full of statistical analyses. Richard Vedder's Going Broke By Degree: Why College Costs Too Much covers an interesting topic. His 230 page analysis is not an easy read. For a decent summation, the last chapter does a good job of summarizing the text.

College has increased in cost far faster than the rate of inflation, sometimes by as much as three times the rate of inflation. The portion of average family income needed to pay for college has dramatically risen as well. In the 50's it took 57 days of income. At the time the book was written (2004) it had increased to over 150 days. According to USA facts, the median household income in 2018 was $38,640. Tuition for the 2019-2020 year (not room board and other assorted fees) for a public institution averages $11,260 and $41,426 for a private institution (according to US News). That amounts to 106 days of income for a public institution and 391days (yes, more than a year) for a private institution. Again, that only accounts for tuition not the entire bill. It is no wonder Americans are concerned about the cost of college. Especially when the value is variable- students who graduate in 4 years with a technical degree like engineering or education earn considerably more over their lifetime than students with only a high school diploma. If you talk about liberal arts degrees, however, that assurance is far from guaranteed.

What drives the cost? The one that has been clear to me is in the uptick in "luxuries"- things like Wi-Fi all over campus, in room cable, doubles rather than quads for accommodations, lower students/bathroom ratios, and hugely improved food choices and quality in dining halls. As I explored campuses with my daughter I learned of other costly extras like multiple smartboards in every classroom, on campus tech support, free laundry, movies, and entrance to sporting events, and smaller student/ teacher ratios.

While he mentions the relationship between supply and demand- more students (parents) want a college degree so the cost of said degree can rise- he does not include it in the main reasons for increased cost. The author cites four main reasons for the increase in costs:

1. impact of third party payments- governments and donors provide funds such that consumers are less concerned about the price
2. price discrimination- the more money you have, the less sensitive you are to increased costs. Discounts in the form of need based financial aid or scholarships. (If you can get into Harvard- you owe nothing if your household income is less than $110,000.)
3. cross-subsidization- divert costs from instruction to other things- primarily research and luxuries.
4. lack of financial discipline- they have no incentive to be thrifty. Administration has increased in number of staff and budget at a significantly higher rate than faculty. Faculty teach relatively few  classes. Nontenure track staff (lecturers and adjunct professors) is increasing to take over teaching load. (p. 214)

Of important note is the rationale for the government aid to colleges. The oft cited reason is that it increases economic value of the community. One of the most interesting statistics Dr. Vedder presented was contrary to this conclusion. There appears to be an inverse relationship between a state's economic status and its investment in higher education. I would love to look into this phenomenon as it is contrary to our assumptions.  I would also like to see him reanalyze the data in terms of today. A decade and a half on, some of his predictions are surely proven out. Some of his predictions about ways to address the situation have been tried. Seeing an update would be valuable- but he should consider doing the presentation in a more reader friendly version.