The College Paradigm: Universities and Why They Are so Expensive

Imagine receiving that college acceptance letter, ripping it open with gusto, and finding that the college has decided to accept your application. Success! But then you see the price tag for the college: $20,000 per semester. That puts a damper on things. Unfortunately, there are many potential college students who are suffering through a predicament very similar to this one on a regular basis, and, perhaps worst of all, it shows no signs of stopping anytime soon, especially for new college students. At this point, it's no secret that attending college is an expensive prospect for just about anybody. Many are left wondering if they should even go to college. Many students must take out loans and be forced into paying back these loans for years or even decades after graduating, which partially defeats the purpose of the degree in the first place.

However, one question that is on everybody's minds is a simple one: "why is college so expensive?" Indeed, it is a valid question, especially considering the rate at which the costs of college are rising. The reasons for the rising costs of college are numerous, but chief among them is a simple one: for most, college is no longer optional for those who wish to secure a stable, well-paying job. The basic principles of economics state that the more demand a product or service has, the more expensive it will become, and nowhere is this more apparent than with college in this day and age.

The first issue that must be addressed in regards to college costs being so high is the sheer popularity of college. A study by the National Center of Education Statistics of America found that there was a whopping 48% increase in the number of degrees being sought from 1990 to 2010 (U.S. Department of Education 3). By contrast, the cost of attending college has increased a large amount for students as well, but the amount it has increased is not even close to proportional. A 2008 article by CNN found that, according to the National Center for Public Policy and Higher Education report, college costs increased by 439 percent from 1982 to 2007, after being adjusted for inflation (CNN 1). These costs create something of a paradox for students, wherein college is now more necessary than ever, being required for the majority of white-collar jobs, but also being exponentially more expensive than ever before. Now, not only are more college students required to attend college, but they must also take out loans, acquire scholarships, or have rich friends and family to do it. The obvious solution here would be to simply not attend college, but that is virtually impossible at this point. These increases have created something of a requirement for high school graduates who want to find their way into the workforce with any sort of reliability. The fact of the matter is simply that since there are now so many people pursuing at least bachelor's degrees, bachelor's degrees are now considered the "norm," while those who merely have a high school education are considered not as fit for most jobs simply because they lack enough education, even if the job for which they are applying is not particularly specialized.

Another possible reason for the rising costs of college has to do with exclusivity. Colleges such as Yale, Harvard, as well as colleges that are more well-known on a state level, such as the University of Alabama, must restrict the number of students they take in each academic year, which leads to a large amount of competition. This means that these colleges have free-reign to increase the costs of attending their respective University as they see fit, meaning that many of these more famous academic institutions are also extremely expensive. Again, this adheres to the most basic concepts of supply and demand. Another factor that could be impacting tuition costs is that many academic institutions increase their own tuition rates in response to the amount of government assistance the students are receiving at the time. " Congress can at best know that its policies increase tuitions and that some portion of the federal assistance ends up being captured by state governments and by the colleges and universities" (Wolfram 1). This simply means that Universities, being publicly owned, can usually increase their own costs, often as a result of government interference, at their own whims, oftentimes as a result of government funding for students, which partially negates one of the biggest advantages potential college students have: government funding.

Another important facet of the rising cost of college has to do with government interference, or, sometimes, a lack thereof. With the election of Obama, democrats have aimed to make college at least a little more affordable for college students, and, to an extent, they have succeeded in this goal. The government will usually provide interest-free loans for most college students who are in need, and will even, sometimes provide grants that cover either part or all of the cost of attending college, for those who meet specific requirements, usually pertaining to family income or background. However, even this government aid has come under scrutiny lately, now that the economy has forced cutbacks for virtually everyone, especially within the government. For starters, the number of grants the government has been dispersing among potential college students has been decreasing. In fact, in fiscal year 2012 alone, state and local financing for higher education declined about 7 percent, which amounts to about $81.2 billion, with per-student support decreasing even more: about 9 percent from the previous year, which is the lowest level it has been in at least 25 years (Lewin 1). These statistics are in line with the prevailing notion among many that many colleges are shifting the cost of education from the public onto the students themselves, as evidenced by the steadily increasing cost of education for students (Lewin 1).

