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A Closer Look at the Costs of College

Above all, we must maintain access to higher education.

By John Hennessy

An educated citizenry is vital to the United States' ability to compete in today's global marketplace. Eleven countries have a higher percentage of college-educated adults than the United States, according to a 2010 report issued by the Organisation for Economic Co-operation and Development, and the OECD projects that the United States will likely lose more ground in the future. To address this, President Barack Obama has set an ambitious goal for this country to lead the world in the percentage of college graduates by 2020. I see two big challenges for higher education: affordability and completion rates. This column focuses on the former.

For many years, college tuition has risen faster than inflation, as measured by the Consumer Price Index. Especially worrying is the combined effect of slowly rising incomes with stable family size: In the past, incomes were rising and family size was shrinking, with the result that families had more disposable income per child for college costs. Income stagnation in the past 10 to 15 years, combined with rising tuition, has put more stress on families. These trends have been exacerbated by reductions in state funding to public institutions, leading to tuition increases that are sometimes three to five times the growth in wages. We must find ways to address this issue or risk making higher education inaccessible to a growing percentage of Americans.

Economists Robert Archibald and David Feldman address this problem in their new book Why Does College Cost So Much? Higher education, they argue, is a people-intensive, artisanal service, requiring a highly educated, well-paid workforce. And like other services that rely on highly skilled providers, such as legal assistance or medical care, its costs will rise faster than inflation. Unlike many consumer products, higher education does not benefit significantly from a reduction in the cost of materials. This does not mean that costs cannot be controlled: Larger classes—say, a minimum of 100 students—would certainly increase faculty productivity, but the quality of instruction would be adversely affected. Improving cost per student without harming quality is a far more elusive goal.

Certainly, universities must be vigilant and creative in containing costs, especially when educational quality is not at stake. But in the end, I share Archibald's and Feldman's view that the greatest gains will come by addressing the issue of access. In recent years, Stanford has greatly enhanced its financial aid program, thanks to the generosity of our alumni and friends. However, the vast majority of people earn their college degrees at public institutions, most of which cannot match our financial aid programs, especially given ongoing state budget reductions. Archibald and Feldman suggest replacing the Pell Grant and other programs and offering federal savings accounts for all families.

It may also be time to rethink how much quality we may be willing to sacrifice to limit cost increases and preserve access in public institutions. Although few would claim replacing a great teacher with an online course achieves the same educational outcome, perhaps it would be acceptable in some parts of the curriculum. We might also make better use of our community college systems, which are often more cost-effective per student than a research institution.

Making progress on containing costs and preserving access and affordability will not be easy. The academy will need to rethink many of its traditional assumptions, but the importance of college education for our young people demands that we take this problem seriously and address it with urgency.

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