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The College Conundrum: How to Lower the Cost of American Universities

By: Eric Bunce  

 Last year I was fortunate enough to study abroad in France. My professors were engaging, the quality of education was high…and the average tuition was 170 euros. Today, the average spending per student in U.S. higher education (including aid) is $30,000 per year, more than double other developed nations. When I tried to explain that to my friends and professors in France, they were flabbergasted. The first question they would ask: where does all that money go? A good question, and one we are struggling to answer. Frankly, the cost of education in America is high enough to saddle its youth with debt or turn them away from college altogether; it threatens our education system and the future of our nation. After exploring some of the root causes for the rising expense, I argue that in the short term, the government needs to modify incentive structures by increasing the flow of information to prospective students and reforming the broken college ranking system.  

While other explanations may also have an impact, there are three main reasons that tuition is so inflated in the U.S.  

The first problem is that funding for public universities comes mostly from states that have drastically cut back spending on higher education over the past three decades. These cuts were driven by fiscal conservativism, rising healthcare costs, and shortsighted solutions during the Great Recession in 2008.  Across 32 states, funding fell by more than $1,500 per student between 2008 and 2020, and that is not considering the decades of earlier cuts. This reduction in government spending on public universities would have an unanticipated cascading effect.  

Step two entails how state schools responded to the lack of funding by acting like private companies. To bring in extra revenue, they targeted advertising and brought in richer out-of-state and international students. These students can afford to pay higher tuition bills, and universities responded accordingly by raising tuition. Some state schools saw in-state enrollments drop by thousands, marking a shift in mission away from educating local residents to bringing in profitable students. This behavior by public schools, which make up the majority of the market in the U.S., quickly spread to competing private and non-profit schools.  

Thirdly, exacerbating the problem generated by entrepreneurial universities is a broken college ranking system. The impact organizations like the US News and World Report have on potential students is massive, so colleges will try anything to move up in the rankings, which distorts their decision-making processes. As rankings also strongly consider prestige, publications, and campus life, colleges are pushed to spend more on non-academic salaries. The U.S. now spends more on non-teaching staff than actual professors, which is not the case in any other developed nation. Thus, the college ranking system has encouraged more superfluous spending. 

What actions could be taken to negate the three inflationary effects above? One solution that is less costly, in terms of political capital and monetary price, is to change the incentive structure for both students and institutions.  

For colleges to make more financially frugal decisions, we must replace the current college ranking system with one focused more on value per dollar spent rather than brute performance. This would reward schools that are offering a better education in marginal terms, incentivizing efficient spending. Any changes to college rankings should also prioritize academic and post-graduation performance and devalue less relevant factors like campus living or faculty publications. One path to accomplish this is by revitalizing and encouraging the use of the College Scorecard. First established by the Obama administration, this source remains uncompetitive with private rankings because of its clanky user interface and lack of data. If reworked, it could become a legitimate competitor of US News or Princeton Review and change the incentive structure for colleges.  

On the demand side, students must be provided with better information to make responsible financial decisions. Revamping college rankings will assist with this, but reform is also needed on the financial front. Students should know how much debt they are going to graduate with before they decide. Sadly, that isn’t the case today as many students only get their financial aid packages after setting their heart on one school. Even once enrolled, tuition can, and does, go up every year. To allow students to make better decisions for themselves, colleges should be required to provide financial aid estimates at the same time of acceptance and hold tuition steady on a class-by-class basis.  

These relatively small changes to the college ranking and financial aid system will have an outsized impact on the changing the incentive structure for both institutions and potential students, which, in turn, will bring down the cost of tuition.  


About the Author 

Eric Bunce graduated in May from Seton Hall University where he studied International Relations and Economics. While there, Eric was fortunate enough to participate in the University Honors Program, the Diplomacy Research Lab, The Global Current Podcast, and Study Abroad programs in France. Having interned with the Departments of Commerce and Homeland Security, Eric hopes to pursue a career in law and/or government. 

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