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Why Does Higher Education Cost So Much?

by Justin Marquis Ph.D.

Let’s get something clear from the outset: education, healthcare, and other public services are not "entitlements." All of these, but education in particular, are valuable societal services. Education is an absolute necessity for all members of a society, and like all social services, education costs money to provide, particularly if you are talking about opening it up to everyone in a society. We are still at a point where a college degree is largely attainable only to those with the means to pay for it, and there is much being made about the way in which the cost of higher education is spiraling out of control. Yes, I absolutely agree that attending a college or university is expensive. But why does it cost so much?

I am fortunate that my parents had the means and were willing to take out loans to send me to a "top tier, national liberal arts college," and I have continued to benefit from that education almost 20 years later.  What I find disturbing is the fact that that institution, along with many other colleges and universities, continually find themselves in a battle to justify the cost of attendance. In such an effort of self-defense, the former VP of financial operations at my alma mater recently published a special report on the cost of higher education, which this post draws on to examine why higher education is so expensive.

The Difference Between Cost and Price
The general public does not realize that there is a difference between how much it costs to provide a college education and the price that is charged to attend an institution.

“Simply put, price is what a student pays to attend college, and cost is what the college spends to provide the student’s total educational experience at the college….Tuition rarely, if ever, covers the costs of a nonprofit public or private college or university. Government support and private contributions often make up the shortfall.” (Wellman 2008, p.4, Cited in Smith-Parker, 2010)

Colleges and universities are considered to be non-profit organizations, or public charities because they provide a service which costs more for them to provide than they charge.  The difference between the cost and price can be quite significant as Smith-Parker’s report indicates:

“…the cost of educating, housing, feeding and supporting a robust experience for one student inside and outside the classroom during the 2009-2010 school year (FY10) was $63,000 [at her institution]. For the same year, the price charged to each student (for tuition, fees, room and board before any financial aid) was just under $50,200. That means that every student began with a “subsidy” of close to $13,000 for the year.”
(2010)

A closer examination of some of the costs associated with a college or university sheds some light on the reality of running what amounts to a money-losing corporation that generally is one of the largest employers in the community where it is located.

Facilities/Equipment
There is immense overhead involved in running a university and making it a safe, comfortable, and productive place for people to work and students to learn. Beyond the actual maintenance of the  hundreds of acres that any college sits on there are a host of other physical components necessary to essentially create a small self-contained community:

  • Buildings housing classrooms and administration
  • Computer Labs and equipment
  • Smart connected classrooms and all of the equipment in them
  • Libraries and tens-of-thousands of books, more computers, and subscriptions to journals
  • Global education sites to provide students with a perspective on life outside of their comfort zone
  • Residence halls for the thousands or tens of thousands of students to live in – not just sleep, but actually live
  • Wireless Internet access from every corner of campus
  • Scientific equipment and lab supplies
  • Exercise/sports facilities so students, faculty and staff can remain physically fit while they learn – you really do need both in order to be a happy, healthy, and productive person.
  • Dining halls to feed thousands of students three times a day
  • Maintaining the school grounds because safety is a concern as is the aesthetic appeal necessary to continually bring new students to campus
  • Meeting ADA accessibility requirements so that access is assured for those with disabilities
  • Providing basic utilities such as heat, electricity and water. For example, the University of Iowa’s utility costs for 2011 were $74.86 million dollars (The Daily Iowan, Dec. 7, 2011)

These are just some of the facilities and equipment necessary to run any institution of higher learning. You must also factor in that for each area listed above, but particularly the academic ones, equipment must be maintained and kept up-to-date in order to provide students with an experience that will translate or match the one they need for the professional world. Maintenance and equipment upgrades need to happen constantly. Think about keeping the virus definitions and software patches up-to-date on the one or two computers in your home. Now imagine doing this for hundreds of computers which get used by multiple users every day.

People
According to Smith-Parker’s report, the greatest single expense for a college or university is the people who work on campus and benefits for those who have retired – accounting for @60% of the annual budget at her institution (see graph below). This is the case for most businesses, so universities are no exception here (Small Business Chronicle). For every category above there are people who actually perform the functions or maintain the facilities or equipment. Again, it cannot be overlooked that a college or university, particularly in a small town, may be the largest single employer providing a range of positions from low-wage janitorial, secretarial, or maintenance to highly-paid professionals. Tuition helps to provide salaries for hundreds of individuals and is often the single largest source of income for the entire area supporting restaurants, clothing shops, department stores, grocery stores, and the service industry as well. So yes, tuition may be high, but it takes many, many people to make a college run. Beyond faculty and administration there are cooks and servers, cleaning staff, secretaries, groundskeepers, electricians, arborists, library staff, IT professionals, coaches and trainers, disabilities services, and police, to name a few.

(Smith-Parker, 2010, p. 25)

Mission Creep
One final area of cost, according to Smith-Parker, that the general public seems to be unaware of is the cost associated with “mission creep.” Sounds like a disease, and to a certain extent it is, but a necessary one. Mission creep is the constant need for colleges and universities to change their mission and degree offerings to meet new demands in the workplace. Realize that 20 or 30 years ago there was no network security major, Nano science and molecular biology were research university-only propositions, security studies and courses in Arabic were few and far between, no one had even heard of diaspora or Africana studies, and sustainability wasn’t even on the academic radar. Now every small college is scrambling to build programs in these hot areas to satisfy not only the demands of the working world, but the demands of students and their parents who want their children to major in these fields.

The costs associated with mission creep can be staggering – adding facilities, faculty, staff, and library resources can cost millions, particularly in the sciences. Universities must proceed carefully and prune outdated programs accordingly, often incurring additional costs in program evaluation and other incidental expenses in so doing. And these new majors are generally necessary additions. Students want value from their education and the only way to provide that is to give them the opportunity to study fields in which there is actual hope for future employment. Studying alchemy  or type setting doesn’t get you very far in the job market in the Information Age. 

The Final Assessment
Tomorrow I will examine whether these costs are justified and what colleges and universities can and cannot do to limit them. For today, however, let me say that it is extremely costly to provide the type of college education that students, their parents, and future employers demand. The high cost of higher education can’t solely be blamed on the institutions themselves. Our expectations, the cost of operating a large business, and the lack of consistent public funding all serve to drive up the price of higher education. So before we point a finger at institutions whose mission is to provide a public service, we had better consider our own role in driving up the very fees we are complaining about.