Long Term Tuition Outlook Is Grim With Increases Likely
by Dr. Watson Scott Swail, President & CEO, Educational Policy Institute
Last week the College Board released the 2014 Trends in College Pricing and Trends in Student Aid reports. As a former co-author of these reports, I remain critically interested in tuition and cost of attendance trends.
Each year, I update our annual projection of the future tuition and fee costs at US institutions of higher education. This is an imperfect science, given that there is no way to forecast what happens at the congressional, legislative, or institutional levels. Similarly, it is somewhat useless to speculate what will happen with global economic and societal trends. We just “don’t know.”
With that, I make certain predictions based on “what is.” My calculations utilize historical data and assume that recent history (as defined as previous 25 years) will be somewhat useful in extrapolating data for the next 25 years. Again, the caveats abound and I would advise people not to do this at home without a certified technician and pulmonary surgeon at your disposal.
The exhibit below illustrates the actual tuition and fee charges from 1978-79 to 2014-15, from historical College Board data. The College Board, by the way, collects these data via their Annual Survey of Colleges, which is completed by a majority of US institutions of higher education. The data released last week by the College Board indicate that the tuition and fee costs for the current academic year averages $3,347 for two-year public institutions, $9,139 for four-year public institutions, and $32,231 for four-year private institutions. To give you some sense of comparability, these are, after controlling for inflation, 27.5, 41.2, and 23.4 percent higher, respectively, than in 2004-05. Remember, that’s the increase beyond inflationary pressures. Over the past 20 years, tuition and fees have increased 59 percent at two-year publics, 110.2 percent at four-year publics, and 65.8 percent at four-year private institutions. In scientific terminology, “that’s a lot.”
The College Board was quick to add that the most recent increases in college prices have been lower than at any point in the last 30 years. Statistically, this is true. However, the data give me little solace that higher education, writ large, is acting in good faith. Rather, these results are only a blimp in what we will see in the next several years. As state governments continue to squeeze public higher education institutions, the institutions will continue to act more like private higher education, engaging business and industry for more grants and contracts while simultaneously increasing the tuition, fee, and room and board charges for students. Just this week I spoke with one administrator from Colorado who said their public system of higher education will essentially be fully private within the decade due to declining subsidies.
As the data illustrate, the last few years have seem somewhat nominal increases in college pricing, regardless of type or sector. The average cost increase for four-year public institutions above inflation has been 1.3, 1.1, and 1.5 percent. However, even as recent as 2011-12, the increase was 6.3 percent, with a 6.8 percent increase the year before and 5.7 percent the year before that. The level of increase is dependent on (a) the economy and (b) what institutions are forced and try and get away with. There is very little to gain from being prudent and keeping costs low. Even for public institutions, there is always the chase of profit margin. The recent changes are more an outcome of the economy, which has been close to zero inflation for the past several years.
Using a multiplier equal to the average tuition and fee charges from the past 25 years, my chart suggests that tuition and fee charges for four-year public institutions will double, in real dollars, within 17 years to $18,586. Let me again put this in perspective. If we could fast forward to the year 2031, sending your child or grandchild to college would be akin to shelling out $18,586 from your pocket, your savings, your IRA, or your PLUS loan today. And I need only say that this is only tuition and fees. Typically, room and board costs about as much as tuition and fees at four-year public institutions. In fact, it costs more on average.
Two-year public institutions will double to $6,660 in 23 years, or by 2037-38. Four-year private institutions increase at the slowest rate and will double in 27 years to $62,039. The privates get a lot of flack for their high prices, which is sometimes justified. But they historically have the lowest increases annually and I expect that trend to continue.
Of course, this is sticker price we are discussing and not net price, as some critics will surely argue. If it was the latter, one had better have a psychologist on hand with the pulmonary surgeon to play that game. Net prices are very pliable and depend on many factors to determine what is real for everyone. They are an important and useful tool, but gross sticker price is better for some level of analysis, even when we know there are grants and loans, including the ever important institutional aid, that impact the true cost of attending college. So I remain guilty and unapologetic for these limitations.
What do these data mean in the end? Not good, to be sure. And every year I calculate these data the message will remain largely the same because the system is not changing and may not change by the time we get into the 2030s. The problem is that we are utilizing an expensive, outmoded system of education to educate a broader spectrum of society, at a time when both the economy is down and states are relinquishing their responsibility to their citizens. The formula is for economic disaster in a private and public scale.
I have never been a fan of free tuition, because that tends to be awfully regressive public policy that favors the affluent. However, if higher education is so critically important to this nation as our policymakers, policy wonks, researchers, business and industry experts, and educators say it is, why are we forcing people to empty their retirement funds to pay for their child’s higher education? Why are we forcing students to take on incredible debt burdens to help pay for their college (I say “help,” because they have already paid through other means for much of the non-borrowed sum)? Because higher education is a state concern in the US and a provincial one in Canada, it is difficult to come up with federal policy that could help redefine the system of accessibility and affordability. Some states (e.g., Oregon) have talked about creating a low-cost or even free system, but the discussion gets mired in issues of upfront costs (if you make college free, where does the immediate funding come before future-to-be-taxpayers help make up the difference) and the worry of brain drain (e.g., students living in Oregon get free tuition but then move to Washington state). If policy could be created on a national level, these issues would be somewhat ameliorated.
Until we find some future solutions, whether in efficiencies, changes in the length of degree (see Steve Trachtenberg’s piece on this), or changes in our credential requirements (e.g., short term certificates and competency-based badges), the chart will remain about the same. The only changes will come from either the items I just mentioned, or because of some massive change in legislation or a critical change at the global, economic level. That’s it.
While we herald colleges and universities for helping keep prices down over the past few years, we know they would raise tuition and fee charges higher if they could. The incentive for keeping prices in lock is insignificant. Everyone wants a little more. It’s the nature of the beast.
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