

The Supersizing of American Colleges - kn0thing
http://priceonomics.com/the-supersizing-of-american-colleges/#truth

======
edtechdev
Taibbi had a good article on this last month:
[http://www.rollingstone.com/politics/news/ripping-off-
young-...](http://www.rollingstone.com/politics/news/ripping-off-young-
america-the-college-loan-scandal-20130815)

"Carey talks about how colleges spend a lot of energy on what he calls
"gilding" – pouring money into superficial symbols of prestige, everything
from new buildings to celebrity professors, as part of a "never-ending race
for positional status." "What you see is that spending on education hasn't
really gone up all that much," he says. "It's spending on things like
buildings and administration. ."

One reason they do the gilding is to increase their ranking - which itself has
problems. Rankings are primarily based on selectivity and prestige, which is
sort of like judging that a hospital is better because of how healthy the
patients are when they get there, not how much healthier they got while they
were there:
[http://www.newyorker.com/reporting/2011/02/14/110214fa_fact_...](http://www.newyorker.com/reporting/2011/02/14/110214fa_fact_gladwell)

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melonakos
To add to this article, I've written a lot on this topic and its relation to
startups:

* Types of Graduate Degree Programs, [http://notonlyluck.com/2013/06/23/types-of-degree-programs/](http://notonlyluck.com/2013/06/23/types-of-degree-programs/)

* When to Drop Out of School?, [http://notonlyluck.com/2013/01/31/when-to-drop-out-of-school...](http://notonlyluck.com/2013/01/31/when-to-drop-out-of-school/)

* Lifelong Learning as a Substitute for School, [http://notonlyluck.com/2013/02/01/lifelong-learning-as-a-sub...](http://notonlyluck.com/2013/02/01/lifelong-learning-as-a-substitute-for-school/)

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kenster07
The glaring issue can be summed up in one statement. College roi is detached
from student roi in the near and mid term.

If these were strongly linked by design, the magnitude of the problem would be
substantially diminished.

------
bambax
> _even humanities faculty would go elsewhere if not compensated at the
> growing rate of their education bracket_

But where would they go? Journalism??

~~~
mathattack
I don't think most humanities faculty are paid well. Perhaps the top few at
the top schools, but the dropoff is enormous.

A better question may be is it worth it for the government to subsidize
research for humanities professors? Or should humanities teachers have regular
9 to 5 teacher jobs?

~~~
slurry
_A better question may be is it worth it for the government to subsidize
research for humanities professors?_

Where is all of this filthy lucre that the government is throwing at
humanities professors? I would like to get some. The only federal body that
funds pure humanities research is the National Endowment for the Humanities,
which has a grand total of $150 million by way of annual budget. I.e.
essentially zero.

 _Or should humanities teachers have regular 9 to 5 teacher jobs?_

Perhaps HN commenters should have regular 9 to 5 jobs.

~~~
yuliyp
That comment is very misleading. The subsidy being talked about is not
research subsidies, which pay lab costs and grad student stipends, not
professors. Instead it's about tuition assistance in the form of student loans
and grants. That's the subsidy that actually pays humanities profs.

~~~
slurry
_That comment is very misleading._

No it's not. I was responding directly to this:

 _A better question may be is it worth it for the government to subsidize
research for humanities professors?_

The article itself didn't have anything directly to say about the humanities
as a field of study.

~~~
gte910h
The govt loans are subsidizing them via tuition.

If loans were given out on a ability to repay standard, instead of govt
guaranteed, humanities would get fewer loans, therefore, govt loans are
subsidizing humanities faculty

~~~
slurry
There was a contention that the government subsidizes humanities _research_. I
demonstrated that, barring the rounding error that is the NEH, it does not.
You reply that yes in fact the government does subsidize humanities
_teaching_. I don't even know what to do with that.

Anyway, if loans were given out on an ability to repay standard then the
biggest losses would be to health professions, criminal justice, early
childhood education and other non-prestige career degrees toward which low
income students tend to gravitate.

------
tsotha
>College is without a doubt a worthwhile investment that pays off over time in
increased earnings and a better quality of life. If anything, a college degree
may be getting even more valuable.

