why does college cost so much?

If you read popular coverage of higher ed, one of the biggest recurring questions is “why does college cost so much?” There’s no really good answer to this question, in part because it’s poorly phrased. Higher ed is a big field containing several different organizational populations that look very different when it comes to costs and revenues (and student bodies, etc.). The chapters by Scott and Ruef & Nag in this edited volume do a nice job of laying out some of the contours of that diversity. Applying that basic insight suggests that the question “why does college cost so much?” might have very different answers for public research universities, community colleges, private liberal arts schools, the elite research universities, for-profits, etc. The relative weight of the various popular explanations (including administrative bloat, Baumol’s cost disease, lavish expenditures on amenities, higher levels of federal financial aid, and declines in state support) may differ radically.

For example, a report from Demos released in May argues forcefully that for public 4-year schools, declines in state support account for almost all of the increase in tuition revenue in the 2000s. That is, schools are mostly replacing dollars of state support with tuition. These schools actually saw a decline in the ratio of upper-level administrators to students, and only small increases in staffing overall. At least when it comes to public universities, it’s hard to see administrative bloat in the data.

In contrast, a story from Market Watch this week highlights the role of increased federal financial aid in allowing small, private colleges and universities to increase tuition. They explain the argument:

William Bennett, the Secretary of Education from 1985 to 1988, is probably the public figure most associated with this theory, which came to be known as the “Bennett Hypothesis” after Bennett argued in 1987 that increases in federal financial aid “have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase.”

Market Watch goes on to discuss recent research from the FRBNY showing that while the Bennett hypothesis may not explain most of the movements in costs at most schools, it may be particularly important at expensive, but not selective, private schools attempting to move up in prestige rankings: “These schools may be more likely to respond to changes in loan limits because unlike their wealthier, more selective counterparts, they can’t rely on their endowments for funding.”

All this to say, the question “why does college cost so much?” is actually a collection of related sub-questions. Public universities cost more than they did 20 year ago for different reasons than small private schools. And be careful with news coverage that tries to link the newest finding to “the cost of college” without clarifying what sort of institution the data actually address.

Author: Dan Hirschman

I am a sociologist interested in the use of numbers in organizations, markets, and policy. For more info, see here.

4 thoughts on “why does college cost so much?”

  1. I would perhaps refine the question, and ask “why does college so much in the United States”? Good point on the diversity and complexity of different institutions, but when you look at the question from a comparative angle, it is hard to avoid the conclusion that the answer might have something to the elite private heights of the stratified and competitive nature of the America higher education. Driving up costs, all the way down the system. I think there is a danger of missing the forest for the trees here, no? Any one have a better big picture explanation I am missing? How many places does it cost more, and what are the structural conditions in those places? Where does it cost less, and what do those societies look like?


  2. If Collins et al. are correct that college is mostly a credentialing regime, then most of its value comes from exclusion. We would expect colleges to not expand enrollments up to demand — they have to be turning people away or the credential’s value drains. So even given the increases in enrollments, demand subsidies and cultural boostering for high education have probably increased demand faster than supply, driving prices up.


  3. The use of Collins here makes good sense, to explain prices being driven up, even given weight to the various critiques of the credentialism thesis. This is hardly my area, so I will let experts engage deeper with the details. But one can’t talk about the Collins model as if it is an abstract universal model. The exclusion is more intense, when the system is led by elite private universities with massive resource, relative to institutions lower down in the system. A flatter system would see some of the same dynamics, but attempting to keep up with elite privates is going to be more expensive…. A system like the American system will certainly spend a lot of energy addressing its legitimacy, by providing resources for including previously excluded groups, in response to mass political protest of the 60s and beyond, and new transparency and critique. A further expense, although not the core dynamic, which seems to be the very structure of the system. Hard to change, but first step would be talking about it openly..

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