Show Me The Money
Okay, I’ll admit it. I was up until midnight last night, which is not usual, and now I’m walking into walls.
I’d talk about Henry James, which is on the agenda, except that at the present half second I can’t read Henry James without sort of going blank in the head.
So, still on the subject of money, let me make a note here.
I talked to a couple of students yesterday who are transferring from my place to better schools, which isn’t unusual with students from non-remedial programs.
One of them said that she’d thought of going to, I think, Georgetown, but that tuition was now $60,000 a year, and that was just past any level of debt she was willing to take on.
I know that if this student had been better as a student, she’d have gotten much more in the way of financial aid and her tab wouldn’t be so high. But she wasn’t exactly being stiffed, either–she’d been offered ten or fifteen thousand. It just wasn’t enough, given the sticker price.
We could go on and on forever about why costs have risen so much–yes, I know, all those extra administrators, and whatever–but the thing that bothers me is what’s happened to supply and demand.
Costs are costs, but what people are both willing and able to pay for something should factor in here too, and it usually does. In fact, in general, it’s usually decisive. It doesn’t matter of it costs you a dollar to make, if people are only willing to pay fifty cents for it they won’t buy it when you offer it for a dollar.
And yes, I do know about Pell Grants and guaranteed student loans–but Pell Grants are small relative to prices like this, and loans are loans. They’ve got to be paid back eventually.
What’s more, higher levels of financial aid go to better students who can get themselves admitted to better colleges–in other words, exactly the students for whom a three hundred thousand dollar college bill is actually worth it.
The people who are paying the real bills are generally not the best students and they’re generally not at the best colleges. And then you have to ask yourself if they’re ever going to get anything like a return on their investment.
Forget the half of all college students who first rack up the bills and then drop out before graduating.
These prices are insane, and I can’t believe that they’re sustainable. I don’t think they represent anything like a realistic appraisal of what “college” is worth, whether it’s actually “college” or just a dressed up vo-tech course.
And I also think that to the extent we’re looking at real college–back to the Great Tradition here again–the chances that anybody is going to go in for it are lowered significantly if they know they’re coming out of school $100,000 in debt.
If college costs had risen with inflation instead of well beyond it, a year at a good private university would now cost somewhere between $10,000 and $15,000, pricy but not beyond the ability of most middle class families to negotiate–I know, because they’re negotiating that much now, and more.
At the moment I don’t know what’s going on, but I do know that the issue isn’t whether or not college is “for the rich” or for “trust fund babies” (the latter have practically NO aptitude or liking for scholastic work), but whether or not ANYTHING being taught is ratinionally worth $60,000 a year, with or without financial aid.
Henry James tomorrow, when I manage to wake up.
11 Responses to 'Show Me The Money'
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Our prices haven’t reached American levels, but it’s surely not unusual under any pricing system for some people to decide that the cost of a ‘good’ university is beyond them. one of my sisters, who was largely educated in the US, was offered a place and a scholarship at a famous college in the eastern US (I keep forgetting which one) but the local state university offered her generous scholarships too, and with their lower cost and the savings from being able to live at home until she started her master’s program – well, it was a big disappointment, but it just wasn’t possible to spend the money it would have cost to take up the scholarship at the eastern college.
But for the bigger issue – things seem to be worth what people are willing to pay for them, not the cost of production plus some fixed percentage for profit (or, in the case of a university, maintenance and expansion). That’s why so much shoddy women’s clothing is worth so much more than any rational estimate of costs + a little profit. Someone, somewhere, is willing to pay that much money for it. (Not me, I hasten to add!) As long as people are willing to sacrifice to pay $60,000 or $100,000 – either up front or later, with interest – the universities are going to charge that, or more. Not only is getting as much as you can practically a tenet of capitalism, status is partly dependent on how much something costs – sometimes mis-stated as how much something is worth.