"Without a doubt", eh? I have doubts. Are we that sure the causality arrow
goes that direction? If I had to bet money I'd say it goes the other way -
college is more likely to attract people who will have higher earnings and a
better quality of life.

------
doctorpangloss
> College is without a doubt a worthwhile investment that pays off over time
> in increased earnings and a better quality of life. If anything, a college
> degree may be getting even more valuable.

Should it surprise anyone that it is expensive to buy an investment product
whose returns get better and better-known?

~~~
jmduke
But it is surprising -- or, at least, interesting -- that the product doesn't
benefit from economies of scale.

~~~
mjn
In some cases it does. The University of California system has managed to
scale up reasonably efficiently, with expenses growing more slowly than
enrollment, thereby reducing the per-student cost of education. The result is
that there's been an overall cost decrease of around 25% (in real terms) over
the past ~40 years, if you take the total UC budget and divide by total
enrollment.

The reason tuition (i.e. price charged to students) has gone up, even though
the cost of providing the service has gone down, is that state funding has
fallen even further than costs, more like 60% [1], so a larger portion of the
cost is now charged to the student. For public institutions, at least, it's
important to distinguish between the total cost of providing education vs. the
amount charged to students, which are numbers that don't always move in the
same direction.

[1]
[http://www.kmjn.org/misc/uc_funding.txt](http://www.kmjn.org/misc/uc_funding.txt)

------
wyclif
Previously submitted, but died:
[https://news.ycombinator.com/item?id=6372933](https://news.ycombinator.com/item?id=6372933)

~~~
larrys
Normally resubmitting would have just upped the vote count but the submitter
tacked something on the the URL and it wasn't recognized as a previous
submission.

~~~
slyall
The trouble is that there is no point sending upvotes to anything more than a
couple of hours old since it'll never make the front-page and be read.

At least the original submitter gets a vote for the resubmitter the first time
the submit (before they change the URL).

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dnautics
what happened in 1981, when the price of college became unhinged from the CPI?

~~~
atg2taa
One hypothesis: the Bayh-Dole Act of 1980 [1], which allowed federal grantees
to own the intellectual property developed with federal funds. Prior to this
Act, all IP made with federal funds belonged to the government.

As R&D is extremely expensive, one theory is that colleges raised their
tuition to help cover the venture capital requirements of research.

[1]
[http://en.wikipedia.org/wiki/Bayh%E2%80%93Dole_Act](http://en.wikipedia.org/wiki/Bayh%E2%80%93Dole_Act)

~~~
dnautics
I'm not certain this makes sense. Why would they need to raise tuition if the
venture capital requirements were covered by the feds anyway? Moreover,
typically gov't granted departments are helping pay for other departments
through overhead, not the other way around.

~~~
atg2taa
I don't think federal grants cover the research costs completely. For example,
if my professor wins one grant, part of the money will be put aside for to
cover 10% of his salary. He certainly doesn't have 10 big grants in play at
any given time, so the remainder has to be offset by the University.

Add to that, you need a lot of overhead like administrative assistants, grant
managers, technology transfer officers.

~~~
jurassic
I would be surprised if your professor's research tab is partly covered by the
university unless they are using startup funds as a new faculty hire. The
universities I've been at all (Caltech, MIT) have a significant "overhead"
charge against all incoming grants to cover the cost of university
infrastructure, keeping the lights on, etc. So it is research that is
subsidizing the university, not the other way around.

~~~
mjn
The last sentence is somewhat questionable, except at the top universities.
Only at the most grant-successful universities does the overhead actually
break even in recouping the extra outlays universities put into research.
Examples: construction of research-specific laboratory facilities, co-
financing of expenditures they wouldn't have otherwise undertaken (many grants
require co-funding), increased salaries and hiring packages caused by bidding
wars for faculty who have successful grant-getting records, department
backstopping of PhD stipends when a large group has a dry year grant-wise,
salaries for grant-writing assistance and research-support staff, etc., etc.

The former Dean of Georgia Tech's College of Computing reached a similar
conclusion: [http://innovate-edu.com/2011/05/18/if-you-have-to-ask-ten-
su...](http://innovate-edu.com/2011/05/18/if-you-have-to-ask-ten-sure-fire-
ways-to-lose-money-on-research/)

------
paul_f
Can we agree there is a distinct and dramatic difference between public and
private colleges? Should we even be talking about them in the same context?
This seems to be much more of a private college bubble.

