Universities are starting to feel the government’s probing hand as they have implemented laws to investigate the rising cost of tuition. But, does it really need to be this way?

The upcoming academic year is seeing many new changes as universities and colleges across the country make drastic increases in tuition. Higher education institutions will have to explain how they came to such astronomical numbers that are causing many high school graduates to reconsider going to college in the face of carrying the burden of massive amounts of student loan debt.

In my column last week I discussed how universities need to help cut down student debt instead of causing it, specifically that which comes from credit cards. However, the debt that this demographic will and continues to accrue has to be scaled down in much larger degrees if they want to hope for any chance at setting up a solid future. The overall cost of college is forcing students to consider other options despite studies proving that it’s the most lucrative and stable move in the long run.

Tuition is Colleges’ Main Fundraiser

So why do students and parents have to cringe every academic year when tuition inevitably rises? What made college prices raise a collective 15 percent over the past five years?

Read: College Tuition: America vs. Abroad

Ronald Ehrenberg, a professor at Cornell University, discusses in a paper the many factors colleges have to take into account when setting tuition prices. The most intriguing of these is something he calls a “Winner-Take-All” society, which accounts for school’s consistently paying more for rising talent. Colleges want to outperform the competition, and even schools that aren’t their competition, in every sphere of the playing field whether it’s research, academics, faculty or sports. To recruit the best talent, you have to pay the most money.

And someone has to foot that bill.

With new technology and resources emerging every year, the rising costs force colleges to take part in this if they want to stay relevant. Now I am not proposing that every college has to implement every new available program, nor will they all be beneficial or even cost-effective, but colleges must evolve along with everyone else – whether the school is Ivy League or a two year trade program.

A crude, yet effective, confirmation of our nation’s success is the fact that tuition has steadily risen about 2 – 3 percent for the past century, even in the 1990’s when times were so good and endowments swelled to such a point that most wondered why tuition was raising at all. Services became more expensive, so free tuition plus a $12 fee that your grandfather may have paid for public college in the good ol’ days is incomparable to our situation.

But, we have also changed the whole system so that the amount of high school graduates who go to college now is exponentially greater to the early- to mid-1900’s, causing the emergence of a more focused “market” for colleges. You can no longer group students together based on broad categories like liberal arts; specialized schools have emerged like the Modoc Railroad Academy which teaches modern railroad operation, and Oaksterdam University which specializes in medical marijuana industry careers.

Colleges Are Not Ordinary Businesses

What makes the college marketplace different from any other is that the students serve as both the consumer and the input, according to a paper from the National Bureau of Economic Research. It means that students are looking for the best college and vice versa, and so they mutually try to improve one another. When a college invests in quality students it becomes a higher quality product. It would make logical sense that as the college improves, the price should increase.

Multiple other factors contribute to rising college tuition as Ehrenberg discusses, all pointing to the fact that colleges are becoming more and more a business as opposed to an institution of higher learning. But is this how colleges should run? How can colleges raise tuition in face of the harsh economy when some have over $1 billion in the bank? Colleges have to get out of the money-making mentality and put more back into the students.

A study by the Delta Cost Project found that public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, a 13 percent increase since 1995. They spent another $1,200 a year on services such as counseling, a 23 percent increase. Meanwhile, they spent about $8,700 a year on classroom instruction for each student, a mere 9 percent increase.

Ehrenberg discusses solutions to the high cost of tuition. The one that struck me the most is what financially sets colleges apart from other businesses. After establishing that universities must grow by substitution, not by expansion, meaning raising prices will not necessarily improve the product, he says that institutions must increase cooperation with their competitors. Sharing academic and administrative resources both within the campus itself and across institutions promise significant savings in a number of areas, including improving basic management skills.

As colleges improve and shape their brand, it will just take one to show the country that there is an affordable and quality solution, which can bring down the cost of tuition nationwide.

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