Did State Colleges Exacerbate The High Cost Of College? Reprint With Addendum

Reprint of my 12-year-old blog post, "Why College Is Expensive" about the price of college.

Saturday, February 19, 2011

Why College Is Expensive

Posted By Milton Recht

A comment I posted on "Why does college cost so much?" by Tyler Cowen:

Colleges and universities do lower their costs of teaching. They use low cost adjuncts, grad students and post docs. They increase class sizes, use large lecture halls and eliminate courses with low enrollments. Schools look for ways to save on heating, cooling and other and energy costs. There is no shortage of competition for students at US colleges as at each beginning term there are many unfilled seats at many of the colleges and universities in the US. A greater part of tuition has gone to non-teaching parts of universities, e.g. administrative, fund raising, sports, buildings, dorms, stadiums, and other physical structures, etc.

Obviously many schools have pricing power and can and have raised their prices without seeing ill effects in applications.

It has been like this for decades.

A more logical reason for pricing power at private universities is the existence of state schools.

State colleges took away from private colleges, the most price sensitive element of college students and parents, lower income and middle class students. Private universities became a luxury good and a sign of affordability for the rich. While private colleges these days do provide financial aid, most colleges do so for only about half or less of their students for less than half the tuition and room and board costs.

Without state colleges there would have been greater pricing and political pressure on private colleges to make schools affordable for the middle and lower income group. Colleges would have be been more frugal with their spending to keep costs and financial aid low so more middle class and lower incomes students could attend.

Basically, state colleges allowed private colleges to become luxury [and Veblen] goods for price insensitive [and staus seeking] consumers, which allowed private schools to raise prices without much concern.

Addendum to the original blog post.

Private colleges did not have to significantly expand their student enrollment to meet the demand of increased applications for private college admission. As states created state colleges or expanded their enrolled number of college students, the state schools admitted the students who were not accepted at private colleges, or could not afford the expense of private schools.

State colleges eased the political and pricing pressure on private colleges to expand the size of the admitted student body; to lower tuition and other college expenses; to increase financial aid. State schools could raise their tuition as long as they remained more affordable than private college.