Tightening the Belt on Higher Education

Tuition rates continue to skyrocket year after year, but the cost of providing a college education hasn’t increased much over the past 50 years. In a recent Cato study, Vance H. Fried argues that “non-profit” universities actually turn a profit by increasing tuition in tandem with increases in expenditures for non-essential programs and services.

. . . [non-profit colleges and universities] take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry’s high profits come at the expense of students and taxpayer.

As a result of this mission creep, students don’t get enough bang for their buck, as their loan payments often exceed the additional earnings college graduates can get. Rather than keeping tuition low, government subsidies actually raise students’ education costs: They lead to higher and more wasteful spending, as colleges with higher tuition also receive more in federal and state subsidies. 

Until the 1980s, Fried notes, non-profit colleges used subsidies and charitable donations to reduce tuition costs.  Now, most undergraduates at state universities pay the full cost of tuition, with “state subsidies going toward profits.”  Pennsylvania has an egregious example of outlandish spending: adjusted for inflation, Penn State’s in-state, full-time tuition and fees quadrupled from $4,272 in 1980 to $17,344 in 2010. While Fried’s analysis mirrors that of others, it is increasingly important in our age of rising college costs.