NCPA - National Center for Policy Analysis

HOW MUCH FOR THAT SHEEPSKIN?

October 28, 2004

Why is college tuition soaring? Higher demand for colleges, largely resulting from well-intended but dubious governmental policies, says Richard Vedder (American Enterprise Institute) in his book, "Going Broke by Degree: Why College Costs Too Much."

When demand rises relative to supply, prices go up, he says. Consequently, rising tuition and enrollment have meant surging college revenues. Real per-student spending rose about 70 percent over the past 20 years. How have the universities used this extra money?

According to Vedder:

  • Financial data provided to the federal government suggest that remarkably little of the higher spending has gone toward instruction -- perhaps 21 cents for each new dollar per student since 1976.
  • Research has grown, but spending on administrative staffs has soared; since 1976, it took the typical university about three "non-faculty professionals" to serve each 100 students; today, it takes nearly six.
  • Over the 1980s and 1990s, real average faculty compensation (including fringe benefits) rose about 45 percent, and near-mid-six-digit salaries are commonplace for top administrators and superstar faculty.

A large proportion of tuition increases has gone not for qualitative learning improvements, but to making life better for the permanent paid members of the academy -- lower teaching loads, more travel, higher salaries, etc., notes Vedder.

How can universities get away with it? Unlike the private, for-profit sector, which faces strict financial discipline imposed by competition and markets, the not-for-profit modern American university is largely shielded from these forces, says Vedder.

Not only is there little financial discipline, but political or institutional accountability is lacking as well. Unlike most governmental agencies, state universities operate with relatively little legislative or executive oversight to ensure accountability, says Vedder.

Source: Richard Vedder, "A Fortune in Tuition," National Review, October 11, 2004.

 

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