The term college tuition refers to fees that students have to pay to colleges in the United States. Pay increases in the U.S. have caused chronic controversy since shortly after World War II. Except for its military academies, the U.S. federal government does not directly support higher education. Instead it has offered programs of loans and grants, dating back to the Morrill Act during the U.S. Civil War and the "G.I. Bill" programs implemented after World War II. Developed countries whose national governments directly support higher education tend toward more moderate patterns of change in college tuitions and different forms of controversy.
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The view that higher education is a bubble is controversial. Most economists do not think the returns to college education are falling.[2] In a financial bubble, assets like houses are sometimes purchased with a view to reselling at a higher price, and this can produce rapidly escalating prices as people speculate on future prices. An end to the spiral can provoke abrupt selling of the assets, resulting in an abrupt collapse in price — the bursting of the bubble. Because the asset acquired through college attendance — a higher education — cannot be sold (only rented through wages), there is no similar mechanism that would cause an abrupt collapse in the value of existing degrees. For this reason, many people find this analogy misleading. However, one rebuttal to the claims that a bubble analogy is misleading is the observation that the 'bursting' of the bubble are the negative effects on students who incur student debt, for example, as the American Association of State Colleges and Universities reports that "Students are deeper in debt today than ever before...The trend of heavy debt burdens threatens to limit access to higher education, particularly for low-income and first-generation students, who tend to carry the heaviest debt burden. Federal student aid policy has steadily put resources into student loan programs rather than need-based grants (see graph), a trend that straps future generations with high debt burdens. Even students who receive federal grant aid are finding it more difficult to pay for college."[3]
One proposed cause of increased tuition is the reduction of state and federal appropriations to colleges thus making them shift the cost over to students in the form of higher tuition.[4][5] This has mostly applied to public universities which in 2011 for the first time have taken in more in tuition than in state funding[5] and had the greatest increases in tuition[1]. Implied from this shift away from public funding to tuition is privatization, although the New York Times reports such claims are exaggerated.[5]
Another proposed cause of increased tuition is U.S. Congress' occasional raising of the 'loan limits' of student loans, in which the increased availability of students to take out deeper loans sends a message to colleges and universities that students can 'afford more,' and then, in response, institutions of higher education raise tuition to match, leaving the student back where he began, but deeper in debt. Therefore, if the students are able to afford a much higher amount than the free market would otherwise support for students without the ability to take out a loan, then the tuition is 'bid up' to the new, higher, level that the student can now afford with loan subsidies.[6] One rebuttal to that theory is the fact that even in years when loan limits have not risen, tuition has still continued to climb.[7][8] However, that may not disprove this proposed cause: It may simply mean that other factors besides 'loan limit' increases played a part in the increases in tuition.
A third, novel, theory claims that the recent change in federal law removing all standard consumer protections (truth in lending, bankruptcy proceedings, statutes of limits, the right to refinance, adherence to usury laws, and Fair Debt & Collection practices, etc.) strips students of the ability to declare bankruptcy.[7][8] This is especially true because the government, if it is the lender or guarantor of the loan, has the ability to garnish the borrower's wages, tax return, and Social Security Disability income without a court order.[9] Some have called the Federal Government 'predatory' for making loans which will have such a high default rate, since the default rate for Student Loans is projected to reach 46.3% of all federal loans disbursed to students at for-profit colleges in 2008.[10][11]
Other factors[4] that have been implicated in increased tuition include the following:
Based on the available data, a number of recommendations to address rising tuition have been advanced by both experts and consumer and students' rights advocates:
The first chart compares standard undergraduate annual tuition and fees charged by major U.S. public, U.S. private and Canadian public 4-year college, showing both current U.S. dollars during the years from 1940 to 2000 and U.S. dollars adjusted to the year 2000 by using the U.S. Consumer Price Index series.[25][26][27]
Tuition at the University of Toronto tracked close to inflation rates during the entire period.[28] The University of Iowa had rapid increases in tuition during the 1950s and then tracked close to inflation rates since that time.[29] The Massachusetts Institute of Technology (MIT), among the most expensive of the private U.S. educational institutions throughout the 20th century,[30] had continual large tuition increases, dipping slightly below inflation rates only during the World War II years.[31][32]
Over the 60-year period charted, the inflation-adjusted, long term, annual increases in tuition at these institutions were 0.4 percent for the University of Toronto, 1.4 percent for the University of Iowa, and 2.1 percent for MIT.[33] Other institutions in the same categories differ in details but not in general patterns.[34] The results of the trends are that over the 60 years shown, adjusted for inflation, the tuition at the University of Iowa increased by a factor of 2.3 and that at MIT by a factor of 3.6, while tuition at the University of Toronto rose only about 30 percent.[35]
This chart compares average undergraduate tuition and fees charged by about 600 U.S. public and 1,350 U.S. private, non-profit 4-year colleges during years from 1993 through 2004.,[36] both unadjusted and adjusted to the year 2004 by using the U.S. Consumer Price Index series. Data were not available for years 1994, 1995 and 1999.