Cheryl
6 May 10 at 8:22 am
My younger daughter would love to go back to grad school but she can’t afford it–either timewise or moneywise. She finished at UF in 2006 with an undergrad degree in psychology (controversial academic choice for many of you, I know) and wants very much to be a child psychologist. She’s worked with preschool children in various childcare facilities since she was 14 and has the magic touch with groups of children. And tuition is going up in Florida as we speak. Scholarships, I quite realize, are, and rightly so, awarded according to academic excellence and other qualifications with not much regard for ability on part of parents or students to pay for it. Our local weekly news publications include pictures and a bit of info about scholarship recipients. Seems like an inordinate number are given to students with wealthy parents. I know, I know, can’t discriminate. But that often leaves middle class students high and dry, no matter what their qualifications are. But as long as there is someone willing to pay ridiculous tuition costs for students without a scholarship, it’s going to stay the same.
jem
6 May 10 at 12:32 pm
Hmmm. Obviously, at some point, tuition becomes a bad investment, and somewhere around a quarter million for a four-year degree, I’d expect the bubble to burst–but it hasn’t. I can think of two reasons:
First, for a lot of careers, there’s no way in without a degree, and sometimes without a degree from one of a fairly limited number of schools.
Second, to some extent the state and Federal governments are propping the system up, and seem likely to continue to do so–requiring the degrees, and giving or loaning the money for that purpose only. There are a lot of loans and grants out there–not to mention the GI Bill. It doesn’t matter if I’d be better off taking the money and starting a business if the money is only available for college-related expenses.
Supply and demand are still there. Start handing out funds which can only be spent on one thing and you’ve vastly increased the supply of money chasing the same amount of education. You don’t need an advanced degree in economics to predict the result.
What we ought to be looking at is a three-tier cost system: (1) a Great Tradition degree, or something close to–English Literature, History or what have you: not inherently expensive, but with tuitions tending to rise with the prestige of the university and the paychecks of the faculty, (2) a high-tech vocational degree for the fields in which even a four-year degree requires expensive lab equipment. These will cost money, but will pay off in salary down the road. (3) Four-year degrees for those jobs which simply require a degree, as in “They give a degree in THAT?” Those should be dirt-cheap and worth it–mostly.
But if rational financial choices were the entire game, women’s shoes and men’s cars would be quite different.
In fairness to the Universities, I should note that as of about ten years ago–the last time I priced these things–an Indiana or Purdue University student who worked 20 hours a week at minimum wage during the school year and full time in summer could cover tuition, books and estimated living expenses.
robert_piepenbrink
6 May 10 at 4:41 pm
University of Florida yearly costs, pretty much the same as Indiana if their websites info is correct, are $19,000 for undergrads and $24,000 for grad students. Not possible to pay for with minimum wage job. And not that many jobs available if one does attain the degree. Tough times.
jem
6 May 10 at 5:03 pm
I wondered, after reading this, “how much does it cost the institution to educate the student?” because I’d heard somewhere that for some universities, it actually doesn’t pay to enroll a student.
Guess what? It’s true, for some schools. Especially private universities, who have enormous endowments, can get along just fine, financially speaking, without enrolling a single student. In fact, they’re better off, as the costs per student can run as much as 125% of tuition. Of course, I also found there was some dispute about some of the schools’ accounting methods, where research costs were charged against the students, but were in fact recovered from research funding.
So why not charge as much as they can? It gets the student closer to being a paying proposition, and apparently, they can do it and still fill enrollment. If some classrooms went empty due to high tuitions, then there might be some market correction, but the top universities *never* go without someone to fill those spaces.
In addition, state and federal subsidies for schools have been falling for the last 10 years. Mid-level and state schools have really tight profit margins, it turns out, and they’re constantly asked to provide more…more security, more highly technical types of equipment, etc. Not to mention all those admin salaries, upon which there is no real check. For some reason that’s not the first area for cost-cutting.
As for a degree being “worth” the cost, well, the figures still seem to run that a college degree means something like $1 million over a lifetime of earnings, more than a high-school degree. That’s worth quite a bit of investment up front, isn’t it?
I’m worried, though, that the culture of debt starts so early. People used to wait until they bought their first house to take on debt that would last life-long. Now, coming out of college with years of loan payments in front of them, what’s the incentive to save? What’s another 10 or 20,000 worth of credit card debt on top of $100,000 in student loans?
