American Higher Education: Beset with Problems, but Solutions Exist

Richard K. Vedder

I will concentrate today on the economics of higher education—why it is so costly, and a few things we can do about it. When I entered Northwestern University over six decades ago, the tuition fee was $795 a year, which is under $7,000 in current dollars. Today, Northwestern’s annual tuition, excluding room and board, is $56,232—eight times as much.

A similar pattern exists with state schools. When I started teaching at my state school, Ohio University, in the mid-1960s, the tuition fee of $450 was less than one-third what it is today, adjusting for inflation.

The higher education establishment usually stresses two explanations for rising costs. First, some economists argue that higher education is a service industry where productivity improvements are hard to accomplish. Teaching is like theater, they say—performing King Lear takes as many actors to perform today as when Shakespeare wrote it 400 years ago.

Professors require compensation increases like other professionals. As salaries rise with productivity in the rest of the economy, they must rise in higher education as well, thus necessitating higher fees to cover increased personnel costs.

The second explanation for rising student fees is that state governments are reducing their support of higher education. Where in the 1960s, state subsidies covered 50 percent or more of university budgets, now they only finance 10 percent to 30 percent of them, again necessitating higher fees.

These explanations are both weak. With respect to the first (often called the Baumol hypothesis), resources universities spend on professors and teaching is only about one-third of total university spending. A typical university has more administrators than faculty. Moreover, technological advances allow professors’ lectures to be replicated many times for large audiences electronically.

As to declining state support, the actual number of dollars appropriated by state governments for higher education is at a record high—$96.6 billion for this fiscal year.

Part of the reason why state appropriations are a smaller portion of university revenues than previously is that those budgets, at least until recently, have grown on a per-student basis. A generation ago, universities didn’t have expensive armies of diversity and sustainability bureaucrats or other administrative positions unrelated to the core academic mission. Moreover, fees have also risen sharply for private schools that receive no state subsidies.

If those two factors are minor, then what explains the explosion in higher education tuition fees? From 1840 to 1978, tuition rose about one percent a year more than the overall inflation rate. Since the incomes of Americans were rising two percent annually, college was becoming more affordable. In the next 40 years, 1978 to 2018, however, tuition rose about three percent annually more than inflation, and also much faster than income growth, which actually slowed down. The burden of financing college rose sharply.

Why did this happen? The reason reflects the explosion in our huge and dysfunctional federal student financial assistance program, especially student loans.

Before 1944, we had no federal student support and limited support (mainly the GI Bill) between 1944 and the late 1960s. In the 1970s, federal student loans became prominent.

As then-Education Secretary William Bennett observed in a 1987 New York Times op-ed, the colleges, realizing that kids could borrow large sums to help pay for college, started raising fees aggressively.

Research by a number of scholars at the New York Federal Reserve Bank of New York and at the prestigious National Bureau of Economic Research confirmed that Bennett was right. The best estimate is that for every dollar more federal assistance provided each student, schools raise their fees by 60 or 65 cents, capturing a large majority of the federal aid.

Student loans help schools much more than students.

And within schools, the increased revenues have financed a massive expansion of administrative staff, some reductions in teaching loads for tenured and tenure track faculty, and increased student amenities—things like climbing walls and lazy rivers.

It is noteworthy that, originally, the push for federal student financial assistance was motivated by a desire to increase access for lower-income students to attend college. On that score, the student aid program has been a colossal failure. The proportion of recent college graduates from the bottom quartile of the income distribution now is smaller than in 1970.

Before discussing some possible remedies for the current dysfunctionalities in public policy, I should provide more detail on inefficiencies making colleges so expensive.

We could begin by suggesting that college resources are vastly underutilized. Start with the buildings. Most of them are largely unused for several months a year, mainly the summer. But even during the academic year, most classrooms are lightly used in evenings and weekends, with the “weekend” beginning on some college campuses around five p.m. on Thursday.  By contrast, how much business office space lies empty for at least one-third of the time?