Another issue in regards to government aid has to do with the government simply running out of money to provide to college students. "In 2008, before the recession, state and local government provided a record high of $88 billion to colleges and universities. And while the recession cut sharply into state financing, the federal stimulus funds helped keep the level of support relatively stable in 2009-11. But by last year, most of that stimulus money had been spent, bringing a large decline in government support" (Lewin 2). In short, this means that while the government was able to provide funds when money is more plentiful, in troubled times such as these, funding is difficult to acquire from the government, if not impossible, for college students. Enrollment numbers are starting to take a hit as a result. While enrollment had increased 28 percent in 2002, in 2012, enrollment dropped by 0.7 percent (Lewin 2). While the federal government might not be directly responsible for increases in the cost of tuition for students, their increased inability to provide funding to increasingly needy and desperate students affects the long-term affordability of college for them substantially, making the end result is the same as if college costs had simply been increased.

As for possible solutions to this issue; there are many, although each one has its flaws. For instance, one idea that is commonly referred to as "Federalizing College Finances" involves the government aid should be relative to the cost of attending each specific University so that each college would have its own grant amount (Mumper 237). This plan also requires a shifting of responsibility of payment from the students and state and local governments to the federal government: a proposition that many, understandably, would not be comfortable with (Mumper 237). Another possible solution lies with smaller, oftentimes private, colleges. Since they generally have far fewer students, they cannot afford to raise their prices nearly as much as public Universities such as the University of Alabama. Many employers are catching on to this strategy as well, and are targeting their recruitment efforts toward those who attended these private colleges (Ehrenberg 13).

Another solution that is more "tough love" than anything involves actually revoking the vast majority of government funding for college students. “Rather than expand the current system, Congress should consider a phase-out of federal assistance to higher education over a 12-year time frame" (Wolfram 2). The effects of this would be immediately apparent. First, it would decrease the "sticker price" of college for everybody. Second, it would cause the private market to react to the lack of government spending by providing more private-sector loans, more private scholarship funds (especially helpful for those who are in low-income areas, are minorities, or have other attributes that make acquiring scholarships easier), and a general expansion of human capital contracts (Wolfram 2). Human capital contracts, essentially, allow a student to pledge a portion of future earnings in return for financial assistance with their tuition (Wolfram 2). While this is not a new concept, it is certainly one of the most radical and could encourage more students to attend college, since it will largely alleviate the initial daunting cost of college.

While there are a number of factors that contribute to the rising costs of college and why they are so expensive, there are also a large number of solutions possible to counteract these rising costs. In short, the main reason for the costs of college being so expensive has to do with supply and demand: students are willing to pay more, so colleges simply increase prices, which is great for short-term return on investments, but causes college students to suffer in both the short-term and long-term, as well as, ultimately those same colleges themselves, eventually.

Works Cited

CNN. "Rising costs could push college out of reach." CNN. Cable News Network, 3 Dec. 2008. Web. 5 Dec. 2013. <http://edition.cnn.com/2008/LIVING/personal/12/03/college.costs/>.

Ehrenberg, Ronald G. Tuition Rising: Why College Costs So Much, With a New Preface. Harvard University Press, 2000. 13

Lewin, Tamar. "Financing for Colleges Declines as Costs Rise." The New York Times website. N.p., 6 Mar. 2013. Web. 5 Dec. 2013. <http://www.nytimes.com/2013/03/06/education/aid-for- higher-education-declines-as-costs-rise.html?_r=0>.

Mumper, Michael. Removing college price barriers: What the government has done and why it hasn't worked. SUNY Press, 1996. 237

U.S. Department of Education, National Center for Education Statistics. (2012). Digest of Education Statistics, 2011 (NCES 2012-001), Chapter 3.

Wolfram, Gary. "Making college more expensive: The unintended consequences of federal tuition aid." (2012). 1-2