Or maybe they just figure their first bankruptcy will take care of it all. :/
Lymaree
6 May 10 at 5:09 pm
As usual, it depends. Some majors are worth it on a straight financial calculation–finance, for example. Some majors are worth it because they are pre- something that is worth it (law, medicine, etc.). But to major in French literature or something? Financially just isn’t going to make sense to take out loans for that. Or to do a psych major or a pre-med and then not get into grad school or med school.
Oh, and student loans don’t go away when you declare bankruptcy.
Cathy
CAFiorello
6 May 10 at 8:30 pm
Cathy has a good point.
I have no figures but I doubt that a civil engineer has lifetime earnings a million dollars more than a bull dozer driver.
jd
6 May 10 at 10:21 pm
When I was a university student, many years ago, your weren’t allowed to work more than 10 hours a week – unless you did it outside the university, so the authorities didn’t know about it. After my first year, I always worked part time during the school year and full time in the summers, and I contributed a LOT to my costs – but couldn’t cover them all. Nowadays, it seems even harder to make any significant contribution to your costs like that – and that’s at cheap Canadian prices. And many students seem to take a lower course load, prolonging their time at university.
I always thought living expenses were the killer, since I lived away from home. Tuition was expensive, so were books (but they could be borrowed sometimes), but the rent and food costs just kept on coming.
I’m listening to a radio program now on the enormous difficulty students are expected to have finding jobs this summer. It’s probably not true in my province – my person unemployment index, noticing whether or not fast food places are looking for employees, indicates that there are SOME jobs out there. But to save enough for your tuition and books after you pay rent and food…that seems to be more of a challenge than ever.
And I was puzzled about the comment about the high salaries of university admin until I thought that it must be a reference to the Deans and Presidents etc. – unless the US office workers get paid much more than they do here. Having people earning professor’s salaries do their own photocopying and scheduling would be even more expensive than hiring admins.
Cheryl
7 May 10 at 8:17 am
Cheryl, the high salaries for admin was in fact a reference to administration: Deans, Provosts, Presidents. And of course, the football coach, who often makes more than the others! But…at least where I am, the univ does expect people earning professor’s salaries to answer their own phones, do their own scheduling, do their own photocopying, etc. I used to coordinate our programs with the help of a secretary and a one-course release per year. They eliminated the secretary a few years ago, and I just got a memo this a.m. eliminating the course release.
No, I’m not bitter.
Cathy
CAFiorello
7 May 10 at 11:06 am
Well, a couple of things here.
First, there are needs-based scholarshhips and merit-based scholarships. Needs-based scholarships are targetted to the financial needs of families and do not go to wealthy people.
Second, public colleges and universities offer the LEAST money in scholarships and the least general financial aid to low income students, on the assumption that they’re already so much cheaper than private schools that that alone is a form of financial aid.
But that means that a kid who gets accepted at Harvard and at UConn will pay LESS to go to Harvard than he will to go to UConn.
Which brings me to my big point here–the people for whom a “college” degree will mean the LEAST financially are the ones going into the highest amount of debt.
I’ll stand by my original assertion–it’s not what you study, it’s where.
There are no finance majors at Harvard College. A Fench Lit major will, however, be interviewed by and hired by white shoe Wall Street firms at a much higher salary than the finance major from UConn–if they bother tolook at the UConn student at all.
A finance major from Western Connecticut State or from the third or fourth tier private schools will have to settle for smaller companies and even less in the way of salary–and if he wants an MBA, he’ll have to pay for it himself and either go at night or give up an income (if his loans will allow it) to get it.
That French major at Harvard, in the meantime, will get his MBA paid for by his company, and his time paid for while he’s studying.
But this means that the guys coming out with a hundred thousand or more in debt are the people least likely to see any real return from that investment.
And that “a million dollars more than high school” thing is an average–meaning that the people from places like Harvard are skewing the stats.
But $60,000 a year is senseless.
janeh
7 May 10 at 12:18 pm
Ah. Yes, the higher-ups do get paid well. I thought most departments had a couple of admin-type people doing at least some of the photocopying and phone-answering. There’s usually a senior secretary who does lots of that and budgets as well, plus assorted others – but then, my particular cubbyhole is located in a faculty that appears to have somewhat better funding than some other faculties, and the scads of minor admin-type people do in fact do a lot of that sort of work for a lot less than the president or other senior figures.
Cheryl
7 May 10 at 5:43 pm