And what about the faculty? Fifty years ago, tenured faculty taught six hours a week, sometimes nine. At similar schools today, they teach three to six hours a week, for 30 or so weeks a year. Even someone teaching two courses is in the classroom less than 200 hours a year and spends maybe a similar amount of time preparing lectures, grading papers and exams, and advising students.

Today, the number of bureaucrats exceeds the number of faculty at most schools.

Low teaching loads are usually justified on the grounds faculty members are doing research. But does anyone read it? One study showed that over 1,000 academic papers are published annually on Shakespeare. Few papers get more than one or two citations. Is there that much new insight we can gather from the writings of the Bard, as great as he was? Diminishing returns set into almost everything, including academic research.

But faculty aren’t the biggest component in rising academic costs and inefficiency. A typical school in, say, 1970, had perhaps one non-instructional white-collar worker for each two faculty; today, the number of bureaucrats exceeds the number of faculty at most schools.

We have armies of administrators doing tasks that did not even exist 50 years ago. The University of Michigan, for example, at last report had 93 diversity and inclusion administrators, of whom more than two dozen made over $100,000 annually. I ask: If that school fired all of them, saving probably $10 to $15 million annually, would Michigan revert to massive racial and gender discrimination? I doubt it.

There are lots of cost-enhancing eccentricities of higher education that we can’t discuss in detail. The institution of tenure in some cases raises costs and impedes needed change. The heavy subsidization of sports, unique to American universities, needs to be revisited. So does accreditation, which was originally designed to protect consumers from fraudulent or shoddy instruction. It does little of this today. Schools of great distinction typically have the same accreditation as schools that do horrible jobs of educating students. Accreditation is costly, excessively complex, lacks transparency, and is mired in conflicts of interest.

Colleges are too expensive, but what can we do about it? If the federal student loan programs instituted 50 years ago are a prime culprit, wouldn’t we sharply reduce tuition price inflation if we got rid of those programs?

University people would scream, “Eliminating federal aid will lead to lower enrollments and prevent some poor kids from going to college.” I would argue that in a world where 40 percent of full-time college enrollees fail to graduate in six years, and where 40 percent of those who do graduate are underemployed, we are overinvested in higher education and some enrollment decline is desirable.

Moreover, I think alternative modes of financing college will evolve. One option would be to introduce on a wider scale privately funded Income Share Agreements (ISAs), where students who previously borrowed for college now sell equity in themselves—a share of postgraduate earnings for several years. An engineering graduate of Duke or NC State might agree to pay eight percent of her earnings for 10 years in return for the money to finance college. By contrast, a gender studies major at East Carolina might have to pay 18 percent of her earnings for 25 years. The terms on ISAs would encourage enrollments in good programs training workers to do productive things—more engineering, less gender studies bloviating.

If it’s politically impossible to end the current federal student loan program, at least several changes could mitigate its damage.

Most important, schools could be forced to have “skin in the game,” sharing in the losses occurring when students default on loans. Schools would become more careful about who they accept for admission and perhaps even nix trendy majors like gender studies.

Similarly, we should reform student loans in other ways. We could impose minimal academic standards—students with poor first-year performance could be constrained from borrowing for a second year, for example. We could impose stricter limits on the amount of borrowing and end loans to parents of students—PLUS loans.

State governments perhaps should give money to students, not to colleges. Pell Grants should be changed into scholarships given directly to truly low-income students, not to college financial aid offices.

Finally, the U.S. Department of Education has harmed higher education in America, and probably K-12 as well. It is time to eliminate it.

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The Ever-growing Costs of Mandatory Student Fees

North Carolina public universities are more than just institutions of higher learning. They are each small cities of young adults with Olympic-level athletic franchises, massive dining and fitness clubs, and special interest hobby communities supported by extensive human and physical infrastructure.

To fund the many perks and benefits of university life, schools charge extra fees beyond tuition and room and board. In the University of North Carolina system, students at each of the 16 member institutions pay, on average, more than $2,500 annually in mandatory fees.

Mandatory student fees are slowly going up at North Carolina public universities, making attendance more expensive and raising questions about the true need and value of the amenities they help provide. Those fees have risen by 16.9 percent since the 2015-2016 academic year, on average, and schools are planning another markup set to take effect this fall.

