woody_zimmerman_118_2007Long ago, early in the last century, I went off to my own personal adventure in higher education. My choice was a small liberal arts college in western New York State. In 1960, a year of college there cost me $1300. My buddies thought I was crazy. They commuted to a Pennsylvania State Teacher’s college where the tuition for a semester cost $75. But I wanted the music, science and social opportunities the college offered, so I paid the full freight. I had saved all the money myself by working part-time and delivering newspapers during my high school years. In my two years there, I was able to keep up, financially, by working a pretty good summer job ($80/week) and saving most of what I earned.

A year at that college now costs $35,000 – an increase of 2600% over those 50 years. This staggering inflation has occurred during an era when the overall American economy inflated by 626%. (This figure is drawn from official government CPI-tables.) Costs at that college have thus increased over 4 times as fast as costs in the economy as a whole.

Not to be too tough on my old alma mater, I hasten to point out that I transferred to a better-known college of similar curricula and social orientation in 1962. A year at that college then cost about $2000, of which about $1100 was tuition. (I remember books costing $50 for a semester. Outrageous!) I didn’t pay room and board, since I was then a married student living with my young bride in our own apartment. (I was, of course, a mere boy at the time.)

A year at that college now costs $42,000, which means that the inflation of the college’s costs has been 2000% over 48 years. During those years, the American economy has inflated by 610%. So that college’s costs have inflated more than 3 times as fast as those of the overall economy – a little better than my original alma mater, but not much better.

My daughter enrolled at the second college in 1981. By that time, a year there was costing $6500. This is an inflation of 546% – over an era when the economy inflated by 136% – i.e., almost exactly 4 times as fast as overall inflation.

In case my readers think the costs of attending these small liberal arts schools are now approaching costs at Harvard University, let me point out that Harvard now charges $60,000/year. This allows us to do another inflation analysis, since I clearly recall a newspaper article from 1964 in which it was noted that an undergrad year at Harvard then cost $4,000 – approximately the cost of a European sports car at the time. This turns out to be an inflation of 1400% – during an era when overall inflation has been 593%. So Harvard’s costs have increased less than 3 times the overall inflation rate. This looks pretty good until you realize that Harvard’s endowment exceeds $27.4 billion. At a government-approved production-rate of 4.5%, this endowment could generate $1.27 billion of usable income a year. Unfortunately, even this is not enough for Harvard, which has an annual budget of $3.6 billion.

Without its endowment, Harvard’s per-student cost would probably be over $100,000/year. This shows us the advantage of an endowment, of course. Harvard is the oldest college in the country. It was founded in 1636, so it has been building its endowment for nearly 400 years. The two colleges I attended are 127 and 150 years old, respectively. The younger college, where I started out in 1960, has an endowment of less than $50 million. The older college, to which I transferred, has a $250 million endowment. Under the best financial conditions, these endowments can produce annual incomes of some $2.2 million and $11.2 million, respectively. These are relatively small fractions of the operating costs of those institutions. That fact helps explain why their costs have inflated more than Harvard’s.

My purpose in writing this article, however, is not to compare (or contrast) the inflation rates of different colleges. Whether one college’s per-student cost has escalated at three times the rate of inflation and another’s at four times inflation is not really the point. The truly alarming point is that costs at all colleges and universities are out of control, and have been so for decades.

As a young student, I could actually earn enough to raise most of the cost of my tuition, room, board, fees and books for a year at a private college, working part-time. No young person has a prayer of doing that now. It is simply impossible. College cost-inflation has far outstripped the ability of ordinary students to work their way through. Indeed, doing the latter is a long outdated concept.

American higher education has gotten used to being an “exception” to ordinary fiscal realities – e.g., supply and demand, proper pricing of their commodity, etc. Many colleges have raised their rates right through the teeth of a serious recession, with little thought given to the financial situations of students and their families. College administrators seem to believe the demand for their product will always remain strong, no matter where the cost goes. But this assumption may not prove correct.

The colleges I know anything about are seeing their enrollment numbers begin to slip in recent years. This leaves a college, typically, with three options:

  1. Raise tuition and fees to cover the shortfall created by the lower enrollment;
  2. Cut costs by eliminating faculty positions, courses and/or entire departments;
  3. Lower admission standards to restore enrollment to targeted numbers.

You don’t need a doctorate in education to see that none of these is a good option. (1) and (2) make the college less attractive to students and reduce enrollment. (3) degrades the quality of the student population, changing the character of the school.

Some colleges, including big universities, have imposed pay-cuts or furloughs on faculty and staff to meet budget shortfalls. This could be a harbinger of the future. But there are no easy ways to bring costs down. Government has thrown money at higher education to help students of limited means afford college, but the government money has not necessarily controlled costs. Indeed, some colleges have merely raised their prices to absorb the “extra” government subsidies.

Two of my children graduated from the older college I cited, and one graduated from the newer (and smaller) of those colleges. They got fine educations, just as I did. But none of them thinks it likely that their children can attend either school. College is being priced out of the reach of people of ordinary means and income. Eventually, the middle class will not be able to afford those pricey small colleges. Their children will attend community colleges for a couple years. After that they will finish at a large state school they can afford.

Colleges do offer “student aid,” but often it includes a large component of loans. A student who pays for college that way can graduate with a crushing burden of debt. Ultimately, students from families with no means to send a child to college (like I was), will no longer attend those excellent little schools where everyone greets you on campus, profs actually know your name, and wonderfully talented people abound. Faced with acceptance of substandard students, many of those colleges will simply fade out and disappear.

The slow death of some of these schools is something like watching a person die of diabetes. In most cases, it doesn’t need to happen. Diabetes is treatable. If you watch your diet, you can overcome it and live a long life. Just so, colleges can bring their diet under control. They can bring their costs down and begin to get their rates in line with historic inflation. When students and their families begin to see small colleges as a sound “buy” again, those colleges will revive. This will not happen naturally or by accident. People who can think “outside the box” of the last 50 years will have to take charge and change the college “nutritional” culture. Unless that happens, it will be slow Death by Inflation. We shall all be poorer if that is allowed to happen.