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December 20, 2012 11:00 AM The Coming Federal Role in College Costs

By Daniel Luzer

A recently released Treasury Department paper on higher education pricing looks at the price of college, and what the Obama administration has done to address it.

Perhaps more importantly, however, the piece, The Economics of Higher Education looks at why that cost is increasing. It’s pretty bad. And the only solution looks like more federal involvement.

It’s not so much that people now pay more for college because the cost of providing an education to citizens costs more, though it does somewhat, it’s that the burden of those costs has shifted from public to private funding. Taxpayers provide less funding and students pay more. As Treasury puts it:

Historically, society provided a significant subsidy to young people through the widespread availability of inexpensive public higher education. However, over the past several decades, there has been a substantial shift in the overall funding of higher education from state assistance, in the forms of grants and subsidies, to increased tuition borne by students
More specifically,
Average net tuition, which is posted tuition minus expected grants and tax benefits… increased. Average net in-state tuition at public institutions [which educate the vast majority of Americans] increased by 58 percent between 1991 and 2013, from $1,840 to $2,910. Average net tuition at private non-profit institutions increased by 25 percent between 1991 and 2013, from $11,060 to $13,870.

This is leaving aside entirely the net price increases that occurred between the end of World War II and the 90s, which were also significant. The reasons for this cost shift are a little vague, but it’s basically a reorientation of society itself. As the piece explains:

Previous generations of students attended colleges supported by state funds, which were funded by broad-based taxes on older generations. Now, students and their families increasingly pay their own way, given the increasingly common view that education is a private investment, rather than a public good.

The ultimate result of the reorientation is that college degree attainment has “stagnated.” This country has the highest college attainment rate in the world for people 55 to 64-years-old. Among younger people, however, we now rank 16th. We can say that’s this is due to an “increasingly common view that education is a private investment, rather than a public good,” what this really means, however, is that the postsecondary education of this country is simply not a priority for older Americans.

Basically Americans over the age of 50 went to college using public funding, paid for by taxes from their parents and grandparents, then they graduated from college and pulled the ladder up behind them: no more cheap college for subsequent generations; state taxes are getting too high.

Current policies, the authors explain, now largely focus on addressing the cost of college through “transparency” promotion and efforts to help people “manage” their student loans. The greater trend here, however, the cost shifting from state governments to individuals, continues unabated. And so something must change:

Individuals may not be able to finance this high-return investment in higher education on their own, and the economy-wide benefits of higher education suggest that a purely private financing market will lead to under-investment in education. Thus, there is important scope for the role of government in higher education.

This is important. If state governments continue to fail to support higher education, either college graduation and attendance will decline, or the federal government will step in and assume control. Probably a little of both.

From national perspective it appears damn well time for a little more federal involvement in this effort and not through just through the promotion of online education or other “cost savings” measures.

The federal government could have a really significant impact. I’ve made this point before, but we could send everyone now in public colleges and universities in this country to school for free for $15 to 30 billion. In 2011 the United States spent 20 billion on air conditioning in Iraq and Afghanistan last year.

It’s a matter of priorities.

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