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November 17, 2010 4:25 PM Crisis in College Pricing?

By Daniel Luzer

Despite the fact that no one’s interested in actually trying to fix the problem, the validity of the crisis in college costs is pretty much unchallenged. We all know college costs too much. We know college costs seem to rise faster than the cost of everything else.

Maybe there’s no crisis, however. Maybe it’s all okay. That’s what Robert Archibald and David Feldman argue in their new book, Why Does College Cost So Much?. College pricing is doing just fine, argue the authors, because consumers still have a lot of money left over.

As Stanley Fish argues in his review of the book in the New York Times, education costs have increased, but:

Not, however, to the point of making the product unavailable to middle-class buyers. …Usually the question asked is, “What percentage of a family’s income goes to the cost of higher education?” Archibald and Feldman prefer to “ask instead whether the amount left over after subtracting the cost of college is rising or falling over time.” The answer they give (buttressed by statistical tables) is “rising”: what their data show is that “over long stretches of time, college costs have been rising at a faster pace than income per worker, yet the average worker’s actual dollar income has gone up by more than the costs, leaving more resources on the family table to spend on other things.”

Well that’s nice to know, I guess but such broad, national statistical information seems undermined by other, more immediate concerns.

Some 65.6 percent of college graduates have education debt as they start their first jobs. The average debt load is $23,186.

That sort of thing actually is a problem, or makes it very hard for graduates to live. I guess it’s nice to know parents still have some money left over after paying for college, but merely having extra money left doesn’t mean the financial plan is a sound one.

Exactly what, then, would be an inappropriate amount of money to spend on college?

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • false seriousness on November 18, 2010 1:02 PM:

    This is an example where the use of "averages" may understate the point.

    What is the average debt load of those who required student loans?

    Those whose families had the least are burdened with vastly higher debt levels - perpetuating and accelerating very disturbing wealth distribution trendlines.

  • Statistician on November 19, 2010 9:53 AM:

    It is bad statistics to compare the dollar increases in college costs to the dollar increases in salaries. The only true comparison that can be made (due to differences in magnitude of the items being compared) is percentages. They are what statisticians call normalized metrics and are, therefore, comparable.

    For example, it would be wrong to say that gasoline prices have not increased much compared to income since over the past 30 years gas prices have only gone up $2.00 but income has increased $10,000 on average (I don't know the correct number- just an example). Of course, the $10,000 increase is much bigger than the $2.00 increase, but it is ridiculous to compare these absolute values when, in fact, the price of gasoline has increased 200% while the average income has increased only 25% (or whatever it is).

  • David Feldman on November 22, 2010 6:51 AM:

    Statistician,

    You need to read up on Baumol's Cost Disease. The driving engine of higher college cost (and higher cost in most personal services) is rising productivity elsewhere in the economy. The force driving personal income upward is the same force driving service prices upward. Affordability, as commonly discussed, is not the same thing as a 'relative price change.' Yes, college is becoming relatively more expensive. Yes, it eats up a greater budget share. The human welfare question is, "after the income and price change, can you buy the same set of goods and services as you could previously." If the answer is yes, then you are not worse off, even if the share of spending on any particular item has risen. In fact, economic growth itself drives up the share people spend on services like higher education and restaurant meals. The demands for these things are 'income elastic.' Are restaurant meals less affordable now because people spend a greater fraction of their income on them??