UNC system mandatory fees pay for a variety of university costs, including:

Athletics
Health Services
Student Activities
Educational and Technology
Campus Security
Debt Service

Association of Student Governments ($1 per student)
Each UNC school has a tuition and fees committee that meets during the fall semester to determine what additional revenue is needed. The committees include faculty, staff, and students. Rate changes agreed upon by the committees are then sent to the boards of trustees for approval, and chancellors ultimately submit them to the Board of Governors.

Any fee increase must be accompanied by expenditure plans and background information justifying their need. System rules limit mandatory student fees from growing by more than 3 percent overall each year, and the addition of new fees is currently prohibited. Mandatory student fees are the same for all students, regardless of whether they’re North Carolina residents, an undergrad or grad student, or if they live on-campus or off.

The Board of Governors discussed mandatory student fee increases for the 2020-2021 academic year during its January meeting and will vote on the issue in March. If the proposed increases are approved, fees will rise by an average of 2.4 percent across the system, from $2,611 to $2,674, but these increases are very different from school to school.

By fee type, campus security fees would grow the most: By 13.8 percent on average. However, they would remain inexpensive, ranging between $30 and $50. The fees support Title IX coordinators, campus security officers, and on-campus investigators. Four dollars per student go to the system office to support active shooter training on campuses and additional security personnel.

A much larger fee than campus security, student activities fees would see 2.6 percent growth on average, rising from $643 to $660. As the name implies, they support the upkeep of student union and intramural activity facilities, as well as student groups. Student governments have the power to direct where much of this money is spent, which can lead to on-campus political problems.

As David French of The Dispatch wrote,

Student fees prop up interest groups, and sometimes they support ideologically driven campus ‘centers’ dedicated to gender equity or LGBT equality. The end result is that students are involuntarily forced to fund an enormous amount of campus activism. It’s a comprehensive system of compelled speech that would be shockingly unconstitutional virtually everywhere but the academy, where the Supreme Court has ruled that the university’s educational mission gives it the authority to compel student funding [of] student expression.

The allocation of funds for student activities must be viewpoint neutral. It’s difficult, though, to identify and correct any wrongdoings. Student governments can impose their own requirements for student group funding requests and split funds across the ideological spectrum. Instances of alleged bias arise from time to time.

Outside of ideological battles, athletics fees may have the widest variation in cost and have a large impact on student life from school to school. They are commonly the most expensive fees that students pay, yet their benefits are unevenly shared.

Those fees support athletic scholarships, staff salaries, travel, and facility maintenance and operation. Each system school, except for the University of North Carolina School of the Arts, has athletic programs and mandates these fees. On average, schools have proposed a 2.8 percent increase in athletics fees, from $735 to $755 for the 2020-2021 academic year.

Most students who don’t play a sport will never get to use the locker rooms and practice facilities for which they paid. They can attend athletic events and get a discount compared to public tickets, but not all students care about sports and would rather spend their time socializing, working, or studying. And of course, students must pay athletics fees whether their school’s teams win or lose.

East Carolina University students would see the greatest increase in athletics fees, a 6.5 percent hike from $773 to $823. The East Carolina Pirates recently completed a round of major athletic facility updates, including a $60 million upgrade to the school’s football stadium. Its teams compete in the Division I American Athletic Conference (AAC), which includes nationally recognized colleges that are competitive, but not dominant. The school has experienced some tumultuous changes in leadership at the same time, including an instance where some trustees attempted to secure a student body president who would support their stances on issues like fee increases.

East Carolina, though, doesn’t have the highest athletics fee in the UNC system. Elizabeth City State University takes the prize instead. Students there are facing a 3.7 percent hike in athletics fees from  $899 to $932 to support the Vikings’ 11 varsity athletic programs. Elizabeth City State competes in the Division II Central Intercollegiate Athletic Association (CIAA), a conference of Historically Black Colleges and Universities that also includes Winston-Salem State University and Fayetteville State University.