~~~
slurry
This part was really interesting too:

 _Public and private research universities had increased revenue from services
like hospitals as well as from the Federal government, yet raised tuition to
further increase costs. Other private institutions (such as liberal arts
schools) have less revenue from their endowments and alumni gifts. They are
charging higher tuition to both make up for that revenue and fund additional
spending. To make up for less state funding, however, non-research public
institutions are both raising tuition and spending less._

In other words, everyone is getting tuition increases, but only community
colleges and lower-level state colleges are actually seeing a cutback in
programs. That actually makes me kind of physically sick.

~~~
orky56
Although that's the effect that is immediately obvious to the end-customer,
the student, in actuality "raising tuition and spending less" creates
something more sustainable. They will actually be less dependent over time
compared to other institutions. This is an example of institutions downsizing
with short-term consequences rather than continuously expanding with longer
term consequences.

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kposehn
Dear Priceonomics:

Please use a responsive design for your blog. I rarely get to read them
because they are difficult to read on the phone, but they are fantastic and
would be great to read on the go.

~~~
omarish
It's coming up on our roadmap. Email me if you'd like to test out our new
responsive design - omar@priceonomics.com

~~~
kposehn
Thanks Omar :)

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lifeisstillgood
I think we shall see a break between the desire for universal education, the
public good of strong research and the pandering to powerful middle class
votes.

100 years ago universal education ended between 12 and 14 years old and only
the rich or the brilliant went on to further education. Now we are heading to
a situation where further education is seen as the minimum universal
education. (Something like 50 % of students are expected to attend college)

this effectively reduces most colleges and courses to an extended High School,
with the expected ROI of the same.

whereas as a society we want to have only the most brilliant and motivated
working on pushing out boundaries of knowledge - basically please invent the
future for us.

and this will lead to two tier colleges - one that act as schools and one that
act as universities.

we cannot allow the universities to be contaminated by rich idiots, or pushing
research out with floods of high schoolers

so ... we should look to soviet Russia - who simply took the best minds and
put them in college. publically funded, strict entrance criteria.

everyone else - publically funded colleges that manage to push the ROI down to
zero.

~~~
sliverstorm
_this will lead to two tier colleges - one that act as schools and one that
act as universities_

That already pretty much exists. Strictly speaking I think the dividing line
is whether or not you can get a PhD at the school in question; in casual
speech, "university" vs. "college" sometimes approximates the distinction.

~~~
superuser2
Note that some "colleges" can provide an arguably superior education than some
lower-end public universities because professors are chosen and paid for their
teaching ability rather than their research.

~~~
slurry
You don't even need to hedge that much.

Quite a few non-PhD granting colleges offer superior education (not even
arguably superior, just superior) than all but the highest tier research
universities, public or private.

I won't pick too many examples lest this gets bogged down haggling over
details, but basically, Swarthmore.

------
Alex3917
For what it's worth, most of the data in these charts is false and/or
misleading. If you read the actual primary sources that this post purports to
use, you'll see the situation isn't actually nearly as bad as presented. It is
somewhat more difficult to pay for college than it was in, say, 1970, but the
'statistics' here are wildly exaggerated.

The weak job market is a much bigger issue than the increased cost of college.

~~~
001sky
This post would be more interesting if you had some analysis. Its odd that you
did so much legwork, without a single example of 'statistics'. Got something?
Post up a counter-example. Or even just a regular example !

~~~
Alex3917
I only have Internet from my phone right now, which is why. It's the same
basic idea as my comments on this article though:

[https://news.ycombinator.com/item?id=5728788](https://news.ycombinator.com/item?id=5728788)

But again their primary sources are fine, they're just not being honest about
what they say. You'd be best off just reading the data from the NCES, College
Board, etc.