During the 11-year period charted, both public and private, nonprofit colleges regularly posted tuition increases well above inflation rates. Peak increases for private colleges were in 1997, after the U.S. economy began booming growth. Peak increases for public colleges were in 2003, after state budgets supporting most of them were crimped by a sharp economic recession. Over this period, annual, inflation-adjusted tuition increases at public colleges averaged 4.0 percent, while those at private, non-profit colleges averaged 3.5 percent. Cumulative results over this period are average public tuitions growing 53 percent above inflation, and average private, nonprofit tuitions growing 47 percent above inflation. As of 2004, private, nonprofit colleges cost on average 3.3 times as much as public colleges attended by residents of their states.
"Disproportional inflation" refers to inflation in a particular economic sector that is substantially greater than inflation in general costs of living. This kind of inflation for medical costs in recent decades is well known. However, that of college tuition and fees exceeds that of medical costs.
The following graph shows the inflation rates of general costs of living (for urban consumers; the CPI-U), medical costs (medical costs component of the consumer price index (CPI)), and college and tuition and fees for private four-year colleges (from College Board data) from 1978 to 2008. All rates are computed relative to 1978. [37]
Cost of living increased roughly 3.25-fold during this time; medical costs inflated roughly 6-fold; but college tuition and fees inflation approached 10-fold. Another way to say this is that whereas medical costs inflated at twice the rate of cost-of-living, college tuition and fees inflated at four times the rate of cost-of-living inflation. Thus, even after controlling for the effects of general inflation, 2008 college tuition and fees posed three times the burden as in 1978.
According to "College Board", the average tuition price for a 4-year public college in 2008-2009 is now $6,585 compared to 2004 where the price was slightly above $5,000. The average price of in-state tuition vs out-of-state tuition for 2008-2009 was $6,585 for a in-state 4-year college to $17,452 for out-of-state 4 year college (collegeboard.com).
Long-term price trends make higher education an especially inflationary sector of the U.S. economy, with tuition increases in recent years sometimes outpacing even explosive health care sectors.[38] These trends are sources of continuing controversy in the United States over costs of higher education[39] and their potential for limiting the country's achievements in democracy, fairness and social justice.[40]
Today, some companies offer tuition reimbursement to students.
Besides economic effects of rapidly increasing debt burdens placed on students, social ramifications are felt. One of these is the increase in suicides directly attributable to the stress related to distressed and defaulted student loans.[41][42][43][44]
A closely related issue is the alarming increase in student borrowing to finance college education and resulting student loan debt. In the 2007-2008 National Postsecondary Student Aid Study (NPSAS), the median cumulative debt among graduating 4-year undergraduate students was $19,999; one quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more.[45] In fact, for the first time in the history of America, 'Student Loan' debt has surpassed 'Credit Card' debt.[9]
There is substantial evidence that students are still getting good value for their investment in an education. Since the mid-1980s, education has played a large part in potential wages, with bachelor's degree holders taking home an average of 38% more than those with only a high school diploma. While college-educated workers' wages have increased over the past two decades, those with only a high school education have seen decreases in annual salaries in the same time period.[46]
There is also substantial evidence that students are not getting good value for their investment in an education. Some colleges and universities in the United States are now participating in grade inflation.[47] Some economists believe that too many people attend college.[48] Not all positions require an individual to obtain a college degree. College students who have acquired a burden of college debt often risk defaulting on their student loans which can lower the individual's credit score.[49] Some employers will be reluctant to hire an individual with bad credit.[50]
The U.S. spends more on education than most other developed countries, and the U.S. has a disproportionate share of the top-ranked universities in the world.[51]