On the other end of the scale, North Carolina State University and UNC-Chapel Hill have the lowest athletics fees, charging $232 and $279, respectively. Neither school has proposed increases for the coming year. They are members of the prestigious Atlantic Coast Conference (ACC) with large followings that generate revenue, especially in men’s basketball and football. Their athletic programs receive more revenue from media deals, apparel, concession and ticket sales, and alumni donations than other system schools do.

Athletics fees can comprise a large chunk of the athletic department’s budget. At East Carolina, 34 percent of the budget is thanks to student fees. At UNC-Chapel Hill, only 7 percent of its budget comes from student fees.

Beyond accounting, there are numerous ways to determine the value of these fees. In the 2018-2019 Director’s Cup ranking of the overall success of schools in Division I athletics, UNC-Chapel Hill finished 10th while East Carolina finished 148th. By that individual metric, East Carolina’s higher fees may not have been worth the money. Personal enthusiasm for a school’s athletic programs may also skew the value perception of student fees.

There is far more data that can be investigated on this subject, but it is clear that mandatory student fees at North Carolina’s public universities fund aspects of university life outside of education, like student activities and athletics, that can be of subjective value.

Those fees make students attending a UNC system school pay thousands of dollars more than they otherwise would. As fees continue to creep up, UNC leaders need to be mindful of the financial burden it puts on students trying to earn a degree.

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Australia: Easier university admission for girls outrageous, says PLC principal Kate Hadwen



The principal of Australia’s largest private school for girls has ­described as “outrageous” the ­decision by the University of Technology Sydney to lower entry standards for female students who want to take STEM courses.

“We don’t need it, do we, girls? No,” said Kate Hadwen, head of Pymble Ladies College, one of the best-performing schools in the country.

The scheme, announced by the UTS for 2020, says girls can enter STEM courses with 10 fewer Australian Tertiary Admissions Rank points than boys.

The girls are then encouraged to aim at careers in science, engineering, IT and maths.

Dr Hadwen was asked for her opinion about the program by one of her students during a Women and Education event hosted by The Australian for International Women’s Day.

Dr Hadwen replied: “It’s outrageous. The thinking is to try and encourage girls into STEM. But I just think that it’s absolutely saying women need help. We don’t need help. We’re great as we are, thanks very much.”

Dr Hadwen said only 40 per cent of students used the ATAR to access university. “So 60 per cent of students will get a university placement through a portfolio and a multitude of other entries,” she said. “You have to earn your place there … I’m a believer in that.”

UTS declined to comment, saying it had nobody available to ­defend the “ATAR-adjustment” program for girls.

The university was criticised when the program was announced last year, prompting Verity Firth, director of UTS Centre for Social Justice and Inclusion, to say: ­“Reviews were oddly mixed. The word ‘merit’ was thrown around like a javelin.”

Women comprise half of all university students, but they don’t tend to do the courses that are still seen as “male” such as engineering, IT and building and construction. Men don’t do the courses seen as “female” either: arts and communications.

The federal government has several programs designed to ­encourage girls to study STEM subjects, such as Curious Minds for talented girls in Years 9 and 10.

Program manager Vanessa Kates said the program, delivered by the Australian Mathematics Trust and Australian Science ­Innovations, identified excellent candidates through a competition, “and the girls, when we contact them, often don’t realise how well they are performing”.

“Very often, they say: Are you sure you mean me? We say ‘Yes, we think you are talented, you are fabulous, you can do this’. And they are often surprised.”

She agreed “something needs to be done” to encourage girls “but I fear that it (ATAR adjustment) may entrench the prejudice against girls, if people are able to say, ‘Oh, you only got in because of the special credit they gave you’.

“The girls we see are … intelligent and have many options, and it’s up to us to say give it a crack, you’re actually excellent.”

The University of South Australia has a STEM Girls program, targeting Year 11 students, some of whom are thinking of dropping maths and science in favour of subjects thought to be “easier”.

“It’s because there is so much emphasis on the ATAR,” she said. “We hear things like: I don’t think I should do the harder subjects, or subjects that are perceived to be harder, like high-level mathematics, because then I won’t get the ATAR I need.

“But if you don’t go on with high enough level mathematics, you can’t actually get the STEM career you want.”

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