As a rule of thumb, conservative ideology is mostly based on theories that
have no basis in reality, whereas liberal ideology is mostly based on facts
that have no basis in reality. This is a good example of the latter.

~~~
001sky
_But again their primary sources are fine, they 're just not being honest
about what they say_

I only skimmed the article, but it seems like you are saying the data in the
charts is OK but you don't like the text (?) If that's the case, why not make
a more specific critique?

At its root, the thesis of the article seems to be there is a data-driven
correlation with debt availability and COGS at universities. Notwithstanding
the obvious similar correlation with Revenue.

I could check a regression, but the eyeball test looks pretty good.
Personally, I thiked the author missed the mark. He should have run a
correlation of student debt to university endowments.

That (time series) would be an even more interesting eye-opener.

~~~
Alex3917
"He should have run a correlation of student debt to university endowments."

Given that the median endowment is $0, I'm not sure that would be useful.

~~~
001sky
Need I mention "stratify the data"? If your technically unclear, I can be more
specific. For example, student debt issuances (flows), not retained balances.
edit: just for fun

==================

2011 Endowment vs 1994 corrected for inflation. These are dollar variances.
100-->156 with inflation. If a school goes from 100 to 200, this would measure
46. Below data is the EXCESS in BILLIONs vs 1994. This is incremenatl wealth
accumulation, the gross changes (typically 5x) are the second figure.
Endowments are approximately at 3x wealthier following this massive inflow of
cash, corrected for inflation.

1) Harvard University (MA) $22.6 up 516% raw

2) Yale University (CT) $13.9 up 548% raw

3) Princeton University (NJ) $12 up 505% raw

4) Stanford University (CA) $12.4 up 611% raw

5) Massachusetts Institute of Technology $7.1 up 571% raw

6) Columbia University (NY) $4.9 up 410% raw

[http://www.usnews.com/education/best-colleges/the-short-
list...](http://www.usnews.com/education/best-colleges/the-short-list-
college/articles/2012/11/27/10-colleges-with-largest-financial-endowments)

[http://data.bls.gov/cgi-
bin/cpicalc.pl?cost1=100&year1=1994&...](http://data.bls.gov/cgi-
bin/cpicalc.pl?cost1=100&year1=1994&year2=2011)

~~~
001sky
^ Its worth pointing out that these "Non-profits" show financial returns on
capital far in excess of "profitable" companies. corrected for inflation,
school's capital is out-performing GDP growth by ~600 basis points, over a
sustained period (multi-cyclic, etc).

~~~
Alex3917
Endowments don't generally come from tuition, and are only partly spent on
scholarships/resources for undergraduates, so I don't see what this would show
us. Especially since only a tiny percentage of colleges have significant
endowments.

~~~
001sky
_I don 't see what this would show us_

You have an interesting lack of intellectual curiousity. Last time I checked,
37 college presidents were being paid over $1MM/year in salary. Where is that
money coming from? Not the endowments? Your right. Its coming from students,
who are basically laundering the government loans, into tuition to support
operating costs of the colleges. Money is fungible, in that regards.

------
r0h1n
It's ironic (or maybe it's just me) that the previous post before this on the
HN front page is a rant against "disruption" (
[https://news.ycombinator.com/item?id=6386989](https://news.ycombinator.com/item?id=6386989))

Ironic because typically there would be many opinions about how MOOCs would
"disrupt" traditional college education.

------
j_baker
It seems as though the problem is more acute in private colleges. Public
colleges just don't seem to be growing in price as much as private colleges.
It seems like one solution to the issue of rising college costs is for us as a
society to place less emphasis on pricey private colleges.

------
npguy
Here is some stats perspective on the size of student loans:

[http://statspotting.com/outstanding-student-loans-in-the-
us-...](http://statspotting.com/outstanding-student-loans-in-the-us-is-more-
than-chinas-total-external-debt/)

------
VLM
No discussion of interest rates?

Its all in the supply and demand.

Bubba can afford a $700/mo loan payment. In 1980 at 20% interest that means
he's going to pay the university $30K. There's no way they're charging a penny
less than he's capable of paying. Now run the numbers in 2010 at 3% and at
$700/mo there's no way the university is going to charge a penny less than
$150K. Either way its the same monthly payment, so what does Bubba care?

Works pretty much as interest rates steadily smoothly collapse to a multi-
generational low. Not so much fun for the big players as interest rates revert
to historical norms (or spike up to just as high of an unusual outlier)

A long term loan is a long term loan. Doesn't matter if we're talking about
school or house.

